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Retail Supplier Files Suit Alleging Violation Of NDA Non-Solicitation Clause By Competitor; Competitor Says Actions Permitted Under NDA
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Agera Energy LLC has filed a suit in federal court against Sunwave USA Holdings, Inc. (Defendant) alleging that Sunwave solicited and hired at least four of Agera’s employees in alleged contravention of a non-solicitation clause contained in a non-disclosure agreement entered into between the two companies during a process under which Agera entertained various suitors for strategic alternatives
Sunwave said that it did not solicit any Agera employees, that any former Agera employees joining Sunwave were previously known by Sunwave, and that such hires were expressly permitted under the non-disclosure agreement (NDA)
As previously reported, Agera Energy has filed for bankruptcy under Chapter 11 and a bankruptcy court has approved the sale of various Agera Energy LLC, Aequitas Energy, Inc. and energy.me midwest llc retail energy customer contracts to Exelon Generation Company, LLC (Constellation)
Agera alleged in the suit, "This is an action for breach of contract, breach of the implied covenant of good
faith and fair dealing, and tortious interference arising from the improper business practices of
Sunwave, in violation of a written non-disclosure agreement dated June 13, 2019 (the
'Agreement'), between debtor Agera and the Defendant."
Agera said that, earlier this year, it conducted a process to evaluate strategic alternatives, including conducting a marketing process for the sale of Agera, as either a going concern or an asset sale, with interested parties, upon signing various confidentiality agreements, provided access to a virtual data room
Agera alleged that Sunwave was among the parties expressing interest in such process
Agera alleged that, "Agera required, and Sunwave agreed to, the Agreement as part of a process to
gain access to confidential information of Agera for the purpose of assessing a potential
transaction between the parties. To protect its interests, Agera insisted on, and Defendant agreed
to, a broad non-solicitation and non-hire of Agera employees."
Agera alleged that, "To protect itself from the loss of its employee base, Agera required, and Sunwave
agreed to, a non-solicitation and non-hire provision (collectively, the 'Non-Solicitation Clause')
which states as follows: In consideration of the Evaluation Material being furnished to you,
you agree that, without the prior written consent of the Company,
for a period of two years from the date hereof you will not, directly
or indirectly, (i) solicit any person or employee whom you know or
have a reasonable basis to know is an employee of the Company; or
(ii) solicit for employment or employ any person employed by the
Company with whom you had contact or who became known to you
during your evaluation of the Company; provided, however, that the
foregoing provision will not prevent you from employing any such
person who contacts you on his or her own initiative without any
direct or indirect solicitation by or encouragement from you, and
provided further that general advertisements and other similar broad forms of solicitation shall not constitute direct or indirect solicitation
hereunder."
"The Non-Solicitation Clause thus contains two separate and distinct provisions.
Sunwave is prohibited both from soliciting any Agera employee and from soliciting or
employing any Agera employee with whom Sunwave had contact or who became known to
Sunwave as part of the evaluation process. The prohibitions address both direct and indirect
actions," Agera alleged
"In spite of the Non-Solicitation Clause, the Defendant solicited and hired at least
four of Agera’s employees. Each of these employees was, upon information and belief, solicited
and hired subsequent to the signing of the Agreement," Agera alleged in the suit
Agera alleged that two of the individuals hired by Sunwave were salespeople, and, as such, "had access to and responsibility for a book of
Agera customers."
Agera alleged that since such individual resigned from Agera, 212 accounts associated with such individuals dropped from Agera’s book of business.
