Scale AI, an AI data-labelling company, has filed a lawsuit in the US District Court, Northern District of California, against rival startup Mercor and a former Scale AI executive, Eugene Ling.
According to reports, the complaint alleges that Ling misappropriated over 100 confidential documents, many of which detailed key customer strategies, by transferring them to his personal Google Drive shortly after meetings with Mercor leadership.
Mercor, however, denies using any of Scale’s proprietary information. Co‑founder Surya Midha acknowledged that Ling had access to some documents stored on his personal drive, which Mercor claims they did not access. Mercor offered to have Ling destroy the files or reach an alternative resolution, but Scale responded that such an action could destroy crucial evidence.
Scale AI, currently valued at around $29 billion following a substantial $14-15 billion investment from Meta for a 49% stake, emphasised the seriousness of the claim. A spokesperson stated, “We won’t allow anyone to take unlawful shortcuts at the expense of our business.”
The lawsuit alleges that Mercor hired Ling to strengthen its relationship with a key Scale client, claiming she took significant documents related to that client. It added that Ling contacted the client for Mercor while still at Scale, and that Mercor still employs her for that account.
The Meta partnership, finalised in June, has already triggered client shifts, with some major partners reportedly reducing ties with Scale AI.
In related developments, Elon Musk’s AI firm xAI has also filed a lawsuit against a former engineer, Xuechen Li, accusing him of stealing trade secrets before joining OpenAI, reflecting a broader trend of legal battles over data and personnel in the AI space. Scale’s lawsuit seeks a court injunction to prevent Mercor from using any of the allegedly stolen information, the return of all sensitive documents, damages and coverage of legal costs.
