Steakhouse Trade Secrets at Peter Luger

Most businesses have some kind of trade secrets, but many don’t realize it. Even when running a seemingly simple business, companies need to be aware of how they are protecting their proprietary information. Recently, food blog wrote about how New York’s venerable Peter Luger Steakhouse prepares its porterhouse. This article shows that trade secrets can show up in unexpected places, like a famous steakhouse’s basement.

The article starts with a quote:

“There are very few secrets in a steakhouse,” says third generation Peter Luger Steakhouse proprietor Jody Storch. “It’s really just about buying the best product that’s out there and simply preparing it.”

But later on, Storch reveals that Peter Luger’s porterhouse is at least a little proprietary:

If there is a “secret” to the Luger porterhouse, it’s in the dry-aging. In the basement of Peter Luger is a long dry-aging room, but Storch cannot reveal details like how cold the temperature is in there, or what the humidity level is, or how long the aging process takes.

Peter Luger’s dry-aging process could be a trade secret. But only if it reasonably protects the information. Based on this article, it certainly seems that Peter Luger is focused on preventing disclosure of its proprietary process. Hopefully, it only shares this information with those who need it to do their jobs, all of whom signed confidentiality agreements.

All businesses, even simple ones, should ask (1) what proprietary information do we have, and (2) how are we protecting it? The answers can be critical to preventing unwanted disclosure and mitigating the damage of any such disclosure.

And if you make it to Peter Luger, order a slice or two of the bacon.

PR in Trade Secrets Lawsuits

In my last few posts, I’ve been discussing issues in the noncompete lawsuit filed by 50 Eggs, a Miami restaurant group, against one of its former executive chefs. This case not only has a lot of interesting legal issues, but it shows some of the out-of-court risks accompanying this type of lawsuit. In particular, 50 Eggs and its founder, John Kunkel, have opened themselves up to some bad PR.

This lawsuit has received a good amount of press coverage locally. The initial stories focused on 50 Eggs’ accusations against Chef Bee. Now, Chef Bee’s attorneys have fired back with a PR campaign of their own, including apparently circulating their colorful motion to dismiss (linked below) to the press. They take aim at both 50 Eggs and Kunkel, including the following passage, which has appeared in the Miami Herald and other local publications:

“To Kunkel” is acquiring a hire – liar – fire cache in the Miami restaurant business, as that appears to be 50 Eggs’ pattern with its executive chefs: to hire them, accuse them of lying, and then fire them (or cause them to quit) . . . None of the original chefs or original equity partners in the 50 Eggs organization has survived; thus, if it is true that “the executive chef is designated as the ‘face’ of the restaurant” . . . , 50 Eggs has de-faced all of its restaurants. Now, Chef Bee too has been Kunkeled.

This is just one example of how the defendant is now using PR to build public support and attack 50 Eggs/Kunkel.

While there are certainly circumstances when a lawsuit is necessary to protect critical proprietary information, there are many others where the decision to file a lawsuit is a closer call. In these situations, it is worth considering whether there are out-of-court risks that tilt the scale one way or another.

PR issues can be one such consideration. Trade-secrets and noncompete lawsuits can attract media attention, particularly if one party seeks it out. Even if 50 Eggs’ claims are successful (and it faces significant legal hurdles, including an unsigned noncompete), it has suffered some damage to its reputation. At a minimum, companies considering whether to file a noncompete or trade-secrets lawsuit should consider whether the opposing party has ammunition to use in a PR fight.

Chef Bee’s Motion to Dismiss

Restaurant Noncompete Lawsuit, Part 2

Previously, I gave some background on the lawsuit filed by 50 Eggs Restaurant Company against its former chef, Chef Bee. I also discussed a hurdle 50 Eggs will have to overcome, namely that Chef Bee never electronically signed the noncompete agreement. Now, let’s take a closer look at 50 Eggs’ employment agreement.

Attached to the complaint (linked below) is 50 Eggs’ Nondisclosure and Noninterference Agreement. This contains strict nondisclosure obligations that broadly describe the types of information that must be kept confidential. While this agreement does a good job giving general examples of confidential information, there are no restaurant-specific examples. Nondisclousre agreements should include categories of information that are important in the relevant industry. So here, 50 Eggs could have included, for example, proprietary recipes in the definition of confidential information.

The agreement also contains a two-year nonsolicitation clause. In the restaurant industry, it is important to keep a departing chef from bringing other employees with her. This is particularly true in the case of a celebrity chef, who may have significant sway over more junior chefs.

50 Eggs also had Chef Bee sign a “nondisparagement and brand protection” covenant. While this contains typical nondisparagement obligations, it also addresses the critical role social media plays in the restaurant business. This agreement prohibits the chef from directly or indirectly referring to the restaurant on any social media, unless authorized by 50 Eggs.

As social media has evolved, companies have used varying strategies to address employees’ social-media use. 50 Eggs takes a very restrictive approach. While this may prevent employees from saying negative or damaging things about the restaurant on twitter, etc., it also stifles social media “buzz.” When employees are enthusiastic about the restaurant, they are likely to share this enthusiasm on their personal social media accounts, which can be forwarded by their friends, and so on. By prohibiting social-media use, 50 Eggs is losing potentially valuable word of mouth.

The agreement also contains several riders, including the noncompete agreement. I’ll examine these in a future post.

Complaint – 50 Eggs Restaurant (01330302)

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