HEDGEYE RISK MANAGEMENT, LLC v. HELDMAN, et al.

Filing 26

MEMORANDUM OPINION: For the reasons stated in this Memorandum Opinion, the Court will deny Hedgeye's motion for a preliminary injunction and motion for partial summary judgment and will grant the defendants' motion to dismiss, or in the alternative, for summary judgment. See document for details. Signed by Judge Randolph D. Moss on 7/8/2016. (lcrdm2, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

HEDGEYE RISK MANAGEMENT, LLC,
Plaintiff,
v.

Civil Action No. 16-935 (RDM)

PAUL HELDMAN; HELDMAN SIMPSON
PARTNERS,
Defendants.

MEMORANDUM OPINION
This case arises out of an alleged breach of a non-compete covenant between a financial
analyst and his former employer. In 2008, Paul Heldman, a health policy analyst who provides
research to institutional investors, joined a small policy research firm based in the District of
Columbia called Potomac Research Group (“PRG”). His employment contract with PRG
included two restrictive covenants that prohibited him from engaging in certain activities for one
year after his departure from PRG: a non-compete covenant that prohibited Heldman from
providing his services to a similar firm and a non-solicitation covenant that barred him from
inducing PRG’s customers and employees to leave PRG. In 2015, a larger financial and
economic research firm, Hedgeye Risk Management, purchased PRG’s assets. Hedgeye
contends that, in purchasing PRG’s assets, it acquired Heldman’s contract, and it alleges that he
breached the non-compete and non-solicitation covenants in that contract when, in early 2016, he
left Hedgeye to found a competing investment advisory firm. Hedgeye also alleges that
Heldman breached his fiduciary duty to Hedgeye during the five weeks that he was a Hedgeye
employee by soliciting its customers and employees to follow him to his new firm.

The matter is before the Court on Hedgeye’s motion for a preliminary injunction and for
partial summary judgment, both limited to the breach of contract claim. Dkt. 3. The defendants
have filed a motion to dismiss or, in the alternative, for summary judgment, with respect to the
entire complaint. Dkt. 11. The Court held a hearing on the preliminary injunction motion and
argument on the additional motions. For the following reasons, the Court will deny Hedgeye’s
motion and will grant the defendants’ motion. Specifically, the Court will grant summary
judgment to the defendants on the contract claim and will dismiss the remaining claims without
prejudice.
I. BACKGROUND
A.

Heldman and PRG
Paul Heldman is a “health policy analyst” who specializes in “research that forecasts

legislative and regulatory outcomes for institutional investors.” Dkt. 11-1 at 22 (Defs.’ Mot.
Summ. J. (“MSJ”), Decl., ¶ 1) (“Heldman Decl.”). He has worked as a policy analyst for 16
years. Id. In 2008, Heldman joined a small research firm in Washington, D.C., called Potomac
Research Group. Id. (Heldman Decl. ¶ 2). Although the parties have not produced an executed
copy of the document, Heldman appears to have signed a contract with PRG in November 2008
that governed his employment there. 1 See Dkt. 1-1 (Compl., Ex. 1) (“PRG Contract”). Under the
employment contract, Heldman was entitled to a base salary of $300,000 and incentive
compensation to be determined annually, id. at 2, although Heldman alleges he did not receive
any incentive payment in 2012 or 2013, Dkt. 18 at 1 (Supp. Heldman Decl. ¶ 4).

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Heldman suggests in a footnote in his initial opposition brief that “the actual existence and
validity of the 2008 PRG Contract are in substantial doubt given the fact that the copy relied
upon by Hedgeye in its Verified Complaint and the present motion is unsigned.” Dkt. 10 at 2
n.1. But Heldman does not appear genuinely to contest that the 2008 contract at some point
governed his employment with PRG. See Dkt. 17 at 7–8, 12–13.
2

Of greater relevance here, the 2008 contract also contained two covenants prohibiting
Heldman from competing with PRG in the event of his departure. The first stated:
Non-Compete:

(1) Employee agrees that, for a period of one year after the
last day that Employee is employed by PRG, Employee
will not, directly or indirectly, without the written prior
consent of PRG, work for or provide services to another
company that engages in the business of delivering health
policy-focused research information (nor deliver such
services directly) to institutional investors in different
formats, including, without limitation, research reports,
telephone calls, meetings and conferences.

Dkt. 1-1 at 2 (PRG Contract). The covenant went onto provide that Heldman could “enter into a
commercial activity that competes with PRG” if he left “for Good Reason,” which the covenant
defined (1) as “a termination of Employee by Employer (other than for Cause)” or (2) as “a
voluntary termination by Employee” following a number of circumstances not relevant here. Id.
at 3. The second covenant stated:
Non-Solicitation:

Employee agrees that, for a period of one year after the last
day that Employee is employed by PRG, Employee will
not, directly or indirectly, without the written prior consent
of PRG, solicit or induce any person or entity who at the
time is or who was at any time during the Employee’s
employment an employee, subscriber, customer, consultant,
contractor, vendor, or supplier of PRG or any of its
affiliates, to cease, curtail, or refrain from entering into any
such relationship with PRG or any of its affiliates or any of
their respective publications.

