DataTreasury Pulls Off Another Win in Contract Dispute
DataTreasury Corp, a once-failing company that ended up generating hundreds of millions of dollars through patent litigation, has defeated a $100 million contract case brought by a jilted former employee. The ruling follows a lengthy bench trial that pitted the employee against defense lawyers at Herrick, Feinstein and McKenna Long & Aldridge.
In exchange for helping to generate revenue back in 2002 and 2003, DataTreasury had given employee Michael Trimarco the option of acquiring 1.5 million shares in the company over a 10-year period. Trimarco alleged $100 million in damages from DataTreasury's breach of that agreement.
In a lengthy decision issued on Thursday, New York Supreme Court Justice Emily Pines in Riverhead, New York, concluded that Trimarco wasn't entitled to the stock option because of seldom-invoked "faithless servant" doctrine of New York law, which essentially holds that disloyal employees forfeit their right to compensation. Trimarco secretly tried to take over DataTreasury's assets, she wrote, which was "both a violation of the covenant of good faith and fair dealing embedded by implication in all his contracts with [DataTreasury] and a breach of his fiduciary duty to that entity as an employee."
The bench verdict is the second big win for DataTreasury this year. In May, it won dismissal of a $15 billion lawsuit brought by a real estate developer named Ted Doukas, who claimed to be the company's rightful co-owner. According to Doukas, he lent $1 million to DataTreasury in 1995 in exchange for a 50 percent ownership interest. DataTreasury used that $1 million to secure its very lucrative patents, Doukas alleged.
A group of individuals from Long Island founded DataTreasury in the 1990s. It held a patent covering a method of processing check payments. The company hoped to market check imaging technology and sell it to banks. When that effort failed, the company began asserting its patents against financial institutions. The Texas law firm Nix Patterson has been representing DataTreasury on a contingency fee in those patent cases. Their successes include a $53 million jury verdict against U.S. Bancorp (that case settled for a confidential amount in December 2011).
As outlined in Pines's ruling, one of DataTreasury's leaders, Keith Delucia, recruited Trimarco to join the company in 2002. The two grew up together in Smithtown, New York. Until DataTreasury took off, it looked like Trimarco was bound to be the more successful of the two. He had a degree from Harvard Business School and worked as a financial analyst. Delucia, on the other hand, made a modest living from his father's car wash business and had served a short jail sentence for assisting a robbery at age 21.
Trimarco's stint at DataTreasury was short but fraught with a tension. In 2003 a DataTreasury employee told Delucia that Trimarco was secretly trying to drum up support for a plan to oust Delucia as DataTreasury's leader. Delucia got his hands on e-mails that corroborated the claim. He confronted Trimarco, who promptly quit (or was fired, depending on who you ask).
Trimarco sued DataTreasury soon after his departure, alleging he was wrongfully deprived of his stock option. He argued that he performed important duties for DataTreasury, like working on a corporate restructuring. He also argued that even if he was disloyal, that disloyalty began after his right to the stock option had already vested.
Pines rejected those arguments in Thursday's opinion. After reading Trimarco's emails and hearing testimony from DataTreasury witnesses, including Delucia, the judge concluded that Trimarco had done little to assist DataTreasury. Instead, he "became angry and secretly attempted to procure the business himself."
Herrick partner Scott Mollen represented DataTreasury, along with Richard Friedman of McKenna Long. In an interview, Mollen told us that "justice has been served" through Pines's ruling.
Smithtown, New York–based attorney Robert Del Col has represented both Trimarco and Doukas in their lawsuits against DataTreasury. He told us he would appeal Pines' decision. "I disagree with the court's application of the faithless servant doctrine," he said. "It's not designed to retroactively strip someone of compensation."