1038-00006 · Calderwood & Harkness LLP · Court Filings

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

DECLARATION OF DR. FRANKLIN OBERG IN SUPPORT OF PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

I, Dr. Franklin Oberg, hereby declare, under penalty of perjury pursuant to 28 U.S.C. § 1746, that the following statements are true and correct to the best of my knowledge, information, and belief. This Declaration is submitted in support of Plaintiff Cascade Retail Holdings Inc.'s ("CRH" or "Plaintiff") Motion for Preliminary Injunction against Defendants Priya Rathore, Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, Kira Johansson (collectively, the "Rathore Group" or "Individual Defendants"), and Verdana Commerce Group, Inc. ("Verdana" or "VCG"). This Declaration is filed on March 17, 2025.

I. QUALIFICATIONS AND BACKGROUND

1. My name is Dr. Franklin Oberg. I hold a Doctor of Philosophy degree in Economics from Northwestern University, where my doctoral research focused on the valuation of intangible assets and the economic analysis of competitive harm in commercial disputes. I also hold a Master of Science degree in Applied Economics from the University of Michigan and a Bachelor of Arts degree in Economics and Mathematics from Carleton College.

2. I am the Principal and Lead Expert at Veltrano Consulting Group LLC ("Veltrano"), an economic consulting firm located at 200 South Wacker Drive, Suite 3100, Chicago, Illinois 60606. I founded Veltrano in 2009 and have served as its Principal since that date. Veltrano specializes in the quantification of economic damages in complex commercial litigation, with particular emphasis on trade secret misappropriation, restrictive covenant enforcement, unfair competition, and intellectual property disputes.

3. I have over twenty years of experience in economic consulting. Over the course of my career, I have been retained as an expert in more than seventy-five matters involving trade secret and restrictive covenant enforcement disputes. These engagements have included matters involving organized employee departures, misappropriation of proprietary business strategies, and competitive harm analysis across a broad range of industries, including retail, technology, financial services, manufacturing, and consumer products.

4. I have testified as an expert witness in federal and state courts on multiple occasions. My testimony has been offered and accepted in the United States District Courts for the Northern District of Illinois, the Southern District of New York, the District of Delaware, and the Eastern District of Virginia, as well as in state courts in Delaware, New York, Illinois, California, and Texas. I have previously testified before the Delaware Court of Chancery on two occasions involving restrictive covenant disputes.

5. I am a member of the American Economic Association and the National Association of Forensic Economics. I have published articles in peer-reviewed journals on topics including the economic valuation of trade secrets, the quantification of lost profits in competitive harm scenarios, and the application of reasonable royalty methodologies in misappropriation cases. I have also lectured on these topics at continuing legal education programs sponsored by the American Bar Association and the intellectual Property Owners Association.

6. A true and correct copy of my curriculum vitae, which sets forth in detail my educational background, professional experience, publications, and prior expert testimony, is attached hereto as Exhibit 1 and is incorporated by reference into this Declaration.

II. RETENTION AND SCOPE OF ENGAGEMENT

7. I was retained by the law firm of Calderwood & Harkness LLP on behalf of CRH on March 3, 2025, in connection with the above-captioned matter (Calderwood & Harkness Matter Number 1038-00006). My engagement was to provide a preliminary economic damages analysis quantifying the harm to CRH arising from: (a) the coordinated departure of eight senior merchandising employees led by Priya Rathore; (b) the potential misuse of CRH's proprietary trade secrets and confidential information by the Rathore Group and Verdana; and (c) the breach of restrictive covenant obligations contained in each departing employee's employment agreement with CRH.

8. I understand that my analysis at this stage is intended to inform the Court's consideration of Plaintiff's Motion for Preliminary Injunction. The opinions expressed in this Declaration are preliminary in nature and are subject to revision, supplementation, or amendment upon completion of full discovery in this matter. Additional analysis may be warranted as further factual information becomes available through document productions, depositions, and forensic investigations.

9. My compensation for this engagement is based on the standard expert engagement rates for Veltrano Consulting Group LLC, which reflect hourly billing rates for myself and my staff. My current hourly rate is $950 per hour; senior associates at Veltrano who have assisted with this analysis are billed at rates ranging from $425 to $625 per hour. My compensation is in no way contingent upon the outcome of this litigation or upon the substance of the opinions I render.

III. MATERIALS REVIEWED

10. In forming the preliminary opinions set forth in this Declaration, I have reviewed the following materials, among others:

(a) The Amended and Restated Employment Agreement of Priya Rathore with CRH, dated March 15, 2021, and the original Employment Agreement of Priya Rathore with CRH, dated June 3, 2019;

(b) Employment Agreements between CRH and each of the following individuals: Derek Linden (dated September 12, 2018), Sonia Kaczmarek (dated February 27, 2020), Amara Osei (dated July 8, 2019), Brent Halvorsen (dated January 15, 2021), Lucia Fernandez-Gill (dated April 22, 2022), Nathan Tsao (dated August 30, 2023), and Kira Johansson (dated March 4, 2024);

(c) CRH's FY2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission, reflecting total revenue of approximately $6.82 billion and merchandising division gross merchandise value ("GMV") of approximately $2.3 billion;

(d) Internal CRH financial data regarding the merchandising division's contribution to CRH's overall profitability, including divisional income statements, margin analyses, and year-over-year performance metrics for fiscal years 2022 through 2024, produced by CRH under the designation CRH-OBERG-00001 through CRH-OBERG-00347;

(e) Materials relating to "Project Ridgeline," CRH's proprietary five-year strategic category expansion roadmap, completed in October 2024, which covers proprietary vendor terms, private-label margin targets, ecommerce assortment algorithms, category-level revenue projections, and competitive positioning strategies;

(f) The Preliminary Forensic Report prepared by Pinnacle Forensics LLC, dated February 28, 2025, documenting the exfiltration of 14,327 files comprising approximately 2.8 gigabytes of data from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10, 2025 and February 4, 2025;

(g) A detailed categorization of the exfiltrated files, which include Project Ridgeline presentations, vendor negotiation term sheets, private-label cost models, and customer segmentation data;

(h) The investigative report prepared by Aurelian Investigations Group Inc., dated March 10, 2025, summarizing the January 6, 2025 dinner meeting at Camberwell Enterprises in New York City among Warren Dietrich (Chief Executive Officer, Verdana Commerce Group, Inc.), Elliot Westbrook (Managing Partner, Greystone Capital Partners, LP), and Priya Rathore, and the subsequent encrypted messaging communications among members of the Rathore Group from January 13 through January 24, 2025;

(i) Verdana Commerce Group, Inc. public filings with the Securities and Exchange Commission, press releases, and publicly available industry reports, reflecting estimated FY2024 revenue of approximately $1.9 billion and including Verdana's January 2025 announcement of a "transformational growth initiative" targeting $4 billion in revenue by 2028, which specifically cited planned expansion into private-label home goods and seasonal décor — categories in which CRH holds a leading competitive position;

(j) Publicly available information regarding the acquisition of Verdana Commerce Group, Inc. by Greystone Capital Partners, LP in the third quarter of 2023 for an enterprise value of approximately $2.4 billion, effected through Greystone Capital Fund VII, LP, a fund with approximately $8.5 billion in committed capital;

(k) Offer letters extended by Verdana Commerce Group, Inc. to each member of the Rathore Group, reflecting aggregate sign-on bonuses of $6,200,000, with Ms. Rathore individually receiving a sign-on bonus of $1,500,000, a base salary of $650,000, a target annual bonus of $520,000 (representing 80% of base salary), and 1.5% of the fully diluted equity of Verdana Commerce Group, Inc.;

(l) CRH compensation records for each departing employee, reflecting, among other things, that Ms. Rathore received a base salary of $485,000, a target annual bonus of $290,000, and a restricted stock unit ("RSU") grant valued at $725,000 with four-year ratable vesting commencing March 15, 2021;

(m) CRH Merchandising Division operational and financial data for fiscal years 2022 through 2024, including revenue, GMV, gross margin, operating margin, and headcount data;

(n) Verdana's press release dated February 14, 2025, titled "Verdana Commerce Welcomes Industry-Leading Merchandising Team to Accelerate Growth";

(o) The Declaration of Theresa Yun-Park, CRH's Senior Vice President of Human Resources, filed on March 5, 2025;

(p) The Declaration of Roland Ashby, CRH's Chief Financial Officer, filed on March 5, 2025;

(q) The Declaration of Dr. Rajiv Anand of Pinnacle Forensics LLC, filed on March 5, 2025; and

(r) The Declaration of Sandra Fielding of Aurelian Investigations Group Inc., filed on March 17, 2025.

