CHRIS BAKER, State Bar No.

181557
cbakerglbakerlpcom
DEBORAH SCHWARTZ, State Bar No. 208934
dschwartzEDbakerlpcom
F I L EOn!LMTV
SAN MATEO:
BAKER CURTIS 8L SCHWARTZ, P.C.
JUN 2 8 2017
44 Montgomery Street, Suite 3520
San Francisco, CA 94104 0mm the: superior 99%!
Telephone: (415) 433-1064
Fax: (415) 366-2525.366.
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Attorneys for Plaintiff

ANN LAI
gllllllllllllllllllllllllllll
l

SUPERIOR COURT OF CALIFORNIA

10
COUNTY OF SAN MATEO
ll
12
17 G l V 9 2% 8 8 2?;

ANN LAI, on behalf of the State of California Case No.

13 and aggrieved employees as to PAGA, and as
an individual, COMPLAINT PURSUANT TO THE
14 PRIVATE ATTORNEYS GENERAL ACT
Plaintiff, AND AS AN INDIVIDUAL
15 vs.
CAUSES OF ACTION
16
BINARY CAPITAL MANAGEMENT, LLC, 1. PAGA
17 JUSTIN CALDBECK, and DOES 1 through 2. LABOR CODE 232.5
10, 3. LABOR CODE 1050
18 4. DEFAMATION
Defendants. 5. IN TENTIONAL INTERFERENCE
19 WITH ECONOMIC ADVANTAGE
6. EMOTIONAL DISTRESS
20

21 DEMAND FOR JURY TRIAL

22 BY FAX
23
INTRODUCTION
24
Silicon Valley companies and their powerful investors in the venture capital world rely
25
on overbroad and illegal condentiality and non-disparagement agreements to suppress and
26
restrict the rights of current and former employees under California law.
27
As a result, the following is what can, and does, happen.
28

LAI COMPLAINT
 PARTIES

1. Plaintiff Ann Lai is a former employee of Binary Capital Management LLC. She

.bUJN
resides in San Francisco, California. She holds aBachelors degree in chemistry and physics, a

Masters degree in applied mathematics, and a Ph.D. in engineering sciences, all om Harvard

University.
\IQUI

2. Justin Caldbeck is a venture capitalist.

3. Binary Capital Management LLC (Binary LLC. or Binary) is a management

company headquartered in Hillsborough, CA. At all times relevant here, Binary LLC was owned

and controlled by Jonathan Teo, another venture capitalist, and Caldbeck.

10 4. In typical venture-capital byzantine fashion, Binary LLC purports to manage

11 Binary Capital MTGP 1, LP. (Binary LP), which in turn acts as the general partner of other

12 limited partnerships bearing the Binary name. Binary LP may or may not be managed by
13 another Binary entity called Binary TTGP. Binary Capital under whatever form invests in

14 early stage, consumer-focused companies, i.e., portfolio companies. As investors, Binary Capital

15 exercises considerable inuence over them.

16 5. Does 1 through 10 are currently unknown. They may include other entities or

17 individuals liable in some way for the claims alleged in this case including, potentially, Binary

18 LP, Binary TTGP, Binary Fund I, LP, and Teo.

19 FACTS
20 The Condentiality, Non-Disclosure, and Non-Disparagement Provisions

21 6. On November 21, 2014, Binary offered Lai a job with a start date of January 5,
22 2014.

23 7. As a condition of employment, Binary required Lai to sign an employment

24 agreement with Binary LLC (the Employment Agreement). This agreement was not subject to

25 negotiation.

26 8. The Employment Agreement contains a confidentiality and nondisclosure

27 provision. This provision stated in pertinent part:

28
-2-
LAI COMPLAINT
 Employee acknowledges and agrees that a_ll information obtained
by Employee in connection with Employee's employment by the
Company concerning the business or assets of the Company, any
client of the Company (a "Client" |i.e., Binary LP]), any
investment fund in respect of which a Client serves as " general
partner" or "managing member" or in respect of which the
Company provides services for or on behalf of a Client (each being
a "Fund"), or any actual or prospective portfolio company of any
Client or Fund shall be deemed strict_ly condential and shall
not, without the prior written consent of the Company or for a
Company purpose, be: (x) used by Employee; or (y) disclosed to
any Person. The Company hereby consents to disclosure by
Employee of Company information, solely for the purpose of
enforcing Employee's rights under this Agreement or of complying
with applicable law, to Employee's accountants, attorneys and
similar advisors bound by a duty of condentiality. . . . Employee
10 expressly acknowledges and agrees that the Company derives
material economic value from the protection of condential
ll information as set forth in the foregoing provisions of this Section .
. . . and that such condential information includes trade secrets and
12
similar types of information the disclosure of which likely would
cause substantial and irreparable harm to the Company.
13

14
9. The Employment Agreement also contains a non-disparagement provision. This

15
provision states:

16 To the maximum extent permitted by applicable law, Employee

shall not disparage the Company . . . . For purposes of the
17 preceding sentence: (i) "disparage" shall mean any negative
comments regarding a Person's business model, business
18
practices, investment-related decisions, afliates, eguityholders,
19
personnel, agents, integrity, fairness, satisfaction of obligations, or
overall performance . . .
.

