Cabela's LLC v. Ryan Wellman

• Court: Court of Chancery of Delaware
• Decided: October 26, 2018
• Docket: 2018-0607-TMR
• Status: Published

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE CABELA’S LLC, a Delaware limited ) liability company, ) ) Plaintiff, ) ) v. ) C.A. No. 2018-0607-TMR ) 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. )

MEMORANDUM OPINION Date Submitted: October 17, 2018 Date Decided: October 26, 2018

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

1 Our History, Cabela’s, https://www.cabelas.com (last visited October 22, 2018); accord Cumings Aff. Ex. 11, at 8. 2 Akhimien Aff. Ex. 63C, at 2. 3 Id. Ex. 61 ¶¶ 4-5. 4 Compl. ¶ 4.

1 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

5 Id. ¶¶ 21-24. 6 Cumings Aff. Ex. 1, at 21. 7 Id. Ex. 2, at 1. 8 Id. Ex. 5, at 11. 9 Id. Ex. 51, at 12. 10 Id. Ex. 3, at 1; id. Ex 4, at 15; id. Ex 5, at 12-13, 18. 11 Compl. ¶ 24; Cumings Aff. Ex. 6, at 9, 18. 12 Cumings Aff. Ex. 6, at 9-10, 14-15, 43.

2 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, the

13 Compl. ¶ 26. 14 See id.; Cumings Aff. Exs. 17-20. 15 Cumings Aff. Ex. 10, at 30. 16 Id. Ex. 17 § 1(a) (“Confidential Information” includes “information about [the] Company’s products and services, markets, customers and prospective customers, the buying patterns and needs of customers and prospective customers, purchasing histories with vendors and suppliers, contact information for customers, prospective customers, vendors and suppliers, miscellaneous business relationships, investment products, pricing, quoting, costing systems, billing and collection procedures, proprietary software and the source code thereof, financial and accounting data, data processing and communications, technical data, marketing concepts and strategies, business plans, mergers and acquisitions, research and development of new or improved products and services, and general know-how regarding the business of [the] Company and its products and services.”).

3 employee 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 associated

17 Id. § 4. 18 Id. § 5. 19 Id. § 6. 20 Id. § 7.

4 with 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

21 Id. 22 Cumings Aff. Exs. 17-20. 23 Id. Exs. 24, 25. 24 Id. Ex. 10, at 10. 25 Id. Ex. 24 § 6(a)(ii); id. Ex. 25 § 6(a)(ii). 26 Id. Ex. 24 § 2(e); id. Ex. 25 § 2(e). 27 Id. Ex. 24 § 2, id. Ex. 25 § 2.

5 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

28 Akhimien Aff. Exs. 63A, 64A, 65A, 66A. 29 Cumings Aff. Ex. 13, at 60-61; see also id. Ex. 10, at 39; Akhimien Aff. Exs. 63A, 64A, 65A, 66A. 30 See, e.g., Akhimien Aff. Ex. 63A. 31 Cumings Aff. Ex. 10, at 63. 32 See id. Ex. 24. 33 Compl. ¶ 37. 34 See Cumings Aff. Ex. 25.

6 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 any

35 Id. Ex. 10, at 41-42. 36 Id. Ex. 22. 37 Id. § 14. 38 Cumings Aff. Ex. 10, at 41-42, 49. 39 Id. Ex. 26. 40 Id. § 17.

7 agreement” 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

41 Id. 42 See id. 43 Cumings Aff. Ex. 27. 44 Stob Decl. ¶ 5. 45 See Cumings Aff. Ex. 5, at 80; id. Exs. 32, 33. 46 Id. Ex. 34.

8 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 Individual

47 Id. Ex. 39. 48 Id. Ex. 6, at 61; id. Ex. 36, at 18, 24; id. Ex. 37, at 7; id. Ex. 40, at 6. 49 Id. Ex. 55. 50 Id. Ex. 48. 51 Id.

9 Defendants 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 element because injunctive relief ‘will never

be granted unless earned.’” 56 Yet, “there is no steadfast formula for the relative

52 Cumings Aff. Ex. 49. 53 See generally Compl. 54 Data Gen. Corp. v. Dig. Comput. Controls, Inc., 297 A.2d 437, 439 (Del. 1972) (citing Richard Paul, Inc. v. Union Improvement Co., 91 A.2d 49 (Del. 1952)). 55 Nutzz.com, LLC v. Vertrue Inc., 2005 WL 1653974, at *6 (Del. Ch. July 6, 2005). 56 La. Mun. Police Emps.’ Ret. Sys. v. Crawford, 918 A.2d 1172, 1185 (Del. Ch. 2007) (quoting Lenahan v. Nat’l Comput. Analysts Corp., 310 A.2d 661, 664 (Del. Ch. 1973)).

10 weight each deserves. Accordingly, a strong demonstration as to one element may

serve to overcome a marginal demonstration of another.”57

A. Cabela’s Reasonable Probability of Success on the Merits at a Final Hearing In its Complaint, Cabela’s alleges three separate causes of action: (1) breach

of contract against the Individual Defendants, (2) violation of the Nebraska Trade

Secrets Act against all Defendants, and (3) tortious interference under Nebraska law

against all Defendants.

1. The breach of contract claim To succeed in its breach of contract claim, Cabela’s must show that (1) a valid

contract exists, (2) defendants breached an obligation under that contract, and

(3) plaintiff suffered damages as a result of the breach.58 For its breach of contract

claim, Cabela’s asserts that the PMAs control regarding the noncompetition,

nonsolicitation, and confidentiality provisions applicable to the Individual

57 Alpha Builders, Inc. v. Sullivan, 2004 WL 2694917, at *3 (citing Cantor Fitzgerald, L.P. v. Cantor, 724 A.2d 571, 579 (Del. Ch. 1998)). 58 See VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003). Nebraska’s requirements to show a breach of contract claim are similar to Delaware’s: On a claim for breach of contract, “the plaintiff must plead the existence of a promise, its breach, damages, and compliance with any conditions precedent that activate the defendant’s duty.” Kotrous v. Zerbe, 846 N.W.2d 122, 126 (Neb. 2014). There is no condition precedent present here to activate the defendant’s duty. To evaluate damages for breach of contract in the context of a motion for preliminary injunction, I evaluate the imminent threat of irreparable harm. See Section II.B below.

