Grillea v. United Natural Foods, Inc.

Decision Date31 August 2016
Docket Number16-CV-3505 (SJF)(SIL)
PartiesTHOMAS GRILLEA, Plaintiff, v. UNITED NATURAL FOODS, INC., Defendant.
CourtU.S. District Court — Eastern District of New York


I. Introduction

On June 24, 2016, plaintiff Thomas Grillea ("plaintiff") commenced this action against defendant United Natural Foods, Inc. ("defendant"), pursuant to this Court's diversity of citizenship jurisdiction, 28 U.S.C. § 1332(a), seeking, inter alia, (1) judgment declaring that a non-competition clause in a severance agreement executed by him is unenforceable; and (2) damages under the theory of promissory estoppel and for defendant's alleged breach of contract and tortious interference with prospective economic advantage. Pending before the Court is plaintiff's motion pursuant to Rule 65 of the Federal Rules of Civil Procedure for a preliminary injunction enjoining defendant from enforcing the non-competition clause against him. For the reasons set forth below, plaintiff's motion is denied.

II. Background
A. Factual Background

Defendant is a Delaware corporation with its principal place of business in Providence, Rhode Island, (Second Amended Complaint ["SAC"], ¶ 3), and is a wholesale distributor of natural and organic foods; personal care, health and beauty products; vitamins; and nutritional supplements throughout the United States and Canada, (Declaration of Tom Dziki ["Dziki Decl."], ¶ 4; Declaration of Dennis Hatchett ["Hatchett Decl."], ¶ 4), that does not sell directly to consumers. (Dziki Decl., ¶ 4). According to Tom Dziki ("Dziki"), a senior vice president of defendant, (id., ¶ 2), defendant "has a total of approximately 29 competitors in the natural and organic product distribution business[,]" (id., ¶ 5), that "sell similar products to the same primary category of customers as [defendant]: retail businesses[,]" (id.), including "Threshold Distributing." (Id., Ex. 1). Defendant "does not compete with its customers [i.e., retail businesses] or its suppliers[,]" (id., ¶ 6), and does not manufacture supplements. (Affidavit of Thomas Grillea in Support of Motion for Preliminary Injunction ["Plf. Aff."], ¶ 31).

Plaintiff is a citizen of the State of New York, (SAC, ¶ 2), who, from 2006 to 2015, served as a division president responsible for various divisions of defendant, including its Select Nutrition division. (Id., ¶ 7; see also Plf. Aff., ¶¶ 3, 6; Dziki Decl., ¶ 7; Declaration of Joseph Traficanti ["Traficanti Decl."], ¶ 5). According to Dennis Hatchett ("Hatchett"), who replaced plaintiff as the division president of defendant's Select Nutrition division, (see Hatchett Decl., ¶¶ 2-3), defendant's Select Nutrition division is a national distributor of vitamins, supplements, personal care items and sports nutrition products "headquartered in Uniondale, New York, [with] distribution centers in Philadelphia Pennsylvania and Auburn, California[,] . . . [and] a dedicated customer service staff in [defendant's] distribution center in Iowa City, Iowa." (Id., ¶¶ 5-7)1. Hatchett avers that "[t]here are three companies that compete directly with Select Nutrition: Palko Distributing Company ('Palko'); Lotus Light ('Lotus'); and Threshold Enterprises [Ltd.] ('Threshold')[,]" (id., ¶ 8), insofar as those "three companies all distribute similar, andsometimes the same, products as Select Nutrition to the same general category of customers, [i.e.,] retail businesses." (Id.) According to Hatchett, defendant "considers Palko and Threshold [to be] the main competitors of Select Nutrition because Lotus operates on a smaller scale." (Id.) Like defendant, Select Nutrition "does not compete with its 9,000 customers [i.e., retail businesses] or its suppliers." (Id., ¶ 9).

As a division president, plaintiff "was one of the 8 highest level executives at [defendant] . . . [,] a member of the Executive Leadership Team and an Officer of [defendant]," (Dziki Decl., ¶ 7; see also Plf. Aff., ¶ 10 ["As an Officer within the company . . ."]; id., ¶ 11 [accord]), and, therefore, "had extensive access to information about [defendant's] sales, customers, marketing strategies, pricing, profits, and planned acquisitions." (Dziki Decl., ¶ 8). According to Dziki, that "information is highly valuable and is kept confidential at [defendant], usually with distribution being limited to members of the Executive Leadership Team." (Id., ¶ 8).2

