Beruflich Dokumente
Kultur Dokumente
Transaction ID 57224092
Case No. 11011-
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VERIFIED COMPLAINT
Plaintiffs Computer Sciences Corporation (CSC) and ServiceMesh Inc.
(ServiceMesh, and collectively with CSC, Plaintiffs) file their Complaint
against Defendant Eric Pulier (Pulier).
NATURE OF THE ACTION
1.
payment. He also received a transaction bonus of over $13 million, restricted stock
units of CSC with a fair market value of almost $26 million, and other incentives.
2.
A significant
million employee bonus, $25 million earnout payment, and $26 million worth of
restricted stock units, and while employed by CSCPulier transferred more than
$2 million to the personal bank accounts of two senior information technology
executives at CBA, both of whom have since been arrested in Australia on charges
of commercial bribery.
intermediary company he had recently formed called Ace, Inc. (Ace). These
large payments breached the Equity Purchase Agreement and violated numerous
CSC rules and policies that Pulier agreed to when he signed a Retention
Agreement with CSC. Pulier did not advise or seek approval from CSC before the
payments, and CSC did not learn about the payments until long after Pulier made
them.
2
4.
earnout payments that it otherwise would not have paid and resulted in a
significant criminal law enforcement investigation in Australia that has caused
CSC to incur significant legal and investigative costs. By this action, CSC and
ServiceMesh seek to recover from Pulier the substantial damages caused by his
intentional misconduct, fraud, fraud by omission, breach of the Equity Purchase
Agreement and Retention Agreement, breach of the implied covenant of good faith
and fair dealing, and breach of the fiduciary duties, including the duty of loyalty,
he owed to CSC and ServiceMesh.
PARTIES AND JURISDICTION
5.
Ridge Circle, Los Angeles, California, 90049, and may be served at that address.
8.
securities of ServiceMesh, a Delaware corporation. This Court also has subjectmatter jurisdiction pursuant to 10 Del. C. 341.
9.
Pulier received over $9 million of the initial cash payment, over $25
million of the earnout payment, a transaction bonus of over $13 million, and other
consideration.
14.
reasons CSC acquired ServiceMesh, and that relationship formed part of the basis
for the agreed acquisition price.
B.
against him, and that his obligations under the agreement would continue beyond
the closing of the acquisition and until those obligations were fully performed. He
represented that his execution of the agreement, his performance of his obligations
thereunder, and the consummation of the transactions contemplated thereby would
not violate any law applicable to him or violate, conflict with, result in a breach of,
or constitute a default under any provision of any other contract to which he was a
party. He further represented that he would not take any action to cause the
representations and warranties made in the agreement to be untrue in any material
respect.
16.
as otherwise noted, its financial statements had been prepared in accordance with
generally accepted accounting principles and accurately and fairly presented, in all
material respects, its financial position and assets and liabilities. It represented that
it had not incurred any liabilities or obligations that would be required in
accordance with generally accepted accounting principles to be disclosed on its
balance sheet that were not otherwise disclosed to CSC. It represented that a
schedule attached to the agreement contained a true, correct, and complete list of
each contract between it and its top customers, including CBA, and that true,
correct, and complete copies of each material contract, including all amendments,
waivers, and modifications thereto, had been made available to CSC.
It
represented that it was operating its business in compliance in all material respects
with all applicable laws. It further agreed that its obligations under the agreement
would continue beyond the closing of the acquisition and until those obligations
were fully performed.
18.
C.
Manager of CSCs cloud business unit, which was being operated through CSC as
well as through ServiceMesh, a new wholly owned subsidiary of CSC. Sometime
later, Pulier was named Head of Strategy for CSCs emerging business group.
Pulier was Vice President of CSC during the entire period of his employment.
20.
following the transaction, CSC granted him restricted stock units of CSC with a
fair market value of $25,945,738 pursuant to the Retention Agreement signed by
Pulier and CSC.
