Cabela's LLC v. Ryan Wellman, an Individual, Trent Santero, an Individual, Mike Riddle, an Individual, Jeremy Nesbitt, an Individual, & Nexgen Outfitters, LLC

• Decision Date: 26 October 2018
• Docket Number: C.A. No. 2018-0607-TMR
• Parties: CABELA'S LLC, a Delaware limited liability company, Plaintiff, v. RYAN WELLMAN, an individual, TRENT SANTERO, an individual, MIKE RIDDLE, an individual, JEREMY NESBITT, an individual, and NEXGEN OUTFITTERS, LLC, a Delaware limited liability company, Defendants.
• Court: Court of Chancery of Delaware

CABELA'S LLC, a Delaware limited liability company, Plaintiff, v. RYAN WELLMAN, an individual,TRENT SANTERO, an individual,MIKE RIDDLE, an individual,JEREMY NESBITT, an individual,and NEXGEN OUTFITTERS, LLC,a Delaware limited liability company, Defendants.

C.A. No. 2018-0607-TMR

COURT OF CHANCERY OF THE STATE OF DELAWARE

Date Submitted: October 17, 2018

October 26, 2018

MEMORANDUM OPINION

Kevin M. Coen and Alexandra M. Cumings, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Sean M. Berkowitz, Matthew W. Walch, and Reuben J. Stob, LATHAM & WATKINS LLP, Chicago, Illinois; Attorneys for Plaintiff.

Henry E. Gallagher, Timothy M. Holly, Mary I. Akhimien, and Shaun Michael Kelly, CONNOLLY GALLAGHER LLP, Wilmington, Delaware; Patrick J. Barrett and Rhianna A. Kittrell, FRASER STRYKER PC LLO, Omaha, Nebraska; Attorneys for Defendants.

MONTGOMERY-REEVES, Vice Chancellor.

This memorandum opinion addresses an employer's Motion for a Preliminary Injunction. The employer requests that this Court enjoin four former employees from violating noncompete, nonsolicitation, and confidentiality provisions contained in agreements they each executed during their employment. The employer also requests that this Court enjoin the former employees and the limited liability company they founded from tortiously interfering with agreements held by any other defendant or any third party. In this opinion, I grant a preliminary injunction enforcing the parties' contractual confidentiality and nonsolicitation provisions.

I. BACKGROUND

Plaintiff Cabela's LLC ("Cabela's") is "the World's Foremost Outfitter of hunting, fishing, and outdoor gear."¹ Until its 2017 merger with Bass Pro Group, LLC ("Bass Pro"), Cabela's had its headquarters in Sidney, Nebraska, "a small rural community,"² and it employed nearly one third of the town's residents.³ Currently, Cabela's maintains an office in Sidney and is the town's single largest employer.⁴

Four of the defendants are former employees of Cabela's (the "Individual Defendants"), and each had worked for Cabela's for over a decade.⁵ Ryan Wellman worked as the Director of Hunting at Cabela's.⁶ His responsibilities included product sourcing, inventory management, vendor negotiations, and departmental budgeting.⁷ Mike Riddle and Trent Santero had similar responsibilities in their roles at Cabela's. Riddle worked as the Archery Category Manager for Cabela's,⁸ and Santero was the Camping Category Manager.⁹ They both selected products, negotiated costs, interacted with vendors, managed inventories, and set retail prices.¹⁰ Jeremy Nesbitt worked as the Senior Director of Planning and Inventory.¹¹ In this role, he gathered Company data to make inventory planning decisions, and he generated sales data and future projections.¹²

A. The Individual Defendants' Various Agreements with Cabela's

Cabela's offered equity benefits to key employees holding senior roles, including the Individual Defendants.¹³ To receive Company stock, each employee was required to sign a Proprietary Matters Agreement (the "PMA") and a Restricted Stock Unit Agreement (the "RSUA").¹⁴ Each year that an employee received a grant of stock, the employee electronically signed a new PMA and RSUA.¹⁵

By signing the PMA, the employee agreed not to disclose the Company's "Confidential Information."¹⁶ The PMA also included provisions restricting the employee's conduct after leaving Cabela's, whether through voluntary or involuntary termination. In the Nonsolicitation of Customers provision, the employee agreed that for a period of eighteen months after leaving Cabela's, theemployee would not solicit Cabela's customers with whom the employee had personal contact and did business during the eighteen months prior to leaving Cabela's.¹⁷ In the Nonsolicitation of Vendors provision, the employee agreed that for a period of eighteen months after leaving Cabela's, the employee would not solicit vendors with whom the employee had personal contact and did business during the eighteen months prior to leaving Cabela's.¹⁸ In the Nonsolicitation of Employees provision, the employee agreed that for a period of eighteen months after leaving Cabela's, the employee would not solicit any Company employees if the employee had personal contact with or received confidential information about the Company employee.¹⁹ In the Noncompetition provision, the employee agreed to not perform services for a competitor that are similar to the employee's work for Cabela's for a period of eighteen months after leaving Cabela's.²⁰ "Competitor" includes any "multi-state, multi-province, and/or multi-channel retailer [in the United States or Canada] engaged in the sale of products and/or services associatedwith hunting, fishing, or camping."²¹ The Individual Defendants each entered into a PMA in March or April 2016.²²