11. I have also drawn upon my experience and expertise in economic consulting, damages quantification, and the analysis of competitive harm in trade secret and restrictive covenant disputes. The foregoing list of materials is not exhaustive, and I reserve the right to rely upon additional materials that may be produced or become available during the course of this litigation.

IV. OVERVIEW OF CRH'S MERCHANDISING BUSINESS AND ECONOMIC SIGNIFICANCE

12. CRH is a publicly traded omnichannel retail company, listed on the Nasdaq Stock Market under the ticker symbol CRHL. In fiscal year 2024, CRH reported total revenue of approximately $6.82 billion. As of February 2025, CRH's approximate market capitalization stood at $4.1 billion. CRH operates 387 brick-and-mortar retail locations across 34 states and maintains a direct-to-consumer ecommerce platform that has experienced significant growth over the past several years.

13. CRH's merchandising division is a critical driver of the company's overall financial performance. In fiscal year 2024, the merchandising division generated approximately $2.3 billion in gross merchandise value, representing approximately one-third of CRH's total revenue. Based on my review of CRH's internal financial data, the merchandising division consistently generates gross margins and operating margins that exceed those of CRH's other business segments, making it a disproportionately important contributor to the company's profitability. The division's strong performance has been driven, in significant part, by proprietary sourcing strategies, sophisticated category management, innovative private-label product development, and data-driven merchandising decisions — each of which reflects the accumulated expertise and institutional knowledge of the departing team.

14. The eight members of the Rathore Group collectively possessed over 38 years of combined tenure at CRH. Ms. Rathore herself served as Senior Vice President of Merchandising, the most senior role within the merchandising division, reporting directly to CRH's Chief Operating Officer. The remaining seven members of the Rathore Group held director-level and senior director-level positions within the division, with responsibilities spanning vendor negotiations, category management, private-label product development, ecommerce assortment optimization, and seasonal buying strategy. Together, these individuals constituted the senior leadership of CRH's most profitable division.

15. The institutional knowledge accumulated by the Rathore Group during their collective tenure at CRH encompasses vendor negotiation playbooks that detail CRH's proprietary approaches to securing favorable terms from key suppliers; seasonal buying algorithms that drive CRH's inventory investment decisions and promotional calendars; private-label sourcing strategies reflecting years of supplier identification, qualification, and cost optimization; and the confidential Project Ridgeline five-year category expansion roadmap, which represents CRH's most comprehensive strategic planning document for the future direction of its merchandising business. This accumulated knowledge is not easily replicated and represents a substantial investment by CRH in developing its competitive position.

V. NATURE AND SCOPE OF COMPETITIVE HARM

A. Direct Competitive Overlap

16. Verdana Commerce Group, Inc. is a direct competitor of CRH in the retail marketplace. Based on my review of publicly available information, Verdana operates approximately 220 retail locations across 22 states and maintains its own ecommerce platform. My analysis has identified 28 overlapping product categories in which both CRH and Verdana actively compete for consumer spending, including home goods, apparel, seasonal décor, kitchen and dining, home textiles, small appliances, outdoor living, pet products, and personal care, among others.

17. Verdana's publicly announced growth initiative — targeting a more than doubling of revenue from approximately $1.9 billion to $4 billion by 2028 — specifically cites planned expansion into private-label home goods and seasonal décor. These are among CRH's strongest categories, representing areas where CRH has invested heavily in proprietary sourcing relationships, product development, and marketing infrastructure. Verdana's strategic plan, as articulated in public statements, contemplates entering these categories in a manner that would place it in direct competition with CRH for the same consumer base, the same vendor relationships, and the same shelf-space and ecommerce positioning.

18. The recruitment of the entire senior merchandising team from CRH — rather than individual hires — represents a wholesale transplant of competitive intelligence from CRH to Verdana. The Rathore Group members, by virtue of their roles, collectively possess knowledge of CRH's complete merchandising strategy, including its vendor relationships and negotiated terms, its margin structures across product categories, its promotional calendars and markdown strategies, its ecommerce assortment algorithms, and its forward-looking strategic plans embodied in Project Ridgeline. The coordinated nature of the departure, combined with the evidence of data exfiltration, amplifies the competitive threat because Verdana has acquired not merely individual perspectives but rather a functioning team capable of replicating and executing CRH's proprietary strategies.

B. Significance of Exfiltrated Information

19. The preliminary forensic report prepared by Pinnacle Forensics LLC documents the exfiltration of 14,327 files comprising approximately 2.8 gigabytes of data from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10, 2025 and February 4, 2025. Based on my review of the categorization of these files, the exfiltrated information falls into four principal categories, each of which carries significant independent economic value.

20. Project Ridgeline Presentations. The exfiltrated files include presentations and supporting documentation for Project Ridgeline, CRH's proprietary five-year strategic category expansion roadmap completed in October 2024. Project Ridgeline details CRH's planned expansion into specific product categories, identifies revenue targets and growth assumptions for each category, sets forth proprietary vendor partnership strategies, establishes private-label margin targets, and articulates the analytical framework and algorithms CRH employs in optimizing its ecommerce product assortment. This roadmap represents the culmination of a multi-year strategic planning process involving substantial investment of executive time, market research resources, and data analytics capabilities. If this roadmap is in Verdana's possession, Verdana would have direct insight into CRH's strategic direction for the next five years, allowing Verdana to anticipate, preempt, or directly counter CRH's competitive moves.

21. Vendor Negotiation Term Sheets. The exfiltrated files include term sheets reflecting CRH's proprietary pricing, margin, and promotional terms with key suppliers. These term sheets embody the results of years of negotiation and relationship development between CRH and its vendor base. Access to this information would permit Verdana to approach the same suppliers with knowledge of the specific terms CRH has negotiated, enabling Verdana either to undercut those terms or to use the knowledge as leverage in its own negotiations — in either case, directly undermining CRH's competitive position.

22. Private-Label Cost Models. The exfiltrated files include cost models showing CRH's cost structures, manufacturing arrangements, and target margins for its private-label product lines. Private-label products represent a high-margin segment of CRH's merchandising business and are an area where CRH has invested significantly in supplier identification, product design, quality assurance, and brand development. Disclosure of CRH's private-label cost models to a competitor would reveal not only CRH's cost basis but also its margin expectations, enabling a competitor to price its own private-label offerings strategically to erode CRH's market share.

23. Customer Segmentation Data. The exfiltrated files include customer segmentation data reflecting purchasing patterns, demographic analyses, and targeted marketing strategies. This data represents a significant investment by CRH in data analytics and market research, and it informs CRH's decisions regarding product assortment, pricing, promotional strategy, and marketing allocation. If utilized by Verdana, this data would enable Verdana to target the same customer segments with competing offerings tailored to exploit the purchasing patterns and preferences that CRH has identified through its proprietary research.

24. In my professional opinion, the exfiltrated information, if utilized by Verdana, would provide Verdana with a substantial and unearned competitive advantage equivalent to years of independent research, development, and market intelligence gathering. The competitive advantage derived from this information is not merely theoretical; it is directly actionable, providing Verdana with a detailed playbook for competing against CRH in the very categories where CRH is strongest.

C. Magnitude of Verdana's Investment in Recruitment

25. The compensation packages offered by Verdana to the Rathore Group reflect an extraordinary investment in acquiring the competitive intelligence these individuals carry. The aggregate sign-on bonuses paid by Verdana to the eight members of the Rathore Group total $6,200,000. Ms. Rathore individually received a sign-on bonus of $1,500,000, a base salary of $650,000 (an increase of approximately 34% over her CRH base salary of $485,000), a target annual bonus of $520,000 representing 80% of her base salary (an increase of approximately 79% over her CRH target bonus of $290,000), and 1.5% of the fully diluted equity of Verdana Commerce Group, Inc.

26. The financial resources to fund this recruitment were provided by Greystone Capital Partners, LP through Greystone Capital Fund VII, LP, which acquired Verdana in the third quarter of 2023 for an enterprise value of approximately $2.4 billion. Greystone Capital Fund VII, LP has approximately $8.5 billion in committed capital, providing Verdana with substantial financial backing to execute aggressive growth strategies. The involvement of a well-resourced private equity sponsor underscores the strategic nature of the recruitment and the expectation that the acquired competitive intelligence will generate returns that justify the extraordinary compensation packages.

