Igor Abramov, Plaintiff, v. US LP CAPULA INVESTMENT MANAGEMENT LLP (2026)

The following e-filed documents, listed by NYSCEF document number (Motion 002) 12, 13, 14, 15, 16, 17, 18, 19, 20, 28, 30, 32, 34, 36, 37 were read on this motion to DISMISS.

The dispute arises from Plaintiff Igor Abramov's ("Abramov") termination as the U.S. Chief Compliance Officer and Head of U.S. Compliance and Legal for Defendants Capula Investment US LP and Capula Investment Management LLP (collectively "Capula"). In this action, he asserts a statutory whistleblower retaliation claim against Capula under New York Labor Law § 740. Capula moves to dismiss the Complaint on the ground that prosecuting the whistleblower claim necessarily will require Abramov to reveal confidential client information in violation of applicable attorney ethics rules. In that regard, Capula relies heavily on the First Department's decision in Wise v Consol. Edison Co. of NY, 282 AD2d 335 [1st Dept 2001], which dismissed a former in-house lawyer's common law wrongful termination claim on similar grounds.

This case thus raises questions about whether and to what extent an in-house lawyer/compliance officer such as Abramov may be precluded from asserting a statutory whistleblower retaliation claim under New York law. Since Wise was decided, the legislature has substantially strengthened the statutory protections of corporate whistleblowers, a group that may well crucially include in-house lawyers and compliance officers as among the employees most likely to spot and report potential violations of the law. While ethical restrictions may limit to some extent what information an in-house lawyer/compliance officer can reveal publicly in support of a claim, an outright ban on whistleblower claims by such employees would — in this Court's view — unduly undermine the legislative purpose behind the whistleblower statute, an issue that was not presented in Wise.

For the reasons discussed below, which expand upon the Court's decision rendered on the record after oral argument held on September 16, 2026, the motion to dismiss is denied.

BACKGROUND

According to the Complaint (NYSCEF 1 ["Compl."]), the factual allegations of which are assumed to be true for purposes of this motion, Abramov worked as U.S. Chief Compliance Officer and Head of U.S. Compliance and Legal at Capula from June 18, 2012, until he was terminated on July 10, 2025 (Compl ¶ 7). As reflected by his title, in addition to his in-house counsel responsibilities (id. ¶ 9), Abramov also oversaw Capula's compliance efforts (id. ¶ 8). Abramov alleges that management impeded his efforts to ensure regulatory compliance in fund management, fund administration, and trading (id. ¶ 12) and later fired him for failing to relent from pursuing these issues. (The Court expresses no opinion at this stage as to whether Abramov's concerns were warranted.)

Capula launched its Capula Multi-Strategy Master Fund Limited (the "MS Fund") which contained a "pass-through expense" ("PTE") structure used to charge overhead costs (id. ¶ 14). Throughout 2024, Abramov raised concerns with senior management regarding regulatory requirements concerning the PTE mechanism (id. ¶ 19). Abramov alleges that senior management dismissed his concerns, denied him access to necessary data to review the PTE mechanism, and threatened his employment status unless he changed his regulatory approach (see id. ¶¶ 22—26, 30—36, 43—47).

According to the Complaint, Capula funds regularly enter into " 'cross trades,' where one Capula fund sells its investment portfolio holdings to another Capula fund" (id. ¶ 53). These cross trades inherently raise the possibility of a conflict of interest by benefitting some Capula funds to the detriment of others (id. ¶¶ 54—58). Abramov alleges that he raised concerns about conflicts of interest and regulatory exposure to senior management but was rebuffed (id. ¶¶ 60—67).

The Complaint further alleges that Capula launched a new convertible bonds trading strategy and conducted a "test trade" using investor funds on June 16, 2025 (id. ¶¶ 87—88). After providing approval, Abramov identified "compliance concerns" stemming from operational issues identified due to the test trade (id. ¶¶ 90—92). Abramov alleges that Capula subsequently executed a second test trade before the compliance concerns were addressed (id. ¶¶ 93—95). Abramov then raised his concerns with senior management, withdrew his approval of the test trades, and was "berated" for doing so (id. ¶¶ 96—100). After raising his concerns with Capula's Chief Executive Officer and Chief Legal Officer on July 9, 2025, Abramov was terminated on July 10, 2025 (id. ¶¶108—109).

Procedural Background

Abramov filed the Complaint on March 2, 2026. It contains a single cause of action against Capula, alleging retaliation for whistleblowing activity in violation of New York Labor Law ("NYLL") § 740 (id. ¶¶ 110—115). Capula now moves to dismiss the Complaint pursuant to CPLR 3211(a)(1) and (a)(7) (NYSCEF 12). The Court heard oral argument on September 16, 2026.

