Injunction entered against Cabela's competitor founded by former employees

By Karen Kidd | Nov 14, 2018

Delaware Vice Chancellor Tamika Montgomery-Reeves  

WILMINGTON, Del. (Legal Newsline) – A Delaware chancellor recently granted a Nebraska-based sporting goods retailer's request for a preliminary injunction against a group of the retailer's former managers who allegedly started their own competing company in the same town where the retailer is headquartered.

In her 44-page memorandum opinion issued Oct. 26 Delaware Vice Chancellor Tamika Montgomery-Reeves also set bond at more than $1.8 million, which she estimated to be the gross profits for this year and all of next for the new company, NexGen Outfitters. The new company's launch had been expected Oct. 29, but the injunction covers contractual confidentiality and nonsolicitation provisions.

NexGen will be directly competing with Cabela's, the former employer of the new company's founders.

"Because NexGen is new and has no significant financial history, it is difficult to estimate the costs and damages it may incur during the pendency of the preliminary injunction," Montgomery-Reeves wrote in her memorandum opinion. She noted that NexGen's own total gross profit estimates for the rest of this year and all of next to be more than $2.5 million.

"If NexGen continues as a business in the face of this preliminary injunction, it will continue to have expenses but will be prevented from generating income and building its business through contacts the individual defendants made while at Cabela's," the vice chancellor said in her memorandum opinion.

Cabela's, based in Sidney, Nebraska, where the company is the town's largest employer, sued NexGen Outfitters founders Ryan Wellman, Trent Santero, Mike Riddle and Jeremy Nesbitt, alleging the former Cabela's managers misappropriated company information and violated noncompete agreements.

Cabela's asked the Chancery Court for a preliminary injunction against its former employees and their new company and that they be enjoined "from tortiously interfering with agreements held by any other defendant or any third party," the background portion of the Chancery Court's memorandum opinion said.

Wellman and Riddle were fired from Cabela's in February while Nesbitt left the same month and Santero left in March, according to the background portion of the Chancery Court's decision. Before they left the company, during the previous December and January, the four "started making preparations for their new business, NexGen," the memorandum opinion said.

"These preparatory steps included designing a logo that included Cabela’s colors, using a Cabela’s-issued computer to install 'Business-in-a-Box,' a tool for setting up a new business, meeting with vendors at a Las Vegas trade show and developing a vision for the new business that included providing products and services to Cabela's customers," the memorandum opinion continued. "In February and March 2018, the individual defendants started taking more concrete steps."

Those steps allegedly included downloading Cabela’s information about national brands and emailing a Cabela's vendor inviting them to participate in the new company while the group obtains some perks in Cabela's home town.

"In April 2018, the Sidney City Council committed eight acres of the town's industrial park for use by NexGen in exchange for NexGen's commitment to create 12 jobs and $640,000 in employee payroll," the memorandum opinion said.

Cabela's lawsuit followed.

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