27. The scale of Verdana's investment in recruiting the Rathore Group is significant as an economic indicator. A rational economic actor would not invest $6,200,000 in aggregate sign-on bonuses — in addition to the ongoing enhanced compensation packages — unless it anticipated a return on that investment far exceeding the cost. The nature of the Rathore Group's roles at CRH and the evidence of data exfiltration strongly suggest that the anticipated return is predicated, at least in significant part, on the competitive intelligence these individuals bring from CRH, including knowledge of CRH's proprietary strategies, vendor terms, cost structures, and the Project Ridgeline roadmap.

VI. PRELIMINARY DAMAGES FRAMEWORK

A. Categories of Economic Harm

28. Based on my preliminary analysis, I have identified three primary categories of economic harm that CRH has suffered or is likely to suffer as a result of the defendants' conduct.

29. Lost Profits from Competitive Displacement. The first and most significant category of harm is the lost profits CRH is likely to sustain as a result of Verdana's ability to use CRH's proprietary strategies and vendor terms to capture market share in the 28 overlapping product categories. Verdana's announced growth initiative targets a doubling of revenue by 2028, and the recruitment of CRH's entire senior merchandising team — together with the exfiltrated information — positions Verdana to achieve this growth, in part, at CRH's direct expense. The resulting competitive displacement would reduce CRH's revenue and profits in its merchandising division over a period of years.

30. Diminished Value of Trade Secrets and Confidential Information. The second category of harm is the diminished economic value of CRH's trade secrets and confidential information once disclosed to a direct competitor. Project Ridgeline, the vendor negotiation term sheets, the private-label cost models, and the customer segmentation data each derive their economic value from the fact that they are not generally known to CRH's competitors. Once this information is in the possession of Verdana, its value as a source of competitive advantage is substantially and permanently diminished, regardless of whether the information is ultimately returned or destroyed.

31. Increased Costs and Operational Disruption. The third category of harm encompasses the direct and indirect costs CRH has incurred and will continue to incur as a result of the coordinated departure and data exfiltration. These costs include executive search and replacement costs for eight senior positions within the merchandising division; the costs of revising compromised strategies and renegotiating vendor terms that have been exposed to a competitor; and the interim operational inefficiency that the merchandising division has experienced and will continue to experience during the leadership transition period, during which Martin Cho, a CRH executive from a separate business unit, has been serving as interim Senior Vice President of Merchandising.

B. Preliminary Quantification Methodology

1. Lost Profits Model.

32. To estimate the lost profits attributable to competitive displacement, I apply a "but-for" analysis. This is a well-established methodology in damages quantification that compares the plaintiff's projected financial performance in the "but-for" world — the hypothetical scenario in which the wrongful conduct did not occur — with the plaintiff's projected financial performance in the "actual" world, accounting for the competitive displacement caused by the defendants' conduct. The difference between these two projections represents the lost profits attributable to the wrongful conduct.

33. The base metric for this analysis is CRH's Merchandising Division GMV of approximately $2.3 billion in fiscal year 2024. Based on my preliminary review, the Rathore Group and the exfiltrated information are directly relevant to the 28 overlapping product categories in which CRH and Verdana compete. Even a modest erosion of market share in these overlapping categories — on the order of 2% to 5% — would yield projected lost GMV in the range of $46 million to $115 million. The corresponding impact on CRH's profits would depend on the applicable margin percentages, which I understand from my review of CRH's internal financials to include gross margins and operating margins that are favorable relative to industry benchmarks. I note, however, that the precise margin figures require further discovery into CRH's internal financial records for refinement and are accordingly not disclosed in detail in this preliminary declaration.

34. My preliminary estimate of the profit margin impact on the affected GMV, while subject to refinement, supports a preliminary damages range for lost profits that is conservatively in the range of tens of millions of dollars over the applicable restrictive covenant period. This estimate accounts only for the direct displacement effect during the restrictive covenant period and does not include the ongoing competitive harm that may persist beyond that period as a result of the permanent loss of trade secret value.

2. Diminished Trade Secret Value Model.

35. To estimate the diminished value of CRH's trade secrets and confidential information, I employ a reasonable royalty and avoided-cost approach. Under this methodology, the damages are estimated based on the cost that a willing licensee would have paid to a willing licensor for the right to use the information in question, or alternatively, the cost that Verdana avoided by acquiring the information through misappropriation rather than through independent development.

36. The development cost of Project Ridgeline and the underlying proprietary information represents years of investment by CRH in market research, vendor relationship development, analytical modeling, and strategic planning. Based on my preliminary analysis, CRH's investment in developing this information — including the allocation of executive time, research resources, data analytics capabilities, and external consulting engagements — represents a substantial expenditure over multiple years. Verdana's ability to replicate this intelligence without incurring the corresponding independent investment represents a quantifiable unjust enrichment.

37. My preliminary estimate of the avoided development costs to Verdana is in the millions of dollars. This estimate is necessarily preliminary at this stage, as a more precise quantification will require detailed analysis of CRH's actual expenditures in developing the proprietary information, the time horizon over which these expenditures were incurred, and the scope of the information that Verdana has accessed and utilized. I intend to refine this estimate upon receipt of additional discovery materials.

3. Operational Disruption Costs.

38. I have also identified direct costs that CRH has already incurred or anticipates incurring as a result of the coordinated departure and data exfiltration. These costs include, but are not limited to:

(a) Executive search and recruitment costs associated with replacing eight senior positions within the merchandising division, including retained search firm fees, candidate screening and assessment costs, and relocation and onboarding expenses;

(b) Costs associated with revising compromised strategies and vendor terms, including the cost of developing replacement strategic plans for the merchandise categories affected by Project Ridgeline's disclosure, and the cost of renegotiating vendor agreements where CRH's negotiating position has been undermined by the disclosure of its proprietary terms;

(c) Interim operational inefficiency during the leadership transition period, reflected in decreased productivity, delayed decision-making, and disrupted vendor and supplier relationships attributable to the departure of the entire senior merchandising team and the appointment of Martin Cho as interim Senior Vice President; and

(d) Costs of the forensic investigation and remediation efforts necessitated by the data exfiltration, including the engagement of Pinnacle Forensics LLC and the implementation of enhanced data security measures.

39. These operational disruption costs are currently estimated to total several million dollars and will be refined as actual expenditures are documented and additional information becomes available through discovery.

C. Preliminary Damages Range

40. While a full damages calculation cannot be completed at this stage due to the preliminary nature of the analysis and the need for additional discovery, it is my preliminary opinion that the total economic harm to CRH from the coordinated departure of the Rathore Group, the breach of restrictive covenant obligations, and the misappropriation and potential use of CRH's trade secrets and confidential information is likely to be substantial. Aggregating the three categories of harm described above — lost profits from competitive displacement, diminished trade secret value, and operational disruption costs — I estimate that the total economic harm to CRH is potentially in the range of tens of millions of dollars to over one hundred million dollars.

41. The irreparable nature of much of this harm — particularly the permanent loss of trade secret value once proprietary information has been disclosed to and reviewed by a direct competitor — underscores the point that monetary damages alone may not adequately compensate CRH for the injury it has sustained and will continue to sustain absent injunctive relief. This conclusion is elaborated further in Section VII below.

VII. IRREPARABLE HARM — ECONOMIC PERSPECTIVE

42. From an economic standpoint, the harm to CRH is particularly difficult to quantify with precision and, in significant part, irreparable for the following reasons.

43. Trade Secret Disclosure Is Irreversible. Once Project Ridgeline materials, vendor negotiation term sheets, private-label cost models, and customer segmentation data are in Verdana's possession and have been reviewed by Verdana's personnel, the competitive advantage derived from the secrecy of that information cannot be restored — even if the information is subsequently returned or destroyed. The knowledge gained from reviewing CRH's proprietary strategies will inevitably inform Verdana's decision-making, and there is no practical mechanism for "unlearning" the information once it has been absorbed. This principle is well recognized in economic literature on information asymmetry and is a fundamental feature of trade secret economics: unlike tangible property, which can be physically returned, the value of confidential information resides in the information itself, and disclosure is an irreversible act.

