EMC v. Arturi (D. Mass 2010)
EMC v. Arturi (D. Mass 2010)
EMC v. Arturi (D. Mass 2010)
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EMC CORPORATION, :
Defendants. :
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action for injunctive relief and damages, and for its Complaint alleges, upon knowledge with
respect to itself and its own acts, and upon information and belief with respect to all other
matters, as follows:
Arturi and Francis Casagrande, who in 2007 reaped in excess of $50 million each by selling their
consulting business to EMC. Arturi and Casagrande have ongoing common law obligations not
to engage in unfair competition and contractual obligations, inter alia, not to exploit confidential
EMC business information for their own benefit. This action seeks to require Arturi and
Casagrande to honor their contractual obligations and to prevent them and their new company,
competition, use of EMC's confidential information, and their other unlawful interference with
EMC's business.
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2. Arturi and Casagrande, and two other individuals, Peter Gibson and
million. BusinessEdge became part of EMC's Global Services Division, and continued to
organization").
including Arturi and Casagrande, became employees of EMC. Arturi and Casagrande
subsequently terminated their respective employment with EMC on December 31, 2007.
resource talent and its employees' respective knowledge of proprietary business processes, know-
how, customer needs and customer relationships. By purchasing BusinessEdge, EMC paid a
considerable sum for this confidential and proprietary business information and the resulting
into identical agreements with Arturi and Casagrande that were crucial to the protection of this
exploit for his own benefit or for the benefit of anyone other than EMC any such Confidential
¶ 6, July 18, 2007, Exhibits 1 and 2 hereto (respectively, the "Arturi Agreement" and
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and proprietary business information were expressly agreed-upon and amply paid-for: indeed,
("Knowledgent"), a consulting business that will offer consulting services substantially identical
organization, Arturi and Casagrande had access to the EMC BusinessEdge organization's
confidential and proprietary business information. EMC will be harmed irreparably if Arturi,
Casagrande and Knowledgent are permitted to use this information for their own benefit in
11. In this action, EMC seeks, among other things, injunctive relief to prohibit
defendants from using or exploiting EMC's confidential and proprietary business information for
their own benefit, as they expressly agreed not to do. EMC also seeks injunctive relief to
prohibit defendants from continuing their unfair competition and unlawful interference with
EMC's business relationships by, among other things, using EMC confidential information to
induce EMC employees to terminate their EMC employment. EMC also seeks to recover
PARTIES
Massachusetts.
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13. On information and belief, Arturi is a citizen of the state of New York.
Arturi is bound by the Arturi Agreement, which is expressly governed by Massachusetts law.
around October 2009 and has offices at 1230 Avenue of The Americas, New York, New York.
16. This Court has jurisdiction over Arturi, Casagrande, and Knowledgent
pursuant to 28 U.S.C. § 1332. The amount in controversy exceeds $75,000, exclusive of costs
and interest.
Massachusetts because, among other reasons, he has sufficient contacts with Massachusetts and
has transacted business within Massachusetts, he has derived substantial benefit and revenue
from his contacts with Massachusetts, and because some of Arturi's unlawful actions occurred in
Massachusetts.
of Massachusetts because, among other reasons, he has sufficient contacts with Massachusetts
and has transacted business within Massachusetts, he has derived substantial benefit and revenue
from his contacts with Massachusetts, and because some of Casagrande's unlawful actions
occurred in Massachusetts.
Massachusetts.
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1391.
FACTUAL BACKGROUND
21. EMC is one of the leading technology companies in the United States.
EMC designs, manufactures, markets and supports a wide range of information storage systems,
software, networks, and services. EMC competes with many established companies in the
markets it serves, and its products and services have achieved enormous market acceptance
because, in part, EMC's products and services are technologically superior to competitors'
products and services. Accordingly, EMC must -- and does -- zealously guard its confidential
technology consulting services to clients primarily in four business verticals: (i) Financial
Services (such as clients involved in asset management, wealth management, capital markets,
banking, and insurance markets), (ii) Life Sciences (such as clients involved in pharmaceutical
and biotechnology markets), (iii) Communications, Media and Entertainment, and (iv) National
value is its human resource talent in a very specialized area of business consulting; knowledge of
customer needs and customer relationships developed by its key talent; and its employees'
respective knowledge of proprietary business processes, all of which were developed and honed
agreement, these are precisely the value for which EMC paid in excess of $200 million. In the
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section intended to protect the value of BusinessEdge pending the completion of the acquisition,
The Company [BusinessEdge Solutions, Inc.] shall, and shall cause the Subsidiaries to,
use reasonable commercial efforts to preserve intact the business organization, and
preserve the goodwill, of the Company and the Subsidiaries, to keep available the
services of the current key officers, employees and consultants of the Company and
Subsidiaries that have significant responsibilities and duties and to preserve the present
relationships of the Company and the Subsidiaries with customers, suppliers, channel
partners and other Persons with which the Company and the Subsidiaries have significant
business relations.
