196 F. Supp. 3d 40
D.D.C.2016Background
- Paul Heldman was employed by Potomac Research Group (PRG) under a 2008 contract containing one-year non-compete and non-solicitation covenants.
- Hedgeye purchased PRG’s assets via a December 2015 Asset Purchase Agreement (APA); the APA listed employees on a disclosure schedule and required Hedgeye to offer employment to PRG employees but did not list PRG employment contracts among the conveyed assets.
- Heldman negotiated employment with Hedgeye for ~5 weeks after the APA closing, was offered employment letters containing non-compete language, but left Hedgeye on January 21, 2016 and shortly thereafter formed Heldman Simpson Partners.
- Hedgeye sued, seeking enforcement of the 2008 covenants (breach of contract) and alleging breach of fiduciary duty for solicitation while employed; moved for preliminary injunction and partial summary judgment on the contract claim.
- Defendants moved to dismiss or for summary judgment; the Court held that the APA unambiguously did not transfer Heldman’s 2008 employment contract to Hedgeye and granted summary judgment to defendants on the contract claim; fiduciary-duty claim was dismissed without prejudice for lack of factual specificity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the APA conveyed Heldman’s 2008 employment contract (thus permitting Hedgeye to enforce its non-compete and non-solicitation clauses) | The APA transferred PRG’s assets "including employee contracts" and Hedgeye relied on schedules listing employees and a required bonus payment as evidence that Heldman’s contract was an asset conveyed | The APA’s sale schedules (Schedule 1.1 and related assumed-contract lists) do not include employment contracts; employees are listed only in the representations/schedules section and Article IX contemplates Hedgeye offering employment, so the contract was not assigned | APA is unambiguous: it did not transfer Heldman’s 2008 employment contract to Hedgeye; summary judgment for defendants on contract claim |
| Whether Hedgeye was entitled to a preliminary injunction enforcing the 2008 covenants | Enforcement of the covenants is needed to prevent irreparable harm from competition/solicitation | No likelihood of success on the merits because the APA did not transfer the contract; thus injunction inappropriate | Preliminary injunction denied (no likelihood of success because contract not transferred) |
| Whether Heldman breached fiduciary duties by soliciting clients/employees while employed | Heldman used Hedgeye instrumentalities and solicited clients/employees to join his new firm | Allegations are vague; complaint lacks specific facts that solicitation or misuse of instruments occurred during employment | Fiduciary-duty claim dismissed without prejudice for failure to plead plausible facts; leave to amend granted |
| Whether remaining claims survive after resolution of contract and fiduciary claims | Injunctive and derivative claims are viable if main claims stand | If Counts II and III fail, derivative claims cannot stand | Remaining claims dismissed (without prejudice to repleading consistent with holdings) |
Key Cases Cited
- Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008) (standard for preliminary injunction requires likelihood of success and irreparable harm)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (complaint must plead facts sufficient to be plausible)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Aziken v. District of Columbia, 70 A.3d 213 (D.C. 2013) (contract interpretation: courts enforce clear written language; ambiguity allows parol evidence)
- Evening News Ass’n v. Peterson, 477 F. Supp. 77 (D.D.C. 1979) (addressed assignability of employment contracts in prior D.D.C. decision)
- Liberty Lobby, Inc. v. Anderson, 477 U.S. 242 (1986) (summary judgment standards and drawing inferences for nonmovant)