International Business Machines Corporation v. Naganayagam
OPINION & ORDER re: 58 MOTION for Summary Judgment . filed by International Business Machines Corporation, 70 MOTION for Sanctions (Notice of Defendant's Motion for Spoliation Sanctions). filed by Nagaseelan Nagana yagam. For the foregoing reasons, Defendant's motion for spoliation sanctions is DENIED and Plaintiff's motion for summary judgment is GRANTED. The Clerk of the Court is respectfully directed to terminate the motions at ECF Nos. 58 and 7 0. Plaintiff is directed to provide the Court and opposing counsel an affidavit with contemporaneous time records in support of its request for attorneys' fees. The parties should notify the Court on or before December 11, 2017 if they have r eached an agreement regarding attorneys' fees. If the parties are unable to reach an agreement by that date, the matter will be referred to the Honorable Lisa Margaret Smith for a hearing. SO ORDERED. (Signed by Judge Nelson Stephen Roman on 11/21/2017) (rj)
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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International Business Machines Corporation
OPINION & ORDER
No. 15 Civ. 7991 (NSR)
NELSONS. ROMAN, United States District Judge
Plaintiff International Business Machines ("IBM") brings this action against Defendant
Nagaseelan Naganayagarn (''Naganayagam") for breach of contract, alleging that it is due $112,
260.81 for the value of rescinded stock options and equity awards previously given to
Defendant-a former employee ofIBM.
Presently before the Court is Plaintiffs motion for summary judgment and Defendant's
cross-motion pursuant to Rule 37 of the Federal Rules of Civil Procedure for spoliation
sanctions. For the reasons that follow, Plaintiffs' motion is GRANTED and Defendants' motion
I. Factual Background
The following undisputed facts are taken from the parties' respective Rule 56.1
statements,' affidavits, and exhibits submitted in support of their motions. Disputed facts along
with the allegations made in the paities' operative pleadings will be discussed as relevant.
The Court notes Defendant's letter dated January 24, 2017 requesting that the Court disregard Plaintiffs Reply to
Defendant's Rule 56.1 Counterstatement of Material Facts. Because the facts derived from Plaintiff's original Rule
56. l Statement of Facts, Defendant's Counterstatement of Facts, and the parties' exhibits were sufficient to reach a
decision in this matter, the Court does not address the propriety of Plaintiff's subsequent submission.
IBM is an information technology corporation organized under the laws of the State of
New York, with its headquarters and principal place of business in Armonk, New York.
(Defendant's Local Civil Rule 56.l Counterstatement of Material Facts ("Def.'s 56.l Reply"), if
1, ECF No. 62.) Defendant is a former employee ofIBM who served as a Vice President in the
Global Business Services Division ofIBM Australia. (Id.
During the course of his employment at IBM, Defendant received long term incentive
and equity awards under the terms and conditions ofIBM's Long Term Performance Plan (the
"Plan") and Equity Award Agreements dated June 8, 2009, June 8, 2010, June 8, 2011, and June
8, 2012 (collectively the "EAAs"). (Id. iii! 5, 10.) Under the EAAs, Defendant was granted
Restricted Stock Units ("RSUs"), which were scheduled to vest on later dates in accordance with
his continued employment with IBM. (Id.
if 11.) Both the Plan and the various EAAs include
terms for the possible cancellation and rescission of the awards granted to Defendant. (Id. iii! 8,
14, 16.) Namely, Section 13(a) of the Plan states, in pertinent part:
"[IBM] may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired,
unpaid, or deferred Awards at any time if the Participant ... engages in any 'Detrimental
Activity.' For the purposes of this Section 13, 'Detrimental Activity' shall include: (i) the
rendering of services for any organization or engaging directly or indirectly in any business
which is or becomes competitive with the Company, or which organization or business, or
the rendering of services to such organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of the Company.
(Deel. of Barbara M. Maisto in Supp. for Pl. 's Mot. for Summ. J. ("Maisto Deel."), Ex. G, 1999
Long-Term Performance Plan, at 9, ECFNo. 60.)
Section 13(b) of the Performance Plan further provides that if a Participant "fails to
comply with the provisions of [Section 13(a)] prior to, or during the Rescission Period, then any
exercise, payment or delivery may be rescinded within two years after such exercise, payment or
delivery." (Id. at 10.)
