ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
This communication is protected by the attorney-client privilege and/or work product doctrine. It has been prepared by Calderwood & Harkness LLP at the direction of and for the sole benefit of Cascade Retail Holdings Inc. in connection with the provision of legal advice and in anticipation of litigation. Do not forward, copy, or distribute without the express authorization of Calderwood & Harkness LLP.
MEMORANDUM
TO: Theresa Yun-Park, General Counsel, Cascade Retail Holdings Inc.
FROM: Bernard Crawford, Partner, Calderwood & Harkness LLP
DATE: February 28, 2025
RE: Privileged Litigation Status Report — Weekly Update #1; Matter No. 1038-00006
SUBJECT: Cascade Retail Holdings Inc. v. Rathore et al. — Restrictive Covenant Enforcement and Related Claims
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I. Executive Summary
Calderwood & Harkness LLP ("C&H" or the "Firm") was formally engaged on February 18, 2025 to represent Cascade Retail Holdings Inc. ("CRH" or the "Company") in connection with the coordinated departure of eight senior merchandising employees led by Priya Rathore, CRH's former Senior Vice President of Merchandising. Ms. Rathore and the seven other departing employees (collectively, the "Rathore Group") resigned simultaneously on February 7, 2025 and have accepted employment with Verdana Commerce Group, Inc. ("Verdana" or "VCG"), a direct competitor of CRH in overlapping retail categories. Verdana is a privately held company majority-owned by Greystone Capital Partners, LP ("Greystone") through its Greystone Capital Fund VII, LP vehicle.
This report covers the first ten days of the engagement, spanning the period from February 18 through February 28, 2025. During this initial phase, the C&H litigation team has accomplished the following key objectives:
(a) completion of conflicts clearance for all adverse parties, including individual defendants, corporate defendants, and opposing counsel firms;
(b) initiation of a forensic investigation of data exfiltration from CRH systems, through our engagement of Pinnacle Forensics LLC, which has already yielded preliminary findings indicating the download of approximately 14,327 files (~2.8 GB) to personal cloud storage accounts by members of the Rathore Group in the weeks preceding their departure;
(c) engagement of a private investigator, Aurelian Investigations Group Inc., to develop evidence regarding the timeline and circumstances of the coordinated recruitment;
(d) comprehensive review of all eight employment agreements and the restrictive covenant provisions contained therein, including non-competition, non-solicitation of employees, non-solicitation of vendors, and confidentiality obligations;
(e) preparation and delivery of cease-and-desist letters to all eight departing employees individually, to Verdana Commerce Group, Inc., and to Greystone Capital Partners, LP;
(f) issuance of a litigation hold notice to all relevant CRH personnel across the legal, human resources, information technology, merchandising, and executive leadership departments; and
(g) initial case strategy development, including identification of claims, forum selection analysis, and development of a preliminary litigation timeline.
Opposing counsel have entered appearances as of February 27, 2025. Whitfield, Nygaard & Doyle LLP ("WND") represents all eight individual departing employees (the Rathore Group), with Catherine Nygaard serving as lead partner. Blackhall & Soren LLP represents Verdana Commerce Group, Inc., with Gavin Blackhall serving as lead partner. No counsel has yet appeared on behalf of Greystone Capital Partners, LP.
This matter is on an emergency trajectory. Based on our review to date, it is our recommendation that CRH file a Verified Complaint and an accompanying motion for a Temporary Restraining Order ("TRO") in the Delaware Court of Chancery within the next week, targeting the week of March 3–5, 2025. The balance of this memorandum provides a detailed account of the work performed, findings to date, and recommended next steps.
II. Engagement and Staffing
A. Formal Engagement
The engagement letter between CRH and C&H was executed on February 18, 2025. The matter has been assigned internal matter number 1038-00006. The scope of the engagement encompasses the enforcement of restrictive covenant provisions — including non-competition, non-solicitation of employees, non-solicitation of vendors, and confidentiality covenants — as well as claims for trade secret misappropriation under the Delaware Uniform Trade Secrets Act, 6 Del. C. §§ 2001–2009 ("DUTSA"), tortious interference with contractual relations, civil conspiracy, and all related causes of action against the individual members of the Rathore Group and against Verdana Commerce Group, Inc. The engagement further encompasses any claims against Greystone Capital Partners, LP that may be appropriate as the factual record develops.
The governing law for all eight employment agreements at issue is the law of the State of Delaware, as specified in the choice-of-law provisions of those agreements. As discussed in greater detail below, the Delaware Court of Chancery is the recommended forum for filing the initial action, given Delaware's governing law, Verdana's Delaware incorporation and Wilmington-based headquarters, and the Court of Chancery's equity jurisdiction over applications for injunctive relief.
B. Staffing
The following attorneys have been assigned to this matter and are actively working on the case:
A staffing and budget memorandum was circulated to Renata Vasquez on February 18, 2025, the date of the engagement. Should the matter require additional staffing — for example, in connection with expedited discovery or the preliminary injunction hearing — we will notify you promptly with a revised staffing proposal and associated budget estimate. At this stage, we believe the current team is appropriately sized for the pre-filing and initial litigation phases.
C. Conflicts Clearance
A comprehensive conflict check memorandum was completed on February 18, 2025, the same day the engagement letter was executed. The conflict check was run against all identified adverse parties and their known affiliates, as well as all opposing counsel firms. The Firm has confirmed that no conflicts of interest exist with respect to any of the following parties:
• Individual Defendants: Priya Rathore, Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, and Kira Johansson;
• Corporate/Entity Defendants: Verdana Commerce Group, Inc. and Greystone Capital Partners, LP (including Greystone Capital Fund VII, LP);
• Opposing Counsel: Whitfield, Nygaard & Doyle LLP and Blackhall & Soren LLP.
