USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________

No. 95-1356

ORKIN EXTERMINATING COMPANY, INC.

D/B/A ORKIN LAWN CARE,

Plaintiff, Appellant,

v.

ARTHUR WALTER RATHJE, III,

Defendant, Appellee.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nancy J. Gertner, U.S. District Judge]

___________________

____________________

Before

Cyr, Circuit Judge,

_____________
Bownes, Senior Circuit Judge,
____________________
and Boudin, Circuit Judge.
_____________

____________________

Richard P. Decker, with whom David H. Woodham, Decker & Hallm

_________________
_________________ _______________
and

James E. Riley, Jr.,

______________________

Of Counsel,

were

on

brief

for

Or

Exterminating Company, Inc.

Philip A. Tracy, Jr.,
_______________________
Sullivan,
________

with whom

Paul T. Prew
_____________

were on brief for appellee.

____________________

December 20, 1995

____________________

and

DiMent
______

BOWNES, Senior Circuit Judge.

BOWNES, Senior Circuit Judge.
____________________

Orkin

Exterminating

nationwide

chemical

Defendant-appellee,

manager

of the

called

application

Arthur

Walter

("Orkin")

lawn

"Nature's

Way,"

Rathje,

branch

Global).

changed

Global

the

In

the

business entity

to

application lawn care business and operated

was

office from

9, 1993.

was

business.

III,

wife created a

later

operates

care

his resignation on April

1992, defendant's

(collectively

Inc.

Hingham, Massachusetts,

May, 1987, until

winter of

Company,

Plaintiff-appellant,

"Global

in

the

Green"

chemical

in the same area

as did Orkin's Hingham branch.

On

August 3,

Rathje, and his wife,

1993, Orkin

sued

defendant, Arthur

Karen, on the following grounds:

(1)

defendant, Arthur Rathje, while an employee of Orkin breached

his

fiduciary duty

management

unfair

to

trade

practices

defendant, Arthur

Orkin;

(4)

Karen

and

while

(5) Karen

for Global

an

employee

of

93A

3 (West

Rathje, converted

tortiously

interfered

converted

Orkin

property

between defendant, Arthur

Rathje

as

Arthur Rathje engaged in

Laws Ann. ch.

Rathje

business relationship

Orkin;

working

employee; (2) defendant

violation of Mass. Gen.

(3)

Orkin by

in

1984);

owned by

with

the

Rathje, and

property owned

by

Orkin.

The

case was tried to

submitted to the jury.

a jury and

all claims were

It found in favor of

Karen Rathje on

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all claims against her.

verdicts.

The jury

No appeal has been

found for defendant,

the conversion claim.

No

appeal has been

taken from these

Arthur Rathje, on

taken from

this

verdict.

The jury could not agree on the breach of fiduciary

duty

claim, nor on the

Ann. ch. 93A.

claim brought under

Mass. Gen. Laws

Both claims had been submitted to

the jury on

an

advisory basis.

district

With the

court decided

findings and rulings

acquiescence of

these two

claims.

of the district

counsel, the

It is

from the

court on these

claims

that Orkin appeals.

Breach of Fiduciary Duty

Breach of Fiduciary Duty
________________________

Under

positions

their

law,

of trust and confidence

employer

employer."

(1983).

Massachusetts

and

must

protect

"[e]mployees

owe a duty

the

occupying

of loyalty to

interests

of

the

Chelsea Indus., Inc. v. Gaffney, 389 Mass. 1, 11

_______________________________

It follows

from actively

that "an executive

competing with his employer

employee is 'barred

during the tenure

of his employment, even in the absence of an express covenant

so providing.'"

Under

Id. at 11-12 (citations omitted).

___

Massachusetts

available to an employer

employee.

can recover

law

there are

two

remedies

for breach of fiduciary duty

If the conduct caused

a loss to the employer, it

as damages the amount of such loss.

-33

by an

Augat, Inc.
___________

v. Aegis, Inc.,
________________

409 Mass.

165,

175

(1991); Meehan v.
__________

Shaughnessy; Cohen, 404 Mass. 419, 436 n.14 (1989).

__________________

The second remedy is forfeiture of compensation

the employee

during the period of breach

An

"can

employee

compensation even

employer."

be

required

to

absent a showing

by

of fiduciary duty.

forfeit

the

right

of actual injury

of

to the

Chelsea Indus., Inc. v. Gaffney, 389 Mass. at 12_______________________________

13.

