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The duty of loyalty requires the directors to place the interests of the company and the shareholders before any of their personal interests. The directors' actions such as diverting corporate assets, opportunities, or information for personal gain can certainly violate their duty of loyalty.
An employee breaches his or her duty of loyalty and that breach can give rise to a cause of action when ?the employee takes action which is inimical to the best interests of the employer.? The duty of loyalty is breached once the employee's actions are detrimental to the employer.
Officers and directors can breach their duty of loyalty to their employer by acting in their own interests, rather than that of the company. This can occur when an officer or director makes a self-interested transaction, uses corporate opportunities for personal gain, or divulges the company's private information.
There are four standard elements required to establish a claim for breach of contract in California: (i) the existence of a valid contract, (ii) the plaintiff's performance or excuse for nonperformance, (iii) the defendant's breach of contract, and (iv) resulting damages.
For a tortious claim, the elements of a cause of action for breach of a duty of loyalty, are: ?(1) the existence of a duty; (2) a breach of that duty; and (3) damages proximately caused by that breach.? The employer must establish each of these elements in order to prevail in its claim.