20
10. The Employment Agreement further provides that the rights of Employee shall be
21
narrowly construed. It is the intention of the Parties that Employee, shall not solely in
22
consequence of the execution of this Agreement, have any rights in respect to the Company, or
23
any afliate thereof, except as specically provided in this Agreement.
24
11. The Employment Agreement as it relates to condentiality and non-disparagemet
25
has no geographic or temporal scope. In other words, it lasts forever.
26
12. Binary requires all employees to sign its Employment Agreement. It also requires
27
certain employees to sign its Partnership Agreement.
28
_ 3 _

LAI COMPLAINT
 The California Labor Code

13. It is against California law to require employees, as a condition of employment, to

sign an overbroad condentiality agreement or a non-disparagement provision. More specically

LII-#0310

(but not exclusively):

a. California Labor Code 232.5 prohibits an employer from requiring an

employee to refrain from disclosing information about the employers working conditions, either

through a writing or otherwise.

\OOO\IO\

b. California Labor Code 432.5 prohibits an employer from requiring an

employee to agree, in writing, to any term or condition of employment which is known by the
10 employer to be prohibited by law. This includes condentiality agreements that effectively
11 constitute a restraint on trade in violation of Business & Professions Code 16600, the

12 Cartwright Act, or Business & Professions Code 17200.

13 Lais Job at Binary

14 14. Lai performed her job well at Binary. She was primarily responsible for
15 establishing Binarys data-driven sourcing strategy, conducting the diligence regarding Binarys
16 potential investments, and supporting Binarys Portfolio companies on analytics/ growth
17 strategies. In October 2015, she was given the title Principal.

18 15. Binarys workplace was not genderneutral and evidenced a sexist and sexual

19 environment prohibited by the anti-discrimination laws. This conduct included, but was not
20 limited to: (a) statements that Binary needed an attractive receptionist; (b) statements concerning
21 sexual relationships; (0) inappropriate conduct with female staff at company outings and
22 otherwise; ((1) a female-specic dress code; and (e) statements about the attractiveness of Lai and
23 other women, including female founders. Lai complained about this misconduct, but nothing was
24 done.

25 16. Accordingly, in November 2015, Lai informed Binary of her intent to resign.
26 Caldbeck convinced her to stay, explaining that the firm was committed to change.
27 17. In January 2016, Lai received a positive performance review as well as a raise.

28 18. In March or April of 2016, Lai learned that Caldbeck was involved in a
_ 4 _

LAI COMPLAINT
 relationship with another employee who had been championed by the rm. This employee
N showed Lai certain text messages and sought advice on how to end the relationship. After

Ac;
learning of, and being disturbed by, Caldbecks conduct'with respect to this employee, Lai

reached out to potential employers about potentially changing jobs. Through this process, Lai

learned additional and disturbing information about Caldbecks treatment of women.

19. Lai took vacation in late April and the rst part of May. During this time frame,
\DOONOkI

she concluded that, under the circumstances, she had to transition out of Binary LLC.
20. On May 10, 2016, Lai informed Caldbeck that, given the circumstances, she

needed to resign. She explained that she was unhappy and uncomfortable with the work

10 environment and that it had not changed. She explained she had tried to resign once before.
11 Caldbeck responded: Is that your narrative? If you want to leave Binary, Ill make it happen and
12 make sure you have no narrative. He also told her that if she left Binary, she would never
13 work again.
14 21. Lai -- frightened by Caldbecks reaction said she would not meet only with
15 Caldbeck. She proposed that she meet with Caldbeck,'Teo, and another Binary partner after she
16 returned from a previously scheduled visit to a portfolio company. This follow-up meeting was 1

17 scheduled for May 17.

18 22. The next day, while Lai was at the portfolio company, Caldbeck began sending Lai
19 messages and emails copying others concerning a project that had previously been placed on
20 hold. He demanded immediate action. His purpose was to create a paper trail to justify her
21 termination.
22 23. On May 13, Lai learned that Binary had declined to auto-deposit her approved
23 expenses into her bank account.

