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GILBERT R. SEROTA (No. 75305)
Email: gserota@howardrice.com
CLARA J. SHIN (No. 214809)
Email: cshin@howardrice.com
MICHAEL L. GALLO (No. 220552)
Email: mgallo@howardrice.com
JOHN P. DUCHEMIN (No. 250501)
Email: jduchemin@howardrice.com
HOWARD RICE NEMEROVSKI CANADY
FALK & RABKIN
A Professional Corporation
Three Embarcadero Center, 7th Floor
San Francisco, California 94111-4024
Telephone: 415/434-1600
Facsimile: 415/677-6262
Attorneys for Plaintiffs
THOMAS WEISEL PARTNERS LLC and
THOMAS WEISEL INTERNATIONAL
PRIVATE LIMITED
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION
THOMAS WEISEL PARTNERS LLC, a
Delaware limited liability company, and
THOMAS WEISEL INTERNATIONAL
PRIVATE LIMITED, an Indian company,
Plaintiffs,
v.
BNP PARIBAS, a French corporation, BNP
PARIBAS SECURITIES (ASIA) LIMITED,
a Hong Kong company, and PRAVEEN
CHAKRAVARTY, an individual,
Defendants.
No. C-07-06198 MHP
Action Filed: December 6, 2007
PLAINTIFFS’ NOTICE OF MOTION,
MOTION, AND MEMORANDUM OF
POINTS AND AUTHORITIES IN
SUPPORT OF MOTION FOR
PARTIAL SUMMARY JUDGMENT
ON THE EIGHTH CAUSE OF ACTION
FOR BREACH OF FIDUCIARY DUTY
AGAINST DEFENDANT
PRAVEEN CHAKRAVARTY
Date: February 22, 2010
Time: 2:00 p.m.
Place: Courtroom 15
Judge: Hon. Marilyn Hall Patel
Trial Date: August 17, 2010
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TABLE OF CONTENTS
Page
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NOTICE OF MOTION AND MOTION 1
INTRODUCTION AND SUMMARY OF ARGUMENT 1
STATEMENT OF UNDISPUTED FACTS 3
A. Praveen Chakravarty Was A Principal Of TWP, Director Of
TWIPL, And Had Primary Managerial Responsibility For
Discovery Research. 3
B. While A Principal Of TWP, A Director Of TWIPL, And A
Senior Manager Responsible For Discovery Research,
Chakravarty Helped BNPP Execute A Raid Of Key Discovery
Research Employees. 4
1. Chakravarty Learns That BNPP Intends To Build A
Research Operation In India And Recruit Employees. 4
2. Chakravarty And BNPP Meet In India, They Discuss
BNPP’s India Plans, And Chakravarty Introduces BNPP
To Discovery Research Analysts. 5
3. BNPP Asks Chakravarty To Identify A “Core Group”
Of Discovery Research Employees And To Provide
Compensation And Background Information In Order
To Facilitate An En Masse Resignation From TWP. 6
4. Chakravarty Selects And Recruits Discovery Research
Employees To Work For BNPP, And Arranges Their
Interviews With BNPP. 7
5. Chakravarty Participates In The Contract Negotiations
Between Discovery Research Employees And BNPP. 11
C. Chakravarty And Over 20 Discovery Research Employees
Join BNPP In December 2007. 11
ARGUMENT 12
I. CHAKRAVARTY OWED FIDUCIARY DUTIES TO TWP. 13
II. THE LAW PROHIBITS A FIDUCIARY FROM RECRUITING
EMPLOYEES OF HIS COMPANY ON BEHALF OF A
THIRD PARTY. 15
III. THE UNDISPUTED FACTS PROVE THAT CHAKRAVARTY
BREACHED HIS FIDUCIARY DUTY OF LOYALTY BY
RECRUITING DISCOVERY RESEARCH EMPLOYEES FOR
BNPP. 18
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A. Charkravarty Violated His Fiduciary Duties As An Officer Of
TWP. 18
1. Chakravarty Provided BNPP With Key Information
About Discovery Research Employees. 18
2. Chakravarty Helped BNPP Solicit Discovery Research
Employees. 20
B. Chakravarty Violated His Duty Of Loyalty As An Employee
Of TWP By Withholding From Senior TWP Managers That
BNPP Was Recruiting Discovery Research Employees. 20
CONCLUSION 22
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TABLE OF AUTHORITIES
Page(s)
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Cases
American Republic Insurance Co. v. Union Fidelity Life Insurance Co., 470
F.2d 820 (9th Cir. 1972) 17, 18
Anadarko Petroleum Corp. v. Panhandle E. Corp., 545 A.2d 1171 (Del.
1988) 13
Bancroft-Whitney Co. v. Glen, 64 Cal. 2d 327 (1966) 2, 15, 16, 17, 18, 19, 20
Daniel Orifice Fitting Co. v. Whalen, 198 Cal. App. 2d 791 (1962) 13
Fowler v. Varian Assocs., Inc., 196 Cal. App. 3d 34 (1987) 13, 14, 20, 21
GAB Bus. Servs., Inc. v. Lindsey & Newsom Claim Servs., Inc., 83 Cal. App.
4th 409 (2000), overruled on other grounds, 33 Cal. 4th 1140 (2004) 13, 14, 15, 17
Galen v. County of Los Angeles, 477 F.3d 652 (9th Cir. 2007) 12, 13
Garner v. Pearson, 374 F. Supp. 580 (M.D. Fla. 1973) 13
Huong Que, Inc. v. Luu, 150 Cal. App. 4th 400 (2007) 15
In re Westec Corp., 434 F.2d 195 (5th Cir. 1970) 13
Richardson v. Reliance National Indemnity Co., No. C 99-2952 CRB, 2000
WL 284211 (N.D. Cal. Mar. 9, 2000) 13
Stokes v. Dole Nut Co., 41 Cal. App. 4th 285 (1995) 14
Wenzel v. Mathies, 542 N.W.2d 634 (Minn. App. 1996) 13
Statutes
Fed. R. Civ. P.