Similarly, the various EAAs executed by Defendant during his employment reiterate that
"IBM may cancel, modify, rescind, suspend, withhold or otherwise limit or restrict [the]
Award[s] in accordance with the terms of the Plan, including, without limitation, canceling or
rescinding this Award if [the Paiticipant] render[s] services for a competitor prior to, or during
the Rescission Period." (Def.'s 56.1Replyif13.) Under the terms of the EAAs, the scope of the
Rescission Period is defined as twelve months. (Id)
In June of2013, the RSUs awarded to Defendant in June of2009, 2010, 2011, and 2012
vested and were released into Defendant's Morgan Stanley Smith Barney account. (Id.
20.) As a result, Defendant realized gains totaling $112, 260.81. (Id if 21.)
Subsequently, Defendant voluntarily resigned from IBM on Mai·ch 31, 2014. (Id if 23.)
On April 7, 2014-roughly one week after his resignation from IBM-Defendant becaine
employed by Computer Science Corporation ("CSC") as Vice President, General Manager, and
Managing Director for its Australia/New Zealand Region. (Id if 24.) CSC is an information
technology corporation that provides services including application management, infrastructure,
business consulting, technology and systems integration and enterprise resource planning to
clients in the banking, healthcare, and insurance industries. (Id. if 25.)
In connection with his employment for CSC, Defendant accepted the written te1ms of an
offer letter dated February 27, 2014 (the "Offer Letter"). (Id if 33.) This Offer Letter included a
non-compete provision, under which Defendant agreed that he "would not compete with CSC by
joining IBM." (Id.
ii 37, Maisto Deel., Ex. 0, Offer Letter, at 2.) Further, the Offer Letter
contained an indemnification provision, stating that "CSC will indemnify [Defendant] for any
loss in IBM equity value resulting from violation of [his] non-competition agreement with IBM."
Plaintiff initiated this action by filing the Complaint on October 09, 2015, seeking to
enforce the terms of the contract and rescind the aforementioned pecuniary gains awarded to
Defendant. Specifically, Plaintiff argues that CSC and IBM are competitors, making Defendant's
employment with CSC a "detrimental activity" under the te1ms of the Plan. (Comp!. iiii 36-37,
On February 24, 2016, this Court issued a discovery plan and referred this case to
Magistrate Judge Lisa Margaret Smith. (Civil Case Discovery Plan and Scheduling Order, ECF
No. 25; Order Referring Case to Magistrate Judge, ECF No. 24.) Shortly thereafter, Defendant
served his first set of interrogatories and requests for production of documents, which included
"requests for all documents relating to Defendant's employment with IBM, Defendant's
departure from IBM, and documents relating to Defendant's defenses." IBM v. Naganayagam,
No. 15-CV-7991(NSR)(LMS), slip op. at 2 (S.D.N.Y. Dec. 09, 2016). IBM produced certain
documents, but otherwise broadly retorted that the document requests were "vague, ambiguous,
unduly burdensome and overbroad." Id.
In June of 2016, Defendant was deposed by Plaintiffs counsel. (Deel. of Justin V.
Sumner in Opp. to Pl. 's Mot. for Summ. J. ("Sumner Deel."), Ex. C, Nagaseelan Dep., June 29,
2016, ECF No. 63.) During his deposition, Defendant described working on "strategic business
paper[ s]"in which IBM identified their marketplace competitors during his employ at IBM. (Id.
at 101 :4-25.) Defendant claimed these strategic plans omitted any mention of CSC as an IBM
competitor in Australia and New Zealand. Id. While Defendant admitted he did not possess these
documents, he testified to their existence and asserted that they are in IBM's possession. (Id.)
In July of2016, Defendant's counsel deposed IBM employee Lisa Caldwell. (Sumner
Deel., Ex. H, Lisa Caldwell Dep., July 11, 2016.) During her deposition, Caldwell testified that
while she was "sure" she had sent and received emails regarding Defendant's departure from
IBM, no "hold" was ever placed on her emails or other documents. (Id. at 27:8-28:22.)
Similarly, during a deposition held on July 26, 2016, another IBM employee-Sudhir Mattoo,
the Human Resources Leader in Defendant's division at IBM-testified that he was never asked
to retain emails he sent or received about Defendant's departure from IBM. (Sumner Deel., Ex.
