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Panera Sues Ex-Technology VP, Papa John’s, for Conspiring on Its Trade Secrets

SAINT LOUIS, Missouri – On Monday Michael R. Nettles, Panera Bread's former vice president of architecture in its Information Technology department, accepted a position with Papa John's pizza chain. On Tuesday Panera Bread filed a lawsuit against Nettles and Papa John's, seeking injunctive relief and damages to compensate for Nettles' breach of confidentiality and non-compete agreement, citing the two conspired in confiscating Panera's proprietary data. 

The complaint, filed in Missouri federal court, states that Nettles had access to the company's "highly-sensitive confidential information and trade secrets." It further asserts that the information he obtained included Panera's thought processes and visions for its technology systems, architectural drawings and specifications for all of its master technology systems, and all schematics used in the development of technology systems to support and drive the company. 

"Allowing Nettles to use this confidential information for the benefit of Papa John's provides the pizza chain with an unfair competitive advantage, and would allow Nettles to unlawfully compete with Panera," the document explains. It states that to allow such conduct "would fly directly in the face of the clear, reasonable, and valid agreement that Nettles voluntarily signed," where he agreed not to compete with Panera for a one-year period following the end of his employment.  

The company stresses, "Panera's very right to compete fairly in the market place is threatened."

Facts of the case 

While the two franchise companies, one pizza and the other bread, sandwiches and soup, are not necessarily competing in the same restaurant category, the competition issue goes deeper. Panera's complaint states that it is a leader in the foodservice industry in integrating technology into its customers' experience, and has developed a clear vision as to how it will capitalize on technology to continue to stay at the top of the industry over the next five years and beyond.  

Panera prides itself on being several steps ahead of the game in developing its technological systems, which ultimately drives a guest's experience with Panera. It states that it has made substantial investments initiating and implementing various digital and technology strategies and systems such as digital ordering and payments. The company has also enhanced its technology-based kitchen display and food production systems. Panera understands that in order to succeed and appeal to customers in such a competitive industry, it must have talented employees who can implement its clear vision for the future.

 While employed by Panera, Michael Nettles in his various roles for almost five years had privileged access to Panera's most highly proprietary technology-based initiatives, and was involved in every aspect of developing Panera's technology systems. And he has insider information into Panera's plans and strategies in implementing its initiatives that focus on improving customer experience.

 Nettles signed a confidentiality and non-competition agreement in 2012, which also listed specific competitors that Panera identified as companies that certain high-level executives could not work for within a certain period of time. Nettles also signed a revised agreement in 2013, stating that if he did not sign the agreement he would not be allowed to continue his employment.

 The complaint alleges that when Papa John's extended an offer of employment to Nettles in June 2016, Papa John's was aware that Nettles had signed the noncompete agreement that forbade him to work for its pizza chain, but it extended the offer anyway. Nettles sent Ron Shaich, CEO of Panera, a lengthy email on June 8, 2016 stating that he wanted to accept the pizza firm's job offer, asking Shaich to release him from the noncompete agreement so he could accept the position. Nettles expressed a desire to move to Kentucky where he could begin a new chapter in his life. Shaich informed the executive that he could not do so because he had a responsibility to Panera shareholders, franchisees and employees to protect Panera's confidential information and ways of thinking. 

The suit states that in being sympathetic to Nettles desire to move, Shaich offered to help Nettles locate another job as long as it was not for a competitor of Panera Bread. Instead, a month later Nettles gave the company his resignation notice and told of his acceptance of Papa John's employment offer. 

According to the court document, Papa John's was aware that Panera declined to release Nettles from his obligations under his agreement, but did not withdraw its offer of employment. Instead, Papa John's encouraged Nettles to begin work for Papa John's immediately and leave Panera with no other choice but to bring its lawsuit. The complaint states that Nettles began working at Papa John's on Monday, July 18, 2016, "in direct breach of the agreement that Nettles signed with Panera." 

Nettles use of personal laptop in storing Panera's confidential data and trade secrets 

Panera's complaint further alleges that Nettles refused to allow Panera limited access to his personal devices and instead deleted all information relating to Panera from those devices. The company has reason to believe that he created a back-up copy of all Panera-related proprietary data and trade secrets before pushing the delete button. Panera believes Nettles plans to share the information, if he has not already done so, with Papa John's.

 In light of this information, Panera brings six charges against Nettles and Papa John's, individually and together, including breach of contract, tortious interference with contractual relations, violation of the Missouri Uniform Trade Secrets Act and the Missouri Computer Tampering Act. Under Civil Conspiracy against both Nettles and Papa John's, the complaint states that Papa John's was aware of the intimate knowledge and involvement Nettles had in developing Panera's trade secrets in the technology space. And that Papa John's knew that Nettles had signed the non-competition agreement with Panera, forbidding him to share confidential information with competitors for a certain period of time following his resignation.

In short, the lawsuit claims that based on Panera's information and belief, Papa John's conspired with Nettles to breach his noncompetition agreement with Panera, which will inevitably lead to the misappropriation of Panera's confidential trade secrets. Because Nettles stored the data on his personal devices and refused to turn them over to the company, Panera believes he still has access to its proprietary information.

Panera is asking for a preliminary injunction and, after trial, a permanent injunction, ordering Nettles to abide by the terms of the agreement he signed as a condition of employment. The conditions of the injunctions are spelled out in the court document. The company asks the court to award Panera its costs and attorney fees, and other relief that appears proper. 

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.