457 F.Supp.3d 323
S.D.N.Y.2020Background
- Plaintiff Francois Trahan, a prominent portfolio strategist, co-founded Cornerstone Macro with three partners and served as Managing Partner overseeing the Market Strategies Advisory Business (MSAB).
- The partnership agreements (LPA and LLC Agreement) included a leave provision (Section 3.7(f)) allowing a departing partner to recover intellectual property (IP) used solely by that partner’s division; dispute involves Pre‑Cornerstone IP (Trahan’s prior models) and Cornerstone IP (models developed at Cornerstone).
- Trahan alleges the other partners and an employee (Kantrowitz) conspired to oust him in 2018, retain or copy his Pre‑Cornerstone trade secret models, freeze him out of operations, and continue publishing/using his IP.
- Trahan asserted 16 claims (contract, DTSA, state trade secret law, fiduciary duty, fraud, torts, NY Labor Law, declaratory judgments). Defendants moved to dismiss all but the breach‑of‑contract claim.
- The court denied dismissal in part and granted it in part: DTSA claim survives as to Pre‑Cornerstone IP but is dismissed as to Cornerstone IP; fiduciary claims survive against the Limited Partner defendants but are dismissed as to Kantrowitz; selected tort, fraud, unjust enrichment, declaratory, and NY Labor Law claims survive in part; faithless servant and implied covenant claims were dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| DTSA — trade secret status, ownership, and misappropriation | Trahan alleges his Pre‑Cornerstone models are trade secrets he owned and that defendants used/disclosed them without consent | Defendants contend (1) IP at issue isn’t a trade secret or was not acquired by improper means, and (2) Cornerstone IP was owned by the Partnership so DTSA cannot cover it | DTSA claim survives for Pre‑Cornerstone IP (adequate secrecy, value, specificity, and alleged use/disclosure without consent); DTSA claim dismissed for Cornerstone IP (owned by Partnership, not misappropriation “of another”) |
| Breach of fiduciary duty — partners vs employee | Trahan says limited partners (Lazar, Laperriere, Perli) owed fiduciary duties by their active management and special trust; Kantrowitz owed duties as a "special employee" | Defendants say limited partners disclaimed fiduciary duties via the LPA or had no duty; Kantrowitz was merely an employee so owed no fiduciary duty to Trahan | Fiduciary duty claims survive against the Limited Partner defendants (active management, trust/confidence alleged); fiduciary claim dismissed against Kantrowitz (no authority for creating fiduciary duty via "special employee") |
| Fraud / negligent misrepresentation — affirmative statements and omissions | Trahan alleges fraudulent omissions (scheme to oust and steal IP) by the Limited Partners and an affirmative misrepresentation by Kantrowitz (promised he would be placated if made co‑head) | Defendants contend statements are non‑actionable puffery/future intent, lack reasonable reliance, or lack particularity under Rule 9(b) | Fraud and negligent misrepresentation claims survive as to (a) Kantrowitz’s alleged false promise re promotion, and (b) omissions by the Limited Partner defendants (pleaded with particularity and based on fiduciary duty); other asserted statements/omissions dismissed for failure to plead reasonable reliance or particularity |
| Contract vs tort duplication; remedies (conversion, unfair competition, implied covenant, other claims) | Trahan asserts torts (misappropriation, unfair competition, conversion, unjust enrichment) and statutory claims in addition to contract claims, especially for Pre‑Cornerstone IP and conduct beyond pure contract breaches | Defendants argue many tort/statutory claims are duplicative of the LPA/LLC contractual rights and should be dismissed | Court permits non‑duplicative tort claims (unfair competition, misappropriation re Pre‑Cornerstone IP, unjust enrichment in the alternative); conversion dismissed insofar as it duplicates contractual IP remedies for Cornerstone IP; implied covenant and faithless servant claims dismissed; tortious interference against Kantrowitz survives; declaratory claims re indemnification and capital account survive; NY Labor Law wage claim survives |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state a plausible claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleadings)
- Integrated Cash Mgmt. Servs., Inc. v. Digital Transactions, Inc., 920 F.2d 171 (trade‑secret factors guide)
- Brinckerhoff v. Enbridge Energy Co., Inc., 159 A.3d 242 (Del. 2017) (partnership agreements may expand/restrict fiduciary duties)
- Nemec v. Shrader, 991 A.2d 1120 (Del. 2010) (fiduciary claims duplicative of contract may be foreclosed)
- Phansalkar v. Andersen Weinroth & Co., L.P., 344 F.3d 184 (faithless servant doctrine requires principal‑agent relationship)
- Truelove v. Ne. Capital & Advisory, Inc., 738 N.E.2d 770 (N.Y. 2000) (analysis of what constitutes "wages" under NY law)
- Financial Guaranty Ins. Co. v. Putnam Advisory Co., LLC, 783 F.3d 395 (Rule 9(b) standards for fraud pleading)
- Chambers v. Time Warner, Inc., 282 F.3d 147 (courts may consider certain documents integral to the complaint)