Law for Business 10th Edition by James Barnes,Terry Dworkin,Eric Richards

Exercise 8

Bell Atlantic is a telecommunications carrier that sells telecommunications services. Under an agency agreement, CTC Communications sold Bell Atlantic's products to end users and was paid a commission on each such sale. Bell Atlantic also paid fees to CTC to manage the relationship between Bell Atlantic and its customers by providing information and service to each customer at no additional charge to the customer. (CTC acted as Bell Atlantic's face to the designated customers.) However, a new federal law permitted companies like CTC to freely provide services in telecommunications market. Prior to the new federal rules, the agency agreement between the parties contained a noncompetition clause. However, in light of the pending telecommunications legislation, CTC had that clause renegotiated to state that, within 12 months after termination of the agency agreement, it was permissible for CTC to resell Bell Atlantic services to otherwise forbidden customers. Twelve months after the agency relationship between CTC and Bell Atlantic was terminated, CTC began soliciting Bell Atlantic's customers for its own reselling operations. Bell Atlantic brought suit against CTC, claiming that it had breached its fiduciary duty to Bell Atlantic by failing to disclose all material information (i.e., its intentions regarding the possibility of resale with respect to the customers it serviced for Bell Atlantic) during the renegotiation of the noncompetition clause. Did CTC breach its fiduciary duty during the renegotiation by failing to disclose its intent regarding the possibility of becoming a reseller if the opportunity to do so arose?