No waivers were required, and the matter has been cleared for representation without limitation.
III. Background and Factual Summary
A. The Departing Employees
On February 7, 2025, at 4:47 PM PST, CRH received simultaneous resignation emails from eight senior employees within its merchandising division. All eight resignations were effective immediately, and all were submitted within seconds of each other, strongly indicating a high degree of coordination. The departing employees comprise the core leadership of CRH's merchandising function and include the following individuals:
Priya Rathore — Former Senior Vice President, Merchandising. Ms. Rathore was employed by CRH from June 3, 2019 through February 7, 2025, a tenure of approximately five years and eight months. She was promoted from Vice President of Merchandising to Senior Vice President of Merchandising effective March 15, 2021, at which time her employment agreement was amended and restated. Ms. Rathore's FY2024 base salary was $485,000, with a target annual bonus of $290,000 (approximately 60% of base). In connection with her promotion, Ms. Rathore received an RSU grant with a face value of $725,000, vesting over four years from March 15, 2021. As the most senior merchandising executive at CRH, Ms. Rathore had direct oversight of all product category management, vendor relationships, private-label strategy, seasonal buying operations, and the Company's confidential five-year category expansion roadmap known internally as "Project Ridgeline."
Ms. Rathore has accepted the position of President, Merchandising & Strategy at Verdana Commerce Group, Inc. Based on information available to us — including the terms disclosed in Verdana's February 14, 2025 press release and information gathered through our investigation — her compensation package at Verdana includes a base salary of $650,000, a sign-on bonus of $1,500,000, a target annual bonus of $520,000 (80% of base salary), and an equity grant of 1.5% of VCG's fully diluted equity. The magnitude of this compensation package, and particularly the sign-on bonus and equity grant, underscores the strategic value that Verdana places on acquiring Ms. Rathore's knowledge of CRH's proprietary operations.
The remaining seven departing employees are as follows:
The aggregate sign-on bonuses paid by Verdana to the Rathore Group total approximately $6,200,000, consisting of the $1,500,000 sign-on bonus to Ms. Rathore and approximately $4,700,000 in sign-on bonuses distributed among the remaining seven employees. The total magnitude of these sign-on payments is itself indicative of the extraordinary lengths to which Verdana has gone to recruit CRH's merchandising leadership as a unit, and further suggests that the knowledge and trade secrets these individuals carry with them — rather than their individual capabilities alone — are the primary asset Verdana seeks to acquire.
B. CRH Business Context
Cascade Retail Holdings Inc. is a publicly traded omnichannel retail company listed on the Nasdaq Stock Market under the ticker symbol "CRHL." CRH's corporate headquarters are located at 2200 Elliott Avenue West, Suite 3400, Seattle, Washington 98119. The Company is incorporated under the laws of the State of Delaware.
CRH is a significant participant in the U.S. retail market. For fiscal year 2024, CRH reported total revenue of approximately $6.82 billion. As of February 2025, CRH's market capitalization is approximately $4.1 billion. The Company operates through multiple divisions, but its merchandising division — the division most directly affected by the departures at issue — is among its most strategically important business units. In FY2024, CRH's merchandising division accounted for approximately $2.3 billion in gross merchandise value ("GMV"), representing a substantial portion of the Company's total revenue and a core driver of CRH's competitive positioning.
The significance of the Rathore Group's departure cannot be overstated in the context of CRH's merchandising operations. The eight departing employees collectively represented the senior leadership of the merchandising division and had direct, unrestricted access to CRH's most sensitive and proprietary business information. This includes, but is not limited to:
• Proprietary vendor negotiation playbooks detailing CRH's negotiation strategies, pricing thresholds, discount structures, volume commitments, and relationship management protocols for hundreds of domestic and international vendors;
• Seasonal buying algorithms that drive CRH's purchasing decisions across product categories, incorporating proprietary demand forecasting models, inventory optimization parameters, and markdown timing protocols;
• Private-label sourcing strategies encompassing CRH's proprietary cost models, factory relationships, quality specifications, and margin targets for its growing portfolio of private-label brands;
• Project Ridgeline — CRH's confidential five-year category expansion roadmap, which was completed in October 2024 following approximately eighteen months of development by a cross-functional team led by Ms. Rathore. Project Ridgeline details CRH's strategic plan for category expansion, market entry into new product segments, geographic expansion priorities, capital allocation plans, and competitive positioning strategies through fiscal year 2029.
The loss of this proprietary information to a direct competitor would cause CRH significant and potentially irreparable competitive harm.
C. Verdana Commerce Group, Inc.
Verdana Commerce Group, Inc. is a Delaware corporation with its principal offices at 400 Christiana Gateway, Suite 700, Wilmington, Delaware 19801. Verdana is privately held and currently majority-owned by Greystone Capital Partners, LP through its investment vehicle Greystone Capital Fund VII, LP, a fund with $8.5 billion in committed capital. Greystone acquired its majority stake in Verdana in Q3 2023 in a transaction valued at approximately $2.4 billion in enterprise value.
Verdana is a direct competitor of CRH. Verdana's estimated FY2024 revenue was approximately $1.9 billion, making it substantially smaller than CRH but a material competitor in a number of critical product categories. Our analysis indicates that CRH and Verdana compete directly in at least 28 overlapping product categories, including home goods, apparel, and seasonal décor — categories that represent some of CRH's strongest competitive positions and highest-margin business segments.
Of particular relevance to this matter, in January 2025 — less than two weeks before the Rathore Group's coordinated resignation — Verdana publicly announced a "transformational growth initiative" targeting $4 billion in revenue by 2028. The announcement specifically cited planned expansion into private-label home goods and seasonal décor, which are among CRH's strongest and most profitable categories and which are squarely within the scope of the strategic plans detailed in Project Ridgeline. The timing of this announcement, followed so closely by the coordinated recruitment of CRH's entire merchandising leadership team, strongly suggests that Verdana's growth initiative is designed to leverage the proprietary knowledge and trade secrets that the Rathore Group developed and had access to at CRH.
