BACKGROUND:

Of all of the common law duties an agent owes the principal, the most important is the fiduciary duty of loyalty. A fiduciary is one who is trusted to act in the best interests of another rather than pursuing his or her own interests. While all of the other common law duties can be reduced by agreement, the duty of loyalty cannot be eliminated. In fact, courts are hesitant to enforce an agreement that diminishes this duty in even the slightest way.

HYPOTHETICAL:

Cameco, a producer of food products, employed Gedicke as a salaried traffic manager at a salary of approximately $38,000 per year. Gedicke's primary duty was arranging transportation of Cameco's food products to retail stores by common carrier. His duties included coordinating Cameco's shipping schedules, negotiating the lowest possible shipping rates, and supervising the warehouse employees who loaded the trucks. Because of his position, Gedicke became familiar with the identity of Cameco's suppliers, customers, and common carriers, as well as its delivery routes and rates. Without telling Cameco, Gedicke and his wife formed Newton Transport service, which Gedicke operated primarily out of his home. Acting on behalf of distributors or truckers, Gedicke arranged for the transportation of food products to retailers. After several years, Newton Transport's profits exceeded $62,000 a year. Two of the distributors for which Newton Transport arrange transportation sold the same products as Cameco. On over 600 occasions, Gedicke arranged for a trucker transporting Cameco's goods also to transport goods for Newton Transport's customers. However, the addition of Newton Transport freight actually enabled Gedicke to negotiate lower rates for Cameco. Gedicke admitted that he engaged in telephone conversations relating to Newton Transport's business during his scheduled hours of Cameco. However, he took no more than 15 minutes per day for such matters and used his personal credit card and making such calls.

QUESTION:

Has Gedicke clearly breached his duty of loyalty? Explain.