Jefferies asserted a claim to recover $1,000,000.00 in liquidated damages that it alleged Gegenheimer owed as a result of breaching the parties' agreement that Gegenheimer executed on May 18, 2016 (the "Agreement"). Jefferies alleged that Gegenheimer was to commence employment at the firm on or before August 17, 2016, and, if he failed to do so, he would be liable to Jefferies for liquidated damages in the amount of $1,000,000.00 pursuant to the Agreement. 

Unless specifically admitted in the Statement of Answer and Counterclaims, Gegenheimer denied the allegations made in the Statement of Claim and asserted various affirmative defenses. In his Counterclaims, Gegenheimer asserted the following causes of action: violation of FINRA Rule 2010; unfair competition; tortious interference with contract and economic relations; and abuse of process. 

In the Amended Statement of Answer and Counterclaims, Gegenheimer added equitable estoppel as a defense. 

Unless specifically admitted in the Statements of Answer to the Counterclaims and the Amended Statement of Answer and Counterclaims, Jefferies denied the allegations made in the Counterclaims and the Amended Statement of Answer and Counterclaims and asserted various affirmative defenses.  

Claimant Jefferies LLC ("Jefferies") is a financial services firm with its headquarters and principal place of business in New York, New York. Respondent Jon A. Gegenheimer ("Gegenheimer") is an investment banker employed by Credit Suisse since 2003 in San Francisco, California. On May 18, 2016, Jefferies and Gegenheimer entered into a written agreement ("the Agreement") under the terms of which Gegenheimer agreed to join Jefferies as a managing director specializing in mergers and acquisitions in Jefferies' technology group in San Francisco. The Agreement provided that Gegenheimer would receive an annual salary of $350,000, a fiscal year 2016 retention bonus of $720,834, and up to $300,000 to replace deferred compensation from Credit Suisse that Gegenheimer would forfeit by leaving Credit Suisse and joining Jefferies. 

The Agreement further provided that Gegenheimer's employment with Jefferies would not commence until August 17, 2016, because Gegenheimer was required to provide Credit Suisse with ninety (90) days prior written notice of his intention to resign. The Agreement obligated Gegenheimer to pay Jefferies liquidated damages if he failed to commence employment with Jefferies. The liquidated damages clause, Section V.B. of the Agreement, provides as follows: 

If during the period beginning from the date you execute this Agreement until your Start Date ("the Interim Period"), you fail to commence employment by August 17, 2016, you agree to pay Jefferies $1,000,000 as liquidated damages ("Liquidated Damages"), which represent only an approximation of a portion of the anticipated loss created by such a violation. For the avoidance of doubt, this Liquidated Damages provision is applicable only if you voluntarily fail to commence employment with Jefferies (except as a result of Jefferies' written withdrawal of this offer): (a) because you return as an employee of Credit Suisse or (b) to engage in Competitive Activity (as defined in the Jefferies Employee Handbook). You agree the Liquidated Damages are reasonable and do not operate as a penalty but reflect Jefferies' reasonable approximation of a portion of its anticipated loss as a result of Jefferies' reliance on your commitment to render services pursuant to this Agreement by your Start Date, Jefferies' forbearance in holding the position of Managing Director in its Investment Banking Division open for you and not hiring another individual for this position during the Interim Period, and all costs incurred by Jefferies to fill the Investment Banking Division Managing Director Position. Nothing in this section shall prevent Jefferies from recovering its actual damages exceeding the Liquidated Damages, and Jefferies shall have the right to avail itself of all other available remedies.  

Jefferies determined the liquidated damages amount by taking Gegenheimer's agreed first year compensation at Jefferies and rounding down to $1,000,000. 

On May 24, 2016, Gegenheimer informed Jefferies that he would not join Jefferies as agreed, but instead would remain with Credit Suisse. On or about August 10, 2016, Credit Suisse offered Gegenheimer a retention award of $1,150,000 in guaranteed total compensation for 2016; Gegenheimer accepted the offer and signed a Retention Agreement.  