24 24. In light of these facts, Lai concluded that she could not wait until the May 17

25 meeting with Caldbeck, Teo, and the other Binary partner to ofcially resign. Instead, she
26 tendered her resignation on May 13 at 1:10 pm, citing the threats to her reputation if she chose to
27 leave, the recent suspicious line of questioning and inconsistent expectations regarding on-going
28 projects, and Binarys unusual behavior concerning expense reports. She explained that these

LAI COMPLAINT
 facts, and other issues, had contributed to a hostile work environment where I do not feel
comfortable in continuing to work.

25. Shortly thereafter, Teo accepted her resignation on behalf of Binary.

Binarys Post-Termination Conduct

26. Immediately following Lais resignation, Binary acting initially through

Caldbeck took immediate steps to ensure Lai did not disclose any information about Binarys
OO\IO\

working conditions, including its inappropriate and illegal behavior. Binary used a carrot and

stick approach. For example, on May 13, 2016, Caldbeck sent the following texts:
\D
(a) At 2:40 pm, Caldbeck texted Lai:
10
[T]here should be no external messaging to entrepreneurs or LPs
11 [Limited Partners] until the legal feedback is consolidated around
this and we have clarity on what we can be supportive ofyou on as
12 you pursue your future career.

13
(b) At 2:47 pm, Caldbeck texted Lai:
14
Im assuming you don t want to meet on tues but we need to sit
15 down at some point to close this out and check some boxe[s] before
expenses, etc., can be reimbursed.
16
(c) At 3:02 pm, Caldbeck texted Lai:
17

What are your intentions w [portfolio company]?

18

19 ((1) At 3:03 pm, Caldbeck texted Lai:

20 When can you talk? We should end this right away.
21 27. The texts continued. On May 14, 2016, Caldbeck wrote:
22
Ann, can you please let me know when a good time to chat is? We
23 I
need to wrap up a few things given your transition and d also like
to advocate for a nal compensation payment to you for next few
24 weeks

25 28. On May 15, Caldbeck proceeded to serial message Lai using the Confide

26 messenger application.1

27 1
Conde is a messenger application that allows individuals to send encrypted messages that
self-destruct. Conde works like this. Initially, the text message is whited-out. As you run
28 your nger along the whitedout text, the text appears and then disappears, making it impossible

LAI COMPLAINT
 (a) The rst text, at 9:32, read:

Ann, just end this right away. Let s nd a transition plan and do
the right thing wrt the companies you support. It s ne it didn t
work out. Im hopeful you nd something you like but lets end the
right way. Reading messages all day and not responding isn t the
smart thing to do here.

(b) The second text, at 11:56, read:

[
Stay the fuck away from our team Ann. Jonathan Teo] is getting
really really really pissed.

As am I. Im not going to warn you again. . . . Please stop and

I
don t add ill will. It didn t work out. have egg on my face for
10 supporting you and Im sure you are disappointed w your
experience but don t put us in a situation where we need to be more
11 aggressive

12 Its a small world Ann. Im meeting with [partner] . . . from [VC

13
firm] next week. Stop.

14 (c) The third text, at 3:04, read:

15 I
What do you want to do next, Ann. know this sucks for you. I
16
I
know you in a tough place w . . . ., a move, a new job. m just
really trying to keep this positive. You re a binary alum and Im
17
hoping for your success but can you please communicate so can I
help?
18

19 29. On May 16, 2016, Lai returned all company property to Binary.

20 30. During the remainder of that week, Caldbeck and Teo repeatedly checked Lais

21 LinkedIn prole. Binary reached out to her contacts and potential employers. Caldbeck and/or

22 Teo falsely told them she had been red or asked to leave Binary for poor performance.

23 31. Nevertheless, during this time frame, Lai attempted to obtain work. She met with

24 two Binary portfolio companies who were interested in hiring her for consulting work. She also

25 met with the venture capital rm referenced in Caldbecks May 15 Conde message who had

26

27 to screen shot the message. Lai would eventually counter the problem of disappearing texts
from Binary by videoing the Conde messages with a separate phone as she ran her nger
28 along the text lines.
-.7
LAI COMPLAINT
 expressed interest in working with her.