F, Sudhir Mattoo Dep. 43:3-7, July 26, 2016.)
On August 4, 2016, Plaintiff submitted a letter to this Court seeking leave to file a motion
for summary judgment. (ECF No. 33.) The very next day, Defendant's counsel indicated their
intention to proceed with a motion for spoliation sanctions relating to IBM's alleged failure to
preserve e-mails relevant to the present litigation. (ECF No. 34.)
On August 29, 2016, Defendant requested that Plaintiff produce all documents that
evidence, relate, or refer to: "(1) IBM's strategic business plans for the Australia and New
Zealand markets between January 1, 2013 and June 1, 2015, (2) companies IBM identified as
competitors for the Australia and New Zealand markets between January 1, 2013 and June 1,
2015, (3) [Defendant's] defense that CSC is not a competitor ofIBM for the purposes ofIBM's
Long Term Performance Plan." Naganayagam, 15-CV-7991(NSR)(LMS), slip op. at 3 (internal
quotation marks omitted). IBM objected to the request for production, arguing that Defendant's
request was untimely, disproportionate to the needs of the case, and sought the production of
privileged, highly confidential and proprietary material. Id.
On October 31, 2016, Defendant filed a motion to compel production of "IBM's strategic
plans for Australia and New Zealand, e-mails related to Defendant's departure from IBM that
were referenced In Lisa Caldwell's deposition, a list of Defendant's accounts, and Defendant's
own e-mails from the course of his employment at IBM." Id at 5. Plaintiff filed an opposition to
the motion to compel reiterating its aforementioned objections and arguing that based on the
testimony of the deponents and an apparent concession of defense counsel during a prior
conference, it was settled thatIBM and CSC are competitors-rendering the requested material
irrelevant. Id at 5-6.
Judge Smith issued an Opinion and Order on December 9, 2016, denying Defendant's
request to compel the production of both his own emails and client account information as well
as Lisa Caldwell's emails, finding that Defendant had failed to establish the relevance of these
materials. However, Judge Smith ruled that Plaintiff was required to produce the strategic plans
generated by IBM delineating their competitors. Id. at 9.
In a letter dated December 30, 2016, Plaintiffs counsel informed Magistrate Judge Smith
that despite diligent eff01is, IBM was unable to locate the strategy plans described by Defendant
in his deposition. (Pl. 's Disc. Resp. to Decision and Order ("Pl. 's Disco Resp."), ECF. No. 57).
Plaintiff further asse1ied that neither Lisa Caldwell-Defendant's immediate supervisor during
his employment at IBM-nor Randy Walker-the IBM executive heading the global Asia
Pacific business-had any recollection of such strategy plans. Id.
Plaintiff filed the present motion for summary judgment on January 20, 2017 (ECF No.
58.) On January 27, 2017, Defendant filed a cross-motion for spoliation sanctions. (ECF No. 70.)
The Comt now considers each motion in tum.
Defendant requests that the Court issue an adverse inference and impose other sanctions
against Plaintiff for spoliation of electronically stored information ("ESI"), including emails
relating to Defendant's depa1ture from IBM and other internal documents. Specifically,
Defendant asks this Court to enter an order "(1) establishing that, at the time of [Defendant's]
departure from IBM, IBM did not view [CSC] as a competitor ofIBM in the Australia/New
Zealand market; [and] (2) requiring IBM to reimburse [Plaintifl] for the costs, including
attorneys' fees incuned inmaking [the present] Motion." (Def.'s Mem. Supp. of Mot. Spoliation
Sanctions ("Def. 's Mot. Spoliation") at 1, ECF No. 75.) Plaintiff opposes Defendant's motion,
arguing that Defendant has provided no evidence of spoliation and has failed to establish the
relevance of the allegedly spoliated evidence. (Pl.'s Mem. in Opp'n to Mot. for Spoliation
Sanctions ("Pl.'s Opp'n") at 1-2, ECF No. 73.)
The Court finds that Defendant has not established a claim of spoliation and that
sanctions against Plaintiff are unwarranted.
