CHRIS BAKER, State Bar No. 181557 cbakergél‘bakerlpcom DEBORAH SCHWARTZ, State Bar No. 208934 dschwartzEDbakerlpcom L EOn!LMTV I F SAN MATEO: BAKER CURTIS 8L SCHWARTZ, P.C. 44 Montgomery Street, Suite 3520 San Francisco, CA 94104 Telephone: (415) 433-1064 Fax: (415) 366-2525.366. JUN 2 8 2017 q _, 0mm the: superior 99%!“ -25.” A . , “w"... w ELI—PGlV-UZSBZ WOOQONM-b Attorneys for Plaintiff ANN LAI figfillllllllllllllllllllllllllll l SUPERIOR COURT OF CALIFORNIA 10 COUNTY OF SAN MATEO ll 12 13 17 G ANN LAI, on behalf of the State of California 2% 8 8 2?; COMPLAINT PURSUANT TO THE PRIVATE ATTORNEYS GENERAL ACT AND AS AN INDIVIDUAL individual, 14 Plaintiff, 15 17 V 9 and aggrieved employees as to PAGA, and as an 16 l Case No. vs. CAUSES OF ACTION BINARY CAPITAL MANAGEMENT, LLC, JUSTIN CALDBECK, and DOES 1 through 10, 18 Defendants. 19 20 PAGA 2. LABOR CODE § 232.5 3. LABOR CODE § 1050 4. DEFAMATION 5. IN TENTIONAL INTERFERENCE WITH ECONOMIC ADVANTAGE 6. EMOTIONAL DISTRESS 1. DEMAND FOR JURY TRIAL 21 BY FAX 22 23 INTRODUCTION 24 Silicon Valley companies and their powerful investors in the venture capital world rely 25 on overbroad and illegal confidentiality and non-disparagement agreements to suppress and 26 restrict the rights of current and former employees under California law. 27 As a result, the following is what can, and does, happen. 28 LAI COMPLAINT PARTIES Plaintiff Ann Lai is a former employee of Binary Capital Management LLC. 1. She resides in San Francisco, California. She holds aBachelor’s degree in chemistry and physics, a .bUJN Master’s degree in applied mathematics, and a Ph.D. in engineering sciences, all fiom Harvard University. \IQUI 2. Justin Caldbeck is a venture capitalist. 3. Binary Capital Management LLC (“Binary LLC’.’ or “Binary”) is a management company headquartered in Hillsborough, CA. At all times relevant here, Binary LLC was owned and controlled by Jonathan Teo, another venture capitalist, and Caldbeck. 10 In typical venture-capital byzantine fashion, Binary LLC purports to manage 4. LP. (“Binary LP”), which in turn acts as the general partner of other 11 Binary Capital MTGP 12 limited partnerships bearing the Binary name. Binary LP may or may not be managed by 13 another Binary entity called Binary TTGP. Binary Capital — under whatever form — invests in 14 early stage, consumer-focused companies, i.e., portfolio companies. As investors, Binary Capital 15 exercises considerable influence over them. 16 Does 5. 1 1, through 10 are currently unknown. They may include other entities or 17 individuals liable in some way for the claims alleged in this case including, potentially, Binary 18 LP, Binary TTGP, Binary Fund I, LP, and Teo. 19 FACTS 20 The Confidentiality, Non-Disclosure, and Non-Disparagement Provisions 21 22 23 of January 5, 6. On November 21, 2014, Binary offered Lai a job with a start date 7. As a condition of employment, Binary required Lai to sign an employment 2014. 24 agreement with Binary LLC (the “Employment Agreement”). This agreement was not subject to 25 negotiation. 26 27 8. The Employment Agreement contains “a confidentiality and non—disclosure” provision. This provision stated in pertinent part: 28 -2LAI COMPLAINT Employee acknowledges and agrees that a_ll information obtained by Employee in connection with Employee's employment by the Company concerning the business or assets of the Company, any client of the Company (a "Client" i.e., Binary LP]), any investment fund in respect of which a Client serves as " general partner" or "managing member" or in respect of which the Company provides services for or on behalf of a Client (each being a "Fund"), or any actual or prospective portfolio company of any Client or Fund shall be deemed strict_ly confidential and shall not, without the prior written consent of the Company or for a Company purpose, be: (x) used by Employee; or (y) disclosed to any Person. The Company hereby consents to disclosure by Employee of Company information, solely for the purpose of enforcing Employee's rights under this Agreement or of complying with applicable law, to Employee's accountants, attorneys and similar advisors bound by a duty of confidentiality. . . . Employee expressly acknowledges and agrees that the Company derives material economic value from the protection of confidential information as set forth in the foregoing provisions of this Section . . . . and that such confidential information includes trade secrets and similar types of information the disclosure of which likely would cause substantial and irreparable harm to the Company. 10 ll 12 13 14 15 9. The Employment Agreement also contains a “non-disparagement” provision. This provision states: To the maximum extent permitted by applicable law, Employee shall not disparage the Company . . . . For purposes of the preceding sentence: (i) "disparage" shall mean any negative comments regarding a Person's business model, business practices, investment-related decisions, affiliates, eguityholders, personnel, agents, integrity, fairness, satisfaction of obligations, or overall performance . . . 