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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
ALIXPARTNERS, LLP, ALIXPARTNERS
HOLDINGS, LLP, ALIXPARTNERS
(SHANGHAI) BUSINESS ADVISORY
SERVICES LIMITED, and
ALIXPARTNERS HONG KONG
LIMITED,
Plaintiffs,
v.
ERIC THOMPSON and IVO NAUMANN,
Defendants.
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C.A. No. 9523-VCP
DEFENDANTS’ PRETRIAL BRIEF
OF COUNSEL:
Steven M. Kayman
Scott Eggers
Elise A. Yablonski
Pietro A. Deserio
Lindsey A. Olson
PROSKAUER ROSE LLP
Eleven Times Square
New York, NY 10036-8299
(212)-969-3000
MORRIS, NICHOLS, ARSHT &
TUNNELL LLP
Kenneth J. Nachbar (#2067)
Jay N. Moffitt (#4742)
Ryan D. Stottmann (#5237)
Dustin B. Hillsley (#5904)
1201 N. Market Street
Wilmington, DE 19801
(302) 658-9200
Attorneys for Defendants
September 10, 2014
PUBLIC VERSION FILED SEPTEMBER 17, 2014
i.
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES iv
PRELIMINARY STATEMENT 1
STATEMENT OF FACTS 8
A. Eric Thompson’s And Ivo Naumann’s Work With
AlixPartners. 8
B. Eric and Ivo Independently Decide To Leave
AlixPartners. 9
C. Eric Gives Notice To AlixPartners. 12
D. Ivo Gives Notice To AlixPartners. 12
E. AlixPartners Prepares To Ambush Eric And Ivo. 13
F. McKinsey Takes Steps To Ensure That Eric And
Ivo Honor Their Obligations To AlixPartners. 14
G. AlixPartners’ Failure To Take Reasonable Steps
To Protect Its Claimed Rights In Connection With
The Defendants’ Departures. 16
H. AlixPartners’ Employees Commonly Used
Personal Devices To Access AlixPartners
Documents. 18
I. Eric’s And Ivo’s Use Of Their Personal E-Mail
Accounts. 20
J. The Protocol Reveals No Misuse, Disclosure or
Injury. 22
K. Defendants Have Retained A Forensic Examiner
To Investigate AlixPartners’ Latest Incendiary
Allegations Of Spoliation. 24
ii.
TABLE OF CONTENTS (Continued)
Page
L. AlixPartners Sat On Whatever Rights It Had To
Enforce Eric’s Non-Compete. 25
ARGUMENT 28
I. ERIC AND IVO DID NOT MISAPPROPRIATE ANY
ALLEGED ALIXPARTNERS TRADE SECRETS. 28
A. Without Evidence Of Use Or Disclosure, And
There Is None Here, AlixPartners Has No Trade
Secret Claim. 28
B. As To Each Of The Documents In Question,
AlixPartners Must Establish The Existence Of A
Protectable Trade Secret. 30
II. ERIC’S NON-COMPETE IS UNENFORCEABLE
UNDER GOVERNING HONG KONG LAW. 31
A. The Non-Compete Is Broader Than Necessary To
Protect AlixPartners’ Legitimate Interests. 32
B. The Worldwide Geographic Scope Of The Non-
Compete Is Too Broad. 34
C. The Duration Of The Non-Compete Is Too Long. 35
D. Hong Kong Courts Will Not Apply A “Blue
Pencil” To Salvage An Overbroad Covenant. 36
E. AlixPartners’ Delay In Seeking To Enforce Eric’s
Non-Compete Undercuts Any Claim Of
Irreparable Harm And Constitutes Laches. 38
III. ERIC AND IVO DID NOT BREACH THEIR
CONTRACTS WITH ALIXPARTNERS. 39
A. AlixPartners Cannot Prevail On Its Confidentiality
Claims Because Eric and Ivo Have Not Used Or
iii.
TABLE OF CONTENTS (Continued)
Page
Misused AlixPartners’ Claimed Confidential
Information. 40
1. Neither Eric Nor Ivo Breached The LLP
Agreement. 40
2. Eric and Ivo Did Not Breach Their
Employment Agreements. 42
B. Eric Did Not Violate His Employment Agreement
By Allegedly “Soliciting” Ivo. 44
1. Eric Did Not Violate the Non-Solicitation
Provision of His Employment Agreement
Because It Only Applies Post-Termination. 44
2. Eric Did Not Breach The Duty Of Loyalty
By Soliciting Ivo. 45
C. Ivo Did Not Violate His Employment Agreement
By Allegedly Soliciting Eric. 48
IV. ERIC AND IVO DID NOT BREACH FIDUCIARY
DUTIES OWED TO ALIXPARTNERS. 50
V. ERIC AND IVO DID NOT CONVERT
ALIXPARTNERS’ CONFIDENTIAL AND
PROPRIETARY INFORMATION. 51
A. Eric And Ivo Did Not Refuse Plaintiffs’ Demand
That They Return AlixPartners’ Documents. 51
VI. ERIC AND IVO DID NOT PARTICIPATE IN A CIVIL
CONSPIRACY. 53
A. No Confederation Existed. 53
VII. ALIXPARTNERS HAS SUFFERED NO INJURY AND
THEREFORE HAS NO DAMAGES. 55
CONCLUSION 58
iv.
TABLE OF AUTHORITIES
Page(s)
Cases
Acierno v. Goldstein,
2005 WL 3111993 (Del. Ch. Nov. 16, 2005) 57
Agilent Techs., Inc. v. Kirkland,
2010 WL 610725 (Del. Ch. Feb. 18, 2010) 30
Dana Ltd. v. Am. Axle & Mfg. Holdings, Inc.,
2013 WL 4498993 (W.D. Mich. Aug. 19, 2013) 30
Draper Commc’ns, Inc. v. Delaware Valley Broadcasters Ltd. P’ship,
505 A.2d 1283 (Del. Ch. 1985) 39
eCommerce Indus., Inc. v. MWA Intelligence, Inc.,
2013 WL 5621678 (Del. Ch. Sept. 30, 2013) 55
Great Am. Opportunities, Inc. v. Cherrydale Fundraising, LLC,
2010 WL 338219 (Del. Ch. Jan. 29, 2010) 28, 30, 55
Mercer Mgmt. Consulting, Inc. v. Wilde,
920 F. Supp. 219 (D.D.C. 1996) 34, 47
Rockwell Automation, Inc. v Kall,
2004 WL 2965427 (Del. Ch. Dec. 15, 2004) 53, 55
Sci. Accessories Corp. v. Summagraphics Corp.,
425 A.2d 957 (Del. 1980) 45, 47
Sit-Up Ltd. v. IAC/InteractiveCorp.,
2008 WL 463884 (S.D.N.Y. Feb. 20, 2008) 31
Solow v. Aspect Res., LLC,
2004 WL 2694916 (Del. Ch. Oct. 19, 2004) 50
Triton Const. Co., Inc. v. E. Shore Elec. Servs., Inc.,
2009 WL 1387115 (Del. Ch. May 18, 2009), aff’d, 988 A.2d 938
(Del. 2010) 45, 51, 52
v.
TABLE OF AUTHORITIES (Continued)
Page(s)
Univ. Computing Co. v. Lykes-Youngstown Corp.,
504 F.2d 518 (5th Cir. 1974) 30
Wayman Fire Prot., Inc. v. Premium Fire & Sec., LLC,
2014 WL 897223 (Del. Ch. Mar. 5, 2014) passim
Weichert Co. of Pa. v. Young,
2007 WL 4372823 (Del. Ch. Sep. 10, 2007) 49, 50
Rules and Statutes
6 Del. C. § 15-404(d) 42, 47
6 Del. C. § 2001(4) 31
6 Del. C. § 2004 57
1.
Defendants Eric Thompson (“Eric”) and Ivo Naumann (“Ivo”) respectfully
submit this pre-trial brief in connection with the trial of this case brought against
them by their former employer, scheduled to commence September 16, 2014.
(Plaintiffs are referred to collectively herein as “AlixPartners.”)
PRELIMINARY STATEMENT
For approximately two and one-half years, starting in 2011, Eric Thompson
was a Managing Director of AlixPartners, assigned to the firm’s Hong Kong
office, although he worked out of his home in Singapore. For approximately seven
years, starting in 2007, Ivo Naumann was a Managing Director of AlixPartners,
assigned to the firm’s office in Shanghai, People’s Republic of China. Both had
substantial prior experience working for other firms in the restructuring field in
Asia.
In the first half of 2013, AlixPartners’ Asia Business Unit was struggling
financially – its revenues had come in far below budget.
AlixPartners’ new majority
owner, a private equity firm called CVC Capital Partners, had decided not to
commit any substantial new resources to the Asia market. AlixPartners – and
many of its employees – were unhappy with the head of the Asia Business Unit,
who was about to be removed.
2.
Eric and Ivo independently decided to consider leaving AlixPartners and
explore outside opportunities – as did several other of the firm’s Managing
Directors in Asia. AlixPartners knew as early as June 2013 that the Defendants
might leave and made substantial efforts, both before and after they resigned, to
convince them to stay. Eric and Ivo had become friendly through their work
together and discussed their mutual unhappiness at AlixPartners and, to some
extent, shared their consideration of alternative employers.
Ultimately, each made an independent decision to leave AlixPartners and
join McKinsey Restructuring and Transformation Services (“McKinsey RTS”), an
operating unit of McKinsey & Company (we will refer to “McKinsey” in this brief
as including McKinsey RTS, unless the context requires otherwise). Eric resigned
on November 1, 2013 and was placed on “garden leave.” Eric’s last official day of
employment with AlixPartners was January 31, 2014, and he started working at
McKinsey the next business day.
Ivo resigned on December 12, 2014. AlixPartners asked Ivo to continue
working for the entirety of his 90-day notice period, because he was generating
substantial revenue for AlixPartners through a major client engagement. Ivo’s last
day of work for AlixPartners was March 14, 2014, and he started his employment
with McKinsey on March 31, 2014.
3.
None of these facts, which form the entirely unremarkable backdrop for this
case, is in dispute. Nor is there any claim by AlixPartners that Eric and Ivo failed
to fully and faithfully perform their work-related duties for AlixPartners
throughout the periods of their employment.