DISCUSSION

Standards Governing a Motion to Dismiss

"On a CPLR 3211 motion, the court must 'accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory' " (DKR Soundshore Oasis Holding Fund Ltd. v Merrill Lynch Int'l, 80 AD3d 448, 449 [1st Dept 2011], quoting Leon v Martinez, 84 NY2d 83, 87—88 [1994]). "[H]owever, 'allegations consisting of bare legal conclusions as well as factual claims flatly contradicted by documentary evidence are not entitled to any such consideration' " (Myers v Schneiderman, 30 NY3d 1, 11 [2017] [citations omitted]).

A motion to dismiss under CPLR 3211(a)(1) based on documentary evidence outside the complaint "may be granted 'only where the documentary evidence utterly refutes [the complaint's] factual allegations, conclusively establishing a defense as a matter of law' " (id. at 449—50, quoting Goshen v Mut. Life Ins. Co. of NY, 98 NY2d 314, 326 [2002]). A motion to dismiss under CPLR 3211(a)(7) on the ground that the pleadings fail to state a cause of action may be granted where a plaintiff has not stated a claim cognizable at law or to dispose of an action in which the plaintiff identified a cognizable cause of action but failed to assert a material allegation necessary to support the cause of action (Sud v Sud, 211 AD2d 423, 424 [2d Dept 1995]).

Analysis

To state a viable claim under NYLL § 740, a plaintiff must plausibly allege (1) a protected activity, (2) a retaliatory action, and (3) a causal connection between the two (McSweeney v Cohen, 776 F Supp 3d 200, 276 [SDNY 2025]).

Abramov has adequately pleaded that he was reporting or objecting to conduct that he reasonably believed was unlawful (Lawlor v Wymbs, Inc., 212 AD3d 442, 443 [1st Dept 2023]; Señal v Lynch, 217 AD3d 466, 467 [1st Dept 2023]). For instance, he alleges that he objected to and raised concerns regarding expense allocation and disclosure practices, noting that these were "compliance concerns" (NYSCEF 1 at ¶¶ 43, 50). Abramov also communicated his concerns that cross-trading practices "created significant conflicts of interest and potential regulatory exposure" to his superiors (id. ¶¶ 60—61). Capula argues that mere allegations of "risks" or "potential violations" are insufficient to plead a NYLL § 740 claim (NYSCEF 34 [Defendants' Reply Brief] at 13). However, affording Abramov every possible favorable inference at this stage (Leon, 84 NY2d 83), it is reasonable to interpret those allegations as describing practices that Abramov reasonably believed were unlawful (Lawlor, 212 AD3d at 443). Defendants concede that Abramov has adequately pleaded the other two prongs of his cause of action, though they deny the allegations (NYSCEF 34 at 11 n.9).

In sum, Capula does not seriously question the adequacy of the pleading on its face. Instead, it argues that the complaint should be dismissed because "virtually every substantive allegation" in the complaint is derived from confidential information that Abramov is prohibited from disclosing under New York's Rules of Professional Conduct, 22 NYCRR 1200.0 (NYSCEF 17 at 7). Specifically, Capula argues that RPC 1.6(a) and 1.9(c) prohibit Abramov's disclosure of the information underlying the allegations of the complaint (id.). In particular, "confidential information" includes client information (1) that is protected by the attorney-client privilege, (2) that would be embarrassing or detrimental to the client if disclosed, or (3) that the client has requested to be kept confidential (RPC 1.6 [a])

Capula primarily relies on Wise v Consol. Edison Co. of NY (282 AD2d 335 [1st Dept 2001]) for the broad proposition that a termination-related claim asserted by an in-house counsel against a former employer must be dismissed if permitting the action to proceed would "entail the improper disclosure" of confidential information (Wise, 282 AD2d at 335). In Wise, the First Department dismissed a claim grounded in a common law theory of wrongful discharge brought by an in-house counsel against his former employer, reasoning that "permitting the action to go forward would entail the improper disclosure" of client confidences (id.). Though Wise remains binding precedent (albeit applying a prior iteration of the applicable ethics rules, New York's Code of Professional Responsibility), the instant case is distinguishable in at least two key respects.