16 17 18 19 . 20 10. 21 The Employment Agreement further provides that “the rights of Employee shall be narrowly construed. It is the intention of the Parties that Employee, shall not solely in 22 consequence of the execution of this Agreement, have any rights in respect to the Company, or 23 any affiliate thereof, except as specifically provided in this Agreement.” 24 11. The Employment Agreement as it relates to confidentiality 25 has no geographic or temporal scope. In other words, 26 12. and non-disparagemet it lasts forever. Binary requires all employees to sign its Employment Agreement. It also requires 27 certain employees to sign its Partnership Agreement. 28 _ 3 _ LAI COMPLAINT The California Labor Code It is against California law to require employees, 13. as a condition of employment, to sign an overbroad confidentiality agreement or a non-disparagement provision. More specifically LII-#0310 (but not exclusively): a. California Labor Code § 232.5 prohibits an employer from requiring an employee to refrain from disclosing information about the employer’s working conditions, either through a writing or otherwise. \OOO\IO\ b. California Labor Code § 432.5 prohibits an employer from requiring an employee to agree, in writing, to any term or condition of employment which is known by the 10 employer to be prohibited by law. This includes confidentiality agreements that effectively 11 constitute 12 Cartwright Act, or Business & Professions Code a restraint on trade in violation of Business & Professions Code 13 § 16600, the 17200. § Lai’s Job at Binary 14 14. Lai performed her job well at Binary. She was primarily responsible for 15 establishing Binary’s data-driven sourcing strategy, conducting the diligence regarding Binary’s 16 potential investments, and supporting Binary’s Portfolio companies on analytics/ growth 17 strategies. In October 2015, she was given the title “Principal.” 18 15. Binary’s workplace was not gender—neutral and evidenced a sexist and sexual 19 environment prohibited by the anti-discrimination laws. This conduct included, but was not 20 limited to: (a) statements that Binary needed an attractive receptionist; (b) statements concerning 21 sexual relationships; (0) inappropriate conduct with female staff at company outings and 22 otherwise; 23 other women, including female founders. Lai complained about this misconduct, but nothing was 24 done. 25 26 16. ((1) a female-specific dress code; and (e) statements about the attractiveness of Lai and Accordingly, in November 2015, Lai informed Binary of her intent to resign. Caldbeck convinced her to stay, explaining that the firm was “committed to change.” 27 17. In January 2016, Lai received 28 18. In March or April of 2016, Lai learned that Caldbeck was involved in a positive performance review _ 4 _ LAI COMPLAINT as well as a raise. a relationship with another employee who had been championed by the firm. This employee N Ac; showed Lai certain text messages and sought advice on how to end the relationship. After learning of, and being disturbed by, Caldbeck’s conduct'with respect to this employee, Lai reached out to potential employers about potentially changing jobs. Through this process, Lai learned additional and disturbing information about Caldbeck’s treatment 19. \DOONO‘kI Lai took vacation in late April and the first part of May. During this time frame, she concluded that, under the circumstances, she had to transition out 20. of women. of Binary LLC. On May 10, 2016, Lai informed Caldbeck that, given the circumstances, she needed to resign. She explained that she was unhappy and uncomfortable with the work 10 environment and that it had not changed. She explained she had tried to resign once before. 11 Caldbeck responded: “Is that your narrative? 12 make sure you have no narrative. He also told her that if she left Binary, “she would never 13 work again.” 14 21. If you want to leave Binary, I’ll make it happen and Lai -- frightened by Caldbeck’s reaction — said she would not meet only with 15 Caldbeck. She proposed that she meet with Caldbeck,'Teo, and another Binary partner after she 16 returned from a previously scheduled visit to a portfolio company. This follow-up meeting was 17 scheduled for May 17. 18 22. The next day, while Lai was at the portfolio company, Caldbeck began sending Lai 19 messages and emails 20 hold. He demanded immediate action. His purpose was to create a paper trail to justify her 21 termination. 22 23 24 23. 1 — copying others — concerning a project that had previously been placed on On May 13, Lai learned that Binary had declined to auto-deposit her approved expenses into her bank account. 