164 F. Supp. 3d 592
S.D.N.Y.2016Background
- MasterCard sued NIKE and former MasterCard employees Dennings and Fusselman for breach of LTIP agreements, tortious interference, and unfair competition after the two left MasterCard to work for NIKE and allegedly recruited MasterCard IS staff and used confidential IS information.
- Dennings was MasterCard’s CISO (left May 28, 2013); Fusselman was a senior IS leader (left Oct. 11, 2013). Both signed LTIP agreements with non-disclosure, non-recruitment (24 months for Dennings, 12 for Fusselman), and injunctive-relief provisions; NIKE knew of those provisions.
- MasterCard alleges Defendants used confidential information (employee compensation/performance, network configuration) and personal communications (LinkedIn, personal email/phones) to solicit MasterCard employees and suppliers; many former MasterCard IS employees joined NIKE.
- Defendants moved to dismiss under Rule 12(b)(6), arguing non-recruitment clauses are unenforceable, confidentiality and solicitation allegations are conclusory, tortious interference must be evaluated under Oregon law with a higher culpability standard, and unfair competition is preempted or inadequately pleaded.
- The Court evaluated enforceability of the restrictive covenants under New York law for contract claims, conducted choice-of-law for the tort/unfair competition claims, denied dismissal of breach and tortious interference claims, and dismissed unfair competition without prejudice (Oregon law to apply).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of non-recruitment clause | Clause is a reasonable protection of MasterCard’s legitimate interests and governed by general contract principles | Clause is a restrictive covenant and should be judged under BDO Seidman reasonableness test and be invalid | Court: BDO Seidman applies; clause survives dismissal (reasonable scope/time; legitimate interests alleged) |
| Breach of confidentiality (misuse of confidential IS/network info) | Allegations (including on information and belief) sufficiently plead disclosure/misappropriation by Dennings/Fusselman/NIKE | Allegations are conclusory and public LinkedIn info negates confidentiality | Court: factual determination inappropriate on 12(b)(6); allegations are plausible — claim survives dismissal |
| Breach of non-solicitation/non-recruitment (suppliers/employees) | MasterCard alleged solicitation of employees/suppliers and competitive recruitment of IS personnel | Defendants say MasterCard and NIKE aren’t competitors and pleadings lack supplier identity/detail | Court: specificity not required at pleading stage; claim survives dismissal |
| Tortious interference & unfair competition — applicable law and pleading sufficiency | New York law should govern; claims adequately allege improper purpose/means and misappropriation | Defendants: Oregon law applies and requires proof of improper purpose/improper means; OUTSA preempts unfair competition | Court: For tort/unfair competition, Oregon law governs (locus/contacts); tortious interference adequately pleaded under Oregon standard; unfair competition claim fails to plead OUTSA elements and is dismissed without prejudice |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state plausible claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard at pleading stage)
- BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (N.Y. 1999) (three-part reasonableness test for employee restrictive covenants)
- Columbia Ribbon & Carbon Mfg. Co. v. A-1-A Corp., 42 N.Y.2d 496 (N.Y. 1977) (scrutiny of ancillary anti-competitive employee agreements)
- Purchasing Assocs., Inc. v. Weitz, 13 N.Y.2d 267 (N.Y. 1963) (non-compete/restraint policy considerations)
- Ticor Title Ins. Co. v. Cohen, 173 F.3d 63 (2d Cir. 1999) (legitimate employer interests supporting restrictive covenants)
- Carvel Corp. v. Noonan, 3 N.Y.3d 182 (N.Y. 2004) (distinguishing interference with contract from interference with prospective economic relations)
- Northwest Natural Gas Co. v. Chase Gardens, 328 Or. 487 (Or. 1999) (Oregon requires improper purpose or means for tortious interference)
- White Plains Coat & Apron Co. v. Cintas Corp., 460 F.3d 281 (2d Cir. 2006) (choice-of-law interests analysis for conduct-regulating rules)