Targetsmart Holdings, LLC v. GHP Advisors, LLC
| Decision Date | 19 September 2019 |
| Docket Number | Civil Action No. 19-312 (RMC) |
| Parties | TARGETSMART HOLDINGS, LLC, et al., Plaintiffs, v. GHP ADVISORS, LLC, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
TargetSmart Holdings, LLC of the District of Columbia complains that Boston-based GHP Advisors, LLC, d/b/a Good Harbor Partners, and Catalist, LLC of D.C., misappropriated TargetSmart's trade secrets under the guise of merger negotiations. TargetSmart alleges that Catalist obtained its trade secrets through GHP, which expressed interest in TargetSmart on behalf of anonymous donors to Democratic Party causes, when GHP actually represented Catalist. TargetSmart asserts that Catalist used the TargetSmart trade secrets to compete improperly and to defame TargetSmart. It seeks damages and injunctive relief.
This lawsuit was initially filed in the district court of Massachusetts. It was transferred here after Judge Douglas P. Woodlock granted Catalist's Motion to Dismiss for lack of personal jurisdiction. Judge Woodlock also transferred the case against GHP, over whom jurisdiction was proper in Massachusetts, to D.C. Catalist's motion to dismiss from this Court is ripe.1
Counts I, II, III, VI, VIII, and IX of the Second Amended Complaint are directed, in part, to Catalist. The Court will grant its Motion to Dismiss as to Counts II, III, VI, VIII, and IX and deny it as to Count I.
TargetSmart Holdings, LLC (TargetSmart) is a District of Columbia-based technology and consulting firm that specializes in providing Democratic and progressive campaigns, candidates, and organizations with data and software to help expand their audiences. Second Am. Compl. (SAC) [Dkt. 36] Introductory Statement, ¶¶ 1, 11.2
Catalist, LLC, is a District of Columbia-based firm that, like TargetSmart, focuses on serving Democratic and progressive candidates. Id. Introductory Statement, ¶¶ 4, 35. Catalist is a competitor of TargetSmart. Id. ¶ 35.
GHP Advisors, LLC, d/b/a Good Harbor Partners (GHP), is a Boston-based investment firm. Id. Introductory Statement.
In early November 2017, Catalist and GHP entered into a letter agreement (Letter Agreement) for GHP to "'serve as advisor [to Catalist] in connection with the potential acquisition of a specific, pre-identified target company.'" Id. ¶ 13; see Ex. 1, Catalist Mot., Letter Agreement [Dkt. 39-1] at 1, § 1. TargetSmart alleges that it was the "'pre-identified target company.'" SAC ¶ 14. The Letter Agreement stated that GHP would provide Catalist "with financial advice and assistance," including managing the due diligence process. Letter Agreement at 1, § 2. The Letter Agreement provided that GHP would keep Catalist "'informed of the activities undertaken by GHP'" and of "'all performance of Services required of GHP'" under the Agreement. SAC ¶ 19; Letter Agreement at 4, § 6. It further stated that GHP was not an employee or agent of Catalist and would perform services as an "independent contractor." Letter Agreement at 4, § 6.
In December 2017, a third-party supplier emailed TargetSmart stating that it was aware of a potential new "'business opportunity.'" SAC ¶ 21. The supplier offered to introduce TargetSmart to GHP to obtain further details. Id. ¶ 22. TargetSmart had an initial call with GHP on December 13, 2017. GHP told TargetSmart that it had been retained by individual political donors who wanted to combine TargetSmart with other companies in order to improve the data infrastructure in the Democratic and progressive markets. Id. ¶ 24. Thereafter, TargetSmart and GHP entered into a Mutual Nondisclosure Agreement (Mutual NDA). Id. ¶ 27. The Mutual NDA allowed the parties to exchange non-public, confidential, trade secret and proprietaryinformation (Non-Public Information) but prevented both parties from using or disclosing such information without the other party's prior written consent. Id. ¶¶ 28-29.3
After the Mutual NDA was signed, GHP and TargetSmart scheduled an in-person meeting in Boston. Id. ¶ 31. In preparation for the meeting and at GHP's request, TargetSmart sent GHP a memorandum on December 20, 2017, which included Non-Public Information about TargetSmart's data, products, services, and clients, as well as information about its finances and possible growth opportunities. Id. ¶ 32. The memorandum specifically stated that the information was covered by the Mutual NDA. Id.
TargetSmart met with GHP on December 21, 2017. GHP again stated that it represented wealthy donors who wanted to combine established companies in the Democratic and progressive markets. Id. ¶ 33. GHP indicated that its clients were most interested in combining TargetSmart with its competitor, Catalist. Id. ¶ 35. TargetSmart told GHP that it would only consider a merger of TargetSmart with Catalist if the donors or funders acquired both companies, if TargetSmart remained in control, and if the Catalist leadership team would not have a role in the combined entity. Id.
