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Cheryl & Co. v. Krueger

United States District Court, S.D. Ohio, Eastern Division

July 25, 2019

CHERYL & CO., Plaintiff,
v.
CHERYL L. KRUEGER, et al., Defendants.

          Edmund A. Sargus, Jr. Chief Judge.

          OPINION AND ORDER

          KIMBERLY A. JOLSON UNITED STATES MAGISTRATE JUDGE.

         This matter is before the Court on the following: (1) Plaintiff's request to appoint its Product Development Manager, Brenda Mortenson to review Defendant's confidential recipes, (Docs. 56, 57); and (2) Plaintiff's Motion for Leave to File Notice of Supplemental Evidence (Doc. 60). The Court finds that, on balance, the use of an independent, rather than in-house, consultant strikes the proper balance between allowing the parties to engage in discovery while also protecting their respective business interests. In addition, Plaintiff's Motion for Leave to File Supplemental Evidence is GRANTED. (Doc. 60).

         I. BACKGROUND

         Plaintiff Cheryl & Co. (“Cheryl's”), founded in 1981, by Defendant Cheryl L. Krueger, is a leading seller of cookies and other baked goods. It is most well-known for its buttercream frosted cookies, pictured below: (Image Omitted) (Doc. 1 at 5). Defendant Krueger sold her company in 2005 for $40 million. (Id., ¶ 12). According to the Complaint, she recently formed a competing cookie company, CKE Management, LLC ("CKE"), that allegedly sells "lookalike cookies using the same secret recipes, branding, and techniques" as Cheryl's. (Doc. 1, ¶ 17). An example of CKE's alleged "knock-off branding and desserts" is provided below.

         (Id. at 6). But Cheryl's accuses CKE of more than selling "lookalike" cookies. It also alleges that CKE "pirated" from it "at least four senior executives"-Defendants David Adell, Amy Coley, T. David Dalton and Elisabeth Allwein. (Id., ¶ 17). Cheryl's alleges that CKE hired these executives to "unfairly compete" against it and to solicit Cheryl's business accounts. (Id).

         Discovery in this matter is ongoing-a process which has required the Court's attention frequently. Currently, the parties disagree about who should review the other's secret recipes. Cheryl's seeks to designate its Product Development Manager, Brenda Mortenson, as an expert witness to “opine about the similarities between and derivations from the recipes and baking processes for certain cookies” made by the respective parties. (Doc. 57 at 1). Cheryl's suggests that CKE, in turn, may designate its own product development director, Elisabeth Allwein, to do the same. (Id.).

         As noted, Ms. Allwein is a Defendant in this case and is one of the four “senior executives” who switched teams from Cheryl's to CKE. (Doc. 1, ¶ 17). Ms. Allwein began working at Cheryl's in 1993 and, until early 2018, served as its Director of Product Development. (Doc. 1, ¶ 92). Ms. Mortenson has since filled this position at Cheryl's. (Doc. 57 at 1). Individuals in this role have access to Cheryl's “top-secret” recipes and approve new flavors and products. (Id., ¶ 93). Cheryl's accuses Ms. Allwein of misusing or threatening to misuse these trade secrets to CKE's competitive advantage. (Id., ¶ 132). Given Ms. Allwein's and Ms. Mortenson's expertise, Cheryl's believes that they are the perfect candidates to review the recipes at issue and opine on their similarities. (Doc. 57 at 1). CKE, however, asserts that only an independent expert, one who is not affiliated with either company, should be permitted to review its secret recipes. (See generally Doc. 56).

         The Undersigned held a status conference with the parties to discuss this matter, among other things, on June 17, 2019. (Doc. 49). In accordance with the Court's directive, the parties filed supplemental letter briefs on June 27, 2019. (See Docs. 56, 57). That same day, the parties submitted the confidential recipes at issue to the Court for in camera review. Cheryl's has also moved to file supplemental exhibits, (Doc. 60), which the Court has thoroughly reviewed as part of its decision. Accordingly, this matter is now ripe for resolution.

         II. STANDARD OF REVIEW

         The Federal Rules of Civil Procedure permit a Court to order that “a trade secret or other confidential research, development, or commercial information not be disclosed or be disclosed only in a designated way.” Fed.R.Civ.P. 26(c)(7). There is however, no absolute bar to the discovery of trade secrets. See Barry Fiala, Inc. v. Stored Value Sys., No. 02-2248 MA/AN, 2005 WL 8157408, at *2 (W.D. Tenn. Feb. 9, 2005). Rather, “courts must exercise discretion to avoid unnecessary disclosure of such information.” Id. (citation and quotation marks omitted); see also R.C. Olmstead, Inc. v. CU Interface, LLC, 606 F.3d 262, 269 (6th Cir. 2010) (noting that “[i]t is within the sound discretion of the trial court to decide whether trade secrets are relevant and whether the need outweighs the harm of disclosure”) (citation and quotation marks omitted). Accordingly, it is the court's job to “consider imposing special conditions when a trade secret is disclosed during discovery.” Id.

         III. DISCUSSION

         Essentially, this dispute boils down to the parties' contrasting views regarding the consequences of disclosing trade secrets to a competitor as part of the discovery process. For its part, CKE believes it should not be forced to disclose its confidential recipes to Ms. Mortenson, Cheryl's Product Development Manager, for fear that she will inevitably use this information to the competitive advantage of Cheryl's. (See generally Doc. 56). Cheryl's, however, views this risk as a non-issue, asserting that parties to litigation routinely rely on in-house experts for consultation and cost-saving purposes and that the parties' protective order minimizes any risk of improper use. (See generally Doc. 57). Good intentions aside, CKE argues it is impossible for Ms. Mortenson to “mentally sequester” CKE's confidential recipes, and her knowledge of the recipes will eventually permeate her decisions made on behalf of Cheryl's, ultimately harming the business interests of CKE. (Doc. 56 at 1).

         Regardless of the practical concerns, Cheryl's posits that “no legal authority” exists to support CKE's position. (Doc. 57 at 3). The Court concludes otherwise. CKE's concern is one that frequently arises in infringement cases. Often in these cases, one party seeks disclosure of the other party's trade secrets to its in-house counsel. Despite this factual distinction, the overarching question from these cases is equally present here: Whether the risk of disclosure of trade secrets to a competitor is outweighed by a party's need for the information. Two cases have emerged as the leading authority in this area: U.S. Steel Corp. v. United States, 730 F.2d 1465 (Fed. Cir. 1984), and Brown Bag Software v. Symantec Corp., 960 F.2d 1465 (9th Cir. 1992). The principles from these cases guide the Court here. See, e.g., Parker Compound Bows, Inc. v. Hunter's Mfg. Co., Inc., No. 5:14CV4, ...


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