Panera Bread store/Credit: Wikimedia CommonsInvestment Fund Led by Ex-Panera Bread CEO in Row Over Chain's Noncompete Agreements
Act III Management said St. Louis, Missouri-based Panera was improperly seeking noncompetition agreements with three Panera employees, in a hiring dispute that exposed the tensions between Panera and the man that oversaw much of the company's growth.
February 21, 2019 at 11:37 AM
3 minute read
An investment vehicle controlled by Panera Bread founder and former CEO Ron Shaich has accused the fast-casual restaurant chain in Delaware Chancery Court of trying to “block the success” of Shaich's new business venture.
In a lawsuit made public on Wednesday, Act III Management said St. Louis, Missouri-based Panera was improperly seeking the noncompetition agreements of three Panera employees, in a hiring dispute that exposed the tensions between Panera and the man that oversaw much of the company's growth.
Shaich, who founded Panera as a single store in 1980, stepped down as CEO in December 2017, after selling the firm to JAB Holding Co. in a $7.5 billion deal. Following his departure, Shaich launched ACT III, a restaurant-investment fund, which bought Panera's interest in Tatte Bakery & Cafe, an upscale bakery and cafe in Boston.
In a September post to his website, Shaich said Act III has $300 million to invest in public and private restaurants to help entrepreneurs build their businesses and stave off challenges from activist investors.
According to the complaint, Panera responded “almost immediately” by hiring Tatte's president, Karen Kelley, despite a noncompete agreement Act III said she had signed with Tatte. Last December, Panera and Shaich agreed to a framework for moving employees between the two firms, which included a process for soliciting Panera employees with noncompetes. Under the agreement, Act III said, Panera was required to act in good faith when considering whether it was “reasonably necessary” to prevent Act III from hiring its workers.
The complaint said that Shaich informed Panera earlier this month that he intended to bring on three information-technology employees to fill high-ranking positions at Act III, a move that Panera “categorically rejected.” Instead, Act III claimed, senior Panera management “interrogated” the employees, fired them on the spot and made defamatory and disparaging remarks about Shaich and his partners at Act III.
“Rather than assess the Notice in good faith, Panera did the opposite,” Act III said in the 22-page complaint.
“Panera also undertook efforts to determine if other employees had plans to join Act III, including by searching the emails of any employees it believed may have communicated with Mr. Shaich in a scorched-earth campaign to intimidate employees from joining Act III.”
Panera did not immediately respond to a request for comment.
Act III said in its filing that neither Tatte nor Act III were competitors to Panera, and none of the three employees possessed Panera's trade secrets, rendering their noncompetes unenforceable.
According to the complaint, Panera has told Shaich that it planned to enforce the agreements through litigation.
Act III is represented by James W. Bucking, Matthew C. Baltay and Michael J. Licker of Foley Hoag in Boston and Jennifer C. Jauffret and Lori A. Brewington of Richards, Layton & Finger in Wilmington.
An online docket-tracking service listed John Sensing, Myron T. Steele and Jesse L. Noa of Potter Anderson & Corroon as counsel for Panera.
The case, captioned Act III v. Panera, has been assigned to Vice Chancellor Morgan T. Zurn.
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