Hedgeye Risk Mgmt., LLC v. Heldman

• Decision Date: 29 September 2019
• Docket Number: Civil Action No. 16-935 (RDM)
• Citation: 412 F.Supp.3d 15
• Parties: HEDGEYE RISK MANAGEMENT, LLC, Plaintiff, v. Paul HELDMAN, Defendant.
• Court: U.S. District Court — District of Columbia

412 F.Supp.3d 15

HEDGEYE RISK MANAGEMENT, LLC, Plaintiff,

v.Paul HELDMAN, Defendant.

Civil Action No. 16-935 (RDM)

United States District Court, District of Columbia.

Signed September 29, 2019

Alan S. Block, Matthew Hoyt Johnson, Bonner Kiernan Trebach & Crociata, LLP, Washington, DC, Anthony Bongiorni, Pro Hac Vice, Raipher D. Pellegrino, Pro Hac Vice, Raipher, P.C., Springfield, MA, for Plaintiff.

Kirk David Becchi, John B. Simpson, Pro Hac Vice, Martin Wren, PC, Charlottesville, VA, for Defendant.

MEMORANDUM OPINION AND ORDER

RANDOLPH D. MOSS, United States District Judge

This is the third round of dispositive motions practice in a contentious dispute between an investment research firm, Hedgeye Risk Management, LLC("Hedgeye"), and one of its former employees, Paul Heldman.After Hedgeye purchased the assets of Heldman's former employer, Potomac Research Group ("PRG"), Hedgeye and Heldman were unable to come to terms on an employment agreement.Heldman and Hedgeye thus parted ways, and Heldman started his own firm, along with two colleagues who also left Hedgeye.In round one, the Court denied Hedgeye's motion for a preliminary injunction, granted summary judgment in Heldman's favor on Hedgeye's claim for breach of contract, and dismissed without prejudice Hedgeye's breach of fiduciary duty claim on the ground that the complaint did not allege that Heldman engaged in any wrongful conduct while employed by Hedgeye.Dkt. 26.In round two, Hedgeye filed an amended complaint renewing and supplementing its claims for breach of fiduciary duty, interference with advantageous business relations, and constructive trust.Dkt. 28.Once again, Heldman (and his company, Heldman Simpson Partners) moved to dismiss or, in the alternative for summary judgment.Dkt. 29.Hedgeye, in turn, opposed that motion, Dkt. 33, and moved for leave to file a second amended complaint, Dkt. 37.The Court denied Hedgeye's motion for leave to amend as futile, denied Heldman's motion to dismiss Hedgeye's claim for breach of fiduciary duty, granted Heldman's motion to dismiss Hedgeye's tortious interference claim as conceded, granted Heldman's motion to dismiss Hedgeye's constructive trust claim, and denied Heldman's motion for summary judgment on the fiduciary duty claim on the ground that Hedgeye was entitled to take discovery on that claim before responding to Heldman's motion.Dkt. 41.

Round three now presents the question that the Court postponed deciding in round two pending completion of discovery—that is, is Heldman entitled to summary judgment on Hedgeye's claim for breach of fiduciary duty?Dkt. 90.In that sole remaining claim, Hedgeye alleges that Heldman "breached his fiduciary obligation to [Hedgeye] by actively soliciting [Hedgeye's] clients and employees while [he was] employed [by] Hedgeye, by using and appropriating confidential and sensitive Hedgeye information, and by using Hedgeye instrumentalities to do so."Dkt. 50at 4–5(2d Am. Compl.¶ 29).In Heldman's view, these allegations are not supported by a scintilla of evidence.He, accordingly, not only seeks summary judgment, Dkt. 90, but also moves for sanctions pursuant to Federal Rule of Civil Procedure 11, Dkt. 115.

As explained below, the Court agrees with Heldman that there is no evidence that he solicited Hedgeye clients while employed by Hedgeye.There is some evidence—albeit slim—however, that would permit a reasonable jury (1) to find that Heldman solicited two Hedgeye employees—Sasha Simpson and Raca Banerjee—to leave Hedgeye and to join him in a competing business while he was still employed by Hedgeye, and (2) to find that at least some of the business cards that Heldman took with him when he left Hedgeye were Hedgeye's property.This is not by any measure an overwhelming case for Hedgeye.But it is enough to avoid summary judgment and the award of sanctions to Heldman.The Court, accordingly, will grant Heldman's motion for summary judgment in part and will deny it in part and will deny his motion for sanctions.

I.BACKGROUND

The Court has previously described the relevant background, seeHedgeye Risk Mgmt., LLC v. Heldman , 196 F. Supp. 3d 40, 42–45(D.D.C.2016)(" Hedgeye I ");Hedgeye Risk Mgmt., LLC v. Heldman , 271 F. Supp. 3d 181, 185–86(D.D.C.2017)(" Hedgeye II "), and will repeat that background only as relevant here.