Id.
B.

Hedgeye and PRG
Hedgeye Risk Management, LLC, is an investment advisory firm based in Connecticut

that “provides financial and economic research and analysis to institutional investors” as well as
“newsletter products to mass market customers.” Dkt. 3-3 at 2 (Pl.’s Mot. for Prelim. Inj., Ex. 1,
¶ 2) (“Blum Aff.”). On December 15, 2015, Hedgeye entered into an asset purchase agreement
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(“APA”) with PRG. See generally Dkt. 1-2 (Compl., Ex. 2) (“APA”). Although PRG continued
to exist as an independent entity following the transaction, Hedgeye acquired PRG’s assets in the
business. See id. Both Michael Blum, Hedgeye’s president, and Suzanne Clark, PRG’s founder
and CEO, represent that “Hedgeye’s acquisition of PRG’s intellectual talent . . . was crucial to
PRG’s asset sale.” Dkt. 3-5 at 2 (Pl.’s Mot. for Prelim. Inj., Ex. 3, ¶ 7) (“Clark Aff.”); see also
Dkt. 3-3 at 2 (Blum Aff. ¶ 4). Clark further states that Hedgeye’s “acquisition” of Heldman’s
services, in particular, was “crucial” to the asset sale. Dkt. 3-5 at 2 (Clark Aff. ¶ 7).
The APA is a detailed 65-page document. See Dkt. 1-2 (APA). It provides that PRG
“shall sell, convey, transfer and assign to [Hedgeye], . . . all of [PRG]’s right, title, interest in and
to the assets relating to the [b]usiness.” Id. at 2 (APA at 1). It further states that “[s]aid assets
are described on Exhibit A,” and “shall include but not be limited to” thirteen categories of
assets, many (but not all) enumerated on separate schedules. Id. at 2–3 (APA at 1–2). Those
categories include PRG’s inventory, equipment, accounts receivable, contracts, intellectual
property, and permits (each enumerated on a separate schedule attached to the APA), as well as
PRG’s “proprietary information,” “office and other supplies,” advance payments and deposits,
records and accounting data, “all general, financial and personnel records,” telephone numbers
and Internet addresses, and “all other rights and assets relating to, or used in connection with[,]
the conduct of” PRG. Id. The APA also includes a “representations and warranties” section. Id.
at 9 (APA at 8). As relevant here, that section contains a warranty that “Schedule 5.13 contains
(a) a list of all employees of [PRG] as of the date hereof (together with each employee’s job
title); (b) each such employee’s length of service, and (c) the current annual compensation of
each such employee.” Id. at 11 (APA at 10). Heldman is listed as an employee on Schedule

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5.13. Id. at 60 (APA, sch. 5.13). Neither he nor his employment contract is otherwise referenced
in the APA, including in the schedules that enumerate PRG’s assets.
Three other provisions of the APA are relevant here. The first, Section 2.1, describes the
liabilities and obligations that Hedgeye would assume. It states that Hedgeye would assume “all
liabilities and obligations relating to employee benefits, compensation, or other arrangements
with respect to employees of [PRG] arising on or after December 1, 2015,” and specifically
provides that Hedgeye would pay Heldman a $25,000 end-of-year bonus. Id. at 4 (APA at 3).
The second relevant provision, Article VIII, provides that neither PRG nor its founder, Suzanne
Clark, would compete with Hedgeye for a period of three years. Id. at 14 (APA at 13). This
section, which is entitled “non-competition,” does not refer to Heldman. The third relevant
provision, Section 9.1(a), states that Hedgeye would “in [its] sole and absolute discretion, offer
employment effective on the Closing Date or thereafter, to all employees of [PRG].” Id. at 15
(APA at 14).
C.

Hedgeye and Heldman
Heldman was aware of the ongoing negotiations between PRG and Hedgeye but was

formally told two days after the execution of the APA that PRG’s assets had been sold to
Hedgeye. Dkt. 11-1 at 23 (Heldman Decl. ¶ 5). According to Heldman, Hedgeye proceeded to
meet with individual PRG employees on the afternoon of December 17, 2015, to discuss the
terms and conditions of their employment with Hedgeye. Id. Heldman states that he was
provided a letter “offering [him] employment that contained non-compete and non-solicitation
language.” Id. (Heldman Decl. ¶ 6); see id. at 29 (Defs.’ MSJ, Ex. A) (“Employment Letter”).
Heldman and Hedgeye negotiated over the terms and conditions of Heldman’s employment at
Hedgeye for the following five weeks. Id. at 23–27 (Heldman Decl. ¶¶ 7–27); id. at 33–34

