Submitted: July 25, 2013
P. Clarkson Collins, Jr. Jason C. Jowers Morris James LLP
Kathleen Furey McDonough John A. Sensing Potter Anderson & Corroon LLP
SAM GLASSCOCK III VICE CHANCELLOR
This Letter Opinion explains my decision regarding the Defendants' Motion to Dismiss Counts I, II, III, IV, IX, X and XI of the Amended Complaint. For the reasons I explain below, I dismiss the portion of Count II that seeks damages without prejudice. I dismiss Counts III and IV in their entirety with prejudice. However, I decline to dismiss Count I or certain claims for damages in Counts IX and X of the Complaint, as explained below. Finally, because Count XI of the Complaint is merely a request for injunctive relief and not a cause of action in its own right, the Motion to Dismiss Count XI is moot.
A. Background Facts
The following facts are alleged in the Amended Complaint. Defendant Andrew Zeinfeld is former CEO and former member of the Board of Managers of the Plaintiff, Simplexity, LLC ("Simplexity"), a Delaware limited liability corporation with its principal offices in Reston, Virginia. Zeinfeld served as Simplexity's CEO since the company's inception in 2007. Before serving as Simplexity's CEO, Mr. Zeinfeld was the President of Simplexity's predecessor, InPhonic, Inc. Simplexity is an online provider of wireless products and services.Simplexity sells wireless products through its own website, Wirefly.com, and also provides sales and activation services for the major mobile retailers. Additionally, Simplexity sells wireless products and services in the brick-and-mortar stores of some its business partners.
As CEO, Zeinfeld was Simplexity's highest ranking officer and "involved in every aspect of its business." For example, Simplexity has alleged that Zeinfeld managed key relationships with customers and retailers, and participated in developing Simplexity's strategies. Prior to his resignation, Zeinfeld had been overseeing Simplexity's expansion into brick-and-mortar stores. In addition, Zeinfeld had access to Simplexity's sensitive confidential information, including its trade secrets. In sum, the facts alleged in the Amended Complaint regarding Zeinfeld's knowledge of Simplexity's confidential information, which I have abbreviated considerably, indicate that Zeinfeld has knowledge of Simplexity's customer lists, cost structure, profitability, intellectual property, trade secrets, contracts, and company-wide strategy.
Because, as CEO, Zeinfeld would be exposed to Simplexity's confidential information, Zeinfeld's employment agreement (the "Employment Agreement") contains non-disclosure, non-competition, and non-solicitation provisions. The non-disclosure provision prevents Zeinfeld from using or disclosing any Confidential Information, for himself or for anyone else, while employed at Simplexity "and at all times thereafter." Confidential Information is defined as:
"all information (whether or not specifically identified as confidential) . . . that is disclosed to, or developed or learned by, [Zeinfeld] in the performance of duties for, or on behalf of, [Simplexity] or that relates to the business, services or research of [Simplexity] or any of [its] investors, partners, affiliates, strategic alliance participants, officers, managers, employees or members.
The Employment Agreement also provides examples of Confidential Information, which includes "identities of potential target companies, management teams, and transaction sources identified by, or on behalf of, [Simplexity] . . . ."
The non-competition provision in the Employment Agreement provides that during Zeinfeld's employment and for twelve months following his employment (the "Restricted Period"), Zeinfeld shall not "directly or indirectly, engage in any activity . . . that is competitive with any business, activities, products or services conducted or offered by [Simplexity]." In addition to this broad non-competition clause, Zeinfeld agreed to detailed restrictions on his ability to ...