Omnibus Incentive Plan Service Based Restricted Stock Unit Award Agreement
(the RSU Agreement).
21.
stock unitsPulier agreed to abide by CSCs rules and policies, including its Code
of Business Conduct. He agreed that these rules and policies include provisions to
protect the business and goodwill of CSC; confirmed that he had read them; and
agreed to be bound by them as if they were specifically incorporated into his
Retention Agreement.
8
D.
revenue from contracts between ServiceMesh and CBA. More than $10 million of
that revenue came from ten contracts that ServiceMesh and CBA entered into
during the Measurement Period. One of those contracts resulted in $5,022,542 of
Measurement Revenue, and the others resulted in $5,404,084 of Measurement
Revenue. Without this revenue from CBA, the $20 million floor for the earnout
would not have been met, and ServiceMesh equityholdersincluding Pulier
would have received no earnout payment at all. With the CBA revenue, however,
the $20 million floor was exceeded by $9,659,265, resulting in an earnout payment
9
The Measurement Period for the earnout ended on January 31, 2014.
Between that date and March 14, 2014, CSC engaged in an earnout verification
process. As part of that process, Pulier and a CBA executivewho would later
receive some of the payments from Pulierexecuted an audit confirmation letter.
In that letter, Pulier and the CBA executive confirmed that the written agreements
between ServiceMesh and CBA represented the entire agreement between the
companies. Pulier and the CBA executive were provided space to describe any
discrepancies, additional contract terms, side-letter arrangements, or oral
agreements outside the contracts that might alter the written contract provisions.
They listed nothing. As part of the earnout verification process, Pulier made
misrepresentations to CSC and its internal and external accountants concerning the
existence and terms of ServiceMeshs contracts with CBA, including new contracts
allegedly entered into during the waning days of the Measurement Period.
E.
After Pulier received the $25 million earnout payment from CSC, he
founded Ace, which in turn transferred more than $2 million to two senior
information technology executives at CBA, both of whom had extensive
involvement in ServiceMesh projects and contracts.
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authority to execute, and did execute, significant contracts and related documents
with ServiceMesh and CSC on behalf of CBA, including during the Measurement
Period. Indeed, one of these individuals was the same CBA executive who had
executed the audit confirmation letter regarding the ServiceMesh-CBA contracts
that CSC required as part of its earnout verification process.
27.
Pulier funded these payments and directed that they be made through
Ace to the two CBA executives. There was no written agreement between Ace and
the CBA executives as to the purpose or terms of these payments.
Upon
information and belief, one of the CBA executives created and provided to CBA
false documents regarding the payments.
28.
Pulier did not advise or seek approval from CSC before making the
payments. Because Pulier withheld information about the payments, CSC was
unaware of them until long after Pulier made them.
29.
rules and policies, which were expressly incorporated into Puliers Retention
Agreement. CSCs Code of Business Conduct provides that CSC employees must
act with integrity and transparency in all personal dealings that would or could
appear to conflict with the business interests of CSC. CSCs Personal Conflict of
11
After learning of the arrest of the first CBA executive, CSC began its
and unconditional interview violated CSCs rules and policies. CSCs Policy on
12
Contacts and Interaction with Law Enforcement Agencies and Counsel for Others
and CSC Investigators requires each CSC employee to cooperate fully in company
investigations relating to the employees work in order to facilitate investigations
into potential irregularities and enable any corrective actions, as needed. When
CSC investigators contacted Pulier concerning the payments, Pulier was obligated
to cooperate by responding to all questions and requests for documents fully and
accurately.
G.
Pulier accused CBA of making false statements about him that caused
Pulier did not advise or seek approval from CSC before threatening
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H.
cause, as that term is defined in the RSU Agreement. CSC also notified Pulier
that, for a 30-day period commencing on March 26, he was suspended, with full
pay and benefits, from all of his roles and responsibilities at CSC. To the extent
the RSU Agreements cure provision was applicable to Puliers conduct, CSC
afforded Pulier the opportunity to cure within 30 days of the notice.
