On July 27, the United States Court of Appeals for the Third Circuit affirmed a district court’s order enjoining a senior executive from Bimbo Bakeries USA, Inc., from working for one of Bimbo’s competitors, Hostess, until after the district court resolved the merits of Bimbo’s misappropriation of trade secrets claim against the executive. Among other trade secrets at issue in the lawsuit is the recipe for Thomas’ English Muffins, which were estimated to account for approximately $500 million in Bimbo’s annual sales income. Defendant Chris Botticella is alleged to be one of only seven people who possess all of the knowledge necessary to replicate independently the muffins.
The Circuit Court affirmed the district court’s finding that Bimbo was likely to prevail on the merits of its misappropriation of trade secrets claim under Pennsylvania’s Uniform Trade Secrets Act (“PUTSA”). Specifically, the Circuit Court left undisturbed the district court’s determination that Bimbo likely would be able to prove at trial that Botticella would misappropriate Bimbo’s trade secrets if allowed to work at Hostess.
The Circuit Court focused on PUTSA section 5303 and related case law, which allows courts to enjoin actual or threatened misappropriation of trade secrets. The district court’s finding that there was “[a] substantial likelihood, if not an inevitability, that [Botticella] will disclose or use Bimbo’s trade secrets in the course of his employment with Hostess,” was proper, held the Circuit Court. In so holding, the Circuit Court rejected Botticella’s argument that the district court could only issue an injunction where it is shown that it would be “virtually impossible” for Botticella to perform his new job at Hostess without disclosing trade secrets.
In reaching this holding, however, the Circuit Court took exception with the district court’s analysis of Pennsylvania’s law concerning the “inevitable disclosure” doctrine. Specifically, the Circuit Court noted that “[w]hile we agree…that Pennsylvania law empowers a court to enjoin the threatened disclosure of trade secrets without requiring a plaintiff to show that disclosure is inevitable, we do not consider that an injunction granted absent such a showing was issued pursuant to the ‘inevitable disclosure doctrine’.” Rather, said the Court, an injunction enjoining one from assuming particular employment may issue where the facts of the case demonstrate a substantial threat of trade secret misappropriation.
Citing the district court’s findings of fact, the Circuit Court held that the district court had, and properly exercised, discretion to enjoin Botticella from working at Hostess to the extent his proposed employment there threatened to lead to the misappropriation of Bimbo’s trade secrets. The Circuit Court noted that, among other things, the district court found that (1) Botticella had accessed via his laptop computer in his final days at Bimbo highly sensitive information belonging to Bimbo which information would have been damaging to Bimbo if obtained by a competitor; (2) Botticella’s explanation at deposition regarding his suspicious use of the laptop was “confusing at best” and “not credible”; and (3) Botticella’s conduct following his acceptance of the Hostess job offer demonstrated his intention to use Bimbo’s trade secrets during his employment with Hostess. As to this latter point, the district court found that Botticella (a) did not disclose to Bimbo his acceptance of a job offer from a direct competitor and remained in his position to receive Bimbo’s confidential information, (b) received Bimbo’s confidential information after his acceptance of the Hostess job offer, and (c) copied trade secret information from his work laptop onto external storage devices.
The Third Circuit’s decision provides guidance to employers as to the showing required to enjoin former employees from assuming new employment where the facts show that there is a substantial threat of trade secret misappropriation.