32. On May 21, 2016, Lai posted the following to her Facebook page:
AWN_

2016 has been a year of restarts & resets some might call it a
midlife crisis, I call it realizing whats really important to me: not
K11 money, not fame. Rather, its about always trying to make a
difference, having no regrets from compromising on the ethics that
are important to me, & sticking to my guns despite short-term costs
. . . so that Ill never look back one day & hate the person Ive

become. As some of you know, its been a long struggle over the
\OOO\IO\

last 5 months (thank you to everyone who has been there for me),
nally pulling the trigger last Friday. Its weird being unemployed,
but I feel that the me that got lost along the way coming back with
every minute of freedom. #newbeginnings #2016.
10
33. Caldbeck was the rst to comment on this post. He posted a response that said:
11
Pulled the trigger hmm. Good luck Ann.
12
34. He also sent her three text messages on May 21 in quick succession:
13
(a) At 10:56 a.m., Caldbeck texted Lai:
14
You do understand the implications ofyou implying that you quit
15 unprovoked in a public setting, right?
16
(b) At 10:59 am, Caldbeck texted Lai:
17
Implying that you quit because binary capital forced you to
18 compromise your ethics is a clear violation ofyour employment
agreement and has implications for carry. I suggest you delete that
19
I
part ofyour post Ann. 've heard from 2 mutual friends on fb about
20
it in the last 10 mins

21 (0) At 11:00 am, Caldbeck texted Lai:

22 Please please stop making this so diicult for you.

23 35. In the early morning of May 23, Lai received an email from an executive at one of
24 the portfolio companies concerning her performing consulting work. Clearly, this portfolio

25 company had heard from Binary, Caldbeck, and/or Teo. The email stated in part: Lastly, I have

26 to be honest with you. Given the series of events, there is some hesitation to have you move
27 forward with this. I am pushing it, taking a risk and trust we will have a successful and

28 awesome deliverable. I want you to know that I am trusting you and if for any reason you feel
8-
LAI COMPLAINT
 like you might not be able to deliver a high quality output lets talk about it now.

36. On May 23, at 12:34 pm, Caldbeck texted Lai again. He falsely accused her of
making disparaging comments about a Binary portfolio company. The text continued:

These are violations ofyour contract and have material damages

OO\IO\UI-I>UJN
attached to them. We will be summarizing all of these and
following up shortly but again, asking you to stop causing yourself
damage.

37. Caldbeck sent a second text three minutes later. It stated:

This is the last time you will hear from me of binary partners (other
\D
than counsel) without a response and/or immediate halting ofyour
tone.
10
38. Lai did not respond. As a result of Binarys false statements about her, the
11
portfolio company declined to provide Lai with consulting work, as did the venture capital firm
12
with Whom she had met.
13
39. Lai, frightened and distraught, left the country. She also retained counsel.
14
40. On June 3, 2016, Lais counsel sent a cease and desist letter to Binary. It
15
demanded that Caldbeck, Teo, and Binary cease and desist from, among other things, contacting
16
her prospective employers to prevent her from gaining employment, threatening Lai, and
17
attempting to communicate with Lai in any way other than through counsel.
18
41. On June 10, 2016, Binary responded through its counsel. The letter stated that Lai
19
had breached her nondisparagement obligations toward Binary. It arther asked Lais counsel to
20
inform her that if she disparages Binary Capital in any way, (i) she will trigger loss of vesting
21
under the applicable agreements and (ii) Binary will immediately pursue all available legal
22
remedies against her.
23
42. On July 31, 2016, Lai returned to the Bay Area. She met with a number of venture
24
capital rms. None was willing to hire her. One stated that, given the Binary situation, it might
25
get complicated. A number of individuals and prospective employers asked why she had left
26
Binary. Lai was afraid to tell them the truth, so responded by saying nothing or explaining that
27
she wanted to return to a more operational role.
28
_9_
LAI COMPLAINT
 43. In October 2016, out of money and unemployed, Lai found a job in New York

with a portfolio company on which Binary did not have a board seat. This portfolio company

agreed to not tell Binary that Lai was working for it. Lai moved to New York and took the job.

44. In December 2016, Lai became suspicious that Binary was aware that she was

\IO\'~II-I>
working for the portfolio company. She also resolved that she was not going to allow Binary to

chase her from the Bay Area, and she started considering offers from Bay Area rms. She

received two. One from Facebook and another from a smaller company. She took the job with
OO
Facebook because she hoped Facebook was too big to be afraid of Binary or Caldbeck. She

hoped Facebook could protect her.