[G]egenheimer also contends that the liquidated damages clause is not enforceable as to him, a resident and employee in the State of California, because the clause violates the strong fundamental public policy of the State of California codified in California Business & Professions Code Section 16600 ("Section 16600"), which provides that "[e]xcept as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." 

Section 16600 has been applied in many cases to nullify post-employment non-competition agreements and restrictive covenants that would keep California residents from engaging in lawful employment. However, Section V.B. of the Agreement is not a post-employment restrictive covenant. Section 16600 does not apply to an agreement to begin working by a particular date as provided in the Agreement. The Agreement did not require Gegenheimer to cease working for Credit Suisse or refrain from working for any other competitor before joining Jefferies. The liquidated damages clause in the Agreement did not restrain Gegenheimer from engaging in his profession in violation of Section 16600. 

By letter dated February 8, 2018, Gegenheimer advised that he filed a motion in United States District Court for the Northern District of California ("District Court") seeking an order vacating the Panel's Liquidated Damages Order, and requested that the Panel suspend any further proceedings in this matter pending the District Court's decision regarding the enforceability of the liquidated damages provision. By letter dated February 12, Jefferies filed an opposition to Gegenheimer's request to stay the matter. By letter dated February 15, Gegenheimer filed an opposition to Jefferies letter and renewed his request to stay all further proceedings in the matter. By Order dated February 20, 2018, the Panel held that:  

• The Liquidated Damages Order concluded the first portion of the bifurcated proceeding pursuant to the parties' stipulation;
• The arbitration must continue to resolve the remaining issues;
• The Panel's Liquidated Damages Order was not intended to be a Final Award or Interim Final Award subject to confirmation or vacatur by court; 
• Jefferies' request to schedule additional hearing dates is granted; and 
• Gegenheimer's request to stay the proceedings is denied.  

On December 12, 2018, Gegenheimer filed a Motion to Reconsider the Panel's January 29, 2018 Liquidated Damages Order and Motion for Clarification of the Panel's May 21, 2018 Scheduling Order ("Motions to Reconsider and for Clarification"), including a copy of the District Court's March 29, 2018 Order Granting Motion to Dismiss Petition to Vacate Arbitration Award ("District Court Order").1 On December 24, Jefferies filed an opposition to Gegenheimer's Motions to Reconsider and for Clarification. On December 31, Gegenheimer filed a reply in support of his Motions to Reconsider and for Clarification. By Order dated January 9, 2019, the Panel denied Gegenheimer's Motions to Reconsider and for Clarification, and advised that the Panel has inherent authority to reconsider and modify interim orders in this arbitration, including the Liquidated Damages Order, at any time before entering the final award. 

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Footnote 1: The District Court Order stated that, "[a]lthough the decision of the panel regarding the liquidated damages provision is very likely wrong (perhaps to the point that the panel should be understood to have manifestly disregarded the law), the panel's decision is not yet subject to review by a federal district court. In the Ninth Circuit an arbitrator's ruling following the first phase of a bifurcated proceeding is not "final and reviewable." Millmen Local 550 v. Wells Exterior Trim, 828 F.2d 1373, 1375 (9th Cir. 1987)." 

Gegenheimer argues that the Panel manifestly disregarded the law in four aspects. Even a cursory review of Gegenheimer's arguments reveals that he is by and large parroting the arguments that he raised in the arbitration. We conclude that none of the cited aspects of the Panel's conclusion warrants vacatur of the Award . . .

[G]egenheimer did not present the panel with any cases involving pre-employment non-compete agreements. Thus, it cannot be said that the panel was aware of law that was "clearly applicable to th[is] case." Wallace, 378 F.3d at 189; see also Duferco, 333 F.3d at 390 ("In determining an arbitrator's awareness of the law, we impute only knowledge of governing law identified by the parties to the arbitration."). Moreover, even applying the standard used for pre-employment non-compete agreements, the panel could have concluded that the 90-day non-compete clause at issue here was reasonable in time and place, necessary to protect Jefferies' interests, and not harmful to the public or unreasonably burdensome to Gegenheimer because the clause merely required that Gegenheimer fulfill his contractual obligation of beginning his employment with Jefferies by the agreed-upon start date.