Date: 07-03-2024

Case Style:

Vitzeslav Zeif v. Marina Aslanyan and SmartLinux Solutions, LLC

Case Number: 2:23-CV-1558

Judge: Bruce Howe Hendricks

Court: United States District Court for the District of South Columbia (Charleston County)

Plaintiff's Attorney:

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Defendant's Attorney: Grant Michael Wills and Jennifer Kirk Dunlap

Description:

Charleston, South Carolina personal injury lawyers represented the Plaintiff who sued on a negligence theory.

This case was filed in the Charleston County Court of Common Pleas, 2024CP1001305, and was removed to federal court by the Defendants.

The following facts are presented in SmartLinx Solutions, LLC's (“SmartLinx”) Verified Amended Complaint, and assumed to be true for purposes of the Motion to Dismiss. SmartLinx provides workforce management and scheduling solutions in the long-term care and nursing marketplace. (Am. Compl. ¶ 4, ECF No. 24.) SmartLinx distinguishes itself from other workforce management and placement companies through its scheduling products and software-Time and Attendance (“TA”) and Schedule Optimizer (“SO”), with the latest scheduling version including a feature called “Ideal Schedule.” (Id. ¶ 11.) Over the last twenty (20) years, SmartLinx has expended millions of dollars in research, development, and implementation of the scheduling software technology, including TA and SO. (Id. ¶ 12.) This scheduling technology is SmartLinx's competitive edge in the marketplace and generates more than half of SmartLinx's annual revenue. (Id. ¶ 13.)

The scheduling software technology, and particularly the recently implemented and trademarked Ideal Schedule feature, was designed to support unique and complex scheduling needs of the long-term care and nursing industry. (Id. ¶ 14.) The technology provides SmartLinx a comprehensive plan of a facility's scheduling needs based on certain criteria, which SmartLinx contends is unrivaled in the industry and affords the company a competitive advantage. (Id.)

During the year preceding the filing of the Amended Complaint, SmartLinx worked with other staffing agencies to roll out a new program that integrates the scheduling needs of nursing facilities with the supply of nurse staffing agencies through one interface provided by SmartLinx. (Id. ¶ 19.) Zeif was directly involved in the development of this program. (Id.)

SmartLinx hired Zeif in 2008 as Project Manager. (Id.) Zeif's role with SmartLinx evolved over the course of thirteen years, from Service/Support to Product Management. (Id.) Throughout his employment with the company, SmartLinx issued Zeif, among other things: (1) a Samsung Galaxy Note 9; (2) an iPad; and (3) a Dell and Lenovo laptop (“SmartLinx Electronic Devices”) for use in connection with his employment responsibilities. (Id. ¶ 20.) During his tenure, Zeif worked hand in hand with SmartLinx's development team in developing and enhancing the SmartLinx scheduling software application and had direct access to the source code underlying the software. (Id. ¶ 21.) SmartLinx's source code is the unique and most fundamental component in the development of its scheduling software application, including the customization of software installations and development of critical features to the scheduling software application, such as Ideal Schedule. (Id. ¶ 22.) SmartLinx describes the source code as the “DNA” of SmartLinx's scheduling technology. (Id.) SmartLinx's source code is not accessible to anyone outside of the company and, within the company, it is only accessible on a confidential and secured basis to those involved with its development. (Id. ¶ 23.)

Zeif had substantial exposure to SmartLinx's confidential and proprietary information and management-level proprietary data (“Proprietary Information”). (Id. ¶ 28.) As such, SmartLinx required Zeif to sign a document titled, “Non-Disclosure and Non-Compete Agreement” (“NDA”). (Id., Ex. A.) Zeif signed the NDA on April 10, 2009 and the form was acknowledged the same day by Georgia Haug on behalf of SmartLinx. (Id.) In September 2009, Zeif was promoted from Project Manager to the position of Director of Support and Implementation. (Id. ¶ 29.) The NDA states that the signatory “will maintain appropriate personal and equipment security precautions in order to protect and maintain the confidential nature of all such materials.” (Id. ¶ 31.) It further states that signatory “specifically acknowledge[s] the proprietary and confidential status of all customer lists customer data, requirements and development documentation, and source or object code supplied in the course of my job execution.” (Id.) The NDA also provides: “I also commit that for a period of two (2) years beyond the conclusion of my work with SmartLinx Solutions, LLC, I will not be employed either as an employee, contractor or consultant with any entity that is directly competitive with SmartLinx Solutions, LLC.” (Id. ¶ 32.)

