United States District Court, M.D. North Carolina
CREATIVE SNACKS, CO., LLC, a North Carolina limited liability company, Plaintiff,
HELLO DELICIOUS BRANDS LLC, a Delaware limited liability company, PETER D. GRUMHAUS, and DOUGLAS M. WEISS, Defendants.
MEMORANDUM OPINION AND ORDER
CARLTON TILLEY, JR. SENIOR UNITED STATES DISTRICT JUDGE
matter is before the Court on Plaintiff Creative Snacks, Co.,
LLC's Motion for Preliminary Injunction [Doc. #6].
Creative Snacks, Co., LLC (“Creative Snacks”)
alleges that Defendant Hello Delicious Brands LLC
(“Hello Delicious”) violated the Supply
Agreement between it and Creative Snacks and that
Defendants Peter D. Grumhaus and Douglas M. Weiss violated
the Confidentiality Agreements they executed and, in so
doing, all Defendants misappropriated trade secrets and
committed unfair and deceptive trade practices. (See
Compl. [Doc. #1].) Hello Delicious and Grumhaus are also
alleged to have committed fraud. (Id.)
Snacks moves to enjoin Hello Delicious and its affiliates
from violating the Supply Agreement and to enjoin Grumhaus
and Weiss from violating the Confidentiality Agreements.
(See Mot. for Prelim. Inj.; Pl.'s Br. in Supp.
of Mot. for Prelim. Inj. [Doc. #7].) After the parties
briefed the matter, a hearing was held on September 26, 2017.
Defendants were permitted to submit further briefing on the
issue of reverse engineering, after which Creative Snacks
moved to do the same [Doc. #53], which request is hereby
granted, and filed its own supplemental brief on the topic.
For the reasons stated below, Creative Snacks's Motion
for Preliminary Injunction is granted in part and denied in
Snacks, founded by Marius Andersen, creates, develops,
manufactures, distributes, and sells snack products
throughout the United States, Canada, Mexico, South Korea,
Japan, China, and the Caribbean. (Marius Andersen Aff. ¶
3 (Feb. 1, 2017) [Doc. #7-2].) Hello Delicious, co-founded by
Grumhaus, is a food and snack innovation company that
manufactures, sells, and distributes various food and snack
products to major vendors like Costco Wholesale Corporation
(“Costco”). (Tr. 7:3-5 [Doc. #47]; Peter D.
Grumhaus Decl. ¶ 4 (Mar. 2, 2017) [Doc. #16].) Belmont
Foods, LLC (“Belmont Foods”) is a holding company
that owns and manages Hello Delicious. (Grumhaus Decl. ¶
6.) It was founded by Weiss, and Grumhaus became a member
several years later. (Id. ¶ 6.) Belmont
Partners, Inc. (“Belmont Partners”) is a food and
beverage broker and is Hello Delicious's food broker for
Costco. (Id. ¶¶ 5, 7.) It was also founded
by Weiss, and, although Grumhaus has no official role with
the company, he has served as a conduit between it and
Creative Snacks. (Id. ¶ 5.)
2015, Creative Snacks developed its organic Toasted Coconut
Clusters product (the “Product”) in cooperation
with a Canadian company, Park's Bread ‘n Buns
Factory, Ltd. (“Park's Bread”). (Andersen
Aff. ¶ 13.) In November of that year, Creative Snacks
sent samples of the Product to Belmont Partners to discuss
having the company develop sales presentations to Costco.
(Id. ¶ 14 (averring that samples were sent to
Peter Grumhaus); see Grumhaus Decl. ¶ 16; Tr.
7:11-20.) Belmont Partners had served as a food broker for
Creative Snacks since 2014 in connection with the sale to
Costco of Creative Snacks's Organic Coconut Chips under
the Creative Snacks brand. (Andersen Aff. ¶ 12; Grumhaus
Decl. ¶ 13.)
Grumhaus and Weiss liked the Product, they traveled to
Greensboro, North Carolina on November 24, 2015, to discuss a
possible working relationship with Creative Snacks on the
Product. (Andersen Aff. ¶¶ 17, 18; Grumhaus Decl.
