“It is a sad day when, in response to the filing of a commercial lawsuit, a corporate defendant feels compelled to hire unlicensed private investigators to conduct secret personal background investigations of both the plaintiff and his counsel. It is sadder yet when these investigators flagrantly lie to friends and acquaintances of the plaintiff and his counsel in an (ultimately unsuccessful) attempt to obtain derogatory information about them.”
These are the opening lines of Judge Jed Radoff’s decision against Uber in the United States District Court for the Southern District of New York.
Of course, in certain sections of the private investigator community, this is (perhaps) not considered terribly uncommon–as the Private Investigation firm in this story admits. But this case is a good reminder of how a reputational investigation can go sideways fast.
Here’s a look inside a pretty vanilla corporate espionage case–gone wrong.
The case began on December 16, 2015, when plaintiff Spencer Meyer, a Yale environmental research, filed a lawsuit against Uber Technologies and Travis Kalanick (Uber’s then CEO) alleging that Uber’s “Surge Pricing” was price-fixing.
The day after the lawsuit was filed, Mat Henley, Uber’s Director of Investigations reached out to Ergo, which appears to be a very top-tier private security and investigation firm. Specifically, Henly contacted Ergo Managing Partners Todd Egeland, a former Chief Strategy Officer at the Central Intelligence Agency (CIA), and Matthew Moneyhon (a former State Department employee, saying “I have a sensitive, very under the radar investigation that I need on an individual here in the U.S.”
Ergo responded the very next day indicating they were happy to take the job and that they do “quite a bit of this work for law firms.”
Within a couple of weeks, Ergos had a statement of work written up and signed off on by Uber, of which it was given specific instructions from Uber to keep it “general enough so that the research remains discreet from a discovery perspective.”
By early 2016, Ergo investigator Miguel Santos-Neves was put on the assignment and subsequently reached out to 28 acquaintances of Meyer, the plaintiff, and his counsel, Andrew Schmidt.
In approaching these “sources,” Neves made a number of materially false statements about why he was contacting. Since Meyer was a conservationist associated with Yale University, Neves told sources that he was attempting to verify the professional record and previous employment of various up and coming researchers in environmental conservation. Telling the sources that what he was doing was similar to a “head hunting process,” Neves questioned his sources on whether they “knew of any personal issues that might affect Meyer’s reputation” and whether Meyer had ever “butted heads with the law in any way.”
Similarly, since Schmidt’s law practice focused on labor law matters, Neves told other sources that he was engaged in a project profiling top up-and-coming labor lawyers in the U.S.
Neves even called Meyer’s landlord, representing that “as a part of the real estate market research project for a client, he was interviewing property owners in New Haven to find out what due diligence steps property owners take to vet a potential tenant.
After extensive pretexting, Neves ultimately failed to uncover any dirt on either the plaintiff or his counsel (at least according to court records). However, Neves did note in his report that “Meyer may be particularly sensitive to any publicity that tarnishes his professional reputation” –specifically in reference to the idea of spreading the word about Meyer’s lawsuit against Uber.
Plaintiff Finds Out
Within weeks of Neve’s action, the plaintiff’s co-counsel, Brain Feldman, Esq., became aware of the fact that an investigator had been contacting acquaintances of the plaintiff and the plaintiff’s counsel.
By May 2016, the Court found itself investigating Ergo’s own investigation, finding that Neves “used false pretenses” and made “blatant misrepresentations” to individuals that he contacted in order to gain information about plaintiff and plaintiff’s counsel.
In his deposition, Egeland, Managing Partner of Ergos and Ex-CIA Chief, testified that “he did not see it as a problem that the sources believed (falsely) that Mr. Santos-Neves was creating a report on leading figures in conservation.” Adding that, Ergo analysts, “as a more general matter, mislead sources about the reason why they are reaching out to them to collect information.”
As it turns out, New York has particularly strict rules about using false pretenses and making misrepresentations, especially as it relates to litigation work. The Court pointed out that the New York Rules of Professional Conduct “require lawyers to adequately supervise non-lawyers retained to do work for lawyers in order to ensure that the non-lawyers do not engage in actions that would be a violation of the Rules if a lawyer performed them.”