Verdana's Chief Executive Officer is Warren Dietrich; its General Counsel is Helen Tsoi. Greystone Capital Partners, LP is led by Managing Partner Elliot Westbrook, with principal offices at 680 Park Avenue, 22nd Floor, New York, New York 10065. As discussed below, our cease-and-desist correspondence has been directed to both Verdana and Greystone, given Greystone's majority ownership interest and its apparent role in facilitating the coordinated recruitment through its operational involvement with Verdana.
D. Discovery of Departures and Initial CRH Response
The timeline of CRH's discovery and initial response to the departures is as follows:
February 7, 2025: All eight resignations were received simultaneously at 4:47 PM PST via coordinated email submissions. Each resignation was effective immediately and did not provide any transition period or notice.
February 10, 2025: CRH's Chief People Officer, Roland Ashby, formally alerted General Counsel Theresa Yun-Park to the coordinated nature of the departures and the potential restrictive covenant implications. Mr. Ashby flagged the departure as unprecedented in the Company's history, both in terms of the number of simultaneous resignations and the seniority of the departing employees.
February 12, 2025: CRH's in-house legal team, under Ms. Yun-Park's direction, confirmed the existence and terms of the restrictive covenant provisions in each departing employee's employment agreement. Concurrently, CRH's Information Technology department conducted an internal audit that identified indications of data exfiltration — specifically, anomalous download activity from CRH's Aldermere Systems and Pinnacle Health IT environments — in the weeks preceding the resignations.
February 14, 2025: Verdana Commerce Group issued a public press release titled "Verdana Commerce Welcomes Industry-Leading Merchandising Team to Accelerate Growth," publicly announcing the hiring of the Rathore Group. The press release specifically identified Ms. Rathore by name and title and described the recruitment as a "strategic investment in world-class talent to accelerate Verdana's transformational growth." The press release made no reference to the existence of restrictive covenant obligations owed by any of the departing employees to CRH.
In the interim, CRH has designated Martin Cho, Vice President of Merchandising, as the interim acting Senior Vice President to lead the merchandising division during this period. Mr. Cho has been briefed on the general circumstances of the departures and is working to stabilize the division's operations.
IV. Restrictive Covenant Review
A. Summary of Review Process
Pursuant to our initial work plan, James Underwood and Devon Archer conducted a comprehensive review of all eight employment agreements during the period of February 19–22, 2025. The review encompassed the original employment agreements, all amendments and restatements, offer letters, promotion letters, RSU agreements with restrictive covenant tie-in provisions, and any other ancillary documents containing restrictive covenant or confidentiality provisions applicable to each departing employee.
Upon completion of the review, a detailed memorandum summarizing the restrictive covenant provisions for all eight employees was prepared and circulated to the internal C&H team on February 22, 2025. The memorandum includes a provision-by-provision analysis of each employee's non-competition, non-solicitation (employees), non-solicitation (vendors), and confidentiality obligations, as well as an identification of the specific consideration supporting each covenant. A comparative analysis chart in spreadsheet format was also prepared on February 22, 2025, providing a side-by-side comparison of covenant terms across all eight agreements for quick reference during strategy discussions and potential court filings.
B. Key Covenant Provisions — Priya Rathore
Ms. Rathore's restrictive covenant obligations are governed by her Amended and Restated Employment Agreement dated March 15, 2021, which superseded her original Employment Agreement dated June 3, 2019. The amendment and restatement was executed in connection with Ms. Rathore's promotion from Vice President to Senior Vice President of Merchandising. The key restrictive covenant provisions are as follows:
Non-Competition: Ms. Rathore is subject to a non-competition covenant for a period of eighteen (18) months following the termination of her employment for any reason. The geographic scope of the non-competition covenant is the United States. The covenant prohibits Ms. Rathore from directly or indirectly engaging in, being employed by, consulting for, or otherwise providing services to any business that competes with CRH in any product category in which CRH operates. Verdana Commerce Group, Inc. is indisputably a direct competitor of CRH, operating in at least 28 overlapping product categories.
Non-Solicitation of Employees: Ms. Rathore is subject to a non-solicitation covenant prohibiting her from directly or indirectly soliciting, recruiting, inducing, or encouraging any CRH employee to leave CRH's employment for a period of twenty-four (24) months following termination. Given that the seven other departing employees resigned simultaneously with Ms. Rathore and joined the same competitor, this provision is of critical importance.
Non-Solicitation of Vendors: Ms. Rathore is subject to a non-solicitation covenant prohibiting her from directly or indirectly soliciting, diverting, or interfering with any vendor or supplier relationship of CRH for a period of twenty-four (24) months following termination.
Confidentiality: Ms. Rathore's confidentiality obligations are perpetual in duration and broadly defined to encompass all proprietary and confidential information of CRH, including trade secrets, business strategies, financial information, customer data, vendor information, pricing models, and any other information not generally available to the public.
Governing Law: The Amended and Restated Employment Agreement specifies that it shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of laws principles.
The additional consideration supporting the enhanced restrictive covenants in the Amended and Restated Employment Agreement included a one-time promotion bonus of $150,000 and the enhanced RSU grant of $725,000 in face value, vesting over four years from the March 15, 2021 promotion date. This additional consideration strengthens the enforceability of Ms. Rathore's covenants under Delaware law, as it demonstrates that the covenants were supported by fresh consideration independent of continued at-will employment.
