That’s How the Cookie Crumbl(e)s: Trade Secrets, Preliminary Injunctions, and Stolen Cookie Recipes

A recent decision from the U.S. District Court for the District of Utah affirms the viability of trade secret protections when an employee departs for a competitor. At the same time, the case reiterates the limitation of redressing injuries through a preliminary injunction. Crumbl LLC v. Dirty Dough LLC, 2023 WL 5180370 (D. Utah Aug. 11, 2023), involved two purveyors of gourmet cookies in retail stores through a franchise business model. The ruling is a reminder that even when a former employee gets caught with his hand in the cookie jar, a court won’t necessarily hand the injured party the whole batch of relief it’s asking for.

The two companies, Crumbl Cookies and Dirty Dough, are competitors in the gourmet cookie market, but they operate under different business models. Crumbl mixes and bakes dough on site at individual franchise locations, while Dirty Dough relies on a centralized facility that ships frozen dough to its stores. At issue in the case were allegedly misappropriated trade secrets by a former Crumbl employee, and their suspected use by Dirty Dough.

The dispute arose after Crumbl, a company based out of Logan, Utah, hired Bradley Maxwell as a process engineer in early 2019. As part of his employment, Maxwell signed confidentiality agreements obligating him to protect Crumbl’s proprietary information and to return all such materials upon termination. During his tenure, Maxwell had access to extensive confidential materials, including detailed cookie recipes, internal process documentation, sales data, and franchise build-out guides.

Shortly after Crumbl declined to award a franchise to Maxwell’s brother, both brothers invested in Dirty Dough, a gourmet cookie startup based out of Arizona. When Crumbl terminated Bradley Maxwell’s employment, rather than leaving no crumbs behind, he downloaded dozens of Crumbl documents to his personal cloud storage. He later uploaded those materials to Dirty Dough’s Google Drive, where they were circulated among company leadership and employees and discussed at meetings. Notes from the meetings showed a discussion of how Crumbl prepared its cookies and its supply chain logistics, along with an acknowledgment by company leadership about how informative the documents and information were.

Following Bradley Maxwell’s termination, Crumbl brought an action on claims of trade dress infringement, unfair competition, and unfair business practices against Dirty Dough. After commencing suit, Crumbl learned about the disclosure of its business documents and ultimately amended its complaint to assert claims for misappropriation of trade secrets and a breach of contract claim against Bradley Maxwell.

Crumbl then moved for a preliminary injunction seeking the return of its documents and information, as well as notes or summaries Dirty Dough created about the documents and information. Crumbl also requested that Dirty Dough issue a public statement about the improper use of Crumbl information, and for the court to prevent Dirty Dough from opening additional franchisee stores pending a determination it would not use any Crumbl information at those stores. The unique request for a public statement was apparently driven by the fact that there had been discussion on the company’s social media channels about the allegations in the case.

The court held a two-day evidentiary hearing where it assessed a forensic analysis of Dirty Dough’s Google Drive and computers with access to the Crumbl data and heard testimony from the Maxwell brothers and other Dirty Dough employees. After the hearing, the parties agreed to entry of an order requiring the return of all copies or derivatives of Crumbl information, return of any notes, summaries, or memoranda discussing the Crumbl information, and a verification under oath that Dirty Dough returned those items and that it has not retained any copies.

Crumbl continued to seek the additional relief identified above, i.e., a court order requiring a public statement from Dirty Dough and preventing Dirty Dough from opening franchisee stores.

In analyzing Crumbl’s remaining requests for relief, the court began by emphasizing that a preliminary injunction is an “extraordinary remedy” requiring a clear and unequivocal showing on multiple elements, including likelihood of success, irreparable harm, balance of hardships, and the public interest. The court expressed little doubt that at least some of Crumbl’s information qualified as trade secrets and that Bradley Maxwell acted unlawfully and unethically by retaining and disclosing that information after his employment ended. The court thus found Crumbl would likely be successful on a claim for misappropriation of trade secrets. The court easily concluded that Crumbl’s recipes—right down to the mysterious “white packet” of secret ingredients—were the real dough behind the business, not just information anyone could scoop off a shelf.

However, because the previously agreed order arising from the two-day evidentiary hearing meant that Dirty Dough would no longer have the alleged trade secrets and because the evidence Crumbl presented was insufficient to determine the extent or significance of Dirty Dough’s use of the information, the court declined to find for Crumbl on the three remaining injunctive relief factors. Noting that “the purpose of a preliminary injunction is ‘not to remedy past harm,’” the court held that Crumbl had not shown a preliminary injunction was necessary to prevent a future harm, nor that Crumbl’s proposed remedy was narrowly tailored to achieve this end. Notably, the court also declined to presume irreparable harm from the misappropriation itself, since neither the federal Defend Trade Secrets Act nor Utah’s Uniform Trade Secrets Act mandates injunctive relief as a remedy – a court “may,” but need not, grant one. Having your cookie and eating it too, in other words, isn’t how preliminary injunctions work.

In doing so, the court noted how the parties had already stipulated to forensic protocols and an order requiring Dirty Dough to return and delete all Crumbl information. With the parties already on the hook to return and destroy every crumb of that information, the court found there was little left to sweep up. Additionally, the court found insufficient evidence that Dirty Dough had actually incorporated Crumbl’s trade secrets into its products or business model, or that any residual risk justified the sweeping relief sought – in particular, a halt to franchise expansion that could put Dirty Dough out of business.

In that vein, the court found the third and fourth elements for a preliminary injunction—a balance of hardships and the public interest—were not met. Specifically, it found “Crumbl has not come close to showing that it still faces irreparable injury that could justify an economic death sentence for its nascent rival.” And Crumbl was unable to show “lingering or impending irreparable injury that outweighs Bennett Maxwell’s First Amendment interest against compelled speech.” The court thus wasn’t willing to “force-feed” a public statement.

The court found that forcing Dirty Dough to halt its expansion would have been a recipe for disaster, potentially putting a nascent rival out of business entirely. Similarly, the court noted the strong public interest in free competition in the economic marketplace, as well as in the fundamental First Amendment rights providing “a free marketplace of ideas.”

Crumbl v. Dirty Dough reflects a measured approach to trade secret disputes of condemning clear misconduct while resisting overbroad injunctive relief that could stifle competition or implicate constitutional concerns. It also shows the distinction between restraining unlawful (and unethical) conduct and the extraordinary step of restraining competition. In the end, the case shows that while courts will protect the recipe box, they won’t necessarily let you dictate how big a bite of relief you get to take.

BFV’s Noncompete/Trade Secrets group helps companies and individuals navigate the thicket of issues that arise when an employee is hired from a competitor or leaves a company to join a competitor. We help companies of all sizes protect themselves from unfair competition, and we defend companies and individuals who are accused of engaging in unfair competition.

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