Dziki avers, by way of example, that "at Leadership Team meetings, which [plaintiff] attended on a monthly basis, [plaintiff] was provided with written information identifying [defendant's] top 100 customers, their sales volume and other information relevant to the meeting in question[;] . . . [and] confidential subjects were often discussed . . . , such as division financial results, customer satisfaction issues and strategies for addressing them, sales and marketing strategies, competitive analyses and multi-year strategic plans for [defendant]." (Dziki Decl., ¶ 9; see also Plf. Aff., ¶ 14 [indicating what allegedly occurred during a "monthlyleadership meeting, which includes all C-level . . . Officers and Directors" of defendant that was held in July 2010]). According to Dziki, that "information is confidential, highly valuable to [defendant], and is maintained as confidential . . . through the use of limited disclosure, contractual confidentiality obligations, and physical and electronic security measures." (Dziki Decl., ¶ 9). In addition, Dziki avers that "in his role as President of Select Nutrition, [plaintiff] also participated in meetings, and was given access to information about, confidential incentive programs with its suppliers, including those who manufacture vitamins and supplements. This information included pricing arrangements, negotiating strategies, sales volumes and purchasing data, and contract terms." (Dziki Decl., ¶ 10). According to Dziki, since "[t]he information provided to [plaintiff] is not generally known in the natural foods industry, nor is it disclosed outside [defendant][,] [i]t would . . . be highly valuable to a direct competitor of [defendant] for several years." (Id., ¶ 11).

Dziki avers that "[p]art of [plaintiff's] job involved the development of strategies to address threats to (Select Nutrition's) market share from its competitors[,] . . . [including] Threshold Enterprises." (Dziki Decl., ¶ 12). According to Dziki, "[w]hile [plaintiff] was still actively employed, [defendant] learned that Threshold was planning to open a new distribution center on the East Coast[,] [and] [plaintiff] was responsible for developing Select Nutrition's competitive strategy to offset and combat Threshold's increased East Coast presence." (Id.) That "strategy involved supplier arrangements, discounting and related pricing strategies, and was not disclosed outside [defendant]." (Id.) However, plaintiff denies that he ever "developed Select Nutrition's competitive strategy to offset and combat Threshold's increased East Coast presence." (Plf. Reply, ¶ 12).

In 2009, plaintiff executed a Severance Agreement, effective April 1, 2009, (SAC, ¶ 9 and Ex. 1; Plf. Aff., ¶ 26 and Ex. 1; Dziki Decl., ¶ 13; Traficanti Decl., ¶ 4), which contains the following non-competition clause:

"During the term of employment, and for a period of one year following termination of such employment for any reason or payment of any compensation, whichever occurs last, [plaintiff] shall not engage, directly or indirectly (which includes, without limitation, owning, managing, operating, controlling, being employed by, giving financial assistance to, participating in or being connected in any material way with any person or entity), anywhere in the United States in any activities with the following companies, that include Tree of Life or any of its subsidiaries, Nature's Best, C&S Distributors or any other company which is a direct competitor of [defendant] with respect to (i) [defendant's] activities on the date hereof and/or (ii) any activities which [defendant] becomes involved in during [plaintiff's] term of employment; provided, however, that [plaintiff's] ownership as a passive investor of less than two percent (2%) of the issued and outstanding stock of a publicly held corporation so engaged, shall not by itself be deemed to constitute such competition. Further, during such one-year period [plaintiff] shall not act to induce any of [defendant's] vendors, customers or employees to take action might [sic] be disadvantageous to [defendant] or otherwise disturb such party's relationship with [defendant]."

(Plf. Aff., Ex. 1, § 6(b)). In addition, the Severance Agreement contains the following provision:

"[Plaintiff] recognizes that the possible restrictions on [his] activities which may occur as a result of [his] performance of [his] obligations under this Agreement are required for the reasonable protection of [defendant] and its investments, and [plaintiff] expressly acknowledges that such restrictions are fair and reasonable for that purpose. [Plaintiff] further expressly acknowledges that damages alone will be an inadequate remedy for any breach or violation of any of the provisions of this Agreement, and that [defendant], in addition to all other remedies hereunder, shall be entitled, as a matter of right, to injunctive relief, including specific performance, with respect to any such breach or violation or threatened breach of violation, in any court of competent jurisdiction. If any of the provisions of this Agreement are held to be in any respect an unreasonable restriction upon [plaintiff] then they shall be deemed to extend only over the maximum period of time, geographic area, and/or range of activities as to which they may be enforceable. [Plaintiff] expressly agrees that all payments and benefits due [him] under this Agreement shall be subject to [his] compliance with the provisions set forth in this Section 6."

(Id., § 6(e)). The Severance Agreement further provides that "its validity, interpretation,...

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