Opinion
602629/06.
Decided March 27, 2008.
Plaintiff was represented by McCue, Sussmane Zapfel P.C., 521 Fifth Avenue, New York, NY 10175, (212) 931-5500, Kenneth Sussmane, Esq.
Defendant was represented by Joseph Gearing, Jr., Esq., 60 East 42nd Street, New York, NY 10165, (212) 400-7420.
Defendant Ragu Raghavan moves for summary judgment dismissing the complaint, CPLR 3212. Plaintiff Titan Capital Group II, LLC cross-moves for partial summary judgment dismissing Raghavan's third counterclaim.
The complaint alleges fraud, breach of contract, misappropriation of trade secrets and unfair competition arising out of the past employment of Raghavan by Titan, and Raghavan's subsequent employment by Marathon Asset Management, L.L.C. (Marathon). The third counterclaim, at issue in the cross motion, sounds in defamation.
Marathon was a defendant in the instant action until May 2007, when Titan and Marathon stipulated that the action would be discontinued with prejudice as to it.
Titan manages hedge funds that specialize in volatility arbitrage and states that it is one of relatively few companies trading the volatility component of options as an asset class.
On June 19, 2001, Titan and Raghavan entered into an employment agreement (the 2001 Agreement), pursuant to which Raghavan was employed as a trader for the Titan Volatility Fund, L.P. (the Fund). The term of the 2001 Agreement was from February 1, 2001 through December 31, 2002. The 2001 Agreement provided that Raghavan would be paid an annual base salary plus up to one-third of gross revenues from the performance fees from the Fund, minus overhead expenses. Paragraph 10 of the Agreement provides:
During your employment with the Company and at all times thereafter, you agree to keep strictly secret and confidential and not to disclose to any third party, any business, economic, financial or marketing information or other confidential or proprietary information of the Company or any of its controlled affiliates or the Fund . . . except with the prior written consent of the Company. . . .
The 2001 Agreement also states that, at the end of its term on December 31, 2002, "if you are still employed and no contract extension has been agreed to, you shall be an employee at will, which means that you may resign your employment at any time, and likewise, the Company may terminate your employment at any time, with or without cause." 2001 Agreement, ¶ 6f.
Titan's president Russell Abrams asserts that in January 2003, Titan and Raghavan entered into an oral employment agreement for a term of one year, pursuant to which Raghavan was employed as a senior trader for the U.S. class of the Fund under a revised salary structure (the 2003 Oral Agreement). Abrams states that throughout 2003, various draft letter agreements confirming the 2003 Oral Agreement were prepared and transmitted to Raghavan but were not executed. Abrams contends that in December 2003, Titan and Raghavan orally agreed to renew the 2003 Oral Agreement for the 2004 calendar year on the same terms and conditions. Abrams asserts that Titan compensated Raghavan pursuant to the provisions of the 2003 Oral Agreement.
Abrams maintains that in January 2004, he and Raghavan executed a written contract memorializing the 2003 Oral Agreement. Abrams submits what he describes as an unsigned copy of the 2003 Oral Agreement, which provides for a term of January 1, 2003 through December 31, 2004, with an option for Raghavan to renew it for additional one-year periods. The document states that at the end of the term, if Raghavan did not renew, he would be an employee at will.
The purported 2003 Agreement contains a non-compete clause stating that, in the event of voluntary termination of employment, for a period of one year, Raghavan would not engage in any business relating to a hedge fund or an investment fund that trades volatility as an asset class in financial markets. Further, in the event that Raghavan breaches the covenant not to compete, Titan would be entitled to liquidated damages. The purported 2003 Agreement also contains the same protection against disclosure of confidential or proprietary information as was set forth in the 2001 Agreement.
Titan did not offer an explanation for its inability to submit a signed copy of the purported 2003 Agreement until Abrams's July 23, 2007 affidavit, in which he contends that Titan relocated its offices in 2005 and that in January 2006 it discovered that the original signed copy of the purported 2003 Agreement and other documents were missing. Abrams asserts that, despite a search of its records and files, Titan has been unable to locate the executed original or a copy of the executed original.
