WALL SYSTEMS, INC. v. WILLIAM K. POMPA et al., SC 19734

Judicial District of Hartford

 

      Employment; Breach of Duty of Loyalty; Whether Employee Required to Disgorge All Compensation Received During Period of Disloyalty to Employer. The plaintiff building subcontractor employed defendant William K. Pompa as manager of its exterior facades installation division.  The plaintiff brought this action, claiming that Pompa breached his duty of loyalty by estimating installation jobs for MK Stucco, Inc., a business competitor, and by taking kickbacks from the plaintiff's subcontractors in exchange for work assignments.  The plaintiff also alleged that Pompa and his wife, defendant Jill Pompa, were unjustly enriched, and it sought the imposition of a constructive trust on their assets.  The trial court found that, while Pompa intentionally breached his duty of loyalty by working for MK Stucco, there was insufficient evidence that the plaintiff was financially harmed by the breach, as there was no evidence of a kickback scheme between Pompa and MK Stucco or evidence that Pompa's actions caused any lost bids or interfered with the job he was doing for the plaintiff.  The court also found that Pompa breached his duty of loyalty by entering into a kickback scheme with subcontractor B-Jan Stucco, LLC, in which Pompa would raise the price the plaintiff would pay B-Jan Stucco and split that increased amount equally with B-Jan Stucco.  The court awarded the plaintiff $14,400, reflecting the plaintiff's total additional payments to B-Jan Stucco.  The court also imposed a constructive trust on the defendants’ joint bank account.  The  plaintiff appeals, contending that, under the Restatement (Second) of Agency § 469, the remedy for an employee's deliberate breach of loyalty is the disgorgement of the entire salary already paid to him, even in the absence of proof of actual harm.  It further contends that, under the Restatement (Second) of Agency § 403, a disloyal employee is required to disgorge all profit realized as a result of his breach of the duty of loyalty.  The defendants cross appeal, arguing that the trial court improperly imposed a constructive trust on Jill Pompa's assets where she was not found liable to the plaintiff on any basis and that the plaintiff failed to prove its damages in connection with the kickback scheme involving B-Jan Stucco with reasonable certainty.