44. Market Share Loss Compounds Over Time. Competitive displacement in the retail merchandising context has cascading effects that extend well beyond the initial period of lost sales. When a competitor captures market share through the use of misappropriated strategies, the effects compound in several ways. Vendor relationships that shift to the competitor become entrenched over time, making it increasingly difficult for the injured party to recapture those relationships. Customers who migrate to the competitor develop purchasing habits and brand loyalty that are resistant to reversal. In brick-and-mortar retail, shelf-space displacement is difficult to reverse once a competitor has established its presence. In ecommerce, algorithmic advantages in search ranking and product placement create self-reinforcing dynamics that favor incumbency. Each of these compounding effects makes it progressively more difficult and costly for CRH to recover the competitive position it will lose during the period of wrongful conduct.

45. Head Start Advantage. Even if the restrictive covenant period is ultimately enforced and the Rathore Group is eventually prohibited from working for Verdana in the overlapping product categories, a temporary period during which the Rathore Group operates in merchandising roles at Verdana using CRH's proprietary information creates a durable competitive advantage that persists beyond any restrictive covenant period. In economic terms, this "head start" advantage allows Verdana to establish vendor relationships, develop product lines, and capture market positioning that would take years to achieve independently. Once established, this advantage does not dissipate when the restrictive covenant period expires; rather, it becomes embedded in Verdana's business operations and serves as a platform for ongoing competitive harm.

46. Difficulty of Post Hoc Attribution. Once Verdana implements strategies derived from CRH's proprietary information, it becomes exceedingly difficult after the fact to isolate and quantify which of Verdana's competitive gains are attributable to the misappropriated information and which are attributable to Verdana's independent efforts. This is a well-recognized challenge in trade secret damages cases. The commingling of misappropriated knowledge with legitimately acquired knowledge creates an attribution problem that makes ex post damages calculations inherently imprecise and unreliable. As a practical matter, Verdana would be expected to argue that its competitive gains resulted from its own independent efforts, and the burden of disentangling these competing explanations would fall on CRH — a burden that becomes increasingly onerous as time passes and the effects of the misappropriated information become more deeply embedded in Verdana's operations.

47. For these reasons, I conclude from an economic perspective that preliminary injunctive relief is necessary to prevent harm to CRH that cannot be adequately compensated through monetary damages alone. The longer the Rathore Group is permitted to operate in their roles at Verdana with access to CRH's proprietary information, the greater and more irreversible the economic harm to CRH becomes.

VIII. CONSIDERATION OF DEFENDANTS' POTENTIAL ARGUMENTS

48. I have considered the potential argument that enforcement of the restrictive covenants as written would impose disproportionate economic harm on the Individual Defendants. In evaluating this argument, I note the following.

49. The members of the Rathore Group were well compensated during their tenure at CRH. Ms. Rathore received a base salary of $485,000, a target annual bonus of $290,000, and a restricted stock unit grant valued at $725,000 with four-year ratable vesting commencing March 15, 2021. The remaining seven members of the Rathore Group received annual salaries ranging from $192,000 to $340,000, with corresponding equity compensation. These compensation levels reflect the value CRH placed on the institutional knowledge and expertise of these individuals and, correspondingly, the consideration CRH provided in exchange for the restrictive covenant obligations each employee agreed to undertake.

50. Moreover, the Individual Defendants have accepted substantially enhanced compensation packages at Verdana. The aggregate sign-on bonuses of $6,200,000, combined with enhanced base salaries, target bonuses, and — in Ms. Rathore's case — a significant equity stake, significantly mitigate any claim of undue economic hardship arising from temporary enforcement of the restrictive covenants. The Individual Defendants have already received and, to my understanding, retained the sign-on bonuses paid by Verdana, and their financial circumstances following the departure from CRH are materially different from those of employees who might face genuine economic hardship from restrictive covenant enforcement.

51. In my opinion, the balance of equities favors CRH given: (a) the magnitude of the business at risk, with CRH's merchandising division generating $2.3 billion in GMV in fiscal year 2024; (b) the deliberate and coordinated nature of the departure, which was planned in advance through the January 6, 2025 meeting and subsequent encrypted communications; and (c) the evidence of data exfiltration, which indicates that the departure was not merely a voluntary career change but rather part of a concerted effort to transport CRH's most valuable proprietary information to a direct competitor.

IX. OPINIONS STATED

52. Based on my qualifications, experience, and the preliminary analysis described in this Declaration, I state the following preliminary opinions to a reasonable degree of economic certainty:

(a) CRH's merchandising division, generating approximately $2.3 billion in gross merchandise value in fiscal year 2024, represents a business of substantial economic value that is directly threatened by the defendants' conduct. The merchandising division is CRH's most profitable segment and is critical to the company's competitive positioning and long-term financial performance.

(b) The exfiltrated proprietary information — including Project Ridgeline presentations and strategic roadmap documents, vendor negotiation term sheets, private-label cost models, and customer segmentation data — has significant independent economic value and would confer a material competitive advantage on Verdana if utilized. This information represents years of investment by CRH and cannot be replicated through independent means without comparable expenditure of time and resources.

(c) The economic harm to CRH from the potential misuse of this information and the breach of restrictive covenant obligations by the members of the Rathore Group is likely to be substantial, potentially in the tens of millions of dollars or more, based on the lost profits, diminished trade secret value, and operational disruption costs described in this Declaration.

(d) A significant portion of this harm is irreparable in nature, as monetary damages cannot fully restore the competitive position CRH would lose through the disclosure and use of its trade secrets by a direct competitor. The irreversible nature of trade secret disclosure, the compounding effects of competitive displacement, the head start advantage conferred on Verdana, and the difficulty of post hoc attribution each support this conclusion.

(e) These opinions are preliminary and subject to revision upon completion of full discovery and additional analysis. I reserve the right to supplement, amend, or revise any opinion stated herein as additional information becomes available.

X. RESERVATION OF RIGHTS

53. I reserve the right to supplement, amend, or revise the opinions stated in this Declaration upon receipt of additional discovery materials. Among other things, my ongoing analysis will benefit from review of the following categories of materials, which I understand are the subject of pending discovery requests:

(a) CRH's detailed financial projections and internal budgets for the merchandising division, including category-level revenue and margin forecasts for fiscal years 2025 through 2029;

(b) Verdana's internal strategic plans, financial projections, and any documents reflecting the use, analysis, or dissemination of CRH information within Verdana's organization;

(c) Deposition testimony of the Individual Defendants, Warren Dietrich, Elliot Westbrook, and other relevant Verdana executives;

(d) Results of the forensic audit to be conducted at Verdana's premises, including an inventory and categorization of all CRH-originated information identified on Verdana systems and in the possession of Verdana personnel; and

(e) Any additional documents, data, or testimony produced in the course of discovery that is relevant to the quantification of CRH's economic harm.

54. My engagement by Veltrano Consulting Group LLC on behalf of CRH through Calderwood & Harkness LLP is ongoing. I anticipate providing further analysis, including a comprehensive damages report, as this matter progresses through discovery and toward trial.

VERIFICATION

I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.

Executed on March 17, 2025, in Chicago, Illinois.

________________________________________

Dr. Franklin Oberg, PhD Principal and Lead Expert Veltrano Consulting Group LLC 200 South Wacker Drive, Suite 3100 Chicago, IL 60606

CERTIFICATE OF SERVICE

I, Bernard Crawford, hereby certify that on March 17, 2025, a true and correct copy of the foregoing Declaration of Dr. Franklin Oberg in Support of Plaintiff's Motion for Preliminary Injunction was served by File & ServeXpress upon the following counsel of record:

Catherine Nygaard, Esq. Whitfield, Nygaard & Doyle LLP 1000 North Market Street, Suite 1500 Wilmington, DE 19801 Counsel for Individual Defendants Priya Rathore, Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, and Kira Johansson

Gavin Blackhall, Esq. Blackhall & Soren LLP 300 Delaware Avenue, Suite 900 Wilmington, DE 19801 Counsel for Defendant Verdana Commerce Group, Inc.

Filed in C.A. No. 2025-0198-MTZ, Court of Chancery of the State of Delaware, before Vice Chancellor Margaret T. Zhao.

________________________________________

Bernard Crawford, Esq. Calderwood & Harkness LLP 1301 K Street NW, Suite 1200 Washington, DC 20005 Counsel for Plaintiff Cascade Retail Holdings Inc.

