Huong Que, Inc. v. Luu
California Court of Appeal for the Sixth District
58 Ca. Rptr. 3d 527 (2007)
Mui Luu and Cu Tu Nguyen (defendants), who sold their calendar business to Huong Que, Inc. (plaintiff), agreed under the sale contract to continue as managing agents for four years and were bound by a covenant not to compete "as an owner" of a competing business; an employee later discovered an email revealing that Luu had requested, and received, a list containing about 90 percent of Huong Que's customers in connection with a planned new competing company (Pro Calendar) in which the defendants would be partners. Huong Que sued for breach of contract, breach of the covenants of good faith and the duty of loyalty, trade-secret misappropriation, and tortious interference, seeking damages and injunctive relief; the trial court granted a preliminary injunction, and the defendants appealed.
Whether sellers of a business who agreed to remain as managing agents, subject to a covenant not to compete as owners, nonetheless owed the buyer a broader fiduciary duty of loyalty that their theft of the customer list and plan to launch a competing business would breach.