36.
resigned without good reason, as that term is defined in the RSU Agreement.
COUNT I
(Breach Of The Equity Purchase Agreement)
37.
contract.
39.
(1) making the payments to two CBA executives; (2) failing to disclose to CSC
those payments and any agreements he or Ace had with those executives; and
(3) causing ServiceMesh to enter into ten contracts during the Measurement Period
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with CBA, the company that employed the two individuals to whom Pulier
directed the payments.
Purchase Agreement.
reasons CSC acquired ServiceMesh, and that relationship formed part of the basis
for the agreed acquisition price. Had CSC known that Pulier would make the
payments to two CBA executives, CSC would have paid less than $260 million to
acquire ServiceMesh. In addition, it would not have paid Pulier a $9 million initial
cash payment, a $13 million employee bonus, or a $25 million earnout payment, or
granted him $26 million in restricted stock units.
42.
Purchase Agreement, Plaintiffs have incurred and will continue to incur significant
legal and investigative costs. Plaintiffs have been required to retain legal counsel,
investigate the large payments to CBA executives, and coordinate with Australian
officials regarding the criminal investigation, among other things.
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COUNT II
(Breach Of The Implied Covenant Of Good Faith And Fair Dealing Under
The Equity Purchase Agreement)
43.
contractual obligation to deal fairly with CSC and not to engage in conduct that
would prevent CSC from receiving the benefits of the agreement. This obligation
required Pulier to act in good faith and in a manner consistent with the purpose and
spirit of the agreement.
45.
Agreement by (1) making the payments to two CBA executives; (2) failing to
disclose to CSC those payments and any agreements he or Ace had with those
executives; (3) causing ServiceMesh to enter into ten contracts during the
Measurement Period with CBA, the company that employed the two individuals to
whom Pulier directed the payments; and (4) misrepresenting in the audit
confirmation letter the full scope and nature of ServiceMeshs agreements with
CBA.
These actions and omissions were not taken in good faith and were
inconsistent with the spirit and purpose of the Equity Purchase Agreement, which
was to establish the terms for CSCs purchase of ServiceMeshs equity securities
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based on the true value of ServiceMesh, including the true value of ServiceMeshs
relationship with CBA.
46.
fair dealing deprived CSC of the benefits of the Equity Purchase Agreement and
caused CSC to suffer damages. Had CSC known that Pulier would make payments
to two CBA executives, CSC would have paid less than $260 million to acquire
ServiceMesh. In addition, it would not have paid Pulier a $9 million initial cash
payment, a $13 million employee bonus, or a $25 million earnout payment, or
granted him $26 million in restricted stock units.
47.
covenant of good faith and fair dealing, Plaintiffs have incurred and will continue
to incur significant legal and investigative costs as described above.
COUNT III
(Fraud)
48.
agreements CBA had entered into with ServiceMesh and asked CBA to confirm
(1) that the list represent[ed] the entire agreement between ServiceMesh and
CBA, and (2) that there were not any discrepancies, any additional contract terms,
or side letter arrangements or oral or written agreements outside of the contract
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which may alter the written contract provisions. Pulier also instructed CBA to
reply directly to Tida Strey, a CSC employee, at 8484 Westpark Drive, McLean
VA, 22102, in the enclosed return envelope and email to InternalAudit@csc.com,
or fax to Tida Strey at 1.866.678.6457.
50.
Pulier intentionally did not list, in the audit confirmation letter, the
side agreement he had with the two CBA executives under which he paid them
over $2 million shortly after the ServiceMesh acquisition closed and Pulier
received his $25 million earnout payment.
51.
that received the large payments coordinated by Pulierstated in writing that the
list of contracts Pulier provided agree[d] with [CBAs] records, and that there
were no agreements other than those Pulier had identified. The same day, the CBA
executive, acting in accordance with Puliers instructions, sent the letter to Tida
Strey at CSC.