In February 2016, Wellman and Nesbitt also each entered into a Key Employee Change of Control Severance Agreement (the "CIC Agreement").²³ The purpose of the CIC Agreements was to retain certain high-level employees during the merger with Bass Pro.²⁴ In the CIC Agreements, Wellman and Nesbitt again agreed to not disclose the Company's confidential information.²⁵ But the CIC Agreements terminated the noncompetition and nonsolicitation provisions in other agreements, effective as of the date Wellman's and Nesbitt's employment with Cabela's ended.²⁶ These agreements provided the terms of Wellman's and Nesbitt's severance packages.²⁷

In March 2017, each of the Individual Defendants executed a cash incentive agreement with Cabela's ("Cash Incentive Agreement").²⁸ In light of the upcoming merger with Bass Pro, Cabela's could no longer grant stock to its employees and, instead, issued cash-based incentive awards.²⁹ Unlike the PMAs, the Cash Incentive Agreements failed to include any confidentiality, nonsolicitation, or noncompetition provisions.³⁰

B. The Individual Defendants Leave Cabela's

Cabela's terminated Wellman's employment in February 2018.³¹ He accepted the severance package pursuant to the terms of his CIC Agreement.³² Nesbitt left Cabela's in February 2018.³³ Similarly, he accepted the severance package pursuant to the terms of his CIC Agreement.³⁴

In February 2018, Cabela's terminated Riddle's employment.³⁵ Cabela's provided Riddle with a severance package, and as a condition of receiving that severance package, Riddle executed a General Release Agreement and Covenant Not to Sue (the "Riddle Separation Agreement") on February 22, 2018.³⁶ The Riddle Separation Agreement explicitly does not "affect, modify, or nullify any prior agreement" Riddle entered into with Cabela's "regarding confidentiality, trade secrets, intellectual property, or unfair competition."³⁷

Santero ended his employment with Cabela's in March 2018.³⁸ Cabela's provided Santero with a severance package, and as a condition of receiving that severance package, Santero executed a Confidential Severance Agreement and General Release (the "Santero Separation Agreement") on March 13, 2018.³⁹ The Santero Separation Agreement explicitly supersedes all prior agreements between Santero and Cabela's "with regard to the subject matter" of the Santero Separation Agreement.⁴⁰ The agreement, however, does not "affect, modify, or nullify anyagreement" Santero entered into with Cabela's that obligates Santero "to protect Cabela's confidential information and/or to refrain from solicitating Cabela's employees or customers after [Santero]'s employment is terminated."⁴¹ The Santero Separation Agreement is silent as to soliciting Cabela's vendors and as to noncompete provisions in other agreements.⁴²

C. The Individual Defendants Lay the Groundwork for NexGen

In December 2017 and January 2018, before the Individual Defendants left Cabela's, they started making preparations for their new business, NexGen. These preparatory steps included designing a logo that included Cabela's colors;⁴³ using a Cabela's-issued computer to install "Business-in-a-Box," a tool for setting up a new business;⁴⁴ meeting with vendors at a Las Vegas trade show;⁴⁵ and developing a vision for the new business that included providing products and services to Cabela's customers.⁴⁶

In February and March 2018, the Individual Defendants started taking more concrete steps. Santero downloaded Cabela's information regarding national brands and shared that information with the other Individual Defendants.⁴⁷ Two Cabela's employees, Alex Mousel and Stacy Schumacher, left their Cabela's employment to begin working for NexGen; Mousel had worked under Santero at Cabela's, and Schumacher had worked under Nesbitt.⁴⁸ Riddle emailed a vendor he had worked with at Cabela's, asking that the vendor keep the email confidential because he was starting a new business and wanted to invite the vendor to participate.⁴⁹ In April 2018, the Sidney City Council committed eight acres of the town's industrial park for use by NexGen in exchange for NexGen's commitment to create twelve jobs and $640,000 in employee payroll.⁵⁰

D. Cabela's Responds

Cabela's learned of the Individual Defendants' new business through a newspaper article.⁵¹ Cabela's sent cease-and-desist letters to each of the IndividualDefendants in June 2018.⁵² Having received no sign from the Individual Defendants that they would halt the launch of NexGen, Cabela's filed this action in August 2018.⁵³

II. ANALYSIS

This Court has broad discretion in granting or denying a preliminary injunction.⁵⁴ "A preliminary injunction may be granted where the movant[] demonstrate[s]: (1) a reasonable probability of success on the merits at a final hearing; (2) an imminent threat of irreparable injury; and (3) a balance of the equities that tips in favor of issuance of the requested relief."⁵⁵ "The moving party bears a considerable burden in establishing each of these necessary elements. Plaintiff[] may not merely show that a dispute exists and that plaintiff[] might be injured; rather, plaintiff[] must establish clearly each...