Match Grp., Inc. v. Rad
| Decision Date | 01 June 2020 |
| Docket Number | INDEX NO. 650287/2019 |
| Citation | 2020 NY Slip Op 31669 (U) |
| Parties | MATCH GROUP, INC.,MATCH GROUP, LLC, IAC/INTERACTIVECORP Plaintiff, v. SEAN RAD, Defendant. |
| Court | New York Supreme Court |
The following e-filed documents, listed by NYSCEF document number (Motion 006) 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 168, 169, 170, 171, 172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 182, 183, 184, 194, 198 were read on this motion to/for DISMISSAL.
In these actions, inter alia, to recover damages for breach of contract, Sean Rad ("Rad") moves for partial dismissal of the second amended complaint in the 2019 action and the counterclaims asserted in the 2018 action.
In the 2018 action, plaintiffs alleged causes of action against Match Group Inc., Match Group, LLC and IAC/InteractiveCorp. ("IAC") (together "Match") for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contracts, and interference with prospective economic advantage. Match moved to dismiss that complaint, and in an order dated June 5, 2019, I dismissed the cause of action for breach of the implied covenant of good faith and fair dealing, the cause of action for unjust enrichment, and the cause of action for breach of contract only as to the merger-related breach of contract claim brought by Alexa Mateen and Justin Mateen.1
In January 2019, Match commenced an action against Rad. In its second amended complaint, Match alleges that Rad breached his employment contract by, among other things, misappropriating confidential information, destroying documents in his work email account, and making numerous secret recordings of his supervisors and other work associates. Match claims that, had it known of Rad's misconduct and breaches at the time they occurred, it would have terminated his employment immediately for cause, and Rad would have had to forfeit his options. Based on these allegations Match pleads causes of action against Rad for (1) breach of confidentiality protocols and employment agreements between Rad and Match and or one of its affiliates, i.e., the Hatch Employment and Confidentiality Agreements; IAC Confidentiality Agreement; Tinder Confidentiality Agreement; IAC Code of Business Conduct and Ethics; and Match's Code of Business Conduct and Ethics, for copying, deleting and retaining confidential information; (2) breach of the same confidentiality protocols and employment agreements for secretly recording confidential communications with other employees; (3) breach of a 2014 Amendment Agreement between Match and Rad by soliciting employees to leave the company; (4) violation of California Invasion of Privacy Act by secretly recording confidential communications with other employees; (5) unjust enrichment; and (6) a declaratory judgment stating that Rad is not entitled to advancement of any of hisexpenses in connection with these lawsuits. Match also asserted these claims as counterclaims in the 2018 action.
Rad now moves to dismiss the breach of contract causes of action and counterclaims, unjust enrichment cause of action and counterclaim, and the California Invasion of Privacy Act cause of action and counterclaim to the extent that it seeks attorneys' fees as damages.
Rad first argues that all of the breach of contract claims must be dismissed because there are no allegations that Rad's purported acts of copying, retaining and deleting company information, recording conversations with employees, and soliciting employees to leave the company caused any injury to the company. Therefore, there can be no recoverable damages.
Rad next contends that, in any event, there is no "claw-back damages" provision included in any of the relevant contracts, and that any damages alleged under this theory would be purely speculative. Further, the second amended complaint does not sufficiently allege that there would have even been grounds to terminate Rad's employment for cause and, to fire him for cause, it would have first had to provide him with notice of any breach he committed and a cure period.
Rad also addresses each basis for the breach of contract claims. With regard to the claim that he breached the contract on the basis of copying, retaining and deleting confidential information, he argues that the 2014 Amendment Agreement authorized him to "use" or "disclose" confidential information in many situations, including disclosure to "any financial, legal, tax or accounting advisor" for any reason during and after hisemployment with Tinder. His rights under that agreement existed "notwithstanding" anything to the contrary in the Tinder or Hatch agreements. He further maintains that there is no contractual provision that prohibited him from deleting information.