52.
all of the contracts CBA had with ServiceMesh even though he knew of his side
agreement with the two CBA executives. By instructing a CBA executive to send
the letter to CSC, Pulier intentionally communicated this false representation to
CSC with the intent that CSC rely on his misrepresentation and with the intent to
secure the earnout payment by exceeding the $20 million earnout floor.
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53.
will continue to incur significant legal and investigative costs as described above.
COUNT IV
(Fraud By Omission)
55.
earnout verification process, Pulier had a duty to disclose all agreements he was
aware of between or among ServiceMesh, CBA, and their respective employees,
including his side agreement with the two CBA executives regarding the large
payments. Pulier owed CSC a duty to disclose this agreement so that CSC was not
misled regarding ServiceMeshs relationship with CBA.
57.
Pulier intentionally failed to disclose his side agreement with the two
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58.
agreement with the two CBA executives in the audit confirmation letter or
otherwise, and it suffered damages as a result. Had it known of Puliers fraud by
omission, CSC would not have made an earnout payment of approximately $98
million to ServiceMesh equityholders, including an earnout payment of
approximately $25 million to Pulier.
59.
incurred and will continue to incur significant legal and investigative costs as
described above.
COUNT V
(Breach Of The Retention Agreement)
60.
by its terms.
62.
and policies, which were provided to him in connection with his execution of the
Retention Agreement.
policies.
63.
64.
Interaction with Law Enforcement Agencies and Counsel for Others and CSC
Investigators required Pulier to cooperate fully in company investigations relating
to his work in order to facilitate investigations into potential irregularities and
enable any corrective actions, as needed. This required cooperation specifically
included providing CSC investigators and any external parties acting under CSCs
direction complete and truthful answers to all questions and volunteering any
material information that may be pertinent to CSCs investigation of the large
payments to CBA executives. Pulier violated this policy, and thereby breached the
Retention Agreement, by refusing to timely and fully disclose requested documents
and material information regarding the payments to CBA executives, and refusing
to submit to a complete interview to discuss the payments.
66.
threatening CBA regarding comments CBA purportedly had made about Puliers
payments to CBA executives. In February 2015, counsel for Pulier wrote to
counsel for CBA, citing California defamation law and stating that CBA, by its
actions, had exposed itself to significant liability under California law.
By
threatening CBA, a CSC client, Pulier violated various CSC policies and
procedures, including its Code of Business Conduct and its Personal Conflict of
Interest Policy.
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67.
CSC. Had CSC known that Pulier would cause ServiceMesh to enter into ten
contracts with CBA during the Measurement Period, make payments to two CBA
executives, not disclose to CSC those payments and any agreements he or Ace had
with those executives, not cooperate fully with CSCs investigation of those
payments, and threaten CBA, CSC would not have granted Pulier $26 million
worth of restricted stock units or allowed any of those units to vest, and would not
have made any earnout payments to ServiceMesh equityholders.
68.
Agreement, Plaintiffs have incurred and will continue to incur significant legal and
investigative costs as described above.
COUNT VI
(Breach Of The Implied Covenant Of Good Faith And Fair Dealing Under
The Retention Agreement)
69.
obligation to deal fairly with CSC and not to engage in conduct that would prevent
CSC from receiving the benefits of the agreement. This obligation required Pulier
to act in good faith and in a manner consistent with the purpose and spirit of the
agreement.
70.
Pulier breached the implied covenant of good faith and fair dealing
under the Retention Agreement by (1) making payments to two CBA executives
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that were not permitted under CSCs rules and policies; (2) failing to disclose to
CSC those payments and any agreements he or his foundation had with those
executives; (3) causing ServiceMesh to enter into ten contracts during the
Measurement Period with CBA, the company that employed the two individuals to
whom Pulier directed the payments; (4) misrepresenting in the audit confirmation
letter the full scope and nature of ServiceMeshs relationship with CBA;
(5) refusing to cooperate fully with CSC in its investigation of the payments to
CBA executives; and (6) threatening CBA, an important CSC client. These actions
and omissions were not taken in good faith and were inconsistent with the spirit
and purpose of the Retention Agreement, which was, in large part, to memorialize
the parties understanding with respect to the terms of Puliers new employment
with CSC.