56(a) 1, 12
56(d)(2) 1, 12
Other Authorities
Principles of Corporate Governance §5.06 illus. e 18
Restatement (Second) of Agency
§393 cmt. e 18
§395 cmt. b 16
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TO ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE THAT on February 22, 2010, at 2:00 p.m., or as soon
thereafter as this matter may be heard by the above-entitled Court, located at 450
Golden Gate Avenue, San Francisco, California, Plaintiffs Thomas Weisel Partners LLC and
Thomas Weisel International Private Limited will, and hereby do, move, pursuant to
Federal Rules of Civil Procedure 56(a) and 56(d)(2), for an order granting Plaintiffs’ Motion
For Partial Summary Judgment On Plaintiffs’ Eighth Cause Of Action For Breach Of
Fiduciary Duty Against Defendant Praveen Chakravarty (the “Motion”). The Motion is
based upon this Notice and Motion, the Memorandum of Points and Authorities below, the
accompanying Declarations of Mark Fisher and Clara Shin with supporting exhibits, the
[Proposed] Order submitted herewith, and such other and further papers and argument as
may be submitted to the Court in connection with the Motion.
INTRODUCTION AND SUMMARY OF ARGUMENT
Plaintiffs Thomas Weisel Partners LLC (“TWP”) and Thomas Weisel International
Private Limited (“TWIPL”) (collectively, “Plaintiffs”) bring this Motion against Defendant
Praveen Chakravarty (“Defendant” or “Chakravarty”) for summary judgment on his liability
for breach of fiduciary duty to TWP.1 The Motion arises from Chakravarty’s conduct in the
fall of 2007, when Chakravarty, a TWP officer and employee, conspired with and assisted
Defendants BNP Paribas Securities (Asia) Limited (“BNPP Asia”) and BNP Paribas
(collectively, “BNPP”) in planning and executing an en masse defection of more than 20 of
TWP’s India research business employees to BNPP.
On December 4, 2007, BNPP publicly announced the launch of an “onshore research
platform”; specifically, “a 27-people strong securities research team in India.” BNPP
described the research team as based in Mumbai, India, “under the leadership of
Praveen Chakravarty, Chief Operating Officer and Acting Head of Equity Research for
1Plaintiffs’ breach of fiduciary duty claim against Chakravarty is the Eighth Cause of
Action in the Second Amended Complaint (“SAC”). Dkt. No. 159.
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BNP Paribas Securities in India, newly appointed as of December 3, 2007.” BNPP did not
disclose that over 20 members of this new research team, including its leader, Chakravarty,
had been hired away from Plaintiffs’ India research business—Discovery Research. BNPP
also failed to disclose that it could not have engineered this mass defection of TWP
employees without the illegal cooperation of Chakravarty.
The undisputed facts set forth below prove that Chakravarty breached his fiduciary
duty to TWP. While a Principal of TWP and a Director and Head of Research of TWP’s
India operations, Chakravarty facilitated BNPP’s raid on Discovery Research by: selecting
the Discovery Research employees BNPP recruited and ultimately hired; preparing and
providing BNPP with a list of Discovery Research employees to target together with their
compensation and background information; introducing BNPP to the Discovery Research
analysts; assisting in arranging BNPP’s interviews of Discovery Research employees; and
otherwise coordinating the recruitment of these employees with BNPP and even presenting
them with and obtaining their signatures on BNPP offer letters. Chakravarty gave BNPP all
this assistance while still on Plaintiffs’ payroll.
A fundamental fiduciary duty of officers, directors, and employees is the duty of
loyalty. This duty prohibits an individual from putting the interests of third parties ahead of
those of his employer. As shown below, there is no credible dispute that Chakravarty owed
fiduciary duties to TWP. Part I, infra. There also is no dispute that the law prohibits a
fiduciary from recruiting his fellow employees on behalf of a third party to leave the firm.
Part II, infra. This has been black letter law for more than 40 years since the California
Supreme Court’s decision in Bancroft-Whitney Co. v. Glen, 64 Cal. 2d 327, 345 (1966).
Finally, the undisputed facts prove that Chakravarty breached his fiduciary duty of loyalty
by helping BNPP recruit Discovery Research employees. Part III, infra. In the absence of
any dispute about the material facts or law establishing Chakravarty’s breach of fiduciary
duty, summary judgment should be entered against Chakravarty on Plaintiff’s eighth cause
of action for breach of fiduciary duty.
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STATEMENT OF UNDISPUTED FACTS
A. Praveen Chakravarty Was A Principal Of TWP, Director Of TWIPL, And
Had Primary Managerial Responsibility For Discovery Research.
TWP is an investment bank and broker-dealer headquartered in San Francisco,
California. Declaration Of Mark Fisher In Support Of Plaintiffs’ Motion For Partial
Summary Judgment On The Eighth Cause Of Action For Breach Of Fiduciary Duty Against
Defendant Praveen Chakravarty (“Fisher Decl.”) ¶2. In 2005, TWP established
Discovery Research, a start-up business in Mumbai, India, that was intended to provide
equity research to TWP’s clients on a subscription and consulting basis. Id. ¶3. TWP
established an Indian subsidiary, TWIPL, to hold its India operations, including Discovery
Research. Id.
In October 2005, TWP relocated Chakravarty from San Francisco, to Mumbai. Id. ¶4.
Chakravarty remained an employee of TWP and was promoted to Principal of TWP in
February 2007. Id. Principals are senior officers of TWP. Id. Chakravarty also held the
position of Head of Research of TWIPL and served on its Board of Directors. Id. ¶5.
In October 2007, Discovery Research employed approximately 14 research analysts
and 24 research associates in India. Id. ¶6. Chakravarty had managerial responsibility for
these employees and for TWP’s India research operations. Id.; Declaration Of Clara Shin In
Support Of Plaintiffs’ Motion For Partial Summary Judgment On The Eighth Cause Of
Action For Breach Of Fiduciary Duty Against Defendant Praveen Chakravarty
(“Shin Decl.”) Ex. A at 6:6-9 (10/3/07 phone call transcript) (“I run the India office for the
San Francisco based investment bank called Thomas Weisel Partners”); see also 7:9-10
(“And basically I run the India office right now”).2 Chakravarty supervised the research
2Exhibit A to the Shin Declaration is a certified transcript of a telephone recording
produced by BNPP in this litigation on August 6, 2009. BNPP has verified that this
telephone conversation between Rousseau and Chakravarty took place on October 3, 2007.