C. Key Covenant Provisions — Other Seven Employees
All seven remaining employment agreements are likewise governed by Delaware law. The following table summarizes the key covenant terms for each employee:
Each agreement contains substantively similar non-competition, non-solicitation, and confidentiality provisions, differing primarily in duration as set forth above. The non-competition periods generally correspond to the seniority level of the employee, with the two Vice Presidents (Linden and Kaczmarek) subject to the longer 18-month period and the Directors and Senior Managers subject to 12-month periods. All agreements designate the United States as the applicable geographic scope for the non-competition covenant.
D. Initial Enforceability Assessment
Delaware law applies a reasonableness standard to the enforcement of restrictive covenants in employment agreements. Under Delaware Court of Chancery precedent, a restrictive covenant will be enforced if it is reasonable in scope, duration, and geographic area, and if it is supported by adequate consideration. The court considers the totality of the circumstances, including the employee's role, access to confidential information, and the employer's legitimate business interests.
Our preliminary assessment is that the restrictive covenant provisions across all eight employment agreements are well-drafted and are supported by adequate consideration. The covenants are tailored to the competitive landscape in which CRH operates, the employees' respective levels of access to proprietary information, and the legitimate business interests CRH seeks to protect. We believe CRH has a strong position on enforceability, particularly with respect to the following factors:
• The covenants were entered into as part of arms-length employment negotiations and, in Ms. Rathore's case, were supported by substantial additional consideration at the time of her promotion;
• The durations are within the range that Delaware courts have upheld in cases involving senior executives with access to trade secrets and confidential business information;
• The employees' access to sensitive proprietary information — including Project Ridgeline, vendor negotiation playbooks, and proprietary buying algorithms — provides a strong justification for the restrictions; and
• The coordinated nature of the departure itself, and the move to a direct competitor that has publicly announced plans to enter CRH's strongest categories, reinforces the legitimate business interests that the covenants are designed to protect.
We have also identified the following potential vulnerabilities, which we are analyzing in greater detail and which we expect opposing counsel to raise:
(a) Scope and duration arguments for shorter-tenure employees. Nathan Tsao (3 years of tenure) and Kira Johansson (4 years of tenure) had the shortest tenures of the departing group, and opposing counsel may argue that a 12-month non-compete is disproportionate to the duration of their employment. However, the relevant inquiry under Delaware law focuses on the employee's access to confidential information and the employer's protectable interests, not solely on the length of employment.
(b) Potential overbreadth challenge on nationwide geographic scope. The non-competition covenants apply across the entire United States. While CRH operates nationally and Verdana competes with CRH on a national basis in 28 overlapping product categories, opposing counsel may argue that a nationwide restriction is overbroad for certain employees whose responsibilities were not national in scope. We believe this argument is weak given CRH's omnichannel retail model and national vendor relationships, but it warrants careful briefing.
(c) Blue-pencil analysis. If the court were to determine that any provision is overly broad in scope, duration, or geographic area, Delaware courts have discretion to "blue-pencil" — i.e., modify — the restriction to render it reasonable and enforceable. This serves as a backstop in the event any individual provision is challenged, as the court may reform rather than invalidate the covenant.
A detailed strengths-and-weaknesses analysis addressing each of these points will follow in a separate privileged work product memorandum, which we expect to circulate in advance of the filing of the Verified Complaint.
V. Vendor Engagements
A. Pinnacle Forensics LLC
C&H engaged Pinnacle Forensics LLC ("Pinnacle") on February 20, 2025 to provide forensic investigation services in connection with this matter. The engagement letter was executed on that date. The engagement is led by Dr. Rajiv Anand, a recognized expert in digital forensics with extensive experience in trade secret misappropriation cases. Pinnacle's offices are located at 8700 Georgia Avenue, Suite 300, Silver Spring, Maryland 20910.
The scope of Pinnacle's engagement includes the following:
• Forensic imaging of all CRH-issued devices (laptops, mobile phones, and tablets) returned by the eight departing employees, to the extent such devices have been recovered;
• Analysis of cloud access logs from CRH's Aldermere Systems and Pinnacle Health IT environments to identify any anomalous access, download, or transfer activity by any member of the Rathore Group in the weeks and months preceding their departure;
• Data exfiltration pattern analysis, including identification of the volume, type, and timing of files downloaded, printed, emailed, or otherwise transferred outside CRH's controlled systems; and
• Preparation of a forensic report suitable for use as evidence in litigation, including potential use in support of a TRO and preliminary injunction application.
Preliminary Findings (as of February 28, 2025). As of the date of this report, Pinnacle has completed the forensic imaging of five of the eight CRH-issued devices that were returned by the departing employees. Three devices remain to be imaged; these devices were received by CRH's IT department later than the others, and imaging is expected to be completed during the week of March 3, 2025.
The initial results of Pinnacle's log analysis are significant and alarming. Pinnacle's review of CRH's Aldermere Systems and Pinnacle Health IT access logs indicates a pattern of significant download activity by members of the Rathore Group between approximately January 10 and February 4, 2025 — the four-week period immediately preceding the coordinated resignations. The preliminary file count indicates that approximately 14,327 files, totaling approximately 2.8 gigabytes of data, were downloaded from CRH's systems to personal cloud storage accounts linked to individual members of the Rathore Group.
Based on Pinnacle's initial review of the file metadata and directory structures, the downloaded files appear to include, among other materials:
• Project Ridgeline presentations, strategy documents, and supporting data files;
• Vendor negotiation term sheets and pricing agreements with key CRH vendors;
• Private-label cost models, including factory cost data, margin targets, and sourcing specifications; and
• Customer segmentation data and category analytics reports.
These preliminary findings are consistent with a deliberate and premeditated effort to exfiltrate CRH's most sensitive proprietary information in advance of the coordinated departure. If confirmed and documented in Pinnacle's final forensic report, this evidence will be a central component of our TRO application and will substantially strengthen our claims for trade secret misappropriation under DUTSA.
