Teachers Insurance & Annuity Association of America v. Simons

Background

TIAA sued Melanie Simons, a former TIAA wealth management director, for breach of contract. TIAA alleged that Simons violated post-employment agreements by soliciting, recruiting, inducing, urging, or encouraging three former TIAA wealth management advisors—Mitchell Falter, Jessica Doll, and Thomas Massie—to leave TIAA.

Simons signed a 2020 voluntary-separation agreement in exchange for benefits exceeding $500,000. The agreement included a 24-month covenant barring her from encouraging TIAA employees to end or reduce their relationship with TIAA. It also included a covenant concerning the solicitation or diversion of TIAA clients. Simons’s employment ended on November 2, 2020.

The record showed that Falter, Doll, and Massie had discussed leaving TIAA and had taken steps toward forming a new wealth-management business before Simons became involved. After Simons left TIAA, Falter contacted her about joining the venture. Simons later became involved in organizing the business, which was eventually named ReFrame Wealth, and became its chief executive officer. She communicated with the three men about forming the company, helped with tasks such as selecting a name and office space, and contacted vendors. Falter, Doll, and Massie resigned from TIAA on February 26, 2021.

Each of the three stated that Simons did not solicit or influence the decision to resign and that each would have left TIAA even without discussions with Simons. TIAA disputed the significance and timing of those decisions, arguing that the employees may have been planning to leave but remained open to staying until Simons took steps to develop the new business.

Summary-Judgment Standard

Summary judgment is appropriate only when the evidence shows that no genuine dispute exists about any material fact and the moving party is entitled to judgment as a matter of law. The court may not resolve competing accounts or decide witness credibility at this stage. With cross-motions, the court evaluates each motion separately and draws reasonable inferences against the party seeking judgment.

Simons’s Motion for Summary Judgment

The court denied Simons’s motion for summary judgment. TIAA needed to prove an agreement, its own performance, Simons’s breach, and damages. For the employee non-solicitation claim, TIAA had to show that Simons solicited, recruited, induced, urged, encouraged, or attempted to encourage one or more TIAA employees to resign.

The court found a genuine dispute about whether Falter, Doll, and Massie had made a final decision to leave TIAA before Simons joined their venture or whether their plans remained open to change. Although they had begun preparing to leave before Simons became involved, a reasonable jury could find that Simons’s communications, work with vendors, organizational tasks, and other efforts encouraged or attempted to encourage them to leave.

Simons also argued that the restrictive covenants were too broad to enforce. The court explained that New York generally subjects employment restrictions to heightened review, but may enforce some restrictions under the employee-choice doctrine when an employee chooses between preserving benefits by not competing and risking forfeiture by competing. The doctrine does not apply if the employer was not willing to continue employing the worker or if the worker was involuntarily discharged without cause. The court found factual disputes about whether TIAA remained willing to employ Simons and whether she was involuntarily dismissed, making summary judgment inappropriate on that issue as well.

TIAA’s Motion for Summary Judgment

The court denied TIAA’s motion for summary judgment. It concluded that the same disputed facts could support a verdict for either TIAA or Simons. The court therefore could not decide as a matter of law that Simons breached the employee non-solicitation covenant.

Client-Diversion Allegation and Possible Amendment

TIAA also argued that Simons violated the agreement’s separate covenant concerning TIAA clients, based on an alleged discussion with Massie about calls to TIAA clients. The court did not address that claim on the summary-judgment motions because TIAA had not pleaded it in the amended complaint. The amended complaint referred to covenants concerning solicitation of co-employees, and the case-management materials described discovery about employee solicitation rather than client diversion.

The court stated that TIAA may move for leave to amend the amended complaint. It did not grant an amendment or decide the client-diversion claim. The court noted that the existing record appeared to contain a factual dispute about whether Simons encouraged Massie to contact former clients.

Rule 11 Sanctions

The court denied Simons’s motion for sanctions under Federal Rule of Civil Procedure 11. Rule 11 permits sanctions for filings made for an improper purpose or without a reasonable factual or legal basis. The court emphasized that sanctions are imposed cautiously and that a claim must be essentially unsupported before sanctions are appropriate.

The court found that TIAA had made meritorious arguments opposing Simons’s summary-judgment motion, so TIAA’s claim was not utterly lacking in support. The court also noted that TIAA had investigated the claim before filing and that the court had previously found TIAA’s allegations plausible when it denied Simons’s motion to dismiss.

Disposition

The court denied Simons’s motion for summary judgment, denied TIAA’s motion for summary judgment, and denied Simons’s motion for Rule 11 sanctions. TIAA was permitted to move for leave to amend its amended complaint, and the court scheduled a telephonic conference to discuss the timing of any amendment and the next steps.