Oliver Wyman, Inc. v. Eielson

• Decision Date: 29 September 2017
• Docket Number: No. 15 Civ. 5305 (RJS),15 Civ. 5305 (RJS)
• Citation: 282 F.Supp.3d 684
• Parties: OLIVER WYMAN, INC., Plaintiff, v. John EIELSON & Alastair Adam, Defendants.
• Court: U.S. District Court — Southern District of New York

282 F.Supp.3d 684

OLIVER WYMAN, INC., Plaintiff,

v.John EIELSON & Alastair Adam, Defendants.

No. 15 Civ. 5305 (RJS)

United States District Court, S.D. New York.

Signed September 29, 2017

Plaintiff and Counterclaim–Defendant Oliver Wyman, Inc. is represented by Jonathan D Polkes and Nicholas James Pappas of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th FL, New York, New York 10153.

Defendants and Counterclaim–Plaintiffs are represented by Michael Christopher Ledley of Wollmuth Maher & Deutsch LLP, 500 Fifth Avenue, Suite 1200, New York, New York 10110.

OPINION AND ORDER

Richard J. Sullivan, District Judge:

Plaintiff Oliver Wyman, Inc. brings this action against its former employees—John Eielson and Alastair Adam—alleging fraud and breach of contract in connection with Oliver Wyman's acquisition of Defendants' consulting business in 2014. For their part, Defendants bring a variety of counterclaims alleging, in essence, that Oliver Wyman fraudulently induced them to sell their business.

Now before the Court are (1) Defendants' motion for summary judgment as to Oliver Wyman's remaining breach of contract claims (Doc, No. 81), (2) Oliver Wyman's motion for summary judgment as to Defendants' counterclaims (Doc. No. 76), and (3) assorted motions to seal portions of the briefs and submissions filed in connection with the summary judgment motions (Doc. Nos. 83, 91, 105, 115). For the reasons set forth below, Defendants' motion is denied, Oliver Wyman's motion is granted in part and denied in part, and the sealing motions are granted, with minor exceptions.

I. BACKGROUND

A. Facts

Defendants co-founded and served as co-CEOs of OCC Boston, a "boutique strategy consulting firm" specializing in "the information services sector."¹ (Pl. 56.1 ¶ 2; Def. 56.1 ¶¶ 4, 5.) Recognizing consulting-industry trends that favored large firms over small ones and that might impact OCC Boston's potential for growth and profits, Defendants began discussing a possible sale of OCC Boston in early 2013. (Pl. 56.1 ¶¶ 3, 4; Def. Counter 56.1 ¶ 3.) Defendants retained financial advisors in late 2013, and, in March 2014, those advisors contacted Oliver Wyman, "an international management consulting firm" based in Manhattan, to gauge the firm's interest in acquiring OCC Boston. (Pl. 56.1 ¶¶ 1, 4, 5.) OCC Boston provided financial and other information that "persuaded [Oliver Wyman] that OCC Boston might be an attractive asset to fold into [its] business," and Oliver Wyman entered into a series of discussions geared toward a possible acquisition. (Id. ¶ 6.)

Throughout the discussions, Oliver Wyman representatives expressed confidence that Oliver Wyman "was a strong platform to support the growth of the OCC Boston business." (Id. ¶ 17.) As the negotiations moved forward, Defendants sought information concerning Oliver Wyman's compensation system, average flow-through rate² and partner compensation, and various economic metrics for the practice groups into which Oliver Wyman planned to integrate OCC Boston—specifically, the Consumer and Industrial Value Transformation ("CIVT") practice and the Communications, Media, and Technology (CMT) sub-practice. (Id. ¶¶ 7, 12–16.) At the time, Oliver Wyman was in the midst of adopting a new compensation system that would go into effect in 2015, and Oliver Wyman's representatives told Defendants that "partner compensation was in flux." (Id. ¶¶ 7, 10.) However, on June 14, 2014, the head of Oliver Wyman North America, Alan McIntyre, and the head of Oliver Wyman's corporate development department, Simon Harris, met with Adam and told him that Oliver Wyman partners had an average flow-through rate of 30% and compensation of around $1 million. (Id. ¶ 11.) Later that month, McIntyre, Harris, and Martin Kon—a partner in the CIVT and CMT groups—met with Adam again and relayed a flow-through figure in the "[h]igh 20's to 30%." (Id. ¶ 12.) Several months later, on October 9, 2014, McIntyre emailed Adam two documents that included information concerning Oliver Wyman's new compensation model; the previously relayed average flow-through rates; Oliver Wyman's consultant billing rates; and the firm's deferred bonus program, by which a portion of partners' yearly bonuses were put into a deferral "pot" to be paid out over the course of the following three years. (Id. ¶¶ 13–16.)

Defendants were disappointed by the information contained in the October 9 documents, particularly as to Oliver Wyman's relatively higher compensation rates for its non-partner employees and its deferred bonus program. (Id. ¶¶ 21, 23–25.) Defendants also believed that Oliver Wyman was deliberately avoiding questions about CIVT's and CMT's comparative profitability and that this indicated Oliver Wyman was not as strong a firm as Defendants had believed. (Id. ¶ 22.) In response to these concerns, Oliver Wyman agreed that Defendants and the other OCC Boston Partners would not be subject to the deferred bonus program for their first two years at Oliver Wyman. (Id. ¶ 25.) Over the next several weeks, Oliver Wyman representatives reached out to Defendants to assuage their concerns about the moneymaking potential at Oliver Wyman. (Id. ; Def. Counter 56.1 ¶¶ 22–24, 26.)

