Bimbo Bakeries USA, Inc. ("Bimbo") is one of the four largest companies in the U.S. baking industry. Bimbo and its affiliates produce and distribute a wide range of well-known baked goods, including Thomas’, Entenmann’s, Arnold, Orowheat and Boboli. In February 2010, the Federal District Court in the Eastern District of Pennsylvania granted Bimbo’s motion for a preliminary injunction against Chris Botticella ("Botticella"), enjoining him from accepting an offer of employment with Hostess Brands, Inc. ("Hostess"), one of Bimbo’s competitors, based on misappropriation of trade secrets involving Thomas’ English Muffins’ "nooks and crannies." Botticella appealed the lower court decision to the U.S. Court of Appeals for the Third Circuit, and the appellate court affirmed the lower court’s order and remanded the case back to the lower court.
BACKGROUND
Chris Botticella was Bimbo’s Vice President of Operations for California from 2001 until January 2010. In this position, he was directly responsible for five production facilities and for overseeing a variety of areas, including product quality and cost, labor issues and new product development. As one of Bimbo’s senior executives, Botticella had access to a wide range of confidential information about Bimbo’s products and business strategy, including – and importantly for this injunction – code books that contained formulas and process parameters for all of Bimbo’s products. Critically, Botticella was one of only seven individuals at the company who possessed all the information necessary to independently replicate Thomas’ English Muffins, including the "secret behind the muffins’ unique ‘nooks and crannies’ texture." (Of note, sales of Thomas’ English Muffins account for approximately half a billion dollars in annual sales.)
While Botticella was employed at Bimbo, he signed a "Confidentiality, Non-Solicitation and Invention Assignment Agreement" with Bimbo, in which he agreed (1) not to directly compete with Bimbo during his employment; (2) not to use or disclose any of the company’s confidential or proprietary information during or after his employment; and (3) upon ceasing his employment with the company, to return all documents he received from the company during his employment. However, the agreement did not restrict where Botticella could work after his employment with Bimbo was terminated.
In September 2009, Hostess offered Botticella a position in Texas as Vice President of Bakery Operations for its eastern region. Botticella accepted the position in October, but did not disclose his plans to Bimbo for several months. During this time, Botticella continued to work at Bimbo and had complete access to Bimbo’s confidential and proprietary information. Botticella claims he continued to work at Bimbo in order to receive his 2009 bonus and to complete two projects for the company. During this period, Botticella also executed an agreement with Hostess that stated Hostess was not interested in "any confidential information, trade secrets or other proprietary information" Botticella had received from Bimbo and, moreover, that he would not disclose this information to Hostess. On January 4, 2010, Botticella informed his supervisor at Bimbo that he would be leaving Bimbo on January 15, but he did not reveal that he was leaving to work for a competitor. It was not until January 13, the day after Hostess announced that Botticella would be joining the company, that Bimbo learned of Botticella’s plans. Botticella was asked to vacate his office that same day.
Critically, between the time he accepted Hostess’ offer and when he left Bimbo, Botticella continued to have access to Bimbo’s confidential and propriety information. However, he later stated that he no longer felt "comfortable" having access to this information, and, accordingly, deleted e-mails and electronic documents containing confidential information and "blocked" similar information that he was exposed to in meetings. Botticella deleted a number of such documents over the Christmas holiday, but subsequently asked a technician to restore them in early January. After Botticella left the company, Bimbo hired a computer forensics expert to investigate Botticella’s use of his company laptop during this period. The investigation revealed that a user (who logged on as Botticella) had accessed a number of confidential files during this period and, in particular, that twelve files were accessed within thirteen seconds on January 13 -- Botticella’s last day at Bimbo. Moreover, this access took place after a phone call with human resources in which Botticella disclosed his plans to join Hostess. The forensic expert determined that this activity – as well as similar activities over the weeks prior to Botticella’s departure – were "inconsistent with an ordinary usage whereby an individual’s files are opened and either read or edited," but was "consistent with copying a group of files," although he could not conclusively determine whether Botticella had copied the files or simply deleted them. The investigation also revealed that three external storage devices (i.e., a "thumb" or "flash" drive) had also been connected to Botticella’s computer, although it was unclear when this had occurred.
