memo-project-ridgeline-trade-secret-analysis.docx

1038-00006 · Calderwood & Harkness LLP · Investigation & Analysis

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MEMORANDUM

TO: Bernard Crawford, Responsible Partner

FROM: James Underwood, Lead Associate

DATE: March 2, 2025

RE: Trade Secret Classification Analysis — Project Ridgeline Materials; Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)

MATTER NO.: 1038-00006

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I. Executive Summary

The purpose of this memorandum is to analyze whether Cascade Retail Holdings Inc.'s ("CRH" or the "Company") Project Ridgeline materials qualify as "trade secrets" under the Delaware Uniform Trade Secrets Act, 6 Del. C. § 2001 et seq. ("DUTSA"), in connection with CRH's claims against the eight departing merchandising employees — Priya Rathore, Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, and Kira Johansson (collectively, the "Rathore Group") — and their new employer, Verdana Commerce Group, Inc. ("Verdana").

Based on our analysis of the relevant statutory provisions, applicable Delaware case law, the factual record developed to date, and the preliminary findings of our forensic and investigative consultants, we conclude that the Project Ridgeline materials — taken individually and, more powerfully, as a compilation — satisfy each element of the DUTSA trade secret definition. Specifically:

• The Project Ridgeline materials derive substantial independent economic value, both actual and potential, from their secrecy. Disclosure of these materials to a direct competitor like Verdana would enable that competitor to replicate CRH's five-year strategic roadmap, undercut its vendor relationships, and erode the competitive advantages CRH has built over years of investment in proprietary data analytics, vendor negotiation strategies, and private-label sourcing infrastructure.

• CRH undertook reasonable efforts to maintain the secrecy of the Project Ridgeline materials through a multi-layered system of contractual protections (including perpetual confidentiality obligations, non-competition covenants, and non-solicitation restrictions), technical and physical security measures (including role-based access controls, multi-factor authentication, document classification and watermarking, and endpoint security with data loss prevention tools), internal information security policies and employee training, and prompt remedial action upon discovery of the suspected misappropriation.

Accordingly, the Project Ridgeline materials should be classified as protectable trade secrets for purposes of the Verified Complaint and motion for a temporary restraining order and preliminary injunction ("TRO/PI motion") to be filed in the Delaware Court of Chancery.

This memorandum supplements the restrictive covenant summary memorandum dated February 22, 2025, and incorporates preliminary findings from two engagement teams: Pinnacle Forensics LLC's forensic analysis of data exfiltration activity (engagement date: February 20, 2025; engagement lead: Dr. Rajiv Anand) and Aurelian Investigations Group Inc.'s investigation into the timeline and circumstances of Verdana's recruitment of the Rathore Group (engagement date: February 21, 2025). References to factual findings from those engagements should be understood as preliminary and subject to revision as those investigations progress.

II. Background and Factual Context

A. Project Ridgeline Overview

Project Ridgeline is a confidential five-year strategic category expansion plan developed by CRH's merchandising division and completed in final form in October 2024. The project represents a comprehensive and integrated strategic blueprint designed to guide CRH's merchandising strategy, capital allocation, vendor relationships, private-label development, and customer segmentation approach through fiscal year 2029.

Project Ridgeline was developed under the direct supervision of Priya Rathore, who at the time held the title of Senior Vice President, Merchandising. Rathore led the effort with contributions from the entirety of her leadership team — the seven other members of what we refer to as the Rathore Group:

• Derek Linden, Vice President, Hardlines Merchandising

• Sonia Kaczmarek, Vice President, Softlines Merchandising

• Amara Osei, Director, Private Label Strategy

• Brent Halvorsen, Director, Seasonal Planning & Analytics

• Lucia Fernandez-Gill, Director, Vendor Relations, Domestic

• Nathan Tsao, Senior Manager, eCommerce Merchandising

• Kira Johansson, Senior Manager, Category Analytics

The development of Project Ridgeline spanned approximately eighteen months, beginning in the spring of 2023, with the final deliverable presented to CRH's executive leadership team (including the Chief Executive Officer, Chief Financial Officer, General Counsel, and Chief People Officer) in October 2024. The project drew upon CRH's proprietary historical sales data, vendor relationship intelligence, customer analytics, and the collective strategic expertise of the merchandising leadership team.

