Hedgeye Risk Management, LLC v. Dale

Background

Hedgeye Risk Management, LLC sued Darius Dale, Stephen Lamar, 42 Macro LLC, Nadine Terman, and Solstein Capital, LLC. Hedgeye alleged that Dale, a former managing director, and the other defendants misappropriated confidential information and trade secrets to establish and operate 42 Macro, a competing venture. The alleged information included Hedgeye’s proprietary financial models, curated customer lists, and notebooks containing organized market data and analysis.

Hedgeye asserted claims under the Defend Trade Secrets Act, common-law misappropriation, breach of contract, tortious interference with contract, and unfair competition. The defendants filed motions under Federal Rule of Civil Procedure 12(b)(6), which asks whether a complaint alleges enough facts to plausibly state a legal claim. At this stage, the court generally accepts well-pleaded allegations as true and does not decide which side’s evidence is more persuasive.

Motion to Seal

The Dale Defendants asked to file three exhibits under seal. Judge Carter denied that request because labeling documents “Confidential” or “Highly Confidential” under a protective order did not by itself overcome the public-access presumption. The court directed that the documents at ECF No. 333 be unsealed.

Count I: Defend Trade Secrets Act

The court found that Hedgeye adequately identified three categories of alleged trade secrets: proprietary financial models, curated customer lists, and notebooks containing curated macroeconomic data and trend signals. The court also found that Hedgeye sufficiently alleged reasonable steps to protect the information, including confidentiality agreements, ethics rules, limited access, password protection, virtual private network access, and permission-based folders.

The court held that the complaint plausibly alleged that Dale acquired, disclosed, and used Hedgeye’s trade secrets through improper means, including by allegedly copying files to a private Dropbox account and using the information for 42 Macro. The court also held that the allegations were sufficient against Terman, who allegedly had access to and edited a Dropbox folder containing Hedgeye source files, and against Lamar, who allegedly accessed and used those files as the basis for 42 Macro’s financial models.

The court held that Hedgeye did not adequately allege that 42 Macro or Solstein Capital individually misappropriated any trade secret. Count I was therefore dismissed as to 42 Macro and Solstein Capital and sustained as to Dale, Lamar, and Terman.

Count II: Common-Law Misappropriation

Because the complaint adequately stated a federal trade-secret claim against Dale, Lamar, and Terman, the court found that it also adequately stated the related New York common-law misappropriation claim against them. The claim was dismissed as to 42 Macro and Solstein Capital. The court rejected Dale’s argument that the claim was duplicative of the breach-of-contract claim, finding that Hedgeye alleged facts from which a factfinder could infer willful conduct intended to harm Hedgeye.

Count III: Breach of Contract Against Dale

The court sustained Hedgeye’s claims that Dale breached the confidentiality, non-competition, and non-solicitation provisions of his Employment Agreement and Code of Ethics. The allegations included uploading Hedgeye files to a shared Dropbox account, taking pictures of confidential information, using Hedgeye information for 42 Macro, and soliciting a Hedgeye employee.

The court also rejected Dale’s argument that the non-solicitation provision was unenforceable merely because it lacked a geographic limitation. The provision was limited to six months, and the allegations concerned solicitation of an employee rather than a client or prospective client.

The court dismissed the claim based on the Employment Agreement’s assignment-of-rights provision because Hedgeye did not explain what that provision required or how Dale allegedly violated it.

Count IV: Tortious Interference with Contract

The court dismissed the tortious-interference claim against Lamar, 42 Macro, Terman, and Solstein Capital. Hedgeye did not provide sufficient factual detail showing that each defendant knew the relevant contract terms or was the “but for” cause of Dale’s alleged breach. The court stated that the claim failed under both New York and California law for the same basic reasons.

Counts V and VI: Claims Involving Solstein Capital and Terman

The court dismissed Hedgeye’s breach-of-contract claim against Solstein Capital based on the Services Agreement. The complaint did not explain the agreement’s relevant language, what “solicitation” meant under that agreement, or when, where, and how Solstein Capital allegedly solicited Dale or otherwise breached the agreement.

Because the claim against Solstein Capital failed, the court also dismissed the related tortious-interference claim against Terman.

Count VII: Unfair Competition

The court dismissed the unfair-competition claim against every defendant. Hedgeye did not oppose Terman and Solstein Capital’s arguments, so the court treated those arguments as conceded. The claim against 42 Macro failed because it was based on the same alleged misappropriation that was insufficiently pleaded under the Defend Trade Secrets Act. The claim against Dale was duplicative of the breach-of-contract claim. The claim against Lamar failed because Hedgeye alleged bad faith only conclusorily and did not provide facts showing fraud, deception, or abuse of a confidential relationship.

Disposition

Judge Andrew L. Carter, Jr. ordered that the defendants’ motions to dismiss be DENIED IN PART and GRANTED IN PART as follows:

- Count I, the Defend Trade Secrets Act claim, was dismissed as to 42 Macro and Solstein Capital and sustained as to Dale, Lamar, and Terman. - Count II, common-law misappropriation, was dismissed as to 42 Macro and Solstein Capital and sustained as to Dale, Lamar, and Terman. - Count III, breach of contract against Dale, was sustained as to the confidentiality, non-competition, and non-solicitation provisions and dismissed as to the assignment-of-rights provision. - Count IV, tortious interference with contract against Lamar, 42 Macro, Terman, and Solstein Capital, was dismissed. - Count V, breach of contract against Solstein Capital, was dismissed. - Count VI, tortious interference with contract against Terman, was dismissed. - Count VII, unfair competition against all defendants, was dismissed.

The court granted Hedgeye leave to replead within 21 days. The order did not state that any dismissed claim was dismissed with or without prejudice.