We

discuss

the

district

court's

findings

and

rulings seriatim.
________

We

agree with the district court's conclusion that

defendant breached his fiduciary duty

of loyalty to Orkin by

helping his wife operate a lawn care business in

competition

with the Orkin

There is no

need

to

branch office which he managed.

restate

conclusion.

the

factual

findings

leading

to

this

They are set forth clearly and explicitly in the

district court opinion and we adopt them.

The district court further found that Orkin had not

proven that defendant's conduct, reprehensible as it may have

been, caused any damage to Orkin.

It held that Orkin did not

prove a causal connection between defendant's conduct and its

claim

that

worthless.

the

We

branch

office

defendant

have reviewed the trial

managed

became

record carefully and

can find no basis for setting the conclusion aside as clearly

erroneous.

-44

Plaintiff's expert testified that the branch office

was worth

a minimum of $106,000

value at all.

in 1990 and in

1993 had no

Two of the factors he considered were material

and equipment that disappeared

from the branch office during

defendant's

tenure

plaintiff's

conversion

defendant on the

been

if

defendant.

The

such

missing

there

evidence

wearing two hats,

was,

that during

But

was

the

the

jury

basis

of

found

for

that verdict has

not

equipment,

cannot

materials,

be

attributed

two bonuses

1992 - April 1993.

about his work;

it must

there is no

the

period defendant

the branch office prospered.

business expanded

received

And

count.

This

and

to

And as the district court pointed out, there was

persuasive

time,

manager.

conversion claim and

appealed.

supplies,

as

and profits

during the

During this

increased.

implicated period

None of defendant's

was

Defendant

- April

superiors complained

in fact, his managerial talents were lauded.

be noted

that defendant

evidence that

resigned voluntarily;

he was pressured

into doing

so.

Defendant may have breached his fiduciary

there

duty to Orkin, but

is evidence in plentitude from which it could be found

that such breach caused no harm to Orkin.

We next address

Orkin

could

not

recover

during the period he

1992 to April 9, 1993.

the district court's finding

the

compensation paid

breached his fiduciary duty -

There is no dispute

-55

that

defendant

April 1,

about the period

of time during which the breach of fiduciary duty took place.

The

court found:

equivalent to

for

his

"[T]he value of his [defendant's] work was

his salary

wife's

small

notwithstanding what he

business.

Therefore,

was doing

Mr.

Rathje

satisfied his burden of showing that the value of the work he

performed

for Orkin

equalled the

compensation he

received

during the period he breached his duty of loyalty."

We turn

to the

applicable Massachusetts law.

In

Chelsea Indus., Inc. v. Gaffney, the court held that "unless

________________________________

defendants proved the value

was

entitled to

recover

of their services, the plaintiff

their entire

compensation."

289

Mass. at 14.

given the

The court then went on

opportunity to

do

to note that, although

so, defendants

had failed

present evidence as to the fair value of their services.

at 15.

In

Meehan v. Shaughnessy,
______________________

fiduciary may be required

404 Mass. at

law the employee

441.

must prove

Id.
___

held that

to repay only that portion

compensation that exceeded the worth

employer.

the court

the value

of his

of his services to

Clearly,

to

his

under Massachusetts

of his/her

services

during the breach period.

We hesitate to set aside the factual finding of the

district

court

showing that the

equalled the

that

defendant

value of

"satisfied

the work he

compensation he

his

burden

performed for

received during the

of

Orkin

period he

breached his duty of loyalty."

But we are persuaded that the

-66

finding is clearly erroneous for two related reasons.

there

was no

explicit

evidence as

to

the fair

First,

value

of

defendant's services during the period of breached loyalty as

would seem

to be

required

under Massachusetts

law.

This

standing alone, however, would not render the finding clearly

erroneous.

There was evidence which,

in the ordinary case,

would suffice to sustain the district court's finding despite

the

lack of explicit

evidence by defendant

paid to him during the period equalled the

that the salary

fair value of the

services performed.

This, however,

of

the

court's

diverted away

the burden

court's

is not the ordinary

finding

that

defendant's

from his responsibilities to

on him to

prove the

finding that he was worth

is very hard to credit.

case.

Because

energies

were

Orkin, and given

value of his

services, the

everything Orkin paid him

It could be argued that Orkin set up

fairly precise standards for measuring the job performance of

an

employee

satisfied

them.

possible to

that

in

There

position

may be

and

certain

a finding

the employer's

equal the fair value of his services.

