EventMonitor, Inc. v. Leness
473 Mass. 540
| Mass. | 2016Background
- EventMonitor (employer) hired Anthony Leness as VP for business affairs in 2001 under a written employment agreement that allowed termination without cause (thirty days' notice + 12 months' salary/benefits severance and accrued vacation) and limited grounds for termination for cause (including "wilful fraud or defalcation").
- In October 2007 Leness created a Carbonite online backup and copied the entirety of his work laptop — including EventMonitor proprietary/customer information — to that service, paid with his personal card and used his personal e-mail; he did not disclose the backup to EventMonitor and attempted to remove traces from the laptop.
- EventMonitor terminated Leness on December 5, 2007, "without cause" and paid severance; after discovering the Carbonite copy in February 2008, it retroactively characterized the termination as "for cause," stopped severance and withheld accrued vacation pay, and sued.
- The trial judge found Leness violated the non‑disclosure/return provisions (failed to return all copies) but did not knowingly disclose or use the information, and did not commit a defalcation or a material breach that would justify termination for cause.
- The judge entered judgment for Leness on EventMonitor’s contract, covenant of good faith, and Wage Act claims; denied Leness’s indemnification claim. The SJC affirmed the findings, corrected a mathematical error in the Wage Act treble‑damages award, and remanded for amended judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Leness’s copying/retention a material breach of the employment contract? | EventMonitor: failure to return all proprietary copies was a material breach undermining confidentiality and justifying withholding severance. | Leness: copying was not used or disclosed; therefore any noncompliance was non‑material. | Held: Not material — no evidence of disclosure/use or likely compromise; breach did not undermine essential confidentiality interest. |
| Did Leness’s actions constitute "defalcation" permitting termination for cause (and may employer retroactively recharacterize termination)? | EventMonitor: uploading proprietary files to Carbonite was a defalcation of company assets and justified retroactive conversion to termination for cause (invoking after‑acquired evidence doctrine). | Leness: no misuse or deprivation of asset value/use; no disclosure/use; retroactive recharacterization inappropriate here. | Held: No defalcation — ordinary meaning requires misuse/deprivation of asset; secure copy did not deprive EventMonitor of use or value; court need not adopt after‑acquired doctrine because facts fail threshold. |
| Is EventMonitor required to indemnify Leness for defense costs under the contract? | Leness: indemnity clause covers being made party to proceedings arising from his role as employee. | EventMonitor: lawsuit arose from Leness’s personal conduct (Carbonite subscription paid with personal card, undisclosed, cleaning efforts), not from acts at the company’s request. | Held: No indemnity — plain language limits indemnification to actions in capacity as employee at company request; findings support personal‑capacity conduct. |
| Were damages under the Massachusetts Wage Act (accrued vacation) correctly calculated and trebled? | Leness: judge miscalculated daily rate and trebled amount; higher treble damages due. | EventMonitor: did not dispute number of days; contested liability but lost. | Held: Judge’s arithmetic error corrected: 8.4 days × $673.08 = $5,653.87; trebled = $16,961.62; remanded to amend judgment. |
Key Cases Cited
- Flesner v. Technical Communications Corp., 410 Mass. 805 (consideration of after‑acquired evidence in employment context)
- Prozinski v. Northeast Real Estate Servs., 59 Mass. App. Ct. 599 (same)
- Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451 (material breach standard)
- Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501 (review of judge’s findings and legal conclusions after bench trial)
- Teragram Corp. v. Marketwatch.com, Inc., 444 F.3d 1 (when court may decide factual question as law if evidence lopsided)
- McKennon v. Nashville Banner Pub. Co., 513 U.S. 352 (limitations on after‑acquired evidence doctrine in discriminatory terminations)
- Indeck v. Clients' Sec. Bd., 450 Mass. 379 (use of "defalcation" to describe misappropriation of entrusted funds)
- Buster v. George W. Moore, Inc., 438 Mass. 635 (defalcation as misappropriation depriving owner of use)