Ethics Lawrence Gaffney was the president and general manager of Ideal Tape Company (Ideal). Ideal, which was a subsidiary of Chelsea Industries, Inc. (Chelsea), was engaged in the business of manufacturing pressuresensitive tape. Gaffney recruited three other Ideal executives to join him in starting a tape manufacturing business. The four men remained at Ideal for the two years it took them to plan the new enterprise. During this time, they used their positions at Ideal to travel around the country to gather business ideas, recruit potential customers, and purchase equipment for their business. At no time did they reveal to Chelsea their intention to open a competing business. The new business was incorporated as Action Manufacturing Company (Action). When executives at Chelsea discovered the existence of the new venture, Gaffney and the others resigned from Chelsea. Chelsea sued Gaffney and the others to recover damages. Chelsea Industries, Inc. v. Gaffney, 389 Mass. 1, 449 N.E.2d 320, Web 1983 Mass. Lexis 1413 (Supreme Judicial Court of Massachusetts)
1. What is the fiduciary duty of loyalty?
2. Did Gaffney act ethically in this case?
3. Did Gaffney and his partners breach their fiduciary duty of loyalty?