Hedgeye "provides financial and economic research and analysis to institutional investors and newsletter products to mass market customers."Dkt. 50at 2(2d Am. Compl.¶ 6).In December 2015, Hedgeye purchased the assets of PRG, Heldman's former employer.Id.(2d Am. Compl. ¶ 9).Heldman worked for Hedgeye for approximately five weeks following the sale, during which time the parties engaged in negotiations regarding the terms of Heldman's continued employment.Dkt. 90-3at 1(Def.'sSUMF ¶ 3);Dkt. 124at 2–3(Pl.'sSUMF ¶¶ 7,19).At the time, Heldman managed a team that oversaw the firm's health policy research.Id. at 1(Pl.'s SUMF ¶ 4).That team allegedly generated over 70% of the PRG's annual revenue.Id. at 1(Pl.'s SUMF ¶ 3);Dkt. 127at 34(HeldmanDep. 34:3–10).On January 4, 2016, Hedgeye hired Raca Banerjee who, along with Sasha Simpson, completed Heldman's three-person health policy research team.Dkt. 129at 10–11(BanerjeeDep. 10:2–5, 11:2–14).Around the same time, Heldman, Simpson, and Banerjee were all negotiating with Hedgeye over their employment contracts.Among other things, Heldman was concerned about a proposed contractual term that would have limited his ability to compete against Hedgeye if he left the firm, and, when Simpson and Banerjee asked him "whether they should sign" similar covenants in their contracts, he told them that it was "up to" them but that he"would not sign it" and, indeed, was "not signing" his.Dkt. 127at 267–68(HeldmanDep. 267:16–268:13).Heldman further testified that he told Banerjee "to hold off" signing an employment contract with Hedgeye.Id. at 102–03(HeldmanDep. 102:5–103:22)

On Hedgeye's view of the facts, soon after it purchased PRG, Heldman began planning his departure.SeeDkt. 125at 5.Hedgeye further contends that, around late December and continuing through January, Heldman began collecting data from Hedgeye's files that would be useful in his new venture.Id. at 5–7.It asserts, in particular, that Heldman sought and was given (by a Hedgeye employee) certain "scorecards" that indicated how much Hedgeye clients valued the work of individual analysts, id. at 5; began reviewing employee salary data, id. at 7; accessed a marketing presentation, id.; and engaged in an "increased pattern" of using Hedgeye's Salesforce database, which contained information regarding the firm's clients, id. at 18.Hedgeye also contends that Heldman began engaging in "closed-door meetings" with Simpson and Banerjee.Id. at 6.Heldman, in response, asserts that, to the extent those meetings happened, they were work-related, seeDkt. 127at 268–69(HeldmanDep. 268:20–269:25), although he does not deny having "at least half a dozen" conversations outside of work with Simpson about the possibility of forming a new company, seeid. at 93–94, 96–97(Heldman Dep. 93:14–94:25, 96:22–97:17), including the specific possibility of Simpson and him forming a venture together, id. at 100–01(HeldmanDep. 100:22–101:8);see alsoDkt. 128at 163–64(SimpsonDep. 163:20–164:7)

On January 21, 2016, Heldman departed Hedgeye under circumstances that are in dispute; he claims he was terminated, Dkt. 127at 109–110(HeldmanDep. 109:19–110:12), while the firm asserts that he resigned, Dkt. 125at 5.It is undisputed, however, that within about an hour of Heldman's departure, Simpson and Banerjee resigned from the firm.SeeDkt. 127at 112(HeldmanDep. 112:10–19).Simpson and Banerjee each claim that they chose to resign independent of Heldman's departure and independent of one another.SeeDkt. 128at 168(SimpsonDep. 168:1–20);Dkt. 129at 87–91(BanerjeeDep. 87:20–90:13, 91:2–11).There is no dispute, however, that their resignations happened so close in time that Simpson and Banerjee departed Hedgeye on the same elevator, seeDkt. 128at 180–81(SimpsonDep. 180:14–181:4), and that Heldman, who was fired or quit about an hour earlier, was still outside the building, seeDkt. 127at 112(HeldmanDep. 112:12–19).In addition, all three—Heldman, Simpson, and Banerjee—acknowledge that, after their departures, they met in the firm's parking lot and, together, all three rode in Heldman's car to Simpson's apartment.Id. at 112–15(HeldmanDep. 112:7–115:19);Dkt. 128at 186–89(SimpsonDep. 186:15–189:19).¹

It is also undisputed that Heldman and Simpson announced the founding of their own firm, Heldman Simpson Partners("HSP"), the day after their departure from Hedgeye, Dkt. 127at 144(HeldmanDep. 144:5–10); that Banerjee was hired as one of HSP's employees, seeid. at 146(Heldman Dep. 146:16–20);Dkt. 129at 102(BanerjeeDep. 102:3–12); that HSP used business cards that Heldman had acquired over the years, including during his tenure at PRG/Hedgeye, to create HSP's initial client contact list, seeDkt. 127at 204(HeldmanDep. 204:3–16); and that HSP began operating (and competing with Hedgeye) within days of its formation, seeid. at 371(Heldman Dep. 371:18–25).In short, there is no dispute that, days after their departure from Hedgeye, Heldman's health policy research team began operating a new firm that "directly competes with Hedgeye."Dkt. 50at 3(2d Am. Compl.¶ 21).

In light of these events, Hedgeye contends that Heldman breached his fiduciary obligations to the firm in three respects: First, Hedgeye alleges that, prior to his departure, Heldman recruited Simpson and Banerjee to join him in founding and operating the new business, thereby causing a "mass resignation" of Hedgeye's health policy research team.Dkt. 125at 1.Second, it contends that Heldman solicited Hedgeye's clients before...