Panera, LLC v. Nettles et al
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Plaintiffs motion for a Temporary Restraining Order is GRANTED. (Doc. No. 2 .) A separate Temporary Restraining Order will be filed this day. IT IS FURTHER ORDERED that Plaintiff shall post within 4 8 hours a bond in the sum of $200,000, in compliance with Rule 65(c) of the Federal Rules of Civil Procedure. IT IS FURTHER ORDERED that the parties shall submit, within three (3) days of this Order, a proposed scheduling plan for disclosure and proposed dates for a combined preliminary and permanent injunction hearing. Signed by District Judge John A. Ross on 8/3/16. (JAB)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
MICHAEL R. NETTLES and
PAPA JOHN’S INTERNATIONAL, INC.,
Case No. 4:16-cv-1181-JAR
MEMORANDUM AND ORDER
This matter is before the Court on the motion of Plaintiff Panera, LLC (“Panera”), for a
temporary restraining order (“TRO”) (Doc. No. 2). A hearing on Panera’s motion was held on July
27, 2016, at which counsel for Panera and Defendants Michael Nettles (“Nettles”) and Papa John’s
International, Inc. (“Papa John’s”) appeared. For the following reasons, the motion will be granted.
The facts, summarized herein, are set forth in Panera’s complaint. Panera is a corporation
that operates “bakery-cafes,” located in urban, suburban, strip mall, and regional mall locations
throughout the country. Nettles was an employee of Panera from 2012 through June 2016, and he
served as the Vice President of Architecture in Panera’s Information Technology department.
Panera describes Nettles as “a critical leader in Panera’s IT department,” and asserts that he “was
invited to join many of Panera’s high-level discussions relating to its strategies as it relates to use of
its technologies.” (Doc. No. 1 at 4-5.) Panera also alleges that it “prides itself on being several
steps ahead of the game in developing its technological systems,” and cites as an example its recent
“Panera 2.0” program, “an integrated, comprehensive, end-to-end solution that aims to reduce wait
times, improve order accuracy, and minimize or eliminate crowding[.]” Id. Panera asserts that in
his role as Vice President of Architecture, Nettles had access to valuable and confidential
information, including information related to Panera’s strategic business plans.
As a condition of Nettles’ employment with Panera, he signed a confidentiality and noncompetition agreement in 2012, and a revised version of that agreement in 2013. Neither party
disputes that both iterations of the agreement were supported by adequate consideration. The 2013
amended agreement specifically listed Papa John’s as Panera’s competitor (along with
approximately 28 other companies), and barred Nettles from working for competitor companies for
a period of one year following the end of his employment with Panera. The agreement stated that a
violation of the non-compete clause would constitute irreparable harm to Panera, and that an
injunction would issue in the face of such a violation. (Doc. No. 7-1 at 1.)
On June 8, 2016, Nettles sent a lengthy email to Panera’s CEO explaining his desire to
accept an offer of employment in a corporate executive role with Papa John’s based in part on his
wife’s recent and untimely death, and requesting a waiver of the non-competition agreement.
Panera’s CEO did not agree to such a waiver. Despite not receiving a waiver from Panera’s CEO,
Nettles tendered his resignation to Panera on July 1, 2016, with sixty days’ notice, but Panera asked
him to leave immediately. Nettles began working for Papa John’s as Senior Vice President, Chief
Information and Digital Officer, on July 18, 2016.
Panera claims that Nettles stored and had access to confidential and proprietary Panera
materials on his personal laptop, and potentially on other electronic personal devices. Upon his
resignation, Nettles apparently created a backup directory of Panera’s files, which he transferred to
a Panera-issued laptop. Nettles then deleted the Panera materials from his personal computer, and
seemingly returned his personal computer to the factory-issued settings.1
At the hearing held on July 27, 2016, Nettles’ counsel suggested that Nettles merely deleted the
information from his laptop. However, Nettles’ counsel previously represented, in a letter to
Panera’s counsel, that the laptop had been returned to “‘factory’ state.” (Doc. No. 7-3 at 11).
Panera’s Complaint alleges that Nettles’ actions constitute a breach of contract, and that by
hiring Nettles, Papa John’s negligently interfered with a contractual relationship. In addition,
Panera asserts causes of action for violation of the Defend Trade Secrets Act, the Missouri Uniform
Trade Secrets Act, the Missouri Computer Tampering Act, and Civil Conspiracy against both
In the instant motion for a TRO, Panera asks that the Court enjoin Papa John’s from
employing Nettles or using any confidential information derived from Nettles. Panera asks that
Nettles be similarly enjoined from working for or disclosing trade secrets or confidential
information to Papa John’s. Finally, Panera asks the Court to order Nettles to provide his personal
laptop and any other materials that may have housed Panera information for review and inspection.