I. Applicable Law
"Spoliation is the destruction or significant alteration of evidence, or failure to preserve
property for another's use as evidence in pending or reasonably foreseeable litigation." In re
Terrorist Bombings of US. Embassies in E. Africa, 552 F.3d 93, 148 (2d Cir. 2008)(internal
quotation marks omitted). Typically, to establish a claim for spoliation sanctions, a moving
party must show "(l) that the party having control over the evidence had an obligation to
preserve it at the time it was destroyed; (2) that the records were destroyed with a culpable state
of mind; and (3) that the destroyed evidence was relevant to the party's claim or defense such
that a reasonable trier of fact could find that it would support that claim or defense." Kravtsov v.
Town of Greenburg, No. 10-CV-3142 (CS), 2012 WL 2719663, at *5 (S.D.N.Y. July 9, 2012)
(quoting Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002)).
Notably, a finding of negligence or gross negligence is sufficient to satisfy the "culpable state of
mind" requirement for spoliation under Second Circuit precedent. See Residential Funding, 306
F.3d at 108.
As of December 1, 2015, however, Federal Rule of Civil Procedure 37(e) went into
effect, thereby impacting when a court may impose sanctions for the loss or destrnction of
electronically stored information ("ESI"). Rhoda v. Rhoda, No. 14-CV-6740 (CM), 2017 WL
4712419, at *2 (S.D.N.Y. Oct. 3, 2017). Specifically,
"The Advisory Committee Notes on section (e)(2) of the new Rule ... make clear
that the new Rule 37 rejects cases such as Residential Funding Corp. v. DeGeorge
Financial Corp., 306 F. 3d 99 (2d Cir. 2002), that authorize the giving of adverse-
inference instrnctions on a finding of [mere] negligence or gross negligence. In
other words, the new Rule 37(e) ovenules Second Circuit precedent on the question
of what state of mind is sufficiently culpable to warrant an adverse inference
instrnction when electronically stored evidence is missing."
Id. (quoting Thomas v. Butkiewicus, No. 3:13-CV-747 (JCH), 2016 WL 1718368, at *7 (D.
Conn. Apr. 29, 2016).
"Now ... a Court may not issue an adverse inference instruction unless the Court finds
'that the party acted with the intent to deprive another party of the information's use in the
litigation."' Best Payphones, Inc. v. City ofNew York, No. 1-CV-3924 (JG)(VMS), 2016 WL
792396, at *4 (E.D.N.Y. Feb. 26, 2016) (quoting Fed. R. Civ. P. 37(e)(2)). This new standard for
adverse inferences in the context of ESI was "developed on the premise that a party's intentional
loss or destruction of evidence to prevent its use in litigation gives rise to a reasonable inference
that the evidence was unfavorable to the party responsible for loss," whereas the negligent loss of
such evidence does not. Fed. R. Civ. P. 37(e) advisory committee's note to 2015 amendment.
Indeed, as the Advisory Committee Notes for Rule 37 elaborate, "[i]nformation lost through
negligence may have been favorable to either patty, including the patty that lost it, and infening
that it was unfavorable to that party may tip the balance at trial in ways the lost information
never would have." Id.
Rule 37(e) does, however, permit courts to impose less severe sanctions or curative
measures if: (1) ESI is lost "because a party failed to take reasonable steps to preserve it," (2)
the ESI "cannot be restored or replaced through additional discove1y," and (3) the court finds
"prejudice to another party from the loss of the information." Id Even once these requirements
are satisfied, a court may only employ measures "no greater than necessary to cure the
prejudice." Fed. R. Civ. P 37(e).
Although the more lenient sanctions standard under Rule 37(e) did not go into effect until
after Plaintiff filed the Complaint in the present action,2 the amended Rule 37(e) can apply
retroactively. Indeed, Chief Justice Roberts included an Order when transmitting the new Rule to
Congress explaining that "the foregoing amendment to Federal Rules of Civil Procedure shall
take effect on December 1, 2015, and shall govern ... insofar as just and practicable, all
proceedings then pending." Rhoda, 2017 WL 4712419, at *2 (quoting 2015 U.S. Order 0017).
This Supreme Court Order "create[d] a presumption that a new rnle governs pending
proceedings unless its application would be unjust or impracticable." CAT3, LLC v. Black
Lineage, Inc., 164 F. Supp. 3d 488, 496 (S.D.N.Y. 2016); see also Rhoda, 2017 WL 4712419, *2
("[A] Court must apply the new version of Rule 37(e) unless, as a preliminary matter, it
concludes that it would be unjust or impracticable to do so.").