To appreciate the significance of Project Ridgeline, it is necessary to understand the scale of CRH's merchandising operations. CRH is a publicly traded omnichannel retail company, listed on the Nasdaq Stock Market under the ticker symbol "CRHL." The Company is incorporated in the State of Delaware and maintains its corporate headquarters at 2200 Elliott Avenue West, Suite 3400, Seattle, Washington 98119. CRH operates 387 brick-and-mortar retail locations across 34 states, as well as a direct-to-consumer ecommerce platform. In fiscal year 2024, CRH generated total revenue of approximately $6.82 billion. Of that total, the merchandising division — the division at the center of this dispute — accounted for approximately $2.3 billion in gross merchandise value ("GMV"), representing a significant and strategically critical portion of the Company's overall business.

Project Ridgeline was not merely an academic exercise or a preliminary brainstorming document. It was the definitive strategic plan upon which CRH intended to base billions of dollars of merchandising decisions over the next five years, including decisions about which product categories to enter or expand, how much capital to invest, which vendors to cultivate or develop, how to optimize its private-label programs, and how to allocate inventory across its 387 physical locations and its ecommerce channel.

B. Components of Project Ridgeline

The Project Ridgeline materials encompass the following five principal categories of proprietary information, each of which is described in greater detail below:

1. Proprietary Vendor Negotiation Playbooks. These materials consist of detailed scripts, strategies, and historical negotiation data used by CRH's merchandising team in its vendor procurement processes. The playbooks cover pricing terms, volume commitments, rebate structures (including tiered rebate schedules tied to volume thresholds), payment schedules, markdown allowances, cooperative advertising contributions, and return-to-vendor terms across CRH's top 50 vendors by spend. These top 50 vendors collectively account for approximately 68% of CRH's total cost of goods sold within the merchandising division. The playbooks reflect years of negotiation history and embody the accumulated knowledge of CRH's vendor relations team regarding each vendor's pricing flexibility, negotiation tendencies, competitive vulnerabilities, and strategic priorities. They are, in effect, a competitive weapon that enables CRH's buyers to negotiate from a position of informational advantage.

2. Seasonal Buying Algorithms. These are proprietary quantitative models used to forecast seasonal demand, optimize inventory allocation across CRH's 387 store locations and its ecommerce channel, and time purchasing decisions to maximize margin and minimize markdowns. The algorithms were developed over multiple years using CRH's proprietary historical sales data — encompassing point-of-sale transaction data, ecommerce browsing and purchasing data, weather correlation models, regional demographic overlays, and promotional response curves. These are not off-the-shelf industry tools or standard forecasting methodologies available from third-party software vendors. They are CRH-specific intellectual property, refined iteratively through application to CRH's unique store footprint, product mix, and customer base. The seasonal buying algorithms were principally developed and maintained by Brent Halvorsen (Director, Seasonal Planning & Analytics) and Kira Johansson (Senior Manager, Category Analytics), with input from Nathan Tsao (Senior Manager, eCommerce Merchandising) on the digital channel components.

3. Private-Label Sourcing Strategies. These materials comprise detailed sourcing plans for CRH's private-label product lines, which represent a rapidly growing and high-margin segment of CRH's merchandising business. The private-label sourcing strategies include factory-level cost models identifying specific manufacturing partners (both domestic and international), per-unit production costs, quality benchmarks and inspection protocols, target gross margins by product category and SKU tier, and details regarding exclusive supplier relationships that CRH has cultivated over a period of years. These exclusive relationships, in particular, represent significant competitive advantages that would be difficult and time-consuming for a competitor to replicate. The private-label sourcing strategies were principally developed and maintained by Amara Osei (Director, Private Label Strategy) and Lucia Fernandez-Gill (Director, Vendor Relations, Domestic).