Pinnacle anticipates completing its full forensic report by approximately March 10–12, 2025. A separate privileged memorandum addressing the forensic findings in detail will be prepared and circulated upon receipt of the final report.
B. Aurelian Investigations Group Inc.
C&H engaged Aurelian Investigations Group Inc. ("Aurelian") on February 21, 2025 to conduct a private investigation in support of this matter. The engagement letter was executed on that date. The investigation is led by Sandra Fielding, a former federal law enforcement agent with significant experience in corporate investigations. Aurelian's offices are located at 1420 Fifth Avenue, Suite 2210, Seattle, Washington 98101.
The scope of Aurelian's engagement encompasses investigation of the circumstances surrounding the coordinated departure, including:
• Pre-resignation communications between members of the Rathore Group and representatives of Verdana and/or Greystone Capital Partners, including email, text message, and other electronic or personal communications to the extent discoverable through lawful means;
• The timeline of the recruitment effort, including identification of when initial contact was made, the sequence and progression of discussions, and the involvement of specific Verdana or Greystone personnel in the recruitment;
• Evidence of conspiracy or coordinated planning among the departing employees to resign simultaneously and join Verdana as a group; and
• Any additional evidence relevant to CRH's claims, including evidence of the use or disclosure of CRH's confidential information or trade secrets.
Status (as of February 28, 2025). Aurelian's investigation is underway. Aurelian is currently tracking public records, social media activity, travel records, and other open-source intelligence relevant to the departing employees and key Verdana and Greystone personnel. Aurelian's initial leads suggest that a pre-departure meeting took place between Ms. Rathore and members of Verdana's and/or Greystone's leadership team, though the specific date, location, and attendees are still being confirmed. Additional details regarding Aurelian's findings will be provided as the investigation progresses. Aurelian anticipates delivering a full investigative report by early March 2025.
C. Future Vendor Engagement — Damages Expert
In addition to the forensic and investigative vendors already engaged, we recommend that CRH retain an economic damages expert to quantify the harm resulting from the potential misuse of CRH's trade secrets and the breach of the Rathore Group's restrictive covenant obligations. Given that CRH's merchandising division accounted for $2.3 billion in gross merchandise value in FY2024, and given the scope and sensitivity of the proprietary information at issue — including the five-year strategic roadmap embodied in Project Ridgeline — the damages exposure in this matter is significant.
A formal recommendation for a specific economic damages expert will be provided next week. We are currently evaluating potential experts with specialized experience in retail industry economics, trade secret valuation, and the quantification of competitive harm in restrictive covenant cases.
VI. Pre-Litigation Correspondence
A. Cease-and-Desist Letters
On February 25, 2025, C&H prepared and sent cease-and-desist letters to the following recipients. All letters were sent by both overnight delivery (via Severin Partners LLC Priority Overnight) and by email to the recipients and/or their known counsel.
1. Priya Rathore. A detailed cease-and-desist letter was sent to Ms. Rathore at her last known address and by email, demanding: (i) immediate cessation of employment at Verdana Commerce Group, Inc. in any capacity involving merchandising, strategy, vendor relations, product development, or any other function that would draw upon or risk disclosure of CRH's confidential information and trade secrets; (ii) the immediate return of all CRH confidential information in Ms. Rathore's possession, custody, or control, in whatever format and on whatever device or storage medium; and (iii) full compliance with all restrictive covenant obligations under the Amended and Restated Employment Agreement dated March 15, 2021, including the 18-month non-competition covenant, the 24-month non-solicitation of employees covenant, the 24-month non-solicitation of vendors covenant, and the perpetual confidentiality obligations. The letter put Ms. Rathore on notice that CRH intends to pursue all available legal remedies, including injunctive relief and damages, if compliance is not forthcoming.
2. Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, and Kira Johansson. Cease-and-desist letters were sent to each of the seven remaining departing employees individually. These letters followed a standardized form but included individual annexes specifying each employee's specific covenant terms, including the applicable non-competition period, non-solicitation periods, and confidentiality obligations, as derived from each employee's respective employment agreement. The substantive demands were identical to those made of Ms. Rathore: immediate cessation of employment at Verdana in any capacity that would breach the employee's restrictive covenants, return of all CRH confidential information, and full compliance with all covenant obligations.
3. Verdana Commerce Group, Inc. A separate cease-and-desist letter was addressed to Helen Tsoi, General Counsel of Verdana Commerce Group, Inc., at Verdana's Wilmington headquarters. The letter demanded that Verdana immediately cease employing the members of the Rathore Group in any capacity that would cause or contribute to a breach of their restrictive covenant obligations to CRH. The letter further warned Verdana that its knowing hiring of employees subject to enforceable restrictive covenants, and its facilitation of the coordinated recruitment of CRH's merchandising leadership, exposes Verdana to liability for tortious interference with contractual relations and civil conspiracy. The letter identified CRH's specific concerns regarding the apparent alignment between Verdana's announced "transformational growth initiative" and the categories and strategies detailed in CRH's confidential Project Ridgeline roadmap.
4. Greystone Capital Partners, LP. A cease-and-desist letter was addressed to Elliot Westbrook, Managing Partner of Greystone Capital Partners, LP, at Greystone's New York offices at 680 Park Avenue, 22nd Floor, New York, New York 10065. The letter notified Greystone of CRH's claims and demanded that Greystone, as the majority owner of Verdana through Greystone Capital Fund VII, LP, take immediate steps to ensure that Verdana ceases its employment of the Rathore Group in violation of their restrictive covenant obligations. The letter specifically referenced Greystone's operational involvement with Verdana and its apparent role in facilitating the coordinated recruitment effort, and put Greystone on notice that CRH would pursue all available claims against any party that participated in or aided and abetted the breach of the Rathore Group's contractual obligations.
