A Disloyal Corporate Officer, Ordered to Forfeit His Compensation To His Employer, Fails in His Attempt to Reduce The Amount of Restitution Under the Joint Tortfeasors Act

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In a case of first impression, the Business Litigation Session (Davis, J.) recently declined to reduce the amount of restitution a disloyal corporate officer had been ordered to pay to his employer in connection with a judgment against the corporate officer. In so holding, the court held that a settlement payment, received by the plaintiff employer from two co-defendants (the former employee and a competitor business), did not fall within the scope of the Joint Tortfeasors Act and, therefore, the Act could not be applied to offset any damages the former corporate officer was ordered to pay. See Element Productions, Inc. v. Editbar, LLC et al. (Suffolk Sup.Ct.).

Plaintiff, a video production business, sued a former executive and two LLCs who established a business to compete with the plaintiff. Before trial, plaintiff reached a settlement with the two LLCs that included a monetary payment. The case then proceeded to trial against the former executive for breach of contract and breach of duty of loyalty. While the court ruled that the former executive had breached his contract with plaintiff, it concluded that plaintiff had failed to prove actual damages. Based on the breach of duty of loyalty, however, the court ordered the former executive to provide restitution to the plaintiff in the form of forfeiture of a portion of the compensation he received during the final year of his employment.

Relying on the Joint Tortfeasors Act, the former executive sought, post-trial, to reduce the amount of restitution by the amount of the settlement payment the plaintiff received from the settlement with the LLC defendants. Under the Act, "where two or more persons become jointly liable in tort for the same injury to person or property, there shall be a right to contribution among them even though judgment has not been recovered against all or any of them." See G.L.c.231B, §1.

The court's ruling was predicated on the principle that compensation for injury allegedly suffered and restitution are not the same. The former executive was found to have been a disloyal employee and, as such, the court held that he was subject to restitution "for payments of services that he did not properly perform," even without any proof of actual injury to the employer. In contrast, the settlement payment was intended to partially compensate plaintiff for its alleged injury. Because the settlement payment and the restitution do not compensate plaintiff for the "same injury," the Act does not apply. Consequently, the restitution "is not subject to a set-off" in the amount of the settlement.

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