CASCADE RETAIL HOLDINGS INC.,

Plaintiff,

PRIYA RATHORE, DEREK LINDEN, SONIA KACZMAREK, AMARA OSEI, BRENT HALVORSEN, LUCIA FERNANDEZ-GILL, NATHAN TSAO, KIRA JOHANSSON, and VERDANA COMMERCE GROUP, INC.,

Defendants.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
DECLARATION OF DR. FRANKLIN OBERG IN SUPPORT OF PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION
I, Dr. Franklin Oberg, hereby declare, under penalty of perjury pursuant to 28 U.S.C. § 1746, that the following statements are true and correct to the best of my knowledge, information, and belief. This Declaration is submitted in support of Plaintiff Cascade Retail Holdings Inc.'s ("CRH" or "Plaintiff") Motion for Preliminary Injunction against Defendants Priya Rathore, Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, Kira Johansson (collectively, the "Rathore Group" or "Individual Defendants"), and Verdana Commerce Group, Inc. ("Verdana" or "VCG"). This Declaration is filed on March 17, 2025.
I. QUALIFICATIONS AND BACKGROUND
1. My name is Dr. Franklin Oberg. I hold a Doctor of Philosophy degree in Economics from Northwestern University, where my doctoral research focused on the valuation of intangible assets and the economic analysis of competitive harm in commercial disputes. I also hold a Master of Science degree in Applied Economics from the University of Michigan and a Bachelor of Arts degree in Economics and Mathematics from Carleton College.
2. I am the Principal and Lead Expert at Veltrano Consulting Group LLC ("Veltrano"), an economic consulting firm located at 200 South Wacker Drive, Suite 3100, Chicago, Illinois 60606. I founded Veltrano in 2009 and have served as its Principal since that date. Veltrano specializes in the quantification of economic damages in complex commercial litigation, with particular emphasis on trade secret misappropriation, restrictive covenant enforcement, unfair competition, and intellectual property disputes.
3. I have over twenty years of experience in economic consulting. Over the course of my career, I have been retained as an expert in more than seventy-five matters involving trade secret and restrictive covenant enforcement disputes. These engagements have included matters involving organized employee departures, misappropriation of proprietary business strategies, and competitive harm analysis across a broad range of industries, including retail, technology, financial services, manufacturing, and consumer products.
4. I have testified as an expert witness in federal and state courts on multiple occasions. My testimony has been offered and accepted in the United States District Courts for the Northern District of Illinois, the Southern District of New York, the District of Delaware, and the Eastern District of Virginia, as well as in state courts in Delaware, New York, Illinois, California, and Texas. I have previously testified before the Delaware Court of Chancery on two occasions involving restrictive covenant disputes.
5. I am a member of the American Economic Association and the National Association of Forensic Economics. I have published articles in peer-reviewed journals on topics including the economic valuation of trade secrets, the quantification of lost profits in competitive harm scenarios, and the application of reasonable royalty methodologies in misappropriation cases. I have also lectured on these topics at continuing legal education programs sponsored by the American Bar Association and the intellectual Property Owners Association.
6. A true and correct copy of my curriculum vitae, which sets forth in detail my educational background, professional experience, publications, and prior expert testimony, is attached hereto as Exhibit 1 and is incorporated by reference into this Declaration.
II. RETENTION AND SCOPE OF ENGAGEMENT
7. I was retained by the law firm of Calderwood & Harkness LLP on behalf of CRH on March 3, 2025, in connection with the above-captioned matter (Calderwood & Harkness Matter Number 1038-00006). My engagement was to provide a preliminary economic damages analysis quantifying the harm to CRH arising from: (a) the coordinated departure of eight senior merchandising employees led by Priya Rathore; (b) the potential misuse of CRH's proprietary trade secrets and confidential information by the Rathore Group and Verdana; and (c) the breach of restrictive covenant obligations contained in each departing employee's employment agreement with CRH.
8. I understand that my analysis at this stage is intended to inform the Court's consideration of Plaintiff's Motion for Preliminary Injunction. The opinions expressed in this Declaration are preliminary in nature and are subject to revision, supplementation, or amendment upon completion of full discovery in this matter. Additional analysis may be warranted as further factual information becomes available through document productions, depositions, and forensic investigations.
9. My compensation for this engagement is based on the standard expert engagement rates for Veltrano Consulting Group LLC, which reflect hourly billing rates for myself and my staff. My current hourly rate is $950 per hour; senior associates at Veltrano who have assisted with this analysis are billed at rates ranging from $425 to $625 per hour. My compensation is in no way contingent upon the outcome of this litigation or upon the substance of the opinions I render.
III. MATERIALS REVIEWED
10. In forming the preliminary opinions set forth in this Declaration, I have reviewed the following materials, among others:
(a) The Amended and Restated Employment Agreement of Priya Rathore with CRH, dated March 15, 2021, and the original Employment Agreement of Priya Rathore with CRH, dated June 3, 2019;
(b) Employment Agreements between CRH and each of the following individuals: Derek Linden (dated September 12, 2018), Sonia Kaczmarek (dated February 27, 2020), Amara Osei (dated July 8, 2019), Brent Halvorsen (dated January 15, 2021), Lucia Fernandez-Gill (dated April 22, 2022), Nathan Tsao (dated August 30, 2023), and Kira Johansson (dated March 4, 2024);
(c) CRH's FY2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission, reflecting total revenue of approximately $6.82 billion and merchandising division gross merchandise value ("GMV") of approximately $2.3 billion;
(d) Internal CRH financial data regarding the merchandising division's contribution to CRH's overall profitability, including divisional income statements, margin analyses, and year-over-year performance metrics for fiscal years 2022 through 2024, produced by CRH under the designation CRH-OBERG-00001 through CRH-OBERG-00347;
(e) Materials relating to "Project Ridgeline," CRH's proprietary five-year strategic category expansion roadmap, completed in October 2024, which covers proprietary vendor terms, private-label margin targets, ecommerce assortment algorithms, category-level revenue projections, and competitive positioning strategies;
(f) The Preliminary Forensic Report prepared by Pinnacle Forensics LLC, dated February 28, 2025, documenting the exfiltration of 14,327 files comprising approximately 2.8 gigabytes of data from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10, 2025 and February 4, 2025;
(g) A detailed categorization of the exfiltrated files, which include Project Ridgeline presentations, vendor negotiation term sheets, private-label cost models, and customer segmentation data;
(h) The investigative report prepared by Aurelian Investigations Group Inc., dated March 10, 2025, summarizing the January 6, 2025 dinner meeting at Camberwell Enterprises in New York City among Warren Dietrich (Chief Executive Officer, Verdana Commerce Group, Inc.), Elliot Westbrook (Managing Partner, Greystone Capital Partners, LP), and Priya Rathore, and the subsequent encrypted messaging communications among members of the Rathore Group from January 13 through January 24, 2025;
(i) Verdana Commerce Group, Inc. public filings with the Securities and Exchange Commission, press releases, and publicly available industry reports, reflecting estimated FY2024 revenue of approximately $1.9 billion and including Verdana's January 2025 announcement of a "transformational growth initiative" targeting $4 billion in revenue by 2028, which specifically cited planned expansion into private-label home goods and seasonal décor — categories in which CRH holds a leading competitive position;
(j) Publicly available information regarding the acquisition of Verdana Commerce Group, Inc. by Greystone Capital Partners, LP in the third quarter of 2023 for an enterprise value of approximately $2.4 billion, effected through Greystone Capital Fund VII, LP, a fund with approximately $8.5 billion in committed capital;
(k) Offer letters extended by Verdana Commerce Group, Inc. to each member of the Rathore Group, reflecting aggregate sign-on bonuses of $6,200,000, with Ms. Rathore individually receiving a sign-on bonus of $1,500,000, a base salary of $650,000, a target annual bonus of $520,000 (representing 80% of base salary), and 1.5% of the fully diluted equity of Verdana Commerce Group, Inc.;
(l) CRH compensation records for each departing employee, reflecting, among other things, that Ms. Rathore received a base salary of $485,000, a target annual bonus of $290,000, and a restricted stock unit ("RSU") grant valued at $725,000 with four-year ratable vesting commencing March 15, 2021;
(m) CRH Merchandising Division operational and financial data for fiscal years 2022 through 2024, including revenue, GMV, gross margin, operating margin, and headcount data;
(n) Verdana's press release dated February 14, 2025, titled "Verdana Commerce Welcomes Industry-Leading Merchandising Team to Accelerate Growth";
(o) The Declaration of Theresa Yun-Park, CRH's Senior Vice President of Human Resources, filed on March 5, 2025;
(p) The Declaration of Roland Ashby, CRH's Chief Financial Officer, filed on March 5, 2025;
(q) The Declaration of Dr. Rajiv Anand of Pinnacle Forensics LLC, filed on March 5, 2025; and
(r) The Declaration of Sandra Fielding of Aurelian Investigations Group Inc., filed on March 17, 2025.
11. I have also drawn upon my experience and expertise in economic consulting, damages quantification, and the analysis of competitive harm in trade secret and restrictive covenant disputes. The foregoing list of materials is not exhaustive, and I reserve the right to rely upon additional materials that may be produced or become available during the course of this litigation.