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(Defs.’ MSJ, Exs. B, C). The focus of these negotiations, according to Heldman, was whether
the employment agreement would include a non-compete provision and, if so, the terms of that
provision. Id. at 24 (Heldman Decl. ¶ 10). Heldman represents that at no time was he ever told,
either by Hedgeye representative or by PRG’s owner, Suzanne Clark, that he was already subject
to an existing non-compete agreement. Id. at 23–25 (Heldman Decl. ¶¶ 8, 10, 14). Clark,
however, disputed this at the preliminary injunction hearing, testifying that she told Heldman on
at least one occasion that he was subject to an existing non-compete agreement.
Although the record is unclear regarding the details of Heldman’s departure from
Hedgeye, the parties agree that he left the firm on January 21, 2016, and shortly thereafter
founded a competing investment advisory firm, Heldman Simpson Partners (“HSP”). Dkt. 3-1 at
5; Dkt. 11-1 at 27 (Heldman Decl. ¶ 27–28). In its complaint, Hedgeye advances two allegations
regarding Heldman’s conduct around this timeframe. It alleges that, “[u]pon information and
belief,” Heldman “used [Hedgeye’s] instrumentalities to start his business while he was still
employed with Hedgeye.” Compl. ¶ 23. The complaint also alleges that Heldman “has reached
out to and solicited Hedgeye clients in order to provide health policy research information
services to them,” but it does not allege whether this conduct occurred before or after Heldman’s
departure from Hedgeye. Id. ¶ 24. Heldman denies that he acted disloyally during the five-week
period in which he was a Hedgeye employee. He states that he left Hedgeye on January 21,
2016, upon declining a “final offer” of employment that would have reduced his salary, Dkt. 111 at 27 (Heldman Decl. ¶ 27); that he and a co-worker, Sasha Simpson, started HSP five days
after he left Hedgeye, id. at 27–28 (Heldman Decl. ¶ 28); and that “[a]t no time while [he] was
working at Hedgeye did [he] encourage any clients to move their business from Hedgeye” or

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“encourage [Simpson or another co-worker] to terminate their employment with Hedgeye,” id. at
28 (Heldman Decl. ¶¶ 30–31).
D.

The Present Action
Hedgeye filed this action on May 18, 2016. Dkt. 1. The complaint asserts six common-

law contract and tort claims against Heldman and his new firm, Heldman Simpson Partners, but
the parties treat two counts as controlling: Count II, which asserts that Heldman breached the
terms of his 2008 contract with PRG (and particularly the non-compete covenant); and Count III,
which asserts that Heldman breached his fiduciary duties to Hedgeye when he solicited its clients
and employees to leave. See Compl. ¶¶ 28–37. In addition to filing a complaint, Hedgeye filed a
motion for a preliminary injunction, arguing that it is entitled to immediate relief—specifically,
the enforcement of the non-compete and non-solicitation covenants in Heldman’s 2008
employment agreement with PRG. Dkt. 3. It clarified at oral argument that the motion for a
preliminary injunction is limited to its breach-of-contract claim. At an initial hearing on the
motion, Hedgeye also agreed that the Court should treat the motion for a preliminary injunction
as a motion for partial summary judgment—also limited to the breach of contract claim. The
defendants filed a motion to dismiss or, in the alternative, for summary judgment with respect to
the entire complaint. Dkt. 11. The motions are now fully briefed.
The Court held a hearing on the motion for a preliminary injunction, and arguments on
the remaining motions, on June 30, 2016. Hedgeye offered testimony from two witnesses: Clark,
the founder of PRG, and Todd Jordan, Hedgeye’s chief financial officer. The defendants did not
call any witnesses.

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II. LEGAL STANDARD
This case is before the Court on motions governed by three different legal standards:
Hedgeye’s motion for a preliminary injunction, the cross-motions for summary judgment, and
the defendants’ motion to dismiss.
A preliminary injunction is “an extraordinary remedy that may only be awarded upon a
clear showing that the plaintiff is entitled to such relief.” Winter v. Natural Res. Def. Council,
Inc., 555 U.S. 7, 23 (2008). “A plaintiff seeking a preliminary injunction must establish [1] that
he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence
of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is
in the public interest.” Id. at 20. Before the Supreme Court’s decision in Winter, courts in this
circuit weighed the preliminary injunction factors on a sliding scale, allowing a weak showing on
one factor to be overcome by a strong showing on another. Davenport v. Int’l Bhd. of Teamsters,
166 F.3d 356, 360–61 (D.C. Cir. 1999). Since Winter, several judges on the D.C. Circuit have
questioned, without deciding, whether this rule remains valid. See Sherley v. Sebelius, 644 F.3d
388, 392 (D.C. Cir. 2011); Davis v. PBGC, 571 F.3d 1288, 1292 (D.C. Cir. 2009). But even if
the sliding-scale approach remains good law, a plaintiff who can show “no likelihood of success
on the merits” cannot obtain a preliminary injunction. Ark. Dairy Co-op Ass’n, Inc. v. U.S. Dep’t
of Agric., 573 F.3d 815, 832 (D.C. Cir. 2009) (emphasis added).
This matter is also before the Court on the parties’ cross-motions for summary judgment.
Summary judgment is granted “if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a);
see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986); Holcomb v. Powell, 433 F.3d
889, 895–96 (D.C. Cir. 2006). A fact is “material” if it is capable of affecting the outcome of the