Here, the Court finds that it would be neither unjust nor impracticable to apply the new
version of Rule 37(e). Although the Complaint was filed two months prior to the effective date
of the new Rule, the issue of spoliation did not arise in the present action until July of 2016--well after the enactment of the new Rule. Further, the present motion for spoliation sanctions
was fully briefed and submitted in January of2017 (ECF No. 70), more than a full year after the
new Rule came into effect. Both patties, therefore, had ample opportunity to brief the spoliation
issue under the new Rule.
Moreover, the application of the new Rule to the present action would not meaningfully
prejudice Plaintiff nor Defendant. With regard to Plaintiff, "because the amendment [to Rule
37(e)] is in some respects more lenient as to the sanctions that can be imposed for violation of
2 Plaintiff filed the Complaint on October 09, 2015-nearly two months prior to the effective date of Rule
37(e). (ECF No. !).
the preservation obligation, there is no inequity in applying it [retroactively]." CAT3, 164 F.
Supp. 3d at 496. With regard to Defendant, the new Rule does not preclude Mr. Naganayagam
from pursuing other avenues of relief against IBM's alleged negligent spoliation of evidence;
namely, less severe sanctions. See Fed. R. Civ. P. 37(e). This Court, therefore, finds the
spoliation standards for ESI under Rule 37(e) applicable in the present action.
As an initial matter, amended Rule 37(e) only allows for adverse inference sanctions
where the non-movant acted intentionally to deprive another party use of the ESI during
litigation. Fed. R. Civ. P. 37(e). Even assuming that Plaintiff did fail to preserve relevant
evidence, Defendant merely alleges that Plaintiff acted negligently rather than intentionally.
(Def.'s Mot. Spoliation, at 1.) Accordingly, this Comt finds that Defendant is not entitled to an
adverse inference under Rule 37(e).
This Court also finds that less severe spoliation sanctions are similarly unwarranted. Rule
37(e) permits courts to impose sanctions other than adverse inferences where ESI is lost
"because a party failed to take reasonable steps to preserve it, and it cannot be restored or
replaced through additional discovery." Fed. R. Civ. P. Rule 37(e). Such sanctions may only be
imposed, however, "upon finding prejudice to another paity from loss of the information." Id.
Defendant has failed to demonstrate that such prejudice exists in the present case. While
Rule 37(e) does not necessarily place the burden of proving or disproving prejudice on any
particular party, requiring the moving party to prove prejudice may be reasonable in situations
where "the content of the lost information is fairly evident, the information [ ] appear[s] to be
unimportant, or the abundance of preserved information [ ] appears sufficient to meet the needs
of all parties." Fed. R. Civ. P. 37(e) advisory committee's note to 2015 amendment.
Here, the content of the allegedly spoliated emails and documents is fairly evident---0r
could have become evident with relatively little effort-yet Defendant has failed to establish
how he has been prejudiced by their alleged loss. During her deposition, Lisa Caldwell, whose
emails are at the center of Defendant's spoliation claims, merely stated that she had sent and
received e-mail correspondence relating to Defendant's departure from IBM. (Sumner Deel., Ex.
H, Lisa Caldwell Dep. 27:8-28:22). As United States Magistrate Judge Lisa Margaret Smith
aptly noted in her December 9, 2016 Decision and Order, "[d]espite Defendant's ability to
depose Caldwell regarding the content of these e-mails, Defendant has failed to provide the
Comt with any deposition testimony by Caldwell to the effect that the e-mails contained
discussions of whether IBM and CSC are competitors." Naganayagam, No. 15-CV-7991 (NSR)
(LMS), slip op. at 10. Without such testimony, Defendant fails to establish how or why the
alleged spoliation of these emails is prejudicial to him. Thus, the imposition of spoliation
sanctions in connection with these emails is unwarranted.
Defendant similarly fails to show how the alleged spolil\tion of his own emails and
account lists from his time as an IBM employee prejudices him. Defendant claims that the list of
his former IBM accounts "would show whether IBM and CSC compete under the Plan by
allowing the parties to examine whether or not these client accounts were serviced or could be
serviced by CSC." (Def.'s Mot. Spoliation, at 10.) The Plan at issue in this case, however, is far
broader than Defendant suggests; Plaintiff need not show that CSC competed with IBM on
Defendant's specific accounts to be entitled to rescission. Rather, the Plan allows Plaintiff to
rescind Defendant's awards for "the rendering of services to any organization ... which is or
becomes competitive with [IBM]." (Maisto Deel., Ex. G, 1999 Long-Te1mPerformance Plan, at
9.) The relevant question in this action is, therefore, whether CSC and IBM are competitors
generally. Information regarding Defendant's specific accounts is immaterial to this action and
this Court finds that Defendant suffered from no prejudice from its absence.