IV. OVERVIEW OF CRH'S MERCHANDISING BUSINESS AND ECONOMIC SIGNIFICANCE
12. CRH is a publicly traded omnichannel retail company, listed on the Nasdaq Stock Market under the ticker symbol CRHL. In fiscal year 2024, CRH reported total revenue of approximately $6.82 billion. As of February 2025, CRH's approximate market capitalization stood at $4.1 billion. CRH operates 387 brick-and-mortar retail locations across 34 states and maintains a direct-to-consumer ecommerce platform that has experienced significant growth over the past several years.
13. CRH's merchandising division is a critical driver of the company's overall financial performance. In fiscal year 2024, the merchandising division generated approximately $2.3 billion in gross merchandise value, representing approximately one-third of CRH's total revenue. Based on my review of CRH's internal financial data, the merchandising division consistently generates gross margins and operating margins that exceed those of CRH's other business segments, making it a disproportionately important contributor to the company's profitability. The division's strong performance has been driven, in significant part, by proprietary sourcing strategies, sophisticated category management, innovative private-label product development, and data-driven merchandising decisions — each of which reflects the accumulated expertise and institutional knowledge of the departing team.
14. The eight members of the Rathore Group collectively possessed over 38 years of combined tenure at CRH. Ms. Rathore herself served as Senior Vice President of Merchandising, the most senior role within the merchandising division, reporting directly to CRH's Chief Operating Officer. The remaining seven members of the Rathore Group held director-level and senior director-level positions within the division, with responsibilities spanning vendor negotiations, category management, private-label product development, ecommerce assortment optimization, and seasonal buying strategy. Together, these individuals constituted the senior leadership of CRH's most profitable division.
15. The institutional knowledge accumulated by the Rathore Group during their collective tenure at CRH encompasses vendor negotiation playbooks that detail CRH's proprietary approaches to securing favorable terms from key suppliers; seasonal buying algorithms that drive CRH's inventory investment decisions and promotional calendars; private-label sourcing strategies reflecting years of supplier identification, qualification, and cost optimization; and the confidential Project Ridgeline five-year category expansion roadmap, which represents CRH's most comprehensive strategic planning document for the future direction of its merchandising business. This accumulated knowledge is not easily replicated and represents a substantial investment by CRH in developing its competitive position.
V. NATURE AND SCOPE OF COMPETITIVE HARM
A. Direct Competitive Overlap
16. Verdana Commerce Group, Inc. is a direct competitor of CRH in the retail marketplace. Based on my review of publicly available information, Verdana operates approximately 220 retail locations across 22 states and maintains its own ecommerce platform. My analysis has identified 28 overlapping product categories in which both CRH and Verdana actively compete for consumer spending, including home goods, apparel, seasonal décor, kitchen and dining, home textiles, small appliances, outdoor living, pet products, and personal care, among others.
17. Verdana's publicly announced growth initiative — targeting a more than doubling of revenue from approximately $1.9 billion to $4 billion by 2028 — specifically cites planned expansion into private-label home goods and seasonal décor. These are among CRH's strongest categories, representing areas where CRH has invested heavily in proprietary sourcing relationships, product development, and marketing infrastructure. Verdana's strategic plan, as articulated in public statements, contemplates entering these categories in a manner that would place it in direct competition with CRH for the same consumer base, the same vendor relationships, and the same shelf-space and ecommerce positioning.
18. The recruitment of the entire senior merchandising team from CRH — rather than individual hires — represents a wholesale transplant of competitive intelligence from CRH to Verdana. The Rathore Group members, by virtue of their roles, collectively possess knowledge of CRH's complete merchandising strategy, including its vendor relationships and negotiated terms, its margin structures across product categories, its promotional calendars and markdown strategies, its ecommerce assortment algorithms, and its forward-looking strategic plans embodied in Project Ridgeline. The coordinated nature of the departure, combined with the evidence of data exfiltration, amplifies the competitive threat because Verdana has acquired not merely individual perspectives but rather a functioning team capable of replicating and executing CRH's proprietary strategies.
B. Significance of Exfiltrated Information
19. The preliminary forensic report prepared by Pinnacle Forensics LLC documents the exfiltration of 14,327 files comprising approximately 2.8 gigabytes of data from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10, 2025 and February 4, 2025. Based on my review of the categorization of these files, the exfiltrated information falls into four principal categories, each of which carries significant independent economic value.
20. Project Ridgeline Presentations. The exfiltrated files include presentations and supporting documentation for Project Ridgeline, CRH's proprietary five-year strategic category expansion roadmap completed in October 2024. Project Ridgeline details CRH's planned expansion into specific product categories, identifies revenue targets and growth assumptions for each category, sets forth proprietary vendor partnership strategies, establishes private-label margin targets, and articulates the analytical framework and algorithms CRH employs in optimizing its ecommerce product assortment. This roadmap represents the culmination of a multi-year strategic planning process involving substantial investment of executive time, market research resources, and data analytics capabilities. If this roadmap is in Verdana's possession, Verdana would have direct insight into CRH's strategic direction for the next five years, allowing Verdana to anticipate, preempt, or directly counter CRH's competitive moves.
21. Vendor Negotiation Term Sheets. The exfiltrated files include term sheets reflecting CRH's proprietary pricing, margin, and promotional terms with key suppliers. These term sheets embody the results of years of negotiation and relationship development between CRH and its vendor base. Access to this information would permit Verdana to approach the same suppliers with knowledge of the specific terms CRH has negotiated, enabling Verdana either to undercut those terms or to use the knowledge as leverage in its own negotiations — in either case, directly undermining CRH's competitive position.
22. Private-Label Cost Models. The exfiltrated files include cost models showing CRH's cost structures, manufacturing arrangements, and target margins for its private-label product lines. Private-label products represent a high-margin segment of CRH's merchandising business and are an area where CRH has invested significantly in supplier identification, product design, quality assurance, and brand development. Disclosure of CRH's private-label cost models to a competitor would reveal not only CRH's cost basis but also its margin expectations, enabling a competitor to price its own private-label offerings strategically to erode CRH's market share.
23. Customer Segmentation Data. The exfiltrated files include customer segmentation data reflecting purchasing patterns, demographic analyses, and targeted marketing strategies. This data represents a significant investment by CRH in data analytics and market research, and it informs CRH's decisions regarding product assortment, pricing, promotional strategy, and marketing allocation. If utilized by Verdana, this data would enable Verdana to target the same customer segments with competing offerings tailored to exploit the purchasing patterns and preferences that CRH has identified through its proprietary research.
24. In my professional opinion, the exfiltrated information, if utilized by Verdana, would provide Verdana with a substantial and unearned competitive advantage equivalent to years of independent research, development, and market intelligence gathering. The competitive advantage derived from this information is not merely theoretical; it is directly actionable, providing Verdana with a detailed playbook for competing against CRH in the very categories where CRH is strongest.
C. Magnitude of Verdana's Investment in Recruitment
25. The compensation packages offered by Verdana to the Rathore Group reflect an extraordinary investment in acquiring the competitive intelligence these individuals carry. The aggregate sign-on bonuses paid by Verdana to the eight members of the Rathore Group total $6,200,000. Ms. Rathore individually received a sign-on bonus of $1,500,000, a base salary of $650,000 (an increase of approximately 34% over her CRH base salary of $485,000), a target annual bonus of $520,000 representing 80% of her base salary (an increase of approximately 79% over her CRH target bonus of $290,000), and 1.5% of the fully diluted equity of Verdana Commerce Group, Inc.
26. The financial resources to fund this recruitment were provided by Greystone Capital Partners, LP through Greystone Capital Fund VII, LP, which acquired Verdana in the third quarter of 2023 for an enterprise value of approximately $2.4 billion. Greystone Capital Fund VII, LP has approximately $8.5 billion in committed capital, providing Verdana with substantial financial backing to execute aggressive growth strategies. The involvement of a well-resourced private equity sponsor underscores the strategic nature of the recruitment and the expectation that the acquired competitive intelligence will generate returns that justify the extraordinary compensation packages.