On March 17, 2014, the first business day after Ivo’s last day of work at
AlixPartners, Eric and Ivo each received a letter from AlixPartners accusing them
of taking AlixPartners documents. Until they received those letters, neither Eric
nor Ivo had any reason to believe they had left on anything other than good terms.
Ivo did send some AlixPartners documents to his personal email account, and
should not have done so, but he did not transfer them with the intent of using them
competitively against AlixPartners or to benefit McKinsey. Eric, on the other
hand, did not send any documents to himself except in the ordinary course of his
work for AlixPartners and immediately demanded to know the details of the
accusation. Since that time, AlixPartners has backed away from its claim that Eric
“stole” the two documents it eventually identified as the ones referred to in its
March 17 letter, and discovery has proven that they were not “stolen,” though
AlixPartners has never had the good grace to admit that its original charge against
Eric was unfounded.
Promptly after receiving the March 17 letters, Eric and Ivo retained counsel,
assured AlixPartners that there had not been and would not be any misuse of its
4.
information and committed to return, delete or otherwise dispose of all
AlixPartners documents in their possession. AlixPartners was not interested in
avoiding conflict, however. It had decided to launch a litigation as part of a
“comprehensive competitive response” to the “threat” posed by McKinsey – to
punish the Defendants for leaving, to send a message to other employees who
might consider leaving to join McKinsey that they too might be made to suffer and
to harass and embarrass McKinsey and thereby, AlixPartners hoped, impede the
“competitive threat” that McKinsey posed.
Now, five months and many millions of dollars in legal expense later,
AlixPartners has nothing more than it had before it sued: evidence that Defendants
possessed certain AlixPartners documents but never misused them. AlixPartners
brought this case stridently accusing Eric and Ivo, in its pleadings and in its
statements to the press, of having a “plan” “to steal AlixPartners’ trade secrets.”
The evidence at trial will show that there never was such a plan and that, just as
Eric and Ivo represented before AlixPartners sued them, they never misused any
AlixPartners information and never had any intention of doing so.
Instead, the evidence will show that AlixPartners was the one with the plan –
to seize upon Ivo’s admittedly unfortunate (but innocent) decision to transfer a
number of emails to his personal account as a justification for launching an all-out,
hyper-aggressive assault on its former employees and their new employer. The
5.
evidence will show that this case was not brought (and has not been prosecuted) in
a good faith effort to safeguard AlixPartners’ claimed confidential information but,
rather, in an attempt to use this Court’s processes as instruments of unfair
competition against a perceived competitive “threat.” That is why AlixPartners hid
the truth of what it knew and when behind a wall of unfounded privilege objections
and its witnesses’ claimed failures of recollection, until this morning when it very
reluctantly admitted to the Court that it knew of the core conduct of which it
complains by December 18, 2013, while Defendants were still in its employ and a
full three months before AlixPartners even expressed a concern about the potential
misuse of its information.
AlixPartners has already been given the remedy that is appropriate and
sufficient for what the evidence will show occurred here: the Defendants’
possession (but not misuse) of AlixPartners’ documents. The parties agreed upon,
and the Court approved, a wide-ranging and hugely intrusive forensic examination
of the Defendants’ computers, personal emails and electronic storage devices.
AlixPartners undertook this investigation because, it said, it was not required to
accept Defendants’ word that there had been no misuse. That may be, but the
examination has now confirmed the truth of what Defendants represented all along,
and all of AlixPartners’ information has now been (or will be) returned, deleted or
otherwise properly disposed of. In the absence of misuse of trade secrets, the
6.
proper remedy for mere possession of information is to order its return and
destruction after an appropriate investigation. That has been done here.
Apart from Plaintiffs’ claims concerning its documents, the other major
issue in the case is Eric’s non-compete. Since May 2014, Eric has been subject to
restrictions on certain client and business development activities in certain
geographic areas. He has offered to extend the Court’s solomonic narrowing of the
non-compete through the restriction’s contractual expiration on November 8, 2014.
AlixPartners wants it extended through May 2015. The Court should decline a
judicial extension of the non-compete for three principal reasons:
First, AlixPartners could have bargained for a tolling provision in the
contract, but did not, and the Court should not re-make the parties’ bargain.
Second, while the Court has the power to equitably extend a non-compete to
account for a period of violation, it should not do so here when AlixPartners sat on
whatever rights it had for more than five months after learning Eric was joining
McKinsey (and after suspecting that he might for five months before that).
Third, the non-compete is unenforceable – and certainly not extendable –
under governing Hong Kong law.
Finally, we respectfully ask this Court of equity to consider and to weigh
heavily the pain and suffering that Eric and Ivo have already experienced as a
result of this case. They have been publicly, loudly – and falsely – called thieves, a
7.
label they may never be able to escape in our digital age in which news reports live
forever. They and their families have been subjected to a hugely intrusive
examination of their most personal electronic records at the behest of an adverse
party pursuing an unrelenting goal of doing them harm. They, like every person
beginning a new career path, had hoped to hit the ground running at McKinsey.
Instead, because of this litigation, they have done very little in the first part of their
careers with McKinsey and have subjected their new employer to very substantial
expense, distraction, unfavorable mentions in the press and other interference with
normal business operations. AlixPartners has largely accomplished its objectives,
proper or not, simply by bringing and then vexatiously prosecuting this case. It is
not entitled to more.
8.
STATEMENT OF FACTS
A. Eric Thompson’s And Ivo Naumann’s Work With
AlixPartners.
Eric Thompson is an American citizen who was born and raised in Thailand
as the son of an American diplomat. Eric earned his Bachelor’s degree from Duke
University in 1994 and an MBA from the University of Chicago in 2001, with a
concentration in international business. Eric has built an impressive career in the
field of business restructuring, specializing in taking interim management roles,
such as Chief Restructuring Officer or Chief Executive Officer, in financially
struggling companies. Eric’s industry experience is varied and well-rounded.
Early on in his career, Eric was a senior director at the consulting firm Alvarez &
Marsal, working in turnaround and crisis management. Eric lives in Singapore
with his wife and two sons.
Eric joined AlixPartners’ Asia Business Unit in 2011 as a Managing
Director. He was employed by AlixPartners for approximately two and one-half
years, during which time he worked from his home in Singapore. AlixPartners did
not have an office in Singapore.
Ivo Naumann is a seasoned and highly-respected business advisor and
manager. Ivo has spent his career working in consulting, including as a partner
and head of the private equity and corporate finance practice groups at the
consulting firm Roland Berger in Shanghai, Tokyo and Zurich, and as a director of
9.
corporate strategy at Charles Schwab & Co. in San Francisco. Ivo is a German
citizen. He graduated from the University of Trier, Germany, in 1996. He is fluent
in German, English, Mandarin Chinese, and Japanese. Ivo lives in Shanghai in the
People’s Republic of China with his wife and two children. Ivo joined
AlixPartners in 2007, and was a Managing Director in AlixPartners’ office in
Shanghai.
Eric and Ivo became acquainted in early 2013, when they worked closely
together on an AlixPartners engagement with a company called G Steel PCL.
Their business relationship developed into a personal friendship, and the two of
them frequently communicated regarding both AlixPartners matters and personal
matters.
B. Eric and Ivo Independently Decide To Leave
AlixPartners.
10.
after 2012, when a controlling stake in the firm was
acquired by a private equity firm called CVC Capital Partners.
For these reasons, Eric and Ivo (as well as several other employees) each
made individual and independent decisions to explore employment opportunities
outside of AlixPartners. Because of their common experience and friendship, Eric
and Ivo discussed where they might go next. Between the two of them they had
contacts at a number of potential employers. Eric introduced Ivo to
and Ivo introduced Eric to
Eric also decided to pursue an opportunity with , a
restructuring consulting firm that was of no interest to Ivo because it was located
outside of China. Similarly, Ivo pursued
opportunities with and with , neither of which do interim
1 Exhibit to Transmittal Affidavit of Dustin B. Hillsley (hereafter “Ex.”).
11.
management work and thus were of no interest to Eric.
In the summer of 2013, Eric was approached by Lancor, a headhunter that
had been retained by McKinsey. See Ex. D. Eric began interviewing with
McKinsey shortly thereafter. See Ex. B Thompson Tr. at 238:23-239:4. Eric
informed Ivo of McKinsey’s interest, and Ivo requested an introduction. See Ex. C
Naumann Tr. at 140:2-19. Eric told the head of McKinsey RTS, Jon Garcia, that
Ivo might be interested, and Mr. Garcia asked Lancor to pursue it. See Ex. E,
Tafolla Tr. at 117:16-24. Eric sent an email in which he introduced Ivo to Mr.
Garcia. See Ex. C, Naumann Tr. at 140:22-141:10. Eric did not “solicit” Ivo – he
simply introduced Ivo to Mr. Garcia at Ivo’s own request and Ivo took it from
there.
Eric and Ivo each independently made a decision to leave AlixPartners, to
pursue the opportunities that were best for them and their families. See Ex. B,
Thompson Tr. at 354:11-14. For example, each of them pursued opportunities that
the other was not interested in. In fact, after AlixPartners offered to promote Ivo to
co-head of the Asia Business Unit, Eric encouraged Ivo to stay with AlixPartners.
See Ex. B, Thompson Tr. at 262:15-20. Ivo decided not to take Eric’s advice and
instead to accept the offer he ultimately received from McKinsey.
12.
Nor were Ivo and Eric recruited together as a “team” by McKinsey. As a
matter of policy and practice, McKinsey recruits candidates on an individual basis
only. The firm does not hire “teams.” Ex. F, Garcia Tr. at 145:7-18.
C. Eric Gives Notice To AlixPartners.
On November 1, 2013, Eric informed AlixPartners that he would be
resigning and that he intended to join McKinsey. Eric was placed on “garden
leave” after his resignation, through January 31, 2014. During that three month
period, Eric did no work for either AlixPartners or McKinsey, although he was
paid his base salary for the period by AlixPartners.
