Advisers Alpha LLC et al v. Deru et al

COMPLAINT filed by ADVISERS ALPHA LLC, INVESTMENT GRADE TECHNOLOGIES LLC d/b/a ORANJ; JURY DEMAND. Filing fee $ 400, receipt number 0752-14483277.

Northern District of Illinois, ilnd-1:2018-cv-03515

Current View

Full Text

Case: 1:18-cv-03515 Document #: 1 Filed: 05/17/18 Page 1 of 45 PageID #:1 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ADVISERS ALPHA LLC and INVESTMENT GRADE TECHNOLOGIES LLC d/b/a ORANJ Case No.: 351 West Hubbard Street Suite 501 Chicago, IL 60654 Plaintiffs, v. DAMON DERU, 278 Imperial Drive Morgan, UT 84050 TRADEWARRIOR, INC. 563 West 500 South Bountiful, UT 84010 DARREN COLLINS 261 East 610 South Santaquin, UT 85655 JANSON EVANS 658 South 600 East Layton, UT 84041 PATRICK KEEL 526 Horizon Drive San Antonio, TX 78228 Defendants. VERIFIED COMPLAINT Case: 1:18-cv-03515 Document #: 1 Filed: 05/17/18 Page 2 of 45 PageID #:2 Plaintiffs Advisers Alpha LLC, ("Advisers Alpha" or the "Company") and Investment Grade Technologies LLC ("IGT") (collectively, "Plaintiffs"), by way of their Verified Complaint against Defendants Damon Deru ("Deru"), TradeWarrior, Inc. ("TWI"), Darren Collins ("Collins"), Jordan Evans ("Evans") and Patrick Keel ("Keel") (collectively, "Defendants"), allege as follows: INTRODUCTION 1. This action stems from Defendants' wrongful scheme to induce IGT to enter into a business relationship with TWI to form Advisers Alpha, Defendants' subsequent misappropriation and destruction of Advisers Alpha's intellectual property and other assets, and Defendants' ongoing attempts to disrupt Plaintiffs' business operations and defame Plaintiffs. 2. Plaintiff Advisers Alpha is in the business of providing portfolio management software products and services to financial advisors. 3. Plaintiff IGT is the majority owner of Plaintiff Advisers Alpha. 4. Defendant TWI owns a minority interest in Advisers Alpha. 5. Defendant Deru is TWI's principal. Deru was employed by Advisers Alpha as President from the Company's formation in April 2017 until December 2017. 6. Defendants Collins, Evans and Keel (collectively, with Deru, the "Employee Defendants") are all former employees of Advisers Alpha. 7. In early 2017, in order to induce IGT to partner with TWI to form Advisers Alpha, Deru and TWI withheld from IGT material information pertaining to TWI's assets, operations and liabilities, as well as material information regarding findings by the U.S. Case: 1:18-cv-03515 Document #: 1 Filed: 05/17/18 Page 3 of 45 PageID #:3 Securities and Exchange Commission ("SEC") that TWI principals had engaged in securities fraud and related misconduct in connection with TWI's predecessor-in-interest. 8. Those misrepresentations and omissions caused considerable harm to IGT and Advisers Alpha, which Plaintiffs have worked to address – to their detriment – since the Company's formation in April 2017. 9. In December 2017, Advisers Alpha terminated the Employee Defendants' employment after discovering that they had, among other things, conspired under the direction of Deru (Advisers Alpha's then-President) to engage in unauthorized business activities that the Company's CEO, David Lyon, had expressly prohibited. The Employee Defendants also, both before and after the termination of their employment, misappropriated, hid and/or destroyed Company property, including Company computers, computer code and customer communications and other information, in an attempt to keep Plaintiffs from learning of their misconduct. 10. Following the termination of the Employee Defendants' employment, Defendants each engaged in various acts intended to interfere with the operation of Advisers Alpha's business, including but not limited to permanently deleting Company data from Company computers and changing the locks on Advisers Alpha's offices. 