Zeif received and was subject to the terms and conditions of the policies contained in the SmartLinx Employee Handbook, including its Code of Conduct, Corrective Action and Personal Property & Workplace Searches policies. (Id. ¶ 33; Ex. B.) Among other things, the Employee Handbook requires that “[e]mployees . . . exercise good judgment, good faith and loyalty to the Company in everyday performance, ” and that employees are required to “[a]dhere to the terms of the SmartLinx Solutions, LLC ‘Non-Disclosure and Non-Compete Agreement' signed upon hire and maintained in their personnel file.” (Id. ¶ 34.)

SmartLinx produces and maintains trade secrets and confidential information that have independent economic value. (Id. ¶ 75.) SmartLinx has taken and continues to take appropriate steps to maintain the confidentiality of its trade secrets and confidential and proprietary information. (Id. ¶ 75.) The source code for its scheduling software is maintained in the SmartLinx GitHub repository that only employees in SmartLinx's Information Technology department with an authorized UserID and Password can access in its native electronic form. (Id. ¶ 75(a).) The company's practice and procedure is to remove access upon an employee's separation of employment from SmartLinx. (Id.) SmartLinx requires all employees to sign agreements that protect its confidential and proprietary information, including the NDA, in an effort to ensure that its trade secrets and other proprietary information are not improperly used or disclosed. (Id. ¶ 75(b).)

On February 12, 2021, Zeig informed Jim Pirraglia, SmartLinx Vice President of Product, that he was resigning from his employment with SmartLinx and would be willing to give the Company six weeks' notice of his departure. (Id. ¶ 38.) Then, on February 14, 2021, Zeif spoke with Marina Aslanyan, SmartLinx's Chief Executive Officer, and advised that he was resigning from the company with the intent to go to work for Intelycare, Inc. (“Intelycare”), which SmartLinx deems to be a direct competitor. (Id. ¶ 39.) Zeif stated that the job with Intelycare was an opportunity of a lifetime “too good to pass up” and that Intelycare wanted him “to come in and build a light version of a scheduling solution.” (Id. ¶ 40.) On the same day, Zeif was reminded of the restrictive covenant obligations in the NDA. (Id. ¶ 41.) SmartLinx contends that Zeif denied he had any agreement with the company imposing such obligations until he received a copy of the NDA from the company in the course of discussing his departure from employment. (Id.)

SmartLinx avers that Intelycare directly competes with the company in the same market space-the nursing and long-term care industry-and provides its own scheduling software that currently has less functionality than the SmartLinx software. (Id. ¶ 44.) On March 2, 2020, as reported by Forbes, Intelycare announced the completion of their Series B funding round, totaling $45 million, with the goal to “disrupt nursing scheduling” through further development of its software solutions. (Id. ¶ 45.) SmartLinx contends Zeif was aware of Intelycare's intention to further develop software solutions in competition with those that he was intimately familiar with in his role at SmartLinx. (Id.) The referenced Forbes article reporting on Intelycare's business development stated that Intelycare's “software allows nursing facilities to instantly request staff and for clinicians to take control of their schedule, potentially picking up shifts in less than 72 hours, which gives flexibility to nurses booking shifts. An associated machine-learning algorithm also matches prices and people, and based on previous behaviour, [the cofounder of Intelycare stated] that it can predict staffing-gaps before they happen, which appears to be solving problems at scale.” (Id. ¶ 46; Ex. C.) SmartLinx asserts that its software and the Ideal Schedule feature already provide a majority of this functionality and the new program being rolled out with staffing agencies, discussed above, will further improve and optimize the nursing scheduling industry. (Id. ¶ 47.) SmartLinx avers that by hiring Zeif, Intelycare “will have” access to SmartLinx Proprietary Information, including its scheduling software source code, that will aid the development of Intelycare's competing scheduling software to “disrupt nursing scheduling” to the detriment of SmartLinx and its competitive advantage in this space. (Id. ¶ 51.)