8

litigation. Holcomb, 433 F.3d at 895; Liberty Lobby, 477 U.S. at 248. A dispute is “genuine” if
the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See
Scott v. Harris, 550 U.S. 372, 380 (2007); Liberty Lobby, 477 U.S. at 248; Holcomb, 433 F.3d at
895. “A party asserting that a fact cannot be or is genuinely disputed must support the assertion
by . . . citing to particular parts of materials in the record . . . .” Fed. R. Civ. P. 56(c)(1)(A).
The party seeking summary judgment “bears the heavy burden of establishing that the
merits of his case are so clear that expedited action is justified.” See Taxpayers Watchdog, Inc.
v. Stanley, 819 F.2d 294, 297 (D.C. Cir. 1987). When a motion for summary judgment is under
consideration, “the evidence of the non-movant is to be believed, and all justifiable inferences
are to be drawn in his favor.” Liberty Lobby, 477 U.S. at 255; see also Mastro v. Pepco, 447
F.3d 843, 850 (D.C. Cir. 2006). The non-movant’s opposition, however, must consist of more
than unsupported allegations or denials and must be supported by affidavits, declarations, or
other competent evidence, setting forth specific facts showing that there is a genuine issue for
trial. Fed. R. Civ. P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The non-movant
must provide evidence that would permit a reasonable jury to find in its favor. See Laningham v.
United States Navy, 813 F.2d 1236, 1241 (D.C. Cir. 1987). If his evidence is “merely colorable”
or “not significantly probative,” summary judgment may be granted. Liberty Lobby, 477 U.S. at
249–50.
Finally, a motion to dismiss brought under Federal Rule of Civil Procedure 12(b)(6) is
designed to “test the legal sufficiency of a complaint.” Browning v. Clinton, 292 F.3d 235, 242
(D.C. Cir. 2002). In evaluating such a motion, the Court “must first ‘tak[e] note of the elements
a plaintiff must plead to state [the] claim to relief,’ and then determine whether the plaintiff has
pleaded those elements with adequate factual support to ‘state a claim to relief that is plausible

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on its face.’” Blue v. District of Columbia, 811 F.3d 14, 20 (D.C. Cir. 2015) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 675, 678 (2009)). Although “detailed factual allegations” are not necessary
to withstand a Rule 12(b)(6) motion, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), “a
complaint must contain sufficient factual matter, [if] accepted as true, to state a claim to relief
that is plausible on its face.” Iqbal, 556 U.S. at 678. A plaintiff may survive a Rule 12(b)(6)
motion even if “recovery is very remote and unlikely,” but the facts alleged in the complaint
“must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at
555–56.
III. DISCUSSION
A.

Contract Claim
Hedgeye’s primary claim is that Heldman breached the non-compete and non-solicitation

covenants set out in his 2008 employment agreement with PRG by establishing a competing
investment firm upon his departure from Hedgeye in January 2016. Compl. ¶¶ 28–32. Hedgeye
has moved for a preliminary injunction and for summary judgment on this claim. See Dkt. 3-1 at
7–9. The defendants have moved to dismiss this claim, or, in the alternative, for summary
judgment. Dkt. 11-1 at 12–17. Although the legal standards applicable to the parties’ motions
vary, because the Court concludes that the defendants are entitled to summary judgment on this
claim, it need not address the parties’ other motions regarding the breach of contract claim.
Hedgeye’s breach of contract claim involves an ordinary question of contract
interpretation. Under District of Columbia law, “the written language embodying the terms of an
agreement will govern the rights and liabilities of the parties regardless of the intent of the parties
at the time they entered into the contract, unless the . . . language is not susceptible of a clear and
definite meaning.” See Aziken v. District of Columbia, 70 A.3d 213, 218–19 (D.C. 2013)

10

(quoting Hartford Fin. Servs. Group v. Hand, 30 A.3d 180, 187 n.12 (D.C. 2011)). Only
“[w]here the contract language is not susceptible of a clear and definite meaning—i.e., where the
contract ‘is determined by the court to be ambiguous’”—shall the court consider evidence of the
parties’ intent. Id. at 219 (quoting Rivers & Bryan, Inc. v. HBE Corp., 628 A.2d 631, 635 (D.C.
1993)). “Whether a contract is ambiguous is a legal question” for the court, not a factfinder, to
decide. 2 Id.
Here, the principal question before the Court is whether Heldman’s employment contract
was one of the assets that the APA conveyed from PRG to Hedgeye. Hedgeye argues that the
parties’ intent was to convey the employment contract to Hedgeye—indeed, that its primary goal
in purchasing PRG was to acquire the services of its employees. Because the APA conveyed the
2008 employment contract, Hedgeye argues, it may enforce the contract’s non-compete
covenant, and Heldman is in violation of the covenant. Dkt. 3-1 at 7–9; Dkt. 19 at 10–15. The
defendants, in turn, argue that the APA did not convey the 2008 employment contract to
Hedgeye; that Hedgeye therefore cannot enforce the contract; and that Hedgeye’s breach of
contract claim accordingly fails. Relatedly, they also argue that 2008 employment contract was

