Scale AI Sues Former Employee and Competitor Mercor Over Alleged Corporate Espionage Amid Industry Turmoil

Scale AI is facing continued turbulence amid a series of high-profile changes, including a multibillion-dollar investment from Meta, the departure of CEO Alexandr Wang to join Meta, and a 14% workforce reduction. Now, the company has escalated the drama by filing a lawsuit against a former employee, Eugene Ling, and his current employer, Mercor, a growing competitor in the AI data labeling space. The lawsuit, filed in the U.S. District Court for the Northern District of California, alleges that Ling, who served as Scale’s head of engagement management, stole over 100 confidential documents before leaving the company. These documents reportedly included proprietary strategies for managing key clients, internal business plans, and sensitive information tied to one of Scale’s most important customers. According to the complaint, Ling downloaded a large number of these files the day after meeting with Mercor’s CEO. The suit claims that during this meeting, Ling began actively recruiting the customer to switch to Mercor while still employed at Scale. Evidence cited in the filing includes a message Ling sent to an employee of the customer, in which he said, “I’m staying within the data space and I’m actually really excited about [how] this new company can support you.” When asked if he meant Mercor, Ling reportedly replied, “Are you working with Mercor already?” The two then arranged a follow-up call. The lawsuit also alleges that Ling attempted to poach multiple Scale employees, engaging in direct outreach to researchers and team members at the company. Correspondence cited in the filing shows he used personal messaging channels to discuss potential moves to Mercor. Scale’s legal action underscores the intense competition and high stakes in today’s AI industry, where access to quality training data and top talent can be decisive. The case comes amid a wave of corporate reshuffling, with executives and engineers frequently moving between major players like OpenAI, Anthropic, Google, Meta, Microsoft, and xAI. Just days before Scale’s lawsuit, Elon Musk’s xAI filed a separate suit against former engineer Xuechen Li, accusing him of stealing trade secrets and company data before resigning to join OpenAI. The complaint alleges Li copied confidential information from his work laptop and sold nearly $7 million in stock shortly before his departure. Scale is seeking damages, legal fees, and a court order preventing Mercor from using any stolen information. The company also wants the immediate return of all proprietary documents. In a statement, Joe Osborne, a Scale AI spokesperson, said, “Scale has become the industry leader on the strength of our ideas, innovation, and execution. We won’t allow anyone to take unlawful shortcuts at the expense of our business.”