Actions that a lawyer may not ethically take include knowingly making a false statement of fact and engaging in “conduct involving dishonesty, fraud, deceit or misrepresentation.”
In its defense, Ergo cited two very popular private investigation cases in its defense: (1) Gidatex, S.r.L. v. Campaniello Imports, Ltd., wherein courts concluded that it was not a violation of attorney disciplinary rules for investigators to pose as customers of the opposing party in order to investigate compliance with a cease-and-desist letter in a trademark case; and (2) Apple Corps Ltd. v. Int’l Collectors Soc., wherein courts allowed misrepresentations to determine whether the opposing party was complying with the terms of a consent order.
The court promptly rejected Ergo’s defense, arguing that Ergo’s case was sharply distinguishable from these cases. A key distinction is that in Gidatex and Apple Corp, the private investigators posed as regular members of the public (customers) and did not “trick” the sales clerks into making statements they otherwise would not have made,” whereas in the case of Ergo, the sources would not have shared the information they did if the private investigator had not misrepresented himself.
Additionally, in Gidatex and Apple, the pretexting was done in order to discover a crime and/or a violation of a court order. In the Apple Corp case, the court wrote: “The prevailing understanding in the legal profession is that a public or private lawyer’s use of an undercover investigator to detect ongoing violations of the law is not ethically proscribed, especially where it would be difficult to discover the violations by other means.” On the other hand, Ergo’s efforts were quite clearly just an ambitious “fishing expedition.”
To make matters worse, Court records note that: “At all times relevant, Ergo’s investigators were not licensed to conduct private investigations in New York.”
In response to Ergo’s assertion that it was not conducting private investigation work, the Court coyly responded: “If concocting fictitious stories to induce acquaintances of a client’s litigation adversary to shed light on the adversary’s employment, finances, family life, and motivation for bringing a lawsuit does not constitute private investigation work, then the Court does not know what would.”
In its Order, the Court spends over 20 pages taking Uber and Ergo to task for blatant misrepresentations, fraudulent conduct, unlicensed private investigator activity, illegal recording of phone calls, and reckless disregard for New York and other state laws.
However, the penalty for Uber, Ergos, and Neves was ultimately very mild. Uber, which by this time must have anticipated a negative reaction from the Court, had already agreed to pay the plaintiff “a reasonable (though publicly undisclosed) sum in reimbursement of plaintiff’s attorneys’ fees and expenses incurred in conjunction with these matters.
The Court ultimately closed the case with the following outcomes:
(1) an order prohibiting Defendants from using any of the information obtained through Ergo’s investigation in any manner, including by presenting arguments or seeking discovery concerning the same;
(2) an order enjoining Defendants and Ergo from undertaking any further personal background investigations of individuals involved in this litigation through the use of false pretenses, unlicensed investigators, illegal secret recordings, or other unlawful means;
(3) The Court retains jurisdiction to enforce Uber’s agreement to reimburse plaintiff in the sum agreed to by the parties.
In its closing arguments, the Court wrote that it “cannot help but be troubled by this whole dismal incident. Potential plaintiffs and their counsel need to know that they can sue companies they perceive to be violating the law without having lies told to their friends and colleagues so that their litigation adversaries can identify ‘derogatories.’ Further, the processes of justice before the Court require parties to conduct themselves in an ethical and responsible manner, and the conduct here fell far short of that standard.”
Based on the Court’s ruling and other public records, it does not appear that any further sanctions were sought against Uber, Uber’s counsel, or Ergos. No record of a disciplinary complaint was found when investigating whether Naves was ultimately sanctioned by the New York Department of State.
Clearly, it pays to have a $50B+ market cap (in the case of Uber) and/or to be ex-CIA (in the case of Ergos). Stay safe out there!
After litigating the case for over 4 years, the Meyer v Uber Technologies and Travis Kalanick case eventually was mandated to arbitration and Uber prevailed in the case.