In response, Nettles argues that the confidentiality and non-competition agreement is not
enforceable because (among other reasons) Panera and Papa John’s are not competitors.
addition, Nettles argues he essentially signed the 2013 agreement under duress because his wife was
dying and battling cancer. Nettles also contends that an agreement requiring Nettles not to divulge
Panera’s confidential information would be a sufficient and less-restrictive means of preventing any
irreparable harm. Finally, Nettles asserts that Panera has offered mere conjecture regarding the
purported misappropriation of trade secrets.
In determining whether to issue a TRO, the Court must consider the following four factors:
(1) the threat of irreparable harm to the movants; (2) the balance between this harm and the injury
that granting the injunction will inflict on other parties litigant; (3) the probability that movants will
succeed on the merits; and (4) the public interest. Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d
109, 113 (8th Cir. 1981) (en banc). “While no single factor is determinative, the probability of
Panera suggests that this means the “metadata” associated with the information—which might
reveal when or to whom Nettles transferred the information—is no longer accessible.
success factor is the most significant.” Home Instead, Inc. v. Florance, 721 F.3d 494, 497 (8th Cir.
2013) (citation omitted). The party requesting injunctive relief bears the “complete burden” of
proving that an injunction should be granted. Gelco Corp. v. Coniston Partners, 811 F.2d 414, 418
(8th Cir. 1987).
A. Likelihood of Success on the Merits
The Court is satisfied that Panera is likely to succeed on the merits of several of its claims,
including its request for enforcement of the confidentiality and noncompetition agreement, as well
as its request for injunctive relief in order to protect the disclosure of its confidential information
and trade secrets.
Under Missouri law, non-compete covenants are enforced if they are reasonable under the
circumstances and their enforcement serves legitimate protectable interests. Mayer Hoffman
McCann, P.C. v. Barton, 614 F.3d 893, 908 (8th Cir. 2010). Here, the non-competition agreement
at issue limits Nettles’ employment for only one year, which is reasonable. See Alltype Fire Prot.
Co. v. Mayfield, 88 S.W.3d 120, 123 (Mo. Ct. App. 2002) (finding a two-year limitation on
employment reasonable). Further, Nettles has accepted employment with a company specifically
included in the agreement’s discrete and reasonable list of competitors, which appears to be, for
purposes of the TRO, an actual competitor to Panera. Therefore, the Court finds the agreement
reasonable and valid, and concludes that Panera will likely succeed on the merits.
Defendants contend that the non-competition agreement is not enforceable because Panera
and Papa John’s are not actually competitors under Missouri law. They direct this Court to
Victoria’s Secret Stores, Inc. v. May Dep’t Stores Co., 157 S.W.3d 256 (Mo. Ct. App. 2004), for
the proposition that even a purported competitor selling the same products may not be a
“competitor” under the narrow definition ascribed to that term for purposes of construing
noncompetition agreements. See also id. at 262 (“Covenants not to compete are enforceable only
to protect against unfair competitive use of either customer contacts or trade secrets.”) Defendants
assert that Papa John’s and Panera do not market the same product; Papa John’s focuses its
business on pizza, and Panera largely markets bread items, sandwiches, soups, and salads.
However, Panera has proffered evidence—including Papa’s John’s own marketing
materials, submitted into the record during the hearing—that Papa John’s and Panera both target a
so-called “clean ingredient consumer,” and that they are direct competitors in the realm of carryout
options for such a consumer base. Panera also distinguishes Victoria’s Secret Stores, Inc. because
the noncompetition agreement in that case did not specifically name the competing business in the
way that Panera’s agreement names Papa John’s as a competitor. Panera suggests that no Missouri
case has refused to enforce a noncompetition agreement against a named competitor when that
agreement was otherwise reasonable.
The Court need not make any definitive finding on the breadth of Missouri law as expressed
in Victoria’s Secret Stores, Inc. at this juncture as the facts in this case appear sufficiently
distinguishable; such a final determination is more appropriately taken up in any eventual motion
for a preliminary or permanent injunction. The Court finds it sufficient to note, for purposes of this
TRO, that the confidentiality and non-competition agreement directly names Papa John’s, and
appears to be reasonably constructed so as to prohibit unfair competition without improperly
proscribing the signatory’s ability to find new employment. Although the agreement could be
subject to a broad interpretation—one that might be vulnerable to claims of overbreadth—the case
before the Court does not require such a broad construction, but instead is limited to enforcement
of the agreement against a specifically named competitor.