2

In an order on June 16, 2016, the Court directed the parties to address, in their reply briefs, the
question of “[w]hich jurisdiction’s substantive law should apply in this diversity action.” Dkt. 20
at 1. Hedgeye asserts, in response, that District of Columbia law applies because “[t]he parties to
this litigation and the underlying employment agreement are all based in Washington D.C.,” and
that the APA’s choice-of-law provision, which provides that the APA “will be governed by and
construed and interpreted in accordance with the substantive laws of the State of Delaware,” Dkt.
1-2 at 16 (APA at 15), cannot be enforced by the defendants, because they were not party to the
APA. Dkt. 22 at 2, 5. Heldman responds that the choice of law is irrelevant, because “there is
no conflict between Delaware law and that of the District of Columbia” with respect to any legal
question implicated by this case. Dkt. 23 at 12. Because the Court agrees that it can discern no
difference between the two legal regimes that would bear on this case, and because Heldman has
effectively waived any argument that Delaware law, not District of Columbia law, should apply,
the Court will apply District of Columbia law in this action.
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not an asset that was subject to transfer, because the relevant covenants protected only PRG,
which ceased to conduct business in December 2015. 3 The Court agrees with the defendants that
the 2008 employment agreement was not among the assets that the APA transferred from PRG to
Hedgeye.
The Court observes at the outset that the question whether an employer may unilaterally
assign an employment contract containing a non-compete clause to the employer’s successor in
interest is a difficult one that implicates important public-policy considerations. See 6 Richard
A. Lord, Williston on Contracts § 13:13 (4th ed. 2009); Adam Schneid, Note, Assignability of
Covenants Not to Compete: When Can a Successor Firm Enforce a Noncompete Agreement?, 27
Cardozo L. Rev. 1485 (2006). Several state courts of highest resort have concluded that, because
covenants not to compete are “personal in nature,” they are unassignable “absent the employee’s
express consent.” Traffic Control Servs., Inc. v. United Rentals Nw., Inc., 87 P.3d 1054, 1058
(Nev. 2004); see also, e.g., Hess v. Gebhard & Co., 808 A.2d 912, 921 (Pa. 2002). There are
good reasons for such a rule. For one, as a general matter, covenants not to compete “should be
construed narrowly” because they “impose a restraint on an employee’s right to earn a
livelihood.” Hess, 808 A.2d at 921; see also Restatement (Second) of Contracts § 188 cmt.g
(1981 & 2016 Supp.). And even if a covenant not to compete is, in itself, enforceable against an
employee, the fact that the employee “may have confidence in the character and personality of
one employer does not mean that [he] would be willing to suffer a restraint on his employment

3

The defendants also argue that: (1) the 2008 employment agreement was not assignable,
because it referred only to PRG and did not use a generic term like “employer,” see Dkt. 17 at 7–
8; and (2) in any event, the 2008 agreement was no longer in effect in 2015, because PRG had
breached it by failing to pay Heldman a bonus in 2012 and 2013, Dkt. 17 at 8; Dkt. 23 at 9–11.
Because the Court concludes that the 2008 employment agreement was not in fact transferred to
Hedgeye in the APA, it need not reach these alternative arguments.
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for the benefit of a stranger to the original undertaking.” Hess, 808 A.2d at 922. These policy
concerns are heightened, moreover, where (as here) the transfer is achieved through a sale of
assets, rather than through a merger. See Schneid, supra, at 1486 & n.6.
As far as the Court can discern, the District of Columbia Court of Appeals has not
resolved this question: the parties cite no controlling authority from the District of Columbia
courts, and the Court has found none. Hedgeye relies on a case from this Court, Evening News
Ass’n v. Peterson, 477 F. Supp. 77 (D.D.C. 1979), for the proposition that employment contracts
may be assigned without the consent of the employee. But Peterson does not explicitly discuss
contemporary District of Columbia law, and even if it did, it has no bearing on the question
whether an employment contract with a covenant not to compete can be assigned without the
employee’s consent. In the end, however, the Court has no need to decide whether D.C. law
would permit an employer to assign or convey such a contract, because the Court concludes that
PRG did not assign or convey Heldman’s employment contract to Hedgeye in the APA—and
that the APA is unambiguous in this respect. The Court reaches this conclusion for several
reasons.
First, the APA enumerates the assets that PRG conveyed to Hedgeye, and it does not list
or otherwise identify the 2008 employment agreement between PRG and Heldman. Article I of
the APA lists thirteen categories of assets conveyed to Hedgeye, six of which are specifically
enumerated on “schedules” attached to the APA. Dkt. 1-2 at 2–3, 27–66 (APA at 1–2, schs.).
Section 1.1(d) of the APA states that those “contracts, leases, purchase orders, sales orders,
contracts to purchase material, contacts to receive services or supplies, contracts to sell products
and materials and all other binding agreements of [PRG] (collectively, the ‘Assumed Contracts’)
including the contracts set forth on Schedule 1.1(d)” conveyed to Hedgeye. Id. at 3 (APA at 2)