Upon the Court’s request, Plaintiffs will make a copy of the audio file available to the Court.
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analysts and associates, including recruiting and training them.3 Only one person in India
was senior to Chakravarty with respect to Discovery Research—KV Dhillon, Chief
Executive Officer and Managing Director of TWIPL. Fisher Decl. ¶5.
B. While A Principal Of TWP, A Director Of TWIPL, And A Senior Manager
Responsible For Discovery Research, Chakravarty Helped BNPP Execute A
Raid Of Key Discovery Research Employees.
1. Chakravarty Learns That BNPP Intends To Build A Research
Operation In India And Recruit Employees.
In September 2007, an acquaintance of Chakravarty connected him to BNPP by email
sent to Chakravarty’s personal gmail account (pchucky@gmail.com). Shin Decl. Ex. C.
Chakravarty and Pierre Rousseau (“Rousseau”), Chief Executive Officer of BNPP Asia and
Global Head of Equity Brokerage for BNP Paribas, spoke by telephone on October 3, 2007.
Id., Ex. A (10/3/07 phone call transcript). At that time, BNPP had no research analysts in
India but were looking to build an operation there:
Q. Did you tell [Chakravarty] in the conversation, this first telephone
conversation, what you were looking for or what you wanted to do with
respect to research in India?
A. I did tell him broadly what we were doing and our intention to do in
India.
Q. What did you say?
A. I don’t recall the exact words, but it was to explain that we were building
an operation in India, including research, a full setup, execution, etcetera,
and we have an ambition plan to develop that activity, as part of a global, as
part of a global expansion in Asia, and the development plan that we had,
and that India was definitely the last piece missing on the Pan Asia
operation.
* * * *
Q. Okay. Is it true that you had no analysts in India at the time?
3Shin Decl. Exs. B at 35:2-6 (Chakravarty Dep.) (“Q. In India, to whom did the
Discovery Research analysts report? A. The Discovery Research analysts reported—the
writing Discovery Research analysts reported in to me”), A at 14:12-16 (“I have very, I
mean literally, you know, I kind of built from zero to 50 people and trained them and
recruited them and all that. So I think I’ve learned a lot of lessons on how the model
works”).
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A. That’s true. (id., Ex. D at 50:10-51:8 (Rousseau Dep.))
Rousseau told Chakravarty that he was looking to recruit people “to develop the platform,
especially on the research side.” Id., Ex. A at 4:23-25 (10/3/07 phone call transcript).
Chakravarty introduced himself to Rousseau as “run[ning] the India office for the
San Francisco based investment bank called Thomas Weisel Partners.” Id. at 6:6-8. He
explained that his efforts had been devoted to building TWP’s India research platform.4
Chakravarty described TWP’s Discovery Research team as “India’s only SEC regulated
entity” (id. at 8:4-9), that it was designed to “produce Wall Street quality research” (id. at
8:20-21), and that the “analysts have to go through all the licensing requirement, series 7, 63,
86, 87 of the SEC, to be able to start writing research”. Id. at 8:14-16.
Chakravarty and Rousseau also discussed whether “the platform” would be for sale:
MR. ROUSSEAU: Today what do you have in mind as an opportunity is to
come with your team or is to look for an opportunity with your team or by
yourself or what is your view you have on that?
MR. CHAKRAVARTY: You know, obviously we created the platform, so
again, I’m not saying I will come with all the 50 people.
MR. ROUSSEAU: Do you think this platform will be for sale or not?
MR. CHAKRAVARTY: Yes, we can. We can—I can make that happen.
(id. at 13:4-14)
At the end of the conversation, Chakravarty and Rousseau agreed to meet in person in
Mumbai. Id. at 14:22-17:24.
2. Chakravarty And BNPP Meet In India, They Discuss BNPP’s India
Plans, And Chakravarty Introduces BNPP To Discovery Research
Analysts.
On or around October 11, 2007, Chakravarty met Rousseau and Jonathan Harris
(“Harris”), BNPP Asia’s Head of Regional Equity Research and Managing Director, in
4Id., Ex. A at 7:21-8:2 (10/3/07 phone call transcript) (“And all my effort has gone into
building the equity research platform. And the thinking was we will build a platform and
then build revenue streams around it because building the research platform, building the
content was—we thought was the first step that we needed to do”)
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Mumbai.5 Rousseau explained that BNPP wanted to establish operations in India6 and they
discussed the Discovery Research team.7 The following day, Chakravarty gave Rousseau
and Harris a tour of TWP’s office in Nariman Point, Mumbai.8 During this visit,
Chakravarty introduced Rousseau and Harris to several senior Discovery Research analysts.9
3. BNPP Asks Chakravarty To Identify A “Core Group” Of Discovery
Research Employees And To Provide Compensation And Background
Information In Order To Facilitate An En Masse Resignation From
TWP.
After their meeting in Mumbai, Harris asked Chakravarty to identify a “core group” of
the Discovery Research team and provide compensation and other background information
about them. Id., Ex. F. Harris proposed an “enmass” resignation by these employees and
raised the possibility that TWP would then “move to shut down the remainder of the office”:
5Chakravarty originally had planned to show Rousseau and Harris the Discovery
Research offices before dinner but deferred the visit until the next day because a TWP
visitor from the United States was going to be there: “Pierre—unfortunately I have someone
from our US office here tomorrow and Friday. So I don’t think its [sic] a good idea to meet
at our office. Can we meet for dinner and drinks directly and I will try and show you the
office maybe after dinner?” Id., Ex. E.
6Id., Ex. D at 59:7-13 (Rousseau Dep.) (“Q. What did you tell him about what you
wanted to do in India? A. It was to explain the fact that we wanted to open an operation
which was a full broker in India and for that, we were looking, that we were looking for
management people, execution people. That we had at that time looking for research also”).
7Id., Ex. D at 60:10-20 (Rousseau Dep.) (“Q. [ ] Do you remember anything else that
you told Mr. Chakravarty at the meeting in the Oberoi and the Intercontinental Hotel dinner?