The Court also finds Panera likely to succeed on the merits of its trade secret claims. In
order to establish a violation of the Missouri Uniform Trade Secrets Act, a plaintiff must
demonstrate “(1) the existence of a protectable trade secret, (2) misappropriation of those trade
secrets by Defendants, and (3) damages.” Secure Energy Inc. v. Coal Synthetics, LLC, 708 F. Supp.
2d 923, 926 (E.D. Mo. 2010). Missouri law defines a trade secret as: “information, including but
not limited to, technical or nontechnical data, a formula, pattern, compilation, program, device,
method, technique, or process . . .” (emphasis added.)
Mo. Rev. Stat. § 417.453(4).
Misappropriation is defined as the use of a trade secret:
without express or implied consent if that person: (a) used improper
means to acquire knowledge of the trade secret; (b) knew or had
reason to know that it was a trade secret and that knowledge had been
acquired by accident or mistake; or (c) at the time of the use, knew or
had reasons to know that knowledge of the trade secret was (1)
derived from or through a person who had utilized improper means to
acquire it, (2) acquired under circumstances giving rise to a duty to
maintain its secrecy or limit its use, or (3) derived from or through a
person who owed a duty to the person seeking relief to maintain its
secrecy or limit its use.
Secure Energy, 708 F. Supp.2d at 926.
Based upon the record, the Court finds that during his employment with Panera, Nettles was
privy to and worked extensively with Panera’s trade secrets regarding such matters as innovations
in ordering and delivery technologies. Nettles’ deletion of the documents in his possession, and
return of his computer to “factory state”, gives rise to a strong inference of irreparable harm, and
suggests that Nettles may have violated his undisputed duty to maintain or limit the use of the
information he possessed. Thus, the Court finds that Panera has a reasonable likelihood of success
on the merits of its trade secrets claims.2
B. Irreparable Harm to Panera Absent an Injunction
Irreparable harm occurs when a party has no adequate remedy at law, typically because its
injuries cannot be fully compensated through an award of damages. Gen. Motors Corp. v. Harry
Brown’s, LLC, 563 F.3d 312, 319 (8th Cir. 2009). Courts regularly find irreparable harm where a
Although the Court’s analysis has focused on Panera’s Missouri trade secrets claim, an analysis
under the Defend Trade Secrets Act would likely reach a similar conclusion.
non-compete agreement states that its breach constitutes irreparable injury. See, e.g., Church Mut.
Ins. Co. v. Sands, No. 14-CV-3119-S-DGK, 2014 WL 3907831, at *3 (W.D. Mo. Aug. 11, 2014)
(holding that the breach of the non-compete agreement “per se supports an inference of irreparable
harm especially since [defendant] consented in his non-compete agreement to an injunction against
him in the event of breach”).
By virtue of his position with Panera, Nettles was privy to Panera’s substantial confidential
and trade secret information directly affecting Panera’s actual and prospective development of
integrated technology systems, including ongoing business strategy.
His employment as a
technology executive at Papa John’s is likely to draw upon, as a matter of course, his experience
and knowledge with regard to Panera’s confidential systems and business strategy. Although
Missouri has not formally adopted the doctrine of inevitable disclosure—and neither has the Eighth
Circuit, with regard to federal trade secrets claims—the Court finds the rationale underpinning such
a theory helpful to understanding why Nettles’ performance of his new role would almost certainly
require him to draw upon and use trade secrets and the confidential strategic planning to which he
was privy at Panera. See, e.g., H & R Block E. Tax Servs., Inc. v. Enchura, 122 F.Supp.2d 1067,
1076 (W.D. Mo. 2000) (recognizing that to prevail under theory of inevitable disclosure,
“employers must demonstrate inevitability exists with facts indicating that the nature of the secrets
at issue and the nature of the employee’s past and future work justify an inference that the employee
cannot help but consider secret information”).
Courts generally hold that the disclosure of
confidential information such as business strategy will result in irreparable harm to the plaintiff, and
the Court agrees that Nettles’ immediate employment with Papa John’s is likely to lead to such
disclosure. See, e.g., Experitec, Inc. v. Stachowski, No. 4:14CV00154 AGF, 2014 WL 11089362, at
*3 (E.D. Mo. Jan. 30, 2014); Reg Seneca, LLC v. Harden, 938 F.Supp.2d 852, 860–61 (S.D. Iowa
2013); TLC Vision (USA) Corp. v. Freeman, No. 4:12CV01855 ERW, 2012 WL 5398671, at *5
(E.D. Mo. Nov. 2, 2012).
