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KCG Holdings, Inc. v. Khandekar

United States District Court, S.D. New York

January 17, 2018

KCG Holdings, Inc. and KCG Americas LLC Plaintiffs,
Rohit Khandekar, Defendant.



         This case involves allegations that Defendant Rohit Khandekar used and accessed confidential and proprietary trade secret information of Plaintiffs KCG Holdings, Inc. and KCG Americas LLC (collectively, "KCG") without authorization to do so. KCG alleges violations of the Defend Trade Secrets Act of 2016, the Computer Fraud and Abuse Act, and New York state law regarding the misappropriation of trade secrets, and breach of Khandekar's employment agreement. Dkt. No. 80 (Amended Complaint) at 1. On October 10, 2017, Khandekar filed a motion to stay the case. Dkt. No. 99. For the reasons explained below, the Court grants that motion.

         I. BACKGROUND

         A. The Instant Action

         From April 2012 through March 2017, Khandekar worked as a quantitative strategist for KCG using and developing mathematical and statistical models ("Predictors") to predict the prices of financial instruments. See Dkt. No. 101 (Khandekar Dec.) at ¶ 2. Plaintiffs allege that while Khandekar was employed by KCG but searching for employment with one of KCG's competitors, he improperly accessed and copied KCG's proprietary trading models. Amended Complaint at 1-2. Specifically, Khandekar allegedly sent emails from his KCG work account to his personal email address containing proprietary research and accessed, reviewed, and copied Predictors that he was not authorized to access. See id.

         On May 11, 2017, Plaintiffs filed suit against Khandekar alleging misappropriation of proprietary information in violation of federal and state law, as well as breach of contract, and they sought a temporary restraining order, which the Court denied. See Dkt. No. 1; Dkt. No. 26, Ex. 1; Dkt. No. 9 at 8:19-20. On June 22, 2017, Plaintiffs filed a motion for a preliminary injunction to, inter alia, enjoin Khandekar from using or accessing KCG confidential information. See Dkt. No. 24. The parties resolved that motion by entering into a stipulation on July 5, 2017. See Dkt. No. 39.

         Plaintiffs filed an amended complaint against Khandekar on August 28, 2017. See Amended Complaint.

         B. The Arbitration Proceeding

         While employed at KCG, Khandekar participated in the Amended and Restated Equity Incentive Plan (the "Plan"). Khandekar Dec. at ¶ 9. The Plan contains the following arbitration clause:

[A]ny dispute, controversy or claim between the Company and a Participant, arising out of or relating to or concerning the Plan or any Award shall be finally settled by binding arbitration in Newark, New Jersey before, and in accordance with the rules then obtaining of, the New York Stock Exchange, Inc. ("NYSE") or, if NYSE declines to arbitrate the matter (or if the matter otherwise is not arbitrable by it), the American Arbitration Association (the "AAA") in accordance with the commercial arbitration rules of the AAA.

Dkt. No. 102, Ex. D at ¶ 14.14. The Restricted Stock Unit Agreement provides that stock units will be forfeited if the grantee breaches or otherwise takes action prohibited by an offer letter, employment agreement, or other agreement that the grantee has with KCG. See Dkt. No. 102, Ex. E at ¶ 4.

         Under the Plan, KCG granted Khandekar 11, 579 restricted stock units. Khandekar Dec. at ¶ 10. Of those units, 8, 909 were unvested when Khandekar left KCG. Id. at ¶ 11.

         In July 2017, KCG merged with Virtu Financial, Inc. See Dkt. No. 102, Ex. G. As a result of the merger, Khandekar was scheduled to receive a cash payment of $178, 180 in exchange for the 8, 909 unvested restricted stock units. Khandekar Dec. at ¶¶ 15-16. Instead, KCG/Virtu eliminated Khandekar's unvested restricted stock units but did not issue him any cash payment. Id. at ¶ 17. In addition, in a letter dated August 4, 2017, Virtu demanded that Khandekar return $199, 998.11, the amount that he had previously received for the vested stock units. Dkt. No. 102, Ex. F. In an email dated August 8, 2017, Virtu explained that Khandekar was not entitled to the value of his vested or unvested units because he had "violated his confidentiality and proprietary information obligations." See Dkt. No. 102, Ex. G.

         In response to Virtu's demand for payment, Khandekar's counsel wrote to Virtu on August 14, 2017, and noted that if Virtu or another entity "intend[ed] to initiate legal action against Mr. Khandekar pursuant to the Plan, . . . paragraph 14.14 of the Plan requires arbitration." Dkt. No. 102, Ex. H. He stated that Khandekar "reserve[d] his right to seek ...

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