(May 8, 2008) CASE 10.6 SP Midtown, Ltd. v. Urban Storage, LP, Tex. App. LEXIS 3364 FACT SUMMARY Getz was the co-owner of a self-storage facility called Space Place. In April SYNOPSIS OF DECISION AND OPINION The 2005, Getz hired Stacy Welch as a property man- Texas Court of Appeals ruled in favor of Space ager for its Houston facility. Part of Welch's Place and held that sufficient evidence of a breach of fiduciary duty existed for the case to proceed to employment agreement required her to maintain trial. The court ruled that certain employees owe a strict confidentiality of Space Place's business and fiduciary duty to their employers under an agent/ customer information. In November of the same principal theory. Because Welch was an employee year, Welch accepted employment with Midtown, who occupied a position of confidence at Space one of Space Place's competitors, but continued Place, the relationship created a fiduciary relation- to work for Space Place for the rest of the month. ship. Given Welch's responsibilities and authority to Getz was unaware of Welch's employment with transact business such as financial transactions, she Midtown but became suspicious when sales at the is considered an employee agent and subject to fidu- Houston facility dropped precipitously. An internal ciary duties including the duty of loyalty. The court investigation revealed that Welch had used a vari- reasoned that Welch owed Space Place the duties ety of techniques to divert customers from Space associated with an agency including the duty not to Place to Midtown's facility. This included falsely act as, or on behalf of, an adverse party without the telling inquirers that Space Place had limited avail- principal's consent. ability and that Midtown's storage rates were lower. The investigation also revealed that Welch received WORDS OF THE COURT: Fiduciary Duties bonuses from Midtown based on the amount of cli- "When a fiduciary relationship of agency exists ents she referred to them. between employee and employer, the employee has a Space Place sued Welch and Midtown. Space duty to act primarily for the benefit of the employer Place's claims against Welch included an allegation in matters connected with his agency. Among the that she breached her fiduciary duty of loyalty owed agent's fiduciary duties to the principal is to account as an agent of Space Place. Welch filed a motion for for profits arising out of employment, the duty not to act as, or on account of, an adverse party without the summary judgment on this claim and others, but the trial court denied the motion. Welch appealed. principal's consent, the duty not to compete with the (continued)principal on his own account or for another in mat- did the court decide that Welch had an agency ters relating to the subject matter of the agency, and relationship rather than a master-servant rela- the duty to deal fairly with the principal in all trans- tionship? Do you agree? actions between them. If an agent, while employed 2. What impact does the confidentiality clause in by his principal, uses his position to gain a business Welch's employment agreement have on your opportunity belonging to his employer, such conduct analysis as to whether a breach of fiduciary duty constitutes an actionable wrong." occurred? 3. Focus on Critical Thinking: What other areas Case Questions 10990 5 of law might impact this case? Could the law- 1. One of Welch's issues on appeal was that she was suit have been brought on any other legal theory not an employee that had agency authority. Why rather than breach of fiduciary duty