Restaurant Noncompete Lawsuit, Part I

In a recent post, I talked about how a Miami restaurant group, 50 Eggs Restaurant Company, dealt with the departure of a “celebrity chef,” known as Chef Bee, from its restaurant Khong River House. Now, 50 Eggs has filed a lawsuit against Chef Bee. A copy of the complaint is linked below.

This lawsuit pulls back the curtain on the development and opening of a high-profile restaurant. And it offers insights into and lessons about protecting proprietary information in the restaurant industry. This is the first in a series of posts discussing the lawsuit. I’m going to start by giving some background on the dispute (as alleged in the complaint) and then discussing one major hurdle 50 Eggs will need to overcome.

50 Eggs is a restaurant group based in South Florida. The complaint describes its marketing philosophy when opening a new restaurant: “the restaurant’s executive chef is designated as the ‘face,’ that is, the spokesperson, for the restaurant.” This is done because “diners generally know of the position ‘chef’ and thus equate everything about a restaurant with whoever is the chef.”

But 50 Eggs says that “the concept for a restaurant may come from a person who is not the executive chef.” Here, 50 Eggs’ CEO John Kunkel’s experience living in Thailand inspired the Khong River House concept.

While Kunkel was originally in negotiations with a New York chef to serve as Khong’s executive chef, he changed course when a local Miami chef he had befriended, Chef Bee, told Kunkel that Bee’s Thai restaurant was having financial difficulties and needed to close. Kunkel ended up hiring Chef Bee.

Chef Bee signed an offer of employment, which referenced the requirement that he sign 50 Eggs’ “standard non-compete agreements.”

50 Eggs uses a system that allows employees to electronically sign documents. Here’s where 50 Eggs may have a problem. The restrictive covenant agreement has several riders, including the noncompete provision. When Chef Bee electronically signed, he did not check the boxes to sign the riders, and thus his electronic signature was not included on those riders. I’ll discuss this in a moment.

After hiring Chef Bee, 50 Eggs “made substantial investments in public relations for the restaurant and making Chef Bee the ‘face’ of the restaurant.” But in the lead up to the restaurant’s opening, bizarre issues started to arise with Chef Bee. He was not contributing to the creation of recipes. He disappeared, only to be found working at his old Thai restaurant. Chef Bee said “he would get sick and break out in hives if he had to cook.” 50 Eggs also discovered that Chef Bee could not cook Thai dishes or run a professional kitchen, so it spent significant time training him by rotating him through Khong River House’s food stations. (It seems strange to me that a restaurant group like 50 Eggs would hire a chef without knowing that he could actually cook and operate a sophisticated kitchen. Perhaps we will learn more about this as the litigation progresses.)

Shortly after the training completed, Chef Bee resigned to open a restaurant in nearby Coral Gables. 50 Eggs now accuses him of taking 50 Eggs’ proprietary information and breaching the noncompete and nonsolicitation covenants. It alleges a number of contractual, tort, and statutory claims. It seeks damages and an injunction.

Back to the electronic signature. In Florida, the restrictive covenant statute provides that “A court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought.” Sec. 542.335(1)(a), Fla. Stat. Per the complaint’s own allegations, Chef Bee never signed the noncompete provision. This could present a significant obstacle. 50 Eggs is using several strategies to get around this problem, such as seeking to have the contract reformed based on either mutual or unilateral mistake. Time will tell whether the court will enforce the noncompete.

Using electronic signatures is becoming more and more common. But if companies are going to use this type of technology, it is critical to make sure that employees actually sign all necessary documents. If not, the company will likely face legal hurdles if it becomes necessary to enforce the contracts.

In future posts, I’ll discuss other interesting legal and factual issues in this case.

Complaint – 50 Eggs Restaurant (01330302)

One response

  1. Pingback: Restaurant Noncompete Lawsuit, Part 2 | Protecting Trade Secrets

Leave a Reply