11 Defendants’ conduct. 59 The Individual Defendants argue that the PMAs are

superseded by other agreements: the CIC Agreements for Wellman and Nesbitt and

the Separation Agreements for Riddle and Santero.60 Cabela’s also contends that

Delaware law governs the PMAs because the PMAs contain a choice-of-law

provision.61 The Individual Defendants respond that Nebraska law governs because

the provisions violate Nebraska’s public policy and Nebraska has a materially

greater interest than Delaware in the enforcement of these provisions.62

a. The PMAs control with regard to their noncompetition, nonsolicitation, and confidentiality provisions

i. The PMA supersedes Wellman’s and Nesbitt’s other agreements Delaware recognizes that where a new, later contract between the parties

covers the same subject matter as an earlier contract, the new contract supersedes

and controls that issue, if the two agreements conflict.63

59 Pl.’s Reply Br. 12. 60 Defs.’ Answering Br. 12-20. 61 Pl.’s Reply Br. 8-12. 62 Defs.’ Answering Br. 21-28. 63 Country Life Homes, Inc. v. Shaffer, 2007 WL 333075, at *5 (Del. Ch. Jan. 31, 2007) (“The new contract, as a general matter, will control over the old contract with respect to the same subject matter to the extent that the new contract is inconsistent with the old contract or if the parties expressly agreed that the new contract would supersede the old one.”); see Bioveris Corp. v. Meso Scale Diagnostics, LLC, 2017 WL 5035530, at *7 n.71 (Del. Ch. Nov. 2, 2017) (“Because there is no way for a 12 Wellman and Nesbitt entered into their CIC Agreements in February 2016 and

November 2015, respectively. 64 Section 2(e) of the CIC Agreements terminates

noncompetition and nonsolicitation provisions of other agreements:

Section 6(b) . . . of this Agreement and similar provisions (including non-competition and non-solicitation provisions but excluding confidentiality provisions) in other agreements between the Employee and the Company shall be terminated and of no further force and effect as of the Date of Termination, but Section 6(a) . . . of this Agreement and similar confidentiality provisions in other agreements between the Employee and the Company shall remain in full force and effect after the Date of Termination.65

For each grant of stock that Wellman or Nesbitt received from Cabela’s, they

entered into a new PMA. 66 The most recent PMAs for Wellman and Nesbitt are

dated April 1, 2016, and March 15, 2016, respectively. 67 The PMAs contain the

following noncompetition and nonsolicitation provisions:

party to comply with both dispute resolution provisions the later in time provision . . . supersedes the earlier provision . . . .” (citing Country Life Homes, 2007 WL 333075, at *5)); Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 189 (2012) (comparing canons of interpretation when a conflicting provision is adopted later in time with when conflicting provisions are adopted simultaneously). 64 Cumings Aff. Exs. 24, 25. 65 Id. Ex. 24 § 2(e) (emphasis added). 66 Id. Ex. 10, at 30. 67 Id. Ex. 17, at 15; id. Ex. 20, at 15.

13 Nonsolicitation of Customers. In order to prevent the improper use of Confidential Information and the resulting unfair competition and misappropriation of Goodwill and other proprietary interests, Employee agrees that while Employee is employed by Company or any of its affiliates and for a period of eighteen (18) months following the termination of Employee’s employment for any reason whatsoever, whether such termination is voluntary or involuntary, and regardless of cause, Employee will not, directly or indirectly, on Employee’s own behalf or by aiding any other individual or entity, call on, solicit the business of, sell to, service, or accept business from any of Company’s customers (with whom Employee had personal contact and did business with during the eighteen (18) month period immediately prior to the termination of Employee’s employment) for the purpose of providing said customers with products and/or services of the type or character typically provided to such customers by Company. 68

Nonsoliciation of Vendors. In order to prevent the improper use of Trade Secrets and Confidential Information and the resulting unfair competition and misappropriation of Goodwill and other proprietary interests, Employee agrees that while Employee is employed by Company or any of its affiliates and for a period of eighteen (18) months following the termination of Employee’s employment for any reason whatsoever, whether such termination is voluntary or involuntary, and regardless of cause, Employee will not, directly or indirectly, on Employee’s own behalf or by aiding any other individual or entity:

(a) Encourage, discourage, interfere with, or otherwise cause, in any manner, any business partner, independent contractor, vendor, or supplier of

68 Id. Ex. 17 § 4.

14 Company to curtail, sever, or alter its relationship or business with Company; or

(b) Solicit, communicate, or do business with any of Company’s business partners, independent contractors, vendors, or suppliers (with whom Employee had personal contact and did business with during the eighteen (18) month period immediately prior to the termination of Employee’s employment) for or on behalf of a Competitor . . . . 69

Nonsoliciation of Employees. Employee agrees that while Employee is employed by Company or any of its affiliates and for a period of eighteen (18) months following the termination of Employee’s employment for any reason whatsoever, whether such termination is voluntary or involuntary, and regardless of cause, Employee will not, directly or indirectly, on Employee’s own behalf or by aiding any other individual or entity, hire, employ, or solicit for employment any employee of Company with whom Employee had personal contact or about whom Employee received Confidential Information while employed by Company or any of its affiliates. 70

Noncompetition. In order to prevent the improper use of Trade Secrets and Confidential Information and the resulting unfair competition and misappropriation of Goodwill and other proprietary interests, Employee agrees that while Employee is employed by Company or any of its affiliates and for a period of eighteen (18) months following the termination of Employee’s employment for any reason whatsoever, whether such termination is voluntary or involuntary, and regardless of cause, Employee will not, directly or indirectly, perform services within the United States of America or Canada for a Competitor that are the same as or similar to the services

69 Id. § 5. 70 Id. § 6.

15 Employee performed for Company during the eighteen (18) month period immediately prior to the termination of Employee’s employment. For purposes of this Agreement, a “Competitor” of Company shall mean [specific, named competitor businesses], or any other multi-state, multi-province, and/or multi-channel retailer engaged in the sale of products and/or services associated with hunting, fishing, or camping. 71

Wellman and Nesbitt argue that their CIC Agreements supersede the

noncompetition and nonsolicitation provisions of their PMAs.72 This argument fails.

The PMAs from March and April 2016 are later in time than the November 2015

and February 2016 CIC Agreements. 73 Therefore, where the PMAs cover the same

subject matter as the CIC Agreements and the two agreements conflict, the PMAs

supersede and control that issue. The noncompetition and nonsolicitation provisions

of Wellman’s and Nesbitt’s PMAs, which conflict with Section 2(e) of the CIC

Agreements, thus control to the extent they are valid under governing law. Other

terms of the CIC Agreements that do not conflict with the PMAs remain in effect.

