Crumbling Cookies: Franchise Activity Request Denied in Alleged Trade Secrets Theft

In a trade secret dispute between two franchisors of cookie stores, a federal judge has denied Crumbl's injunction request following claims that fellow cookie franchise Dirty Dough misappropriated trade secrets from Crumbl. Crumbl LLC v. Dirty Dough LLC, 2023 WL 5180370, at *1 (D. Utah Aug. 11, 2023).

Dirty Dough was founded 2018 in Tempe, Arizona, by Bennett Maxwell. His brother Bradley Maxwell invested in Dirty Dough while still employed at Crumbl. During the last week of his employment, Bradley Maxwell downloaded 66 Crumbl recipes and other Crumbl information from Crumbl’s internal password protected server onto his personal cloud drive.

After a whistleblower contacted Crumbl upon learning that Bradley Maxwell uploaded the Crumbl information to Dirty Dough's server, Crumbl requested an order to enjoin Dirty Dough from opening any new franchises while the lawsuit remained active and to issue a corrective statement conceding improper acquisition of Crumbl information.

Courts in the Eighth Circuit conduct a four-factor test for determining whether to grant a motion for a preliminary injunction: (1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that movant will succeed on the merits; and (4) the public interest.

After a two-day evidentiary hearing, Crumbl and Dirty Dough stipulated to an order that required that Dirty Dough and Bradley Maxwell return all Crumbl-related information to Crumbl; deliver all notes, memoranda, summaries that might have incorporated any Crumbl information; and provide a sworn statement that they have complied with the order. The stipulated order established a forensic protocol for examination of Bradley Maxwell’s personal Google Drive, Dirty Dough’s Google Drive, Dirty Dough’s Slack accounts, Dirty Dough’s company email accounts, and any other related electronic storage devices in the possession of Bradley Maxwell or Dirty Dough.

Despite the ruling, Crumbl pressed ahead with the motion. The court concluded that Crumbl had demonstrated it was likely to prevail on its claims for trade secret misappropriation and false designation of origin under federal and state law because Bradley Maxwell acquired the Crumbl information unlawfully and that recipes and other information were proprietary and constitute trade secrets.

However, given that Crumbl had already received its information back from Dirty Dough, and no evidence existed that Dirty Dough had incorporated Crumbl's recipes because the recipes differed substantially. The court concluded there was no irreparable harm because injunctive relief cannot be used to redress past harm. Although Dirty Dough had experienced rapid success, no evidence existed that tied that success to Crumbl information. 

The court ruled that Crumbl failed to show that the threatened injury outweigh the harm because the economic harm outweighed any threatened injury that Crumbl might face. As far as the public interest element, the court cited at least two compelling public interests: free competition in the economic marketplace and that restricting Dirty Dough from opening any new franchises would be anti-competitive. The request for a corrective public statement was not directed to any threatened injury and the injunction request would likely constitute an unconstitutional restraint of speech under the First Amendment.

The court, therefore, denied Crumbl’s motion for a preliminary injunction because it failed to meet three of the four requirements for obtaining a preliminary injunction.