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Sweet Street Desserts, Inc v. Better Bakery

January 7, 2013

SWEET STREET DESSERTS, INC.,
PLAINTIFF
v.
BETTER BAKERY, LLC, DEFENDANT



The opinion of the court was delivered by: Stengel, J.

MEMORANDUM

Sweet Street Desserts, Inc., a Pennsylvania corporation, has filed a complaint against Better Bakery, LLC, a California limited liability company, seeking preliminary injunctive relief for violations of the Lanham Act and common law unfair competition. It also seeks damages based upon Better Bakery's breach of contract, unjust enrichment, and misappropriation of Sweet Street's trade secrets. A hearing has been scheduled in January 2013 to consider Sweet Street's motion for preliminary injunction. Better Bakery has filed a motion to dismiss Counts II, III, and IV of the complaint, to which Sweet Street responded in vigorous opposition. For the reasons that follow, I will grant the motion in its entirety.

I. BACKGROUND

Plaintiff Sweet Street is in the business of research, design, manufacture, supply and distribution of specialty baked goods. It characterizes itself as among the most successful, well-known, and respected designers and suppliers of such baked goods in its industry. According to market research, Sweet Street is the most well-regarded brand in its competitive set of nine major dessert producers. Currently, Sweet Street works with over one thousand distributors throughout the United States and in fifty-five other countries.

In July 2011, Thomas Henzi, a pastry chef with a background in the commercial food product industry approached Sweet Street with a request that Sweet Street evaluate and consider working with him to develop further a distinctive pretzel sandwich for sale through Sweet Street's national and global distribution network. Sweet Street agreed and proceeded to expend considerable time and resources to develop this new type of rolled pretzel product, to be known as the "Sweet Street Pretzel Sandwich."

Defendant Better Bakery, at Mr. Henzi's direction, had already attempted to make a prototype of the stuffed pretzel but was unsuccessful. Thereafter, in the fall of 2011, Sweet Street began to discuss the potential for the defendant to work with Sweet Street in designing the Sweet Street Pretzel Sandwich. The defendant would also benefit from this arrangement through assisting in the development of the pretzel sandwich and the opportunity to manufacture the product on behalf of Sweet Street.

In order to protect the sharing of confidential information between the plaintiff and the defendant, the parties executed a preliminary Mutual Confidentiality Agreement on September 28, 2011, followed by a superseding Confidentiality and Non-disclosure Agreement, executed on November 2, 2011. The defendant admitted to the plaintiff that as of that date it was not independently making any filled pretzel products.

The complaint and motion for preliminary injunction allege that this new product was to be distinctive in its unique design features and the recipe used. The visual appeal designed by the plaintiff was allegedly more desirable than prior "stuffed pretzel" products on the market. The plaintiff wanted its product to reveal through distinctive angled slits on the surface, the contents "stuffed" inside. As the production and design of the pretzel proceeded, the plaintiff took many steps using its proprietary knowledge and expertise to amplify its quality, appeal, and distinctiveness. Because it viewed the defendant as the baker of the prototypes and the eventual producer of the final product, the plaintiff shared all of these steps with the defendant.

Meanwhile, the plaintiff spent a lot of time, effort, and resources to present prototypes of the pretzel sandwich to customers in Chicago, the West Coast, and the East Coast for feedback prior to the product's launch. It then revealed the confidential and proprietary results of this market research to the defendant in order to continue to develop and refine the design of the sandwich. Bryan Freeman, the defendant's principal, acknowledged the unique aspects of the design and agreed in an email that the critical consumer appeal-related design creations are proprietary to Sweet Street.

The parties continued to collaborate. However, the defendant could not meet the plaintiff's requirement of consistent execution of its exacting standards. To assist with that, the plaintiff gave the defendant confidential information regarding modifications so the defendant could satisfactorily manufacture the sandwich.

According to the complaint, the defendant developed a secret scheme to steal the design and qualities of the pretzel sandwich. It also secretly schemed to begin marketing and selling a knock-off product, in violation of the parties' agreements.

In October 2012, the plaintiff learned that the defendant had begun surreptitiously selling a knock-off of the product, on a large-volume scale, including to numerous Sam's Clubs. The plaintiff also learned that the defendant was actively interviewing regional food service brokers in order to assist in the launch of pretzel products as if they were the defendant's own products. The knock-offs specifically used the design elements created by the plaintiff and protected by the agreement, including the wide top slits and numerous other appeal-enhancing design elements of the product that were developed expressly by Sweet Street and acknowledged in writing by the defendant to be Sweet Street's own design features.

II. STANDARD OF REVIEW

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted examines the sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Following the Supreme Court decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009), pleadings standards in federal actions have shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss under Fed. R. Civ. P.12(b)(6). Fowler v. UPMC Shadyside, 578 F.3d 203, 210-211 (3d Cir. 2009); see also Phillips v. County of Allegheny, 515 F. 3d 224, 230 (3d Cir. 2008). Therefore, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. First, the factual and legal elements of a claim should be separated. The court must accept all of the complaint's well-pleaded facts as true but may disregard legal conclusions. Iqbal, 556 U.S. at 679. Second, a district court must determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a "plausible claim for relief." Id. In other words, a complaint must do more than allege the plaintiff's entitlement to ...


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