Likewise, Defendant also fails to establish that the alleged spoliation of IBM's "strategic
plans" for New Zealand and Australia prejudiced him in any way. Just as Plaintiff need not
demonstrate that CSC serviced Defendant's former IBM clients, neither must Plaintiff show that
CSC and IBM are competitors in the New Zealand and Australia markets specifically. Even if
such plans did indeed exist, Defendant nevertheless fails to show how they would be relevant to
Plaintiff's broader breach of contract claim.
Because Defendant was not prejudiced by the absence of the allegedly spoliated
evidence, Defendant's motion for spoliation sanctions is denied.
The Court next considers Plaintiff's motion for summary judgment. Plaintiff contends
that Defendant has failed to raise any genuine issue of material fact regarding his alleged breach
of the Plan and EAAs. Defendant argues that the language of the Plan is susceptible to different
interpretations and that a factual dispute exists as to whether Defendant's subsequent
employment with CSC entitles Plaintiff to rescind his equity awards.
This Court finds that there is no genuine dispute of material fact regarding Defendant's
breach of the Plan and EAAs, and grants Plaintiffs motion for summary judgment.
I. Standard on Motion for Summary Judgment
A "comt shall grant summary judgment ifthe movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter oflaw." Fed.
R. Civ. P. 56(a). The moving party bears the initial burden of"demonstrat[ing] the absence of a
genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the
moving pmty fulfills its preliminary burden, the onus shifts to the non-moving party to identify
"specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986) (internal citation and quotation marks omitted).
A genuine dispute of material fact exists when "the evidence is such that a reasonable
jury could retmn a verdict for the nomnoving party." Id.; accord Benn v. Kissane, 510 F. App'x
34, 36 (2d Cir. 2013) (surnm. order). Cou1ts must "constru[e] the evidence in the light most
favorable to the non-moving party and draw all reasonable inferences in its favor." Fincher v.
Depository Trust & Clearing Corp., 604 F.3d 712, 720 (2d Cir. 2010) (internal quotation marks
omitted). The party asse1ting that a fact is genuinely disputed must support their asse1tion by
"citing to particular pmts of materials in the record" or "showing that the materials cited do not
establish the absence ... ofa genuine dispute." Fed. R. Civ. P. 56(c)(l). "Statements that are
devoid of any specifics, but replete with conclusions, m·e insufficient to defeat a properly
supported motion for surmnm·y judgment." Bickerstajfv. Vassar Coll., 196 F.3d 435, 452 (2d
In the context of contract disputes, summary judgment may be granted "when the
contractual language on which the moving party's case rests is found to be wholly unambiguous
and to convey a definite meaning." Topps Co. v. Cadbury Stani S.A.IC., 526 F.3d 63, 68 (2d Cir.
2008). Whether the te1ms of a contract are ambiguous or unambiguous is a question of law for
the court to decide. Revson v. Clinique & Clinique, P.C., 221F.3d59, 66 (2d Cir. 2000). Even
where a court finds the contractual language ambiguous, suuunary judgment may nonetheless be
appropriate "if the ambiguities may be resolved through extrinsic evidence that is itself capable
of only one interpretation, or where there is no extrinsic evidence that would support a resolution
of these ambiguities in favor of the non-moving party's case." Topps, 526 F.3d at 68.
A. Breach of Contract
This Court finds that Plaintiff has satisfied its burden of showing an absence of a genuine
dispute of material fact regarding Defendant's breach of the contract. To establish aprimafacie
case for breach of contract under New York law, a plaintiff must plead and prove "(1) the
existence of an agreement, (2) adequate performance of the contract by the claimant, (3) breach
of contract by the accused, and (4) damages." Int'/ Bus. Machines C01p. v. United
Microelectronics Corp., No. 16-CV-5270, 2017 WL 3972515, at *6 (S.D.N.Y. Sept. 7, 2017)
(quoting Stadt v. Fox News NetworkLLC, 719 F. Supp. 2d 312, 318 (S.D.N.Y. 2010)). The party
asse1ting a breach of contract claim bears the burden proof as to all elements. Barton Gip., Inc. v.