-77

defendant

paid the

it

is

so accurately

positive evaluation

that the amount

case.

that

jobs where

measure an employee's performance

evidence of

sustain

defendant's

would

employee would

But this is not such a

In this case, such

As

a measurement was not possible.

a branch office manager, defendant not only operated with

relatively little direct monitoring, but also contributed

the

criteria used

to

judge his

performance.

In

to

"1st

quarter review letter" authored by defendant, dated March 27,

1993,

which

stated,

customer

was

within

in effect,

the

that he

confirmations

and

breached-loyalty

was ahead

its

period,

of Orkin's

branch office goals.

goal for

profit/loss target.

evidence establishes that defendant helped formulate

he

The

his own

We think

place

the emphasis it did

Orkin and

were

it was

the positive

based on

putting

his

perception

altered.

of

Orkin's

on the bonuses

mistaken belief

efforts

deceived his

his

district court

value

into

because they

that defendant

its

employer, it

to the

to

paid defendant by

evaluation he received

undiluted

defendant not

error for the

company

was

business.

Had

is clear that

its

would

have been

We therefore hold that it was clearly erroneous for

the district court to find that the fair value of defendant's

services to Orkin was

proper weight

unimpaired.

to its own

The court failed

finding, solidly supported

record, that defendant diverted

to give

in the

an appreciable amount of his

time and energy from Orkin's business to a competing business

owned and

operated by

him

and his

wife.

And

the

court

apparently failed to factor into its finding the heavy burden

-88

on defendant to prove that his work was worth the full amount

paid him by Orkin.

We

recognize that

the

evidence credited

by

the

district court indicates that defendant's services were worth

something to Orkin.

our

than

But under our reading of the record and

understanding of

the

necessary.

full

amount

to

paid.

this must

remand

is,

be less

therefore,

Although the court's calculation will necessarily

be imprecise, it is

judge

Massachusetts law,

make.

well within the capability of

We

will,

of

course,

give

the trial

substantial

deference to a reasonable finding by the court.

The district

another respect.

court also

It found

committed clear error

in footnote six

of its

in

opinion

that "Orkin submitted no evidence reflecting the compensation

paid Mr.

Rathje during the

period was from

Exhibit T

relevant period."

April 1, 1992

shows that

to April 9,

defendant was paid

The relevant

1993.

In

fact,

$45,000, including

bonuses,

from January

1,

$13,905.29 for the period

Although this

it

is

1992 to

31, 1992,

January 1, 1993 to April

does not cover the

sufficiently

December

complete

compensation paid during the

and

9, 1993.

relevant period precisely,

so

that

the

amount

of

relevant period can be prorated

and accurately determined.

The 93A Claim

The 93A Claim
_____________

-99

Chapter

93A

11

of Mass.

Gen. Laws

Ann. (West

1984) provides:

Any person who engages in the conduct

of

any trade or commerce and who suffers any

loss

of

personal,

money

or

as

result

employment
engages

or

a
by

property,

or

use

or

of the

another

in any trade

real

person

or commerce

who
of an

unfair method of competition or an unfair

or

deceptive

act

or practice

declared

unlawful by section two ... may ... bring

an action in

the superior court

... for

damages and equitable relief...

The

district court held

to prove a causal

that because Orkin failed

connection between defendant's conduct and

harm,

if any,

agree.

to Orkin,

there was

no 93A

violation.

We

As already pointed out, there was evidence from which

it could reasonably be found that the Orkin branch,

operated

by defendant during the time he aided and abetted his wife in

competition

with Orkin, prospered.

peradventure that "there must

seller's

deception and the

Lake Motors, Inc., 369

__________________

See supra.
___ _____

It is beyond

be a causal connection between

buyer's loss."

Mass. 795, 800-01

Kohl v. Silver
_______________

(1976); Shepard's
_________

Pharmacy v. Stop & Shop Companies, Inc., 37

_________________________________________

Mass. App. Ct.

516, 522 (1994); PDM Mechanical Contractors, Inc. v. Suffolk

____________________________________________

Constr. Co., Inc., 35 Mass. App. Ct. 228, 237 (1993).

_________________

Affirmed in part.
Affirmed in part.

Remanded for the district court

Remanded for the district court

___________________________________________________

to determine an appropriate amount of defendant's salary for

to determine an appropriate amount of defendant's salary for
_____________________________________________________________

reimbursement to Orkin.
reimbursement to Orkin.
_______________________

No costs to either party.

No costs to either party.
_________________________

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