Thursday, August 12, 2010

Third Circuit Preliminarily Enjoins Company Vice President from Working For Competitor Based on Concerns Regarding Disclosure of Trade Secrets

 In Bimbo Bakeries USA, Inc. v. Botticella, No. 10-1510, 2010 U.S. App. LEXIS 15314 (3rd Cir. July 27, 2010) (copy available here) Bimbo Bakeries sued Chris Botticella, Bimbo's former vice president of operations, after Botticella accepted a job offer with Hostess, a competitor.  Bimbo sought to preliminarily enjoin Botticella under the Pennsylvania Uniform Trade Secrets Act (PUTSA) from starting work for Hostess, on the grounds that there was a high likelihood that Botticella would disclose Bimbo's trade secrets to Hostess.  The U.S. District Court for the Eastern District of Pennsylvania (Judge R. Barclay Surrick) granted the preliminary injunction, and on appeal, a panel of the Third Circuit (Judges Smith, Fisher, and Greenberg) affirmed.

The Third Circuit's opinion was based in part on the holding that Botticella's new employment would likely result in the disclosure of Bimbo's trade secrets.  Under the PUTSA, the relevant consideration in determining whether to grant such an injunction is whether there is a sufficient likelihood or substantial threat of disclosure of trade secrets.  The Court held that there were sufficient facts for the District Court to have found that this standard was met.  For example, during the time period between when Botticella accepted Hostess' job offer and when he ceased working for Bimbo, he continued to have executive-level access to Bimbo's confidential and proprietary information, and in fact accessed a number of highly sensitive files during his final days at Bimbo.

Mr. Botticella attempted unsuccessfully to argue that Bimbo had to meet a higher standard of proof in order to be entitled to such an injunction.  In particular, rather than only having to show a sufficient likelihood or substantial threat of disclosure of trade secrets, Botticella argued that Bimbo should have to show that disclosure of trade secrets would be inevitable - i.e., that it would be "virtually impossible" for him to do his job for Hostess without disclosing Bimbo's trade secrets.  The Third Circuit rejected this argument and held that the "sufficient likelihood or substantial threat" test was the proper standard under the PUTSA.

The Court further rejected Botticella's attempt to distinguish between the disclosure of technical vs. non-technical trade secrets, and held that trade secrets do not have to be technical in nature in order to be covered by the PUTSA.

A tip of the hat to the following authors & firms for their insightful articles on this case:

  • Morgan Lewis, Third Circuit Clarifies Availability of Preliminary Injunction to Prevent Former Employee from Working for a Competitor, Labor and Employment Lawflash, July 30, 2010 (available here).
  • Andy Arnold, A Bimbo By Any Other Name: Third Circuit Upholds "Inevitable Disclosure" Injunction, Beat Your Non-Compete Blog, August 2, 2010 (available here).
  • James McNairy, Bimbo Bakeries v. Boticella: Man vs. Muffin, Muffin Wins Injunction, Trading Secrets Blog, August 3, 2010 (available here).

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