D. Ivo Gives Notice To AlixPartners.
Ivo submitted his resignation on December 12, 2013. AlixPartners made a
substantial effort to retain Ivo, offering him increased compensation and the
position of co-head of AlixPartners’ Asia Business Unit. When Ivo declined the
offer (against Eric’s advice), Ivo was not placed on “garden leave.” Instead,
AlixPartners requested that Ivo continue working at its Shanghai office and
13.
complete an important client assignment, up until the last day of his 90-day notice
period.2
E. AlixPartners Prepares To Ambush Eric And Ivo.
Ivo’s last day of employment was March 14, 2014. In anticipation of his
departure, AlixPartners ordered a forensic backup of Ivo’s computer on February
24, 2014. Although individuals in the Human Resources department reviewed an
exit checklist with Ivo, Ivo was not asked if he had AlixPartners documents on his
personal email account or on any personal electronic storage devices (see Ex. G,
Chow Tr. at 107:6-24, 108:16-22), despite the fact that such occurrences were
common at AlixPartners and the fact that AlixPartners had by that point been
secretly investigating Eric and Ivo for at least four months (see Ex. H, Collins Tr.
at 149:20-150:11). As AlixPartners finally admitted during the pretrial conference
in this case, it had known since December 18, 2013, that Defendants had e-mailed
certain AlixPartners documents to their personal e-mail addresses. But it did
2 In the Verified Complaint, AlixPartners falsely and remarkably alleges that
Ivo “took advantage of his undisclosed conflict-of-interest and continued to
misappropriate confidential AlixPartners information.” Verified Compl., ¶ 44
(emphasis added). Discovery has established that AlixPartners knew at the time
Ivo resigned that he was likely going to McKinsey and suspected Ivo might leave
to join McKinsey for months before that. Yet AlixPartners took no steps to wall
him off from its so-called sensitive information or its clients. And, for his part, Ivo
continued to fully and conscientiously perform all his duties for AlixPartners, as
requested by AlixPartners.
14.
nothing to address the issue for the three months after that date that Ivo remained
employed by AlixPartners.
F. McKinsey Takes Steps To Ensure That Eric
And Ivo Honor Their Obligations To AlixPartners.
Eric and Ivo are subject to certain post-employment restrictions under their
Employment Agreements3 and the LLP Agreement of AlixPartners. Eric and Ivo
reached out to AlixPartners multiple times before their departures to ensure that all
of their obligations under those agreements were satisfied. See Ex. B, Thompson
Tr. at 67:6-16; Ex. I. McKinsey also took Eric’s and Ivo’s contractual obligations
very seriously and—as is common in the professional services industry when
hiring lateral recruits—took steps to understand these restrictions so that it could
ensure that they complied with them and that they could actually work for
McKinsey when they arrived there. See Ex. J; Ex. K.
The evidence will show that McKinsey did not hire Eric and Ivo for the
purpose of obtaining AlixPartners’ confidential information or to take
AlixPartners’ clients. Nor did Eric and Ivo join McKinsey with the intention of
providing AlixPartners’ confidential information to McKinsey or taking
3 Eric Thompson’s Service Agreement with AlixPartners, dated April 29,
2011 (“Eric’s Employment Agreement”) and Ivo Naumann’s Employment
Contract with AlixPartners, dated October 1, 2009 (“Ivo’s Employment
Agreement” and, collectively, “Employment Agreements”).
15.
AlixPartners clients. First, Eric and Ivo have done neither of these things. Second,
during their recruitment process, both Eric and Ivo acknowledged that they were
subject to, and intended to fully honor, their obligations to AlixPartners (except for
Eric’s overbroad non-compete). After all, both Eric and Ivo thought they were
leaving AlixPartners on good terms. Third, McKinsey indicated on multiple
occasions that it expected full compliance with all enforceable obligations owed by
Eric and Ivo to AlixPartners.
McKinsey went even further than that. Naumann’s contract with McKinsey
also provides that
Thompson’s
contract with McKinsey provides that
To that end, Eric (on October 30, 2013) and Ivo (on November 27, 2013)
contractually agreed with McKinsey to “observe all relevant obligations and duties
owed AlixPartners, including but not limited to the duty of confidentiality.” Ex. L
16.
at MCK0000104; Ex. N at MCK0000044. Eric and Ivo further agreed not to
“[a]ccess confidential/protected drives for any reason other than genuine business
reasons (e.g. reviewing printing off old mandates, decks of advice, financial
information etc.)” and not to “[u]se confidential information of or about
AlixPartners clients, revenues, profit, key staff and their terms and remuneration,
in respect of any future business plans with McKinsey.” Id.
G. AlixPartners’ Failure To Take Reasonable Steps
To Protect Its Claimed Rights In Connection With
The Defendants’ Departures.
As noted, AlixPartners finally admitted just this morning during the pre-trial
conference that AlixPartners discovered on December 18, 2013, that Defendants
had sent certain AlixPartners documents to their personal e-mail addresses. That
fact makes it all the more remarkable that, in the months following Eric’s and Ivo’s
resignations, AlixPartners made no effort to discuss with them any email or
document retention practices, nor did AlixPartners request that Eric and Ivo return
any AlixPartners documents they may have had in backup files or personal email
accounts. In fact, on the day prior to Eric being placed on garden leave, the head
of the Asia Business Unit suggested that
Despite this reminder, no one bothered to ask Eric
17.
about it4 and AlixPartners never responded to Eric’s inquiries
5 about whether he
was required to complete any tasks prior to his exit. See Ex. B, Thompson Tr. at
67:6-16.
Instead, AlixPartners waited until March 17, 2014, months after Eric and Ivo
resigned, six weeks after Eric joined McKinsey, and only one business day after
Ivo’s last day of employment at AlixPartners, to send two separate letters (the
“March 17 Letters”) accusing Eric and Ivo of breaching their obligations for the
purpose of benefitting themselves and McKinsey. AlixPartners could have raised
these purported serious concerns when Eric and Ivo asked; but instead of resolving
matters amicably, as Eric and Ivo intended, AlixPartners kept silent and ambushed
them with the issue after they left.
After the March 17 Letters, Eric and Ivo immediately responded to
AlixPartners’ stated concerns. They repeatedly represented to AlixPartners that
they were not using or misusing AlixPartners’ confidential information and offered
to return or destroy whatever documents they had in their possession.
4 Indeed, Mr. Ramachandran (the Asia Business Unit head), Gigi Chow (the
head of the Human Resources Department in Asia), and Julie Severson (the
Director of Human Resources) testified that they were unaware of any follow up
by AlixPartners to retrieve any AlixPartners documents in Eric’s possession. See
Ex. G, Chow Tr. at 104:21-105:2; Ex. P, Severson Tr. at 138:25-139:7; Ex. Q,
Ramachandran Tr. at 253:20-256:10.
5 See, e.g, Ex. R; Ex. S.
18.
AlixPartners, however, demanded a forensic search of Eric’s and Ivo’s files.
Although the parties disagreed as to the appropriate level of intrusiveness for such
a search, Eric and Ivo made clear all along that they were willing to negotiate a
forensic search process to assuage AlixPartners’ concerns. And, ultimately, the
parties agreed to a document review protocol without any intervention from the
Court.
H. AlixPartners’ Employees Commonly Used
Personal Devices To Access AlixPartners
Documents.
AlixPartners’ Verified Complaint attempts to fabricate a conspiracy to
“steal” AlixPartners’ trade secrets for McKinsey’s benefit by pointing to the fact
that Eric and Ivo emailed themselves and each other certain AlixPartners
documents during the months leading up to their departure from AlixPartners.
AlixPartners makes much of this timing, but the evidence will show that Eric and
Ivo used their personal email accounts to conduct company business over the
whole course of their employment with AlixPartners. In fact, this practice was so
common at the outset of Ivo’s employment that he had to request that AlixPartners
employees (who sent various AlixPartners and client documents to his personal
email address) use his AlixPartners email account rather than his personal one. See
Ex. T.
19.
It was not at all unusual at AlixPartners for employees to send emails to and
from their personal accounts and their AlixPartners accounts. For example, Jay
Alix (the founder of AlixPartners), John Collins (Managing Director and General
Counsel of AlixPartners), and Fred Crawford (the Chief Executive Officer of
AlixPartners) all testified that
Plainly, AlixPartners does not have a policy
against using personal email accounts for AlixPartners business or, if it does, it is
routinely ignored.7
While AlixPartners does have a policy against the copying of unencrypted
data to personal removable media devices, it is only posted in the IT section on its
website. AlixPartners has never notified its employees that the policy existed,
20.
distributed it or ensured compliance with it. In fact, Akira Arai, a member of
AlixPartners’ computer support staff, helped Ivo back up his AlixPartners laptop
onto a personal hard drive without objection, in apparent contravention of the
policy. During his deposition, Mr. Arai indicated that at the time he did not even
know that AlixPartners had a policy against the use of unencrypted backup
devices. See Ex. Y, Arai Tr. at 46:7-18. AlixPartners will not be able to prove a
breach of these flimsy or non-existent policies, and if it did, AlixPartners’ own
CEO and other high level executives were themselves in constant breach of those
policies.
I. Eric’s And Ivo’s Use Of Their Personal E-Mail
Accounts.
Eric, whose office was in his home because AlixPartners does not have an
office in Singapore, routinely sent emails to his personal email account in the
course of performing his duties at AlixPartners, and he routinely made backups of
his work computer in the ordinary course of business. There is no evidence that
Eric ever sent any emails to his personal email account for any reason other than to
conduct AlixPartners’ business.
Ivo sent emails from his AlixPartners email account to his personal email
account, used personal thumb drives to save AlixPartners documents and made
routine backups of his work files on external hard drives. He did so in part because
on one occasion when his AlixPartners laptop crashed in the past it took a very
21.
long time to restore important data he needed for client work. See Ex. C, Naumann
Tr. at 269:19-270:19.