Wellman and Nesbitt also argue that Cabela’s SEC Form 8-K dated October

3, 2016, provides that the provisions of the CIC Agreements would be enforced.74

71 Id. § 7. 72 Defs.’ Answering Br. 15-17. 73 Compare Cumings Aff. Exs. 17, 20, with id. Exs. 24, 25. 74 Defs.’ Answering Br. 16-17.

16 Section 5.11 of the Form 8-K states that Cabela’s will “honor . . . the Company’s . . .

employment, severance, retention and termination plans, policies, programs,

agreements and arrangements (including any change in control or severance

agreement between the Company . . . and any Company Employee), in each case, in

accordance with their terms as in effect immediately prior to” the merger with Bass

Pro.75 Here, Section 2(e), a term of the CIC Agreements, was not in effect in October

2016, when the Form 8-K was filed, or immediately prior to the merger because it

was superseded by the relevant provisions of the PMAs in March and April 2016.

ii. The Santero Separation Agreement preserves the terms of Santero’s PMA Section 17 of the Santero Separation Agreement states,

This Agreement is a complete agreement between the parties and supersedes all prior discussion, negotiations, and agreements with regard to the subject matter herein, whether oral or written. However, Employee agrees that this Agreement shall not in any way affect, modify, or nullify any agreement(s) Employee may have entered into with Cabela’s that obligate Employee to protect Cabela’s confidential information and/or to refrain from soliciting Cabela’s employees or customers after Employee’s employment is terminated, . . . and that any such obligations contained in those agreement(s) remain in full force and effect to the extent permitted by law. 76

75 Akhimien Aff. Ex. 62E, at 58 (emphases added). 76 Cumings Aff. Ex. 26 § 17 (emphases added).

17 The Santero Separation Agreement preserves the confidentiality,

nonsolicitation-of-employees, and nonsolicitation-of-customers provisions of the

PMA. Santero argues that the nonsolicitation-of-vendors and noncompetition

provisions of the PMA are superseded by Section 17 of his Separation Agreement.77

None of the Separation Agreement’s terms refer to nonsolicitation-of-vendors or

noncompetition obligations.78 These obligations, therefore, are not part of the

“subject matter” of the Separation Agreement, and the Separation Agreement does

not supersede the relevant provisions of the PMA. The confidentiality,

nonsolicitation, and noncompetition provisions of the PMA, therefore, remain in

effect to the extent they are valid under governing law.

iii. The Riddle Separation Agreement preserves the terms of Riddle’s PMA Section 14 of the Riddle Separation Agreement states,

This Agreement constitutes the entire agreement between the Company and [Riddle] with respect to the issues addressed in this Agreement, except this Agreement does not in any way affect, modify, or nullify any prior agreement [Riddle] entered into with the Company regarding confidentiality, trade secrets, intellectual property, or unfair competition.79

77 Defs.’ Answering Br. 18-20. 78 See Cumings Aff. Ex. 26. 79 Cumings Aff. Ex. 22 § 14 (emphases added).

18 The Riddle Separation Agreement preserves the confidentiality provision of

Riddle’s PMA. Riddle argues that the nonsolicitation and noncompetition

provisions of the PMA are superseded by Section 14 of his Separation Agreement.80

The Riddle Separation Agreement preserves “any prior agreement [he] entered

into . . regarding . . . unfair competition.”81 To the extent that the noncompetition

provision of the PMA covers unfair competition, the Riddle Separation Agreement

preserves that provision. The Riddle Separation Agreement’s terms do not refer to

any obligations related to ordinary (or not unfair) competition; to the extent that the

noncompetition provision of the PMA covers ordinary competition, the Separation

Agreement does not supersede the noncompetition provision of the PMA.

Further, none of the Riddle Separation Agreement’s terms refer to any

nonsolicitation obligations.82 These obligations, therefore, are not “issues addressed

in” the Riddle Separation Agreement, and the Separation Agreement does not

supersede the relevant provisions of the PMA.

The confidentiality, nonsolicitation, and noncompetition provisions of the

PMA, therefore, remain in effect to the extent they are valid under governing law.

80 Defs.’ Answering Br. 18-20. 81 Cumings Aff. Ex. 22 § 14. 82 See Cumings Aff. Ex. 22.

19 iv. The Cash Incentive Agreements do not supersede the PMAs The Individual Defendants argue in the alternative that the Cash Incentive

Agreements superseded the noncompetition and nonsolicitation provisions of the

PMAs. 83 The Cash Incentive Agreements dated March 2, 2017, “supersede[] all

other oral or written agreements or understandings, between [the employee] and the

Company regarding the subject matter hereof.”84 None of the Cash Incentive

Agreements’ terms refer to noncompetition or nonsolicitation obligations.85 These

obligations, therefore, are not part of the “subject matter” of the Cash Incentive

Agreements, and the Cash Incentive Agreements do not supersede the relevant

provisions of the PMAs. 86

b. Nebraska law governs the PMAs In the PMAs, Cabela’s and the Individual Defendants agreed to a Delaware

choice-of-law provision.87 When evaluating choice-of-law provisions, Delaware

83 Defs.’ Answering Brief 18. 84 Akhimien Aff. Exs. 63A, 64A, 65A, 66A. 85 See Akhimien Aff. Exs. 63A, 64A, 65A, 66A. 86 The Individual Defendants further argue that the PMAs are not valid agreements because the Individual Defendants electronically signed and accepted the terms of the PMAs. This argument fails because Delaware law allows digital acceptance of the terms of an agreement. Newell Rubbermaid Inc. v. Storm, 2014 WL 1266827, at *6-8 (Del. Ch. Mar. 27, 2014). 87 See, e.g., Cumings Aff. Ex. 17 § 16(b).

