United States District Court, District of Columbia
MEMORANDUM OPINION AND ORDER
RANDOLPH D. MOSS, UNITED STATES DISTRICT JUDGE
round two in a dispute between an investment advisory
company, Hedgeye Risk Management, and one of its former
employees, Paul Heldman. Hedgeye purchased the assets of
Heldman's former employer, Potomac Research Group
("PRG"), in December 2015. After the purchase,
Hedgeye and Heldman were unable to come to terms on an
employment agreement. Heldman, accordingly, left Hedgeye
after just five weeks to start his own firm. In round one,
Hedgeye brought suit against Heldman and his new company,
Heldman Simpson Partners ("HSP"), seeking, among
other things, a preliminary injunction to enforce non-compete
and nonsolicitation clauses in Heldman's employment
contract with PRG. Defendants, in turn, opposed Hedgeye's
motion and moved to dismiss or, in the alternative, for
summary judgment. The Court agreed with Defendants and, thus,
denied Hedgeye's motion for a preliminary injunction,
granted Defendants summary judgment on Hedgeye's claim
for breach of the non-compete and non-solicitation
provisions, and dismissed Hedgeye's remaining claims
without prejudice. See Hedgeye Risk Mgmt, LLC v.
Heldman, 196 F.Supp.3d 40 (D.D.C. 2016).
round two, Hedgeye has now filed an amended complaint
renewing and supplementing its claims for breach of fiduciary
duty, interference with advantageous business relations, and
constructive trust. And, once again, Heldman and HSP have
moved to dismiss or, in the alternative, for summary
judgment. Hedgeye opposes that motion and also seeks leave to
file a second amended complaint, which would add claims for
violation of the Computer Fraud and Abuse Act
("CFAA"), 18 U.S.C. § 1030, and conversion.
reasons that follow, the Court will DENY
Defendants' motion for summary judgment without
prejudice, will GRANT in part and
DENY in part Defendants' motion to
dismiss, and will DENY without prejudice
Hedgeye's motion for leave to amend.
Court recounted much of the relevant background in its prior
opinion, see Hedgeye, 196 F.Supp.3d at 42-45, and
will, accordingly, only briefly outline the facts and
allegations relevant to the pending motions. In considering
Heldman's motion to dismiss and Hedgeye's motion for
leave to amend, moreover, the Court will accept Hedgeye's
factual allegations as true. See Ashcroft v. Iqbal,
556 U.S. 662, 679 (2009). Although that standard does not
apply to Heldman's motion for summary judgment,
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248-49 (1986), that distinction will have no bearing on the
Court's decision for reasons explained below, see
infra Part II. A.
is an investment advisory firm that "provides financial
and economic research and analysis to institutional investors
and newsletter products to mass market customers." Dkt.
28 at 2 (Am. Compl. ¶ 5). On December 15, 2015, Hedgeye
purchased the assets of Heldman's employer, PRG.
Id. (Am. Compl. ¶ 8). Heldman worked for
Hedgeye for approximately five weeks following the sale.
Id. (Am. Compl. ¶ 9). He left on January 21,
2016 to found HSP, which "directly competes with
Hedgeye." Id. at 2-3 (Am. Compl. ¶¶
he was still employed by Hedgeye, Heldman allegedly recruited
Hedgeye employees, solicited Hedgeye clients, and used
Hedgeye resources to start his own firm. Hedgeye alleges, for
example, that Heldman "recruited two other Hedgeye
employees to join him in the new business." Id.
at 3 (Am. Compl. ¶ 20). In addition, although the
amended complaint does not identify any particular companies,
Hedgeye alleges-on "information and belief-that Heldman
solicited Hedgeye's clients before leaving the
firm. Id. at 4 (Am. Compl. ¶ 22).
Finally, Hedgeye alleges that Heldman "used
[Hedgeye's] instrumentalities to start his business while
he was still employed with Hedgeye." Id. at 3
(Am. Compl. ¶ 19).
Heldman's exit, Hedgeye enlisted Setec Security
Technologies, Inc. ("Setec") "to perform a
forensic examination of the laptop computer used by
Heldman." Id. at 2 (Am. Compl. ¶ 12).
Setec's investigation revealed the following: First,
"Heldman's computer was found to have logged several
USB storage devices during his employment with Hedgeye,
" which Hedgeye asserts "suggest[s] improper
information downloads." Id. at 3 (Am. Compl.
¶ 14). Second, Heldman "open[ed] a large number of
files and folders on the Hedgeye network shared drive, "
including "[d]ozens of. . . files and folders [that
were] highly sensitive and contain[ed] documents that Heldman
would not have . . . access[ed] in his normal and ordinary
course of business." Id. (Am. Compl.
¶¶ 15-16). Third, "many emails were sent [by
Heldman] to individuals requesting in-person meetings."
Id. (Am. Compl. ¶ 17). Fourth,
"Heldman's web- browsing history revealed contact
lookups, contact searches and dozens of individual contacts
being referenced in late December 2015, through January 13,
2016." Id. (Am. Compl. ¶ 18).
this backdrop, the amended complaint asserts three causes of
action. First, Hedgeye alleges that Heldman breached his duty
of loyalty to Hedgeye "by actively soliciting
[Hedgeye's] clients and employees while employed [by]
Hedgeye" and "by using and appropriating
confidential and sensitive Hedgeye information" through
the use of "Hedgeye instrumentalities."
Id. at 4 (Am. Compl. ¶ 28). Second, it avers
that Heldman tortiously interfered with Hedgeye's
"business relationships." Id. at 5 (Am.