SmartLinx alleges that in connection with his resignation from the company and anticipated employment with Intelycare, Zeif “engaged in a systematic and strategic raid of [SmartLinx's] most confidential business plans and proprietary information, in violation of the confidentiality provisions of the SmartLinx [NDA] that he signed, as well as in violation of the [Defend Trade Secrets Act], the [Computer Fraud and Abuse Act], and the [South Carolina Trade Secrets Act].” (Id. ¶ 50.) SmartLinx first learned of these alleged activities by performing an internal audit of its systems and information after Zeif advised of his intention to join Intelycare. (Id. ¶ 52.) SmartLinx avers that Zief breached the confidentiality provisions of the NDA by accessing the SmartLinx GitHub repository to download approximately 50, 000 files containing SmartLinx Proprietary Information onto his Microsoft OneDrive cloud system and local C Drive. (Id. ¶ 53.) SmartLinx uses the OneDrive cloud system as its official cloud storage for sensitive proprietary information and the C Drive at issue was on Zeif's work computer provided by SmartLinx. (See Id. Ex. J.) SmartLinx alleges that Zeif had no authorization or permission from the company to engage in this activity and none of the other SmartLinx developers engaged in the same or similar behavior. (Id. ¶ 54.) Rather, SmartLinx developers responsible for working on the SmartLinx Proprietary Information always accessed the source code through the GitHub repository without ever downloading these files to the OneDrive or local C Drive. (Id.)

After being promoted to Director of Product Management in early 2020, Zeif was no longer responsible for coding and thus had no reason to access or work on SmartLinx Proprietary Information. (Id. ¶ 55.) SmartLinx expressly instructed Zeif to discontinue working on the source code; specifically, Mr. Pirraglia (SmartLinx Vice President of Product and Defendant's direct supervisor) and Ms. Aslanyan (SmartLinx CEO) had numerous conversations with Zeif from October 2020 through and including February 2021 in which they expressly instructed him not to work on the source code to ensure accountability of the development team. (Id. ¶ 56.) Zeif responded that he understood during those conversations and confirmed that he was no longer working on the source code. (Id.)

SmartLinx alleges that in January 2021, after he began the interview process with Intelycare and less than a month prior to his resignation, Zeif again performed a mass download of computer files containing the SmartLinx Proprietary Information from the GitHub repository to his OneDrive and Local C Drive without the permission of SmartLinx. (Id. ¶ 57.) SmartLinx further alleges that Zeif's conduct of downloading SmartLinx Proprietary Information to his OneDrive and Local C Drive continued, including unauthorized downloads on the same days he gave verbal and written notice of his resignation, February 14, 2021 and February 24, 2021, respectively. (Id. ¶ 58.) The majority of the file downloads occurred during non-working hours on weekends and after Zeif gave notice of his resignation. (Id. ¶ 59.)

Zeif has suggested, through his counsel and in an affidavit (ECF No. 11-1), that he downloaded the files for work purposes to correct or fix software “bugs.” SmartLinx alleges that its forensic audit of Zeif's work computer discredits this explanation. (See Kyprianou Decl., ECF No. 24-10.) SmartLinx contends the audit revealed that the downloaded files were not actually being modified by Zeif, but rather were being locally stored on Zeif's hard drive where he could access them independently. (Am. Compl. ¶ 60.) A comparison of Zeif's activities and other employees that accessed the GitHub repository during this time revealed that no other employee downloaded or copied the SmartLinx Proprietary Information in the same or similar manner. (Id.)

During this time period, Zeif also used his SmartLinx issued work phone to communicate with Intelycare and to schedule his Zoom interviews with representatives of his prospective employer. (Id. ¶ 61.) Calendar entries obtained from Zeif's work phone reflect that from January 20, 2021 through February 8, 2021, Zeif engaged in multiple Zoom calls with varying levels of Intelycare senior management, including two meetings between Zeif and the Intelycare CEO. (Id. ¶ 62; Ex. E.) The process of interviewing Zeif for a position with Intelycare, which one of the Zoom meetings indicates is for a Product Director position, occurred over a sixteen (16) day period from January 20, 2021 to February 5, 2021, after which he was presented with an offer, with a follow up meeting on February 8, 2021. (Id. ¶ 63.) SmartLinx avers, upon information and belief, that Zeif received equity as part of the offer to join Intelycare. (Id. ¶ 64.)

