Employer Gets Whacked For $17.5 M For Stealing Employee's PC

I opened up this month's Lawyer USA to find a stunning piece about a swiped PC leading to a $17.5 million dollar verdict. From what's reported, here's what happened in the case of Trealoff v. Forest River Inc. out of the Superior Court of San Bernardino County, California.

Dallen Trealoff, an experienced RV salesman, was hired in 1995 as a sales manager by a start-up company called Forest River Inc., an Indiana based company.

Trealoff  worked out of the company's Rialto, California warehouse and was in charge of developing a sales network in eleven Western states according to a P.E.com story.

The company did not provide a computer so Trealoff used his personal laptop.     

Trealoff claimed that he:

  •  was hired to help a fledgling company 
  • took a pay cut in reliance on a promise that he would be compensated later at a higher rate

 According to Trealoff's lawyer, the raise never materialized:

It took him about five years to realize they were not going to give him the raise.  That's when he started to look for other employment and then they fired him.

Before Trealoff got fired, the company president Peter Liegl took Trealoff's laptop, stole the hard drive and deleted thousands of files.

During the time he worked for Forest River, Trealoff used his spare time to develop a software program which kept track of sales data. That information was on the computer as was Trealoff's personal financial information.

Trealoff got the computer back and tried to restore some of the files. None of it was usable.

Liegl claimed he took Trealoff's computer because he suspected that Trealoff was stealing company information and going to start his own company.

In 2003, Trealoff and his wife did start their own company called Eclipse Recreational Vehicles.

In 2005, Forest River was bought out by Warren Buffet's  Berkshire Hathway Inc.

Trealoff sued Liegl and Forest River alleging:

  • breach of contract
  • fraud
  • conversion
  • violation of a California statutory claim  for improperly accessing a computer without the owner's permission

Forest River counter sued alleging that Trealoff took proprietary information in order to start his own business.

It's important to note these points in the context of the case:

  1. Trealoff had no written agreement with Forest River regarding the terms of his employment.
  2. Forest River did not have a non disclosure agreement signed by Trealoff

After a seven week trial, Trealoff won on almost all counts.  The jury awarded:

  • $1.8 million dollars in commissions owed to Trealoff
  •  punitive damages against Forest River of $7 million
  •  punitive damages of $8 million against Liegl personally

The defendants lost in their counter suit against Trealoff.

How does something like this happen?

From a business point of view, George's Employment Blawg has a good article on this case with lots of sound advice to employers including this:

  • Trealoff 's employer allowed Trealoff  to work on his personal computer with confidential company information
  • Computers are inexpensive. If Trealoff was using a company computer, instead of a personal computer,  he would have been required to return it
  • If Trealoff used a company computer, it would have been difficult to prevail on any privacy or conversion claim regarding the content on the computer

Certainly, the company could have done a better job at protecting itself from this catastrophe.

There's also a subtext here from a trial lawyer's perspective about how this kind of verdict happens.

From what is reported, according to jury interviews, Dallen Treadwell was a very believable witness.  From Treadwell's perspective -- which he was obviously able to convey to the jury --he:

  • took a pay cut to take the position
  • worked hard and did a good job
  • never got the raise he was promised, so he started to look for another position
  •  was then fired and denied commissions owed to him of $1.8 million
  • had his files ruined and software stolen which he had been working on for years

At the same time, Forest River was bought out by Berkshire Hathaway for some enormous sum of money.

Peter Liegl's testimony was recorded.  When it was played to the jury, it was clear from his answers that he was not taking the case seriously according to Treadwell's lawyer. Forest River never made a settlement offer in the case.

I tried an age discrimination case in Youngstown several years ago with a similar scenario.  It's a case we would have settled for $300,000 but the offer was never made.

The manager who fired my client was the only witness from the company who showed up. She left the trial early to go on a cruise.

No company representative, officer, or HR representative bothered to make the trip from New York to Youngstown to defend the company. It appeared as if the company didn't care.

The jury awarded over $30 million dollars, the majority of which was punitive damages.  The case settled on appeal.

Simply said, when a wealthy employer "screws" one of it's employees, and has a "no care" attitude about it, it's asking for trouble -- particularly when there's some malicious or reckless conduct involved. 

There are lots of lessons to be learned from this verdict.

Image: www.maximumpc.com

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