In the weeks leading up to his departure from AlixPartners, Ivo sent a
limited number of documents to his personal email account. While this decision is
regrettable, there is no evidence that Ivo ever intended to misuse or did misuse
these documents. Ivo sent these documents for several reasons. Among others: (i)
he anticipated that AlixPartners would not pay him a significant bonus that he had
earned for 2013 and he wanted to have proof that he had earned that bonus; (ii) he
anticipated needing certain of these documents at his disposal as he assisted in the
transition of the new head of the AlixPartners Shanghai office; and (iii) he needed
certain documents to assist AlixPartners employees with their compensation-
related issues.8
Eric and Ivo did not transmit or retain any AlixPartners documents for any
improper purpose, or for the purpose of disclosing any AlixPartners confidential
information to McKinsey. Eric and Ivo have not disclosed any of the documents at
issue to McKinsey, and McKinsey has no interest in, or use for, such documents.
8 Ivo also sent two AlixPartners marketing presentations to his brother as
examples of what a marketing presentation looks like, not for their substance.
Ivo’s brother is a marketing professional in a wholly unrelated field. There is no
evidence that Ivo’s brother ever misused these documents or disclosed them to any
third party.
22.
The evidence will show that McKinsey has not reviewed any AlixPartners
documents apart from Eric’s and Ivo’s employment related documents, which do
not belong exclusively to AlixPartners (see, e.g. Ex. G, Chow Tr. at 92:18-24), do
not contain confidential AlixPartners information, and were only reviewed by
McKinsey in-house counsel and personnel in the Human Resources department.
Furthermore, these documents were not reviewed by McKinsey in order to “steal”
anything from AlixPartners; rather, they were reviewed for the exact opposite
purpose—in order to ensure compliance with legitimate post-employment
obligations to AlixPartners.9
J. The Protocol Reveals No Misuse, Disclosure or
Injury.
Because they had and have nothing to hide, Eric and Ivo voluntarily agreed
to make their personal email accounts and electronic devices available for a
sweeping and intrusive forensic examination designed to identify AlixPartners
documents and any evidence of misuse or disclosure (the “Protocol”). This
forensic examination is complete and it has revealed what Eric and Ivo have said
all along: they did not disclose AlixPartners information to anyone. Gary Titus
9
23.
from Stroz Friedberg, LLC (“Stroz Friedberg”) analyzed Eric and Ivo’s
AlixPartners laptops, and he did not find any evidence of copying of files or of
disclosure of any files to any third parties. All he found was evidence that USB
devices had been attached to their AlixPartners laptops by Eric and Ivo at various
times, which the evidence at trial will show was done as a regular practice by Eric
and Ivo (sometimes with the assistance of AlixPartners’ IT staff) for business or
personal use or in order to back up their information.
Stephen Morgan, also of Stroz Friedberg, carried out a forensic analysis of
Eric and Ivo’s personal email accounts, personal media devices and McKinsey
laptops pursuant to the Protocol. This analysis was carried out in two steps. First,
Mr. Morgan identified any AlixPartners documents on Eric and Ivo’s devices or
accounts. To the extent those documents were not privileged or personal, they
have been or will be returned to AlixPartners and will be permanently deleted
from Defendants’ devices and accounts pursuant to the Protocol. Thus, the
evidence will show that Eric and Ivo no longer have access to the AlixPartners
documents on their accounts and devices and that all such documents are in
AlixPartners’ hands.
Second, Mr. Morgan performed a follow-up targeted search for 21 key files
identified by AlixPartners, including by searching for those documents on
Defendants’ McKinsey computers. This analysis also revealed zero evidence that
24.
any AlixPartners documents were disclosed to McKinsey or any third party. Stroz
Friedberg found no results on Ivo’s McKinsey computer, and the only “hit” found
on Eric’s McKinsey computer was a “digital artifact” of a 2010 AlixPartners China
Business Plan. This digital artifact merely showed that McKinsey’s automated
backup software accessed this document when Eric attached an external hard drive
containing this document (Eric did not realize the document was on the hard drive)
to his McKinsey laptop. According to Mr. Morgan, there was no indication that
the China Business Plan was ever (i) stored on Eric’s computer, (ii) accessed by
anyone or (iii) even backed up by McKinsey’s backup software – just an indication
that it was “accessed” by McKinsey’s backup software. The evidence will show
that the document was never accessed by anyone, was on McKinsey’s backup
server for 30 days, and has since been automatically deleted.10
K. Defendants Have Retained A Forensic Examiner
To Investigate AlixPartners’ Latest Incendiary
Allegations Of Spoliation.
Despite the concrete evidence that no AlixPartners document was ever
opened on Eric’s McKinsey computer, or used or disclosed to anyone by Eric,
AlixPartners has just this week filed a motion for sanctions based on alleged
10
AlixPartners’ fervor over this digital artifact underscores the weakness of its
case and its lack of any real evidence of misuse or disclosure of its alleged trade
secrets. The China Business Plan is a high level, four-year old document that
would be of no use to McKinsey.
25.
spoliation, arguing that Eric’s use of cleaning software on his personal laptop
amounted to deliberate destruction of evidence, warranting a default judgment
against Eric, or an inference that AlixPartners can use to plug up the major hole at
the middle of its case – the absence of any evidence of use or disclosure.
Defendants have retained a forensic examiner to conduct a thorough investigation
of Eric’s personal devices and plan to present this Court with an accurate set of
facts relating to Eric’s actions once that investigation is complete. Tellingly,
AlixPartners has already objected to his appearance at trial, without even knowing
what he has to say.
AlixPartners has once again leveled serious accusations of wrongdoing,
despite the lack of any indication that any relevant evidence has been lost.
Defendants have no reason to doubt – and Eric’s testimony indicates and the
Defendants’ forensic examiner will undoubtedly confirm – that AlixPartners has
once again overreached in an effort to create the appearance of wrongdoing.
L. AlixPartners Sat On Whatever Rights It Had To
Enforce Eric’s Non-Compete.
Eric began working for McKinsey on February 3, 2014. Eric intended to
leave AlixPartners on good terms, even continuing to refer business to
AlixPartners up until the start of this litigation—something he was not obligated to
do. See Ex. B, Thompson Tr. at 66:22-67:5. Eric also signed an agreement with
26.
McKinsey that provided, among other things, that for a period of time he would
not solicit any clients that he served while working for AlixPartners.
AlixPartners clearly did not place much importance on Eric’s non-compete
(or else assumed that it was not enforceable). AlixPartners was informed in
November 2013 that Eric planned to join McKinsey, a perceived competitor of
AlixPartners, and yet AlixPartners did nothing to prevent Eric from joining
McKinsey.11
While AlixPartners did send Eric letters on November 1, 2013 and
March 17, 2013 vaguely reminding him of his post-employment obligations,
AlixPartners did not state in either letter, or at any time before bringing this case,
that it considered Eric going to work for McKinsey to be a violation of his non-
compete.
It was not until April 9, 2014 – ten months after AlixPartners knew that Eric
was in discussions with McKinsey, five months after AlixPartners knew that Eric
was leaving for McKinsey and more than two months after Eric started working at
McKinsey – that AlixPartners finally filed this action seeking an order barring Eric
from working for McKinsey. AlixPartners’ delay in enforcing Eric’s non-compete
11
27.
undercuts any argument that the non-compete was important and necessary to
protect AlixPartners’ legitimate interests.
Eric’s non-compete is also overbroad. Eric’s non-compete, as written, is
unlimited in geographic scope and would prohibit Eric from working in any
capacity for any competitor of AlixPartners. These restrictions are more confining
than necessary to protect the legitimate interests of AlixPartners and are overly
oppressive of Eric’s right to be employed and of fair competition.
The evidence will show that Eric did not breach his non-compete by
working for McKinsey. Eric does not perform the same type of work at McKinsey
as he did while employed at AlixPartners. This makes sense because McKinsey
does not compete in any significant way with AlixPartners in Asia. In the main,
clients of McKinsey are larger and are in less distress than those AlixPartners
serves. While AlixPartners has served some large companies in Asia, those have
principally been subsidiaries of U.S. companies. Furthermore, McKinsey has
focused on performance improvement exclusively, addressing all operating levers
in large-scale, holistic transformations. Except in what AlixPartners’ CEO has
called the “the war for talent” (Ex. AA), competition between McKinsey RTS and
AlixPartners in Asia has been minimal or non-existent.
28.
ARGUMENT
AlixPartners asserts five causes of action in the Complaint:
misappropriation of trade secrets, breach of contract, breach of fiduciary duty,
conversion and civil conspiracy. None is meritorious.
I. ERIC AND IVO DID NOT MISAPPROPRIATE ANY
ALLEGED ALIXPARTNERS TRADE SECRETS.
There is no evidence in this case that Eric or Ivo used or disclosed the
documents claimed by AlixPartners to contain its trade secrets – except in the
ordinary course of business for AlixPartners. Furthermore, any such documents
have been or will be returned to AlixPartners pursuant to the Protocol.
AlixPartners has therefore been made whole and requires no further relief from this
Court. Furthermore, AlixPartners cannot establish the required elements of a trade
secret claim as to the allegedly misappropriated materials.
A. Without Evidence Of Use Or Disclosure, And
There Is None Here, AlixPartners Has No Trade
Secret Claim.
“To find misappropriation of trade secrets under the [Delaware Uniform
Trade Secrets Act (“DUTSA”)] . . . a plaintiff must demonstrate that specific
information constituted a trade secret and that such trade secret was, in fact,
improperly acquired, used, or disclosed.” Great Am. Opportunities, Inc. v.
Cherrydale Fundraising, LLC, 2010 WL 338219, at *20 (Del. Ch. Jan. 29, 2010)
(emphasis added).
29.
“Specifically, under DUTSA, [AlixPartners] affirmatively must prove the
following: first, that a trade secret exists, i.e., that the statutory elements—
commercial utility or value arising from secrecy and reasonable steps to maintain
secrecy—have been shown; second, that [AlixPartners] communicated the trade
secret; third, that such communication was made pursuant to an express or implied
understanding that the secrecy of the matter would be respected; and fourth, that
the trade secret has been used or disclosed improperly to [AlixPartners’]
detriment.” Wayman Fire Prot., Inc. v. Premium Fire & Sec., LLC, 2014 WL
897223, at *13 (Del. Ch. Mar. 5, 2014) (emphasis added).
