California-based home furnishings retailer Restoration Hardware is accusing two former executives of helping competitor Crate & Barrel steal its successful in-store food and beverage concept. In a trade secrets lawsuit filed in San Francisco Superior Court January 30, Restoration Hardware (RH) claims that Crate & Barrel undertook an aggressive campaign to lure away its top executives in an effort to turn around its own declining performance, eventually recruiting chief development officer, Douglas D., and Kimberly A., director of food and beverage (Restoration Hardware, Inc. v. Diemoz, Alheim, Crate & Barrel Inc.)
“Crate effectively sought to steal a page from the successful RH playbook,” the suit charges.
RH unveiled the furniture showroom/restaurant concept at its new Chicago store in October 2015, the site of the renovated century-old Three Arts Club in the Gold Coast. Dubbed “the Gallery at the 3 Arts Club,” the multilevel facility features wine and coffee bars and culinary offerings. Douglas and Kimberly had worked on the rollout. Douglas left RH to become CEO of Illinois-based Crate earlier in 2015, shortly before the store opened.
RH claims that in her senior role, Kimberly was privy to proprietary and sensitive sales and marketing information in addition to information about the food and beverage operation. The company alleges that Crate hired Douglas in order to implement the same strategy used by RH to introduce its own in-store restaurant concept. “Rather than developing its own know-how and data necessary to create such a program for expansion at Crate,” the complaint alleges, “Crate and [Douglas] set about to leverage the know-how of RH by targeting [Kimberly] for hiring by Crate. They set upon the strategy of soliciting away [Kimberly] and thereby gaining access to substantial RH confidential information that had been developed after [Douglas] left RH…”.
RH claims that in violation of the confidentiality and nonsolicitation agreement Douglas had signed, he attempted to recruit talent away from RH as soon as he joined Crate. RH accuses Kimberly of continuing to work for RH for several months after she knew she was leaving for Crate, while accumulating and downloading “vital” trade secrets and other confidential information to her private email accounts. This allegedly included financial results from the Chicago food and beverage operation.
When she announced to RH she was leaving the company, she did not reveal that she was going to work for Crate even though she was already helping plan Crate’s program, the suit alleges. RH accuses her of taking a “massive” amount of confidential RH information with her to Crate, which it discovered after her departure.
The crux of RH’s complaint is that as a result of the defendants’ collusion and trade secret theft, Crate reaped the benefits of RH’s extensive research and development without having to invest resources in developing its own business model, instead getting a “head start” from copying Crate’s successful strategy.
RH is suing Crate, Douglas, and Kimberly for misappropriation of trade secrets under the California Uniform Trade Secrets Act, and Douglas and Kimberly separately for breach of their employment contracts. The company claims it has been injured by the defendants’ actions and is seeking injunctive relief and unspecified damages.
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