Compl. ¶ 31). Third, it asserts a claim for
"constructive trust" and requests that the Court
declare that "Defendants are involuntary trustees
holding . . . profits in constructive trust" for
Hedgeye. Id. at 6 (Am. Compl. ¶36).
move to dismiss and, in the alternative, move for summary
judgment. Dkt. 30. Hedgeye opposes both motions, Dkt. 33, and
also moves for leave to file a second amended complaint, Dkt.
38, which would add claims for violation of the CFAA and for
common law conversion.
Defendants' Motion for Summary Judgment
initial matter, the Court concludes that Defendants'
motion for summary judgment is premature. That motion is
supported by Heldman's own declaration, which denies the
core allegations of the amended complaint. He attests, for
example, that before his departure he "worked diligently
with the best interests of Hedgeye in mind" and
"sought to contact clients who had engaged PRG in order
to facilitate a transition of their business to Hedgeye,
" Dkt. 30-1 at 2 (Heldman Deck ¶ 6); that, while he
worked at Hedgeye, he "did not access or review any
files, folders, documents or information that [he] was not
authorized to access, " id. (Heldman Decl.
¶ 8); that he has not "used any property or
information belonging to Hedgeye" while at HSP,
id. at 3 (Heldman Decl. ¶ 9); that "[a]t
no time while [he] worked at Hedgeye did [he] suggest or
request that a client move its business away from Hegdeye,
" id. (Heldman Decl. ¶ 12); and that he
"did not encourage" the two former Hedgeye
employees who joined him at HSP "to terminate their
employment with Hedgeye" but, rather, that "they
approached [him], " id. at 4 (Heldman Decl.
Heldman's declaration provides important evidence, it is
asking too much to require Hedgeye to controvert this
evidence without first having any opportunity to engage in
discovery. Federal Rule of Civil Procedure 56(d) speaks
directly to this concern and provides that, "[i]f a
nonmovant shows by affidavit or declaration that, for
specified reasons, it cannot present facts essential to
justify its opposition, " the Court may deny the motion
and permit the nonmovant to take appropriate discovery.
Fed.R.Civ.P. 56(d). Such an affidavit must satisfy three
criteria. See Convertino v. U.S. Dep 't of
Justice, 684 F.3d 93, 99-100 (D.C. Cir. 2012); see
also U.S. ex rel. Folliard v. Gov't Acquisitions,
Inc., 764 F.3d 19, 26 (D.C. Cir. 2014) ("[D]istrict
courts must assess all the requirements discussed in
Convertino.'"). First, it must
"outline the particular facts [the party] intends to
discover and describe why those facts are necessary to the
litigation." Convertino, 684 F.3d at 99.
Second, it must explain "why [the party] could not
produce [the facts] in opposition to the motion [for summary
judgment]." Id. at 99-100 (second and third
alterations in original) (quoting Carpenter v. Fed.
Nat'l Mortg. Ass'n, 174 F.3d 231, 237 (D.C. Cir.
1999)). Finally, the affidavit must demonstrate that
"the information is in fact discoverable."
Id. at 100.
with Rule 56(d) and these requirements, Hedgeye has submitted
an affidavit describing the specific discovery it needs to
respond to Defendants' motion for summary judgment. As
explained in that affidavit, Hedgeye seeks to discover two
categories of information: (1) "the nature of [the]
conversations . . . Heldman had with approximately eleven
clients of [Hedgeye] who subsequently hired [HSP] . . . and
[with] two employees who subsequently left Hedgeye for [HSP],
" and (2) "facts surrounding how [Heldman] used
[Hedgeye's] property and highly proprietary intellectual
property to start [HSP] . . . includ[ing] whether
[Hedgeye's] proprietary data can be found on [HSP's]
systems and whether Defendants used such data in the
production of their research reports." Dkt. 33-1 at 1
(Prisby Aff ¶¶ 1-2). The affidavit also explains
that Hedgeye has been unable to obtain this information
"despite diligent investigation" because it has not
been able "to depose Heldman, the departed Hedgeye
employees, or anyone at the Hedgeye client firms, " nor
has it had the chance to inspect Heldman's Hedgeye-issued
smartphone or HSP's "electronic storage
systems." Id. at 2 (Prisby Aff. ¶¶
3-4). Importantly, the affidavit further avers that several
former Hedgeye clients have stated that they will not
"provide testimony" without a subpoena.
Id. (Prisby Aff. ¶ 3). Finally, the affidavit
attests that Hedgeye would be able to obtain this information
if permitted to depose witnesses and to inspect the
electronic devices and systems in question. Id.
(Prisby Aff. ¶ 5).
affidavit readily satisfies the requirements of Rule 56(d),
as explicated by the D.C. Circuit. Because "summary
judgment is [typically] premature unless all parties have
'had a full opportunity to conduct discovery, '"
Convertino, 684 F.3d at 99 (quoting Liberty
Lobby, 477 U.S. at 257), and because Hedgeye has made
the required showing, the Court will deny Defendants'
motion for summary judgment as premature. Heldman, of course,
remains free to move for summary judgment after Hedgeye has
had the opportunity to take appropriate
Defendants' Motion To Dismiss
survive a motion to dismiss, a complaint "must contain
sufficient factual matter, accepted as true, to 'state a
claim to relief that is plausible on its face.'"
Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp.
v. Twombly,550 U.S. 544, 570 (2007)). The
"plausibility standard . . . asks for more than a sheer
possibility that a defendant has acted unlawfully."
Id. To meet the threshold of plausibility, the
plaintiff must plead "factual content that allows the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Id. The
Court, in assessing plausibility, must "assume [the]
veracity" of "well-pleaded factual allegations,
" id. at 679, and it must "grant [the]
plaintiff the benefit of all inferences that can be derived
from the facts alleged, " Sparrow v. United Air
Lines, Inc.,216 F.3d 1111, 1113 (D.C. Cir. 2000)
(internal quotation marks omitted). Unlike well-pleaded