24. In light of these facts, Lai concluded that she could not wait until the May 17 25 meeting with Caldbeck, Teo, and the other Binary partner to officially resign. Instead, she 26 tendered her resignation on May 13 at 1:10 27 leave, the recent suspicious line 28 projects, and Binary’s unusual behavior concerning expense reports. She explained that these pm, citing the threats to her reputation if she chose to of questioning and inconsistent expectations regarding on-going LAI COMPLAINT facts, and other issues, had contributed to a “hostile work environment where I do not feel comfortable in continuing to work.” 25. Shortly thereafter, Teo accepted her resignation on behalf of Binary. Binary’s Post-Termination Conduct 26. Immediately following Lai’s resignation, Binary — acting initially through Caldbeck — took immediate steps to ensure Lai did not disclose any information about Binary’s OO\IO\ working conditions, including its inappropriate and illegal behavior. Binary used a carrot and stick approach. For example, on May 13, 2016, Caldbeck sent the following texts: \D (a) 10 At 2:40 pm, Caldbeck texted Lai: [T]here should be no external messaging to entrepreneurs or LPs [Limited Partners] until the legal feedback is consolidated around this and we have clarity on what we can be supportive ofyou on as you pursue your future career. 11 12 13 (b) At 2:47 pm, Caldbeck texted Lai: 14 I’m assuming you don ’t want to meet on tues but we need to sit down at some point to close this out and check some boxe[s] before 15 expenses, etc., can be reimbursed. 16 (c) At 3:02 pm, Caldbeck texted Lai: 17 What are your intentions w [portfolio company]? 18 At 3:03 pm, Caldbeck texted Lai: 19 ((1) 20 When can you talk? We should end this 21 27. right away. The texts continued. On May 14, 2016, Caldbeck wrote: 22 Ann, can you please let me know when a good time to chat is? We need to wrap up a few things given your transition and ’d also like to advocate for a final compensation payment to you for next few weeks I 23 24 25 26 27 28 28. On May 15, Caldbeck proceeded to serial message Lai using the Confide messenger application.1 1 “Confide” is a messenger application that allows individuals to send encrypted messages that “self-destruct.” Confide works like this. Initially, the text message is whited-out. As you run your finger along the whited—out text, the text appears and then disappears, making it impossible LAI COMPLAINT (a) The first text, at 9:32, read: Ann, just end this right away. Let ’s find a transition plan and do the right thing wrt the companies you support. It ’s fine it didn ’t work out. I’m hopeful you find something you like but let’s end the right way. Reading messages all day and not responding isn ’t the smart thing to do here. (b) The second text, at 11:56, read: [ Stay the fuck away from our team Ann. Jonathan Teo] is getting really really really pissed. As am I. I’m not going to warn you again. . . . Please stop and don ’t add ill will. It didn ’t work out. have egg on my face for supporting you and I’m sure you are disappointed w your experience but don ’t put us in a situation where we need to be more aggressive I 10 11 12 It’s a small world Ann. I’m meeting with [partner] firm] 13 . . . from [VC next week. Stop. 14 (c) The third text, at 3:04, read: 15 What do you want to do next, Ann. know this sucks for you. know you in a tough place w . . . ., a move, a new job. ’m just really trying to keep this positive. You ’re a binary alum and I’m hoping for your success but can you please communicate so can help? I 16 I I I 17 18 19 29. On May 16, 2016, Lai returned all company property to Binary. 20 30. During the remainder of that week, Caldbeck and Teo repeatedly checked Lai’s 21 LinkedIn profile. Binary reached out to her contacts and potential employers. Caldbeck and/or 22 Teo falsely told them she had been fired or asked to leave Binary for poor performance. 23 31. Nevertheless, during this time frame, Lai attempted to obtain work. She met with 24 two Binary portfolio companies who were interested in hiring her for consulting work. She also 25 met with the venture capital firm referenced in Caldbeck’s May 15 Confide message who had 26 27 28 to screen shot the message. Lai would eventually counter the problem of disappearing texts from Binary by videoing the Confide messages with a separate phone as she ran her finger along the text lines. -.7— LAI COMPLAINT expressed interest in working with her. 32. On May 21, 2016, Lai posted the following to her Facebook page: AWN_ of restarts & resets — some might call it a “midlife crisis,” I call it realizing what’s really important to me: not 2016 has been a year money, not fame. Rather, it’s about always trying to make a difference, having no regrets from compromising on the ethics that are important to me, & sticking to my guns despite short-term costs . . . so that I’ll never look back one day & hate the person I’ve become. As some of you know, it’s been a long struggle over the last 5 months (thank you to everyone who has been there for me), finally pulling the trigger last Friday. It’s weird being unemployed, but I feel that the me that got lost along the way coming back with every minute of freedom. #newbeginnings #2016. K11 \OOO\IO\ 10 33. Caldbeck was the first to comment on this post. He posted a response that said: 11 “’Pulled the trigger’ hmm. Good luck Ann.” 12 34. He also sent her three text messages on May 21 in quick succession: 13 (a) At 10:56 a.m., Caldbeck texted Lai: 14 You do understand the implications ofyou implying that you quit unprovoked in a public setting, right? 