AlixPartners claims that Ivo and Eric “misappropriated” multiple documents
containing its trade secrets. In every instance, as to every alleged trade secret
claimed, the claim must fail because this required element is missing – there is no
evidence of use or disclosure of any of the alleged trade secrets. That is sufficient
in and of itself to deny AlixPartners any relief.
AlixPartners’ claim of trade secret misappropriation must fail for a second
reason as well. Pursuant to the Protocol, each of the documents alleged to contain
AlixPartners’ trade secrets has been, or will be, returned to it. Absent evidence of
use or disclosure, there is no basis for a damage claim. And the Protocol that the
Court entered on consent of the parties has mooted any claim for equitable relief.
30.
A showing that a defendant merely possessed a trade secret, absent evidence
of use or disclosure, entitles a plaintiff to an injunction for the return of the trade
secret, and nothing more. See Univ. Computing Co. v. Lykes-Youngstown Corp.,
504 F.2d 518, 539 (5th Cir. 1974) (noting that money damages are not available
where defendant has not put the trade secret “to some commercial use”). When, as
here, defendants have returned all of the information, even injunctive relief is
inappropriate. See Dana Ltd. v. Am. Axle & Mfg. Holdings, Inc., 2013 WL
4498993, at *34 (W.D. Mich. Aug. 19, 2013) (“Injunctive relief is not appropriate
in this case because Dana has not proved that Defendants used Dana’s confidential
information or that they failed to return any of Dana’s confidential information.”).
B. As To Each Of The Documents In Question,
AlixPartners Must Establish The Existence Of A
Protectable Trade Secret.
“A successful claim for misappropriation of a trade secret first requires that
trade secrecy be proven.” Agilent Techs., Inc. v. Kirkland, 2010 WL 610725, at
*17 (Del. Ch. Feb. 18, 2010). To prove that a trade secret exists, AlixPartners
must prove that it possessed information that (1) “[d]erives independent economic
value, actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use;” and (2) “[i]s the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.” Great Am., 2010 WL 338219, at
31.
*16. “Information must meet all of the requirements of Section 2001(4) to qualify
for ‘trade secret’ status.” Wayman Fire, 2014 WL 897223, at *13.
AlixPartners has the burden of providing specific details sufficient to show
that the information it seeks to protect meets each of these requirements and that
the information claimed to be “secret” is not in the public domain. See, e.g., Sit-
Up Ltd. v. IAC/InteractiveCorp., 2008 WL 463884, at *11 (S.D.N.Y. Feb. 20,
2008) (“specificity is required ... [to] divine the line between secret and non-secret
information”); see also 6 Del. C. § 2001(4). AlixPartners cannot hope to meet this
burden as to each of the hundreds of documents that it claims contain its trade
secrets.
II. ERIC’S NON-COMPETE IS UNENFORCEABLE
UNDER GOVERNING HONG KONG LAW.
The non-compete provision in Eric’s Employment Agreement provides:
The term “Restricted Area” is defined broadly to mean
32.
Thus, as applied to the present situation, the non-compete provision
effectively reads:
Eric was a partner and director in AlixPartners’ restructuring group, and therefore
was concerned to a material extent with AlixPartners’ restructuring
practice. AlixPartners’ restructuring business purports to be “global.” Thus, the
non-compete, if enforceable according to its terms (which it is not), would prevent
Eric from working in any role for an AlixPartners competitor almost anywhere in
the world. Such a restriction is overbroad and void under governing Hong Kong
law.12
A. The Non-Compete Is Broader Than Necessary To
Protect AlixPartners’ Legitimate Interests.
Under Hong Kong law, a non-compete provision is unenforceable if it is
broader than reasonably necessary to protect AlixPartners’ legitimate interests. See
12
33.
Reyes Decl. at ¶¶12, 51.13
Under Hong Kong law, the party seeking to enforce the
covenant carries the burden of showing that the restriction is both reasonable in the
interests of the contracting parties and reasonable in the interests of the public. See
Reyes Decl. at ¶13; Coleman Report at ¶21.
Under Hong Kong law, an “employer may not prevent his ex-employee from
using the skill and knowledge in his trade or profession which he learnt in the
course of his employment or from using the general knowledge the employee has
acquired of the employer’s scheme or organization and methods of business.”
Coleman Report at ¶25; see also Reyes Decl. at ¶13.
13
Declaration of Anselmo Reyes on July 23, 2014 (hereafter “Reyes
Declaration” or “Reyes Decl.”). The parties have stipulated to the admission of
foreign law experts’ declarations, as they are largely not in conflict on the material
points of law addressed. Defendants have submitted the Report of Anselmo Reyes,
a distinguished former judge in Hong Kong. The sources of Hong Kong law that
govern the enforceability of Eric’s non-compete are the common law (that is, case
law including English and other Commonwealth cases, in addition to Hong Kong
case law) and English law practitioners’ texts. See Reyes Decl. at ¶10; Expert
Report of Russell Coleman (“Coleman Report”) at ¶10. The Coleman Report was
submitted by AlixPartners, and where it supports the statement of law made in the
text, it will be cited together with the Reyes reports. Further, the jurisdiction with
the most significant contacts to Eric (where his home and office are located) is
Singapore. Singapore law in sum and substance follows the same principles as
Hong Kong law. Defendants have also submitted the Report of Eugene
Thuraisingam, an experienced Singapore attorney, who, like Anselmo Reyes,
found Eric’s non-compete overbroad, unenforceable, and unsalvageable by
applying a “blue pencil.”
34.
Two legitimate interests which an employer may take reasonable efforts to
protect are trade secrets and customer connections. See Reyes Decl. at ¶¶ 33-34;
Coleman Report at ¶26). Here, Clause 9.4 of Eric’s Employment Agreement
protects AlixPartners’ “Confidential Information,” and AlixPartners has offered no
evidence as to why Clause 9.4 does not sufficiently protect its trade secrets or why
its customer connections are not sufficiently protected by limitations on their
activities put in place by the Defendants and McKinsey. See Reyes Decl. at ¶36.14
B. The Worldwide Geographic Scope Of The Non-
Compete Is Too Broad.
In determining the validity of the geographic scope of a restraint, a Hong
Kong court would consider whether a narrower covenant would have protected the
employer’s interests, and whether there is a functional correspondence between the
proscribed area and the area in which the employer operates. See Coleman Report
at ¶31. This is a fact dependent inquiry wherein the geographic scope must be read
together with the nature of the activity being restrained. See Coleman Report at
14
Mr. Coleman argues that Clause 9.4 does not render Clause 11.3 excessive
or redundant, citing to an English Court of Appeal case which held that, “when the
[confidential] information is of such a character that a servant can carry it away in
his head” the only solution is a restrictive covenant. Coleman Rebuttal Report ¶30.
However, Mr. Coleman’s rebuttal analysis stops there, because AlixPartners has
not provided Mr. Coleman, nor can it provide this Court, with any evidence that
the type of consulting work engaged in by Mr. Thompson is of such a unique and
proprietary nature that he will inevitably disclose AlixPartners’ trade secrets
merely by engaging in similar work for the clients of McKinsey.
35.
¶32. Here, given the definitions of the terms in Clause 11.3, the geographical
restriction would effectively cover just about every major city in the world. See
Reyes Decl. at ¶25. As a result, because Clause 11.3 on its face prohibits Eric
from being employed anywhere in the world by any entity that may be regarded as
being in competition with the business of AlixPartners anywhere in the world, the
clause is overbroad and unenforceable. See Reyes Decl. at ¶31.
C. The Duration Of The Non-Compete Is Too Long.
Hong Kong courts take a more rigorous approach to the duration of a
restriction than English courts. Hong Kong courts treat a 12-month duration for a
non-compete as prima facie too long. See Reyes Rebuttal at ¶4. A restraint will be
considered reasonable in duration only if the duration is no longer than is necessary
(1) for the employer to put a new employee on the job and for the new employee to
demonstrate his effectiveness to customers and (2) to prevent an employee who has
quit the territory from returning to acquire the employer’s business. See Reyes
Decl. at ¶22; Coleman Report at ¶57(8).
Neither Mr. Coleman nor AlixPartners has proffered any evidence as to why
a 12 month restraint is reasonably necessary or why 12 months is necessary to find
a replacement for Mr. Thompson. See Reyes Rebuttal at ¶24. “Presumably,
similar replacements exist in the market and AlixPartners would not need any
36.
significant time (much less 12 months) to enable a replacement Managing Director
to build up a reputation and connections.” Id.
D. Hong Kong Courts Will Not Apply A “Blue
Pencil” To Salvage An Overbroad Covenant.
Hong Kong courts will not “read down” an unreasonably written restrictive
covenant in an effort to render it reasonable and enforceable. See Reyes Decl. at
¶38; Coleman Report at ¶36. However, Hong Kong courts may strike out (“blue
pencil”) the words of any unreasonable covenants from the relevant clause and, to
the extent that what is left is intelligible, the remainder may be enforceable. See id.
Here, rendering Clause 11.3 enforceable would require deleting the 12 month
restriction, reducing or eliminating the worldwide geographical restriction and
limiting the overbroad prohibition as to the type of work prohibited (any
employment by any competitor anywhere in the world). See Reyes Decl. at ¶39.
That is asking too much of the “blue pencil rule,” because it would require
rewriting the entire provision.
Mr. Coleman, in his Report at ¶¶59-60, contends that Clause 11.3 is not
overbroad so much as it is ambiguous. In certain situations, where there are two
possible constructions of a covenant, one of which would lead to the covenant
being unenforceable and the other leading to the opposite result, then the court may
adopt the latter construction. See Reyes Rebuttal at ¶25; Coleman Report at ¶58.
Clause 11.3 requires that Mr. Thompson not “carry on or set up or be employed or
37.
engaged by or otherwise assist in or be interested in any capacity in a business in
the Restricted Area which is in competition with the Business.” See Reyes Decl. at
¶5.
Mr. Coleman argues that Clause 11.3 is ambiguous because it is unclear
whether “in any capacity” merely modifies the preceding word “interested”, or
whether “in any capacity” relates to all the preceding terms beginning with “carry
on.” See Coleman Report at ¶59. Mr. Coleman argues that this ambiguity would
permit a Hong Kong court to interpret and modify Clause 11.3 so as to render it
enforceable. See id.