(Agreement And Plan Of Merger By And Among EMC Corporation, Edge Merger Corporation,
BusinessEdge Solutions, Inc. And The Representative Of the Holders Of All Of The Capital
Stock Of BusinessEdge Solutions, Inc., ¶ 5.1, July 26, 2007, Exhibit 3 hereto (excerpts)
(emphasis added).)
24. Arturi and Casagrande founded BusinessEdge along with two other
individuals in 1999. Upon EMC's acquisition of BusinessEdge in August 2007, they became
special consultants to EMC's Global Services organization, responsible for ensuring a smooth
transition of BusinessEdge into EMC. Arturi and Casagrande remained in that role until their
resignation effective December 31, 2007. As the founders of BusinessEdge, Arturi and
Casagrande not only had access to, but were also primarily responsible for creating confidential
and proprietary information. The confidential and proprietary information includes, among other
things, information regarding the identity and skill sets of the BusinessEdge organization's key
employees, all of whom were hired under Arturi and Casagrande's ownership and management;
proprietary business processes; consulting methodologies and strategies that were unique in the
business and technology consulting industry; and the resulting customer relationships and
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business goodwill that arose from the proprietary information created by BusinessEdge under
BusinessEdge, Arturi and Casagrande each executed an Agreement. The protections afforded to
EMC in the Agreements were a critical condition to EMC agreeing to acquire BusinessEdge for
[Arturi/Casagrande] has acquired valuable trade secrets and other confidential and
proprietary information relating to the business and the operation of BusinessEdge
Solutions Inc., a Delaware Corporation ("BusinessEdge");
* * *
Concurrently with the execution of the Merger Agreement, in order to protect the
goodwill related to BusinessEdge and as a condition and an inducement to EMC's
willingness to enter into the Merger Agreement and consummate the transactions
contemplated thereby, [Arturi/Casagrande] has agreed to the noncompetition,
nonsolicitation, confidentiality and other covenants provided in this Agreement.
26. The Agreements, inter alia, prohibit Arturi and Casagrande from
disclosing confidential and proprietary business information, and from using or exploiting the
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that the "remedy at law for any breach of this Agreement is and will be inadequate," and in the
from the conduct which would constitute a breach of this Agreement . . . ." (Agreements,
employment, Arturi and Casagrande also expressly agreed to be bound by the EMC Business
Conduct Guidelines. In the section titled, "Protect EMC’s Confidential and Proprietary
Information," the Business Conduct Guidelines state: "Misusing or disclosing information that
EMC considers confidential, both during and after your employment with EMC, is prohibited . .
." (Arturi and Casagrande July 18, 2007 Employment Letters and July 25, 2007 Business
29. Although Arturi and Casagrande were also bound by non-compete and
non-solicitation covenants with specific temporal limitations, their common law and contractual
obligations not to misuse EMC's confidential and proprietary information have no temporal
limitations.
June 2009, Arturi and Casagrande formed Knowledgent to offer the same types of products and
services offered by EMC's BusinessEdge organization. While EMC fully recognizes that Arturi
and Casagrande are now free to start a business that competes against EMC, they must compete
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fairly and cannot build a new business based on their usurping the very value that they sold to
materials its "Market Experience," which it describes as "our collective knowledge" gained from
"working with the world's leading companies." Knowledgent also touts its "rich inventory of
models and methodologies tried, tested and tailored." Inasmuch as Knowledgent is a brand new
company comprised primarily of Arturi and Casagrande, and employing a number of employees
they hired directly from EMC’s BusinessEdge organization, the "rich inventory of models and
methodologies tried, tested and tailored" are part of the critical assets that EMC purchased from
Arturi and Casagrande and which they are now exploiting for their own benefit.
does not exist independently, it is represented by the key professionals who make up consulting
businesses like Knowledgent and EMC's BusinessEdge organization. As one of its "Key
Differentiators," Knowledgent lists its "People" who are "[a] diverse team of industry and
competency oriented individuals" who "partner with" clients to address those clients' needs.