10 45. Nevertheless, fearful of Binary and Caldbeck, she attempted to keep her

ll employment at Facebook secret. Among other things, she did not update her LinkedIn prole to
12 say she worked there. (Caldbeck continued to check Lais LinkedIn prole regularly.) Lai did
13 not tell many people she was working for Facebook. Those friends she did tell she asked that
14 they keep it secret.
15 46. On February 25, 2017, Lai had a housewarming party. She also declared the party
16 a secret because she did not want Binary or Caldbeck to know she had returned. During the
17 party, Lais depression and anxiety got the best of her. She told her friends that she had quit
18 Binary because of her working conditions, including Caldbecks behavior. She told them his
19 response when she stated she wanted to quit. She told them of Binarys posttermination threats
20 and her inability to nd a job.

21 47. The next day, on February 26, 2017, and despite Lais request that Binary and
22 Caldbeck not contact her directly, Caldbeck did so. He repeated the carrot-and-stick approach,
23 alternatively threatening to destroy Lai and offering his support. The series of texts read:
24
I I
Ann, know its been a long time. know there have been lots of
25 I
emotions and bad feelings. also know that you re back in sf and
I
my wife and have heard what you ve been saying to others. want I
26 to try one more time to talk to you about this civilly and come to a
good place. It doesn t need to be negative and we don t need to sue
27 I
you for what you re saying. really really really just want to talk
this out and be supportive ofyour next move. We have not yet
28
-10_
LAI COMPLAINT
 I
stripped vou of the nal piece of vour carrv. have been really
hopeful we can just stop this and support one another. Can you
please make 10 minutes to talk to me so this doesn t get worse. I
I
really don t want it to, genuinely. am in a position to make
things a lot better in supporting you but iust want to talk it
through. Can you please chat for 10 minutes?

I have no ill will. Ijust want to talk please.

Can I call you? This will be so much better if we talk it through
Ann.

I tried you. Id really like to put this behind both of us. I want to
clariz that we are not currently suing you. We are not taking any
I
legal action at all. just want to talk with you about your goals,
what you d like and how we can move past this. Can you let me
10 know when to call you. Side conversations without chatting will be
the worse on all sides and Im not sure what options we[]re left
11 if
with you can t talk to us but are continuing to disparage us in the
market. Im asking you to please work through this with me so we
12
can all move forward. Is there a good time to reach you?
13
Can you just provide a response even you won t talk with me?
if
14 Im happy to talk w you and your lawyer you want? djust
if I
15
appreciate even a short response [i]f
you are willing to talk please.

Is there someone else you d like to speak with instead like Teo?
16
Talking about us in the market with serious accusations to people
17
we know well isn t going to help bring this to a close and you re
reading but not responding to my request to talk it out an[d] move
18 on in a positive way. Im really not sure what else to do but would
really like to talk this through before it gets worse. Can We iust
19 talk it through so vou don t feel like were out to ruin your career
and we don t feel like vou are pushing us to sue vou? We just
20
want to be positive and move on and I know we can make a lot of
21 progress with a short call to understand what we can do to alleviate
your concerns that we want to take you down in some way. Again,
22 can we please talk and work through this?

23 I
Mailbox is full so cannot leave a vm
24
Btw congrats on the Facebook iob.
25
48. The next day, Monday, February 27, 2016, a mutual acquaintance of Lai and
26
Caldbeck relayed a message to Lai with more carrots and sticks. This message read:
27
Ann, you should really just call Justin back. He is the one that
28 decides what path they are pursuing with vou legallv and he wants
-11-
LAI COMPLAINT
 to talk through this with you so that it ends in a good place. He has
no interest in disparaging vou (he knows [vou re] at Facebook
and hasn t made anv calls there). He wants to keep it positive but
its putting him in a bad spot when you are spreading rumors about
him and his firm in this small of an ecosystem. Just call him back
and it will be much much better.
LII-RMN

49. Caldbeck then sent Lai a text, during work hours, stating: Im going to try you in

I
30 minutes and really hope we can talk.

50. Because the texts were not ending (despite the fact that Lai never responded to

\OOOQON

them), because Caldbeck was communicating with Lai through third parties and while she was at

work, because Caldbeck was threatening to ruin her career at Facebook, and because she was

afraid of what Binary and Caldbeck would do to her, Lai agreed to speak with Caldbeck.
10
51. They spoke on February 27. The conversation was brief. He told her that he
11
hoped she would be smart. He told her that she still had her carry. He told her that he would
12
not disparage her.
13
52. On information and belief, during this time frame The Information a technology
14
news website was researching a story on Binary and Caldbeck. Binary, Caldbeck, and Teo
15
were aware that the Information was asking questions.
16
53. On April 20, 2017, Caldbeck texted Lai again. This text stated:
17

18
Ann, I do not think talking to the information is a good idea.
54. Caldbeck followed this text with another that included only a period:
19

20
55. This time, Lai responded:
21
What are you talking about?
22
56. Caldbeck did not respond.
23

24
57. Five days later, on April 25, 2017, at 2:35 pm, Caldbeck sent Lai another text that
read simply:
25
Stop.
26
58. This was followed with another text at 6:49 pm. that again included only a period.
27

28
_ 12 _

LAI COMPLAINT
 59. Lai was very very frightened.