4. Five-Year Category Expansion Roadmap. This is the central strategic document within the Project Ridgeline suite. It is a comprehensive plan identifying specific product categories that CRH intends to enter or expand over the five-year period from 2025 through 2029, including home goods, seasonal décor, and private-label apparel. The roadmap includes projected revenue targets for each category, required investment budgets (encompassing capital expenditure, inventory investment, and marketing spend), store rollout timetables specifying which of CRH's 387 locations will carry each new category and on what timeline, ecommerce assortment strategies, competitive positioning analyses, and identified risks and contingencies. The roadmap represents the distillation of the other four categories of Project Ridgeline materials into a single, actionable strategic plan. It is, in essence, CRH's competitive playbook for the next five years.

5. Customer Segmentation Data. These materials consist of proprietary analytics on CRH's customer base, including detailed purchase behavior models, customer lifetime value ("CLV") calculations, propensity-to-purchase scores by product category, customer churn prediction models, and targeted merchandising recommendations derived from CRH's ecommerce platform and its loyalty program (branded as "CRH Rewards," with approximately 14.2 million enrolled members as of December 2024). The customer segmentation data enables CRH to tailor its merchandising strategy — including assortment, pricing, and promotional decisions — to the specific behaviors and preferences of its most valuable customer segments. These analytics were principally developed and maintained by Kira Johansson (Senior Manager, Category Analytics) and Nathan Tsao (Senior Manager, eCommerce Merchandising).

C. Competitive Significance

The competitive significance of the Project Ridgeline materials is underscored by the identity and strategic posture of the entity that recruited the Rathore Group: Verdana Commerce Group, Inc.

Verdana is a Delaware corporation headquartered at 400 Christiana Gateway, Suite 700, Wilmington, Delaware 19801. It is a direct competitor of CRH in the omnichannel retail space, with estimated fiscal year 2024 revenue of approximately $1.9 billion. Verdana directly competes with CRH in 28 overlapping product categories, spanning hardlines, softlines, home goods, and seasonal merchandise. The two companies compete for many of the same customers, vendors, and retail real estate opportunities.

Several facts highlight the strategic context in which the Rathore Group's departure and recruitment occurred:

First, in January 2025 — approximately one month before the Rathore Group resigned — Verdana publicly announced what it described as a "transformational growth initiative" targeting $4 billion in revenue by 2028. In its public statements accompanying that announcement, Verdana specifically cited expansion into private-label home goods and seasonal décor as pillars of its growth strategy. These are the very product categories at the heart of Project Ridgeline's five-year category expansion roadmap. The temporal proximity and substantive overlap between Verdana's announced strategy and the content of Project Ridgeline are striking and, in our view, unlikely to be coincidental given the subsequent recruitment of the entire team that developed Ridgeline.

Second, Verdana is backed by significant private equity capital. Greystone Capital Partners, LP, a private equity firm headquartered at 680 Park Avenue, 22nd Floor, New York, New York 10065, acquired a majority stake in Verdana through Greystone Capital Fund VII, LP in the third quarter of 2023 at an enterprise value of $2.4 billion. Fund VII has $8.5 billion in committed capital, providing Verdana with substantial financial resources to execute an aggressive growth strategy — including the acquisition of strategic talent from competitors.

Third, the economic terms on which the Rathore Group was recruited underscore the value Verdana placed on the knowledge and strategic insights these employees carried. The Rathore Group received aggregate sign-on bonuses of $6,200,000 from Verdana. Rathore herself received a sign-on bonus of $1,500,000. These figures are extraordinary for merchandising executives and suggest that Verdana was willing to pay a significant premium to acquire not just talent but the specific institutional knowledge and strategic intelligence that the Rathore Group developed at CRH — including, we submit, the Project Ridgeline materials.

D. Data Exfiltration

The preliminary forensic analysis conducted by Pinnacle Forensics LLC under the direction of Dr. Rajiv Anand has revealed substantial evidence of data exfiltration by members of the Rathore Group in the weeks preceding their simultaneous resignations.