A. After a while, we asked questions about what’s going on, what is the operation, what it
is, what those people were doing. Q. What did he tell you? A. Broadly speaking, he
explained that he build that team, that he came here to build this business, and that he
brought all these people, put them together”).
8Id., Ex. D at 66:25-67:11 (Rousseau Dep.) (“Q. So the next day you had another
meeting. A. Yes. Q. Face to face. A. It was a meeting where we meet, of course, Praveen,
and we went to the, we went to their offices and he showed us all his setup, buildings and
video conference. When you know the setup in India, it was very impressive to see the setup
in place there, so. Q. So he gave you a tour of the office? A. Yes. We came there, he give
us a tour, explain what people were doing, etcetera”)
9Id., Exs. B at 177:21-23 (Chakravarty Dep.) (“I recall making an introduction of
Mr. Rousseau and Mr. Harris to a few analysts in a conference room”), D at 70:4-9
(Rousseau Dep.) (“Q. And who did you meet during that trip to the offices? A. So we did
this tour. Q. Right. A. And after, we wanted to see the—we asked him, some of his, what
he called senior analysts”).
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Pierre and I both came away feeling we had some good discussions and that
there is a lot of complementary interest. As we discussed, the way we’d like
to take this forward is to first identify the core group of your team, I think
you said about 20-25 individuals. We’d like to then work on preparing
employment documents for all of them. Once you have them and all is
satisfactory, we’d look to you to resign from Thomas Weisel enmass. If their
reaction is that they’d move to shut down the remainder of the office, we can
step in and offer to take over the remainder as a gesture to save them the
office shutdown costs.
First step would be to get from you a list of all employees, their current comp
and job descriptions. Next I’d like you to highlight the 20 or 25 key
individuals, and a bit more info on their job descriptions and background.
For this group, please include an indication of what comp levels you would
think about for their move to BNP Paribas. Once I get this from you, you
and I can arrange for a call to talk through the info. (id.)
See id., Ex. G at BNP040760 (internal BNPP memo from Harris) (“Chakravarty and his
team will then approach Thomas Weisel USA to resign en-mass. Based on our discussions
with Chakravarty, we would expect Thomas Weisel at this point to move to shut down the
India operations as its highest value employees will be leaving”).
4. Chakravarty Selects And Recruits Discovery Research Employees To
Work For BNPP, And Arranges Their Interviews With BNPP.
Chakravarty—while still employed by TWP—identified for BNPP the best research
analysts to recruit and provided BNPP with these employees’ background information. He
even told BNPP what level of compensation would be necessary to lure them away from
TWP. According to BNPP, these were essential steps in its recruitment process:
Q. Now, Mr. Harris, in October 2007, did you ask Mr. Chakravarty to
identify for BNP Paribas the key research analysts and associates in Thomas
Weisel’s Mumbai office?
A. I did.
Q. And did he do that for you?
A. He did.
Q. And did that help BNP Paribas in the recruitment process?
A. It did.
Q. In October of 2007, did you ask Mr. Chakravarty to give you the job
descriptions and backgrounds of the key research analysts and associates in
Thomas Weisel’s Mumbai office?
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A. I did.
Q. And did he do that?
A. He did.
Q. And did that assist BNP Paribas in the recruitment process?
A. It did.
Q. And in October 2007, did you ask Mr. Chakravarty to provide BNP
Paribas with the current Thomas Weisel compensation of each of these key
people?
A. I asked for their current compensation.
Q. And did he give that to you?
A. Yes.
Q. And did that help you in the recruitment process for these individuals?
A. The recruitment process for these individuals was the same process that
we would follow elsewhere, and a starting point is to come up with their
current compensation.
Q. So by having Mr. Chakravarty provide you with their current
compensation, it helped you in the recruiting process?
A. Yes, you could say that.
Q. And did you, in October 2007, ask Mr. Chakravarty to give you an
indication of what compensation levels he thought would help facilitate their
move to BNPP Asia?
A. I did.
Q. And did he give you that indication?
A. Yes, he did.
Q. And did that assist in the recruitment process?
A. That began the negotiation process. (id., Ex. H at 47:12-49:8 (Harris Dep.))
Chakravarty emailed Harris and Rousseau a spreadsheet that he stated “contains 07
base, 07 bonus, expected 08 base and proposed BNP 08 base and bonus, # of years of work
experience and educational qualifications for each [Discovery Research employee].” Id.,
Ex. I. Chakravarty explained that he had included “ALL analysts and the ones highlighted
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in green are the ones that will move with me” and noted “we have a total of 28 associates of
which I propose to pick the 14 most experienced ones.” Id.10
Chakravarty identified “next steps” in the recruitment process and made himself the
point person for arranging interviews and meetings:
1: Let me know who you want to talk to and i can arrange for it
immediately. You can call each on their cell phones.
2: You are not obliged to take the entire team. The minimum we can go
with is 8 analysts and the rest are available as needed.
3: If we close deal with 8 analysts, me and the HR/Prod Mgmt person
quickly, then we can try to bid for the office space and others. (id.)
Harris thereafter suggested the following plan:
Praveen,
* * * *
For later this week, I’d like to set up individual meetings with your 12 core
analysts to meet with myself, Hugo Leung (Deputy CEO) and Theresa Ho
(Senior Equities HR from Singapore). I am OK to do these as a 3 on 1 to
keep it to 6 meetings. I’d propose that we book a room in the business center
of the Oberoi in which to conduct the meetings. If there are others from
your team that you think we should meet with, please let us know—perhaps
your Product Manager? I believe that Angelo has requested resumes from
your key people. It would be good to have those to refer to during our
meetings.
We’ll need to schedule at least an hour meeting with you to go through the
details. Perhaps we can do this on Thurs PM and then have dinner together.
We are scheduled to arrive Wed night, and will fly out on the same flight
back to HK as last visit on Friday PM. We will be free to meet with you and
your group whenever it suits during this period.
Jon (id., Ex. K)
Chakravarty emailed Harris a “proposed schedule” with interview times on October 25 and
26 for ten Discovery Research analysts and their sector coverage, years of experience, and
education. Id. Chakravarty also arranged to meet with the BNPP recruitment team during
the interviews:
10Two days later, Chakravarty sent another spreadsheet containing “details with the
sectors of each analyst”. See id., Ex. J.