15 16 (b) At 10:59 am, Caldbeck texted Lai: 17 Implying that you quit because binary capital forced you to compromise your ethics is a clear violation ofyour employment agreement and has implications for carry. I suggest you delete that part ofyour post Ann. 've heard from 2 mutual friends on fb about 18 I 19 20 it in 21 (0) 22 Please please stop making this so diflicult for you. 23 35. the last 10 mins At 11:00 am, Caldbeck texted Lai: In the early morning of May 23, Lai received an email from an executive at one of 24 the portfolio companies concerning her performing consulting work. Clearly, this portfolio 25 company had heard from Binary, Caldbeck, and/or Teo. The email stated in part: “Lastly, I have 26 to be honest with you. Given the series 27 forward with this. I am pushing it, taking a “risk” and trust we will have a successful and 28 awesome deliverable. I want you to know that I am trusting you and —8- of events, there is some hesitation to have you move LAI COMPLAINT if for any reason you feel like you might not be able to deliver a high quality output — let’s talk about it now.” On May 23, at 12:34 36. pm, Caldbeck texted Lai again. He falsely accused her of making disparaging comments about a Binary portfolio company. The text continued: These are violations ofyour contract and have material damages attached to them. We will be summarizing all of these and following up shortly but again, asking you to stop causing yourself damage. OO\IO\UI-I>UJN 37. Caldbeck sent a second text three minutes later. It stated: This is the last time you will hear from me of binary partners (other than counsel) without a response and/or immediate halting ofyour \D tone. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 38. Lai did not respond. As a result of Binary’s false statements about her, the portfolio company declined to provide Lai with consulting work, as did the venture capital firm with Whom she had met. 39. Lai, frightened and distraught, left the country. She also retained counsel. 40. On June 3, 2016, Lai’s counsel sent a cease and desist letter to Binary. It demanded that Caldbeck, Teo, and Binary cease and desist from, among other things, contacting her prospective employers to prevent her from gaining employment, threatening Lai, and attempting to communicate with Lai in any way other than through counsel. 41. On June 10, 2016, Binary responded through its counsel. The letter stated that Lai had breached her non—disparagement obligations toward Binary. inform her that It fiarther asked Lai’s counsel to “if she disparages Binary Capital in any way, (i) she will trigger loss of vesting under the applicable agreements and (ii) Binary will immediately pursue all available legal remedies against her.” 42. On July 31, 2016, Lai returned to the Bay Area. She met with a number of venture capital firms. None was willing to hire her. One stated that, given the Binary situation, get complicated.” A number of individuals “it might and prospective employers asked why she had left Binary. Lai was afraid to tell them the truth, so responded by saying nothing or explaining that she wanted to return to a more operational role. 28 _9_ LAI COMPLAINT 43. In October 2016, out of money and unemployed, Lai found a job in New York with a portfolio company on which Binary did not have a board seat. This portfolio company agreed to not tell Binary that Lai was working for it. Lai moved to New York and took the job. 44. \IO‘\'~II-I> In December 2016, Lai became suspicious that Binary was aware that she was working for the portfolio company. She also resolved that she was not going to allow Binary to chase her from the Bay Area, and she started considering offers from Bay Area firms. She received two. One from Facebook and another from OO a smaller company. She took the job with Facebook because she hoped Facebook was too big to be afraid of Binary or Caldbeck. She hoped Facebook could protect her. 10 45. Nevertheless, fearful of Binary and Caldbeck, she attempted to keep her ll employment at Facebook secret. Among other things, she did not update her LinkedIn profile to 12 say she worked there. (Caldbeck continued to check Lai’s LinkedIn profile regularly.) Lai did 13 not tell many people she was working for Facebook. Those friends she did tell she asked that 14 they keep it secret. 