71.
good faith and fair dealing. Had CSC known of Puliers actions and omissions, it
would not have granted him $26 million worth of restricted stock units or allowed
any of those units to vest, and would not have made any earnout payments to
ServiceMesh equityholders.
72.
good faith and fair dealing, Plaintiffs have incurred and will continue to incur
significant legal and investigative costs as described above.
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COUNT VII
(Breach Of Fiduciary Duty On Behalf Of Plaintiff ServiceMesh)
73.
end of the earnout period, CSCs cloud business was pursued through both CSC
and ServiceMesh, as a wholly owned subsidiary of CSC. As Chairman and CEO
of ServiceMesh before the acquisition, and Vice President of CSC appointed by
CSC to run the cloud business after the acquisition, Pulier owed fiduciary duties of
care, loyalty, good faith, and candor to ServiceMesh. This required Pulier to,
among other things, conduct the affairs of ServiceMesh with due care; not put selfinterests or any personal considerations ahead of the interests of ServiceMesh; act
in good faith (by, among other things, not violating any laws or consciously and
intentionally disregarding fiduciary duties); and communicate with ServiceMesh
with forthrightness and candor.
75.
(2) fail to disclose to CSC those payments and any agreements he or Ace had with
those executives; (3) cause ServiceMesh to enter into ten contracts during the
Measurement Period with CBA; and (4) misrepresent in the audit confirmation
letter the full scope and nature of ServiceMeshs relationship with CBA, violated
his fiduciary duties.
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76.
or among ServiceMesh, CBA, and their respective employees, including his side
agreement with the two CBA executives regarding the large payments.
77.
Plaintiffs have incurred and will continue to incur significant legal and
investigative costs as described above.
COUNT VIII
(Breach Of Fiduciary Duty On Behalf Of Plaintiff CSC)
79.
President and General Manager of CSCs cloud business unit, and later Head of
Strategy for CSCs emerging business group. Pulier was a Vice President of CSC
from the time of his employment until termination of that employment. Following
CSCs acquisition of ServiceMesh and at least through the end of the earnout
period, CSCs cloud business was pursued through both CSC and ServiceMesh, as
a wholly owned subsidiary of CSC.
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81.
fiduciary duty under Nevada law. He owed CSC, among other things, a duty of
loyalty.
82.
two CBA executives that were not permitted under CSCs rules and policies;
(2) failing to disclose to CSC those payments and any agreements he or Ace had
with those executives; (3) causing ServiceMesh to enter into ten contracts during
the Measurement Period with CBA, the company that employed the two
individuals to whom Pulier directed the payments; (4) misrepresenting in the audit
confirmation letter the full scope and nature of ServiceMeshs relationship with
CBA; (5) refusing to fully cooperate with CSC in its investigation of the large
payments to CBA executives; and (6) threatening CBA, an important CSC client.
83.
CSC has been damaged by Puliers breach of his duty of loyalty. Had
CSC known of Puliers actions and omissions, it would not have granted him $26
million worth of restricted stock units or allowed any of those units to vest, and
would not have made any earnout payments to ServiceMesh equityholders.
84.
has incurred and will continue to incur significant legal and investigative costs as
described above.
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limited to, payments made to Pulier under or in connection with the Equity
Purchase Agreement, the value of vested restricted stock units granted to Pulier
under his Retention Agreement, and the full amount of the earnout payment paid to
ServiceMesh equityholders under the Equity Purchase Agreement.
86.
87.
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Respectfully submitted,
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