Jane Street Group, LLC v. Millennium Management LLC

Background

Jane Street alleged that it developed a confidential options-trading strategy for India. Douglas Schadewald and Daniel Spottiswood, former Jane Street employees, had worked on Jane Street’s trading strategies and had signed confidentiality and intellectual-property agreements with Jane Street. In February 2024, they left Jane Street to join Millennium Management LLC, which Jane Street described as a competitor. Jane Street later alleged that the defendants were using its trading strategy.

Jane Street’s lawsuit asserted claims under the federal Defend Trade Secrets Act, New York trade-secret law, contract law, and other legal theories. The amended complaint sought monetary damages but no longer sought an injunction. The defendants filed answers asserting affirmative defenses, meaning defenses that, if established, could prevent or limit Jane Street’s recovery even if Jane Street proved its claims. Jane Street moved under Federal Rule of Civil Procedure 12(f) to strike several of those defenses.

The Court’s Analysis

The court first considered the defendants’ unclean-hands defense. The defendants claimed that Jane Street’s losses resulted from its own unusual trading activity and that Jane Street filed the lawsuit to chill competition, interfere with business relationships, and deter employees from joining competitors. The court held that neither theory supported an unclean-hands defense. Under New York law, that defense requires misconduct directly related to the right the plaintiff seeks to enforce. The defendants had not alleged misconduct by Jane Street in obtaining, developing, maintaining, or using its trade secrets or confidentiality agreements. Allegations about Jane Street’s later trading activity or its reasons for filing the lawsuit did not have the required connection to those rights. The court therefore struck the unclean-hands defense.

The court then considered waiver and estoppel. The defendants argued that Jane Street had waived or should be prevented from enforcing confidentiality obligations because it did not use non-compete agreements, told the individual defendants they were not bound by non-compete agreements, and publicly stated that it did not use such agreements. The court rejected those defenses as legally insufficient as pleaded. Jane Street was not seeking to enforce a non-compete agreement; it alleged violations of confidentiality provisions and trade-secret misappropriation. The defendants had not alleged facts showing that Jane Street intentionally gave up its confidentiality rights or misrepresented those obligations. The individual defendants also had not alleged that they relied on Jane Street’s conduct to their substantial detriment. The court struck both the waiver and estoppel defenses.

Finally, Jane Street challenged 18 defenses that it said were merely denials of liability, including failure to state a claim, failure to identify trade secrets, lack of disclosure or misappropriation, unjust enrichment, unenforceable contracts, lack of injury or damages, and lack of vicarious or joint liability. The court agreed that many appeared to deny elements of Jane Street’s claims rather than assert true affirmative defenses. But it declined to strike them because doing so would not meaningfully streamline the case, would not expand discovery, and could consume more time and resources than allowing them to remain. The court also declined to strike the individual defendants’ reserved defenses.

Ruling

The court granted in part and denied in part Jane Street’s motion to strike. It struck the defendants’ unclean-hands, waiver, and estoppel defenses. The court did not strike the challenged denial-of-liability defenses or the individual defendants’ reserved defenses. The court stated that the decision to strike was without prejudice to a later motion to amend under Rule 15 if discovery reveals new facts supporting those defenses, but defendants may not simply relitigate the ruling. The order did not decide whether the defendants misappropriated Jane Street’s trade secrets, breached their contracts, or were otherwise liable.