Wall Systems, Inc. v. Pompa
154 A.3d 989
| Conn. | 2017Background
- Wall Systems sued long‑time division head William Pompa for breaching his duty of loyalty by (1) doing estimating work for a competitor (MK Stucco) while employed and (2) taking three cash kickbacks from subcontractor B‑Jan.
- Pompa earned about $894,000 from Wall Systems (2005–2010) and about $89,782 from MK Stucco; some MK‑estimated jobs overlapped with Wall Systems bids.
- The trial court found Pompa wilfully disloyal, provenly received three contract overcharges totaling $14,400 from B‑Jan, and characterized other allegations (kickbacks from other subs, lost bids) as unproven.
- Trial court trebled the proven $14,400 under the statutory theft theory to $43,200, awarded prejudgment interest and attorney’s fees, and imposed a constructive trust on a joint bank account held with his wife, Jill Pompa.
- Wall Systems appealed seeking forfeiture/disgorgement of all compensation Pompa received during the period of disloyalty (including MK Stucco pay). Pompa cross‑appealed damages calculation. Jill Pompa appealed the constructive trust.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether forfeiture/disgorgement is mandatory when employee wilfully breaches duty of loyalty | Forfeiture of all salary during period of disloyalty and disgorgement of third‑party pay is required once wilful breach is found | Remedies are equitable and discretionary; wholesale forfeiture/disgorgement would be harsh here | Forfeiture/disgorgement are available but discretionary; trial court did not abuse its discretion in denying wholesale forfeiture/disgorgement |
| Proper measure of damages from kickback scheme | All overcharges paid by Wall Systems should be awarded (trebled under statutory theft) | Only half of the overcharges (net to Wall Systems after credit to B‑Jan) was owed | Trial court’s finding that the full $14,400 constituted proven overcharges was supported by the record; award affirmed |
| Whether a constructive trust could be imposed on joint bank account held with Pompa’s wife | Constructive trust appropriate because illicit funds were likely deposited in joint account | No proof kickback cash was deposited into that joint account or that wife participated in wrongdoing | Constructive trust reversed — plaintiff failed to trace illicit funds into the joint account; inference would be mere conjecture |
| Standard of review for equitable remedies in loyalty breaches | (implicit) legal rule requires remedy upon breach | Equitable remedies require balancing and are reviewed for abuse of discretion | Remedies like forfeiture/disgorgement are equitable, fact‑specific, and reviewed for abuse of discretion; trial court’s balancing upheld except as to the untraced constructive trust |
Key Cases Cited
- Town & Country House & Homes Service, Inc. v. Evans, 150 Conn. 314 (Conn. 1963) (recognizes employer’s action for employee breach of loyalty)
- Breen v. Larson College, 137 Conn. 152 (Conn. 1950) (employee’s secret hostile acts breached loyalty; employer remedies discussed)
- Phoenix Mutual Life Ins. Co. v. Holloway, 51 Conn. 310 (Conn. 1884) (agency duty of loyalty principles)
- Votto v. American Car Rental, Inc., 273 Conn. 478 (Conn. 2005) (trial court’s broad discretion in awarding damages)
- Walpole Woodworkers, Inc. v. Manning, 307 Conn. 582 (Conn. 2012) (deferential review of equitable monetary awards)
- Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999) (forfeiture of compensation is equitable, fact‑specific remedy)
- Cameco, Inc. v. Gedicke, 157 N.J. 504 (N.J. 1999) (discusses forfeiture and balancing equities for employee disloyalty)
- Jet Courier Service, Inc. v. Mulei, 771 P.2d 486 (Colo. 1989) (examples of cases awarding forfeiture/disgorgement in loyalty breaches)
- Design Strategy, Inc. v. Davis, 469 F.3d 284 (2d Cir. 2006) (apportionment principle when disloyalty confined to specific pay periods)