"While each is subject to a nonsolicitation
agreement of clients by virtue of their employment with Agera, Sunwave’s
solicitation and hire of these individuals, in direct violation of the Agreement, signals a clear
intent to pursue Agera clientele aggressively," Agera alleged in the suit
"The resulting damage to Agera is potentially staggering. At a time when Agera is
most vulnerable and must ensure that it retain its customers and the valuable employees who
service them, Sunwave’s actions threaten the potential loss of millions of dollars of revenue and
profits. Some of the damage is done, yet it can and should be first stopped by injunctive action,
and thereafter undone by virtue of an award of compensatory and, with respect to the tortious
conduct to be proven at trial, punitive damages commensurate with the unlawful conduct in
which Sunwave has engaged," Agera alleged in the suit
"Upon information and belief, Sunwave is engaged in continuing efforts to hire
Agera’s employees in violation of the Agreement. Unless Sunwave is immediately restrained
from violating the Agreement, Agera will suffer immediate and irreparable injury through the
continued loss of its customers and employees, which (i) threatens its enterprise value and
impacts its ongoing sale efforts, (ii) affects its ability to maintain the human capital needed to
sustain its business while it finalizes a sale, and (iii) erodes the knowledge base and skill set of
Agera’s sales and trading teams," Agera alleged in the suit
"As such, Agera is entitled to preliminary and permanent injunctive relief. Agera
is also entitled to damages, in an amount to be determined at trial, including the Defendant’s
profit obtained through its tortious interference, and Agera’s losses sustained as a result thereof,
as well as attorney’s fees and costs," Agera alleged in the suit
In a memorandum of law in opposition to Agera's motion, Sunwave said that it has not breached the NDA, and thus injunctive and other emergency relief is not warranted. Sunwave said that the hirings were expressly permitted under the NDA
"Sunwave executed the NDA in connection with due diligence it was conducting on a potential acquisition of Agera in June 2019. Agera claims that Sunwave subsequently breached a non-solicitation provision in the NDA (the 'Non-Solicitation Clause') by soliciting and hiring Agera employees. Although Sunwave hired four former Agera employees in September 2019, it was expressly allowed to do so according to the Non-Solicitation Clause, which provided that Sunwave could hire Agera employees it knew prior to signing the NDA, including the aforementioned employees. Agera’s entire premise for seeking emergency relief is that Sunwave has breached the Non-Solicitation Clause, which is has not, and that Sunwave will continue to do so without the Court’s intervention," Sunwave said in a memorandum of law
Sunwave alleged that the NDA’s Non-Solicitation Clause provides the following: "In consideration of the Evaluation Material being furnished to you, you agree that, without the prior written consent of [Agera], for a period of two years from the date hereof you will not, directly or indirectly, (i) solicit any person or employee whom you know or have a reasonable basis to know is an employee of [Agera]; or (ii) solicit for employment or employ any person employed by [Agera] with whom you had contact or who became known to you during your evaluation of [Agera]; provided, however, that the foregoing provision will not prevent you from employing any such person who contacts you on his or her own initiative without any direct or indirect solicitation by or encouragement from you, and provided further that general advertisements and other broad forms of solicitation shall not constitute direct or indirect solicitation hereunder."
"The Non-Solicitation Clause requires that Sunwave refrain from soliciting Agera employees it did not know before executing the NDA, and further refrain from hiring Agera employees that Sunwave learned about in the course of evaluating Agera for potential purchase—unless such employees independently approach Sunwave about employment. The Non-Solicitation Clause does not generally prohibit Sunwave from hiring Agera employees," Sunwave said
Sunwave said that the individuals hired who formerly worked at Agera, "all were known to Sunwave prior to the time Sunwave executed the NDA." Sunwave said that it did not become aware of the individuals during Sunwave’s evaluation of Agera through the NDA process
"As Sunwave has represented to Agera on numerous occasions prior to the commencement of this proceeding, Sunwave has not -- and will not -- solicit Agera employees," Sunwave said
"Sunwave has always abided by the terms of the NDA and will continue to do so. Moreover, Sunwave has no current plans to hire any Agera employees," Sunwave said
"Agera’s Motion must also be denied because it impermissibly requests that the Court expand the class of Agera employees whom Sunwave may not hire. In the event that Sunwave became aware of or was introduced to an Agera employee in connection with the due diligence process, the Non-Solicitation Clause permits Sunwave to hire such an employee so long as it does not solicit him or her. Despite the clear language of the Non-Solicitation Clause, Agera asks the Court to prohibit Sunwave from hiring any Agera employees with whom it became acquainted during the due diligence, even if Sunwave does not solicit them. Because the Court may not disturb the NDA negotiated by Agera and Sunwave -- which Sunwave has abided by -- Agera cannot obtain the relief it has requested," Sunwave said in a memorandum of law
Sunwave said that the individuals who formerly worked in sales at Agera have abided strictly by the terms of their employment with Agera. "Each of them has obtained two new contracts for Sunwave with former Agera customers who were no longer under contract with Agera. This is allowed under the terms of [their] employment with Agera," Sunwave said
Case 19-08554-rdd
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November 19, 2019
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Reporting by Paul Ring • ring@energychoicematters.com
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