20 follows the Restatement (Second) of Conflict of Laws (the “Restatement”).88 Under

the Restatement, the parties’ choice of law generally will control an agreement.89

The Restatement, however, recognizes an exception to that general principal. Where

the parties enter a contract which, except for the choice-of-law provision, would be

governed by the law of a particular state, and that state has a public policy under

which a contractual provision would be limited or void, “the Restatement recognizes

that allowing the parties to contract around that public policy would be an

unwholesome exercise of freedom of contract.”90 “[A]llowing parties to circumvent

state policy-based contractual prohibitions through the promiscuous use of [choice-

of-law] provisions would eliminate the right of [other] state[s] to have control over

enforceability of contracts concerning [their] citizens.”91

88 Ascension Ins. Hldgs, LLC v. Underwood, 2015 WL 356002, at *2 (Del. Ch. Jan. 28, 2015) (citing Total Hldgs. USA, Inc. v. Curran Composites, Inc., 999 A.2d 873, 881-82 (Del. Ch. 2009); Weil v. Morgan Stanley DW Inc., 877 A.2d 1024, 1032 & n.16 (Del. Ch.), aff’d, 894 A.2d 407 (Del. 2005); Abry P’rs V, L.P. v. F & W Acq. LLC, 891 A.2d 1032, 1047 (Del. Ch. 2006)); accord DCS Sanitation, 435 F.3d at 895 (explaining that Nebraska follows the Restatement (Second) of Conflict of Laws). 89 Restatement § 187(1) (providing that “[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue”). 90 Ascension, 2015 WL 356002, at *2 (citing Restatement § 187). 91 Id.

21 Here, Cabela’s, a corporation with its headquarters in Nebraska, entered into

agreements with its employees, residents of Nebraska.92 The employees worked in

Nebraska, and the parties entered into the agreement in Nebraska. 93 Other than the

choice-of-law provision in the PMAs, the only connections to Delaware are

(1) Cabela’s is a Delaware corporation and (2) the Individual Defendants signed the

PMAs as a condition to receive Delaware stock.94 Nebraska is the state with the

strongest contacts to the contract; in the absence of the Delaware choice-of-law

provision, Nebraska law would apply to the PMAs.95 As a result, the Restatement

instructs that I first determine whether enforcement of the noncompete provision

would conflict with a fundamental policy of Nebraska. If so, then I must also

determine whether Nebraska has a materially greater interest in the enforcement of

92 Compl. ¶¶ 1, 10, 12-15; see Cumings Aff. Exs. 17-20. 93 Cumings Aff. Ex. 21, at 45-47. 94 Oral Arg. Tr. 24:21-24. 95 Ascension, 2015 WL 356002, at *3; Restatement § 188(2) (listing contacts to evaluate when determining the law applicable to an issue); accord DCS Sanitation, 435 F.3d at 896 (8th Cir. 2006) (finding a substantial relationship to Nebraska when the parties entered into the agreement in Nebraska, the services at issue occurred in Nebraska, the former employees reside in Nebraska, enforcement of the noncompete affects employment in Nebraska, and the former employer does business in Nebraska).

22 the PMAs than Delaware. If both these conditions are met, then Nebraska law will

apply despite the PMAs’ choice-of-law provision.96

Nebraska law has long recognized that all contracts in restraint of trade or

commerce are against public policy and void. 97 “A restraint on the employee is

illegal [in Nebraska] when its purpose is the prevention of competition . . . .”98

Ordinary competition may not be constrained. 99 In other words, an employer cannot

prevent its former employee from using any general knowledge, skill, or facility

acquired on the job as an edge for ordinary competition. 100 Nebraska, however, does

allow for a narrow exception: An employer may protect itself from a former

96 See Ascension, 2015 WL 356002, at *3; Restatement § 187(2)(b). 97 Gaver v. Schneider’s O.K. Tire Co., 856 N.W.2d 121, 127 (Neb. 2014); see also Neb. Rev. Stat. § 59-1603. 98 Chambers-Dobson, Inc. v. Squier, 472 N.W.2d 391, 398 (Neb. 1991) (quoting 6A A. Corbin, Corbin on Contracts § 1394, at 100 (1962)); see, e.g., Gaver, 856 N.W.2d at 133 (“By attempting to restrict Gaver from opening or having an ownership interest in a competing business not coupled with a recognized protectable interest [of the former employer], [the former employer] is attempting to prevent ordinary competition by a former employee, not unfair competition.”). 99 See Chambers-Dobson, 472 N.W.2d 391 at 398-99; Gaver, 856 N.W.2d at 127; Aon Consulting, Inc. v. Midlands Fin. Benefits, Inc., 748 N.W.2d 626, 638 (Neb. 2008); Polly v. Ray D. Hilderman & Co., 407 N.W.2d 751, 755 (Neb. 1987); Boisen v. Petersen Flying Serv., Inc., 383 N.W.2d 239, 245 (Neb. 1986). 100 Gaver, 856 N.W.2d at 131 (quoting Boisen, 383 N.W.2d at 34); Restatement (Second) of Contracts § 188 cmt. g (Am. Law Inst. 1981) (“A line must be drawn between the general skills and knowledge of the trade and information that is peculiar to the employer’s business.”).

23 employee’s improper or unfair competition.101 Nebraska courts have held that

improper or unfair competition includes misappropriation of the employer’s

(1) goodwill by soliciting the employer’s customers when the employee had

substantial personal contact with the employer’s customers, (2) confidential

information, or (3) trade secrets.102

Delaware law, to the contrary, allows a much broader range of noncompete

agreements. Noncompete agreements that are “reasonable in scope and duration, . . .

advance a legitimate economic interest of the [former employer], and . . . survive a

101 Gaver, 856 N.W.2d at 130; Aon Consulting, 748 N.W.2d at 638; Polly, 407 N.W.2d at 755; Boisen, 383 N.W.2d at 245. 102 E.g., Gaver, 856 N.W.2d at 130-31 (“Legitimate interests of an employer which may be protected from competition include: the employer’s trade secrets which have been communicated to the employee during the course of employment; [and] confidential information communicated by the employer to the employee . . . .” (quoting 54A Am. Jur. 2d Monopolies and Restraints of Trade § 906, at 208 (2009))); Aon Consulting, 748 N.W.2d at 638 (“The nonsolicitation agreement signed by Pearson did not prevent him from engaging in ‘ordinary competition’ with Aon after leaving its employment. It only prevented him from business contacts with those customers with whom he had personal business dealings during the last 2 years of his employment with Aon.”); id. (“To distinguish between ‘ordinary competition’ and ‘unfair competition,’ [Nebraska courts] have focused on an employee’s opportunity to appropriate the employer’s goodwill by initiating personal contacts with the employer’s customers. Where an employee has substantial personal contact with the employer’s customers, develops goodwill with such customers, and siphons away the goodwill under circumstances where the goodwill properly belongs to the employer, the employee’s resultant competition is unfair and the employer has a legitimate need for protection against the employee’s competition.”).