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1: I meet all of you for breakfast at 8:30am at the Oberoi on Thursday.
2: We start analyst meetings (10 analysts) at 10am on Thursday – 6 on
Thursday and 4 on Friday
3: You will meet my HR/Prod mgmt on Friday after all analyst meetings.
4: I will do a follow-up meeting on Thurday (sic) evening after all the
analyst interviews and follow up with dinner
5: We can do a final wrap on Friday before your flight Friday evening.
Praveen. (id. at BNP039388)
Around the time of these interviews, Chakravarty provided BNPP with additional
information about the Discovery Research analysts. Chakravarty emailed BNPP: 1) an
“Excel sheet with numbers, names and the proposal” and 2) a “zip file with all analyst
profiles.” Id., Ex. L. The first document identified the names and proposed BNPP salaries
of each of the ten Discovery Research analysts interviewed on October 25 and 26 as well as
of 13 associates; Chakravarty included details of his proposed “perks” in the spreadsheet.
Id. This document also contained a section entitled “Timelines” in which Chakravarty set
out how he and BNPP would time the defections to inflict maximum damage on TWP:11
Timelines
Contracts for Praveen and Analysts 1-Nov
Analyst Signing Bonus payment 8-Nov
Analysts Resign 10-Nov
Praveen Signing bonus payment 11-Nov
Praveen resigns 13-Nov
Contracts for Associates & Support 17-Nov
Associates & Support Signing Bonus 21-Nov
Associates Resign 23-Nov
11Chakravarty testified that he had a general discussion with Harris about the timelines
and couldn’t recall whether Harris or Harris’s assistant also had “added any details to that
box or not.” Id., Ex. B at 219:1-11 (Chakravarty Dep.).
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Support Staff Resign 23-Nov
TWP Decision on Real Estate 8-Dec
Start Date 9-Jan
Chakravarty apprised Harris that he had “spoken to 8 of the 13 associates and all of them
have agreed.” Id. at BNP042582.
5. Chakravarty Participates In The Contract Negotiations Between
Discovery Research Employees And BNPP.
Following the interviews of Discovery Research employees, Chakravarty wrote to
Harris to let him know that he had “reviewed the [BNPP] contracts” and was “getting
analysts to sign them later this afternoon.” Id., Ex. M. Chakravarty also relayed information
between Discovery Research employees and BNPP:
Q. Did you play a role with respect to BNP making offers to Discovery
Research employees?
A. What do you mean by “role”? Did I –
Q. Meaning did you participate in any way in passing contracts along,
serving as a go-between between BNP and Discovery Research employees?
* * * *
Q. The only recollection I have is being a—is one of being a messenger.
A. Tell me what you mean by “one of being a messenger.”
Q. What I mean by being a messenger is conveying information, relaying
information between some Discovery Research analysts and Mr. Harris and
others at BNP. (id., Ex. B at 226:17-227:7 (Chakravarty Dep.))
C. Chakravarty And Over 20 Discovery Research Employees Join BNPP In
December 2007.
Prior to the defecting Discovery Research employees’ departure to BNPP, Chakravarty
did not tell his supervisor—KV Dhillon—or any other TWP senior managers involved with
Discovery Research that BNPP was recruiting Discovery Research employees:
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Q. Did you tell Mr. Dhillon that BNP had interviewed Discovery Research
analysts?
A. I don’t have a specific recollection of that.
Q. Did you tell Mr. Dhillon that BNP had interviewed Discovery Research
associates?
A. I don’t have a specific recollection of that.
* * * *
Q. Did you tell Mr. Dhillon that you played a messenger role in the
discussions between BNP and Discovery Research analysts and associates?
* * * *
THE WITNESS: I don’t recall [telling] Mr. Dhillon that I played the role of
messenger between Discovery analysts and BNP.
Q. What about research associates and BNP?
* * * *
THE WITNESS: I don’t recall telling Mr. Dhillon. (id. at 236:25-238:4
(Chakravarty Dep.))
On November 6, 2007, Chakravarty sent TWP an email stating that he would be unable
to continue at the firm. Fisher Decl. ¶7. TWP terminated Chakravarty’s employment the
next day. Id. ¶8. A total of 23 former Discovery Research employees and Chakravarty
became employees of a new BNPP research unit in India under Chakravarty’s leadership.
Shin Decl. Ex. N
On December 4, 2007, BNPP announced the launch of an “onshore research platform”;
specifically, “a 27-people strong securities research team in India.” Id., Ex. O. BNPP
explained that the research team would be based in Mumbai, India “under the leadership of
Praveen Chakravarty, Chief Operating Officer and Acting Head of Equity Research for
BNP Paribas Securities in India, newly appointed as of December 3, 2007.” Id. Over
twenty members of BNPP’s new team had previously been Discovery Research employees.
ARGUMENT
Plaintiffs seek summary judgment on Praveen Chakravarty’s liability for breach of
fiduciary duty to TWP pursuant to Federal Rules of Civil Procedure 56(a) and 56(d)(2). A
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party claiming relief may move “for summary judgment on all or part of the claim” (Fed. R.
Civ. P. 56(a)) and “[a]n interlocutory summary judgment may be rendered on liability alone,
even if there is a genuine issue on the amount of damages.” Fed. R. Civ. P. 56(d)(2). To
defeat summary judgment the opposing parties “must make a showing sufficient to establish
a genuine dispute of material fact regarding the existence of the essential elements of [the]
case that [they] must prove at trial.” Galen v. County of Los Angeles, 477 F.3d 652, 658
(9th Cir. 2007) (emphasis added). Summary judgment is appropriate here because there are
no disputes of law or fact regarding Chakravarty’s liability on Plaintiffs’ eighth cause of
action for breach of fiduciary duty.
I.
CHAKRAVARTY OWED FIDUCIARY DUTIES TO TWP.