Following the meeting, GHP notified TargetSmart that it would like to proceed with due diligence for a potential transaction. GHP asked for information about TargetSmart's book of business, its third-party relationships and vendor agreements, and its costs and expenses. Id. ¶ 36. TargetSmart advised GHP that it was uncomfortable with the request, as TargetSmart believed it exceeded the information required to appraise TargetSmart's business for purposes ofa merger. Id. ¶ 37. TargetSmart asked GHP to provide a rough estimate of the proposed purchase price for TargetSmart's "political business" in exchange for access to TargetSmart's financials. Id. ¶¶ 37-39. GHP agreed to the proposal, "subject to further due diligence," and TargetSmart provided financial information to GHP. Id. ¶¶ 38-39. In January 2018, the very next month, GHP informed TargetSmart that TargetSmart's financials showed that it was "'bigger than expected'" and that GHP would need some time to raise capital to acquire TargetSmart. Id. ¶ 40.
On February 8, 2018, TargetSmart learned that a writer with ties to Laura Quinn, the Chief Executive Officer (CEO) of Catalist, "was contacting TargetSmart's employees and asking a number of pointed questions about TargetSmart and its relationship with certain specified clients." Id. ¶ 41. TargetSmart alleges that certain questions "were based upon [N]on-[P]ublic Information provided to GHP and covered by the Mutual NDA." Id.
TargetSmart asked GHP if the writer's inquiries were part of GHP's due diligence or if the writer were acting for Catalist. GHP stated that "the inquiries were not part of the due diligence process" and that "they would be 'shocked' if Catalist was [sic] behind the writer's inquiries." Id. ¶ 44. TargetSmart then contacted Mike Podhorzer, a member of Catalist's Board of Directors, and repeated its concerns about the inquiries and potential disclosures by Ms. Quinn. Mr. Podhorzer stated that he would speak to Ms. Quinn. Id. ¶ 45. When he called back, Mr. Podhorzer "stated that he did not agree with Ms. Quinn's actions, and promised that the inquiries would stop." Id.
On February 21, 2018, TargetSmart discovered that a third-party source had told a TargetSmart client that "Catalist was in the process of buying TargetSmart." Id. ¶ 46.TargetSmart contacted GHP and again expressed its concerns about compliance with the Mutual NDA. GHP responded that it would "'reinforce'" confidentiality with its clients. Id. ¶ 47.
On March 14, 2018, TargetSmart met with GHP and Catalist in the District of Columbia to discuss the potential acquisition. Id. ¶¶ 49-50. Catalist was represented at the meeting by its Board Members Mark Steitz and Mr. Podhorzer. Id. ¶ 50. At the outset of the meeting, Mr. Podhorzer stated that he was not covered by an NDA and offered to leave the room during the discussion. Id. ¶ 51.4 GHP then explained to TargetSmart that it could not raise enough capital for the acquisition because of TargetSmart's size. Id. ¶ 53. Mr. Steitz thanked TargetSmart for participating in "'the process'" and stated that Catalist was "'respectful' . . . of the NDA." Id. However, Mr. Steitz further indicated that one of Catalist's funders had "'broke[n] the NDA.'" Id. TargetSmart asked who else at Catalist had received TargetSmart's Non-Public Information. TargetSmart was told that Mr. Steitz had received all of the Non-Public Information and that Ms. Quinn had received some of it. Id. ¶ 55.
On April 10, 2018, TargetSmart sent GHP a letter in which it accused GHP of violating the Mutual NDA. TargetSmart demanded that GHP comply with certain requests including return of all Non-Public Information. Id. ¶ 59. In response, GHP denied that it had breached the Mutual NDA but at the same time admitted that it had shared the Non-Public Information with Mr. Steitz and Ms. Quinn. GHP stated that both Catalist individuals werebound by separate NDAs with TargetSmart and, further, that GHP had destroyed all of the Non-Public Information and had instructed Catalist to do the same. Id. ¶¶ 60, 62-63.
With its response, GHP enclosed documents that indicated that Catalist had agreed to NDAs with TargetSmart. TargetSmart alleges that GHP had altered the Mutual NDA signed by TargetSmart by replacing GHP's signature line with a signature line for Mr. Steitz and Ms. Quinn but retaining a signature line for TargetSmart.5 Id. ¶ 61. TargetSmart asserts that "Catalist never received countersigned copies of the false NDAs (or any true NDAs) signed by a TargetSmart representative because TargetSmart was not in fact involved in the creation of the false NDAs and was unaware of their creation until receiving the letter from GHP." Id. TargetSmart further argues that "[t]he supposed [NDAs] so blatantly...
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