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Graham Capital Management, L.P. v. Bongiovanni

United States District Court, D. Connecticut

February 14, 2019

GRAHAM CAPITAL MANAGEMENT, L.P., Plaintiff,
v.
STEVEN BONGIOVANNI, Defendant.

          MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

          WARREN W. EGINTON SENIOR UNITED STATES DISTRICT JUDGE

         Plaintiff Graham Capital Management (“GCM”) has moved for a preliminary injunction against its former employee, Steven Bongiovanni, whose job responsibilities at GCM included developing quantitative methods and computer software programs for systematic trading. In its proposed injunction dated October 5, 2018, GCM requested that Bongiovanni be enjoined from (a) using any GCM confidential information or trade secrets in any manner or for any purpose, and from (b) disclosing any GCM confidential information or trade secrets to any person or entity outside of GCM. At first, GCM also requested that the court order Bongiovanni to return all GCM confidential information and trade secrets, in any form, in his possession, custody, or control. However, GCM has since withdrawn its request for a return order.

         On September 27, 2018, GCM's counsel took Bongiovanni's deposition in connection with an age discrimination lawsuit Bongiovanni brought against GCM. Bongiovanni testified that he had secretly recorded meetings at GCM, including research department meetings, and that he still had five recordings in his possession. Bongiovanni also testified that he was actively seeking employment with other investment advisory firms during the time that he was secretly making recordings.

         GCM alleges that Bongiovanni's recordings of GCM research department meetings have the potential to cause irreparable harm to GCM, which cannot be adequately compensated by money damages. GCM also initially asserted that Bongiovanni's “failure to return those recordings” contributed irreparable harm to GCM; however, GCM's most recent proposed injunction does not seek the return of Bongiovanni's copies of the recordings.

         GCM argues that it will suffer irreparable harm in the absence of a preliminary injunction because Bongiovanni secretly recorded confidential and trade secret information concerning GCM's trading systems and models, which is crucial to GCM's business. GCM asserts that the confidential information that Bongiovanni recorded is used by GCM to trade billions of dollars' worth of financial instruments. Further, GCM fears that the information in Bongiovanni's recordings could enable a third party to replicate or front-run one or more of GCM's proprietary trading strategies.

         Bongiovanni contends that GCM is merely trying to prevent him from successfully litigating his claims of discrimination and that this action is retaliation for those claims. Bongiovanni asserts that the primary objective in making his recordings was ensuring the accuracy of his age-based discrimination claims. Moreover, Bongiovanni submits that the recordings were kept only because they were accidentally and unintentionally copied from the recording device to Bongiovanni's automated backup on his laptop computer. Bongiovanni argues that the information on the recordings is not worthy of protection. Finally, Bongiovanni focuses on a failure by GCM to demonstrate a threat of irreparable harm.

         The court convened an injunction hearing over the course of three days. The parties have since submitted thorough post-hearing papers.

         DISCUSSION

         A preliminary injunction may be granted upon a showing of irreparable harm and either likelihood of success on the merits or sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in favor of the movant. North Atlantic Instruments, Inc. v. Haber, 188 F.3d 38, 43 (2d Cir. 1999). “Irreparable harm is ‘injury for which a monetary award cannot be adequate compensation.'” Natsource LLC v. Paribello, 151 F.Supp.2d 465, 469 (S.D.N.Y. 2001) (quoting Jayaraj v. Scappini, 66 F.3d 36, 39 (2d Cir. 1995)). Preliminary injunctions generally are granted when there is urgent need for speedy action to protect a party's rights. Jordache Enters., Inc. v. Levi Strauss & Co., 841 S. Supp. 506, 521 (S.D.N.Y. 1993).

         Breach of Restrictive Covenant

         At the outset, GCM argues that Bongiovanni breached his employment agreement, which GCM contends should create a presumption of irreparable harm. But even where all parties agree that a restrictive covenant has been breached, courts continue to consider all factors to determine the issue of irreparable harm and to decide whether the covenant is enforceable. See USAchem, Inc. v. Goldstein, 512 F.2d 163, 167-69 (2d Cir. 1975). Although the breach of a restrictive covenant is one factor in the analysis, it is not determinative. See id. at 168 (“Having determined that the covenant was of some validity and that it was breached, we are compelled to conclude nonetheless that [plaintiff] is entitled to no relief.”); National Elevator Cab & Door Corp. v. H&B, Inc., 282 Fed.Appx. 885, 887 (2d Cir. 2008) (“[E]ndorsement of the Agreement constituted an additional factor weighing in favor of the conclusion that National had made the required showing of irreparable harm.”); see also Ticor Title Ins. Co. v. Cohen, 173 F.3d 63, 69 (2d Cir. 1999) (observing that breach of employment contract “might arguably be viewed as an admission by [defendant employee] that [plaintiff employer] will suffer irreparable harm were he to breach the contract's non-compete provision.”).

         Here, Bongiovanni's employment agreement provides, in relevant part:

Employee agrees to take reasonable steps to assure that such confidential information and trade secrets are stored securely on the premises of the Company and not to remove or send any such information from the premises of the Company without the express written consent of the Company. For the purposes of this Agreement, confidential information and trade secrets shall include, without limitation, proprietary investment and trading models, programs and systems and the underlying and associated design, source code, documents, data files, investment strategies, trading system rules, risk management techniques, algorithms, mathematical equations used to design trading strategies, and other information of a confidential nature (whether written or oral, contained in computer files or software, or otherwise) relating to or concerning the business, operations, management, services, products, activities or affairs of the Company, including client lists and client names.

         While Bongiovanni admits to inadvertently copying audio recordings of team meetings onto his personal computers, he maintains that he took reasonable precautions to ensure that the recordings did not leave GCM's offices. For example, Bongiovanni submits that he always kept the recording device in his office and deleted each recording after he had reviewed it. Bongiovanni eventually discovered that the recordings had been automatically saved to his laptop upon being attached to the recording device at the office. Although ...


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