B. Responses and Opposing Counsel Appearances
On February 27, 2025, two business days after the cease-and-desist letters were delivered, the following opposing counsel entered appearances:
Whitfield, Nygaard & Doyle LLP ("WND") entered an appearance on behalf of all eight individual departing employees (the Rathore Group). The lead partner on the matter is Catherine Nygaard; the associate is Travis Beaumont. WND's offices are located at 1000 North Market Street, Suite 1500, Wilmington, Delaware 19801. WND's entry of a single appearance on behalf of all eight individuals confirms the coordinated nature of the group's departure and strongly suggests a unified legal strategy among the individual defendants.
WND has indicated that it will provide a substantive response to the cease-and-desist letters early next week. Based on informal communications with WND, initial indications suggest that opposing counsel intends to challenge the enforceability of the restrictive covenants under Delaware's reasonableness standard. We anticipate that WND will argue, among other things, that the non-competition covenants are overly broad in geographic scope and/or duration, and that the covenants lack adequate consideration as to certain employees. We are preparing to address these arguments in our Verified Complaint and TRO motion papers.
Blackhall & Soren LLP entered an appearance on behalf of Verdana Commerce Group, Inc. The lead partner is Gavin Blackhall; the senior associate is Meredith Lau. Blackhall & Soren's offices are located at 300 Delaware Avenue, Suite 900, Wilmington, Delaware 19801. No substantive response has yet been received from Blackhall & Soren.
As of the date of this report, no response has been received from Greystone Capital Partners, LP directly, and no counsel has entered an appearance on Greystone's behalf. We will continue to monitor for any response from Greystone and will report on developments in our next weekly update.
VII. Litigation Hold
C&H prepared a comprehensive litigation hold notice on February 19, 2025, the day following formal engagement. The litigation hold notice was distributed to relevant CRH personnel, with distribution coordinated through CRH's General Counsel's office.
The hold covers all documents, communications, and electronically stored information related to the following topics and individuals:
• All eight members of the Rathore Group, including all personnel files, performance reviews, communications, correspondence, and other documents related to their employment, compensation, restrictive covenant obligations, and departures;
• Project Ridgeline, including all versions of presentations, strategy documents, supporting data, meeting notes, and communications related to the development, review, or dissemination of the Project Ridgeline roadmap;
• All merchandising division data, including vendor negotiation materials, pricing models, cost structures, seasonal buying algorithms, customer segmentation data, and category analytics;
• All communications with, about, or regarding Verdana Commerce Group, Inc. and Greystone Capital Partners, LP, including any competitive intelligence, market analysis, or strategic assessments referencing Verdana or Greystone; and
• All communications and documents related to the circumstances of the departures, including exit interviews (if any), IT audit findings, and internal communications regarding the departures.
Distribution of the litigation hold notice has been confirmed to relevant CRH personnel across the following departments: Legal, Human Resources, Information Technology, Merchandising, and Executive Leadership. Acknowledgment receipts have been requested and are being tracked by CRH's in-house legal team.
Recommendation. To ensure continued compliance, periodic reminder notices should be circulated to all hold recipients. We will prepare a follow-up hold reminder notice for distribution in approximately 30 days. Additionally, we recommend that CRH's IT department implement automated preservation protocols for the email accounts and shared network drives of the departing employees, to the extent not already in place.
VIII. Litigation Strategy and Next Steps
A. Proposed Claims
Based on our initial review of the facts, the employment agreements, and the applicable law, we recommend asserting the following causes of action in a Verified Complaint to be filed in the Delaware Court of Chancery:
1. Breach of Restrictive Covenant (Non-Competition) — Against All Eight Individual Defendants. Each member of the Rathore Group has accepted employment with Verdana Commerce Group, Inc., a direct competitor of CRH, in violation of the non-competition covenants contained in their respective employment agreements. The employment of the Rathore Group members at Verdana in merchandising and strategy roles that are substantially similar to or overlapping with the roles they held at CRH constitutes a clear breach of these provisions.
2. Breach of Confidentiality Obligations — Against All Eight Individual Defendants. The preliminary forensic evidence indicates that members of the Rathore Group downloaded approximately 14,327 files containing CRH's proprietary and confidential information — including Project Ridgeline materials, vendor negotiation term sheets, private-label cost models, and customer segmentation data — to personal cloud storage accounts in the weeks preceding their departure. This conduct constitutes a breach of the perpetual confidentiality obligations contained in each individual's employment agreement.
3. Misappropriation of Trade Secrets Under the Delaware Uniform Trade Secrets Act (DUTSA) — Against All Eight Individual Defendants and Verdana Commerce Group, Inc. The information exfiltrated by the Rathore Group qualifies as trade secrets under DUTSA, as it derives independent economic value from not being generally known or readily ascertainable and was subject to reasonable measures by CRH to maintain its secrecy. Verdana's knowing receipt and use of this information — in furtherance of its announced competitive expansion into CRH's strongest categories — constitutes misappropriation under the Act.
4. Tortious Interference with Contractual Relations — Against Verdana Commerce Group, Inc. Verdana had actual or constructive knowledge of the restrictive covenant obligations binding each member of the Rathore Group, and it nonetheless deliberately recruited, hired, and compensated the entire group with substantial sign-on bonuses totaling $6.2 million, thereby inducing and facilitating breaches of those contractual obligations.
5. Civil Conspiracy — Against All Individual Defendants and Verdana Commerce Group, Inc. The coordinated nature of the simultaneous resignations, the pre-departure data exfiltration, the simultaneous hiring by a single competitor, and the alignment between Verdana's announced growth strategy and CRH's confidential strategic plans collectively demonstrate a conspiracy among the Rathore Group members and Verdana (and potentially Greystone) to deprive CRH of its key personnel, trade secrets, and competitive advantages.
