In June, I read this AP story by Maryclaire Dale about an unfair competition lawsuit filed by Bimbo Bakeries USA, better known as the maker of Thomas’ English Muffins – the “nooks and crannies” muffin – against its former executive, Chris Botticella, who had accepted a position with Hostess Brands, Inc., which makes baked goods under several brands, including Hostess, Wonder Bread, and Drake’s (popularized in a 1992 Seinfeld episode)
Bimbo (sorry, but that’s the plaintiff’s name) wanted to prevent Botticella, who was one of only seven executives with the knowledge necessary to make the muffins, from going to work for Hostess. Bimbo earns $500 million per year in sales from Thomas’ English muffins, so the recipe, and its potential loss to Bimbo, clearly has tangible value.
I thought the case was an interesting example of litigation that typically can be fairly abstract — who can’t relate to nooks and crannies? Anyway, I lost track of the lawsuit until last week, when I read that the Third Circuit Court of Appeals had issued an opinion affirming the district court’s grant of an injunction that prevents Botticella from working for Hostess, at least pending the outcome of the trial on Bimbo’s claims. Bimbo Bakeries USA, Inc. v. Botticella, 2010 WL 2902729 (3rd. Cir., July 26, 2010).
Here’s how the story starts:
Botticella was Bimbo’s Vice President of Operations for California, and was paid $250,000 per year. He had access to the "nooks and crannies" recipe, as well as other confidential and proprietary information for all of Bimbo’s products, including those made under the Entenmann’s, Boboli, and Stroehmann’s brands. Botticella had signed a confidentiality and non-disclosure agreement for his employment with Bimbo.
In September 2009, Hostess offered Botticella a position in Teas as Vice President of Bakery Operations for its eastern region. He accepted the position in October and agreed to start in January 2010. He didn’t tell anyone at Bimbo that he had had accepted the position, however, which enabled him to have continued access to Bimbo’s confidential and proprietary information. Botticella claimed that he continued to work for Bimbo in order to receive his 2009 bonus and to complete a couple of projects he had been working on.
After Botticella had accepted its offer, Hostess had him execute an agreement acknowledging that Hostess wasn’t interested in any proprietary or confidential information that Botticella had acquired from Bimbo and that he wouldn’t disclose such information to Hostess.
Botticella told his superiors at Bimbo on January 4, 2010 that he was leaving on January 15, but didn’t say he was going to work for Hostess, and apparently no one at Bimbo asked him about his plans. On January 12, Hostess announced that Botticella was becoming its VP of Bakery Operations, effective January 18. Bimbo learned of Hostess’ announcement on January 13, and after Botticella confirmed his job offer, he was ordered to vacate Bimbo’s offices that day.
The litigation started when Bimbo filed suit to protect its trade secrets and moved for injunctive relief. The district court held a hearing where Bimbo presented Botticella’s videotaped deposition and live testimony from a computer forensics expert (who testified regarding Botticella’s use of his company laptop in December 2009 and January 2010) and one of its own executives. Botticella presented no evidence on his own behalf.
The court granted Bimbo’s motion and preliminarily enjoined Botticella from starting work with Hostess and from divulging any confidential or proprietary information belonging to Bimbo and ordering him to return any of Bimbo’s property. The court issued the injunction on February 9, 2010, which was to remain in effect until trial, which was scheduled to start on April 12, 2010. Botticella appealed the district court’s order, which postponed the trial and caused the injunction to remain in effect.
Botticella’s appeal presented the issue of whether the district court erred in enjoining him from working for Hostess until after the court had resolved the merits of Bimbo’s claim against him.
The appeals court applied the Third Circuit’s four-factor test for issuance of an injunction: (1) the movant’s likelihood of success on the merits; (2) the movant will suffer irreparable harm if the injunction is denied; (3) granting relief will not result in even greater harm to the non-moving party; and (4) the public interest favors such relief.
The court focused on Bimbo’s likelihood of success on the merits, and ultimately decided that under Pennsylvania state law, the district court correctly ruled that Bimbo demonstrated a likelihood of success on its misappropriation of trade secrets claim.
The court’s analysis was detailed, but this excerpt aptly summarizes its ruling:
Even assuming that the District Court erred by drawing an adverse inference from Botticella’s failure to testify, the conclusion that Botticella intended to use Bimbo’s trade secrets during his employment with Hostess rests on a solid evidentiary basis, namely, Botticella’s "not disclosing to Bimbo the acceptance of a job offer from a direct competitor, remaining in a position to receive Bimbo’s confidential information and, in fact, receiving such information after committing to the Hostess job, and copying Bimbo’s trade secret information from his work laptop onto external storage devices.
For the second factor, the court found that the district court did not abuse its discretion in finding that Bimbo would suffer irreparable harm without injunctive relief because the disclosure of its trade secrets to Hostess would place it at a competitive disadvantage that a legal remedy could not redress.
As to the harm to Botticella that an injunction would cause, the court recognized that he was harmed by being unable to go to work for Hostess, but noted that he had been paid for the 11 weeks of vacation he had accrued with Bimbo. The court also observed that Botticella had "in effect extended the duration of the preliminary injunction by pursuing an interlocutory appeal," which caused the district court to extend the injunction.
Finally, the court concluded that the public interest was served by granting the preliminary injunction, as "preventing the misappropriation of Bimbo’s trade secrets outweighs the temporary restriction on Botticella’s choice of employers."
The opinion demonstrates that Botticella had some valid objections to Bimbo’s assertion that its trade secrets would be misappropriated by his employment with Hostess, he didn’t do himself any favors by not telling anyone at Bimbo that he had taken the job with Hostess — which gave him continued access to Bimbo’s confidential and proprietary information — until Bimbo learned from Hostess’ announcement that Botticella had accepted a new position. Equally damaging was the computer forensics expert’s analysis that:
the person logging in as Botticella had accessed twelve files within a span of thirteen seconds on January 13, 2010, Botticella’s last day at Bimbo. Significantly this access occurred minutes after the phone call in which Botticella finally disclosed to Bimbo his plans to work for Hostess and Bimbo told him to cease working for it.
Considering what was and is at stake in terms of the value of Bimbo’s trade secrets, such as the nooks and crannies recipe, Bimbo had a strong case for an injunction. But the facts suggest, at least to me, that despite Botticella’s protestations that he had no intention of using such information in his new position, his conduct in the days and weeks preceding his termination bolstered Bimbo’s case.
But there’s more to the story. Apparently, Botticella wasn’t as valuable to Hostess as he had thought. According to this story in last Friday’s New York Times, William Neuman reports that Hostess is no longer holding Botticella’s job for him. (Hostess’ spokesperson didn’t mince any words: "We have a business to run. We have to move on.") So what effect — if any — does Hostess’ withdrawal of its job offer have on Bimbo’s lawsuit against Botticella? Let me know what you think.
Botticella’s saga has also been the subject of discussion in several blogs, including this post on Seyfarth Shaw’s Trading Secrets blog, this post on Max Kennerly’s Litigation and Trial blog, and this post on Womble Carlyle’s Trade Secrets Blog.