Hedge Fund Founder Challenges Firm’s Post-Employment Access to His Home Computer

In an action filed in the U.S. District Court for the Southern District of New York (Court) arising out of a messy hedge fund divorce, the founder of the hedge fund alleged that his former firm wrongfully accessed his home computer after terminating his employment, thereby violating the Computer Fraud and Abuse Act (CFAA), the Stored Communications Act (SCA) and the Wiretap Act and committing common law property torts. In response, the firm entities and principals asserted that the founder had breached a covenant not to compete and other employment-related duties; misappropriated trade secrets; and violated the CFAA, the SCA and the Defend Trade Secrets Act. Following cross-motions for summary judgment, the Court dismissed most of the founder’s claims and certain firm counterclaims, as well as its novel defense that it required access to the founder’s computer to comply with its regulatory obligations. This article discusses the Court’s decision, with commentary from Akin Gump partners Peter I. Altman, Natasha G. Kohne and Richard J. Rabin. See “HFLR Program Looks at Recent Developments and Trends in Employment Law Relevant to Fund Managers” (Jul. 26, 2018); and “Best Practices for Fund Managers to Mitigate Litigation and Regulatory Risk Before Terminating Employees” (Feb. 9, 2017).

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