Fiduciary duties are vested in any officer who “has some discretion in managing
corporate affairs”—top level control is unnecessary. GAB Bus. Servs., Inc. v. Lindsey &
Newsom Claim Servs., Inc., 83 Cal. App. 4th 409, 419-21 (2000), overruled on other
grounds, 33 Cal. 4th 1140 (2004) (regional vice president was fiduciary); see also Daniel
Orifice Fitting Co. v. Whalen, 198 Cal. App. 2d 791, 797 (1962) (corporate vice-president
and chief engineer was fiduciary because he “participated in management”).12 Officers of
subsidiaries to a corporation also owe fiduciary duties to the parent corporation. In
Richardson v. Reliance National Indemnity Co., Judge Breyer held that, under California
law, a director of a corporate subsidiary owes a fiduciary duty to shareholders of the
corporate parent. No. C 99-2952 CRB, 2000 WL 284211, at *12 (N.D. Cal. Mar. 9, 2000).13
12This Court has stated that “California state law will govern” all the claims in this case
aside from one federal statutory claim. Dkt. No. 85 at 16. On November 9, 2009,
Chakravarty moved to dismiss Plaintiffs’ breach of contract claims based on California law.
Dkt. No. 161.
13See, e.g., Wenzel v. Mathies, 542 N.W.2d 634, 641 (Minn. App. 1996) (directors of
closely held bank owed fiduciary duty to equitable shareholders of the bank’s holding
company); Anadarko Petroleum Corp. v. Panhandle E. Corp., 545 A.2d 1171, 1174 (Del.
1988) (“in a parent and wholly-owned subsidiary context, the directors of the subsidiary are
obligated only to manage the affairs of the subsidiary in the best interests of the parent and
its shareholders”); Garner v. Pearson, 374 F. Supp. 580, 586 (M.D. Fla. 1973) (“This duty
would be a duty owed by directors [of subsidiary] to the shareholder . . . of its parent”); In re
(continued . . . )
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California law further vests all corporate employees with a duty of loyalty that requires
them to refrain from competing with their employer. “California law does not authorize an
employee to transfer his loyalty to a competitor. During the term of employment, an
employer is entitled to its employees’ undivided loyalty.” Fowler v. Varian Assocs., Inc.,
196 Cal. App. 3d 34, 41 (1987) (citation and internal quotation marks omitted). This duty is
breached, “and may give rise to a cause of action in the employer, when the employee takes
action which is inimical to the best interests of the employer.” Stokes v. Dole Nut Co., 41
Cal. App. 4th 285, 295 (1995). Among other things, an employee is “obligat[ed] to share
with his employer” any “substantial information” about competitors’ plans to compete with
the corporation—and an employee who refuses to do so, particularly when the employee is
planning to join the competitor, is in breach of his or her duty of loyalty. Fowler, 196 Cal.
App. 3d at 41, 42. In Fowler—a wrongful termination case—the court granted summary
judgment on an employer’s affirmative defense that a disloyal employee had breached his
fiduciary duty of loyalty by failing to disclose his knowledge of a competitor’s plans and
found that the corporation had good cause to discharge the employee.14
The undisputed facts show that Chakravarty owed fiduciary duties to TWP—both as an
employee of TWP and as an officer. Chakravarty “participated in [the] management” of and
exercised “some discretionary authority” over TWP in at least two ways. GAB Bus. Servs.,
83 Cal. App. 4th at 420-21. First, Chakravarty was a Principal of TWP, a senior officer
position at the company, and helped to create and manage Discovery Research for TWP.
See pp.2-3, supra; Shin Decl. Ex. A at 6:6-13 (10/3/07 phone call transcript) (“I run the India
office for the San Francisco based investment bank called Thomas Weisel Partners”).
Second, Chakravarty was a Director of a TWP subsidiary (TWIPL) and had direct
( . . . continued)
Westec Corp., 434 F.2d 195, 202 (5th Cir. 1970) (under Texas law, fiduciary duties of
subsidiary’s manager “should be seen as running to the shareholders of [parent company]”).
14In Stokes, the court noted that fiduciary breaches like those in Fowler could be the
basis for a tort claim by the employer for breach of fiduciary duty. 41 Cal. App. 4th at 295.
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managerial authority over Discovery Research analysts and associates as the Head of
Research. See pp.3-4, supra.
II.
THE LAW PROHIBITS A FIDUCIARY FROM RECRUITING
EMPLOYEES OF HIS COMPANY ON BEHALF OF A
THIRD PARTY.
Officers breach their fiduciary duty of loyalty by engaging in a “course of conduct . . .
designed to obtain for a competitor those of plaintiff’s employees whom the competitor
could afford to employ and would find useful.” Bancroft-Whitney Co. v. Glen, 64 Cal. 2d
327, 347-48 (1966); see also GAB Bus. Servs., 83 Cal. App. 4th at 424 (breach of fiduciary
duty for officer to “recruit valued employees away from the corporation to, and into jobs
with the corporation’s competitor”).15
In Bancroft-Whitney, defendant Glen was president of plaintiff Bancroft-Whitney, a
publisher of law books with its principal place of business in San Francisco. 64 Cal. 2d at
330. While still an employee of Bancroft-Whitney, he entered into negotiations with a rival
publisher, Matthew Bender (“Bender”), to become the head of a new Bender regional office
in San Francisco and recruited employees from Bancroft-Whitney on Bender’s behalf. Glen
identified Bancroft-Whitney employees to be recruited by Bender (id. at 336, 340); compiled
a list of Bancroft-Whitney candidates along with salary information (id. at 340-41); and gave
this list to Bender (id. at 341)—conduct nearly identical to Chakravarty’s.
The California Supreme Court held that Glen’s conduct violated an officer’s duties to
his corporation:
It is beyond question that a corporate officer breaches his fiduciary duties when,
with the purpose of facilitating the recruiting of the corporation’s employees by a
competitor, he supplies the competitor with a selective list of the corporation’s
employees who are, in his judgment, possessed of both ability and the personal
characteristics desirable in an employee, together with the salary the corporation
15These duties exist as a matter of law and are independent of any contractual
relationship. GAB Bus. Servs., 83 Cal. App. 4th at 416-21; accord Huong Que, Inc. v. Luu,
150 Cal. App. 4th 400, 412 (2007) (“an agent’s duty of loyalty arises not from any contract
but from the parties’ relationship”).