24 balance of the equities” are enforced in Delaware.103 Cabela’s argues that the

Nebraska courts’ interpretation of reasonable noncompete agreements is

“consistent” with Delaware’s requirement of reasonableness.104 But this argument

does not withstand scrutiny. An agreement prohibiting ordinary competition is

enforced in Delaware so long as the agreement is not “oppressive to an employee,”105

but the same agreement is void in Nebraska precisely because the agreement

prohibits ordinary competition. 106

Cabela’s also argues that Nebraska’s public policy against restrictions on

trade or commerce is not strong because it is not defined by a statute, but instead by

common law. This argument is wrong. First, Nebraska’s policy is set out, albeit

briefly, in statute: “Any contract . . . in restraint of trade or commerce shall be

103 Weichert Co. v. Young, 2007 WL 4372823, at *3 (Del. Ch. Dec. 7, 2007). 104 Oral Arg. Tr. 26:19-22. 105 EDIX Media Gp. v. Mahani, 2006 WL 3742595, at *7-8 (Del. Ch. Dec. 12, 2006) (enforcing agreement as to actions that compete directly with plaintiff’s business activities); see also Hough Assocs., Inc. v. Hill, 2007 WL 148751, at *6, 14-15 (Del. Ch. Jan. 17, 2007) (enforcing noncompete agreement against ordinary competition); Del. Express Shuttle, Inc. v. Older, 2002 WL 31458243, at *6, 15 (Del. Ch. Oct. 23, 2002) (same). 106 Compare Gaver, 856 N.W.2d at 125-27 (holding that noncompete agreement regarding “any trade business similar to the business owned and operated by Employer” is unenforceable), with Hough Assocs., 2007 WL 148751, at *6, 14-15 (holding that noncompete agreement regarding “any business which is similar to the business conducted by the Company” is enforceable).

25 unlawful.”107 Second, I am unaware of, and Plaintiff does not cite, any authority to

support the proposition that public policy is strong only when it is enshrined in a

statute. To the contrary, for example, Delaware’s strong public policy regarding

right to freedom of contract is not set out in statute but is abundantly supported by

case law.

As I explained above, noncompete agreements are allowed by Nebraska law

only to the extent they protect the employer against improper and unfair competition

such as misappropriation of goodwill, confidential information, or trade secrets.108

Any noncompete agreement prohibiting ordinary competition is contrary to a

fundamental policy of Nebraska. 109 Here, the noncompete provision in the PMAs

prohibits the employee from performing services for a competitor that are the same

as or similar to the services the employee performed for Cabela’s during the

eighteen-month period immediately prior to the termination of the employee’s

employment. 110 “For purposes of [the PMAs], a ‘Competitor’” means any “multi-

107 Neb. Rev. Stat. § 59-1603. Compare id., with Cal. Bus. & Prof. Code § 16600 (“Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”). 108 See supra note 101. 109 Gaver, 856 N.W.2d at 127. 110 Cumings Aff. Ex. 17 § 7.

26 state, multi-province, and/or multi-channel retailer engaged in the sale of products

and/or services associated with hunting, fishing, or camping.”111 This provision is a

prohibition of ordinary competition and, thus, is in conflict with a fundamental

policy of Nebraska.112

I must next determine whether Nebraska’s specific interest is materially

greater than Delaware’s general interest in enforcing a contract that has no

substantial relationship to this state. “Upholding freedom of contract is a

fundamental policy of this State.”113 “[W]here Delaware’s law applies, with very

limited exceptions, our courts will enforce the contractual scheme that the parties

have arrived at through their own self-ordering, both in recognition of a right to self-

order and to promote certainty of obligations and benefits.”114 But “where it is clear

111 Id. 112 E.g., DCS Sanitation, 435 F.3d 892 at 894, 897 (affirming district court’s holding that noncompete agreement was overbroad and unenforceable when noncompete agreement stated “For a period of one (1) year following the date of termination of employment for any reason, I will not directly or indirectly engage in, or in any manner be concerned with or employed by any person, firm, or corporation in competition with [DCS] or engaged in providing contract cleaning services within a radius of one-hundred (100) miles of any customer of [DCS] or with any customer or client of [DCS] or any entity or enterprise having business dealings with [DCS] which is then providing its own cleaning services in-house or which requests my assistance or knowledge of contract cleaning services to provide its own cleaning services in-house” (alterations in original)). 113 Ascension, 2015 WL 356002, at *4 (citing NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 35 (Del. Ch. 2009)). 114 Id.

27 that the policy of [Nebraska] is that the contract at issue is abhorrent and void, and

where, as here, the formation and enforcement of the contract relate overwhelmingly

to [Nebraska], a general interest in freedom of contract is unlikely to be the equal of

that public policy under the Restatement analysis.”115 Because Nebraska has a

greater material interest in the agreements and application of Delaware law would

violate a fundamental policy of Nebraska law, I apply Nebraska law to the question

of the validity and enforceability of the nonsolicitation and noncompete provisions

of the PMAs. 116

c. Validity of the confidentiality, nonsolicitation, and noncompete provisions of the PMAs i. The confidentiality provision The Defendants do not argue that the confidentiality provision of the PMAs

is unenforceable or void under Nebraska law. Nor can they; Nebraska law identifies

confidential information as a legitimate protectable business interest. 117

115 Id. at *5; see Gaver, 856 N.W.2d at 127 (“[A]ll contracts in restraint of trade are against public policy and void.”); accord DCS Sanitation Mgmt., 435 F.3d at 897 (holding that reformation of an overbroad noncompete agreement violates a fundamental policy of Nebraska law). 116 DCS Sanitation, 435 F.3d at 897; Aon Consulting, 748 N.W.2d at 638. 117 Gaver, 856 N.W.2d at 130 (“We have identified legitimate protectable business interests as including employer’s goodwill, confidential information, and trade secrets.”); Boisen, 383 N.W.2d at 34 (“[A]n employer has a legitimate need to curb or prevent competitive endeavors by a former employee who has acquired confidential information or trade secrets pertaining to the employer’s business operations.” (citing Brewer v. Tracy, 253 N.W.2d 319, 321 (Neb. 1977))).