15 46. On February 25, 2017, Lai had a housewarming party. She also declared the party 16 a 17 party, Lai’s depression and anxiety got the best of her. She told her friends that she had quit 18 Binary because of her working conditions, including Caldbeck’s behavior. She told them his 19 response when she stated she wanted to quit. She told them 20 and her inability to find a job. 21 “secret” because she did not want Binary or Caldbeck to know she had returned. During the 47. of Binary’s post—termination threats The next day, on February 26, 2017, and despite Lai’s request that Binary and 22 Caldbeck not contact her directly, Caldbeck did so. He repeated the carrot-and-stick approach, 23 alternatively threatening to destroy Lai and offering his support. The series of texts read: 24 25 26 27 28 I I Ann, know its been a long time. know there have been lots of emotions and bad feelings. also know that you ’re back in sf and my wife and have heard what you ’ve been saying to others. want to try one more time to talk to you about this civilly and come to a good place. It doesn ’t need to be negative and we don ’t need to sue you for what you ’re saying. really really really just want to talk this out and be supportive ofyour next move. We have not yet I I I I -10_ LAI COMPLAINT I stripped vou of the final piece of vour carrv. have been really hopeful we can just stop this and support one another. Can you please make 10 minutes to talk to me so this doesn ’t get worse. really don ’t want it to, genuinely. am in a position to make things a lot better in supporting you but iust want to talk it through. Can you please chat for 10 minutes? I I I have no ill will. Ijust want to talk please. Can I call you? This will be so much better if we talk it through Ann. I tried you. I want to I’d really like to put this behind both of us. clarifiz that we are not currently suing you. We are not taking any legal action at all. just want to talk with you about your goals, what you ’d like and how we can move past this. Can you let me know when to call you. Side conversations without chatting will be the worse on all sides and I’m not sure what options we[‘]re left with you can ’t talk to us but are continuing to disparage us in the market. I’m asking you to please work through this with me so we can all move forward. Is there a good time to reach you? I 10 if 11 12 13 Can you just provide a response even you won ’t talk with me? I’m happy to talk w you and your lawyer you want? ’djust appreciate even a short response you are willing to talk please. if 14 [i]f if I 15 22 Is there someone else you ’d like to speak with instead like Teo? Talking about us in the market with serious accusations to people we know well isn ’t going to help bring this to a close and you ’re reading but not responding to my request to talk it out an[d] move on in a positive way. I’m really not sure what else to do but would really like to talk this through before it gets worse. Can We iust talk it through so vou don ’t feel like we’re out to ruin your career and we don ’t feel like vou are pushing us to sue vou? We just want to be positive and move on and I know we can make a lot of progress with a short call to understand what we can do to alleviate your concerns that we want to take you down in some way. Again, can we please talk and work through this? 23 Mailbox is full so cannot leave a vm 24 Btw congrats on the Facebook iob. 16 17 18 19 20 21 25 26 I 48. The next day, Monday, February 27, 2016, a mutual acquaintance of Lai Caldbeck relayed a message to Lai with more carrots and sticks. This message read: 27 28 Ann, you should really just call Justin back. He is the one that decides what path they are pursuing with vou legallv and he wants -11LAI COMPLAINT and to talk through this with you so that it ends in a good place. He has no interest in disparaging vou (he knows [vou ’re] at Facebook and hasn ’t made anv calls there). He wants to keep it positive but its putting him in a bad spot when you are spreading rumors about him and his firm in this small of an ecosystem. Just call him back and it will be much much better. LII-RMN 49. Caldbeck then sent Lai a text, during work hours, stating: “I’m going to try you in I 30 minutes and really hope we can talk.” 50. \OOOQON Because the texts were not ending (despite the fact that Lai never responded to them), because Caldbeck was communicating with Lai through third parties and while she was at work, because Caldbeck was threatening to ruin her career at Facebook, and because she was afraid of what Binary and Caldbeck would do to her, Lai agreed to speak with Caldbeck. 10 51. They spoke on February 27. The conversation was brief. He told her that he 11 hoped she would be “smart.” He told her that she still had her carry. He told her that he would 12 not disparage her. 13 52. On information and belief, during this time frame The Information — a technology 14 news website — was researching a story on Binary and Caldbeck. Binary, Caldbeck, and Teo 15 were aware that the Information was asking questions. 