NCR Corp., 796 F. Supp. 2d 473, 498 (S.D.N.Y. 2011).
Here, there is no dispute that Defendant received equity awards under Plaintiffs LongTerm Performance Plan and various EAAs executed throughout the course of his employment
with IBM. (Def.'s 56.1 Reply 'if 21.) Neither is it disputed that Defendant received gains equaling
$112,260.81 as a result of these agreements-which Plaintiff has since sought to rescind and
Defendant has refused to return. Id. Plaintiff, therefore, has successfully established (1) the
existence of an agreement, (2) performance of its obligations under the agreement, and (3)
possible damages. The only remaining issue is whether Defendant's subsequent employment
with CSC and refusal to return his equity awards constitutes a breach under the terms of the Plan.
This Court finds that it does.
Section 13(b) of the Plan entitles Plaintiff to cancel or rescind awards where the
beneficiary engages in any "Detrimental Activity." (Maisto Deel., Ex. G, 1999 Long-Term
Performance Plan, at 9.) The agreement defines "Detrimental Activity" as including "the
rendering of services for any organization or engaging directly or indirectly in any business
which is or becomes competitive with [IBM], or which organization or business, or the rendering
of services to such organization or business, is or becomes otherwise prejudicial to or in conflict
with the interests of the Company." Id.
Defendant contends that the scope of the Plan's non-compete language is susceptible to
different interpretations. Specifically, Defendant maintains that while Plaintiff characterizes the
provision as broad and all inclusive, the term "competitive with" is undefined and could be read
more narrowly. (Def.'s Mem. Opp. Pl.'s Mot. Summ. J. ("Def.'s Opp.") at 15, ECF No. 64.) The
relevant inquiry, Defendant argues, should not be whether CSC and IBM are competitors
generally, but rather whether "CSC and IBM compete for the [specific] services that [Defendant]
rendered in the Australia/New Zealand market while he was employed at IBM." (Id.) Defendant
asserts that this alleged ambiguity in the contractual language creates an issue of fact that may
not be resolved through summary judgment. (Id.)
Plaintiff counters that "Detrimental Activity" is an unambiguously defined term in the
contract as "competition in the broadest sense with no service limitations or geographic carve
outs." (Pl. 's Reply Mem. Supp. Mot. Summ. J., at 6, ECF No. 66.) This Court agrees.
The language of the Plan and subsequent EAAs executed between Plaintiff and
Defendant is clear and unambiguous; any competitive relationship between CSC and IBM
suffices to wanant rescission of Defendant's equity awards. The Plan's language is broad and
evinces an intention to cover the rendering of any services to an entity that is "competitive with"
or othe1wise "prejudicial to" or "in conflict with" the interests of IBM. The Plan does not require
the pa1ticipant' s specific services for such companies to be detrimental to IBM. Rather, the
generally competitive relationship between IBM and the new employer is enough to wanant
rescission of awards.
Presently, there is no dispute that IBM and CSC compete. During his deposition,
Defendant himself testified that CSC and IBM are, in fact, competitors "for some services."
(Maisto Deel., Ex. D, Nayagam Dep. 55:20-25.) Similarly, defense counsel conceded during a
conference before this Court that IBM and CSC are competitors in many areas. (Maisto Deel. Ex.
N, Sept. 21, 2016 Tr. pp. 18-19.) Indeed, CSC's employment letter to Defendant includes a noncompete provision that specifically names IBM as a competitor. (Maisto Deel. Ex. 0.) Because
it is undisputed that CSC and IBM are competitors in many respects, there are no triable issues of
fact in this case. Defendant's subsequent employment with IBM's competitor, regardless of the
specific functions Defendant performed for IBM or CSC, constitutes "detrimental activity" under
the Plan. Accordingly, Plaintiff has meet its burden of demonstrating that Defendant indisputably
breached their contractual agreement.
B. Enforceability of the Contract
Having found that Defendant indisputably breached his agreement with IBM, the Court
now turns to the enforceability of the Plan's non-compete provisions. "New York coutts have
generally concluded that restrictive covenants in employment contracts-such as non-compete,
non-solicitation, and non-recruitment clauses-must be subjected to heightened judicial scrutiny
since they potentially impinge on individual agency and an employee's ability to make a living."
