United States District Court, S.D. New York
KCG Holdings, Inc. and KCG Americas LLC Plaintiffs,
Rohit Khandekar, Defendant.
MEMORANDUM OPINION & ORDER
J. NATHAN, DISTRICT JUDGE
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.
The Instant Action
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.
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.
filed an amended complaint against Khandekar on August 28,
2017. See Amended Complaint.
The Arbitration Proceeding
employed at KCG, Khandekar participated in the Amended and
Restated Equity Incentive Plan (the "Plan").
Khandekar Dec. at ¶ 9. The Plan contains the following
[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
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 ¶
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.
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 ...