16 53. On April 20, 2017, Caldbeck texted Lai again. This text stated: 17 Ann, 18 19 I do not think talking to the information is a good idea. 54. Caldbeck followed this text with another that included only a period: 55. This time, Lai responded: 20 21 What are you talking about? 22 23 24 25 56. Caldbeck did not respond. 57. Five days later, on April 25, 2017, at 2:35 read simply: Stop. 26 27 pm, Caldbeck sent Lai another text that 58. This was followed with another text at 6:49 pm. that again included only 28 _ 12 _ LAI COMPLAINT a period. 59. Lai was very very frightened. The Information Story and Its Aftermath 60. On the morning of June 22, 2017, The Information published an article about Binary and Caldbeck. Six women spoke about Caldbeck’s inappropriate conduct towards them. Three spoke on the record and three spoke off the record. The Information quoted Binary and OO\IO\£IIJ> Caldbeck’s response to the story, stating: a statement that said the notion that Mr. Caldbeck “engaged had in improper behavior” with female entrepreneurs was “false.” Binary said that while the Information had “found a few examples which show that Justin has in the past occasionally dated or flirted with women he met in a professional capacity, let’s be clear: There is no evidence that Justin did anything illegal and there is no evidence that any of his investing decisions were affected by his social interests. . . . Binary issued KO 10 11 12 Caldbeck said, “I strongly deny The Information’s attacks on my character. The fact is, I have always enjoyed respectful relationships with female founders, business partners, and investors. In 13 14 15 16 61. a statement, The industry reacted to the story. That afternoon, Caldbeck issued an additional statement that read: 17 Obviously, I am deeply disturbed by these allegations. While significant context is missing from the incidents reported by The Information, I deeply regret ever causing anyone to feel uncomfortable. The fact is that I have been privileged to have worked with female entrepreneurs throughout my career and I sincerely apologize to anyone who I made uncomfortable by my actions. There is no denying this is an issue for the venture community, and I hate that my behavior has contributed to it. 18 19 20 21 22 62. 23 The story refused to die. The next day, Caldbeck issued yet another statement. was breathtaking in its hypocrisy. It read in part: 24 25 26 The past 24 hours have been the darkest of my life. I have made many mistakes over the course of my career, some of which were brought to light this week. To say I'm sorry about my behavior is a categorical understatement. Still, Ineed to say it: I am so, so sorry. 27 28 -13LAI COMPLAINT It I direct my apology first to those women who I've made feel uncomfortable in any way, _at any time - but also to the greater tech ecosystem, a community that I have utterly failed. N The power dynamic that exists in venture capital is despicably unfair. The gap of influence between male venture capitalists and female entrepreneurs is frightening and I hate that my behavior played a role in perpetrating a gender-hostile environment. It is outrageous and unethical for any person to leverage a position of power in exchange for sexual gain= it is clear to me now that that i_s exactly what I've done. \ioxm-bw I am deeply ashamed of my lack of self-awareness. I am grateful to Niniane, Susan, Leiti, and the other women who spoke up for providing me with a sobering look into my own character and behavior that I can no longer ignore. The dynamic of this industry makes it hard to speak up. but this is the type of action that leads to progress and change, starting with 10 11 me. 12 14 The Binary team will also be taking measures to ensure that the firm is a safe place for founders of all backgrounds to find the support and resources they need to change the world, without abuse of power or mistreatment of any person. 15 I owe a heartfelt apology to my family, my investors, my portfolio, 13 . and the team at Binary, who have been completely blindsided and in no way deserve the pain I've caused. But most of all I apologize again to those who I've hurt during the course of my career and for the damage I've done to the industry I care so deeply about. 16 — 17 18 19 63. This last statement was issued because Caldbeck’s and Binary’s conduct was It is not only the “industry dynamic” that makes it hard to speak up, but also illegal 20 revealed. 21 confidentiality and non-disparagement provisions. Caldbeck’s and Binary’s “abuse of power” 22 started when they required employees to give up the non-waivable right to speak as a condition 23 working for them. Caldbeck is certainly not “grateful” to Lai for speaking up. He did everything 24 in his power to prevent it. He also does not lack “self—awareness.” As set forth above, Binary 25 and Caldbeck were, at all times, 26 64. fully aware of what they were doing. Lai brings the following claims. 