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(emphasis added). Schedule 1.1(d) corresponds to Section 1.1(d); where Section 1.1(d) refers to
“all . . . binding agreements of” PRG as the “Assumed Contracts,” Schedule 1.1(d) is titled
“Assumed Contracts.” Schedule 1.1(d), in turn, simply provides that “[a]ll contracts set forth on
Schedule 5.7 and Schedule 5.15 are incorporated by reference herein.” Id. at 33 (APA sch.
1.1(d)) (emphasis added). Schedules 5.7 and 5.15 list dozens of contracts. But the 2008
employment contract between Heldman and PRG is not among the listed—or “Assumed”—
contracts; indeed, none of the “Assumed Contracts” are employment contracts. Id. at 52–55, 61–
65 (APA schs. 5.7, 5.15).
Hedgeye insists that Heldman’s employment contract was nonetheless an asset conveyed
to it by the APA. Dkt. 3-1 at 7–9; Dkt. 19 at 10–15. It argues that “PRG agreed to transfer and
assign to Hedgeye all of the assets of its business, including its employee contracts,” and it
suggests that the fact that the employees’ names and salaries are set out in the “DISCLOSURE
SCHEDULE TO THE ASSET PURCHASE AGREEMENT” (the schedules attached to the
APA) buttresses its understanding that the employee contracts were conveyed in the APA. Dkt.
3-1 at 8; see Dkt. 1-2 at 60 (APA sch. 5.13); see also id. at 3 (APA at 2) (conveying “all other
rights and assets relating to, or used in connection with[,] the conduct of the Business”). The
Court does not doubt that Hedgeye purchased “all” of PRG’s “assets” as an ongoing business,
but that does not answer the critical question whether Heldman’s employment contract was, in
the view of the parties to the APA as reflected in that contract, an “asset” of the business. The
text and structure of the APA answer that question, and they belie any claim that PRG’s
employment contracts were among the “assets” conveyed in the APA.
As explained above, Article I of the APA describes the “assets” that PRG intended to
convey to Hedgeye. See Dkt. 1-2 at 2 (APA at 1). Those “assets” are set out in schedules that

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begin with “Schedule 1.1”—corresponding to Section 1.1 of the APA (“Sale of Assets”). See id.
at 2–3, 28–39 (APA at 1–2, sch. 1.1). Nothing in Article I or the corresponding schedules,
however, includes any reference to employment contracts—or, indeed, to any PRG employees.
Article V of the APA, in contrast, does refer to PRG employees. Unlike Article I, however,
Article V does not transfer assets; instead, it sets out the “representations and warranties” that
PRG made to Hedgeye. See id. at 9 (APA at 8). Section 5.13 contains PRG’s “warranty” that
“Schedule 5.13 contains . . . a list of all employees of [PRG]” and their salaries. Id. at 11 (APA
at 10). And Schedule 5.13—the only schedule in the APA to refer to Heldman—in fact contains
just such a list. Id. at 60 (APA sch. 5.13). The fact that Heldman’s name and salary appears in
the APA, in other words, hardly suggests that Heldman (or his employment contract) was an
“asset” that the APA conveyed to Hedgeye. To the contrary, the fact that they appear on
Schedule 5.13 (which corresponds to the “representations and warranties” made by PRG),
instead of Schedule 1.1 (which corresponds to the transfer of assets), supports the conclusion that
they were not.
The remainder of the contract further rebuts any claim that the APA conveyed
employment contracts (including Heldman’s) to Hedgeye as “assets” of PRG. Most importantly,
Article IX expressly addresses “Employees and Employee Benefits,” yet it says nothing about
conveying any existing employment contracts to Hedgeye. Dkt. 1-2 at 15 (APA at 14). What
Article IX does say, moreover, supports precisely the opposite conclusion. In particular, Section
9.1(a) states that Hedgeye “shall, in [its] sole and absolute discretion, offer employment . . . to all
employees of [PRG].” Id. The same section further contemplates that some employees will be
“offered such employment and [will] accept said employment,” id., whereas others will not. The
fact that the APA explicitly provides that Hedgeye could offer employment to PRG employees,

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and that those employees might then either accept or reject such an “offer,” is squarely at odds
with Hedgeye’s contention that PRG’s existing employment contracts conveyed to Hedgeye as
“assets” of PRG.
Finally, Article VIII of the APA expressly addresses “non-competition,” but it too says
nothing about Heldman. The “non-competition” clause, instead, is limited to PRG and its
founder, Clark. See id. at 14 (APA at 13). The absence of any discussion in this provision of
whether other PRG employees—including Heldman—would be allowed to compete with
Hedgeye thus casts further doubt on the argument that the APA effectively barred Heldman and
others from competing with Hedgeye. And, when considered along with the other provisions
discussed above, it makes clear that Hedgeye is simply wrong when it contends that it “acquired
PRG’s talented employees” when it signed the APA. Dkt. 3-1 at 2.
Hedgeye’s remaining textual arguments are equally unpersuasive. Hedgeye argues that
the provision of the APA that conveyed PRG “liabilities and obligations” to Hedgeye also
conferred Heldman’s contract. Id. at 8. According to Hedgeye, Section 2.1 transferred “all
liabilities and obligations relating to employee benefits, compensation or other arrangements
with respect to employees of [PRG] arising on or after December 1, 2015,” and specifically
required Hedgeye to pay Heldman a “$25,000 end of year bonus” by March 31, 2016. See Dkt.
1-2 at 4 (APA at 3) (emphasis added). But the fact that the parties stipulated to the assumption
of certain employee-related liabilities—specifically, those liabilities that arose between
December 1, 2015, and the time that the purchase was complete, and certain year-end payments
to certain employees, including Heldman—is hardly evidence that they meant the employment
contracts to transfer wholesale to Hedgeye. Indeed, if anything, the fact that the parties agreed
on exactly which pre-existing liabilities Hedgeye would incur (in connection with the provision