These "Key Differentiators" were, again, part of the critical value that EMC acquired when it
any, "collective knowledge" or, for that matter, any "partnerships" with "the world's leading
companies," because Arturi and Casagrande sold that information -- as well as all of
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34. On information and belief, Arturi and Casagrande have used and continue
to use their knowledge of EMC confidential and proprietary information to instantly and unfairly
build Knowledgent as a competing consulting organization based on the very same assets they
sold to EMC. In sum, they have unfairly and illegally taken back, and continue to take back, the
assets -- in the form of proprietary information and business goodwill -- that they sold to EMC in
August 2007.
35. These assets and information are precisely what made the business sold to
EMC so valuable, and their actions in exploiting the confidential information they sold to EMC
are precisely the reason why EMC sought and obtained protection in the Agreements. This
information includes, but is not limited to, confidential information about the identity, skill sets,
well as those employees' customer relationships, knowledge of customer needs, and knowledge
targeted the following critical talent from EMC's BusinessEdge organization to form the nucleus
of newly-created Knowledgent:
(a) Robert Caggiano was the Director, Business Operations for the EMC
BusinessEdge organization and had been employed at BusinessEdge since hired by Arturi and
Casagrande when BusinessEdge was created in 1999. He was responsible for managing the
Financial Services and Life Sciences verticals from an operational perspective, including back
organizations Caggiano managed represented more than 55% of the BusinessEdge organization's
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revenue. Arturi and Casagrande hired Caggiano to be the Chief Operations Officer (COO) at
organization and had been employed at BusinessEdge since 2003. He was one of only four
vertical practice heads in the EMC BusinessEdge organization, and was responsible for running
the entire Financial Services vertical consulting practice. Historically, the Financial Services
practice generates more revenue than any of the other three practice verticals, totaling more than
one third of the EMC BusinessEdge organization's total revenue. As its head, Schuette has
intimate knowledge about every aspect of the Financial Services vertical. Arturi and Casagrande
hired Schuette as Managing Director at Knowledgent. As a result, Schuette resigned from EMC
(c) John D'Urso was a Senior Director in the EMC BusinessEdge organization
and had been employed at BusinessEdge since its founding by Arturi and Casagrande in 1999.
He was one of only four vertical practice heads in the EMC BusinessEdge organization and was
responsible for managing the National Markets vertical practice, which focuses on emerging
business consulting markets such as health care, retail, and local government. The National
Markets practice, which generated approximately fifteen percent of the EMC BusinessEdge
organization's total revenue, consulted for customers across the other practice groups, including
Financial Services. Based upon D'Urso's role as a senior level manager of BusinessEdge since
its formation in 1999, he had intimate knowledge of virtually every aspect of the BusinessEdge
business. Arturi and Casagrande hired D'Urso as a Partner at Knowledgent. As a result, D'Urso
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(d) Chris Blotto was a Director in the EMC BusinessEdge organization and
had been employed at BusinessEdge since 2006. Blotto was considered one of the top technical
experts in the BusinessEdge organization and the top technical expert in one of its most rapidly
very rare and specialized skill set in business technology consulting. Blotto worked directly for
John D'Urso and supported not only the National Markets vertical, but the Financial Services
vertical and other verticals within the EMC BusinessEdge organization. He was the critical
resource that BusinessEdge had in connection with consulting with national and international
customers regarding how to most efficiently store and access data, as well as how to effectively
mine that data for customer and business intelligence. Blotto was instrumental in developing
many of BusinessEdge's master data management practices. Arturi and Casagrande hired Blotto
to be the Chief Technology Officer (CTO) at Knowledgent. As a result, Blotto resigned from
BusinessEdge organization and had been employed at BusinessEdge since Arturi and
Casagrande created BusinessEdge in 1999. He was responsible for account management, sales
and client relationships in the Financial Services practice, and had responsibility for many of
BusinessEdge's most important Financial Services accounts. Upon information and belief, Arturi
and Casagrande recruited and hired Edelstein to take a similar role at Knowledgent. As a result,
BusinessEdge organization, and had been employed at BusinessEdge since 2005. He was
responsible for account management, sales and client relationships in the Financial Services
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practice and, among other clients, was responsible for Citizens Bank/Royal Bank of Scotland and
information and belief, Arturi and Casagrande recruited and hired Brazee to take a similar sales
role at Knowledgent. As a result, Brazee resigned from EMC on January 22, 2010.
