noncompete guideThis is truly unusual - and bizarre.

In a case that was filed in Delaware Chancery Court on April 5, 2022 former Zuora executive Jagan Reddy Balasundaram sued his old employer, seeking a declaration that under the terms of the company's by-laws, Zuora was, and is, required to pay for the legal fees he has, and will continue to, incur in defending the lawsuit he's currently facing in California.

So far, so good.

But here's the catch:

Balasundaram is demanding that Zuora pay to indemnify him - and cover his lawyers' fees - for its own lawsuit against him.

To put some proverbial meat on this bone, Zuora sued Balasundaram because according to Zuora, Balasundaram miapprorpriated a substantial amount of confidential data from Zuora before he left, downloading a slew of files from their computer system, and then used that confidential information to start a competing agency to unfairly compete against Zuora.

Why This Case is So Bizarre

So, in other words - and in a breathtaking trip of circular logic - Balasundaram is arguing that Zuora's agreements require them to pay for the privilege of suing him for breaking those very same agreements. Taken to its logical conclusion, Balasundaram is further asserting that if Zuora wins its case for breach of contract and fiduciary duty, misappropriation and unfair competition against Balasundaram and is awarded a monetary judgment against Zuora, Zuora would be obligated to pay that judgment .... to itself!

Leaving the foregoing logical leaps aside, Balasundaram's case is, to be kind, challenging, because it is inherently predicated on the notion that Zuora should be required to pay to defend him against claims that arose in the context of his working for, and on behalf of, Zuora's best interests. In the California action (and at the risk of stating the painfully obvious), however, Zuora is claiming the exact opposite: they are asserting entitlement to damages they incurred as a direct result of Balasundaram working directly contrary to Zuora's interests.

And that is why I would be shocked if the Delaware Court does anything other than reject Balasundaram's claim in its entirety.

 

Jonathan Cooper
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Non-Compete, Trade Secret and School Negligence Lawyer
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