27. The scale of Verdana's investment in recruiting the Rathore Group is significant as an economic indicator. A rational economic actor would not invest $6,200,000 in aggregate sign-on bonuses — in addition to the ongoing enhanced compensation packages — unless it anticipated a return on that investment far exceeding the cost. The nature of the Rathore Group's roles at CRH and the evidence of data exfiltration strongly suggest that the anticipated return is predicated, at least in significant part, on the competitive intelligence these individuals bring from CRH, including knowledge of CRH's proprietary strategies, vendor terms, cost structures, and the Project Ridgeline roadmap.
VI. PRELIMINARY DAMAGES FRAMEWORK
A. Categories of Economic Harm
28. Based on my preliminary analysis, I have identified three primary categories of economic harm that CRH has suffered or is likely to suffer as a result of the defendants' conduct.
29. Lost Profits from Competitive Displacement. The first and most significant category of harm is the lost profits CRH is likely to sustain as a result of Verdana's ability to use CRH's proprietary strategies and vendor terms to capture market share in the 28 overlapping product categories. Verdana's announced growth initiative targets a doubling of revenue by 2028, and the recruitment of CRH's entire senior merchandising team — together with the exfiltrated information — positions Verdana to achieve this growth, in part, at CRH's direct expense. The resulting competitive displacement would reduce CRH's revenue and profits in its merchandising division over a period of years.
30. Diminished Value of Trade Secrets and Confidential Information. The second category of harm is the diminished economic value of CRH's trade secrets and confidential information once disclosed to a direct competitor. Project Ridgeline, the vendor negotiation term sheets, the private-label cost models, and the customer segmentation data each derive their economic value from the fact that they are not generally known to CRH's competitors. Once this information is in the possession of Verdana, its value as a source of competitive advantage is substantially and permanently diminished, regardless of whether the information is ultimately returned or destroyed.
31. Increased Costs and Operational Disruption. The third category of harm encompasses the direct and indirect costs CRH has incurred and will continue to incur as a result of the coordinated departure and data exfiltration. These costs include executive search and replacement costs for eight senior positions within the merchandising division; the costs of revising compromised strategies and renegotiating vendor terms that have been exposed to a competitor; and the interim operational inefficiency that the merchandising division has experienced and will continue to experience during the leadership transition period, during which Martin Cho, a CRH executive from a separate business unit, has been serving as interim Senior Vice President of Merchandising.
B. Preliminary Quantification Methodology
1. Lost Profits Model.
32. To estimate the lost profits attributable to competitive displacement, I apply a "but-for" analysis. This is a well-established methodology in damages quantification that compares the plaintiff's projected financial performance in the "but-for" world — the hypothetical scenario in which the wrongful conduct did not occur — with the plaintiff's projected financial performance in the "actual" world, accounting for the competitive displacement caused by the defendants' conduct. The difference between these two projections represents the lost profits attributable to the wrongful conduct.
33. The base metric for this analysis is CRH's Merchandising Division GMV of approximately $2.3 billion in fiscal year 2024. Based on my preliminary review, the Rathore Group and the exfiltrated information are directly relevant to the 28 overlapping product categories in which CRH and Verdana compete. Even a modest erosion of market share in these overlapping categories — on the order of 2% to 5% — would yield projected lost GMV in the range of $46 million to $115 million. The corresponding impact on CRH's profits would depend on the applicable margin percentages, which I understand from my review of CRH's internal financials to include gross margins and operating margins that are favorable relative to industry benchmarks. I note, however, that the precise margin figures require further discovery into CRH's internal financial records for refinement and are accordingly not disclosed in detail in this preliminary declaration.
34. My preliminary estimate of the profit margin impact on the affected GMV, while subject to refinement, supports a preliminary damages range for lost profits that is conservatively in the range of tens of millions of dollars over the applicable restrictive covenant period. This estimate accounts only for the direct displacement effect during the restrictive covenant period and does not include the ongoing competitive harm that may persist beyond that period as a result of the permanent loss of trade secret value.
2. Diminished Trade Secret Value Model.
35. To estimate the diminished value of CRH's trade secrets and confidential information, I employ a reasonable royalty and avoided-cost approach. Under this methodology, the damages are estimated based on the cost that a willing licensee would have paid to a willing licensor for the right to use the information in question, or alternatively, the cost that Verdana avoided by acquiring the information through misappropriation rather than through independent development.
36. The development cost of Project Ridgeline and the underlying proprietary information represents years of investment by CRH in market research, vendor relationship development, analytical modeling, and strategic planning. Based on my preliminary analysis, CRH's investment in developing this information — including the allocation of executive time, research resources, data analytics capabilities, and external consulting engagements — represents a substantial expenditure over multiple years. Verdana's ability to replicate this intelligence without incurring the corresponding independent investment represents a quantifiable unjust enrichment.
37. My preliminary estimate of the avoided development costs to Verdana is in the millions of dollars. This estimate is necessarily preliminary at this stage, as a more precise quantification will require detailed analysis of CRH's actual expenditures in developing the proprietary information, the time horizon over which these expenditures were incurred, and the scope of the information that Verdana has accessed and utilized. I intend to refine this estimate upon receipt of additional discovery materials.
3. Operational Disruption Costs.
38. I have also identified direct costs that CRH has already incurred or anticipates incurring as a result of the coordinated departure and data exfiltration. These costs include, but are not limited to:
(a) Executive search and recruitment costs associated with replacing eight senior positions within the merchandising division, including retained search firm fees, candidate screening and assessment costs, and relocation and onboarding expenses;
(b) Costs associated with revising compromised strategies and vendor terms, including the cost of developing replacement strategic plans for the merchandise categories affected by Project Ridgeline's disclosure, and the cost of renegotiating vendor agreements where CRH's negotiating position has been undermined by the disclosure of its proprietary terms;
(c) Interim operational inefficiency during the leadership transition period, reflected in decreased productivity, delayed decision-making, and disrupted vendor and supplier relationships attributable to the departure of the entire senior merchandising team and the appointment of Martin Cho as interim Senior Vice President; and
(d) Costs of the forensic investigation and remediation efforts necessitated by the data exfiltration, including the engagement of Pinnacle Forensics LLC and the implementation of enhanced data security measures.
39. These operational disruption costs are currently estimated to total several million dollars and will be refined as actual expenditures are documented and additional information becomes available through discovery.
C. Preliminary Damages Range
40. While a full damages calculation cannot be completed at this stage due to the preliminary nature of the analysis and the need for additional discovery, it is my preliminary opinion that the total economic harm to CRH from the coordinated departure of the Rathore Group, the breach of restrictive covenant obligations, and the misappropriation and potential use of CRH's trade secrets and confidential information is likely to be substantial. Aggregating the three categories of harm described above — lost profits from competitive displacement, diminished trade secret value, and operational disruption costs — I estimate that the total economic harm to CRH is potentially in the range of tens of millions of dollars to over one hundred million dollars.
41. The irreparable nature of much of this harm — particularly the permanent loss of trade secret value once proprietary information has been disclosed to and reviewed by a direct competitor — underscores the point that monetary damages alone may not adequately compensate CRH for the injury it has sustained and will continue to sustain absent injunctive relief. This conclusion is elaborated further in Section VII below.
VII. IRREPARABLE HARM — ECONOMIC PERSPECTIVE
42. From an economic standpoint, the harm to CRH is particularly difficult to quantify with precision and, in significant part, irreparable for the following reasons.
43. Trade Secret Disclosure Is Irreversible. Once Project Ridgeline materials, vendor negotiation term sheets, private-label cost models, and customer segmentation data are in Verdana's possession and have been reviewed by Verdana's personnel, the competitive advantage derived from the secrecy of that information cannot be restored — even if the information is subsequently returned or destroyed. The knowledge gained from reviewing CRH's proprietary strategies will inevitably inform Verdana's decision-making, and there is no practical mechanism for "unlearning" the information once it has been absorbed. This principle is well recognized in economic literature on information asymmetry and is a fundamental feature of trade secret economics: unlike tangible property, which can be physically returned, the value of confidential information resides in the information itself, and disclosure is an irreversible act.
