Judge Dismisses Craft Beer Franchisor Trade Secret Suit against Glassdoor

In a high-profile lawsuit, a judge dismissed the complaint filed by Craft Beer Stellar against Glassdoor, alleging the website operator allowed negative postings against one of its franchisees containing confidential information. The franchisor asserts that was a violation of federal Defend Trade Secrets Act.

Filed last March under Craft Beer Stellar, LLC v. Glassdoor, Inc., and John Does 1-20, lawsuit claims also include violation of the Computer Fraud and Abuse Act, breach of contract, commercial disparagement, tortious interference with prospective business relations, and fraud and deceit. Craft Beer claims that Glassdoor’s actions resulted in the franchise company’s suffering from irreparable harm to its business and reputation, causing lost revenue, lost profits and lost prospective business.

The John Does 1-20 defendants are unknown persons and/or entities, that had registered with and/or posted on Glassdoor, and have distributed, disseminated and published certain false, defamatory and disparaging statements and content, by and through Glassdoor. While doing so, the defendants have allegedly breached their contractual duty of confidentiality and duty to Craft Beer, according to the lawsuit.

The Massachusetts-based franchisor owns stores throughout the United States and has developed extensive contacts throughout the craft beer industry, including brewers, vendors, distributors and members of the beer media. In the normal course of its business, Craft Beer meets with prospective franchisees and provides them with confidential, proprietary material, information and training, all part of their due diligence.

The legal dispute concerns reviews anonymously posted from November 2017 and March 2018. In November 2017, someone identifying himself as an employee of Craft Beer posted a negative review of the Belmont, Massachusetts Craft Beer Cellar on glassdoor.com. The court order states that over the next few months, one or more unnamed users identifying themselves as current (or former) employees of Craft Beer continued to post negative reviews. Each mentioned the co-founder Suzanne Schalow.

When a member of Glassdoor’s content and community team informed the co-founder of Craft Beer that Glassdoor had removed one of the six reviews of its failure to “meet” the website’s “community guidelines,” Schalow then, a week later, informed Glassdoor team members that the removed review had been “re-posted,” and to remove it again. The team member responded, saying the negative review would not be removed because it no longer violated the website’s guidelines.  

Craft Beer’s lawsuit asserts that because Glassdoor initially removed one of the negative posts at the request of Craft Beer, and then permitted a revised version to be posted, the franchisor alleges it violated the federal Act and two additional causes of action: Because Glassdoor was responsible for developing the content of the posting, the website operator no longer has internet publisher immunity; and that under Section 230(c ) immunity was inapplicable anyway because it contains a “carve-out for any law pertaining to intellectual property.”

Massachusetts U.S. District Court Judge F. Dennis Saylor, IV disagreed. He stated that he dismissed all causes of action in his October 17, 2018 order because Craft Beer Stellar failed to state a claim.

The federal judge explained that in order to prevail on a misappropriation of trade secrets claim under Massachusetts law, a plaintiff must prove that 1) the information at issue is a trade secret; 2) the plaintiff took reasonable steps to preserve the secrecy of the information; and 3) the defendant used improper means, in breach of a confidential relationship, to acquire and use the trade secret.  Judge Saylor added that “although Craft Beer Stellar alleges that it shared a confidential relationship with its employees who supposedly wrote the negative reviews on Glassdoor’s website, it has not—and seemingly cannot—contend that it ever shared a confidential relationship with Glassdoor.”

Judge Saylor stated in his order that the complaint filed by Craft Beer Stellar does not satisfy that element of trade secret misappropriation under Massachusetts law.