In reality, however, “Mr. Coleman is not actually clarifying any ‘ambiguity’
in Clause 11.3. What he is instead doing is attempting, through the guise of
construction, to water down the explicit wording of Clause 11.3 so as to make its
wide-ranging restriction more palatable as a matter of Hong Kong law.” Reyes
Rebuttal at ¶28.
Clause 11.3 was plainly intended to have an extremely wide scope. It
purports to prevent Mr. Thompson from being “employed by” a competitor of
AlixPartners. Whether the words “in any capacity” modify only the words
“interested in” or not, the effect is the same. As this Court has previously
acknowledged – “I’m not going to enforce a noncompete as broadly as
[AlixPartners] say, that it’s any work in the restructuring field. If that’s what it is,
38.
then it is unenforceable. It’s invalid.” Apr. 22, 2014 Hr’g Tr. at 40:4-8. Unable to
render Clause 11.3 enforceable by resolving a manufactured ambiguity, nor by
blue penciling, a Hong Kong court would likewise find the clause, as written, to be
unenforceable. See Reyes Report at ¶41.
E. AlixPartners’ Delay In Seeking To Enforce Eric’s
Non-Compete Undercuts Any Claim Of
Irreparable Harm And Constitutes Laches.
AlixPartners knew that Eric was departing for McKinsey when he gave
notice in November 2013, and strongly suspected this for months before that, but
failed to raise the issue of his non-compete. AlixPartners sent Eric a letter on
November 1, 2013 vaguely reminding him of his post-employment obligations, but
failed even to call out the non-compete specifically. AlixPartners sent another,
more strongly worded letter on March 17, 2013, but again failed to demand that
Eric cease working for McKinsey. It was not until eight weeks after Eric started
working at McKinsey – and over five months after it knew that he was going to
work there – that AlixPartners finally filed this action seeking an order barring Eric
from working for McKinsey. Because of its delay in seeking to enforce Eric’s
non-compete, AlixPartners’ request for relief should be denied.
Hong Kong law recognizes the doctrine of laches. See Reyes Decl. at ¶¶47-
49; Coleman Rebuttal at ¶34. Where a claimant has unreasonably delayed in
enforcing its rights, a Hong Kong court may, in the exercise of its discretion, refuse
39.
to grant equitable relief. See id. Although Mr. Coleman argues that this doctrine
applies only to injunctions issued pending trial, he cites no case law holding that
the irreparable injury standard is limited to interlocutory injunctions. In fact,
Delaware law requires the same showing of irreparable harm for the issuance of a
permanent injunction. See Draper Commc’ns, Inc. v. Delaware Valley
Broadcasters Ltd. P’ship, 505 A.2d 1283 (Del. Ch. 1985) (“Where a permanent
injunction is being sought, the standards are identical, except that actual, rather
than probable, success on the merits is the relevant criterion.”).
III. ERIC AND IVO DID NOT BREACH THEIR
CONTRACTS WITH ALIXPARTNERS.
AlixPartners claims that Eric and Ivo breached their Employment
Agreements and the AlixPartners’ LLP Agreement: specifically that Eric and Ivo
violated the confidentiality provisions in their Employment Agreements and the
LLP Agreement, and that Eric violated the non-competition and non-solicitation
provisions of his Employment Agreement. (The non-competition claim is
addressed above.) AlixPartners has also sought leave to amend its Complaint to
allege that Ivo violated the non-solicitation provision of his Employment
Agreement by “soliciting” Eric to join the consulting firm FTI. None of these
claims has merit.
40.
A. AlixPartners Cannot Prevail On Its Confidentiality
Claims Because Eric and Ivo Have Not Used Or
Misused AlixPartners’ Claimed Confidential
Information.
AlixPartners asserts that Eric and Ivo breached the confidentiality terms of
their Employment Agreements and the LLP Agreement by allegedly
“misappropriating” AlixPartners’ trade secrets and confidential and proprietary
information in order to use that information for their benefit and for the benefit of
McKinsey. AlixPartners cannot prevail on this claim because it has no evidence of
either use or disclosure.
1. Neither Eric Nor Ivo Breached The LLP
Agreement.
The relevant provision of the LLP Agreement (Compl. Ex. A) provides that
however, has no evidence that either Eric or Ivo “used” AlixPartners’ non-public
information, or that they disclosed any such information to any third person.
Rather, AlixPartners merely asserts that Eric and Ivo forwarded certain documents
to themselves or accessed them on non-AlixPartners devices. The rest of
AlixPartners’ Complaint was founded on speculation that the information was to
be used for the benefit of McKinsey, but none of the information was ever
41.
disclosed to McKinsey. AlixPartners has no evidence to the contrary. In fact, the
evidence will show that Eric and Ivo did not “use” those documents other than in
connection with their work for AlixPartners, much less that Eric and Ivo misused
any of the documents.
AlixPartners’ desperation to find some evidence of disclosure is well-
illustrated by its reliance on the fact that Eric and Ivo provided McKinsey with
their Employment Agreements so that McKinsey could evaluate their post-
employment restrictions. The evidence will show that providing such information
is routine in any industry15
and that AlixPartners also requests and reviews such
information in connection with its consideration of candidates for employment.
Such information is neither trade secret nor proprietary to AlixPartners – its own
head of human resources in Asia, Gigi Chow, testified that AlixPartners considers
such information to be “co-owned” by the employee. Ex. G, Chow Tr. at 92:17-
24.
For the same reason, Ivo also disclosed excerpts of the AlixPartners LLP
Agreement to McKinsey. Even then, Ivo only disclosed excerpts of select
provisions, after he had sent a copy of the table of contents of the document and
15
Arturo Tafolla, McKinsey’s headhunter at Lancor, indicated at his
deposition that it was not unusual for employers to request, and employees to
disclose, employment documents for the purpose of analyzing applicable post-
employment restrictions. See Ex. E, Tafolla Tr. at 152:2-10, 209:23-210-19.
42.
McKinsey’s in-house counsel selected the provisions that appeared most likely to
contain post-employment restrictions. See Ex. BB. Still, Ivo insisted that
McKinsey sign a confidentiality agreement providing that McKinsey would use the
excerpts only for the purpose of evaluating Ivo’s employment and for no other
purpose. See Ex. CC. Ivo cannot be found to have violated the confidentiality
obligations under the LLP Agreement “solely because [his] conduct furthers [his]
own interest.” 6 Del. C. § 15-404(d). And Eric never provided the LLP
Agreement (or even excerpts of it) to McKinsey at all.
2. Eric and Ivo Did Not Breach Their
Employment Agreements.
Eric’s Employment Agreement (Compl. Ex. B) provides that,
For the same reasons explained above,
AlixPartners will be unable to prove that Eric used any AlixPartners documents to
benefit himself or any third party. Indeed, the evidence will show that Eric sent the
emails at issue and backed-up the documents at issue as expressly permitted by his
Employment Agreement, i.e.,
43.
Ivo’s Employment Agreement (Compl. Ex. D) provides that
Ivo did not breach this provision. As discussed above, Ivo
did not disclose the AlixPartners documents that he retained to anyone, or use them
for any purpose.
Moreover, Ivo’s Employment Agreement is governed by the laws of the
People’s Republic of China (“PRC”). The People’s Republic of China is a civil
law jurisdiction, as explained in the Report of George Fu, a former presiding judge
of the Shanghai High People’s Court, whose Report Defendants have submitted.16
Under PRC law, the confidentiality clause in Ivo’s Employment Agreement
is invalid to the extent it imposes confidentiality restrictions that are broader than
those allowed under Chinese Labor Law and Labor Contract Law. Fu Opinion at
¶27. Under Chinese law, employers can require that employees keep their
information confidential. Fu Opinion at ¶27; see also Clarke Report at ¶27.
However, the scope of confidentiality is limited to trade secrets or information that
is related to certain intellectual property rights. Fu Opinion at ¶27. Ivo’s
16
See August 14, 2014 Legal Opinion of George Fu (hereafter “Fu Opinion”).
44.
Employment Agreement states
which is much broader than the
permissible scope under Chinese law. That would be considered an unreasonable
deprivation of the employee’s rights, which renders the clause invalid under
Chinese law. Fu Opinion at ¶32. The clause can only extend to trade secrets.17
B. Eric Did Not Violate His Employment Agreement By
Allegedly “Soliciting” Ivo.
1. Eric Did Not Violate the Non-Solicitation Provision of
His Employment Agreement Because It Only Applies
Post-Termination.
The non-solicitation provisions in Eric’s Employment Agreement are found
in the
AlixPartners
claims that Eric encouraged Ivo to join McKinsey while Eric was
The evidence will show that Ivo
signed his offer documents with McKinsey in December 2013, while Eric was still
on garden leave and before his employment had terminated. Given this evidence
17
Ivo did send two marketing presentations to his brother, as examples of what
such documents look like, as his brother was applying for a marketing job. Unless
AlixPartners could establish that this document is a trade secret – and by its nature
it is designed for public consumption, making that highly unlikely – the disclosure
could not breach Ivo’s Employment Agreement. In any event, there is no evidence
Ivo’s brother used the document to the detriment of AlixPartners.
45.
and AlixPartners’ own allegations, the non-solicitation clause in Eric’s
Employment Agreement simply cannot form the basis for a claim that Eric
breached his Employment Agreement.
2. Eric Did Not Breach The Duty Of Loyalty
By Soliciting Ivo.
AlixPartners also contends that Eric breached his duty of loyalty to
AlixPartners by “encourag[ing] Naumann to join McKinsey while they were both
still employed by AlixPartners” and by “connect[ing] Naumann to Jon Garcia at
McKinsey . . . .” Br. Further Support TRO at 23-24. This claim is factually and
legally meritless.
a. Eric Did Not Effectuate the “Mass Resignation” of
Key AlixPartners Employees.
