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JPMorgan Chase Bank, N.A. v. IDW Group

February 9, 2009

JPMORGAN CHASE BANK, N.A., PLAINTIFF,
v.
THE IDW GROUP, LLC, DEFENDANT.



The opinion of the court was delivered by: Paul G. Gardephe, Usdj

MEMORANDUM OPINION AND ORDER

The IDW Group, LLC ("IDW") entered into a series of written agreements with JPMorgan Chase Bank, N.A. ("JPMorgan") in which it agreed to provide executive search services to JPMorgan. In this lawsuit, JPMorgan alleges that IDW breached these agreements, breached the implied covenant of good faith and fair dealing, and breached its fiduciary duty to JPMorgan, by inter alia, recruiting JPMorgan employees to work at a competing firm. Before this Court is IDW's motion to dismiss Counts Three and Four of the Complaint, which respectively allege claims under New York law for breach of the implied covenant of good faith and fair dealing and breach of fiduciary duty. IDW has also moved to dismiss JPMorgan's demand for costs and attorneys' fees.

IDW argues that the implied covenant claim must be dismissed because it is based on "precisely the same conduct" asserted in JPMorgan's breach of contract claims. (Def. Br. at 2) In the alternative, IDW contends that this claim must be dismissed because it seeks to impose duties on IDW that the parties' agreements do not require. (Id. at 11) IDW further argues that the breach of fiduciary duty claim should be dismissed because JPMorgan has failed to assert facts sufficient to show a fiduciary relationship, and because the breach of fiduciary duty claim is duplicative of JPMorgan's breach of contract claim. (Id. at 12) Finally, IDW argues that JPMorgan's demand for costs and attorneys' fees should be dismissed because the underlying agreements do not provide for any such recovery. (Id. at 18)

For the reasons stated below, IDW's motion to dismiss Count Three is granted in part and denied in part; IDW's motion as to Count Four is denied; and IDW's motion concerning JPMorgan's demand for costs and attorneys' fees - which JPMorgan does not contest (Pltf. Br. at 1 n.1) - is granted.

BACKGROUND

A. THE FOUR AGREEMENTS BETWEEN THE PARTIES

IDW is an executive search firm working in the financial services industry. (Cmplt. ¶¶ 6, 17-18) Between February 2007 and June 2008, IDW and JPMorgan entered into four written agreements (collectively the "Agreements") in which IDW agreed to provide certain executive search services to JPMorgan. Specifically, IDW agreed to: (a) analyze the relevant candidate pools for each position that JPMorgan identified; and (b) produce reports to JPMorgan that identified potentially qualified diverse candidates within the respective candidate pools.*fn1 (Id. ¶ 7; see Decl. of IDW's President and Chief Executive Officer Ilana D. Weinstein, Nov. 11, 2008 ("Weinstein Decl."), Ex. A ("February 12 Agreement") at 14, 16; Ex. B ("August 6 Agreement") at 1; Ex. C ("August 9 Agreement") at 1; Ex. D ("June 18 Agreement") at 1) In exchange, JPMorgan agreed to pay IDW based on a set fee schedule. (Cmplt. ¶ 7; Weinstein Decl., Ex. A at 12, 14, 16; Ex. B at 2; Ex. C at 2; Ex. D at 2)

1. The February 12, 2007 Agreement

On or about February 12, 2007, the parties entered into their first written agreement (the "February 12 Agreement"), whereby IDW agreed to help JPMorgan recruit candidates for positions within JPMorgan's Credit Hybrids Trading Group. (Cmplt. ¶ 8; Weinstein Decl., Ex. A at 14, 16) Under this agreement, IDW would receive individual search assignments from JPMorgan and then analyze JPMorgan's staffing needs, interview and evaluate candidates, present confidential written reports on the candidates to JPMorgan, schedule interviews between JPMorgan and each candidate, collect references concerning the final candidate, assist JPMorgan in structuring proposed compensation packages for the successful candidates, and assist JPMorgan in integrating successful candidates into their respective client teams. (Cmplt. ¶ 17; Weinstein Decl., Ex. A at 11)

The February 12 Agreement contains non-solicitation and confidentiality provisions that are at the core of JPMorgan's breach of contract claims. With respect to nonsolicitation, the February 12 Agreement provides that:

[IDW] shall not, directly or indirectly solicit, induce, recruit or entice any employee or contractor of [JPMorgan] within the Credit Hybrids Trading Line of Business . . . to leave [JPMorgan] for a position outside [JPMorgan] during the term of this Agreement and for a period of one year from the termination or expiration of this Agreement, or for a period of one year from the last date of the provision of Service(s) (e.g. the last placement) provided in accordance with this Agreement, whichever is later. [IDW] also agrees to refrain from accepting any direct overtures regarding candidacy for a position outside of [JPMorgan] from [JPMorgan] employees . . . , and, to the extent that [IDW] fails to so refrain, such acceptance will be deemed a solicitation as prohibited herein. (Weinstein Decl., Ex. A ¶ 11; see Cmplt. ¶ 9) The February 12 Agreement also requires IDW to maintain the confidentiality of, and refrain from using or disclosing, the confidential, proprietary, and personal materials and information that JPMorgan provides to IDW. (Cmplt. ¶ 10; Weinstein Decl., Ex. A ¶¶ 5, 10) Finally, the February 12 Agreement contains provisions concerning indemnification, JPMorgan's right to audit IDW, the fact that both parties are independent contractors, non-exclusivity, and merger.