44. Market Share Loss Compounds Over Time. Competitive displacement in the retail merchandising context has cascading effects that extend well beyond the initial period of lost sales. When a competitor captures market share through the use of misappropriated strategies, the effects compound in several ways. Vendor relationships that shift to the competitor become entrenched over time, making it increasingly difficult for the injured party to recapture those relationships. Customers who migrate to the competitor develop purchasing habits and brand loyalty that are resistant to reversal. In brick-and-mortar retail, shelf-space displacement is difficult to reverse once a competitor has established its presence. In ecommerce, algorithmic advantages in search ranking and product placement create self-reinforcing dynamics that favor incumbency. Each of these compounding effects makes it progressively more difficult and costly for CRH to recover the competitive position it will lose during the period of wrongful conduct.
45. Head Start Advantage. Even if the restrictive covenant period is ultimately enforced and the Rathore Group is eventually prohibited from working for Verdana in the overlapping product categories, a temporary period during which the Rathore Group operates in merchandising roles at Verdana using CRH's proprietary information creates a durable competitive advantage that persists beyond any restrictive covenant period. In economic terms, this "head start" advantage allows Verdana to establish vendor relationships, develop product lines, and capture market positioning that would take years to achieve independently. Once established, this advantage does not dissipate when the restrictive covenant period expires; rather, it becomes embedded in Verdana's business operations and serves as a platform for ongoing competitive harm.
46. Difficulty of Post Hoc Attribution. Once Verdana implements strategies derived from CRH's proprietary information, it becomes exceedingly difficult after the fact to isolate and quantify which of Verdana's competitive gains are attributable to the misappropriated information and which are attributable to Verdana's independent efforts. This is a well-recognized challenge in trade secret damages cases. The commingling of misappropriated knowledge with legitimately acquired knowledge creates an attribution problem that makes ex post damages calculations inherently imprecise and unreliable. As a practical matter, Verdana would be expected to argue that its competitive gains resulted from its own independent efforts, and the burden of disentangling these competing explanations would fall on CRH — a burden that becomes increasingly onerous as time passes and the effects of the misappropriated information become more deeply embedded in Verdana's operations.
47. For these reasons, I conclude from an economic perspective that preliminary injunctive relief is necessary to prevent harm to CRH that cannot be adequately compensated through monetary damages alone. The longer the Rathore Group is permitted to operate in their roles at Verdana with access to CRH's proprietary information, the greater and more irreversible the economic harm to CRH becomes.
VIII. CONSIDERATION OF DEFENDANTS' POTENTIAL ARGUMENTS
48. I have considered the potential argument that enforcement of the restrictive covenants as written would impose disproportionate economic harm on the Individual Defendants. In evaluating this argument, I note the following.
49. The members of the Rathore Group were well compensated during their tenure at CRH. Ms. Rathore received a base salary of $485,000, a target annual bonus of $290,000, and a restricted stock unit grant valued at $725,000 with four-year ratable vesting commencing March 15, 2021. The remaining seven members of the Rathore Group received annual salaries ranging from $192,000 to $340,000, with corresponding equity compensation. These compensation levels reflect the value CRH placed on the institutional knowledge and expertise of these individuals and, correspondingly, the consideration CRH provided in exchange for the restrictive covenant obligations each employee agreed to undertake.
50. Moreover, the Individual Defendants have accepted substantially enhanced compensation packages at Verdana. The aggregate sign-on bonuses of $6,200,000, combined with enhanced base salaries, target bonuses, and — in Ms. Rathore's case — a significant equity stake, significantly mitigate any claim of undue economic hardship arising from temporary enforcement of the restrictive covenants. The Individual Defendants have already received and, to my understanding, retained the sign-on bonuses paid by Verdana, and their financial circumstances following the departure from CRH are materially different from those of employees who might face genuine economic hardship from restrictive covenant enforcement.
51. In my opinion, the balance of equities favors CRH given: (a) the magnitude of the business at risk, with CRH's merchandising division generating $2.3 billion in GMV in fiscal year 2024; (b) the deliberate and coordinated nature of the departure, which was planned in advance through the January 6, 2025 meeting and subsequent encrypted communications; and (c) the evidence of data exfiltration, which indicates that the departure was not merely a voluntary career change but rather part of a concerted effort to transport CRH's most valuable proprietary information to a direct competitor.
IX. OPINIONS STATED
52. Based on my qualifications, experience, and the preliminary analysis described in this Declaration, I state the following preliminary opinions to a reasonable degree of economic certainty:
(a) CRH's merchandising division, generating approximately $2.3 billion in gross merchandise value in fiscal year 2024, represents a business of substantial economic value that is directly threatened by the defendants' conduct. The merchandising division is CRH's most profitable segment and is critical to the company's competitive positioning and long-term financial performance.
(b) The exfiltrated proprietary information — including Project Ridgeline presentations and strategic roadmap documents, vendor negotiation term sheets, private-label cost models, and customer segmentation data — has significant independent economic value and would confer a material competitive advantage on Verdana if utilized. This information represents years of investment by CRH and cannot be replicated through independent means without comparable expenditure of time and resources.
(c) The economic harm to CRH from the potential misuse of this information and the breach of restrictive covenant obligations by the members of the Rathore Group is likely to be substantial, potentially in the tens of millions of dollars or more, based on the lost profits, diminished trade secret value, and operational disruption costs described in this Declaration.
(d) A significant portion of this harm is irreparable in nature, as monetary damages cannot fully restore the competitive position CRH would lose through the disclosure and use of its trade secrets by a direct competitor. The irreversible nature of trade secret disclosure, the compounding effects of competitive displacement, the head start advantage conferred on Verdana, and the difficulty of post hoc attribution each support this conclusion.
(e) These opinions are preliminary and subject to revision upon completion of full discovery and additional analysis. I reserve the right to supplement, amend, or revise any opinion stated herein as additional information becomes available.
X. RESERVATION OF RIGHTS
53. I reserve the right to supplement, amend, or revise the opinions stated in this Declaration upon receipt of additional discovery materials. Among other things, my ongoing analysis will benefit from review of the following categories of materials, which I understand are the subject of pending discovery requests:
(a) CRH's detailed financial projections and internal budgets for the merchandising division, including category-level revenue and margin forecasts for fiscal years 2025 through 2029;
(b) Verdana's internal strategic plans, financial projections, and any documents reflecting the use, analysis, or dissemination of CRH information within Verdana's organization;
(c) Deposition testimony of the Individual Defendants, Warren Dietrich, Elliot Westbrook, and other relevant Verdana executives;
(d) Results of the forensic audit to be conducted at Verdana's premises, including an inventory and categorization of all CRH-originated information identified on Verdana systems and in the possession of Verdana personnel; and
(e) Any additional documents, data, or testimony produced in the course of discovery that is relevant to the quantification of CRH's economic harm.
54. My engagement by Veltrano Consulting Group LLC on behalf of CRH through Calderwood & Harkness LLP is ongoing. I anticipate providing further analysis, including a comprehensive damages report, as this matter progresses through discovery and toward trial.
VERIFICATION
I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.
Executed on March 17, 2025, in Chicago, Illinois.
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Dr. Franklin Oberg, PhD Principal and Lead Expert Veltrano Consulting Group LLC 200 South Wacker Drive, Suite 3100 Chicago, IL 60606
CERTIFICATE OF SERVICE
I, Bernard Crawford, hereby certify that on March 17, 2025, a true and correct copy of the foregoing Declaration of Dr. Franklin Oberg in Support of Plaintiff's Motion for Preliminary Injunction was served by File & ServeXpress upon the following counsel of record:
Catherine Nygaard, Esq. Whitfield, Nygaard & Doyle LLP 1000 North Market Street, Suite 1500 Wilmington, DE 19801 Counsel for Individual Defendants Priya Rathore, Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, and Kira Johansson
Gavin Blackhall, Esq. Blackhall & Soren LLP 300 Delaware Avenue, Suite 900 Wilmington, DE 19801 Counsel for Defendant Verdana Commerce Group, Inc.
Filed in C.A. No. 2025-0198-MTZ, Court of Chancery of the State of Delaware, before Vice Chancellor Margaret T. Zhao.
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Bernard Crawford, Esq. Calderwood & Harkness LLP 1301 K Street NW, Suite 1200 Washington, DC 20005 Counsel for Plaintiff Cascade Retail Holdings Inc.
CASCADE RETAIL HOLDINGS INC.,
Plaintiff,
v. | C.A. No. 2025-0198-MTZ
PRIYA RATHORE, DEREK LINDEN, SONIA KACZMAREK, AMARA OSEI, BRENT HALVORSEN, LUCIA FERNANDEZ-GILL, NATHAN TSAO, KIRA JOHANSSON, and VERDANA COMMERCE GROUP, INC.,
Defendants.