Pontius Ebel v. G/O Media, Inc.

Background

G/O Media, Inc. and Onion, Inc. previously brought counterclaims against Katherine Pontius Ebel. The court had dismissed those counterclaims, holding that the defendants had not plausibly alleged that Pontius breached fiduciary duties or her employment agreement. The defendants then moved for reconsideration or, alternatively, for permission to amend their counterclaims.

The defendants argued that the court had overlooked facts about the timing of events, Pontius’s alleged failure to cooperate with efforts to restore her duties, her receipt and disclosure of confidential or privileged information, and the parties’ dispute over whether her role had been diminished. They also relied on later deposition testimony, emails, and communications through private email accounts. The court concluded that these materials did not provide a basis to reconsider its earlier ruling. Some facts had already been accepted for purposes of the earlier decision, while other materials were not shown to be new or did not establish a breach by Pontius.

Reconsideration

The court denied the motion for reconsideration in full. It explained that reconsideration is an exceptional remedy, generally requiring an overlooked controlling decision or fact, an intervening change in law, new evidence that could alter the result, or a need to correct clear error or prevent serious unfairness.

The court reaffirmed that the alleged conduct did not state a claim under New York’s faithless-servant doctrine or duty-of-loyalty rules. Those doctrines generally address conduct such as competing with an employer, diverting business opportunities, embezzlement, improper kickbacks, or other direct self-dealing against the employer’s interests. The court held that the alleged effort to invoke a contractual right to resign, even if supported by confidential information or coordination with another employee, did not fit those doctrines.

The court also rejected the defendants’ argument that Pontius breached the employment agreement by obstructing efforts to cure the alleged reduction in her responsibilities. The court stated that the counterclaims had not tied that allegation to a specific contract provision and therefore had not adequately pleaded that theory in the original counterclaims.

Leave to Amend

The court granted in part and denied in part the request for leave to amend. It denied leave to amend the faithless-servant claim because the proposed allegations would still be legally insufficient. It also denied leave to amend the duty-of-care claim because that claim rested on the same disloyalty allegations as the rejected duty-of-loyalty claim.

The court granted leave to amend the breach-of-contract counterclaim to allege that Pontius failed to act in good faith and to perform her work faithfully and diligently while the defendants attempted to cure the alleged reduction in her role. The court said that the issue appeared fact-dependent and could not be found futile at the pleading stage. The court also allowed the defendants to add a contract theory based on Pontius’s alleged retention, use, or disclosure of confidential information, because the employment agreement addressed those matters.

Finally, the court granted leave to add a fiduciary-duty counterclaim based on the alleged unauthorized retention and disclosure of confidential and privileged communications after Pontius’s employment ended. The court distinguished that theory from the faithless-servant claim, stating that the alleged disclosure might support a fiduciary-duty claim even though it did not support a faithless-servant claim.

Disposition

Judge Paul A. Engelmayer granted the defendants’ motion for leave to file an amended counterclaim for breach of contract and breach of fiduciary duty, limited to the theories identified in the opinion. In all other respects, the motion was denied. The defendants were directed to file any permitted amended counterclaims by July 14, 2021.