Citadel defeats bid against ex-execs

Citadel Investment Group LLC defeated a bid by former executives to dismiss a claim that contracts they signed while working for the $12 billion hedge-fund management firm barred them from building their own business after they left.

Cook County Circuit Court Judge Mary Rochford denied Sept. 4 a defense request to throw out the allegation made in a lawsuit filed against them by the Chicago-based firm, which also accused the men of stealing its trade secrets.

Citadel sued Mikhail "Misha" Malyshev, Jace Kohlmeier, former in-house attorney Matthew Hinerfeld and their new business, Teza Technologies LLC, on July 10. The firm claimed Malyshev and Kohlmeier breached contracts in which they pledged not to compete with it for nine months after leaving.

"There is nothing in the non-compete agreements which states or indicates that actual trading must occur," Rochford wrote in her six-page decision.

She rejected defense arguments that the contract couldn't be read to bar preparations to launch a rival firm. The judge ordered the defendants to file an answer to Citadel's allegations by Sept. 11.

All three men are accused of taking, or now having access to, confidential information including high-frequency trading methods. Citadel spent "hundreds of millions of dollars" to research and develop those methods, according to an amended complaint filed last month.

Citadel seeks a court order barring Malyshev and Kohlmeier, both of whom left the firm in February, from competing for the duration in their contracts and preventing all three men from using or disclosing any trade secrets they may have improperly taken.

A hearing on that injunction request is set for Sept. 29 before Rochford.

The Citadel case is Citadel Investment Group LLC v. Teza Technologies LLC., 09CH22478, Chancery Division, Cook County, Illinois, Circuit Court, (Chicago).