28 ii. The nonsolicitation provisions Under Nebraska law, nonsolicitation provisions are valid if they focus on the

former employee’s personal contacts with the employer’s customers. 118 Nebraska

courts will enforce a nonsolicitation provision that prohibits the former employee

from soliciting those customers with whom the employee had personal contact. 119

The PMAs prohibit the solicitation of customers, vendors, and employees.

The Individual Defendants are prohibited from soliciting customers “with whom

[they] had personal contact and did business with during the eighteen (18) month

period immediately prior to the termination of [their] employment.” 120 Because the

provision is limited to those customers with whom the employee had personal

contact, it legitimately protects Cabela’s goodwill and is enforceable under Nebraska

law.

Similarly, the PMAs prohibit the Individual Defendants from soliciting

vendors or suppliers “with whom Employee had personal contact and did business

with during the eighteen (18) month period immediately prior to the termination of

118 Aon Consulting, 748 N.W.2d at 638 (citing Moore v. Eggers Consulting Co., 562 N.W.2d 534 (Neb. 1997); Boisen, 383 N.W.2d 29). 119 E.g., Aon Consulting, 648 N.W.2d at 638. 120 Cumings Aff. Ex. 17 § 4.

29 Employee’s employment.” 121 For the same reasons above, this provision protects

Cabela’s legitimate business interest and is enforceable under Nebraska law.

Finally, the PMAs prohibit the Individual Defendants from soliciting Cabela’s

employees “with whom Employee had personal contact or about whom Employee

received Confidential Information while employed by [the] Company.” 122 Again,

this provision protects Cabela’s legitimate business interest and is enforceable under

Nebraska law. The three nonsolicitation provisions are enforceable here. 123

iii. The noncompetition provision Under Nebraska law, noncompete agreements are allowed only to the extent

they protect the employer against unfair competition. 124

To distinguish between “ordinary competition” and “unfair competition,” [Nebraska courts] have focused on an employee’s opportunity to appropriate the employer’s goodwill by initiating personal contacts with the employer’s customers. Where an employee has substantial personal contact with the employer’s customers, develops goodwill with such customers, and

121 Id. § 6. 122 Id. 123 Nebraska law requires that nonsolicitation agreements be no greater than reasonably necessary to protect the employer’s legitimate business interest. Under this requirement, nonsolicitation agreements must be reasonably limited in duration. See Aon Consulting, 748 N.W.2d at 653-54. The parties do not address whether the nonsolicitation provision’s duration is reasonable. I, therefore, do not address this issue. 124 See supra note 101.

30 siphons away the goodwill under circumstances where the goodwill properly belongs to the employer, the employee’s resultant competition is unfair and the employer has a legitimate need for protection against the employee’s competition.125

Any noncompete agreement prohibiting ordinary competition is void.126

“[A]n employer does not ordinarily have a legitimate business interest in the

postemployment preclusion of an employee’s use of some general skill.” 127 Further,

“an employer has no legitimate business interest in post-employment prevention of

an employee’s use of some general skill or training acquired while working for the

employer, although such on-the-job acquisition of general knowledge, skill, or

facility may make the employee an effective competitor for the former employer.”128

Here, the noncompete provision in the PMAs prohibits the employee from

performing services for a competitor that are the same as or similar to the services

the employee performed for Cabela’s during the eighteen-month period immediately

prior to the termination of the employee’s employment. 129 “For purposes of [the

125 Aon Consulting, 748 N.W.2d at 638 (footnote omitted) (citing Moore, 562 N.W.2d 534; Boisen, 383 N.W.2d 29; Schuelke v. Wilson, 587 N.W.2d 369 (Neb. 1998)). 126 Gaver, 856 N.W.2d at 127. 127 Id. at 131 (citing Moore, 562 N.W.2d 534). 128 Id. (quoting Boisen, 562 N.W.2d at 34). 129 Cumings Aff. Ex. 17 § 7.

31 PMAs], a ‘Competitor’” means any “multi-state, multi-province, and/or multi-

channel retailer engaged in the sale of products and/or services associated with

hunting, fishing, or camping.”130

“[P]erform[ing] services . . . that are the same as or similar to the services . . .

performed for [the] Company” precludes the use for a competitor of the employee’s

general skills.131 Because the Individual Defendants may not work for “any other

multi-state, multi-province, and/or multi-channel retailer engaged in the sale of

products and/or services associated with hunting, fishing, or camping,” the PMAs’

noncompetition provision is a prohibition of ordinary competition and is

unreasonable under Nebraska law. 132

“[The Supreme Court of Nebraska] has long held that it is not the function of

the courts to reform a covenant not to compete in order to make it enforceable.”133

130 Id. 131 Id. 132 Id. Compare id., with Gaver, 856 N.W.2d at 125 (“any trade business similar to the business owned and operated by Employer”). 133 H & R Block Tax Servs., Inc. v. Circle A Enters., Inc., 693 N.W.2d 548, 552 (Neb. 2005) (citing CAE Vanguard, Inc. v. Newman, 518 N.W.2d 652 (Neb. 1994); Brockley v. Lozier Corp., 488 N.W.2d 556 (Neb. 1992); Vlasin v. Len Johnson & Co., 455 N.W.2d 772 (1990); Philip G. Johnson & Co. v. Salmen, 317 N.W.2d 900 (Neb. 1982)).

32 Nebraska courts either enforce the provision as written or not at all.134 Because the

noncompete provision in the PMAs is unreasonable, under Nebraska law, I cannot

enforce the provision, nor can I reform it.

d. The Individual Defendants’ breaches of the PMAs Cabela’s alleges that the Individual Defendants breached the nonsolicitation,

confidentiality, and noncompetition provisions of the PMAs. I address only the

allegations regarding the nonsolicitation and confidentiality provisions as I cannot

enforce the noncompetition provision under Nebraska law.

Cabela’s accuses the Individual Defendants of collectively contacting at least

thirteen vendors with whom Cabela’s has done business in violation of the

nonsolicitation-of-vendors provision.135 For example, Cabela’s provides evidence

that Riddle contacted at least one vendor “with whom [he] had personal contact and

did business with.”136 Riddle reached out via email to his old Cabela’s contact at

Ten Point Crossbows. 137 He asked in that email that the vendor keep the email

confidential because he was starting a new business and wanted to invite the vendor

134 H & R Block, 693 N.W.2d at 552 (quoting CAE Vanguard, 518 N.W.2d at 656). 135 Pl.’s Opening Br. 39. 136 Cumings Aff. Ex. 17 § 5(b). 137 Id. Ex. 55; see also id. Ex. 5, at 148-49.