First, unlike the plaintiff in Wise, Abramov alleges that he was unlawfully terminated for engaging in statutorily protected whistleblower conduct pursuant to NYLL § 740. Recent amendments to NYLL § 740 significantly expand the range of protected activity under the statute and confirm a clear legislative policy favoring robust protections for whistleblowers (see Spiegel v 226 Realty LLC, 231 AD3d 562, 563 [1st Dept 2024] ["[T]he Whistleblower Law has since been amended . . . [i]t now covers activity 'that the employee reasonably believes' violates law or poses a danger to the public"]). By contrast, Wise involved a common law claim (282 AD2d at 336) and thus did not involve a balancing of the in-house lawyer's general ethical obligations and a robust legislative policy choice to protect corporate whistleblowers with a bespoke cause of action.

Second, Abramov alleges that the complaint's substantive allegations arise from his chief compliance officer role, not his in-house counsel role. Compliance officers—especially those who work for heavily-regulated entities like Capula—perform vital management functions to prevent corporate wrongdoing and ensure that these entities comply with a panoply of regulations. While compliance officers may be lawyers, they need not be. As employees under NYLL § 740, compliance officers are entitled to the whistleblower protections that plaintiff relies on in his complaint (see NYLL § 740 [1] [a] [defining an "employee"]).

The Complaint's central allegations support a reasonable inference that Abramov identified compliance concerns regarding the PTE structure of the MS Fund, cross-trading issues, and test trades, reported those concerns to senior management, and suffered retaliation for doing so (see Compl. ¶¶ 22—26, 30—36, 43—47, 53—67, 87—100). Abramov thus sufficiently alleges that the allegations in his complaint arise from his compliance role rather than his role as in-house counsel.

In response, Capula argues that it makes no difference whether Plaintiff was acting in a compliance role or a legal role when he obtained the confidential information on which his claim is based. (NYSCEF 34 at 5—6). In support of this admittedly "broad holding" (NYSCEF 34 at 6), Capula relies on Johnson v MediSys Health Network (2011 WL 5222917 [EDNY June 1, 2011] [Pohorelsky, Magistrate Judge], report and recommendation adopted as mod, 2011 WL 4101323 [EDNY Sept. 8, 2011]). In that case, the court recognized that "[a]s General Counsel and Corporate Compliance Officer, the plaintiff acted as both an attorney and as a member of management" (id. at *8), but held that that it did not matter whether an in-house counsel obtained confidential information in a legal or business capacity because the "critical issue" is that the attorney later sought to use the confidential information to the client's disadvantage (id. at *25).

While the confidentiality concerns expressed in Johnson are legitimate, the Court respectfully declines to apply them to preclude Abramov's statutory whistleblower claim under New York law. Under Defendants' proposed rule, a standard confidentiality agreement would be sufficient to broadly foreclose whistleblowing by a compliance officer/in-house counsel. Moreover, companies could largely foreclose protected disclosures by their compliance officers simply by choosing to hire only lawyers for those roles. In sum, categorically denying statutory whistleblower remedies to attorneys who serve as compliance officers could substantially undermine the effectiveness of the statutory regime.

To be sure, the Court recognizes the importance of preserving client confidences and does not suggest that a lawyer should be free to reveal such confidences absent an extraordinary justification.¹ As this case progresses, the Court may rule that certain communications and testimony are inadmissible and may also entertain appropriate sealing motions to address legitimate confidentiality concerns. However, the Court finds that the legislature's clear policy favoring robust whistleblower protections weighs against imposing a per se rule requiring summary dismissal of a statutory whistleblower retaliation claim simply because the plaintiff is an attorney.

Accordingly, it is

ORDERED that Defendant's motion to dismiss the Complaint is DENIED; it is further

ORDERED that Defendant file an Answer within twenty-one (21) days of the date of this Order; and it is further

ORDERED that the parties appear for a preliminary conference on November 10, 2026, at 11:00 a.m., with the parties circulating dial-in information to chambers at SFC-Part3@nycourts.gov in advance of the conference.²

This constitutes the Decision and Order of the Court.

DATE 10/1/2026

JOEL M. COHEN, J.S.C.

FOOTNOTES

1.   Although a whistleblower claim presupposes that Abramov is revealing unlawful activity, he has not at this point sought to defend his use of otherwise confidential information by reference to the crime/fraud exception to the attorney-client privilege (e.g., In re New York City Asbestos Litig., 109 AD3d 7, 10—11 [1st Dept 2013]). Accordingly, the Court does not rely on that exception in deciding this motion.

2.   If the parties agree on a proposed preliminary conference order in advance of the conference date (consistent with the guidelines in the Part 3 model preliminary conference order, available online at https://www.nycourts.gov/LegacyPDFS/courts/comdiv/NY/PDFs/Part3-Preliminary-Conference-Order.pdf), they may file the proposed order and email a courtesy copy to chambers with a request to so-order in lieu of holding the conference.

Joel M. Cohen, J.