Despite their misgivings, Defendants ultimately decided to move forward with the sale of OCC Boston to Oliver Wyman for $16.5 million, and, on October 29, 2014, the two firms entered into an Asset Purchase Agreement ("APA") with a closing date of December 2, 2014. (Pl. 56.1 ¶¶ 27, 33; Def. 56.1 ¶ 7; see also Doc. No. 89, Ex. A.) As part of the acquisition, both Defendants executed identical employment agreements, which provided that Defendants would work at Oliver Wyman for four years at an annual salary, before bonuses, of $425,000. (Pl. 56.1 ¶ 28; see also Doc. No. 89, Exs. C, D.) Defendants also executed identical non-solicitation agreements that prohibited them from (1) soliciting Oliver Wyman clients and prospective clients and (2) causing any employee with whom they worked at the firm to separate from Oliver Wyman. (Pl. 56.1 ¶ 28; Def. 56.1 ¶ 10; see also Doc. No. 89, Exs. C at 12, D at 12.)

Soon after the closing in December 2014, Defendants began working at Oliver Wyman's Boston office. Almost immediately, however, Defendants' compensation concerns resurfaced. (Pl. 56.1 ¶ 34.) As Defendants feared, the conversion of OCC Boston projects to Oliver Wyman's compensation structure resulted in reduced profits for partners like Defendants. (Id. ¶¶ 34, 35.) Although Oliver Wyman eventually took steps to reduce the shortfall experienced by former OCC Boston partners, Defendants remained unhappy with their compensation at Oliver Wyman. (Id. ¶¶ 36–38.)

By late December 2014, Eielson was already convinced that the sale of OCC Boston had been a mistake and that he wanted to leave Oliver Wyman. (Pl. Counter 56.1 ¶ 40.) On January 25, 2015, Eielson emailed Adam that he was not sure he would "make it to June" and that the situation at Oliver Wyman reminded him of a previous time Defendants had left an employer. (Id. ¶ 20.) Adam responded that he thought it would take him "until spring to figure out plan b," but that he did not "think about much else these days." (Id. ; Doc. No. 97, Ex. E.) And, in a February 19, 2015 email to his wife, Eielson wrote that he did not "really work anymore." (Pl. Counter 56.1 ¶ 20.) In March 2015, Oliver Wyman promoted Adam to be North American geo-coordinator of CIVT and planned to promote Eielson to head the firm's private equity practice. (Def. 56.1 ¶¶ 24, 25.) Nevertheless, Defendants' enthusiasm for the Oliver Wyman merger continued to diminish. Indeed, Defendants' billable hours declined each month they were employed, with neither billing any time to clients whatsoever in the month of April. (Id. )

That same month, Eielson learned of an opportunity to acquire an information services company. (Def. 56.1 ¶ 29.) Soon thereafter, Eielson informed Adam about the opportunity, sought his advice, and expressed his desire to leave Oliver Wyman to pursue the new venture. (Id. ¶¶ 29, 30.) In response, Adam also expressed a desire to leave the firm, and on April 21, 2016, Defendants announced their resignations from Oliver Wyman. In a May 2, 2015 email, sent after Defendants tendered their resignations but before they left the firm, Eielson wrote to Adam that they needed to be careful about how they characterized their resignations and "stick to the party line." (Pl. Counter 56.1 ¶ 42.) On May 8, 2015, they both left the firm to pursue, together, the opportunity previously identified by Eielson. (Pl. 56.1 ¶ 38; Def. 56.1 ¶¶ 31, 33, 35.) While Defendants "vigorously pursued" the acquisition opportunity, it ultimately did not materialize. (Def. 56.1 ¶ 36.) Since leaving Oliver Wyman, neither Defendant has attempted to return to the consulting business to compete with their former employer. (Id. ¶ 37.)

B. Procedural History

On June 16, 2015, Oliver Wyman commenced suit against Defendants. Although the action was originally filed in New York State Supreme Court, New York County (Doc. No. 1; Pl. 56.1 ¶ 1; Def. 56.1 ¶¶ 1–3), Defendants removed the action to this Court on July 9, 2015, pursuant to 28 U.S.C. §§ 1332, 1441, 1446, since Oliver Wyman is a Delaware corporation with its principal place of business in New York and Defendants are Massachusetts citizens. (Doc. No. 1.)

On July 14, 2015, Oliver Wyman filed its first amended complaint, alleging claims for fraudulent inducement, fraud, breach of contract, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, tortious interference with contractual and business relationships, breach of the implied covenant of good faith and fair dealing, violation of Chapter 93A of the Massachusetts General Laws, and unjust enrichment. (Doc. No. 8.) Defendants moved to dismiss the complaint, and, on September 22, 2016, the Court granted the motion in substantial part, leaving only Oliver Wyman's breach of contract claims under the employment...