33 to participate.138 Based on this evidence, I find that Cabela’s has demonstrated a

reasonable probability it can show at the final hearing that the Individual Defendants

breached the nonsolicitation-of-vendors provision of his PMA.

Cabela’s also alleges that the Individual Defendants violated the

nonsolicitation-of-employees provision of the PMAs. Two Cabela’s employees,

Alex Mousel and Stacy Schumacher, left their Cabela’s employment to begin

working for NexGen; Mousel worked directly under Santero at Cabela’s, and

Schumacher under Nesbitt.139 This evidence shows Cabela’s has a reasonable

probability of proving that the Individual Defendants breached the nonsolicitation-

of-employees provision of the PMAs.

Cabela’s alleges violations of the confidentiality provisions of the PMAs. By

signing the PMAs, the Individual Defendants each agreed that he “shall not directly

or indirectly disclose to any person or entity or use for any purpose or permit the

exploitation, copying, or summarizing of any Confidential Information of [the]

Company, except as specifically required in the proper performance of [his] duties

for [the] Company.” 140 Cabela’s provides evidence that the Individual Defendants

138 Id. Ex. 55. 139 Id. Ex. 6, at 61; id. Ex. 36, at 18, 24; id. Ex. 37, at 7; id. Ex. 40, at 6. 140 Id. Ex. 17 § 1(b); see supra note 16 (quoting the PMAs’ definition of “Confidential Information”).

34 sent Cabela’s confidential documents to their personal email accounts for non-

Cabela’s use and that they used a thumb drive to save confidential information for

non-Cabela’s use. First, Cabela’s alleges that Riddle forwarded Cabela’s “new

vendor” form from his personal email address. 141 Second, Santero emailed a

Cabela’s “top brands” spreadsheet to the other three Individual Defendants.142 Third

and finally, Cabela’s alleges that Riddle has retained other confidential information,

including copies of Cabela’s weekly reports. 143 The Company’s evidence supporting

these allegations is based in part on Riddle’s own deposition testimony. 144

The Individual Defendants argue that the information Cabela’s claims is

confidential (1) is not, in fact, confidential information 145 or (2) is irrelevant to

NexGen’s business.146 I need not determine at this stage whether each document is

141 Pl.’s Opening Br. 42. 142 Id.; Cumings Aff. Ex. 39. 143 Pl.’s Opening Br. 43; Cumings Aff. Ex. 5, at 53. 144 E.g., Cumings Aff. Ex. 5, at 41, 53. 145 Defs.’ Answering Br. 38-39 (pricing information), 41 (shipping methods), 42 (market information), 42 (customer lists), 43-44 (vendor information). 146 Id. at 39-40 (buying practices), 41 (marketing plans, including merchandise plan inventory), 43-44 (vendor information). Where the Individual Defendants concede the confidential nature of the information but dispute their use of the information, their argument is irrelevant. The confidentiality provision of the PMAs prohibits the unauthorized disclosure of confidential information “for any purpose.” Cumings Aff. Ex. 17 § 1(b).

35 confidential; I need only determine whether there is a reasonable probability that

Cabela’s will succeed in its claim that these documents, or a portion of them, are

confidential. The documents at issue include Cabela’s (1) vendor lists with

associated sales data and (2) pricing information and margins. This information is

arguably confidential and the use of this information by NexGen may be unfair

competition because NexGen would be using information unique to Cabela’s to

promote NexGen’s business.

I find that Cabela’s has shown a reasonable probability of success on the

merits of its claim that the Individual Defendants have breached the nonsolicitation

and confidentiality provisions of the PMAs.

2. The Nebraska Trade Secrets Act claim Cabela’s alleges that the Individual Defendants and NexGen violated the

Nebraska Trade Secrets Act 147 by misappropriating and misusing Cabela’s trade

secrets. 148 “[M]uch of the confidential information of Cabela’s as defined in the

PMA constitutes its trade secrets.” 149

In connection with the confidentiality provision of the PMAs, Cabela’s

requests that this Court enjoin the Individual Defendants from using or disclosing

147 Neb. Rev. Stat. §§ 87-501 to -507. 148 Compl. ¶ 56. 149 Id. ¶ 53.

36 the Company’s confidential information. This relief also addresses potential

continuing misappropriation and misuse of Cabela’s trade secrets. I need not

separately address the merits of Cabela’s second cause of action as to the Individual

Defendants.

For this Court to enjoin NexGen, Cabela’s must demonstrate a reasonable

probability of success on the merits. NexGen is a small company, and the four

Individual Defendants are intimately involved in every aspect of the company. 150

The Individual Defendants have confidential information from Cabela’s, and

Cabela’s has shown, through the Individual Defendants’ own statements, that the

Individual Defendants intend to use Cabela’s potential trade secrets to benefit

NexGen.151 This evidence is sufficient to show Cabela’s reasonable probability of

success on the merits against NexGen.

3. The tortious interference claim Cabela’s argues that the Individual Defendants and NexGen tortiously

interfered with Cabela’s business relationships with its employees. For example,

Cabela’s argues that by inducing Alex Mousel and Stacy Schumacher to leave

150 See Cumings Aff. Ex. 37, at 5; id. Ex. 40, at 6. 151 See, e.g., id. Ex. 7.

37 Cabela’s and join NexGen, the Individual Defendants and NexGen induced the two

employees to breach his or her PMA with Cabela’s. 152

In connection with its tortious interference claim, Cabela’s requests that this

Court enjoin the Individual Defendants from hiring, employing, or soliciting for

employment any Cabela’s employee with whom the Individual Defendants had

personal contact or about whom the Individual Defendants received Confidential

Information. Enforcement of the nonsolicitation provision of the PMAs addresses

Cabela’s request for relief as to the Individual Defendants. I therefore need not

separately address the merits of Cabela’s third cause of action.

NexGen, through the Individual Defendants, has induced former Cabela’s

employees to breach various provisions of the PMAs and other agreements. This

inducement is sufficient for Cabela’s to demonstrate a reasonable probability of

success on the merits of its claim against NexGen.

