RainMakers Partners LLC v. NewSpring Capital, LLC

Background

RainMakers Partners, LLC brought claims against NewSpring Capital, LLC, NewSpring Holdings, LLC, and NSH III Management Company, LLC (collectively, “NewSpring”) for breach of contract and misappropriation of trade secrets. The dispute involved an April 2, 2019 advisory agreement under which NSH engaged RainMakers as a non-exclusive adviser to help raise money for NewSpring Health Capital III, L.P. The agreement required RainMakers to initiate contact with introduced investors, facilitate discussions between NewSpring and those investors, and counsel NewSpring about negotiating with them.

The agreement defined an “Introduced Investor” as an investor identified by RainMakers and approved by NSH for introduction by RainMakers. RainMakers supplied a list of 31 entities. NewSpring maintained that RainMakers facilitated meetings with only three of them: New2nd Capital, Industry Ventures, and J.P. Morgan. Northleaf Capital Partners, Ltd. was on the list but was not one of those three.

A June 4, 2019 addendum extended the definition of the investment fund to include investment vehicles or co-investments managed or offered by NewSpring Capital and stated that those investments could be subject to a placement fee. The addendum also said that all other agreement terms remained unaltered. The fund closed in February 2020. In June 2021, NewSpring announced a separate $120 million Northleaf investment in NewSpring Holdings, known as Project Tiger. The opinion states that another agent, Triago Americas, Inc., facilitated Northleaf’s involvement. RainMakers requested a $2.4 million placement fee, and NewSpring responded that RainMakers had not provided the services required for such a fee.

Motion to Disqualify Counsel

RainMakers moved to revoke the pro hac vice admission of Paul K. Leary, Jr., an attorney for NewSpring. RainMakers relied on emails in which Leary called RainMakers’ attorney a “shit head,” suggested that RainMakers’ president may have engaged in criminal conduct by secretly recording a conversation, and stated that he would represent a former NewSpring employee if RainMakers intended to depose him. NewSpring argued that Leary’s language responded to disparaging comments from RainMakers’ attorney and that the other allegations were unfounded.

The court explained that admission to appear pro hac vice is a privilege within the judge’s discretion and that revoking it is a drastic measure because it interferes with a party’s choice of counsel. The court noted that Leary had apologized and stated that the unprofessional conduct would not happen again. It found the admitted facts insufficient to justify interfering with NewSpring’s choice of counsel. The court therefore denied RainMakers’ motion to disqualify counsel.

Partial Summary Judgment

Summary judgment is appropriate when no genuine dispute exists about a material fact. The moving party must first show the absence of such a dispute; the opposing party must then present admissible evidence that could allow a reasonable fact-finder to rule in its favor. The court stated that unsupported assertions, conjecture, and simple denials are insufficient.

NewSpring sought partial summary judgment on whether the advisory agreement and addendum required RainMakers to provide services before it could earn a fee. NewSpring submitted a statement of undisputed facts stating that RainMakers facilitated introductions with only three investors and did not provide services for Northleaf’s Project Tiger investment. Because RainMakers’ responses were not supported by admissible evidence, the court deemed several of NewSpring’s factual statements admitted for purposes of the motion.

The court held that the agreement’s plain language required RainMakers to perform specified services before earning fees. Those services included initiating contact with introduced investors, facilitating discussions, and counseling NewSpring about strategy and tactics. The court held that the addendum incorporated those requirements because it left the agreement’s other terms unchanged.

The court rejected RainMakers’ reliance on cases involving different contractual arrangements or circumstances in which the adviser had performed some services. It also rejected RainMakers’ argument that NewSpring improperly excluded it from dealings with investors, noting that the agreement was non-exclusive. The court found that RainMakers had not sufficiently disputed NewSpring’s evidence that it facilitated introductions with only Industry Ventures, J.P. Morgan, and New2nd Capital, and not Northleaf. The court granted NewSpring’s cross-motion for partial summary judgment.

Discovery

RainMakers moved to compel discovery about all investments made by the 31 listed investors, rather than limiting the request to Northleaf and the three investors with whom RainMakers facilitated meetings. NewSpring argued that broader discovery was unwarranted because services were required to trigger fee obligations and because it had already produced relevant documents concerning Northleaf, the three investors, and investments in the fund.

The court held that, in light of its ruling that services were required and the limited number of investors with whom RainMakers facilitated meetings, the additional discovery was unwarranted. The court denied RainMakers’ motion to compel discovery.

Disposition

The court denied RainMakers’ motions to disqualify counsel and to compel discovery. It granted NewSpring’s cross-motion for partial summary judgment. The clerk was directed to terminate the motions identified as Documents 53 and 59.