In Delaware, the “policy in favor of free competition has prompted the
recognition of a privilege in favor of employees which enables them to prepare or
make arrangements to compete with their employers prior to leaving the employ of
their prospective rivals without fear of incurring liability for breach of their
fiduciary duty of loyalty.” Sci. Accessories Corp. v. Summagraphics Corp., 425
A.2d 957, 964-65 (Del. 1980). “Under some circumstances, the purported exercise
of the privilege may breach the employee’s fiduciary duty of loyalty. For example,
an employee may be denied the protection of the privilege when they have . . .
conspired to effectuate mass resignation of key employees . . . .’” Triton Const.
46.
Co., Inc. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115, at *11 (Del. Ch. May
18, 2009) (emphasis added), aff’d, 988 A.2d 938 (Del. 2010) (citing Sci.
Accessories Corp., 425 A.2d at 964-65); see Wayman Fire Prot., Inc. v. Premium
Fire & Sec., LLC, 2014 WL 897223, at *20 (Del. Ch. Mar. 5, 2014) (same).
The term “mass resignations” has never been applied to the resignation of
one employee.18
Where the entity in question is small, the resignation of a small
number of employees may constitute “mass resignations.” But AlixPartners is not
a small company. Moreover, it would defy the plain meaning of the word “mass”
to consider it satisfied by the resignation of only one employee.
b. Eric Did Not Solicit Ivo.
The evidence will show that Eric and Ivo independently chose to leave
AlixPartners for a variety of legitimate reasons and that each acted independently
in searching for a new job. Discussions between friends about the possibility of
leaving their employment, even together, does not constitute solicitation. See
18
In Dweck v. Nasser, this Court found a breach of fiduciary duty for bringing
about mass resignations when nearly all of the employees resigned. 2012 WL
161590, at *10-11 (Del. Ch. Jan. 18, 2012). In Corwin v. Silverman, on a motion
to stay proceedings, this Court used the term “mass resignations,” in its description
of plaintiffs’ argument, to refer to the resignation of 10 board members. 1999 WL
499456, at *2, 4 (Del. Ch. Jun. 30 1999). Lastly, in Beard Research, Inc. v. Kates,
this Court found that a former employee breached his fiduciary duty by, among
other things, inducing three employees to leave and join another company with
him. 8 A.3d 573, 579, 603 (Del. Ch. 2010).
47.
Mercer Mgmt. Consulting, Inc. v. Wilde, 920 F. Supp. 219, 231-32 (D.D.C. 1996)
(rejecting a claim of solicitation where the employees viewed their discussions
regarding a possible business venture “as conversations among long-time friends,
and not as solicitation.”); See Restatement (Third) of Employment Law § 8.04 TD
No 4 (2011) (“an employee’s pretermination interaction with coworkers does not
breach a duty of loyalty if the departing employee had personal reasons,
independent of the employee’s conduct, for leaving the employer”).
During their employment with AlixPartners, Eric and Ivo worked together
and became friendly. Both Eric and Ivo shared concerns regarding the leadership
and direction of AlixPartners’ Asia Business Unit, and they discussed those
concerns periodically in 2013. Based on this common apprehension, Eric and Ivo
began independently exploring opportunities outside of AlixPartners in 2013.
While Eric and Ivo did have discussions about the opportunity to join McKinsey
and other potential employers, at no point did Eric encourage, solicit or induce Ivo
to leave AlixPartners or join McKinsey.19
19 Eric and Ivo were at-will employees and had the right to seek alternative employment – even if such actions adversely impacted AlixPartners’ business. See Science Accessories Corp. v. Summagraphics Corp., 425 A.2d 957, 962 (Del. 1980). This expressly includes the right to “make arrangements or plans to go into competition with [AlixPartners] before terminating their [employment], provided no unfair acts are committed or injury done [AlixPartners].” Id.; see 6 Del. C.§ 15-404(d) (“A partner does not violate a duty or obligation . . . under the
(Continued . . .)
47.
Mercer Mgmt. Consulting, Inc. v. Wilde, 920 F. Supp. 219, 231-32 (D.D.C. 1996)
(rejecting a claim of solicitation where the employees viewed their discussions
regarding a possible business venture “as conversations among long-time friends,
and not as solicitation.”); See Restatement (Third) of Employment Law § 8.04 TD
No 4 (2011) (“an employee’s pretermination interaction with coworkers does not
breach a duty of loyalty if the departing employee had personal reasons,
independent of the employee’s conduct, for leaving the employer”).
During their employment with AlixPartners, Eric and Ivo worked together
and became friendly. Both Eric and Ivo shared concerns regarding the leadership
and direction of AlixPartners’ Asia Business Unit, and they discussed those
concerns periodically in 2013. Based on this common apprehension, Eric and Ivo
began independently exploring opportunities outside of AlixPartners in 2013.
While Eric and Ivo did have discussions about the opportunity to join McKinsey
and other potential employers, at no point did Eric encourage, solicit or induce Ivo
to leave AlixPartners or join McKinsey.19
19
Eric and Ivo were at-will employees and had the right to seek alternative
employment – even if such actions adversely impacted AlixPartners’ business. See
Science Accessories Corp. v. Summagraphics Corp., 425 A.2d 957, 962 (Del.
1980). This expressly includes the right to “make arrangements or plans to go into
competition with [AlixPartners] before terminating their [employment], provided
no unfair acts are committed or injury done [AlixPartners].” Id.; see 6 Del. C.
§ 15-404(d) (“A partner does not violate a duty or obligation . . . under the
(Continued . . .)
48.
Ivo left AlixPartners for his own reasons, not because of Eric. See Ex. C,
Naumann Tr. at 128:5-132:16, 158:21-23, 167:3-170:10. In fact, even his former
boss, CV Ramachandran, emailed Ivo expressing regret for his part in bringing
about Ivo’s departure from AlixPartners (and corroborating Ivo’s stated concern
about the leadership of the Asia Business Unit). See Ex. DD. Indeed, at one point,
Eric encouraged Ivo to stay at AlixPartners, but Ivo chose otherwise for his own
reasons. See Ex. B, Thompson Tr. at 262:15-20.
C. Ivo Did Not Violate His Employment Agreement
By Allegedly Soliciting Eric.20
AlixPartners has requested – in the Pretrial Order and in a motion made last
night – that it be granted leave to assert a claim that Ivo improperly solicited Eric
to join FTI Consulting. The purpose of this proposed amendment can only be
guessed at – there is no evidence of any such solicitation, neither of them ended up
working there and AlixPartners could not prove any injury on such facts, even if it
could prove the violation. Moreover, the Report of George Fu, Ivo’s expert on
PRC law, does not address any such claim, as it was not previously asserted. The
(. . . continued)
partnership agreement solely because the partner’s conduct furthers the partner’s
own interest.”).
20 AlixPartners has asked the Court for leave to amend its Complaint in order
to add this allegation. In addressing this allegation, Eric and Ivo reserve all rights
and waive none.
49.
motion to amend should therefore be denied on the grounds of futility and undue
prejudice.
If the Court is inclined to consider the claim any further, we note that under
Delaware law (the only law we are in a position to address due to the lack of
notice), the claim would have to be dismissed for lack of injury.
In order for AlixPartners to carry its burden on this breach of contract claim,
it would have to demonstrate that (1) its non-solicitation provision is valid and
enforceable; (2) Ivo materially breached that provision; and (3) AlixPartners
suffered damages as a result of Ivo’s purported breach. See, e.g., Weichert Co. of
Pa. v. Young, 2007 WL 4372823, at *3 (Del. Ch. Sep. 10, 2007). Even assuming
that the clause is enforceable – a big assumption under PRC law, which not
surprisingly tends to favor the worker – AlixPartners cannot establish that Ivo
solicited Eric. As discussed above, Eric and Ivo each left AlixPartners for their
50.
own reasons. They did discuss that decision and, because of their friendship, they
did help each other explore employment options, but that does not constitute
solicitation.
Moreover, in order to prevail on this claim, AlixPartners must show that it
suffered damages as a result of Ivo’s purported breach of the non-solicitation
provision. See, e.g., Weichert Co. of Pa. v. Young, 2007 WL 4372823, at *3 (Del.
Ch. Sep. 10, 2007). AlixPartners could not make such a showing because Eric did
not join FTI Consulting. Thus, the claim is meritless, in addition to being
untimely.
IV. ERIC AND IVO DID NOT BREACH FIDUCIARY
DUTIES OWED TO ALIXPARTNERS.
AlixPartners claims that Eric and Ivo breached the fiduciary duty of loyalty.
These allegations are based on the same facts underlying their claims that Eric and
Ivo breached the confidentiality provisions of their Employment Agreements and
that Eric, by allegedly soliciting Ivo, breached the contractual duty of loyalty in his
Employment Agreement. AlixPartners’ breach of fiduciary duty claims should
therefore be dismissed as duplicative of their breach of contract claims. See Solow
v. Aspect Res., LLC, 2004 WL 2694916, at *4 (Del. Ch. Oct. 19, 2004) (“Because
of the primacy of contract law over fiduciary law, if the duty sought to be enforced
arises from the parties’ contractual relationship, a contractual claim will preclude a
51.
fiduciary claim. This manner of inquiry permits a court to evaluate the parties’
conduct within the framework created and crafted by the parties themselves.”).21
Even if AlixPartners’ fiduciary duty claims are not precluded, it will not be
able to establish that Defendants breached any such duty. As discussed above,
there was no improper solicitation and no violation of the confidentiality
provisions of their agreements because there was no use and no disclosure of any
of AlixPartners’ information.
V. ERIC AND IVO DID NOT CONVERT ALIXPARTNERS’
CONFIDENTIAL AND PROPRIETARY INFORMATION.
A. Eric And Ivo Did Not Refuse Plaintiffs’ Demand
That They Return AlixPartners’ Documents.
To be successful on its conversion claim, AlixPartners must demonstrate that
it made a demand that its property be returned and that Eric and Ivo refused that
demand. See Triton Const. Co. v. E. Shore Elec. Servs., Inc., 2009 WL 1387115,
at *25 (Del. Ch. May 18, 2009), aff’d, 988 A.2d 938 (Del. 2010). This demand
21
The claimed fiduciary duty is apparently tied to the employment contracts,
not the LLP Agreement of AlixPartners. Thus, this claim should arguably be
addressed under Hong Kong and PRC law. With respect to Ivo’s employment
contract, as the Fu Opinion points out, there is no generalized fiduciary duty owed
under PRC law by an employee. Fu Opinion ¶ 20. A senior manager of a
company may owe certain specified duties to the company, but none of them apply
here. Moreover, “due to the vagueness of the term ‘duty of loyalty,’ judges in the
Chinese courts are usually reluctant to find employees in violation of the ‘duty of
loyalty’ . . . without an express finding of other wrongful conduct.” Fu Opinion
¶ 22.