Rad also argues that his alleged secret recording of conversations with employees does not constitute a breach of contract because, inter alia, there is no allegation that Rad improperly used or disclosed the recordings or that Match sustained any harm or loss as a result of the recordings.
Rad contends that the claim that he breached a non-solicitation clause in the 2014 Amendment Agreement must fail. He explains that even though the subject agreement is governed by Delaware law, the parties who were allegedly solicited were California residents and located in California at the time of the alleged solicitation and thus, California law would apply to this claim. Under California law, the subject non-solicitation provision is unenforceable because it violates public policy. Further, none of the individuals that were allegedly solicited actually left their employment.
As to the cause of action under the California Invasion of Privacy Act, Rad contends that Match is not entitled to attorneys' fees because attorneys' fees are not ordinarily recoverable as actual damages under the statute. Rather, at most, Match could be entitled to damages of $5,000 per recording. Finally, Rad maintains that the unjust enrichment claim must be dismissed as duplicative of the breach of contract claim.
In opposition, Match first argues that the relevant contracts clearly provide that Rad was not permitted to copy, retain or delete company documents. Specifically, the IAC Agreement provides that Rad promised to "preserve and protect the confidentialityof all Confidential Information," and promised not to transmit such information for non-work purposes. In the Hatch Agreement, Rad promised, "I will not make copies of any Confidential Information or remove or transmit any Confidential Information from Hatch Labs' business premises without prior authorization from Hatch Labs." In the Tinder Agreement, Rad promised not to misuse documents and to obey company policies, which expressly barred "copying of electronic files." Further, Rad assigned property rights over all confidential information to IAC, Match and their affiliates pursuant to Section 3.2 of the Hatch Agreement and Section 2 of the IAC Agreement. Match contends that Rad deleted the information so that it could not be used against him in the valuation process or in any litigation.
Match explains that the 2014 Amendment Agreement only adjusted the Hatch and Tinder Agreements slightly to authorize Rad to "disclose" or "use" confidential information in connection with an options valuation or other legal disputes with Match. That amendment did not give him permission to copy or retain the information in his personal possession after his employment was terminated. Even after execution of the 2014 Amendment Agreement Rad was always required to follow company policies, not copy or delete confidential information, and return confidential information if his employment was terminated. Match also notes that the 2014 Amendment Agreement does not reference the IAC Agreement, therefore, the prohibitions set forth in the IAC Agreement are not superseded.
Match next argues that, in any event, even if the 2014 Amendment Agreement did give Rad permission to use and disclose confidential information, the breach of contractclaims cannot be dismissed because Rad admitted that he took confidential documents beginning 2012, at which time the 2014 Amendment Agreement was not in effect. In addition, Rad copied materials beyond those which were contemplated by the 2014 Amendment Agreement.
Match argues that Rad's copying, retaining and deleting confidential information also violated company policy and breached his obligations pursuant to the IAC Code of Business Conduct and Ethics, and Match's Code of Business Conduct and Ethics to act in a manner that was "honest, lawful, and in accordance with high ethical and professional standards." Rad's act of secretly recording company employees also violated his ethical obligations and his obligations to preserve confidential information.
Additionally, Match argues that it adequately pled damages. Rad would have been fired for cause if his breach of the agreements and company policies and unethical secret recordings had been known, and he would have had to forfeit his vested options. Match maintains that Rad cannot claim that he was not given an opportunity to cure misconduct that he actively concealed, and in any event, the contractual notice and cure provisions acknowledge that some breaches, such as the ones alleged herein, would not be curable. Further, whether the breaches were curable or not as a matter of law is an issue not ripe for adjudication at this time. In any event, even if Match was not entitled to money damages, it could be entitled to nominal damages and also equitable relief.
With regard to the claim that Rad breached his non-solicitation obligations, Match argues that pursuant to the 2014 Amendment Agreement, Rad agreed "that during his employment at Tinder and for...
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