¶ 16; Tr. 8:11-15, 9:1-3.) Grumhaus and Weiss each
executed a Confidentiality Agreement prior to touring
Creative Snacks's packaging facility and before holding
any discussions with representatives of Creative Snacks.
(Andersen Aff. ¶ 19; Grumhaus Decl. ¶ 17; see
also Confidentiality Agreements, e.g., Exs. 2
& 3 to Mot. for Prelim. Inj. [Docs. #7-3, 7-4].) The
Confidentiality Agreement required Grumhaus and Weiss to keep
business plans, formulas, products, technologies, and
processes developed by Creative Snacks (referred to as
“Confidential Information”) secret and
confidential and prohibited them from disclosing the
Confidential Information to anyone without Creative
Snacks's written permission. (See
Confidentiality Agreement.) Subject to those agreements,
Andersen discussed the possibility of developing closer
working relationships between Creative Snacks and the Belmont
Companies, even possibly a joint venture. (Andersen Aff.
¶ 20; Grumhaus Decl. ¶ 18.)
the course of the following months, the parties moved towards
finalizing their working relationship. (See, e.g.,
Grumhaus Decl. ¶¶ 19-36.) During the parties'
communications, Creative Snacks provided to Grumhaus the
country of origin for the Product's ingredients, (Emails
among Lindsay Hancock, Marius Andersen, and Peter Grumhaus
(Apr. 18-19, 2016) (e.g., Prelim. Inj. Ex. 3) [Doc.
#20-3]; Tr. 57:22-58:10), the component percentage breakdown
for the Product, (Emails between Peter Grumhaus and Lindsay
Hancock (May 5-6, 2016) (e.g., Prelim. Inj. Ex. 4)
[Doc. #20-2]), and the profit sharing model which included
the cost of ingredients, inbound freight, bags, and overhead
(Tr. 28:18-24, 32:20-23, 33:4-12, 70:13-23, 75:2-12; Ex. A to
Supply Agreement (e.g., Prelim. Inj. Ex. 5 [Doc.
16, 2016, Creative Snacks, as Supplier, and Hello Delicious,
as Buyer, entered into a Supply Agreement. (Andersen Aff.
¶ 31; Grumhaus Decl. ¶ 41; see also Supply
Agreement (e.g., Ex. 5 to Mot. for Prelim. Inj.) [Doc.
#7-6].) Pursuant to the Supply Agreement, Creative Snacks
agreed to sell its Toasted Coconut Clusters Product to Hello
Delicious during the term of the Supply Agreement solely for
the purpose of resale to Costco through its United States
retail stores. (Andersen Aff. ¶ 32; Grumhaus Decl.
¶ 42.) The Supply Agreement, among other things, also
restricted during the term of the Supply Agreement Hello
Delicious's manufacture, sale, or distribution of the
Product (defined as “the coconut cluster snack food
product now manufactured, developed, produced, sold and
distributed by” Creative Snacks); prohibited Hello
Delicious's use and disclosure of Confidential
Information (defined as “any and all trade secrets or
other confidential or proprietary information . . . which
derives economic value . . . from not being generally known
without reverse engineering, decompiling, or disassembly to
the public or to other persons who can obtain economic value
from its disclosure or use”); and protected Creative
Snacks's Product Rights (defined as “all
proprietary, intellectual property, or other rights in . . .
the Products . . .”). (See, e.g., Supply
Agreement §§ 1.2, 1.6, 1.7, 2.5, 3.1, 4.1, 4.2,
to Creative Snacks, its Confidential Information, at least
some of which it believes constitutes trade secrets,
a. the specific, detailed recipe for the Coconut Clusters
b. the ingredient specifications for the Coconut Clusters
c. ingredient origin related to the Coconut Clusters Product;
d. the cost breakdown as to the manufacture of the Coconut
e. access to manufacturing and packaging facilities, methods
of manufacture, and packaging of the Coconut Clusters
f. ingredient costs, packaging costs, and other costs as to
the Coconut Clusters Product;
g. detailed profit and profit margin information as to the
Coconut Clusters Product;
h. lead times as to supply of the Coconut Clusters Product;
i. supply chain information; j. distribution information;
k. pricing information concerning the sale by Creative Snacks
of the Coconut Clusters Product under its brand ...