52.
requirement can be excused where the alleged wrongful act amounts to a denial of
the ownership rights of the real owner. See Triton Const. Co. v. E. Shore Elec.
Servs., Inc., 2009 WL 1387115, at *25 (Del. Ch. May 18, 2009) aff’d, 988 A.2d
938 (Del. 2010). However, that demand was not excused here, because Eric and
Ivo did not use or disclose AlixPartners’ documents or information. See Wayman
Fire Protection, 2014 WL 897223, at *23 (Del. Ch. Mar. 5, 2014) (“In addition, I
find that White used at least some of the program files he had copied from
Wayman and taken with him to Premium Fire during his tenure there. White’s
modification and use of some of the program files at issue constitutes a denial of
Wayman’s rights to utilize its files for similar purposes.”) (emphasis added).
Julie Severson, the head of the Human Resources department at
AlixPartners, testified that she did not recall anyone asking Eric or Ivo to return or
to delete information in their personal email accounts or backup hard drives. It
was not until the March 17 Letters that AlixPartners demanded the return of
documents. At that point, Eric and Ivo, through their attorneys, were willing, even
anxious, to return the documents. Eric and Ivo offered on numerous occasions to
return, delete or destroy all such information in accordance with AlixPartners’
preferences. Before the parties reached an agreement on how to proceed,
AlixPartners filed this lawsuit. Because of Defendants’ willingness to return
53.
AlixPartners’ documents, the demand requirement was not excused, and
AlixPartners’ conversion claim must fail.
In all events, the documents have now been returned, pursuant to the
Protocol, or will be when the final request is made pursuant to the terms of the
Protocol. That fact negates another necessary element of a conversion claim: that
AlixPartners suffered damages as a result of Eric’s and Ivo’s retention of
Plaintiffs’ confidential documents. See Rockwell Automation, Inc. v Kall, 2004
WL 2965427, at *4 (Del. Ch. Dec. 15, 2004).
VI. ERIC AND IVO DID NOT PARTICIPATE IN A CIVIL
CONSPIRACY.
AlixPartners cannot prove the necessary elements of its civil conspiracy
claim. “The elements for civil conspiracy under Delaware law are: (1) a
confederation or combination of two or more persons; (2) an unlawful act done in
furtherance of the conspiracy; and (3) damages resulting from the action of the
parties to the conspiracy.” Wayman Fire Prot., Inc. v. Premium Fire & Sec., LLC,
2014 WL 897223, at *24 (Del. Ch. Mar. 5, 2014).
A. No Confederation Existed.
Civil conspiracy is a “scienter-based” doctrine. Wayman Fire Prot., Inc. v.
Premium Fire & Sec., LLC, 2014 WL 897223, at *25 (Del. Ch. Mar. 5, 2014). To
make out such a claim, “[AlixPartners] may not rely solely on the fact that more
than one person is involved in committing an alleged wrong.” Id. at *24. “A
54.
‘confederation or combination’ of people for purposes of a civil conspiracy claim
means that there is a ‘meeting of the minds between or among such persons,’ and
that ‘meeting of the minds’ relates to the allegedly improper object or course of
conduct to be accomplished.” Id.
Thus, to prevail on its civil conspiracy claim, AlixPartners must demonstrate
that Eric and Ivo reached an agreement between themselves to wrongfully possess
or use AlixPartners’ property. There has been no evidence adduced of any such
agreement. AlixPartners alleges individual acts, not coordinated ones. Ivo’s
decision to forward himself emails and Eric’s routine back-ups of his computer
were independent, not coordinated, actions.
AlixPartners has pointed to the fact that Eric sent from his AlixPartners
email account to Ivo’s AlixPartners email account the contact list of another
AlixPartners employee, Lisa Donahue. This was done in October of 2013, while
they were both employees of AlixPartners. The Complaint paints a picture of this
act as a deliberate theft, done with the intention of stealing the contact list so that
Eric and Ivo could bring it to McKinsey. Disturbingly, AlixPartners had no basis
on which to allege such skullduggery. Eric sent the contact list to Ivo in order to
plan an Asia trip with Al Koch, an AlixPartners Managing Director. As Mr.
Koch’s testimony confirms, the three of them intended to use the list to identify
people they could call upon during the trip. It turned out the contact list mostly
55.
contained people they already knew and North American contacts who were
irrelevant for their purposes.22
VII. ALIXPARTNERS HAS SUFFERED NO INJURY AND
THEREFORE HAS NO DAMAGES.
Apart from AlixPartners’ breach of fiduciary duty claims, damages are a
required element of all of AlixPartners’ claims. See eCommerce Indus., Inc. v.
MWA Intelligence, Inc., 2013 WL 5621678, at *13 (Del. Ch. Sept. 30, 2013) (“To
be successful on a breach of contract claim, a party must prove . . . damages that
the plaintiff suffered as a result of the breach. To satisfy the final element, a
plaintiff must show both the existence of damages provable to a reasonable
certainty, and that the damages flowed from the defendant’s violation of the
contract.”) (emphasis added); Great Am. Opportunities, Inc. v. Cherrydale
Fundraising, LLC, 2010 WL 338219, at *20 (Del. Ch. Jan. 29, 2010) (requiring
evidence of use or disclosure to support a misappropriation claim); Rockwell
Automation, Inc. v Kall, 2004 WL 2965427, at *4 (Del. Ch. Dec. 15, 2004) (noting
22
To the extent that AlixPartners intends to base its conspiracy claim on Eric’s
allegedly wrongful solicitation of Ivo, that claim also fails. First, there is no
evidence of any such solicitation. Second, Ivo’s act of joining McKinsey was a
fully lawful one. Third, a conspiracy claim requires a showing that Eric and Ivo
agreed that Eric would breach his fiduciary duty of loyalty by soliciting Ivo. See
Wayman Fire Prot., Inc. v. Premium Fire & Sec., LLC, 2014 WL 897223, at *24
(Del. Ch. Mar. 5, 2014). In other words, AlixPartners must show that Ivo
knowingly aided Eric in his purported breach of fiduciary duty.
56.
that a “necessary element[] of conversion” is that Plaintiffs suffered damages as a
result of Defendants’ conduct) (emphasis added); Wayman Fire Prot., Inc. v.
Premium Fire & Sec., LLC, 2014 WL 897223, at *24 (Del. Ch. Mar. 5, 2014)
(noting that an element of civil conspiracy is “damages resulting from the action of
the parties to the conspiracy”) (emphasis added). Because AlixPartners cannot
prove damages, AlixPartners cannot prevail on any of its claims.
Mr. Marshall
further admitted that if Eric, Ivo and McKinsey did not access the documents
retained by Eric and Ivo (and they did not), then AlixPartners would suffer no
harm. See Ex. EE, Marshall Tr. at 353:5-22, 370:10-371:3.
Before this case began, Eric and Ivo offered to return or destroy any
AlixPartners’ documents in their possession. Those documents now have been or
will be returned pursuant to the Protocol. AlixPartners has not identified a single
client, account, business relationship or contact lost as a result of Eric’s and Ivo’s
possession of the documents at issue after their departures. Nor has AlixPartners
explained how or why there is even a potential for harm. Furthermore,
AlixPartners has not identified a single instance of use, misuse or disclosure of its
alleged confidential, proprietary or trade secret information.
57.
At the appropriate time, Eric and Ivo intend to seek the recovery of their
attorneys’ fees from AlixPartners pursuant to the DUTSA and otherwise. See 6
Del. C. § 2004 (“If a claim of misappropriation is made in bad faith, a motion to
terminate an injunction is made or resisted in bad faith, or wilful and malicious
misappropriation exists, the court may award reasonable attorney’s fees to the
prevailing party.”); Acierno v. Goldstein, 2005 WL 3111993, at *2 (Del. Ch. Nov.
16, 2005) (noting that attorneys’ fees may be awarded where “a party, or its
counsel, has proceeded in bad faith, has acted vexatiously, or has relied on
misrepresentations of fact or law in connection with advancing a claim in
litigation”); see also Compl. Ex. A, LLP Agreement, § 8.4 (providing for
indemnification of costs and expenses).23
23
AlixPartners has claimed approximately $19,000 in damages in the form of
the time-value cost of reducing certain AlixPartners’ allegedly misappropriated
trade secrets to their written form. Why AlixPartners would even bother to
advance such a paltry claim is a mystery. Doing so in the absence of any evidence
of use of the claimed trade secrets makes it frivolous.
58.
CONCLUSION
For the foregoing reasons, Eric and Ivo respectfully request that the
Court enter judgment in their favor and against AlixPartners in all respects.
OF COUNSEL:
Steven M. Kayman
Scott Eggers
Elise A. Yablonski
Pietro A. Deserio
Lindsey A. Olson
PROSKAUER ROSE LLP
Eleven Times Square
New York, NY 10036-8299
(212)-969-3000
MORRIS, NICHOLS, ARSHT &
TUNNELL LLP
/s/ Jay N. Moffitt
Kenneth J. Nachbar (#2067)
Jay N. Moffitt (#4742)
Ryan D. Stottmann (#5237)
Dustin B. Hillsley (#5904)
1201 N. Market Street
Wilmington, DE 19801
(302) 658-9200
Attorneys for Defendants
September 10, 2014
8516991
CERTIFICATE OF SERVICE
I hereby certify that on September 17, 2014, the foregoing was caused
to be served upon the following counsel of record via File & ServeXpress:
Gregory P. Williams (#2168) Jennifer C. Jauffret (#3689) Lori A. Brewington (#4522) Anthony G. Flynn (#5750) RICHARDS LAYTON & FINGER, P.A. 920 N. King Street Wilmington, DE 19801
/s/ Dustin B. Hillsley Dustin B. Hillsley (#5904)
