Scale AI Sues Ex-Employee and Mercor Over Alleged Customer Poaching
Scale AI Files Lawsuit Against Former Employee and Rival Mercor
Scale AI, a leading provider of data preparation services for AI models, has initiated a lawsuit against its former sales executive Eugene Ling and competitor Mercor. The legal action, filed on September 3, 2025, alleges that Ling misappropriated over 100 confidential documents related to Scale's customer strategies and proprietary information before joining Mercor.
Key Allegations in the Lawsuit
- Misuse of Confidential Data: Scale claims that Ling attempted to use confidential files to pitch Mercor's services to one of Scale’s most significant customers—referred to in court documents as "Customer A"—while still employed at Scale.
- Trade Secret Misappropriation: The company is suing Mercor for allegedly attempting to leverage these documents to win over Customer A and other major clients, which could result in contracts worth millions.
- Breach of Contract: Ling faces separate claims for violating his contractual obligations to Scale by allegedly retaining and exploiting sensitive information.
Mercor's Response
Surya Midha, co-founder of Mercor, has denied any use of Scale's proprietary data. According to Midha, while Ling did have access to old documents stored on a personal Google Drive, Mercor has never accessed these files and is actively investigating the matter. Midha stated that Mercor proactively contacted Scale to offer a resolution, including destroying the files, and is awaiting a response.
Context: Competitive Tensions in the AI Data Industry
The lawsuit underscores the intensifying competition in the AI data preparation sector, especially as companies like Mercor gain traction by hiring specialized talent—including PhDs—to train large language models (LLMs). Despite Scale’s recent $14.3 billion investment from Meta (acquiring a 49% stake), several of Scale’s major clients—particularly those competing with Meta—have reportedly ended their contracts with the company.
Mercor’s rising profile and its ability to attract talent from competitors have made it a formidable player in the AI data training market. According to recent reports, Meta’s core AI unit (TBD Labs) continues to work with Mercor and other LLM training providers, even after its partnership with Scale.
What Happens Next?
Scale is seeking a comprehensive list of all documents in Ling’s possession and wants to prevent Ling from working with Customer A. The outcome of this case could set important precedents for data privacy, trade secret protections, and talent movement in the rapidly growing AI services industry.
