April 2026
Hedge fund seeks $11 million after portfolio manager allegedly reneged on employment
Schonfeld Strategic Advisors LLC sued portfolio manager Adam Grunfeld in New York Supreme Court, alleging breaches of an employment agreement and related confidentiality agreement after Grunfeld retracted his agreement to join the hedge fund following months of negotiations and allegedly used the terms of his accepted offer to secure more favorable terms with his current employer. According to the complaint, Schonfeld engaged in extensive discussions with Grunfeld regarding a senior portfolio manager role to develop a new strategy and build out a team on Schonfeld’s multi‑strategy platform, during which it incurred significant upfront costs and forgone opportunities in anticipation of a long‑term relationship. Schonfeld seeks to enforce an $11 million liquidated damages provision tied to Grunfeld’s failure to commence employment by the negotiated start date and additional damages arising from Grunfeld’s breaches of confidentiality by disclosing the terms of the employment agreement and their negotiations, which had been expressly negotiated as confidential. Schonfeld claims these disclosures caused independent competitive harm by revealing sensitive information regarding its recruiting approach, compensation structures, and internal business arrangements.
S&K Take: This case is set to test the enforceability of two tools employers have in recruiting high-demand candidates: negotiated liquidated damages tied to failure to commence employment and robust confidentiality protections covering offer terms and negotiations. If enforced, such provisions may provide employers with a meaningful remedy for candidates who renege on employment, while also serving as a deterrent to candidates who might otherwise leverage competing offers.
Delaware Supreme Court revives Payscale’s restrictive covenant claims
In Payscale Inc. v. Norman, the Delaware Supreme Court reversed the Court of Chancery’s dismissal of Payscale’s claims seeking to enforce restrictive covenants and confidentiality provisions against a former senior sales executive. As previously reported, the Court of Chancery had declined to enforce an 18‑month, nationwide non-compete in incentive equity agreements, finding it facially unenforceable, supported by “vanishingly small” consideration, and that Payscale’s allegations of breaches of the non-solicitation and confidentiality provisions were conclusory. The Supreme Court held that the sole question on a motion to dismiss is whether, accepting all allegations as true, the complaint states a “reasonably conceivable claim for relief,” and that the Court of Chancery prematurely weighed evidence and drew inferences against Payscale in holding that it did not. In the same vein, the Supreme Court emphasized that it expressed “no view” on the ultimate enforceability of the covenants, as they should be assessed on a more developed factual record.
Addressing the non‑compete, the Supreme Court acknowledged that a nationwide, 18‑month restriction against an employee is generally disfavored, but held it was premature to reject the covenant as facially unreasonable. Payscale had plausibly alleged detailed facts concerning its nationwide operations, the executive’s senior role and access to company‑wide strategy, and the customer‑driven justification for the duration and scope. The Supreme Court likewise found it premature to discount the consideration supporting the covenants based on allegations that the equity award had no value at the time of issuance, reiterating that Delaware law focuses on the existence—not the adequacy—of consideration, and that contingent consideration may suffice.
The Supreme Court also reinstated Payscale’s non-solicitation, confidentiality and related tortious interference claims against the new employer. Allegations that key enterprise customers moved to a competitor shortly after the executive joined that competitor, combined with the concentration of former Payscale employees there, supported a reasonable inference of solicitation or misuse of confidential information sufficient to survive dismissal.
S&K Take: Notwithstanding Delaware’s increasing skepticism toward broad employee non‑competes, courts will adhere closely to procedural standards at the pleading stage. Employers who allege detailed facts tying restrictive covenants to an employee’s role, access to confidential information, and legitimate business interests are more likely to survive a motion to dismiss as considerations of enforceability and proportionality are reserved for later analysis. The decision is also notable for its treatment of consideration: even equity awards alleged to have no present value may constitute sufficient consideration at the pleading stage. It remains to be seen whether these facts will ultimately prevail.
SDNY partially enjoins former Palantir employees but declines to enforce broad AI non‑compete
In Palantir Technologies, Inc. v. Jain et al., the Southern District of New York partially granted Palantir’s request for a preliminary injunction against three former senior employees accused of violating their restrictive covenants and confidentiality obligations by launching a competing, venture‑backed AI startup while still employed. After a stipulated temporary restraining order and expedited discovery, the court enjoined the former employees from soliciting Palantir employees and from using or disclosing Palantir’s confidential information, but found Palantir’s post‑employment non‑compete provisions “likely unenforceable” under New York law.
In enforcing the employee non‑solicitation and confidentiality provisions, the court found a sufficient risk of harm to Palantir to justify injunctive relief. The court credited evidence, including text messages, showing attempted efforts to poach Palantir employees, and concluded that the non‑solicitation restrictions were reasonable and protected Palantir’s legitimate interests. Additionally, it relied on evidence that one of the former employees secretly sent internal healthcare strategy and AI-related documents to a personal device and deleted them from her work laptop shortly before resigning. Although there was no evidence that the information had been shared with the new employer yet, the court held the risk of misuse was enough to enjoin its possible future disclosure.
In contrast, the court refused to enforce Palantir’s non‑compete and customer non‑solicitation provisions. The non-compete restrictions barred former employees from working for any business “similar” to Palantir or its subsidiaries if they performed, “directly or indirectly, in whole or part,” any job functions they had performed at Palantir. Accordingly, given Palantir’s expansive role as “both [a] software and consulting” company operating across virtually all industries, the court found the restriction so broad that it effectively prevented the employees from working for almost any AI or data analytics company and failed to provide meaningful notice of permissible post‑employment work. The court also rejected the customer non‑solicitation provision because it prohibited contact with any entity that had “used or inquired of” Palantir’s services in the prior two years, extending well beyond customers the employees had personally served.
S&K Take: This decision underscores New York courts’ continued willingness to carefully parse different categories of restrictive covenants rather than treating them as an all‑or‑nothing package. While the court enforced employee non‑solicitation and confidentiality obligations, it refused to uphold a non‑compete that, in its view, swept too broadly in an increasingly AI‑driven economy where many companies could be considered “similar.” Further, the opinion shows that courts remain receptive to injunctive relief where there is concrete evidence of attempted employee raiding or suspicious handling of confidential information. Employers should ensure that post‑employment restrictions are tightly drafted, role‑specific, and clearly linked to protectable interests, especially in rapidly evolving technology sectors.