B. Imminent Threat of Irreparable Harm “Harm is irreparable unless ‘alternative legal redress [is] clearly available and

[is] as practical and efficient to the ends of justice and its prompt administration as

the remedy in equity.’” 153 “Damages would not adequately compensate Plaintiff[]

152 Pl.’s Opening Br. 25-26, 51. 153 Destra Targeted Income Unit Inv. Tr. v. Parmar, 2017 WL 373207, at *2 (Del. Ch. Jan. 25, 2017) (alterations in original) (quoting T. Rowe Price Recovery Fund, L.P. v. Rubin, 770 A.2d 536, 557 (Del. Ch. 2000)).

38 for a breach of the confidentiality provisions because the purpose of such provisions

is to prevent harm and misuse before it occurs.” 154 “[W]here an employee has

agreed . . . that he will not divulge or disclose to his employer’s detriment any trade

secrets or other confidential information which he has acquired in the course of his

employment, the employer is entitled to an injunction against a threatened use or

disclosure of such confidential information . . . .” 155

Here, Cabela’s has adequately shown that the Individual Defendants and

NexGen are attempting to use the confidential information the Individual Defendants

obtained as Cabela’s employees. Allowing such use subjects Cabela’s to unfair

competition and irreparable harm.

Additionally, this Court has held that contractual stipulations as to irreparable

harm may suffice to establish that element for the purpose of issuing preliminary

injunctive relief.156 The Individual Defendants agreed in the PMAs that “a breach

of any of the . . . agreements contained [in the PMA] will result in irreparable and

154 Horizon Pers. Commc’ns, Inc. v. Sprint Corp., 2006 WL 2337592, at *20 (Del. Ch. Aug. 4, 2006) (citing T. Rowe Price Recovery Fund, 770 A.2d at 557 n.66; E.I. du Pont de Nemours & Co. v. Am. Potash & Chem. Corp., 200 A.2d 428, 431 (Del. Ch. 1964)). 155 E. I. duPont de Nemours, 200 A.2d at 431. 156 Cirrus Hldg. Co. Ltd. v. Cirrus Indus., Inc., 794 A.2d 1191, 1209 (Del. Ch. 2001) (citing True N. Commc’ns Inc. v. Publicis S.A., 711 A.2d 34, 44 (Del. Ch. 1997); Vitalink Pharmacy Servs., Inc. v. Grancare, Inc., 1997 WL 458494, at *9-10 (Del. Ch. Aug. 7, 1997)).

39 continuing damage to [the] Company.” 157 This stipulation is sufficient to show

irreparable harm under the circumstances of this case related to breaches of the

nonsolicitation and confidentiality provisions.

C. Balance of the Equities Cabela’s argues that the balance of the equities favors Cabela’s because the

Individual Defendants received valuable stock in exchange for the confidentiality,

nonsolicitation, and noncompetition provisions of the PMAs. 158 Failure to enforce

these provisions would deny Cabela’s the benefit of the parties’ bargain. The

Individual Defendants respond by arguing that the economic loss that will be

suffered by the Individual Defendants, NexGen employees, and the City of Sidney

will outweigh any harm to Cabela’s, which, according to Defendants, would be

negligible.159

As discussed above, the confidentiality and nonsolicitation provisions of the

PMAs serve to protect Cabela’s legitimate business interest. The Individual

Defendants received Company stock in exchange for their voluntary agreement to

the provisions. By seeking to enforce the terms of those provisions, Cabela’s has

157 Cumings Aff. Ex. 7 § 12. 158 Pl.’s Opening Br. 56-57. 159 Defs.’ Reply Br. 51-53.

40 not exceeded the scope of its legitimate business interests.160 I conclude, therefore,

that, on balance, there is nothing inequitable in allowing Cabela’s to enforce the

confidentiality and nonsolicitation provisions.

I conclude that Cabela’s has satisfied the requisite elements for injunctive

relief, and I GRANT in part its Motion for a Preliminary Injunction.

III. BOND Court of Chancery Rule 65(c) provides that “[n]o . . . preliminary injunction

shall issue except upon the giving of security by the applicant, in such sum as the

Court deems proper, for the payment of such costs and damages as may be incurred

or suffered by any party who is found to have been wrongfully enjoined or

restrained.” “The security, usually a bond, fixes the maximum amount that an

enjoined party may recover. . . . Because actual damages are uncertain, and because

a wrongfully enjoined party has no recourse other than the security, the court should

‘err on the high side’ in setting the bond.” 161 The party seeking the bond, however,

must support its application with “facts of record or . . . some realistic as opposed to

a yet-unproven legal theory from which damages could flow to the party

160 See Kan-Di-Ki, LLC v. Suer, 2015 WL 4503210, at *20 (Del. Ch. July 22, 2015). 161 Guzzetta v. Serv. Corp. of Westover Hills, 7 A.3d 467, 470 (Del. 2010) (citing Coyne-Delany Co., Inc. v. Capital Dev. Bd., 717 F.2d 385, 393 (7th Cir. 1983)).

41 enjoined.”162 “[T]he amount of a bond is a matter of discretion,” but there must be

a “credible basis for the estimated damages.” 163

Because NexGen is new and has no significant financial history, it is difficult

to estimate the costs and damages it may incur during the pendency of the

preliminary injunction. NexGen has created profit and loss estimates for the second

half of 2018 and for 2019.164 NexGen estimates its total gross profits for the second

half of 2018 at $1,011,360 and for 2019 at $1,518,461.28. If NexGen continues as

a business in the face of this preliminary injunction, it will continue to have expenses

but will be prevented from generating income and building its business through

contacts the Individual Defendants made while at Cabela’s.

NexGen’s launch is currently set for October 29, 2018. To simplify my

calculations, I assume a launch date of November 1, 2018. To “err on the high side,”

I set the bond at an amount equal to two months’ gross profits for 2018 and all gross

profits for 2019, or $1,855,581.28.165

162 Id. (omission in original) (quoting Petty v. Penntech Papers, Inc., 1975 WL 7481, at *1 (Del. Ch. Sept. 24, 1975)). 163 Id. at 471. 164 Cumings Aff. Ex. 38. 165 The portion of the bond representing two months’ gross profits for 2018 is $1,011,360 divided by six months and then multiplied by two months.

42 IV. CONCLUSION For the foregoing reasons, I conclude that Cabela’s has satisfied the requisite

elements for injunctive relief, and I GRANT in part its Motion for a Preliminary

Injunction as to the use of Cabela’s confidential information and as to solicitation of

Cabela’s vendors, employees, or customers. Plaintiff shall submit a proposed

implementing form of order and post a bond in the amount of $1,855,581.28 within

five days of this opinion.

IT IS SO ORDERED.