The Appeals Court of Massachusetts recently vacated a judgment totaling almost $65,000,000 on the grounds the alleged unfair and deceptive acts of the defendants did not occur primarily in Massachusetts and that the trial judge allowed prejudicially erroneous jury instructions regarding constructive discharge under Maryland law.
In FTI, LLC v. Duffy, Plaintiff FTI, LLC and FTI Consulting, Inc. brought claims of breach of noncompetition, nonsolicitation, and confidentiality provisions of employment agreements with three former executives (“Individual Defendants”), who left Plaintiff for a rival consulting group, Defendant Berkeley Research Group, LLC (BRG). The Individual Defendants convinced 31 of Plaintiff’s employees to eventually join Defendant BRG, and brought over numerous clients of Plaintiff. Plaintiff also brought claims of tortious interference with contractual relations and violation of Chapter 93A against Defendant BRG.
The Individual Defendants worked for Plaintiff and, while two were based in the Boston office and one in the New York City office, they traveled extensively for work and were seldom in the office. New management took control of Plaintiff in 2016 and attempted to implement new employment agreements significantly decreasing the Individual Defendants’ salaries (essentially halving base salaries, and claiming the loss could be made up in bonuses) and, for certain Individual Defendants, essentially demoting them. Recruiters from Defendant BRG reached out to the Individual Defendants at around the same time these changes were occurring. The Individual Defendants and representatives from BRG met in New York City and Washington D.C., in the lead up to the Individual Defendants moving over to BRG. Once the Individual Defendants moved to BRG, they worked on bringing over other employees and clients of Plaintiff, eventually convincing 31 employees (16 from the Boston office, and 17 from other offices around the nation) to move to BRG. The Individual Defendants also brought over numerous clients, only one of whom was Massachusetts-based.
Following a jury trial, the Individual Defendants were found to have breached their employment agreements, and Defendant BRG was found to have tortiously interfered with Plaintiff’s contractual relations and to have engaged in unfair and deceptive trade practices in violation of Chapter 93A. The court entered judgment in the amount of $64,952,675.31.
On appeal, however, the Appeals Court reversed the judgment finding Defendant BRG liable under Chapter 93A on the grounds that the conduct giving rise to the 93A claim did not occur primarily and substantially in Massachusetts. The Appeals Court held that, even though two of the Individual Defendants were based in the Boston office, the plans for their move to BRG and then their efforts to bring over other of Plaintiff’s employees, occurred in meetings in New York and Washington D.C. and while the Individual Defendants were traveling around the nation. Additionally, only 16 of Plaintiff’s departing employees and only 1 departing client were based in Massachusetts – the rest were from across the country. Thus, the Appeals Court concluded, Massachusetts was not the “center of gravity” of the conduct and, therefore, Plaintiff could not recover under Chapter 93A. The Appeals Court also vacated the judgment against the Individual Defendants, on the grounds that the instructions given to the jury regarding constructive discharge under Maryland law were erroneous. If the Individual Defendants were constructively discharged by Plaintiff, their contractual obligations would cease, thus they would be not liable for breach of their employment agreements. As the trial judge allowed a jury instruction that was erroneously prejudicial (misstating that Plaintiff must intend to constructively discharge the Individual Defendants), the judgment was vacated, and the case remanded for further proceedings.