(g) John Edmonds was a Director, Client Solutions, in the EMC BusinessEdge
organization and had been employed at BusinessEdge since 2006. He was responsible for
account management, sales and client relationships in the Financial Services practice. Upon
information and belief, Arturi and Casagrande recruited and hired Edmonds to take a similar
sales role at Knowledgent. As a result, Edmonds resigned from EMC on January 29, 2010.
manager in the EMC BusinessEdge organization, and had been employed at BusinessEdge since
Arturi and Casagrande created BusinessEdge in 1999. Connelly had specialized business
consulting expertise within the Financial Services vertical, and, in particular, was a key resource
on BusinessEdge's significant and high-growth Morgan Stanley account. Upon information and
belief, Arturi and Casagrande recruited and hired Connelly to take a similar role at Knowledgent.
BusinessEdge's four practice verticals, Blotto represents the top technical expert in another
practice vertical and is one of EMC BusinessEdge's top technical experts overall; Shuette and
D'Urso represent the leaders of two of the four of EMC BusinessEdge's vertical practices; and
Edelstein, Edmonds, and Brazee represented three of the four members (i.e., 75%) of
BusinessEdge's Financial Services sales force. Further, the employees identified above were all
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highly rated in the EMC BusinessEdge organization's structured review process to identify high-
38. Upon information and belief, Arturi and Casagrande are focusing their
start up efforts on the Financial Services and National Markets verticals and have, as a result,
targeted critical BusinessEdge resources to provide them with an instant infrastructure to target
those markets, including a Chief Operating Officer (Caggiano), Chief Technology Officer
(Blotto), two senior directors to manage the Financial Services and National Markets verticals
(Schuette and Durso), and a sales force that has extensive expertise and experience selling and/or
providing consulting services to Financial Services clients (Edelstein, Brazee, Edmonds, and
Connelly).
Casagrande (or those acting on their behalf) have targeted and approached other key employees
in the EMC BusinessEdge organization, and they are continuing to do so today. On information
and belief, Arturi and Casagrande have also recruited to Knowledgent a number of other former
40. This pattern reveals that, on information and belief, Arturi, Casagrande
and Knowledgent are by-passing the normal process of a start-up business which would be to
build a workforce from a broad pool of potential candidates. Instead, they have a chosen to
follow a careful and covert plan to use their intimate knowledge about EMC's BusinessEdge
organization to target critical talent from the company they sold to EMC and have that talent
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41. Indeed, Arturi's and Casagrande's scheme is so obvious from the pattern of
their recruitment, and the dependence of their new company, Knowledgent, on misappropriated
EMC assets, that they appear to be trying to conceal both. Tellingly, despite having an otherwise
fully-developed website stating that its "team consists of highly experienced information
management and industry experts," Knowledgent's page titled "Leadership Team," merely states
"Coming Soon." Similarly, several of the employees identified above offered nearly identical
"scripts" in providing vague explanations for terminating their EMC employment and their future
employment plans in a manner suggesting that they had been carefully coached to avoid
42. Despite these efforts to disguise their activities, Arturi's and Casagrande's
scheme simply cannot be hidden: for example, Knowledgent has a page on the popular business
networking website LinkedIn, which automatically generates "Career Paths" to work at the
company based on backgrounds of the individuals associated with it. LinkedIn identifies two
such career paths to employment at Knowledgent that are really one and the same: "EMC" and
"BusinessEdge." Moreover, of the ten (10) Knowledgent employees recently listed in LinkedIn,
43. Arturi's and Casagrande's purpose in targeting these key resources is clear
and the result is inevitable: to move the necessary infrastructure for a successful business
proprietary information and trade secrets -- from EMC to Knowledgent, so that Knowledgent
would be an operating consulting business without expending the time and funds necessary to
lawfully and fairly compete. This conduct is also intended by Arturi, Casagrande and
Knowledgent to cripple EMC's consulting business through the departure of key employees.
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Simply put, they are not truly building a "new" business, they are using confidential information
to improperly take back a business -- including goodwill -- that they sold to EMC.
44. On information and belief, Arturi, Casagrande, and Knowledgent are now
using the confidential information and key resources that they have taken from EMC to directly
and unfairly compete for specific EMC BusinessEdge engagements. For example, on
information and belief, Arturi, Casagrande, and Knowledgent, are specifically targeting an
consulting for a large financial institution that is an important EMC BusinessEdge account.
