Legal Question in Business Law in California

Well, your statement of facts is clear insofar as it goes. You leave us without any additional question to answer, however. I'm guessing that you are connected in some way with the "old" corporation, maybe as an investor or officer. I'll also hazard a guess that you want to know whether the director's action is "legal," or whether the investors, officers, etc. of the "old" corporation can take any legal action against the defector.

The short answer is that there are two competing legal philosophies that will determine whether what this guy did is permissible or not. First, California law favors competition and employment mobility. A person functioning in a particular capacity in Business X has a right to take his knowledge and energy to Business Y or to start a new business, Z.

On the other hand, California law also recognizes that corporate officers and directors have what as called "fiduciary duties," meaning that they are entrusted with responsibilities to act on behalf of those who have given them power, authority and access to trade secrets. More likely than not, this individual is acting in violation of his fiduciary duties to the old corporation and could be sued successfully by the other owners. It would be necessary to have a close look at the facts to determine whether such a suit is likely to be a winner, and to estimate the damages or other relief that a court might award.

Clear enough to indicate there probably are 'unfair business practice' type violations, among others, as grounds for lawsuit and restraining orders/injuctions. If the original company is serious about pursuing this, feel free to contact me to discuss.