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of the APA that required Hedgeye to renegotiate employment contracts with PRG employees)
suggests that the parties did not intend the contracts to convey prospectively.
Hedgeye’s only remaining argument—and, in truth, its primary argument—is that “the
entire point of the sale between PR[G] and Hedgeye was that Hedgeye was desirous of obtaining
PRG’s talent.” Dkt. 3-1 at 8. That is, Hedgeye argues that its goal in acquiring PRG (and thus in
executing the APA) was to acquire the services of PRG’s employees, and particularly Heldman.
See id. (arguing that the APA provision requiring Hedgeye to pay Heldman’s bonus “evidenc[es]
Heldman’s clear value to the transaction”). It is not hard for the Court to believe that Hedgeye
desired to hire PRG’s employees, nor that it wanted to hire Heldman in particular. But it is hard
to read the APA to achieve that result itself—not in light of the APA’s express statement that
Hedgeye may “offer employment” to all PRG employees. See Dkt. 1-2 at 15 (APA at 14)
(emphasis added).
To be sure, Clark did testify that she told Heldman that he would remain subject to the
non-compete covenant in his 2008 employment agreement even after the effective date of the
APA. That testimony is at odds with Heldman’s declaration, however, and there is no evidence
that Hedgeye ever asserted such a right during the five-week period in which it attempted to
reach an agreement with Heldman. See, e.g., Dkt. 11-1 at 23–27 (Heldman Decl. ¶¶ 6–27); id. at
29–32 (Employment Letter); id. at 33–34 (Defs.’ MSJ, Exs. B, C). To the contrary, during that
period, Heldman and several Hedgeye employees engaged in extensive negotiations regarding
the terms and conditions of his employment there. As the e-mails attached to Heldman’s motion
for summary judgment make clear, the focus of those negotiations was instead whether he would
accept a non-compete covenant. See id. at 24 (Heldman Decl. ¶ 10) (“It would have made no
sense to have engaged in these discussions and negotiations . . . if I was already under a non-

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compete agreement with Hedgeye.”). But, regardless of what Clark may have said, or how
Heldman and Hedgeye may have acted, parol evidence of the parties’ intent is relevant only
“[w]here the contract language is not susceptible of a clear and definite meaning—i.e., where the
contract ‘is determined by the court to be ambiguous.’” Aziken, 70 A.3d at 219 (quoting Rivers
& Bryan, 628 A.2d at 635). Here, the Court concludes that the language of the APA is clear, and
that it does not assign Heldman’s employment contract to Hedgeye.
Finally, the fact that the APA envisioned that Hedgeye would negotiate new terms of
employment—including, if appropriate, new non-compete clauses—is also consistent with the
language of Heldman’s 2008 employment contract with PRG. The employment contract was
between Heldman and PRG, and, although no longer an operating company, PRG did not merge
with Hedgeye and, indeed, continues to exist as an entity separate from Hedgeye. More
importantly, the non-compete clause included an exception upon “termination of Employee by
Employer (other than for Cause).” Dkt. 1-1 at 3 (PRG Contract at 2) (emphasis added). Here, as
Heldman notes, his status as an employee of PRG came to an end on the effective date of the
APA, and that change in status occurred for reasons “other than for Cause.” Similarly, the nonsolicitation clause merely precluded Heldman from “solict[ing] or induc[ing] any person or
entity . . . to cease, curtail or refrain from entering into” a customer or employment “relationship
with PRG or any of its affiliates.” Id. (emphasis added). Here, neither Hedgeye nor PRG
contends that Heldman solicited or induced anyone to stop doing business, or from leaving
employment, with PRG. Whether or not this is the only plausible construction of the 2008
employment agreement, it is—at a minimum—consistent with the understanding embodied in
the APA that Hedgeye would need to negotiate its own employment agreements with the PRG
employees it sought to retain.

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Because the APA did not convey Heldman’s employment contract to Hedgeye, Hedgeye
is not entitled to enforce its non-compete and non-solicitation covenants. Accordingly, the Court
will grant summary judgment to the defendants on Hedgeye’s contract claim, and will deny
Hedgeye’s motion for a preliminary injunction and motion for summary judgment with respect
to that claim.
B.

