Panera, LLC v. Nettles and Papa John’s International, Inc., 2016 WL 4124114 (E.D. Mo. Aug. 3, 2016) is one of the first cases under the Defend Trade Secrets Act (DTSA). It both answers and raises questions about how the statute will be interpreted.

Here, Panera sued a former senior IT employee who left to work for Papa John’s, allegedly in violation of a noncompete/nondisclosure agreement. Panera brings claims for breach of contract, violations of the DTSA, and violations of the Missouri Trade Secrets Act. A copy of the order is linked below.

18 U.S.C. 1836(b)(3)(A)(i)(I) provides that any injunction entered under the DTSA cannot “prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information that the person knows[.]”

This raised a question that would need to be answered by the courts: if a plaintiff sues for breaching a restrictive covenant and violating the DTSA, can the court enter an injunction based on the restrictive covenant, or would that injunction violate the provision above?

Since the court here entered an injunction, this case suggests that the provision above does not preclude injunctions in restrictive-covenant cases that also include DTSA claims. (Which strikes me as the obviously correct result.)

Interestingly, the court entered an injunction precluding the defendant from working for Papa John’s based on violations of the DTSA, not only breaches of the restrictive covenant. This at least arguably violates the DTSA prohibition on such injunctions. It will be interesting to see if this issue is addressed on appeal.

The provision above was also intended to preclude arguments based on inevitable disclosure, since the DTSA provides that an injunction setting forth employment conditions could not be based solely on information known by the former employee. But here, the Court explicitly considered, and at least partially relied upon, the inevitable-disclosure doctrine:

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.

Again, this at least arguably violates the DTSA.

Perhaps these apparent contradictions will be addressed if the case progresses, particularly if it reaches the Eighth Circuit. I will also continue to keep my eye out for other cases under the DTSA that address these and other open issues.

Panera v. Papa John’s

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