The Information Story and Its Aftermath

60. On the morning of June 22, 2017, The Information published an article about

Binary and Caldbeck. Six women spoke about Caldbecks inappropriate conduct towards them.

Three spoke on the record and three spoke off the record. The Information quoted Binary and
OO\IO\IIJ>

Caldbecks response to the story, stating:

Binary issued a statement that said the notion that Mr. Caldbeck
had engaged in improper behavior with female entrepreneurs was
false. Binary said that while the Information had found a few
KO examples which show that Justin has in the past occasionally dated
or irted with women he met in a professional capacity, lets be
10 clear: There is no evidence that Justin did anything illegal and
there is no evidence that any of his investing decisions were
11
affected by his social interests. . . .
12
In a statement,Caldbeck said, I strongly deny The Informations
13 attacks on my character. The fact is, I have always enjoyed
respectful relationships with female founders, business partners,
14 and investors.
15 61. The industry reacted to the story. That afternoon, Caldbeck issued an additional
16 statement that read:
17
Obviously, I am deeply disturbed by these allegations. While
18 significant context is missing from the incidents reported by The
Information, I deeply regret ever causing anyone to feel
19 uncomfortable. The fact is that I have been privileged to have
worked with female entrepreneurs throughout my career and I
20
sincerely apologize to anyone who I made uncomfortable by my
actions. There is no denying this is an issue for the venture
21
community, and I hate that my behavior has contributed to it.
22
62. The story refused to die. The next day, Caldbeck issued yet another statement. It
23
was breathtaking in its hypocrisy. It read in part:
24
The past 24 hours have been the darkest of my life. I have made
25 many mistakes over the course of my career, some of which were
brought to light this week. To say I'm sorry about my behavior is a
26
categorical understatement. Still, Ineed to say it: I am so, so sorry.
27

28
-13-
LAI COMPLAINT
 I direct my apology rst to those women who I've made feel
uncomfortable in any way, _at any time - but also to the greater tech
N ecosystem, a community that I have utterly failed.

The power dynamic that exists in venture capital is despicably

unfair. The gap of inuence between male venture capitalists and
female entrepreneurs is frightening and I hate that my behavior
played a role in perpetrating a gender-hostile environment. It is
\ioxm-bw

outrageous and unethical for any person to leverage a position

of power in exchange for sexual gain= it is clear to me now that
that i_s exactly what I've done.

I am deeply ashamed of my lack of self-awareness. I am

grateful to Niniane, Susan, Leiti, and the other women who
spoke up for providing me with a sobering look into my own
character and behavior that I can no longer ignore. The
10 dynamic of this industry makes it hard to speak up. but this is
the type of action that leads to progress and change, starting with
11 me. .

12
The Binary team will also be taking measures to ensure that the
13
rm is a safe place for founders of all backgrounds to nd the
support and resources they need to change the world, without
14 abuse of power or mistreatment of any person.

15 I owe a heartfelt apology to my family, my investors, my portfolio,

and the team at Binary, who have been completely blindsided and
16
in no way deserve the pain I've caused. But most of all I apologize
17 again to those who I've hurt during the course of my career and for

the damage I've done to the industry I care so deeply about.

18

19 63. This last statement was issued because Caldbecks and Binarys conduct was

20 revealed. It is not only the industry dynamic that makes it hard to speak up, but also illegal
21 condentiality and non-disparagement provisions. Caldbecks and Binarys abuse of power

22 started when they required employees to give up the non-waivable right to speak as a condition of
23 working for them. Caldbeck is certainly not grateful to Lai for speaking up. He did everything

24 in his power to prevent it. He also does not lack selfawareness. As set forth above, Binary

25 and Caldbeck were, at all times, fully aware of what they were doing.
26 64. Lai brings the following claims.

27

28
_ 14 _

LAI COMPLAINT
 First Cause of Action
PAGA (under 232.5 (b) and (c))

(Against Binary)
.50)

65. Binary requires all its employees to sign a standard employment agreement that

contains condentiality and non-disparagement provision that prohibits them from ever

disclosing information about their working conditions. These illegal provisions to put it mildly
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make it hard for employees to speak up about inappropriate or illegal conduct, both during
their employment and forever after. Employees are instead led to believe that it is illegal to do so,
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and that disclosing information about their working conditions will lead to ruinous litigation.
10 These provisions allow employers to abuse their power and mistreat their workforce. They allow

ll their employers to leverage their positions of power for sexual gain and for other inappropriate
12 reasons.