Abrams maintains that Raghavan orally exercised his option to extend the term of the purported 2003 Agreement in December 2004, for calendar year 2005, and in December 2005, for calendar year 2006. Titan states that Raghavan was its employee under the terms of the purported 2003 Agreement until January 30, 2006. According to Titan, in January 2006, Raghavan induced Titan to pay him $450,000, in addition to his compensation under the purported 2003 Agreement, in exchange for Raghavan's promise to assume new responsibilities and develop and engage in new trading activities for Titan. Titan states that, on January 30, 2006, almost immediately after he received the additional money he sought, Raghavan breached the purported 2006 Agreement and resigned. Titan alleges that Raghavan never performed the additional services as promised, and that a month later he commenced employment with Marathon to trade volatility as an asset class in financial markets.
Titan claims that it informed Raghavan that it would not consent to his employment by Marathon, and that such employment violated the non-competition terms of the purported 2003 Agreement. Titan argues that Raghavan also breached the 2001 and 2003 Agreements by retaining, using and, upon information and belief, disclosing to Marathon, Titan's confidential and proprietary information and trade secrets.
Titan maintains that it disclosed confidential and proprietary information and trade secrets to Raghavan to facilitate his services as a senior trader. Its trade secrets included formulae, patterns, devices and compilations of information that are used in its business, and which give it an opportunity to obtain an advantage over competitors who do not know or use them. Titan states that such trade secrets include the identity of and details regarding investors in its funds, its trading strategies and trading information, as well as models, statistics and compilations of information, developments, processes, technology, investment returns, profit figures, finances and other business information regarding Titan.
Abrams asserts that Raghavan sent numerous risk exposure reports to his personal e-mail account. He also submits documents that he claims Raghavan presented to Marathon prior to commencing employment which, according to Titan, set forth some of Titan's proprietary and confidential information, trade secrets and business strategies, and which describe the trading system that Raghavan was paid $450,000 to implement and supervise on Titan's behalf.
Raghavan states that the only employment agreement he ever executed with Titan was the 2001 Agreement, which expired on December 31, 2002, and which did not contain a non-compete clause. He asserts that he has complied with the confidentiality policy in the 2001 Agreement. Raghavan maintains that, although he and Titan exchanged drafts of an employment agreement in 2003, no such agreement was ever executed. Raghavan denies that he entered into the purported 2006 Agreement or that he agreed to undertake additional responsibilities or to remain at Titan throughout 2006 in exchange for the $450,000 payment he received from Titan.
Raghavan points out that the memo section of the $450,000 check states that it is "FOR 2005." He also disputes Abrams's claims that, in reliance upon the purported 2006 Agreement, Titan hired two new employees and expended money on a new system. Raghavan submits that, according to the deposition of Stephen Cohen, Titan's former Chief Operating Officer, the hiring and spending of money took place in 2005, before the date of the purported 2006 Agreement.
Raghavan argues that he is entitled to summary judgment. He maintains that the purported 2003 Agreement, and its subsequent alleged oral renewals, are barred by the statute of frauds. He also asserts that Titan has produced no trade secrets to support its allegations that it possesses trade secrets that he had access to and that he misappropriated for purposes of his new employment. According to Raghavan, Titan has not produced any documents that establish the existence of its trade secrets, and that its conclusory assertions that it possesses trade secrets are insufficient to withstand summary judgment as a matter of law.
Raghavan states that the generic trading strategies listed on a document that Abrams refers to as proprietary information were not unique to Titan, but rather were common knowledge among professionals in the securities industry. He further asserts that, regarding the items he e-mailed to his home e-mail account, they were risk exposure reports that he e-mailed to his personal account throughout his employment at Titan, so that he would have the daily report available at home in case an emergency arose. Raghavan maintains that he did not retain any such reports when he left Titan and never used the reports in connection with his new employment, nor has Titan alleged that he has.
Raghavan asserts that he did not remove or retain any Titan information when he resigned from Titan. He further states that he has not disclosed any confidential information about Titan to anyone at Marathon and has never used such information in his employment with Marathon.
Titan argues that Raghavan's summary judgment motion should be denied. Titan maintains that there are genuine issues of fact concerning Raghavan's liability for fraud based on the false and misleading statements he made to induce Titan to make a payment to him of $450,000.
