CrossBorder Solutions v. Macias
- Nelson Roman
- 7:20-cv-04877
- U.S. District Court · Southern District of New York
- 22
In CrossBorder Solutions v. Macias, Gini, & O’Connell, LLP, Judge Roman partly allowed amendment but rejected the proposed racketeering claim and denied two discovery-sealing requests.
CrossBorder Solutions, Inc. and CrossBorder Transactions, LLC were allowed to add Sanjay Agarwal and pursue their other proposed claims against Agarwal and MGO, but could not assert the proposed RICO claim. MGO and Agarwal remained affected defendants in the permitted claims.
What happened
In CrossBorder Solutions, Inc. and CrossBorder Transactions, LLC d/b/a CrossBorder Solutions v. Macias, Gini, & O’Connell, LLP, the plaintiffs sought permission to file a second amended complaint. They wanted to add MGO partner Sanjay Agarwal as a defendant, add new allegations based on information from a settling former employee, and assert a federal racketeering claim against Agarwal and MGO. The proposed case concerned alleged theft and use of CrossBorder’s confidential information and customer list.
MGO argued that the court lacked authority over Agarwal and that the proposed racketeering claim was legally insufficient. The court found that Agarwal had sufficient connections with New York because he allegedly recruited New York employees, encouraged use of CrossBorder’s information, and pursued CrossBorder clients. The court also found that the proposed complaint adequately alleged wire fraud and theft of trade secrets, but not the required continuing pattern of racketeering activity.
Judge Nelson S. Roman granted the amendment request in part and denied it in part. He allowed CrossBorder to add Agarwal and assert the other remaining claims against Agarwal and MGO, but denied permission to assert the proposed racketeering claim. He also denied CrossBorder’s two requests to file supporting discovery under seal and for private court review, and allowed CrossBorder to file a third amended complaint consistent with the opinion.
The detailed version
- CrossBorder Solutions v. Macias · No. 7:20-cv-04877
- Nelson Roman
- Feb. 23, 2022
Background
CrossBorder alleged that former employees took confidential and proprietary information, including a detailed customer list, and that their new employer, Macias, Gini, & O’Connell, LLP (MGO), and MGO partner Sanjay Agarwal used that information to pursue CrossBorder’s clients. The alleged information included client contacts, contract dates, pricing-related information, client needs, and potential business opportunities.
CrossBorder moved for leave to file a proposed Second Amended Complaint. The proposed amendment would add Agarwal as a defendant, include factual allegations based on information learned from a settling former employee, and add a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO) against MGO and Agarwal. MGO opposed the motion, arguing that the proposed amendments were futile because the court lacked personal jurisdiction over Agarwal and because the proposed RICO claim did not state a legally sufficient claim.
Personal Jurisdiction Over Agarwal
The court held that it had personal jurisdiction over Agarwal under New York’s long-arm statute and that exercising jurisdiction was consistent with federal due process. The proposed complaint alleged that Agarwal conducted telephone interviews with employees who were working in New York, extended them employment offers while they were subject to noncompetition agreements, encouraged the use of CrossBorder’s confidential information, and used the customer list to target CrossBorder clients.
The court concluded that these allegations showed that Agarwal purposefully conducted activities connected to New York and that the claims against him arose from those activities. The court also stated that the allegations supported jurisdiction over all claims against Agarwal because the claims arose from the same alleged conduct: recruiting CrossBorder employees, encouraging them to breach their agreements, obtaining confidential information, and using that information to solicit CrossBorder’s customers.
Proposed RICO Claim
The court analyzed whether the proposed RICO claim was futile under the standard used for deciding whether a claim could survive dismissal for failure to state a claim. CrossBorder alleged two predicate acts of racketeering activity: wire fraud and theft of trade secrets.
The court found that CrossBorder adequately pleaded both alleged predicate acts. The proposed complaint described telephone calls, emails, and text messages allegedly used to encourage the taking of CrossBorder’s information and the solicitation of its clients. It also alleged that employees downloaded and transmitted the customer list and that MGO and Agarwal used the information to contact at least 35 CrossBorder clients.
The court nevertheless held that the proposed RICO claim was futile because CrossBorder did not adequately plead open-ended continuity. In the court’s explanation, the alleged conduct was directed at one victim, had one main purpose—obtaining CrossBorder’s clients—and did not show a threat of continuing racketeering activity. The court further distinguished the criminal theft of trade secrets, which can serve as a RICO predicate act, from the later use of stolen trade secrets. It held that the alleged ongoing use of the information could not establish a continuing threat of criminal activity under the applicable criminal trade-secret statute.
Disposition
The court GRANTED IN PART and DENIED IN PART CrossBorder’s motion for leave to amend. It DENIED the request to assert the proposed RICO claim against Agarwal and MGO. It GRANTED the request to add Agarwal as a defendant and to assert all other remaining claims in the proposed amended complaint against Agarwal and MGO. CrossBorder was permitted to file a Third Amended Complaint consistent with the opinion by March 16, 2022.
The court also DENIED CrossBorder’s two letter motions seeking to file discovery under seal and for private court review. The court stated that those materials could not be considered on the amendment motion because they were outside the complaint and, in any event, would not cure the RICO claim’s continuity problem. The court directed the parties to contact Magistrate Judge Judith C. McCarthy and terminated the motions listed at docket entries 85, 94, and 95.
Read the full 22-page opinion on CourtListener, the free public archive maintained by the Free Law Project.