By all accounts, 2008 was a significant year for non-compete and trade secrets developments in New York. The injunction issued in the IBM-Apple dispute concerning Mark Papermaster certainly received a number of headlines, and the Marsh USA v. Karasaki case also involved a high-profile set of players fighting over the applicability of a client non-solicitation agreement. On top of that, Gov. David Paterson signed into law a prohibition on non-compete agreements for broadcast industry employees, bringing New York in line with other jurisdictions (Illinois, Maine, Washington, D.C., Arizona, and Massachusetts) banning such non-competes.
At the end of last year, JPMorgan Chase filed suit against one of its executive search firms - The IDW Group. The suit arose out of a series of contracts JPMorgan entered into with IDW for the placement of financial services executives. According to the allegations of the Complaint, IDW violated the retained search agreements by facilitating the departure of JPMorgan executives to Citadel Investment Group, presumably another of IDW's clients.
IDW appears to be fighting back hard, and from the publicly available information, its theory on the breach of contract claims seems to be that the Investment Bank employees at JPMorgan who left for competitive opportunities at Citadel were not off-limits by the terms of the retained search agreements. Indeed, those agreements seem to limit IDW from soliciting JPMorgan employees in the Credit Trading Hybrids Group, the North American Portfolio Group, and the Proprietary Positioning Group.
There is no mention in the Complaint's allegations that the ex-JPMorgan employees were within any of these three groups. Whether the JPMorgan Investment Bank is tied into these three enumerated groups probably will be an issue for trial.
Right now, IDW's motion to dismiss the remaining claims is pending and has been fully briefed. One interesting issue will be the ruling on JPMorgan's breach of fiduciary duty claim. The financial services behemoth apparently claims that IDW had some heightened relationship with it that transformed an ordinary commercial deal into one cloaked with fiduciary obligations. Frankly, the allegation seems bizarre. That said, JPMorgan has defended it vigorously, arguing the existence of a duty cannot be decided on a motion to dismiss.
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Court: United States District Court for the Southern District of New York
Opinion Date: n/a
Cite: JPMorgan Chase Bank v. The IDW Group (Civil Action No. 08:cv:09116)
Favors: n/a
Law: New York
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