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is paying the employee and a suggestion as to the salary the competitor should
offer in order to be successful in recruitment. (id. at 350-51)
Bancroft-Whitney, taking an expansive view of the information that an officer of a
corporation is prohibited from revealing to a competitor, held that an unpublished list of
salaries paid by a corporation to its employees is “confidential information and that an
officer of a corporation violates his trust if he reveals it to a competitor for the purpose of
enabling the solicitation of the corporation’s employees by the competitor.” Id. at 351. The
court relied on the Restatement of Agency to explain that the rule prohibiting the disclosure
of confidential information by an agent applies “‘not only to those communications which
are stated to be confidential, but also to information which the agent should know his
principal would not care to have revealed to others or used in competition with him.’” Id.
(citing Restatement (Second) of Agency §395 cmt. b).
Like Chakravarty, Glen did not stop at providing a list of employees he thought should
be recruited. Glen helped Bender solicit the target Bancroft-Whitney employees—assistance
which the California Supreme Court “condemned as a breach of his fiduciary duty.” Id. at
352. Glen suggested tactics to be followed in discussions with the Bancroft-Whitney
employees, discussed these employees with Bender during the recruiting campaign,
personally approached them to offer employment, and communicated with Bender about the
progress they were making in recruiting employees. Id. Also like Chakravarty, Glen was
hired by the company for whom he did the recruiting; the California Supreme Court opined
that this made his misconduct even more problematic:
If Glen while still president of plaintiff had performed these acts on behalf of
Bender Co. without also obligating himself to join the company, there could be
no doubt that he would have violated his duties to plaintiff. Surely his position in
this regard cannot be improved by the fact that he was also to be employed by
Bender Co. and was to share in the profits of the new western division. (id. at
348)
The Supreme Court determined that it “need not decide whether any of these acts would
constitute a breach of fiduciary duty, taken alone, since there can be little doubt that, in
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combination, they show a course of conduct which falls demonstrably short of ‘the most
scrupulous observance’ of an officer’s duty to his corporation.” Id.
Following Bancroft-Whitney, the court in GAB Business Services decided that a
corporate officer is disloyal when he uses “his insider’s knowledge of employee skills and
salaries to recruit valued employees away from the corporation he owed a fiduciary duty to,
and into jobs with the corporation’s competitor.” 83 Cal. App. 4th at 424.16 In
GAB Business Services, the disloyal fiduciary, Neal, was regional vice president of GAB—a
claim adjusting company. A competitor, Lindsey, approached Neal and offered to make him
its western regional manager. Neal invited two friends at GAB to “explore the Lindsey
opportunity with him” and together they recruited fourteen other GAB employees. Id. at
414-15. The three conspirators and fourteen other GAB employees resigned en masse,
leaving “big holes” at GAB. Id. at 415. The court held that such conduct was ample
evidence to support a verdict for breach of fiduciary duty. Id. at 423-24. “Easing this
analysis is the striking similarity between Neal and that of an officer in Bancroft-Whitney
Co. v. Glen, who was found to have breached his fiduciary duty as a matter of law.” Id. at
423-24 (internal citation omitted). The court pointed out that the faithless fiduciary’s
conduct in GAB Business Services was “slightly worse” than in Bancroft-Whitney because
“Neal accomplished the solicitation himself, rather than merely ‘facilitating’ it.” Id. at 424.
In American Republic Insurance Co. v. Union Fidelity Life Insurance Co., the Ninth
Circuit relied on Bancroft-Whitney to uphold a trial court finding of unfair competition on
the ground that a corporate manager of an insurance company breached his duty of loyalty
by recruiting his fellow employees to work for a competitor.17 470 F.2d 820 (9th Cir. 1972).
16In GAB Business Services, the plaintiff appealed the trial court’s refusal to instruct
the jury that the corporate officer defendant owed a fiduciary duty to his company as a
matter of law. 83 Cal. App.4th at 415. The court of appeal ruled that the trial court’s refusal
was prejudicial error and that there was ample evidence to support a jury verdict in the
plaintiff company’s favor on its breach of fiduciary duty claim, and reversed the judgment.
Id. at 423.
17American Republic was decided under Oregon law, but nothing about the decision
suggests a different outcome under California law—thus the reliance on Bancroft-Whitney.
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In that case, the manager, Lindgren, decided to work for a rival insurer. Id. at 823-25.
Before resigning, Lindgren “attempted to persuade his subordinates to leave [his employer]
and join him at [his employer’s competitor]. He succeeded to the extent that seven salesmen
signed contracts with him prior to April 22 [the resignation date] and eight others followed
thereafter.” Id. at 823. The Ninth Circuit concluded that Lindgren’s conduct was an
actionable wrong in contravention of the usual duty of loyalty owed to his employer. Id. at
824-25.
These cases are in accord with fundamental common-law principles. The Restatement
(Second) of Agency Section 393 notes that “an employee is subject to liability if, before or
after leaving the employment, he causes fellow employees to break their contracts with the
employer.” Id. at cmt. e. The American Law Institute’s Principles of Corporate Governance
state that “[a]lthough a senior executive or director may advise other officers and employees
of an intention to enter a competing business while still employed by the corporation, his or
her duty under §5.06 would be violated if, while still in the corporation’s employ, the
director or senior executive attempts to persuade an employee to join the competing
business.” Principles of Corporate Governance §5.06 illus. e.
III.
THE UNDISPUTED FACTS PROVE THAT CHAKRAVARTY
BREACHED HIS FIDUCIARY DUTY OF LOYALTY BY
RECRUITING DISCOVERY RESEARCH EMPLOYEES FOR
BNPP.
The undisputed facts show that, by helping BNPP identify, solicit, and hire TWP’s key
India research employees, Chakravarty’s actions fell demonstrably short of “the most
scrupulous observance” of an officer’s duty to his corporation and, taken together, constitute
a breach of his fiduciary duty. Bancroft-Whitney, 64 Cal. 2d at 348.
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A. Chakravarty Violated His Fiduciary Duties As An Officer Of TWP.
1. Chakravarty Provided BNPP With Key Information About Discovery
Research Employees.