27 28 _ 14 _ LAI COMPLAINT of First Cause of Action PAGA (under 232.5 (b) and (c)) (Against Binary) .50) 65. Binary requires all its employees to sign a standard employment agreement that contains confidentiality and non-disparagement provision that prohibits them from ever disclosing information about their working conditions. These illegal provisions 00\]O\ — — to put it mildly it hard for employees to “speak up” about inappropriate or illegal conduct, both during make their employment and forever after. Employees are instead led to believe that it is illegal to do so, \O 10 and that disclosing information about their working conditions will lead to ruinous litigation. These provisions allow employers to abuse their power and mistreat their workforce. They allow ll their employers to leverage their positions of power for sexual gain and for other inappropriate 12 reasons. 13 66. On May 9, 2017, Lai sent the required PAGA notice to the Labor Workforce and 14 Development Agency. (Ex. A). The exhaustion period has expired with respect to Lai’s PAGA 15 claims as they relate to Labor Code 16 letter and Binary has made no effort to cure its illegal conduct. 17 18 19 20 67. and the State 68. § Lai seeks PAGA civil penalties on behalf of herself, other aggrieved employees, of California as a result of this unlawful agreement. Lai will amend her complaint claims upon the exhaustion as a matter of right to allege additional PAGA of additional administrative periods. *** 21 22 232.5(b) and (c). The LWDA has not responded to Lai’s 69. The remaining causes of action only concern, 23 and Caldbeck’s post-termination conduct towards Lai 24 activity. and are expressly limited to, Binary with respect to her post-termination 25 26 27 28 -15LAI COMPLAINT Second Cause (Labor Code of Action § 232.5) (Against Binary) 4}. 70. As detailed above, subsequent to Lai’s employment with Binary, Binary discriminated against Lai because she disclosed, or because Binary believed she had disclosed, \IONUI information about her working conditions after her employment with Binary had ended. This discrimination took the form of discouraging others from hiring her, threatening her With litigation, threatening to ruin her career, and sending her harassing and threatening texts for the purpose of discouraging her from engaging in conduct protected by law. 10 71. Through this conduct, Binary violated Labor Code 11 72. In its conduct, Binary acted with malice. 12 73. As a Third Cause of Action 14 (Labor Code 1050 et seq) 15 (Against Binary and Caldbeck) 74. 232.5(c) result, Binary caused Lai economic and emotional harm. 13 16 § As detailed above, subsequent to Lai’s employment with Binary, Binary and 17 Caldbeck made misrepresentations to VC firms, portfolio companies, and, on information and 18 belief, numerous others about Lai. They did so in order to prevent or attempt to prevent Lai from 19 finding another job. 20 75. Through this conduct, Binary and Caldbeck violated Labor Code 21 76. Through this conduct, Binary and Caldbeck acted with malice. 22 77. As a result, Binary and Caldbeck caused Lai economic and emotional harm. 23 Pursuant to Labor Code § 1054, Lai is entitled to treble damages. 24 25 26 27 28 —16- LAI COMPLAINT § 1050 Fourth Cause of Action (Defamation) (Against Binary and Caldbeck) LII-PWN 78. As detailed above, subsequent to Lai’s employment with Binary, Binary and Caldbeck made knowing and false statements of fact to VC firms, portfolio companies, and, on information and belief, numerous others about Lai. 79. Through this conduct, Binary and Caldbeck defamed Lai. 80. Through this conduct, Binary and Caldbeck acted with malice. 81. As \OOOQQ a result, Binary and Caldbeck caused Lai economic and emotional harm. 10 11 Fifth Cause of Action 12 (Intentional Interference with Prospective Economic Advantage) 13 (Against Binary and Caldbeck) 14 82. As detailed above, subsequent to Lai’s employment with Binary, Binary and 15 Caldbeck engaged in conduct with the intent and/or the substantial certainty that it would 16 interfere with her prospective economic relationships with the portfolio companies and VC firms 17 identified above. Binary and Caldbeck’s conduct, in fact, interfered with those relationships. 18 83. Binary and Caldbeck’s conduct was wrongful. It violated both the 19 84. Through this conduct, Binary and Caldbeck acted with malice. 20 85. As 21 result, Binary and Caldbeck caused Lai economic and emotional harm. Sixth Cause of Action 22' (Intentional Infliction of Emotion Distress) 23 24 a (Against Binary and Caldbeck) 86. As detailed above, and subsequent to Lai’s employment with Binary, Caldbeck 25 and Binary engaged in outrageous conduct that was intended to cause, and did cause, Lai extreme 26 emotional distress. This conduct included, but is not limited to, defaming her, threatening her, 27 and by continuing to send her threatening communications, even after being instructed by Lai’s 28 -17LAI COMPLAINT counsel to only contact Lai through her attomey. This conduct was in violation under the California Labor Code and the California Constitution as A of Lai’s rights it relates to liberty of speech. 