13 66. On May 9, 2017, Lai sent the required PAGA notice to the Labor Workforce and
14 Development Agency. (Ex. A). The exhaustion period has expired with respect to Lais PAGA
15 claims as they relate to Labor Code 232.5(b) and (c). The LWDA has not responded to Lais

16 letter and Binary has made no effort to cure its illegal conduct.
17 67. Lai seeks PAGA civil penalties on behalf of herself, other aggrieved employees,
18 and the State of California as a result of this unlawful agreement.
19 68. Lai will amend her complaint as a matter of right to allege additional PAGA
20 claims upon the exhaustion of additional administrative periods.
21 ***
22 69. The remaining causes of action only concern, and are expressly limited to, Binary

23 and Caldbecks post-termination conduct towards Lai with respect to her post-termination
24 activity.
25

26

27

28
-15-
LAI COMPLAINT
 Second Cause of Action
(Labor Code 232.5)

(Against Binary)
4}.
70. As detailed above, subsequent to Lais employment with Binary, Binary

discriminated against Lai because she disclosed, or because Binary believed she had disclosed,

information about her working conditions after her employment with Binary had ended. This
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discrimination took the form of discouraging others from hiring her, threatening her With

litigation, threatening to ruin her career, and sending her harassing and threatening texts for the

purpose of discouraging her from engaging in conduct protected by law.

10 71. Through this conduct, Binary violated Labor Code 232.5(c)

11 72. In its conduct, Binary acted with malice.

12 73. As a result, Binary caused Lai economic and emotional harm.
13 Third Cause of Action
14 (Labor Code 1050 et seq)
15 (Against Binary and Caldbeck)
16 74. As detailed above, subsequent to Lais employment with Binary, Binary and
17 Caldbeck made misrepresentations to VC rms, portfolio companies, and, on information and
18 belief, numerous others about Lai. They did so in order to prevent or attempt to prevent Lai from
19 nding another job.
20 75. Through this conduct, Binary and Caldbeck violated Labor Code 1050

21 76. Through this conduct, Binary and Caldbeck acted with malice.
22 77. As a result, Binary and Caldbeck caused Lai economic and emotional harm.
23 Pursuant to Labor Code 1054, Lai is entitled to treble damages.

24

25

26

27

28
16-
LAI COMPLAINT
 Fourth Cause of Action
(Defamation)

(Against Binary and Caldbeck)

LII-PWN

78. As detailed above, subsequent to Lais employment with Binary, Binary and

Caldbeck made knowing and false statements of fact to VC rms, portfolio companies, and, on

information and belief, numerous others about Lai.

79. Through this conduct, Binary and Caldbeck defamed Lai.

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80. Through this conduct, Binary and Caldbeck acted with malice.

81. As a result, Binary and Caldbeck caused Lai economic and emotional harm.
10

11 Fifth Cause of Action

12 (Intentional Interference with Prospective Economic Advantage)
13 (Against Binary and Caldbeck)
14 82. As detailed above, subsequent to Lais employment with Binary, Binary and
15 Caldbeck engaged in conduct with the intent and/or the substantial certainty that it would
16 interfere with her prospective economic relationships with the portfolio companies and VC rms
17 identied above. Binary and Caldbecks conduct, in fact, interfered with those relationships.
18 83. Binary and Caldbecks conduct was wrongful. It violated both the
19 84. Through this conduct, Binary and Caldbeck acted with malice.
20 85. As a result, Binary and Caldbeck caused Lai economic and emotional harm.
21 Sixth Cause of Action
22' (Intentional Infliction of Emotion Distress)
23 (Against Binary and Caldbeck)
24 86. As detailed above, and subsequent to Lais employment with Binary, Caldbeck
25 and Binary engaged in outrageous conduct that was intended to cause, and did cause, Lai extreme

26 emotional distress. This conduct included, but is not limited to, defaming her, threatening her,
27 and by continuing to send her threatening communications, even after being instructed by Lais

28
-17-
LAI COMPLAINT
 counsel to only contact Lai through her attomey. This conduct was in violation of Lais rights
under the California Labor Code and the California Constitution as it relates to liberty of speech.
87. Through this conduct, Binary and Caldbeck acted with malice.
A 88. As a result, Binary and Caldbeck caused Lai economic and emotional harm.
'

PRAYER FOR RELIEF

\IQLJI

WHEREFORE, Lai prays for judgment against Binary and Caldbeck as follows:
1. Full and complete civil penalties for each violation of PAGA in accordance with

the Private Attorneys General Act-(as against Binary).