Chakravarty’s undisputed conduct was nearly identical to that condemned by Bancroft-
Whitney as being “beyond question” a breach of fiduciary duty. Chakravarty supplied BNPP
“with a selective list of the corporation’s employees who are, in his judgment, possessed of
both ability and the personal characteristics desirable in an employee, together with the
salary the corporation is paying the employee and a suggestion as to the salary the
competitor should offer in order to be successful in recruitment.” Id. at 350-51; see pp.6-11,
supra.
BNPP asked Chakravarty to identify a “core group”18 of employees and Chakravarty
did so. Like the faithless fiduciary in Bancroft-Whitney, Chakravarty betrayed TWP by
providing BNPP with employee lists containing compensation information, including
suggested compensation, work experience, educational qualifications, and industry expertise.
See pp.6-11, supra. Specifically:
• On October 15, 2007, Chakravarty emailed to BNPP a spreadsheet that he
explained “contains 07 base, 07 bonus, expected 08 base and proposed BNP 08
base and bonus, # of years of work experience and educational qualifications for
each [targeted Discovery Research analyst].” Shin Decl. Ex. I. Chakravarty
highlighted the analysts that would move with him and he proposed “pick[ing] the
14 most experienced” associates. Id.
• On October 17, 2007, Chakravarty emailed to BNPP a spreadsheet, which included
“the sectors of each analyst.” Id., Ex. J.
• On October 26 and 30, 2007, Chakravarty emailed to BNPP a “spreadsheet with
proposed numbers and current base for all” along with a zip file “with all analyst
profiles”. Id., Ex. L.
18Shin Decl. Ex. F.
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The California Supreme Court has held that officers are prohibited from providing such
information to a competitor and that an officer, by making such disclosures, “violates his
trust if he reveals it to a competitor for the purpose of enabling the solicitation of the
corporation’s employees by the competitor.” Bancroft-Whitney, 64 Cal. 2d at 351.
2. Chakravarty Helped BNPP Solicit Discovery Research Employees.
Like the faithless fiduciary in Bancroft-Whitney, Chakravarty also helped BNPP solicit
the targeted employees. See pp.4-12, supra. The California Supreme Court has deemed
such conduct to violate the duty of loyalty. Bancroft-Whitney, 64 Cal. 2d at 352.
Chakravarty helped to arrange BNPP’s interviews of Discovery Research employees,
including sending Harris a “proposed schedule” for ten Discovery Research analysts along
with their sector coverage, years of experience, and education. Shin Decl. Ex. K.
Chakravarty scheduled times to meet with BNPP before, during, and after these interviews.
Id. Chakravarty helped to coordinate the Discovery Research employees’ contract
discussions and resignations. See pp.11-12, supra. He emailed BNPP a spreadsheet that
contained a section entitled “Timelines” setting out dates for the analysts’, associates’, and
his resignations; for the signing of bonus payments; and the start date at BNPP. Shin Decl.
Ex. L. Chakravarty also relayed information between Discovery Research employees and
BNPP during the contract discussions. Id., Ex. B at 226:17-227:7 (Chakravarty Dep.);
see pp.11-12, supra.
The California Supreme Court has held that “assistance” such as that provided by
Chakravarty to BNPP is “to be condemned as a breach of [ ] fiduciary duty.” Bancroft-
Whitney, 64 Cal. 2d at 352.
B. Chakravarty Violated His Duty Of Loyalty As An Employee Of TWP By
Withholding From Senior TWP Managers That BNPP Was Recruiting
Discovery Research Employees.
Chakravarty did not tell Dhillon or any of the other senior TWP senior managers
involved with Discovery Research that BNPP was recruiting Discovery Research
employees. See pp.11-12, supra. Chakravarty’s failure to disclose this information was a
violation of his obligation as an employee “to share with his employer” any “substantial
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information” about a competitor’s plans to compete with the corporation—particularly when
he was planning to join the competitor. Fowler, 196 Cal. App. 3d at 41-42.
In Fowler, Varian Associates fired a disloyal employee, Fowler, who then sued the
company for wrongful termination. Fowler v. Varian Assocs., Inc., 196 Cal. App. 3d 34
(1987). As an affirmative defense, Varian argued that Fowler had breached his duty of
loyalty to Varian and the appellate court affirmed an award of summary judgment in
Varian’s favor. Id. at 37. Fowler had been Varian’s marketing manager when a potential
competitor to Varian began courting him and exchanging information with Fowler about
future plans. Id. at 41-42. Fowler withheld this information from Varian. Id. The appellate
court held that Fowler had “an acknowledged obligation to share with his employer
information about competitors’ plans” and that his silence was “fundamentally inconsistent
with his duty of loyalty to Varian”—particularly because he was planning on joining the
competitor. Id. at 42.
Like the disloyal employee in Fowler, Chakravarty violated his employee duty to
prefer TWP’s interests over those of BNPP. Chakravarty knew that BNPP was interested in
recruiting research employees and that BNPP was looking for Discovery Research
employees “to resign from Thomas Weisel enmass.” See pp.4-7, supra. BNPP and
Chakravarty both understood and expected that this en masse resignation could result in
TWP shutting down its India operations: “we’d look to you to resign from Thomas Weise
enmass. If their reaction is that they’d move to shut down the remainder of the office, we
can step in and offer to take over the remainder as a gesture to save them the office
shutdown costs.” Shin Decl. Ex. F; see id., Ex. G. This certainly constituted the sort of
“substantial information” about a competitor’s plans that Chakravarty was obligated to
disclose to TWP.
As a matter of law, Chakravarty transferred his allegiance to BNPP while still
employed by TWP, and, as a result, violated his fiduciary duty of loyalty to TWP.
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CONCLUSION
For the foregoing reasons, Plaintiffs respectfully request that the Court enter judgment
for Plaintiffs on the eighth cause of action for breach of fiduciary duty against Defendant
Praveen Chakravarty.
DATED: January 14, 2010 GILBERT R. SEROTA
CLARA J. SHIN
MICHAEL L. GALLO
JOHN P. DUCHEMIN
HOWARD RICE NEMEROVSKI CANADY
FALK & RABKIN
A Professional Corporation
By: s/Clara J. Shin
CLARA J. SHIN
Attorneys for Plaintiffs THOMAS WEISEL
PARTNERS LLC and THOMAS WEISEL
INTERNATIONAL PRIVATE LIMITED
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