The Delaware Court of Chancery is the appropriate forum for this action for several independent reasons: (a) the choice-of-law provisions in all eight employment agreements specify Delaware governing law; (b) Verdana Commerce Group, Inc. is incorporated in Delaware and maintains its corporate headquarters in Wilmington, Delaware; and (c) the Court of Chancery has equity jurisdiction and is the appropriate forum in Delaware for applications for injunctive relief, including temporary restraining orders and preliminary injunctions. The Court of Chancery also offers the advantage of bench trials before experienced chancellors, which is particularly favorable in complex trade secret and restrictive covenant cases.
We note that claims against Greystone Capital Partners, LP are under further analysis and may be added to the Verified Complaint depending on the evidence developed through Aurelian's investigation regarding Greystone's direct involvement in the recruitment effort.
B. Emergency Relief
Given the urgency of this matter, we recommend filing a motion for a Temporary Restraining Order and Preliminary Injunction simultaneously with the Verified Complaint. The purpose of the emergency relief is to restrain the ongoing and irreparable harm to CRH that is occurring with each day that the Rathore Group remains employed at Verdana, with access to and ability to deploy CRH's proprietary information in direct competition with CRH.
The target filing date is the week of March 3–5, 2025. This timeline reflects the need to balance thoroughness of preparation with the urgency of obtaining injunctive relief.
The TRO would seek to restrain all eight defendants from commencing or continuing employment at Verdana Commerce Group, Inc. in any merchandising, strategy, vendor relations, category management, or analytics capacity, and from using, disclosing, or relying upon any CRH confidential information or trade secrets. We will also seek to require the immediate return or destruction of all CRH confidential information in the defendants' possession, custody, or control.
CRH will likely be required to post an injunction bond in connection with the TRO and/or preliminary injunction. We are in preliminary contact with Broadview Surety Corp., located at 175 Water Street, Suite 2400, New York, New York 10038, regarding the issuance of an injunction bond. Based on our preliminary assessment of the potential harm to defendants from the requested injunction, we anticipate the court may require a bond in the range of $2,000,000 to $3,000,000. We will provide a more refined estimate as we finalize the scope of the requested relief and the supporting financial analysis.
Supporting declarations will be needed from the following individuals to accompany the TRO motion:
• Theresa Yun-Park, General Counsel of CRH: To testify regarding CRH's business, the nature and scope of the confidential information and trade secrets at issue, the protective measures CRH maintains, the circumstances of the departures, and the irreparable harm to CRH.
• Roland Ashby, Chief People Officer of CRH: To testify regarding the employment history of each departing employee, the restrictive covenant provisions in their respective employment agreements, the consideration provided for those covenants, and the HR circumstances surrounding the departures.
• Dr. Rajiv Anand, Pinnacle Forensics LLC: To testify regarding the preliminary forensic findings, including the scope and volume of data exfiltration, the types of files downloaded, and the forensic methodology employed.
We will coordinate with your office on the preparation of these declarations in the coming week.
C. Anticipated Timeline
The following timeline represents our current plan for the initial stages of the litigation:
Week of March 3, 2025: File the Verified Complaint and motion for Temporary Restraining Order in the Delaware Court of Chancery.
Within 2–3 business days of filing: Expected ruling on TRO application. Depending on the court's scheduling and the nature of any opposition, the TRO may be granted on an ex parte basis or on shortened notice to the defendants.
14–21 days after TRO entry: Anticipated scheduling of a preliminary injunction hearing. We will seek expedited briefing and an accelerated hearing schedule.
Immediately upon filing: We will seek expedited discovery, including targeted document requests and depositions of key individuals, to support the preliminary injunction hearing and to develop the full evidentiary record.
This timeline is aggressive but appropriate given the emergency nature of the matter. Every day that the Rathore Group remains employed at Verdana in merchandising and strategy roles increases the risk of irreparable harm to CRH through the use and dissemination of CRH's proprietary information.
D. Key Deliverables — Next Week
The following key deliverables and action items are planned for the week of March 3, 2025:
1. Complete forensic imaging of remaining three CRH devices. Pinnacle Forensics will complete imaging of the three devices received later, enabling a comprehensive forensic analysis across all eight departing employees' CRH-issued equipment.
2. Analyze WND response to cease-and-desist letters upon receipt. Upon receipt of the substantive response from Whitfield, Nygaard & Doyle LLP, we will analyze the arguments raised and incorporate our analysis into the Verified Complaint and motion papers.
3. Begin drafting the Verified Complaint and TRO/PI motion papers. We will commence drafting the Verified Complaint, memorandum of law in support of the TRO and preliminary injunction, proposed order, and all ancillary filings.
4. Prepare supporting declarations. We will begin coordinating with CRH personnel on the preparation of the supporting declarations from Ms. Yun-Park and Mr. Ashby, and with Dr. Anand at Pinnacle Forensics on the expert forensic declaration.
5. Finalize engagement of damages expert. A formal recommendation for a specific economic damages expert will be provided, and we will seek CRH's approval to proceed with the engagement.
6. Continue Aurelian Investigations' inquiry. Aurelian will continue its investigation into the pre-resignation recruitment timeline and the involvement of Verdana and Greystone personnel, with a focus on developing admissible evidence of the conspiracy to recruit the Rathore Group as a coordinated unit.
7. Prepare analysis of Verdana's February 14 press release. We will prepare a memorandum analyzing the evidentiary implications of Verdana's public press release announcing the hiring of the Rathore Group, including its potential use as evidence of Verdana's knowledge of the competitive implications and its intent to leverage the departing employees' knowledge of CRH's proprietary operations.