2. The Three Subsequent Agreements

On or about August 6, 2007, the parties entered into a second written agreement (the "August 6 Agreement"), whereby IDW agreed to assist JPMorgan in recruiting candidates for JPMorgan's North American Portfolio Group, which is the North American portion of JPMorgan's Proprietary Positioning Group. (Cmplt. ¶ 11, Weinstein Decl., Ex. B at 1) On or about August 9, 2007 and June 18, 2008, the parties entered into two additional agreements (the "August 9 Agreement" and the "June 18 Agreement"), in which IDW agreed to help JPMorgan recruit candidates for JPMorgan's Proprietary Positioning Group globally. (Cmplt. ¶¶ 13, 15, Weinstein Decl., Ex. C at 1, Ex. D at 1)

The August 6, August 9, and June 18 agreements explicitly incorporate the terms and conditions of the February 12 Agreement. (Weinstein Decl., Ex. B at 1; Ex. C at 1; Ex. D at 1) In addition, the three subsequent agreements contain non-solicitation clauses similar to the February 12 Agreement's non-solicitation provision. The August 6 Agreement prohibits IDW from: (a) soliciting, inducing, recruiting, or enticing any employee or contractor within JPMorgan's North America Portfolio Group (or an overlapping functional or product area) to leave for a position outside the North America Portfolio Group; and (b) accepting any direct overtures from employees within JPMorgan's North America Portfolio Group regarding candidacy for a position outside JPMorgan. (Cmplt. ¶ 12; Weinstein Decl., Ex. B at 3) Similarly, both the August 9 and June 18 Agreements prohibit IDW from: (a) soliciting, inducing, recruiting, or enticing any employee or contractor within JPMorgan's Proprietary Positioning Group (or an overlapping functional or product area) to leave for a position outside the Proprietary Positioning Group; and (b) accepting any direct overtures from employees within JPMorgan's Proprietary Positioning Group regarding candidacy for a position outside JPMorgan. (Cmplt. ¶¶ 14, 16; Weinstein Decl., Ex. C at 3; Ex. D at 3)

B. IDW'S ALLEGED WRONGFUL CONDUCT

The Complaint alleges that between March and July 2008, six employees within JPMorgan's Investment Bank resigned and then assumed positions at Citadel Investment Group, LLC ("Citadel"), which JPMorgan describes as "a global financial institution focusing on alternative investment strategies and services, often acting in direct competition with JPMorgan." (Cmplt. ¶¶ 1, 21) The first of the six employees to leave for Citadel was Patrik Edsparr ("Edsparr"), who as of January 2008, "functioned as JPMorgan's Global Head of Rates, Foreign Exchange, Securitized Products, Fixed-Income Exotics & Hybrids, Proprietary Positioning, and Principal Investments." Edsparr, who reported to the head of JPMorgan's Investment Bank, supervised the Proprietary Positioning Group referred to in the Agreements. (Id. ¶ 23)

JPMorgan alleges that it learned in August 2008 that IDW had helped Citadel recruit Edsparr and five other employees from JPMorgan's Investment Bank. (Id. ¶¶ 22-24, 26, 28) JPMorgan further claims that IDW "received a substantial placement fee from Citadel for succeeding in inducing Edsparr to leave his employment with JPMorgan and accept an offer from Citadel" and that "IDW directly or indirectly solicited, induced, recruited, or enticed (or failed to refrain from accepting direct overtures from) some or all of the [other five] employees . . . to leave their employment with JPMorgan for a position elsewhere." (Id. ¶¶ 26, 28)

On October 23, 2008, JPMorgan filed this action, which asserts four claims against IDW: (1) breach of contract by "directly or indirectly soliciting, inducing, recruiting, or enticing JPMorgan employees and/or assisting JPMorgan employees in pursuing opportunities outside JPMorgan" (Id. ¶ 32); (2) breach of contract by "using and, on information and belief, disclosing to third parties, Confidential, Proprietary, and Personal Information for purposes other than the rendering of the Services, including for purposes of wrongfully soliciting JPMorgan employees" (Id. ¶ 37); (3) breach of the implied covenant of good faith and fair dealing; and (4) breach of fiduciary duty.

On November 12, 2008, IDW moved under Fed. R. Civ. P. 12(b)(6) to dismiss Counts Three and Four of the Complaint and JPMorgan's demand for costs and attorneys' fees.

DISCUSSION

A. STANDARD UNDER RULE 12(b)(6)

To withstand a Rule 12(b)(6) motion to dismiss for failure to state a claim, "a complaint must plead `enough facts to state a claim for relief that is plausible on its face.'" Patane v. Clark, 508 F.3d 106, 111-12 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1974 (2007)). This Court "must accept all well-pleaded facts as true[, must] consider those facts in the light most favorable to the plaintiff," Patane, 508 F.3d at 111, and must draw all reasonable inferences from those allegations in plaintiff's favor. See Thomas v. City of New York, 143 F.3d 31, 36 (2d Cir. 1998). The issue on a motion to dismiss "`is not whether . . . plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.'" Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir. 1995) (quoting Scheuer v. Rhodes, 416 U.S. ...


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