Titan asserts that there are genuine issues of fact concerning Raghavan's liability for his alleged misappropriation of its trade secrets, and that it has not yet completed discovery with respect to this claim. Titan further argues that there are genuine issues of fact with respect to Raghavan's liability for unfair competition. It argues that, under New York law, the essence of a common-law unfair competition claim against a former employee is the unauthorized exploitation of proprietary information or trade secrets. Titan contends that, even if some or all of the Titan information might not qualify as trade secrets, Raghavan may still be held liable for the unauthorized taking of Titan's proprietary information.
Titan also argues that there are genuine issues of fact concerning Raghavan's liability for breach of the confidentiality provision in the 2001 Agreement, the confidentiality and non-compete provisions of the purported 2003 Agreement, and the purported 2006 Agreement. Titan maintains that Abrams's affidavit asserting the existence of the purported 2006 Agreement, pursuant to which Raghavan agreed to perform services in exchange for the payment of a $450,000 advance, is sufficient to create a genuine issue of material fact as to its existence, despite Raghavan's denial of such an oral agreement. Titan further contends that the existence of a written copy of the purported 2003 Agreement is a triable issue of fact.
The party moving for summary judgment "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact." Alvarez v Prospect Hosp., 68 NY2d 320, 324 (1986). The party opposing the motion then has the burden of producing admissible evidentiary proof that establishes the existence of a material issue of fact that requires a trial of the action. Id. Raghavan has shown his entitlement to summary judgment as a matter of law, and Titan has failed to establish the existence of material issues of fact. Thus, Raghavan's motion for summary judgment is granted.
The first cause of action, sounding in fraud, alleges that Raghavan's purported misrepresentations induced Titan to enter into the purported oral 2006 Agreement. This claim is dismissed as duplicative of the claim alleging breach of the purported 2006 Agreement. Where a fraud claim "relates to the cause of action for breach of contract, the fraud cannot be the basis for a separate cause of action." Giannisis v Maniatis, 160 AD2d 629, 629 (1st Dept 1990).
The second and third causes of action sound in breach of contract, with the second seeking a permanent injunction requiring Raghavan to deliver to Titan all records he improperly took from Titan upon leaving the firm, and with the third cause of action seeking monetary damages.
The three contracts at issue are the 2001 Agreement, the purported 2003 Agreement, and the purported 2006 Agreement. The term of the 2001 Agreement ended on December 31, 2002, and, because there was no contract extension agreed to, pursuant to paragraph 6f of the contract, Raghavan became an employee at will. Thus, because the provisions of the 2001 Agreement are not applicable to any actions taken by the parties in 2006 and thereafter, Raghavan is entitled to summary judgment dismissing the claim as far as it applies to the 2001 Agreement.
Raghavan's summary judgment claim is also granted as far as it applies to the purported 2003 Agreement. Titan cannot establish the existence of an enforceable 2003 Agreement or any renewals thereof. Even if the court accepted Abrams's explanation as to Titan's inability to produce a signed copy of the purported 2003 Agreement, the purported oral renewals in subsequent years would nonetheless be unenforceable under the statue of frauds.
Titan alleges that Raghavan orally renewed in December of 2003 for calendar year 2004 and in December of 2004 for calendar year 2005. Such oral renewals, even if they did occur, are unenforceable because they could not be performed within one year of their making. "It is well settled that an oral employment agreement for a period of one year to commence at a time subsequent to the making of the agreement is unenforceable against a plea of the Statute of Frauds. Such an agreement is void if, [b]y its terms [it] is not to be performed within one year from the making thereof'" General Obligations Law § 5-701 [a] [1]; Ginsberg v Fairfield-Noble Corp., 81 AD2d 318, 319 (1st Dept 1981). Thus, the court need not decide whether the 2003 Agreement was ever executed or is enforceable, because it would have expired on December 31, 2004, and any subsequent oral renewals are unenforceable. Thus, Raghavan would thereafter have been an employee at will, and not subject to an employment agreement.
As to the purported 2006 Agreement, Raghavan has submitted evidence supporting his assertion that the $450,000 payment he received from Titan in January 2006 was not in exchange for promises of future activity on his part, but rather for work he did for Titan in 2005. Titan has not submitted reliable evidence contradicting those assertions. The breach of contract claims are, therefore, also dismissed insofar as they apply to the purported 2006 Agreement. Thus, Raghavan has shown that he is entitled to summary judgment dismissing the second and third causes of action sounding in breach of contract.