Indeed, upon information and belief, former EMC employees Edmonds and Brazee, who had
been the account manager for the financial institution at EMC, recently met with clients at
45. The practices that Arturi, Casagrande, and Knowledgent have engaged in
have caused and continue to cause significant harm to EMC. It is impossible to place a monetary
value on the damage that would be done to EMC if Arturi and Casagrande were permitted to
continue to exploit EMC's confidential information for their own and Knowledgent's purposes,
COUNT I
(Breach Of Contract Against Arturi And Casagrande:
The Agreements and Business Conduct Guidelines)
46. EMC repeats and realleges all of the allegations contained in the foregoing
47. The Agreements are valid and binding contractual agreements between
Arturi and Casagrande and EMC and prohibit Arturi and Casagrande from disclosing or using for
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48. The Business Conduct Guidelines are valid and binding contractual
agreements between Arturi and Casagrande and EMC and prohibit Arturi and Casagrande from
49. The Agreements and Business Conduct Guidelines were made for valid
consideration.
50. EMC performed its contractual duties under the Agreements and Business
Conduct Guidelines.
consonant with public policy, and are necessary to protect the legitimate business interests of
EMC.
these breaches.
COUNT II
(Tortious Interference With Advantageous
Business Relationships Against Arturi And Casagrande)
53. EMC repeats and realleges all of the allegations contained in the foregoing
54. There exist valid employment agreements between EMC and certain of
55. Arturi and Casagrande have interfered and are seeking to interfere with
EMC's business relationships with certain EMC employees and customers, and have done so
defendant's acts.
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COUNT III
(Unjust Enrichment Against Arturi And Casagrande)
58. EMC repeats and realleges all of the allegations contained in the foregoing
themselves and continue to gain such benefits at EMC's expense. These benefits include its
confidential information, human resource talent, and its employees' knowledge of proprietary
business processes, methodologies and strategies, customer needs and customer relationships.
These benefits also include the more than $100 million that EMC paid directly and indirectly to
61. It is unjust for Arturi and Casagrande to commit the acts alleged herein,
and it would be inequitable for Arturi and Casagrande to retain the benefits conferred at EMC's
62. As a result of Arturi's and Casagrande's conduct, EMC has suffered and
continues to suffer irreparable harm, injury and/or loss of property, as well as damages in an
amount to be determined at trial, plus interest and costs, including but not limited to the costs of
COUNT IV
(Unfair Business Practices In Violation Of Massachusetts
General Laws Chapter 93A Against Arturi And Casagrande)
63. EMC repeats and realleges all of the allegations contained in the foregoing
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Trade Practices Act, Mass. Gen. Laws c. 93A, § 1 et seq., make it unlawful for "any person who
engages in the conduct of any trade or commerce . . . [to engage in] an unfair method of
competition or an unfair or deceptive act or practice . . . ." Section 11 further provides that any
person who engages in trade or commerce and who suffers any loss of money or property as a
result of such conduct is entitled to multiple damages, attorneys' fees, costs and equitable relief,
including an injunction.
66. As set forth in greater detail above, Arturi and Casagrande by virtue of
their tortious conduct have engaged in unfair and deceptive trade practices in willful and
67. The unfair and deceptive trade practices of Arturi and Casagrande --
Massachusetts. Further, Arturi's and Casagrande's actions, regardless of where they occurred,
68. Arturi's and Casagrande's knowing and willful conduct with respect to
EMC's confidential information and other assets has caused EMC irreparable harm for which
69. As a direct and proximate result of the willful and knowing violations of c.
93A by Arturi and Casagrande, EMC has suffered substantial monetary damages in an amount to
be determined at trial.
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COUNT V
(Civil Conspiracy Against Arturi, Casagrande, And Knowledgent)
70. EMC repeats and realleges all of the allegations contained in the foregoing
into an agreement with each other, among others, for the unlawful purpose of taking back the
processes, methodologies and strategies, customer needs and customer relationships that Arturi
and Casagrande sold to EMC. As part of this plan, Arturi, Casagrande, and Knowledgent agreed
to breach the Agreements, use and exploit EMC confidential information for their own benefit,
interfere with EMC's employee and client relationships, unjustly enrich themselves at EMC's
knew of the plan and its purpose, and acted in concert to use and exploit EMC confidential
information for their own benefit and take back the valuable assets that Arturi and Casagrande
sold to EMC.
trial.
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B. That EMC be awarded its costs and attorneys fees incurred in this action;
D. That this Court award such other and further relief as it deems fit and
proper.
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