11. In January 2018, Plaintiffs and Deru participated in a voluntary mediation in Chicago, before mediator William Hartgering of JAMS. The disputes that were submitted to mediation included (a) Plaintiffs' claims pertaining to Deru's role in Defendants' wrongful misappropriation and destruction of Advisers Alpha property, and (b) Deru's counter-assertions, in which he accused IGT and its principal, Lyon, of having engaged in various purported -2- Case: 1:18-cv-03515 Document #: 1 Filed: 05/17/18 Page 4 of 45 PageID #:4 fraudulent acts and other misconduct in connection with the formation and operation of Advisers Alpha, which allegations IGT and Lyon rejected. 12. Defendants were on clear notice that, if the January mediation in Chicago were unsuccessful, Plaintiffs intended to proceed with a suit in this Court, which is the proper venue for adjudication of disputes arising out of or relating to the agreements governing the formation and operation of Advisers Alpha and the Employee Defendants' employment agreements with Advisers Alpha. 13. Ultimately, Plaintiffs and Deru negotiated a binding and enforceable settlement – documented in a January 26, 2018 Binding Settlement Term Sheet (the "Term Sheet") – resolving the asserted disputes between them. The Term Sheet included commitments made by Deru on behalf of TWI (including, e.g., an agreement to dissolve Advisers Alpha and transfer its assets to IGT) and on behalf of the other Employee Defendants (including, e.g., an agreement that Deru would return to Advisers Alpha all Company property, including all computer code created by any employee, agent or representative of TWI or Advisers Alpha). The Term Sheet contemplated that the parties would enter into a further, more detailed settlement agreement to address, among other things, the disposition of various assets and the logistics of dissolving Advisers Alpha. 14. As set forth herein, Plaintiffs' ability to complete a final settlement agreement with Deru was undermined by, among other things, Deru's material breaches of his obligations under the Term Sheet and repeated attempts to inject new material terms into the settlement to which Plaintiffs had never agreed, and would not agree. -3- Case: 1:18-cv-03515 Document #: 1 Filed: 05/17/18 Page 5 of 45 PageID #:5 15. On March 29, 2018, Plaintiffs and Deru finally reached agreement on all key terms to be included in the more detailed settlement agreement contemplated by the Term Sheet. On April 2, 2018, Plaintiffs provided Deru with a draft of the final settlement agreement. 16. Deru never responded to that draft. Instead, on April 4, 2018, with no notice to Plaintiffs, Deru and TWI filed suit against Advisers Alpha, IGT and Lyon in federal court in Utah, asserting (among other things) precisely the same claims against IGT and Lyon that they had raised, and settled, in the Chicago mediation, and complaining about various aspects of the draft settlement agreement that Plaintiffs had provided to Deru just two days before. 17. Deru's and TWI's Utah lawsuit is, on information and belief, an attempt to pressure Plaintiffs to negotiate a new settlement on terms more favorable to Defendants than those already agreed to in the Term Sheet. The Utah lawsuit is also an attempt to deprive Plaintiffs of their rightful choice of forum for adjudicating their claims against all Defendants – the Northern District of Illinois. That is the forum specified by, inter alia: (a) the April 13, 2017 Operating Agreement ("Operating Agreement"), which governed the operation of Advisers Alpha, and to which IGT, Mr. Lyon, TWI and Deru are signatory parties; and (b) all of the Employee Defendants' employment agreements with Advisers Alpha (the "Employment Agreements"). 18. Plaintiffs accordingly have brought this suit to ensure that the parties' disputes are heard in the proper forum. Plaintiffs are contemporaneously moving to dismiss, stay or transfer the improper anticipatory complaint that Defendants Deru and TWI filed in Utah. -4- Case: 1:18-cv-03515 Document #: 1 Filed: 05/17/18 Page 6 of 45 PageID #:6 PARTIES 19. Plaintiff IGT, doing business as Oranj, is a Delaware limited liability company with its principal place of business in Chicago, Illinois. 