The fourth and fifth causes of action sound in misappropriation of trade secrets, seeking a permanent injunction and damages, respectively. The sixth cause of action alleges unfair competition, claiming that Raghavan misappropriated confidential information belonging to Titan, thereby damaging Titan.
New York defines a trade secret in accordance with the Restatement of Torts (§ 757, Comment b), such that a trade secret exists where there is a "formula, pattern, device or compilation of information . . . used in one's business, . . . which gives [one] an opportunity to obtain an advantage over competitors who do not know or use it.'" Mann v Cooper Tire Co. , 33 AD3d 24 , 31 (1st Dept 2006) (quoting Ashland Mgt. v Janien, 82 NY2d 395, 407 (1993)).
Some of the factors that are relevant in considering whether information qualifies as secret include "the extent to which the information is known outside of [the] business' and the ease or difficulty with which the information could be properly acquired or duplicated by others.'" Id. at 32 (quoting Restatement of Torts § 757, Comment b).
Raghavan has set forth a prima facie case, showing that the so called trade secrets were not actually trade secrets or that Raghavan took and used any proprietary information of Titan's. For example, Raghavan submits several documents showing that the strategies set forth in a memorandum Raghavan provided to Marathon were not proprietary to Titan, but rather were generic trading strategies that were public knowledge used widely within the industry. See, Raghavan Aff. Titan does not submit evidence to dispute these assertions and evidence regarding Titan's lack of trade secrets or proprietary information. Thus, Titan has not shown that there are issues of material fact related to these issues, and Raghavan is entitled to summary judgment dismissing the fourth, fifth and sixth causes of action.
Therefore, Raghavan's motion is granted, and summary judgment is granted dismissing the complaint in its entirety.
Titan moves for partial summary judgment to dismiss Raghavan's third counterclaim for defamation. The allegedly defamatory statements are contained in letters from Titan to Marathon. On May 12, 2006, Titan wrote to Marathon that "[i]n January 2006, Mr. Raghavan requested a very substantial advance over and above his share of performance fees. He secured such advance by agreeing to assume new responsibilities and engage in new activities. Shortly after receiving the advance from Titan, Mr. Raghavan resigned, proving that he had no intention of fulfilling the promises and commitments he made to secure the advance, and refusing to repay the monies to Titan."
The letter further stated that "Mr. Raghavan has now violated his contract with Titan by accepting employment with Marathon." In a May 24, 2006 letter to Marathon, Titan wrote that "Mr. Raghavan's breach of his agreement with Titan is compounded by his refusal to return the advance paid to him by Titan, based on promises and commitments that were breached shortly after payment of the advance."
Raghavan asserts that these statements are false and that they constitute libel per se in that they impute fraud, dishonesty, and misconduct by Raghavan in his professional conduct.
Titan states that the alleged defamatory statements are statements of legal opinion or conclusions and not of fact in the defamation sense. Furthermore, according to Titan, the statements complained of are protected by absolute privilege because they are pertinent to the instant litigation. Finally, according to Titan, Raghavan has not presented any evidence that he has been damaged by the alleged defamatory statement.
The statements in the letters to Marathon are mere opinion and, therefore, not actionable. Although assertions of fact can form the basis of a libel claim, such a claim cannot be based on expressions of opinion. Gross v New York Times Co., 82 NY2d 146, 151 (1993).
The court must examine the statements at issue to determine: (1) if the specific language in question has a precise and easily understood meaning; (2) if the statements at issue can be proven true or false; and (3) if the full context in which the statements are presented indicate that they are likely to be opinion, not fact. Id. at 153.
In the context of the letters written from Titan to Marathon, its statements that Raghavan breached his contract with Titan would commonly be viewed as Titan's opinion as to the legal implications of Raghavan's termination of his employment with Titan. Furthermore, Titan's statement of opinion is not actionable because it "does not imply the existence of undisclosed underlying facts." Id.
Thus, Titan's cross motion for summary judgment is granted and the third counterclaim is dismissed.
Accordingly, it is
ORDERED that defendant's motion for summary judgment is granted and the complaint is dismissed with costs and disbursements to defendant as taxed by the Clerk of the Court upon the submission of an appropriate bill of costs; and it is further
ORDERED that plaintiff's cross motion for summary judgment on the third counterclaim is granted and the third counterclaim is dismissed; and it is further
ORDERED that the remainder of the action shall continue; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.