A number of the files that were accessed during Botticella’s last days with Bimbo were "highly sensitive" (e.g., information regarding cost-reduction strategies, product launches, plant and line closures, production strengths and weaknesses, and labor contracts). Clearly, possession by a competitor would have been very damaging to Bimbo. In his deposition, Botticella admitted to copying files during his last weeks at Bimbo, but claimed he did so "only to practice his computer skills in preparation for his new position at Hostess." The District Court found Botticella’s explanation "confusing at best" and "not credible" and granted Bimbo’s motion for a preliminarily injunction against Botticella beginning his employment with Hostess and divulging any confidential Bimbo information to Hostess. The court also ordered Botticella to return any confidential or proprietary information to Bimbo. Botticella appealed the decision.
DISCUSSION
In determining whether to grant a preliminary injunction, the court must consider four factors: (1) a likelihood of success on the merits; (2) whether the party seeking the injunction will suffer irreparable harm if the injunction is denied; (3) whether granting relief will result in even greater harm to the non-moving party; and (4) whether public interest favors such relief.
I. Likelihood of Success on the Merits
The District Court found that Bimbo was likely to prevail on the merits in its claim of misappropriation of trade secrets. First, Botticella had access to and had acquired a number of Bimbo’s trade secrets during his employment, including information in Bimbo’s code books, Bimbo’s strategy for increasing profitably, knowledge of how Bimbo produces bread, documents copied with no "credible" explanation, Bimbo’s promotional strategies, cost positions and customer identities. Accordingly, the court determined that Bimbo would be able to prove at trial that Botticella would misappropriate these trade secrets if he were allowed to work at Hostess. Botticella claimed that the conclusion was wrong as a matter of law, because (1) a court can only enjoin a defendant from starting a new job to protect the former employer’s technical trade secrets; (2) where it would be "virtually impossible" for the defendant to perform his new job without disclosing trade secrets; (3) Bimbo did not present any evidence that Botticella’s new responsibilities at Hostess would lead him to disclose Bimbo’s trade secrets; and (4) the District Court drew "impermissible adverse inferences" against Botticella that shifted the burden of proof to him.
As a preliminary matter, the Court of Appeals determined that the District Court could properly grant an injunction even if disclosure of the trade secrets was not inevitable. The court then considered Botticella’s claims and found: (1) while a court may "more readily" enjoin new employment when technical trade secrets are involved, the rule is not inflexible, but depends on a "highly fact-specific inquiry" and a court can enjoin a defendant from starting new employment when the facts demonstrate a "substantial threat" of trade secret misappropriation; (2) under the circumstances of this case, it would have been "virtually impossible" for Botticella to avoid disclosure of trade secrets if he were employed at Hostess; (3) based on prospective position Botticella at Hostess, Botticella would have similar broad responsibilities at Hostess such that the District Court did not err in determining that the two positions were "substantially similar;" and (4) Botticella’s conduct after accepting the position at Hostess demonstrated his intention to use Bimbo’s trade secrets in his new employment.
II. Irreparable Harm
The District Court determined that Bimbo would suffer irreparable harm if it did not grant an injunction because disclosure of its trade secrets would put Bimbo at a competitive disadvantage. On appeal, Botticella argued that the court should grant a narrower injunction where he would stipulate that he would not disclose Bimbo’s trade secrets. Although the Appellate Court recognized that evidence at trial could show that a narrower injunction was appropriate, it found that the lower court did not abuse its discretion in granting the injunction when "faced with the evidence of Botticella’s suspicious conduct during his final weeks at Bimbo."
III. Harm to Botticella Caused by Injunctive Relief
The District Court also concluded that the harm to Bimbo if its trade secrets were disclosed outweighed the harm to Botticella as a result of not being able to begin work at Hostess until the court made a final determination. As the restriction on Botticella’s employment was only temporary (although delayed by Botticella’s appeal), the Appellate Court agreed that the injunction was necessary to prevent greater irreparable harm to Bimbo.
IV. The Public Interest
Finally, the Appellate Court agreed with the District Court that granting a preliminary injunction was consistent with the public interest in "upholding the inviolability of trade secrets and enforceability of confidentiality agreements," which, under the facts of this case, outweighed the public interest in employers being able to hire whomever they please and employees being able to work for whomever they please.
CONCLUSION
The Appellate Court affirmed the District Court’s decision in its entirety and remanded the case to the lower court for further review. On December 30, 2010, the District Court granted permanent injunctive relief against Botticella, (1) enjoining him from working for -- or providing services to -- Hostess; (2) enjoining him from using or divulging any of Bimbo's trade secrets, proprietary information or confidential information; (3) ordering him to return any confidential or proprietary information to Bimbo; and (4) ordering him to notify Bimbo if he accepts employment or a contract position in the baking industry within the next 24 months. On January 4, 2011, the District Court entered an order disposing of the outstanding motions and closed the case.
