Skyline Advanced Technology Services v. Shafer

Background

Skyline sued Sabrina Shafer, its former Director of Training and Services Sales, asserting several claims, including breach of contract and breach of the duty of loyalty. Skyline alleged that Shafer violated an Employee Proprietary Information and Inventions Agreement, shared Skyline information, entered an agreement with Xentaurs while still working for Skyline, helped recruit Skyline employees for Xentaurs, and acted against Skyline’s interests in transactions involving Xentaurs and Cisco.

Shafer initially testified that she did not sign Skyline’s proprietary-information agreement and later stated that she did not remember signing it. At the hearing, she no longer maintained that she had not signed it. Skyline submitted the signed agreement and an email from Shafer attaching it. The agreement barred conflicting employment or business activities and prohibited disclosure of Skyline’s proprietary information.

The court also described sanctions entered because Shafer intentionally destroyed evidence. Those sanctions included an adverse instruction in Skyline’s case, meaning the court would assume the destroyed information was unfavorable to the party that lost it. The court had previously adopted a recommendation finding that Shafer willfully destroyed evidence and had dismissed her related case as a terminating sanction.

Motion and analysis

Skyline moved for partial summary judgment, which asks whether the evidence leaves any genuine factual dispute requiring a trial, on its breach-of-contract and breach-of-loyalty claims. Shafer opposed the motion and challenged Skyline’s damages expert, Kawamoto.

For the contract claim, California law required Skyline to show a contract, Skyline’s performance or an excuse for nonperformance, Shafer’s breach, and damages. The court found that Skyline paid Shafer, suffered damage from compensating an employee who was undermining it, and that Shafer breached the agreement by signing an Independent Contractor Agreement with Xentaurs on August 23, 2018, while still employed by Skyline. The court also found breaches based on Shafer’s disclosure of Skyline’s bid information and information about Skyline employees. Shafer’s lack of memory about signing the agreement did not create a genuine factual dispute because Skyline submitted the signed agreement and related email.

For the duty-of-loyalty claim, the court explained that California employees owe loyalty to their employers and may not act against their employers’ best interests. It found that Shafer breached that duty by entering the Xentaurs agreement while still working for Skyline, disclosing Skyline bid information, and recruiting current Skyline employees to join Xentaurs. The court acknowledged factual disputes about the two Skyline-Xentaurs-Cisco deals and about why Skyline received no commission, but found those disputes did not prevent judgment based on Shafer’s other conduct.

Damages and disposition

Skyline sought $745,061.53 for compensation it said it paid Shafer during periods of disloyal conduct, plus $70,000 related to the two Skyline-Xentaurs-Cisco deals, for a total of $815,061.53. The court found that the timing and extent of Shafer’s disloyal conduct were not sufficiently established to calculate damages at that stage. It also stated that Kawamoto’s expertise as a forensic accountant did not qualify him to establish matters such as romantic relationships or whether particular conduct was disloyal. The court therefore postponed the damages determination and did not reach Shafer’s challenge to Kawamoto’s report under the expert-evidence rules.

The court granted in part Skyline’s motion for partial summary judgment, granting summary judgment on the breach-of-contract and breach-of-loyalty claims. It postponed the award or determination of damages and set a status conference to discuss the next steps for determining them.