IX. Budget and Fee Status
As noted in Section II above, a staffing and budget memorandum was circulated to Billing Partner Renata Vasquez on February 18, 2025, the date of the engagement. That memorandum included a preliminary estimate of total fees through resolution of the matter, based on the anticipated scope of the litigation and the staffing plan.
Fees incurred through February 28, 2025 will be reported in the first billing statement, which will be prepared and submitted to CRH in accordance with the billing procedures established in the engagement letter. The primary cost drivers during this initial period include the comprehensive restrictive covenant review across all eight employment agreements, conflicts clearance, cease-and-desist letter preparation and delivery, vendor engagement coordination, forensic investigation initiation, and case strategy development.
Expenses incurred to date include the retainer payment to Pinnacle Forensics LLC, the retainer payment to Aurelian Investigations Group Inc., and courier and overnight delivery charges for the cease-and-desist letters sent on February 25, 2025.
We anticipate that fees and expenses will increase significantly in the coming weeks as we move into the drafting of the Verified Complaint and TRO motion, the preparation of supporting declarations, and the filing and prosecution of emergency relief. A revised fee estimate will be provided as the litigation posture becomes clearer, particularly following the filing of the Complaint and the court's disposition of the TRO application.
X. Corporate Governance and Disclosure Considerations
The commencement of significant litigation raises several corporate governance and regulatory disclosure considerations for CRH as a publicly traded company. We flag the following items for your attention and recommend that they be addressed in coordination with CRH's in-house legal team:
Board Notification. We recommend that CRH notify Dr. Lorraine Stahl, the Independent Director and Chair of the Audit Committee, regarding the litigation contingency arising from this matter. A formal letter addressed to Dr. Stahl is being prepared by C&H and will be submitted for your review and delivery in the coming week. Given the potential financial magnitude of the claims and the public nature of the departures following Verdana's press release, the Audit Committee should be kept informed as part of its oversight of litigation contingencies and risk management.
Outside Auditors. CRH's outside auditors, Hargrove & Tillett CPA, PLLC (lead audit partner: Denise Wheatley), should be informed as appropriate regarding the potential Q1 2025 litigation contingency accrual. We understand that a preliminary estimate of a $3,500,000 accrual is under consideration by CRH's finance team. The ultimate accrual amount will need to be evaluated in light of the applicable accounting guidance (ASC 450, Contingencies) and in consultation with Hargrove & Tillett. We are available to confer with the auditors at your direction regarding the nature and status of the claims.
Credit Facility Notification. CRH's $750 million revolving credit facility, administered by Keypoint National Bank, N.A., contains a material litigation reporting covenant at Section 6.02(c) of the Credit Agreement. Depending on the trajectory of the litigation and the court's rulings on emergency relief, notification to Keypoint National Bank may be required under that covenant. We are reviewing the specific terms of Section 6.02(c) to determine the applicable threshold and timing for notification, and we will advise you further as the litigation develops.
SEC Disclosure. As a Nasdaq-listed company, CRH is subject to SEC disclosure requirements, including the potential requirement to file a Current Report on Form 8-K for material definitive agreements or events, and the requirement to disclose litigation contingencies in the notes to its quarterly and annual financial statements (Form 10-Q and Form 10-K). At this stage, the need for a specific 8-K filing or 10-Q subsequent event disclosure will depend on the materiality of the litigation contingency relative to CRH's overall financial profile, including its $6.82 billion annual revenue and approximately $4.1 billion market capitalization. We will address the SEC disclosure analysis at a later stage as the materiality assessment becomes more developed, and we recommend coordinating with CRH's securities counsel on this issue.
XI. CRH Internal Contacts
The following CRH personnel have been identified as the primary points of contact for this matter:
Primary Contact: Theresa Yun-Park, General Counsel. All communications from C&H regarding this matter will be directed to Ms. Yun-Park unless otherwise instructed.
Key Internal Stakeholders Briefed: The following CRH executives have been briefed on the general status and trajectory of this matter:
• Marcus Langford, Chief Executive Officer
• Roland Ashby, Chief People Officer
• Martin Cho, Vice President of Merchandising (acting interim Senior Vice President of Merchandising)
Privilege Preservation Request. To preserve the attorney-client privilege over all communications related to this matter, we respectfully request that all internal CRH communications regarding this litigation, the Rathore Group's departures, the forensic investigation, the restrictive covenant enforcement effort, and any related topics be routed through Ms. Yun-Park. Internal discussions about legal strategy, the substance of privileged communications with C&H, or the assessment of litigation risk should not be circulated broadly or discussed in forums where non-privileged participants may be present. We are happy to provide additional privilege preservation guidance to any CRH personnel as needed.
XII. Conclusion and Recommendation
This matter is progressing on an emergency timeline consistent with the critical need for injunctive relief to prevent ongoing and irreparable harm to CRH's competitive position. The coordinated departure of eight senior merchandising employees to a direct competitor, the preliminary forensic evidence of significant pre-departure data exfiltration, and the close alignment between Verdana's announced growth strategy and CRH's proprietary Project Ridgeline roadmap collectively present a strong case for immediate enforcement action.
We recommend proceeding with the filing of the Verified Complaint and the motion for Temporary Restraining Order and Preliminary Injunction by March 5, 2025. All necessary preparatory work — including drafting of the Complaint, preparation of the motion papers, coordination of supporting declarations, and finalization of the injunction bond — is underway and on track for that target date.
The next weekly status report — Weekly Update #2 — will be provided on or about March 7, 2025, following the anticipated filing and initial developments in the Court of Chancery.
We are available for a call at your convenience to discuss any aspect of this report, the litigation strategy, or any of the issues identified herein. Please do not hesitate to contact me directly.