U.S. judge to Legal Sea Foods: noncompete agreement suit all wet: trade protection claims hold no water if recipes are in public domain

Nation's Restaurant News, Oct 13, 2003 by Milford Prewitt

NEW YORK -- A federal judge here ruled that it is unlawful for restaurant companies to punish ex-employees for disclosing proprietary recipes if the former employer routinely shares the same information in public.

In a case dealing with alleged violations of a noncompete agreement signed by a former chef for Legal Sea Foods, the court last month held that restaurant companies forfeit the right to claim trade protection over recipes and other operational practices if they print cookbooks, promote their chefs on television and hold cooking demonstrations.

Although noncompete contracts often trigger lawsuits when executives switch jobs between rivals in the recording, finance, computer software and drug research industries, rarely do they occur in foodservice, especially among chefs, according to lawyers specializing in labor law.

But the court's decision reinforces an employee's right to seek gainful employment as well as the difficulty of proving that operators who seek media attention for their fare have trade secrets that need rigorous guarding.

"The theory behind what Legal Sea Foods argued is that it is unfair for a business to invest time, money and training on an employee and then have them take that knowledge to a competitor across the street," said Michael Mitchell, an attorney with Fisher & Phillips, a New Orleans law firm that specializes in hospitality labor law. "They have a right to prevent or limit that from happening.

"But there is a more overwhelming principle in the law as well, that an employee has every right to do that [pursue job opportunities elsewhere] if he so chooses," Mitchell added.

Legal Sea Foods filed the lawsuit earlier this year, seeking to force New York-based B.R. Guest to fire or transfer from its Blue Water Grill seafood concept in Manhattan a former Legal's executive chef who knew Legal's proprietary recipes and safe food-handling procedures. Legal's charged breach of contract, unfair competition and misappropriation of trade secrets in its complaint.

The plaintiff said the noncompete contract included a confidentiality agreement to keep Legal Sea Food's recipes secret. The contract also forbade ex-employees to accept jobs at restaurants where more than 50 percent of the menu items are seafood or that are located within a 50-mile radius of the nearest Legal Sea Foods until a year after the employees had left the company.

But Judge Harold Baer Jr. of the U.S. District Court for the Southern District of New York denied Legal's request for an injunction that B.R. Guest fire or transfer the employee. Baer argued that Legal Sea Foods did not prove that either the chefs defection or his employment at Blue Water Grill had hurt Legal's. The judge added that Legal Sea Foods had publicized its recipes in cookbooks and on television shows and that its proprietary safe food-handling procedures are widely practiced in the restaurant industry.

Rick Heller, corporate counsel for Legal Sea Foods, said the company would appeal the decision.

But Carolyn Richmond, corporate counsel for B.R. Guest, expressed confidence that the higher court also would find that B.R. Guest did nothing wrong by hiring the employee and has not damaged Legal Sea Foods in any way.

"This is the equivalent of a Hail Mary pass in football," Richmond said. "I think the court is going to find that its noncompete [agreement] is a little overbroad. You can't lock people out of a job."

At issue in the dispute is whether Blue Water Grill's sous chef Stephen Calise violated terms of a confidentiality and noncompete agreement he signed at Legal Sea Foods two months after the start of a five-year tenure there.

According to court documents, Calise, an accomplished and versatile chef, joined 28-unit Legal Sea Foods in 1998. In 2000 the company promoted him from kitchen manager to executive chef of its Paramus, N.J., outlet, one of four Legal units within a 30-mile radius of Manhattan and about 17 miles from Blue Water Grill.

B.R. Guest, which has 12 diverse casual dinnerhouses in New York, a new Las Vegas location and a three-star Italian concept, hired Calise as a sous chef at Blue Water Grill in May 2003.

Shortly after Calise submitted his resignation letter, executives at Legal Sea Foods--who found out about the pending career opportunity when B.R. Guest called Legal's human-resources department for a job reference--reminded him that he had signed a noncompete agreement and warned him that the company intended to enforce its terms.

Bret Reichler, B.R. Guest's executive corporate chef, testified that he probably would not have hired Calise if the company had known the new sous chef had signed a noncompete agreement with Legal Sea Foods.

Calise, during his orientation with B.R. Guest, met with Laurel Cudden, the company's director of food safety and risk assessment, who sought his suggestions on ways to improve the safety of the company's seafood handling. But Cudden testified that Calise said he had no Legal Sea Foods paperwork and wouldn't be helpful.