Jane street knocks out some millennium defenses in trade-secrets fight

Jane street knocks out some millennium defenses in trade-secrets fight

Jane Street Group won a round in its trade secrets suit against Millennium Management and two ex-traders, who tried to argue that losses suffered by Jane Street were due to its own “highly unusual trading activity” rather than alleged strategy theft.

US District Judge Paul Engelmayer on Thursday struck that “unclean hands” defense by Millennium and traders Douglas Schadewald and Daniel Spottiswood, saying they failed to adequately allege that Jane Street engaged in “unconscionable” conduct directly related to the case.

“Defendants’ allegations — that Jane Street’s recent losses were self-inflicted and that it initiated this litigation in bad faith — do not say anything about Jane Street’s underlying rights (or lack thereof) in the trading strategy,” Engelmayer wrote in his order.

Millennium and Jane Street declined to comment on the ruling.

Jane Street sued Millennium and the two men in April. The proprietary trading firm said Schadewald and Spottiswood took a highly confidential and “immensely valuable” strategy to their new jobs with Izzy Englander’s hedge fund group in February. That strategy was later revealed to involve options trading in India.

$1 Billion in Profits
Both sides have since won some legal skirmishes, with Engelmayer earlier in the case denying Jane Street’s request for a restraining order barring Millennium and the two traders from using the strategy.

Jane Street has said the strategy generated $1 billion in profits and that it knew the Schadewald and Spottiswood were using it at Millennium because it suffered a significant drop in profits. But Engelmayer said Thursday that the defendants failed to allege “any impropriety in how Jane Street acquired, developed, or disseminated the trading strategy.”

He did say alternative reasons for Jane Street’s losses could be considered if and when damages are awarded.

The judge also rejected a defense based on allegations that Jane Street brought the suit to “chill competition, interfere with defendants’ business relationships, and deter its own employees from seeking employment with competitors.”

Engelmayer additionally struck a defense based on the argument that Jane Street waived its right to sue Millennium, Schadewald and Spottiswood because it didn’t have the traders sign noncompetition agreements and indeed touts the fact that it doesn’t have them for its employees. The judge said Jane Street wasn’t trying to enforce a noncompete.

Streamlining Case
“That an employer chooses not to restrict an employee’s ability to work for a competitor does not logically imply that the employer intends to allow the employee to take and use the employer’s confidential information,” Engelmayer wrote. “Jane Street’s stance towards non-compete agreements cannot reasonably be construed as a decision to abandon all protections for its confidential information and trade secrets.”

Though he ruled that the defenses were legally insufficient, the judge also said striking them would help streamline a case that’s already on an expedited schedule. The parties are set to finish disclosing documents to each other by the end of the month.

Engelmayer cited efficiency again in not striking 18 defenses that Jane Street had challenged as being “improperly packaged” denials of liability. The judge said he agreed about many of the defenses but said removing them wouldn’t speed up the case and would more likely prolong it with legal back-and-forth.

Schadewald, Spottiswood and Millennium deny stealing any trade secrets and have countersued to get Jane Street to cover their costs. Schadewald and Spottiswood claimed credit for building the Indian options business at Jane Street but said it was based on their experience and expertise rather than any secret “algorithms or automated signals.”

The case is Jane Street Group LLC v. Millennium Management LLC, 24-cv-02783, US District Court, Southern District of New York (Manhattan).