But even without relying on inevitable disclosure, the Court finds that here, where the
irreparable harm to Panera may include not only the divulgence of trade secrets, but also the
violation of a binding non-competition agreement designed to protect Panera’s interests, Panera’s
remedy at law is inadequate, because its damages would be difficult if not impossible to measure.
Baker Electric Co-op., Inc. v. Chaske, 28 F.3d 1466, 1473 (8th Cir. 1994); Systematic Business
Services, Inc. v. Bratten, 162 S.W.3d 41, 51 (Mo. Ct. App. 2005). Furthermore, Nettles expressly
agreed that a violation of the non-compete clause of his agreement would constitute irreparable
harm to Panera, and that an injunction issued against him would be a likely remedy. (Doc. No. 7-1
at 1.) For all of these reasons, there is sufficient likelihood of irreparable harm to justify imposition
of a TRO.
Finally, Defendants have urged the Court to consider Baxter Int’l, Inc. v. Morris, 976 F.2d
1189, 1197 (8th Cir. 1992), in which the Eighth Circuit affirmed that “the district court’s order
enjoining [employee] from the use or disclosure of confidential information he acquired at [new
employer] provides [former employer] with adequate protection.”) The Court finds Baxter wholly
inapposite. First, the Eighth Circuit’s consideration of the enforcement of the noncompetition
agreement in Baxter focused largely on choice of law issues that are not germane to this case.
Ultimately, the Court considered application of the noncompetition agreement under Illinois law,
again making the case malapropos to the instant matter.
Further, the Eighth Circuit merely
affirmed the district court’s decision that, based on the facts of that case, a confidentiality order was
sufficient to protect the plaintiff’s interests, and an order prohibiting the defendant from working
for the new employer was not necessary. Because of Nettles’ executive position and knowledge of
business strategy, and because of the apparent competitive relationship between the two companies,
the Court finds that enforcement of the noncompetition agreement is necessary and appropriate
C. Balance of Harms
In balancing the harm to the parties caused by entry of the TRO, the Court is mindful of
Nettles’ argument that he signed the 2013 amended agreement under duress. While the Court is
sympathetic to Nettles’ situation at the time he signed the agreement, it is also true that Nettles did
not challenge or seek to amend the terms of the agreement between 2013, when he signed it, and
mid-2016, when the events giving rise to this lawsuit occurred. Additionally, the harm to Nettles, if
enjoined at least until such time as the Court can hold a preliminary injunction hearing, can be
satisfied by the payment of any monies that may be lost during the period of non-employment.
Thus, the harm that Panera has suffered, and will continue to suffer absent an injunction, outweighs
any harm to Nettles if his actions in competing with Panera are enjoined.
However, pursuant to Rule 65(c) of the Federal Rules of Civil Procedure, the Court will
order that Panera provide a surety bond in the amount of $200,000.00, which Panera must post as
security for the payment of such costs and damages (if any) as may be incurred or suffered by
Nettles if he is found to have been wrongfully enjoined or restrained. In deciding upon this amount,
the Court has considered Nettles’ weekly compensation at Papa John’s and the time that will likely
be required for the Court to hear and decide the motion for preliminary injunction. The Court has
also considered in determining the bond an amount for Defendants’ attorneys’ fees, should they be
D. The Public Interest
Here, the balance of the equities also favors granting Panera’s motion for injunctive relief.
Enjoining Nettles from violating Missouri statutes and his contractual obligations will not harm the
public, as it will continue to have access to Papa John’s (and other competitors’) products and
Conversely, denying injunctive relief will undermine the enforcement of statutes
including the Defend Trade Secrets Act and the Missouri Uniform Trade Secrets Act.
IT IS HEREBY ORDERED that Plaintiff’s motion for a Temporary Restraining Order is
GRANTED. (Doc. No. 2.) A separate Temporary Restraining Order will be filed this day.
IT IS FURTHER ORDERED that Plaintiff shall post within 48 hours a bond in the sum of
$200,000, in compliance with Rule 65(c) of the Federal Rules of Civil Procedure.
IT IS FURTHER ORDERED that the parties shall submit, within three (3) days of this
Order, a proposed scheduling plan for disclosure and proposed dates for a combined preliminary
and permanent injunction hearing.
JOHN A. ROSS
UNITED STATES DISTRICT JUDGE
Dated this 3rd day of August, 2016.
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