United States District Court, D. Minnesota
Bison Advisors LLC, a Minnesota limited liability company, Plaintiff,
Irvin Kessler, Peter Goddard and Walleye Trading Advisors LLC, a Minnesota limited liability company, Defendant.
Jeffrey J. Bouslog, Esq. and Oppenheimer, Wolff & Donnelly, LLP, 222 South Ninth Street, Suite 2000, Minneapolis, MN 55402, counsel for plaintiff.
William Z. Pentelovitch, Esq. and Maslon, Edelman, Borman & Brand, 90 South Seventh Street, Suite 3300, Minneapolis, MN 55402, counsel for defendant.
DAVID S. DOTY, District Judge.
This matter is before the court upon the motion for a preliminary injunction by plaintiff Bison Advisors, LLC (Bison). Based on a review of the file, record, and proceedings herein, and for the following reasons, the court denies the motion.
This business dispute arises out of the alleged breach of and interference with a noncompete agreement by defendants Irvin Kessler, Peter Goddard, and Walleye Trading Advisors LLC. Kessler and Goddard were founding members of Bison, a computer-based commodities and equities trading firm. Am. Compl. ¶¶ 9, 16, 18. Bison was jointly created in 2010 by Kessler and Ephraim Gildor, a specialist in quantitative, math-driven, and computer-executed trading strategies. Id . ¶ 16; Gildor Decl. ¶ 23.
In 2003, and before forming Bison, Gildor founded Axiom, a hedge fund focused on computer-executed trading of foreign currencies. Amend. Compl. ¶ 14. Axiom's founding members included Gildor, professor Kevin Murphy, and physicist Linling Wu. Id . Axiom, Murphy, and Wu were also founding members of Bison. Id . ¶ 18.
Defendant Walleye Trading Advisors LLC, and its affiliated entities Walleye Trading LLC, Walleye Investments Fund LLC, and Walleye Software LLC (collectively, Walleye) were formed in 2005 by Kessler and Goddard. Kessler Decl. ¶ 23. Before forming Walleye, Kessler founded Deephaven Capital Management and Deephaven Market Neutral Fund (collectively, Deephaven). Id . ¶ 4. In 1997, Kessler hired Tom Rectenwald to develop a pairs trading framework for Deephaven. Id . ¶ 6. Kessler eventually left Deephaven, and the pairs traders that Rectenwald and Kessler hired followed Kessler to Walleye. Id . ¶¶ 8, 12-19, 37. The Deephaven and Walleye traders regularly achieved average daily turnover rates of 25 percent or higher. Id . ¶¶ 20, 36.
Kessler approached Gildor in 2010 with a proposal that would implement pairs trading through Gildor's and Axiom's expertise in computer-executed trading strategies. Am. Compl. ¶ 16; Kessler Decl. ¶ 29. Bison was formed as a result. Am. Compl. ¶ 16. Kessler and Goddard provided Bison with historical pairs trading data from Deephaven and Walleye so that Gildor, Murphy, and the rest of the Axiom team could develop the models to be employed at Bison. Id . ¶¶ 20, 22; Kessler Decl. ¶¶ 34, 36, 43; Goddard Decl. ¶¶ 10, 11. Bison began trading in June 2011. Goddard Decl. ¶ 23. Every evening, Bison electronically provides Walleye with pairs trading instructions, which Walleye automatically executes the following morning. Kessler Decl. ¶ 40.
On December 21, 2010, the Bison members signed an Operating Agreement, which included the following noncompete covenant:
(a) During the period of time that any Person is a Member of [Bison] and for two (2) years after the date of withdrawal or removal of a Member, such Person will not directly or indirectly...
(i) engage in, have an interest in or become associated with any entity, firm, business, activity or enterprise which trades or plans on trading equity or commodity markets with a strategy that has an average daily turnover of 25 percent or more.
Am. Compl. Ex. 1 at ¶ 6.4. The members further agreed that "irreparable injury will result to [Bison]" in the event the covenant is breached, and that money damages would be impossible to measure for such a breach. Id . ¶¶ 6.4(d); 10.12.
Walleye's individual pairs traders operate separately from Bison's automated platform and do not have access to the models and algorithms used by Bison. Kessler ¶ 41. Trading at Walleye became more automated and systematic during the summer of 2013, however, and over the next year and a half the turnover rates and trading patterns at Walleye began to closely match those of Bison. Am. Compl. ¶ 38; Kessler Decl. ¶ 45, 56, 57; Gildor Decl. ¶ 40. Gildor and the other members of the Axiom team were made aware of this change around May or June 2014. Gildor Decl. ¶¶ 36, 39, 40. Moreover, Bison alleges that this was the first time it became aware that the pairs traders at Walleye were using strategies with average daily turnover rates in excess of 25 percent. Am. Compl. ¶ 40. Bison alleges that defendants violated ...