Breach of Fiduciary Duty Claim
Hedgeye also argues that Heldman breached his fiduciary duty to Hedgeye by “actively

soliciting [its] clients and employees.” Compl. ¶ 36. Hedgeye originally appeared to move for a
preliminary injunction based on both its breach of contract and breach of fiduciary duty claims.
See Dkt. 3 at 9–10. At oral argument, though, Hedgeye’s counsel conceded that Hedgeye was
not entitled to injunctive relief on the latter claim. As a result, all that is pending before the
Court with respect to Hedgeye’s breach of fiduciary duty claim is the defendants’ motion to
dismiss or, in the alternative, for summary judgment. See Dkt. 11-1 at 17. The Court will grant
the defendants’ motion to dismiss this claim, but will grant Hedgeye leave to file an amended
complaint, if appropriate.
Under the common law of agency, “[e]mployees . . . ‘owe an undivided and unselfish
loyalty to the corporation’ during the term of their employment, ‘such that there shall be no
conflict between duty and self-interest.’” Phillips v. Mabus, 894 F. Supp. 2d 71, 92 (D.D.C.
2012) (quoting Mercer Mgmt. Consulting v. Wilde, 920 F. Supp. 219, 233 (D.D.C. 1996)). As a
result, “[a]lthough an agent may ‘make arrangements or plans to go into competition with his
principal before terminating his agency,’ he may only do so ‘provided no unfair acts are
committed or injury done [to] his principal.’” Id. (quoting Mercer Mgmt., 920 F. Supp. at 233).
“The ultimate determination of whether an employee has breached his fiduciary duties to his

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employer by preparing to engage in a competing enterprise must be grounded upon a
thoroughgoing examination of the facts of the particular case.” Furash & Co., Inc. v. McClave,
130 F. Supp. 2d 48, 54 (D.D.C. 2001) (quoting Maryland Metals, Inc. v. Metzner, 382 A.2d 564,
569–70 (Md. 1978)). But, as a matter of D.C. law, “after termination of his employment [and] in
the absence of an agreement to the contrary,” an agent “may compete with his former principal.”
United States Travel Agency, Inc. v. World-Wide Travel Serv. Corp., 235 A.2d 788, 789 (D.C.
1967) (emphasis added).
Here, Hedgeye contends that Heldman “solicit[ed] Hedgeye clients and employees to
leave Hedgeye and join, or send business to, Heldman Simpson,” and that in doing so he “used
confidential and proprietary Hedgeye information to Hedgeye’s detriment.” Dkt. 3-1 at 10. The
problem is that Hedgeye’s complaint contains no more than the thinnest of allegations regarding
an alleged breach of fiduciary duty. The complaint avers, “[u]pon information and belief,” that
Heldman “used [Hedgeye’s] instrumentalities to start his business while he was still employed
with Hedgeye.” Compl. ¶ 23. But the bare allegation that Heldman used its “instrumentalities,”
even taken as true, falls far short of the level of detail required to “state a claim to relief that is
plausible on its face.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). Hedgeye’s
complaint also alleges that, “upon information and belief,” Heldman “has reached out to and
solicited Hedgeye clients in order to provide health policy research information services to
them.” Compl. ¶ 24. But absent an allegation that this conduct occurred while Heldman was
employed at Hedgeye, this allegation, too, falls short of making out a claim for breach of
fiduciary duty.
Accordingly, the Court will grant the defendants’ motion to dismiss Hedgeye’s breach of
fiduciary duty claim. But because Hedgeye may be able to plead facts sufficient to withstand a

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motion to dismiss—even if it has not yet done so—the Court will dismiss the claim without
prejudice. See Firestone v. Firestone, 76 F.3d 1205, 1209 (D.C. Cir. 1996) (per curiam) (“A
dismissal with prejudice is warranted only when a trial court ‘determines that the allegation of
other facts consistent with the challenged pleading could not possibly cure the deficiency.’”
(quoting Jarrell v. U.S. Postal Serv., 753 F.2d 1088, 1091 (D.C. Cir. 1985))). For instance, if
Hedgeye has a good-faith basis for alleging that Heldman “reached out to and solicited Hedgeye
clients” while he was employed with Hedgeye, such an allegation would likely be sufficient to
withstand a motion to dismiss. For present purposes, however, the Court finds that Hedgeye’s
complaint does not “state a claim to relief that is plausible on its face,” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 570), and so will grant the defendants’ motion to dismiss Count
III without prejudice.
C.

Remaining Claims
Finally, in its opposition brief to the defendants’ motion to dismiss or, in the alternative,

for summary judgment, Hedgeye clarified that Count I, which seeks injunctive relief, is solely “a
recitation of Hedgeye’s requested injunctive relief,” and not a freestanding cause of action. See
Dkt. 19 at 9. And at oral argument, Hedgeye’s counsel clarified that Counts IV, V, and VI are
derivative of its other claims, and that those claims could not stand alone if the Court found that
Counts II and III failed. Because the Court is granting summary judgment to the defendants on
Count II and dismissing Count III without prejudice, it will dismiss the remaining claims as well,
and permit Hedgeye to re-plead them in an amended complaint to the extent there is a good-faith
basis to do so.

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CONCLUSION
For these reasons, the Court will deny Hedgeye’s motion for a preliminary injunction and
motion for partial summary judgment, Dkt. 3, and will grant the defendants’ motion to dismiss or
in the alternative for summary judgment, Dkt. 11. A separate Order will issue.

/s/ Randolph D. Moss
RANDOLPH D. MOSS
United States District Judge
Date: July 8, 2016

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