2. Attorneys fees and costs.

10 3. Economic damages.

11 4. General damages.

12 5. Interest.

13 6. All other relief the Court deems proper and just.

14
Dated: June 27, 2017 BAKER CURTIS 8L SCHWARTZ, P.C.
15

4/f
16

17
W 612/
3
Chris Bake? V
18
Attorneys for Plaintiff
19 ANN LAI

20

21
JURY TRIAL DEMANDED
22
Plaintiff hereby demand a trial by jury.
23
Dated: June 27, 2017 BAKER CURTIS & SCHWARTZ, P.C.
24

///L/I
25

26
Chris Baker/
27
Attorneys for Plaintiff
28 ANN LAI
-13-
LAI COMPLAINT
 '

Exhibit A
 BAKER CURTIS &
SCHWARTZ PC
Chris Baker
44 Montgomery Street, Suite 3520
San Francisco, CA 94104
tel. (415) 433-1064
cbakerbbakerlpsom
www. bakerlp.com

May 9, 2017

Via On-Line

Labor & Workforce Development Agency'

Attention: PAGA Administrator

Via Certified Mail

Binary Capital Management, LLC

50 Verbalee Lane
Hillsborough, CA 94010

Binary Capital MTGP 1., LP.

50 Verbalee Lane
Hillsborough, CA 94010

RE: Request For Relief Under the Private Attorneys General Act

Dear LWDA, Binary Capital Management, LLC, and Binary Capital MTGP I.,L.P.:

I represent Ann Lai. She is an aggrieved employee of Binary Capital Management,

LLC (Binary LLC), and Binary Capital MTGP I.,L.P. (Binary LP) under California Labor
Code sections 2699 et seq.

The purpose of this letter is to provide notice to the LWDA, Binary LLC and Binary LP
(collectively Binary) pursuant to Labor Code 2699 et seq. Binary LLC and Binary LP
constitute either an integrated enterprise, a single employer, and/or a joint employer of Lai and
all personnel who work for Binary LLC and are either limited partners or venture partners of
Binary LP.
 g
n O
LWDA
Binary LLC
Binary LP
May 9, 2017
Page 2

Specically, Binary requires all their employees, including Ann Lai, to Sign employment
agreements, partnership agreements, and related amendments to such agreements that violate the
California Labor Code.

For example:

1. The agreements contain overbroad condentiality provisions which define essentially

everything as condential and that contain no geographic or temporal limitation. The
non-disparagement provisions have a similar effect in that they prevent former
employees from effectively competing with Binary or nding alternative work.
These provisions constitute an illegal restraint on trade in violation of Business and
Professions Code 16600, the Cartwright Act, and Business & Professions Code
17200 et seq.

2. The overbroad condentiality and non-disparagement provisions also prohibit the

'
disclosure of information, including negative information, that is not condential as a
matter of law. For example, the agreements prohibit the disclosure of information
about working conditions, wages, and illegal conduct. See, Labor Code 232,
232.5, 1197.5(k), and 1102.5. The provisions violate Labor Code 96(k) and 98.6
insofar as they infringe on the constitutional right of liberty of speech and liberty to
work during non-work hours and away from the employers premises, as well as the
right to engage in conduct protected by the above-referenced provisions of the Labor
Code. Moreover, the provisions also violate the Fair Employment and Housing Act
and Title VII by prohibiting the disclosure of information about illegal sexual
harassment and discrimination and retaliation.

3. Binary knows these provisions are illegal. Their purpose is to aid Binary and its true
owners in breaking or skirting the law by silencing any employees who might wish to
engage in whistle blowing, assert claims, and to prevent former employees from .

effectively competing with Binary. Accordingly, the provisions also violate Labor
Code 432.5

{
Lai signed the agreements that contain the unlawful provisions as a condition of her
employment. She purportedly remains bound by them. She ceased working for Binary in May
2016.

The aggrieved employees are all current and former employees of Binary who have
signed either an employment agreement or partnership agreement that contain the condentiality
and non-disparagement provisions referenced above.
LWDA
Binary LLC
Binary LP
May 9, 2017
Page 3

Accordingly, Lai seeks civil penalties on behalf of herself and all other aggrieved
employees, as well as the State of California, in accordance with Labor Code 2699 et seq.
with respect to these violations.

Thank you for your attention to this matter.

Very truly yours,