87. Through this conduct, Binary and Caldbeck acted with malice. 88. As a result, Binary and Caldbeck caused Lai economic and emotional harm. ' PRAYER FOR RELIEF \IQLJI WHEREFORE, Lai prays for judgment against Binary and Caldbeck 1. as follows: Full and complete civil penalties for each violation of PAGA in accordance with the Private Attorneys General Act-(as against Binary). 2. Attorneys’ fees and costs. 10 3. Economic damages. 11 4. General damages. 12 5. Interest. 13 6. All other relief the Court deems proper and just. 14 15 Dated: June 27, 2017 BAKER CURTIS 16 W 17 8L 612/ “3 SCHWARTZ, P.C. 4/f 18 Chris Bak‘e? V Attorneys for Plaintiff 19 ANN LAI 20 21 JURY TRIAL DEMANDED 22 Plaintiff hereby demand a trial by jury. 23 Dated: 24 June 27, 2017 BAKER CURTIS & SCHWARTZ, P.C. ///L/I 25 26 Chris Bake‘r/ Attorneys for Plaintiff 27 ANN LAI 28 -13LAI COMPLAINT Exhibit A BAKER CURTIS & SCHWARTZ PC Chris Baker 44 Montgomery Street, Suite 3520 San Francisco, CA 94104 tel. (415) 433-1064 cbakerfibbakerlpsom www. bakerlp.com May 9, 2017 Via On-Line Labor & Workforce Development Agency Attention: PAGA Administrator ' Via Certified Mail Binary Capital Management, LLC 50 Verbalee Lane Hillsborough, CA 94010 Binary Capital MTGP 1., LP. 50 Verbalee Lane Hillsborough, CA 94010 RE: Request For Relief Under the Private Attorneys General Act Dear LWDA, Binary Capital Management, LLC, and Binary Capital MTGP I.,L.P.: I represent Ann Lai. She is an “aggrieved employee” of Binary Capital Management, LLC (“Binary LLC”), and Binary Capital MTGP I.,L.P. (“Binary LP”) under California Labor Code sections 2699 et seq. The purpose of this letter is to provide notice to the LWDA, Binary LLC and Binary LP (collectively Binary) pursuant to Labor Code § 2699 et seq. Binary LLC and Binary LP constitute either an integrated enterprise, a single employer, and/or a joint employer of Lai and all personnel who work for Binary LLC and are either “limited partners” or “venture partners” of Binary LP. n O g LWDA Binary LLC Binary LP May 9, 2017 Page 2 Specifically, Binary requires all their employees, including Ann Lai, to Sign employment agreements, partnership agreements, and related amendments to such agreements that violate the California Labor Code. For example: 1. The agreements contain overbroad confidentiality provisions which define essentially everything as confidential and that contain no geographic or temporal limitation. The non-disparagement provisions have a similar effect in that they prevent former employees from effectively competing with Binary or finding alternative work. These provisions constitute an illegal restraint on trade in violation of Business and Professions Code § 16600, the Cartwright Act, and Business & Professions Code § 17200 et seq. 2. The overbroad confidentiality and non-disparagement provisions also prohibit the disclosure of information, including negative information, that is not confidential as a matter of law. For example, the agreements prohibit the disclosure of information about working conditions, wages, and illegal conduct. See, Labor Code §§ 232, 232.5, 1197.5(k), and 1102.5. The provisions violate Labor Code §§ 96(k) and 98.6 insofar as they infringe on the constitutional right of liberty of speech and liberty to work during non-work hours and away from the employer’s premises, as well as the right to engage in conduct protected by the above-referenced provisions of the Labor Code. Moreover, the provisions also violate the Fair Employment and Housing Act and Title VII by prohibiting the disclosure of information about illegal sexual harassment and discrimination and retaliation. ' 3. Binary knows these provisions are illegal. Their purpose is to aid Binary and its true owners in breaking or skirting the law by silencing any employees who might wish to engage in whistle blowing, assert claims, and to prevent former employees from effectively competing with Binary. Accordingly, the provisions also violate Labor Code § 432.5 . Lai signed the agreements that contain the unlawful provisions as a condition of her employment. She purportedly remains bound by them. She ceased working for Binary in May 2016. { The aggrieved employees are all current and former employees of Binary who have signed either an employment agreement or partnership agreement that contain the confidentiality and non-disparagement provisions referenced above. LWDA Binary LLC Binary LP May 9, 2017 Page 3 Accordingly, Lai seeks civil penalties on behalf of herself and all other aggrieved employees, as well as the State of California, in accordance with Labor Code §§ 2699 et seq. with respect to these violations. Thank you for your attention to this matter. Very truly yours, fig