20. Plaintiff Advisers Alpha is a Delaware Limited liability company with its principal place of business in Chicago, Illinois. Advisers Alpha's two members are IGT (51% ownership interest) and TWI (49% ownership interest). 21. Defendant TWI is a Nevada corporation with its principal place of business in Utah. 22. Defendant Deru is an adult individual and resident of Utah. Deru is the former President of Advisers Alpha and the current and/or former President of TWI. 23. Defendant Collins is an adult individual and resident of Utah. Collins is the former Head of Engineering of Advisers Alpha. 24. Defendant Evans is an adult individual and resident of Utah. Evans is the former Vice President of Sales of Advisers Alpha and currently holds himself out as the Executive Vice President of Sales for TWI. 25. Defendant Keel is an adult individual and resident of Texas. Keel is the former Production and Support Manager of Advisers Alpha. JURISDICTION AND VENUE 26. This Court has jurisdiction pursuant to 18 U.S.C. § 1836, et seq. (the Defend Trade Secrets Act of 2016), 28 U.S.C. § 1331 (federal question jurisdiction), 28 U.S.C. § 1332 (diversity jurisdiction) and 28 U.S.C. § 1367 (supplemental jurisdiction). -5- Case: 1:18-cv-03515 Document #: 1 Filed: 05/17/18 Page 7 of 45 PageID #:7 27. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b), as a substantial part of the events or omissions giving rise to Plaintiffs' claims occurred in this district and/or a substantial part of the property that is the subject of the action is situated in this district. 28. Venue also is proper because this dispute arises out of the Employee Defendants' breaches of their Employment Agreements with Advisers Alpha, TWI and Deru's breaches of the Operating Agreement, and TWI and Deru's breaches of the Term Sheet. The Operating Agreement and all of the Employment Agreements state that all disputes pertaining to those agreements shall be adjudicated in either the state courts of Cook County, Illinois or the federal court in the Northern District of Illinois. Disputes pertaining to the Term Sheet – which represents the settlement of claims arising under and relating to the Operating Agreement and Deru's Employment Agreement, and which was negotiated in a mediation in Chicago in lieu of Plaintiffs' filing suit against Deru in this district – are also subject to adjudication in this forum. FACTUAL BACKGROUND The Formation of Advisers Alpha 29. In or around 2007, Defendant Deru founded TWI to develop and sell an investment portfolio rebalancing software product for financial advisors called "TradeWarrior," which is described on its website as "institutional grade investment rebalancing and account management software for financial advisors." 30. By early 2017, TWI needed additional funding for its survival, which Plaintiff IGT agreed to provide. 31. To that end, IGT and TWI entered into an agreement to form Advisers Alpha, a Delaware limited liability company with two members: IGT, the majority member with a 51% -6- Case: 1:18-cv-03515 Document #: 1 Filed: 05/17/18 Page 8 of 45 PageID #:8 ownership interest, and TWI with a 49% ownership interest. The parties accordingly executed the Operating Agreement to address the formation and governance of Advisers Alpha, and an April 13, 2017 Contribution Agreement ("Contribution Agreement") to address the transfer of assets and certain liabilities from TWI to Advisers Alpha.1 32. IGT, TWI, Deru and Lyon are signatories to the Operating Agreement. 33. Advisers Alpha (through its Manager, IGT), TWI and Deru are signatories to the Contribution Agreement. The Advisers Alpha Operating Agreement 34. Pursuant to the Operating Agreement, IGT and TWI each appointed an individual to serve as a Manager of the Company. 35. IGT appointed Lyon, and TradeWarrior appointed Deru, to serve as their respective Managers. 36. In addition to serving as IGT's appointed Manager of Advisers Alpha, Lyon serves as the Company's Chief Executive Officer ("CEO"). 37. In addition to serving as TWI's appointed Manager of Advisers Alpha, Deru served as the Compan