Oliver Wyman, Inc. v. Eielson, No. 15-CV-5305 (RJS), 2017 WL 4403312, at *5 (S.D.N.Y. Sept.
29, 2017). One notable exception to this rigorous scrutiny, however, is the employee choice
doctrine. Int'! Bus. Machines C01p. v. Smadi, No. 14-CV-4694 (VB), 2015 WL 862212, at *3
(S.D.N.Y. Mar. 2, 2015).
Under the employee choice doctrine, "New York coutts will enforce a restrictive
covenant without regard to its reasonableness if the employee has been afforded the choice
between not competing (and thereby preserving his benefits) or competing (and thereby risking
forfeiture)." Id (citing Lucente v. Int'/ Bus. Machines Corp., 301 F.3d 243, 254 (2d Cir. 2002).
To be applicable, the employee must have left his employment voluntarily and his former
employer must have demonstrated its "continued willingness to employ the party who
covenanted not to compete." Id
Here, there is no dispute that Defendant "voluntarily resigned from IBM on or about
March 31, 2014." (Def. 's 56.1 Reply if 23.) Additionally, Defendant himself testified during his
deposition that Randy Walker, his supervisor at IBM, expressed a desire to match CSC's offer
and keep Defendant at IBM. (Sumner Deel., Ex. C, Nagaseelan Dep. 86: 15-87: 11.) IBM's
willingness-even eagerness-to continue employing Defendant is clear. Thus, Defendant was
clearly "afforded the choice of continuing to receive awards by refraining from competing with
IBM, or forfeiting the monetary value of Awards by refraining from competing with IBM, or
forfeiting the monetary value of the awards by competing with IBM." Smadi, 2015 WL 862212,
at *3. As such, the rescission of Defendant's awards is permitted under the employee choice
doctrine. Because Plaintiff has established a breach of an existing, enforceable agreement, this
Comt grants summary judgment in favor of Plaintiff.
C. Attorneys' Fees
Lastly, the Comt turns to the issue of whether Plaintiff, having prevailed on its motion for
summary judgment, is entitled to attorneys' fees. "Although the general rule in American courts
is that the prevailing plaintiff must bear his own fees in a contract action," Parker Hannifin
Corporation v. North Sound Properties, No. 10-CV-6359 (MHD), 2013 WL 3527761, at *1
(S.D.N.Y. July 12, 2013), "[u]nder New York law, a contract that provides for an award of
reasonable attorneys' fees to the prevailing party in an action to enforce the contract is
enforceable if the contractual language is sufficiently clear." NetJets Aviation, Inc. v. LHC
Commc'ns, LLC, 537 F.3d 168, 175 (2d Cir. 2008).
Here, Plaintiff is entitled to reasonable attorneys' fees. Section 15(1) of the Plan states
that "[i]n the event that a Participant or the Company brings an action to enforce the terms of the
Plan or any Award Agreement and the Company prevails, the Participant shall pay all costs and
expenses incuned by the Company in connection with that action, including reasonable
attorneys' fees." (Maisto Deel., Ex. G, Long Term Performance Plan, at 11.) Thus, the Plan
contains a clear and unambiguous fee-shifting provision, the likes of which have been found
valid and enforceable under New York law. See, e.g., Paker Hannifin Corp. v. N. Sound
Properties, No. 10-CV-6359 (MHD), 2013 WL 1932109, at *10 (S.D.N.Y. May 8, 2013). This
Comt, therefore, finds that Plaintiff is entitled to recover reasonable attorney's fees associated
with this action.
For the foregoing reasons, Defendant's motion for spoliation sanctions is DENIED and
Plaintiffs motion for summary judgment is GRANTED.
The Clerk of the Comt is respectfully directed to terminate the motions at ECF Nos. 58
and 70. Plaintiff is directed to provide the Comt and opposing counsel an affidavit with
contemporaneous time records in suppmt of its request for attorneys' fees. The parties should
notify the Court on or before December 11, 2017 if they have reached an agreement regarding
attorneys' fees. If the parties are unable to reach an agreement by that date, the matter will be
referred to the Honorable Lisa Margaret Smith for a hearing.
November 21 , 2017
White Plains, New York
United States District Judge
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