Iacovacci v. Brevet Holdings, LLC

Background

Paul Iacovacci sued Brevet Holdings, LLC; Brevet Capital Management, LLC; Brevet Short Duration Partners, LLC; Brevet Short Duration Holdings, LLC; and Douglas Monticciolo, Mark Callahan, and Johnny Lan. Iacovacci was a co-founder and former member of two Brevet entities and a former employee of Brevet Holdings. After Brevet terminated him on October 14, 2016, Lan remotely accessed Iacovacci’s company-issued computer during the early morning of October 18, 2016. Lan copied documents to a USB drive, took a screenshot showing part of Iacovacci’s Yahoo! email inbox, and installed FileZilla. Iacovacci had returned his company phone but refused to return the computer.

Iacovacci asserted claims under the Computer Fraud and Abuse Act, the Federal Wiretap Act, and the Stored Communications Act. He also asserted New York claims for conversion and trespass to chattels. The defendants asserted counterclaims involving the employee handbook’s non-compete and confidentiality provisions, fiduciary and loyalty duties, unfair competition, trade secrets, tortious interference, the Computer Fraud and Abuse Act, the Stored Communications Act, and the federal Defend Trade Secrets Act. The opinion states that the defendants later voluntarily dismissed their breach-of-contract, Computer Fraud and Abuse Act, and Stored Communications Act counterclaims.

Defendants’ Motion for Summary Judgment

Computer Fraud and Abuse Act. The court granted summary judgment to the defendants on Counts One, Two, and Three. A civil claim under the Act required Iacovacci to show unauthorized access and at least $5,000 in qualifying damage or loss. Iacovacci relied on an invoice for digital-forensics services, but he produced it for the first time after the defendants had submitted their summary-judgment materials. The court excluded the invoice as an appropriate discovery sanction because Iacovacci had not produced it during discovery, gave no justification for the delay, and the late production prejudiced the defendants. Without the invoice, the court found no evidence from which a jury could find at least $5,000 in damages.

Federal Wiretap Act. The court granted summary judgment to the defendants on Count Four. It adopted the rule that an electronic communication must be intercepted while it is being transmitted, rather than after it has reached electronic storage. The screenshot showed emails dated nearly two weeks before Lan accessed the computer, and Iacovacci offered no evidence that Lan acquired an email at the same time it was being transmitted.

Stored Communications Act. The court denied summary judgment on Count Five. The screenshot showed the Yahoo! account and displayed some email content, including subject lines and sender information, creating a genuine factual dispute about whether Lan obtained electronic communications. The court also found factual disputes about whether Lan’s access was authorized, including whether Brevet’s handbook policies applied after Iacovacci’s termination and whether regulatory obligations authorized the access. The claim may proceed to trial.

Conversion and trespass to chattels. The court granted summary judgment to the defendants on Counts Six and Seven. For conversion, the court found no evidence that Iacovacci was completely excluded from possessing the computer or that copying the documents economically or otherwise diminished their value. For trespass to chattels, Iacovacci did not show that installing FileZilla damaged the computer or impaired its functioning.

Iacovacci’s Partial Summary-Judgment Motion

Covenant claims. Iacovacci sought summary judgment on the counterclaims alleging that he breached the handbook’s non-compete and confidentiality provisions. The court denied that request. Although the handbook said it was not an employment agreement or guarantee of employment, the court declined to hold that it could never be an enforceable contract. Iacovacci acknowledged receiving the handbook, which stated that an employee who violated its policies would be subject to discipline and responsible for resulting damages. The court found at least a factual question about whether he agreed to be legally bound by the handbook.

Fiduciary-duty and loyalty claims. Iacovacci sought summary judgment on the claims asserted directly against him by Monticciolo and Callahan. Applying Delaware’s test for distinguishing direct claims from claims belonging to a company, the court found that the alleged harms—competition with Brevet, use of Brevet resources, misuse of trade secrets, and solicitation of customers—were harms to Brevet rather than independent harms to the individuals. Any recovery would flow first to Brevet. The court therefore granted Iacovacci summary judgment on the Fourth and Fifth Counterclaims as asserted by Monticciolo and Callahan. The opinion does not dismiss those counterclaims as asserted by BCM.

Unfair competition and trade-secret claims. The court granted Iacovacci summary judgment on the unfair-competition counterclaim because the defendants could not simply repackage their other claims as unfair competition. The court denied summary judgment on the state and federal trade-secret counterclaims. The defendants identified categories of alleged trade secrets, including investor lists, presentation materials, valuation methods, and underwriting documents, and offered evidence that they restricted access and used confidentiality protections. The record also contained evidence that Iacovacci forwarded a list of more than 27,000 investor contacts and other Brevet materials to his personal email account, and that some Brevet and Enascor documents had striking similarities. The court found factual disputes about whether the information qualified as trade secrets and whether Iacovacci misused it.

Tortious-interference claims. The court granted summary judgment to Iacovacci on the Seventh Counterclaim for tortious interference with business relations because that claim was not distinct from the prospective-business-relations claim, and the defendants could not change the claim through summary-judgment briefing. The court denied summary judgment on the Eighth Counterclaim for tortious interference with prospective business relations. Evidence concerning alleged trade-secret misappropriation could support the required wrongful-means element, and testimony identified six transactions that Brevet claimed Iacovacci diverted. The court found that the evidence raised factual questions for a jury.

Damages and affirmative defense. The court rejected Iacovacci’s argument that the remaining covenant, trade-secret, and tortious-interference claims lacked evidence of damages. It noted that nominal damages may be available for breach of contract, that the trade-secret claims sought damages and injunctive relief, and that the record contained evidence concerning lost transactions and possible lost profits. The court granted summary judgment to Iacovacci on the defendants’ twenty-third affirmative defense, which asserted that Brevet’s regulatory compliance duties justified monitoring communications. The defendants provided no authority showing that those compliance efforts would defeat Iacovacci’s remaining Stored Communications Act claim, so the court struck the defense.

Expert Testimony and Sealing

The court denied the parties’ motions in limine to exclude expert testimony without prejudice to renewal 60 days before trial. The court also found the parties’ sealing requests overly broad and ordered them to submit narrower requests and supporting authority by April 28, 2023. The parties were directed to appear for a pretrial conference on June 6, 2023.