General Mills, Inc. v. Champion Petfoods USA, Inc.

Background

General Mills sued Champion Petfoods, Inc. and Modestino Mele under state law and the federal Defense of Trade Secrets Act, asserting contract and related claims. The court had previously granted General Mills a preliminary injunction based only on its contract claim. The injunction barred Mele from working for Champion and from disclosing General Mills’s confidential information. The court also partially granted Defendants’ motion to compel arbitration and directed the parties to arbitrate whether the dispute was arbitrable—the question of who should decide whether the claims must be arbitrated.

Defendants appealed and then filed two motions. The first sought a stay of the preliminary injunction while the appeal was pending, or clarification that the injunction would end once the dispute reached an arbitrator. The second sought to narrow the injunction so Mele could work for Champion, including as head of sales for jurisdictions outside the United States and Canada.

Court’s analysis

The court held that a district court may issue a preliminary injunction to preserve meaningful relief while a dispute is being arbitrated. It rejected Defendants’ argument that the Supreme Court’s decision in Henry Schein, Inc. v. Archer & White Sales, Inc. eliminated that authority. The court explained that a preliminary injunction preserves the parties’ positions pending a final decision and is not itself a decision on the underlying merits.

The court also rejected Defendants’ argument that an injunction pending arbitration must always preserve the immediate status quo. It concluded that the relevant status quo was the last peaceful, uncontested situation before the dispute began, which preceded Mele’s employment by Champion. General Mills had objected to that employment before filing suit, and the court found that the short delay before seeking relief did not undermine General Mills’s showing of irreparable harm.

The court further concluded that the injunction could remain in effect throughout arbitration, rather than ending when the dispute was merely submitted to an arbitrator. At that time, only arbitrability had been assigned to the arbitrator; it remained unresolved whether the underlying claims would be decided by the arbitrator or the court. The court stated that the injunction would remain in effect until the merits were resolved by the arbitrator or the court, but in any event would not extend beyond August 1, 2020, when Mele’s contractual obligation expired.

As to the requested scope changes, the court ruled that Defendants’ appeal limited its authority to preserving the status quo and prevented a substantive modification of the injunction. Alternatively, the court rejected the proposed changes on their merits. Allowing Mele to work for Champion while merely barring use or disclosure of confidential information would not address the contractual non-compete obligation or the risk of unfair competitive harm. The proposed role outside the United States and Canada also did not adequately prevent Mele’s work from assisting Champion’s North American competition.

Disposition

Judge Kenneth M. Karas denied Defendants’ Motion to Stay the preliminary injunction pending appeal and denied Defendants’ Motion to Modify the preliminary injunction. The injunction therefore remained in effect under the terms described by the court.