Gregory Parzych served as president of ZipBy USA, LLC, a parking technology company, starting in 2016. In 2020, Parzych learned that Q-Free International, the owner of a company called TCS that Parzych had previously founded and sold, was considering selling TCS. Parzych advised ZipBy's owner to decline the acquisition, and ZipBy's board voted not to proceed. However, Parzych then secretly executed a nondisclosure agreement on behalf of his own shell company to acquire TCS for himself using financial data Q-Free had provided to ZipBy. Upon discovering this, ZipBy fired Parzych and sued him for breach of fiduciary duty, breach of contract, trade secret misappropriation, trademark infringement, and false designation. A jury initially returned a verdict against Parzych on all counts, awarding ZipBy over $2.5 million in damages. The district court subsequently granted judgment as a matter of law on the trade secret claims, finding the evidence insufficient, but upheld the verdict on the other claims, entered a permanent injunction, and awarded ZipBy a portion of its attorneys' fees. Parzych appealed the remaining verdicts and fee award, while ZipBy cross-appealed the set-aside of the trade secret verdict.
The First Circuit addressed several distinct issues. First, regarding evidentiary challenges, the court held that the district court did not abuse its discretion in admitting expert testimony on lost profits. The expert's reliance on pre-pandemic financial projections was not inadmissible because the projections were used to estimate synergies and future potential rather than just past performance, and the jury was capable of weighing the testimony's reliability. The court also affirmed the exclusion of late-disclosed tax records, noting that the party failed to justify the delay and that admitting them would have deprived the opposing party of time to conduct necessary discovery. Second, the court found no abuse of discretion in the district court's decision to proceed with the trial when lead counsel contracted COVID-19. The counsel participated remotely, and the court found that Parzych was fully represented by both the remote and in-person attorneys, with no concrete evidence of prejudice. Third, on the cross-appeal regarding trade secrets, the court agreed with the district court that ZipBy failed to meet its burden. Under both the Defend Trade Secrets Act and Massachusetts law, a plaintiff must show that the information was a trade secret and that the defendant used improper means. The court found that the financial data provided by Q-Free was not sufficiently secret, as Q-Free did not object to Parzych's use of it for his own acquisition attempt. Furthermore, ZipBy's internal strategy to forgo the acquisition was not a trade secret because ZipBy took no measures to keep that strategy confidential. Finally, the court affirmed the attorneys' fees award. The IP Agreement's fee-shifting provision covered fees incurred in enforcing the agreement's covenants. Since the jury found Parzych breached the IP Agreement by failing to devote his skills to ZipBy's interests, the fees incurred in litigating that breach were recoverable, even if some work also supported other claims.
The decision reinforces that corporate executives owe strict fiduciary duties to their employers and that attempting to divert corporate opportunities for personal gain constitutes a breach of contract and fiduciary duty. It clarifies that lost profits are a permissible measure of damages in corporate opportunity cases under Massachusetts law, provided the expert testimony meets reliability standards. However, the ruling limits the scope of trade secret protection in this context, requiring plaintiffs to demonstrate that the information was actually kept secret and that the defendant used improper means to acquire it. The permanent injunction barring Parzych from acquiring TCS remains in effect, and the award of attorneys' fees stands, signaling that parties who breach employment agreements regarding loyalty and confidentiality face significant financial consequences.
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