Panera gets TRO against IT executive who defected to Papa John's
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Monday, August 8, 2016

Panera gets TRO against IT executive who defected to Papa John's

By Brandi O. Brown, J.D. In a dispute over a confidentiality and noncompetition agreement, a federal district court in Missouri granted a TRO to Panera after a Vice President of Architecture in Panera's Information Technology department left to work for Papa John's. The court was satisfied that Panera would likely succeed on the merits of several claims, including the claims under the confidentiality and noncompetition agreement, and that it would likely suffer irreparable harm were it not to issue an injunction. Panera was ordered to post a $200,000 bond under Rule 65(c) (Panera, LLC v. Nettles, August 3, 2016, Ross, J.). Asked for waiver, left anyway. In 2012 and 2013, the Panera VP signed confidentiality and noncompete agreements. Listed among the competitors for whom the VP would not be allowed to work for one year following the end of his employment was Papa John's. Nevertheless, in early June 2016, the VP sent an email to Panera's CEO asking for a waiver from the agreement, explaining his desire, based in part on his wife’s recent death, to accept an offer from Papa John's. The CEO did not agree to the waiver. Nonetheless, the employee offered his resignation in early July, and although he provided 60 days' notice, he was asked to leave immediately. He began working as a Senior Vice President and Chief Information and Digital Officer for Papa John's just a few weeks later. Panera serves up suit. Panera sued alleging that the VP's actions constituted a breach of contract and that Papa John's had negligent interfered with a contractual relationship when it hired the employee. It also asserted causes of action under several Missouri laws, including trade secret laws. It later sought a temporary restraining order enjoining Papa John's from employing the former VP and/or using any confidential information it had gained from the employee. It also sought to enjoin the former VO from working for Papa John's or disclosing confidential information to his new employer. Noncompete reasonable. Considering four factors, including the threat of irreparable harm to Panera, the balance between that harm and the injury that would be inflicted on the defendants, the probability of Panera's success on the merits, and the public interest, the court granted the motion. Panera was likely to succeed on the merits of multiple claims, including its request for enforcement of the agreement. Under Missouri law, the court explained, such covenants are enforced if they are reasonable under the particular circumstances and if enforcement of the covenant would serve "legitimate protectable interests." In this case the agreement limited the individual defendant's employment for a period of one year, which was reasonable. Moreover, the court noted, the employee accepted a job with a company that was included in what it deemed to be a "discrete and reasonable list of competitors," and that company appeared to be Panera's actual competitor. Although the defendants contended that Papa John's was not an actual competitor with Panera under Missouri law, the court was not persuaded. Panera produced evidence that both restaurants target a certain type of customer, a "clean ingredient customer," and a particular dining option, i.e., carryout. Trade secrets. The court also concluded that Panera was likely to succeed on the merits of the trade secret claims. During his employment with Panera, the VP worked extensively with trade secrets such as ordering and delivery technology innovations. Moreover, the fact that he deleted documents from his personal computer and returned that computer to its factory settings "gives rise to a strong inference of irreparable harm," the court added, and suggested that he might have "violated his undisputed duty to maintain or limit the use of the information he possessed." Panera would suffer irreparable harm otherwise. The VP’s work with confidential and trade secret information also led the court to conclude that Panera's could suffer irreparable harm based on his new employment with Papa John's. His new employment was "likely to draw upon, as a matter of course, his experience and knowledge with regard to Panera’s confidential systems and business strategy." Although noting that Missouri and the Eighth Circuit have not adopted the inevitable disclosure doctrine, the court explained that it nevertheless found that doctrine’s rationale "helpful to understanding" why the employee's new job "would almost certainly require him to draw upon and use trade secrets and the confidential strategic planning to which he was privy at Panera." The court agreed that in this case the employee's immediate employment by Papa John's was likely to lead to disclosure. Moreover, the court noted, because the harm also included violation of a binding agreement not to compete, the former employer's remedy at law was not adequate because damages would be nearly impossible to measure. The balance of harms weighed in Panera's favor, even though the VP argued that he had signed the 2013 agreement under duress caused by his wife's terminal illness. The balance of equities also favored granting the motion because the public would not be harmed by the injunction, but denial would undermine enforcement of the law. The court granted the motion and required Panera to post a bond in the amount of $200,000.

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