On February 8, 2021, Zeif texted a fellow SmartLinx employee about his decision to leave SmartLinx, stating: “I'm gonna give them 6 weeks notice [sic] and moonlighting after.” (Id. ¶ 65.) SmartLinx contends this reflects Zeif's intent to act as a faithless servant against the interests of the company, and that this intent was manifested in mid to late-February 2021 when Zeif accessed the GitHub repository to download thousands of files containing the SmartLinx Proprietary Information to his local devices. (Id. ¶ 66.)

An audit of the internet searches performed by Zeif after giving notice of his resignation revealed two results that SmartLinx alleges are indicators of his intention to misappropriate SmartLinx source code. (Id. ¶ 67; Ex. F.) First, Zeif reviewed a software article entitled “Who Owns the Code?” which explains the issues associated with efforts of source code programmers to reuse code they had developed after moving to a new employer. (Id.) Second, Zeif conducted a search to determine how to use the remote desktop application to connect to a Windows 10 personal computer, which SmartLinx asserts would enable Zeif to remotely access SmartLinx systems from a separate, non-work computer. (Id.) In his affidavit, Zeif contests this explanation of the reasons for reviewing the referenced articles as baseless and provides innocent explanations for accessing those resources. (Zeif Aff. ¶¶ 20-21.)

SmartLinx avers the audit of Zeif's devices also showed that, on February 13, 2021, after downloading files containing SmartLinx Proprietary Information onto his OneDrive cloud system and local C Drive, Zeif used a series of USB devices to connect to his SmartLinx devices, which USB devices were not disclosed or returned to SmartLinx when his employment ended. (Id. ¶ 68.) The audit further revealed that Zeif had access to a number of external devices and platforms in addition to USB devices, including a Google Gmail address, a Dropbox account, and Google Drive account linked to his SmartLinx devices. (Id.)

On February 28, 2021, SmartLinx transmitted correspondence to Zeif, terminating him for cause and directing him to immediately discontinue utilizing all electronic devices provided to him by SmartLinx during the course of his employment. (Id. ¶ 76; Ex. G.) On the same day, SmartLinx sent a letter to Intelycare, advising the company of what SmartLinx viewed to be Zeif's illegal conduct and demanding that Intelycare cease and desist all efforts to employ Defendant. (Id. ¶ 77; Ex. H.) SmartLinx also demanded that Intelycare: (1) provide SmartLinx with a list of any SmartLinx Proprietary Information provided to Intelycare by Zeif; and (2) Intelycare return all SmartLinx Proprietary Information in its possession. (Id. ¶ 78; Ex. H.)

On March 1, 2021, SmartLinx received correspondence from John E. North, Jr., Esq., counsel for Zeif (the “North Letter”). (Id. ¶ 81; Ex. I.) In the North Letter, Zeif denies misappropriating SmartLinx Proprietary Information, explaining that he spent a significant amount of time rectifying software “bugs.” (Id. ¶ 82; Ex. I.) Zeif further asserts that he did this work for years, primarily on weekends so as not to interfere with his primary responsibilities, for the purpose of assisting his team. (Id. ¶ 83.)

SmartLinx avers that the forensic audit of Zeif's devices obtained after his termination contradicts the statement in the North Letter that he regularly worked weekends to fix the alleged bug problem. (Id. ¶ 85.) Rather, contends SmartLinx, the forensic data on the devices reveals that the bulk of this activity-downloading SmartLinx Proprietary Information from the GitHub repository to Defendant's local devices- occurred on three occasions: in April 2020, November 2020, with the majority of the activity in January and February 2021, after Defendant began to interview with Intelycare. (Id.; Ex. J.) SmartLinx further contends that the audit contradicts statements in the North Letter that Zeif would delete the source code files from his local devices after fixing the bug problem. (Id. ¶ 86.) Per SmartLinx's evaluation of the audit, Zeif neither modified the source code nor deleted it from his local devices. (Id.) Moreover, SmartLinx notes that its policies and procedures prohibited any such deletion of files and information from SmartLinx devices. (Id.) In sum, SmartLinx claims that Zeif's explanations for his activities with regard to the source code are not credible and are contradicted by SmartLinx's forensic analysis.

Outcome: STIPULATION of Dismissal with prejudice by Marina Aslanyan, Olender Feldman, LLP, Howard A. Matalon, Esq., SmartLinx Solutions, LLC. (Dunlap, Jennifer) (Entered: 07/02/2024)

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