According to Pinnacle's preliminary findings, a total of 14,327 files comprising approximately 2.8 gigabytes of data were downloaded from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts (including personal Hollowell Health IT, Larkspur Technologies, and Meridian Systems accounts) between January 10 and February 4, 2025. The downloads were conducted by multiple members of the Rathore Group using their CRH-issued credentials. The pattern of downloads was concentrated in the final weeks of January and the first few days of February 2025, with a notable spike in activity on January 28 and January 29, 2025.

The exfiltrated files include, but are not limited to:

• Project Ridgeline presentations (Northgate Services Inc. and PDF formats), including the final October 2024 executive presentation and supporting appendices;

• Vendor negotiation term sheets for CRH's top 50 vendors;

• Private-label cost models and factory-level sourcing specifications;

• Customer segmentation data exports and CLV analysis workbooks;

• Seasonal buying algorithm documentation and model parameters; and

• Internal communications (email and Northgate Data Systems messages) regarding Project Ridgeline strategy, implementation timelines, and competitive analysis.

The Rathore Group submitted simultaneous resignation letters on February 7, 2025, at 4:47 PM Pacific Standard Time, effective immediately. The timing — late on a Friday afternoon — appears calculated to minimize CRH's ability to conduct orderly exit interviews, secure return of company property, and investigate potential data exfiltration before the departing employees began their new positions at Verdana. CRH became aware of the full scope of the resignations on Monday, February 10, 2025, when its Chief People Officer reviewed the resignation letters submitted over the weekend.

On February 14, 2025, Verdana publicly announced the hiring of the Rathore Group in a press release titled "Verdana Commerce Welcomes Industry-Leading Merchandising Team to Accelerate Growth." The press release described the Rathore Group as "a world-class merchandising leadership team that will spearhead Verdana's ambitious growth plans across key strategic categories."

The timeline of events — from the commencement of data exfiltration on January 10, 2025, through the coordinated Friday-afternoon resignations on February 7, 2025, to Verdana's public announcement on February 14, 2025 — strongly suggests a coordinated plan by the Rathore Group and Verdana to extract CRH's most sensitive strategic materials and transplant CRH's merchandising leadership team, wholesale, to a direct competitor.

III. Legal Framework — DUTSA Trade Secret Definition

A. Statutory Text

The applicable statutory provision is 6 Del. C. § 2001(4), which defines a "trade secret" as follows:

"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique or process, that:

(i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

6 Del. C. § 2001(4). This definition tracks the language of the Uniform Trade Secrets Act as adopted by the majority of states and provides a broad and flexible framework for identifying protectable trade secret information.

B. Two-Prong Analysis Required

As the statutory text makes clear, a two-prong analysis is required to determine whether particular information qualifies as a trade secret under DUTSA:

Prong 1: Independent Economic Value from Secrecy. The information must derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. This prong focuses on whether the information provides a competitive advantage by virtue of its secrecy — that is, whether a competitor would gain economic value from having access to the information, and whether the information is not otherwise publicly available or readily ascertainable through legitimate means.

Prong 2: Reasonable Efforts to Maintain Secrecy. The information must be the subject of efforts that are reasonable under the circumstances to maintain its secrecy. This prong requires the trade secret claimant to demonstrate that it took affirmative steps to protect the confidentiality of the information. The standard is one of reasonableness — not perfection. The question is whether the claimant's efforts, viewed in their totality and in light of the circumstances, were reasonable to protect the information from disclosure.

Importantly, DUTSA broadly defines the categories of qualifying information. The statute expressly identifies "compilations" as a type of protectable information. This is significant because compilations of otherwise non-secret information can qualify as trade secrets if the compilation itself — that is, the selection, arrangement, and integration of the component information into a coherent whole — derives independent economic value from its secrecy. See 6 Del. C. § 2001(4) (including "compilation" within the definition). This compilation theory is directly relevant to the Project Ridgeline materials, which integrate multiple categories of information into a unified strategic plan.

C. Relevant Delaware Precedent

Delaware courts, particularly the Court of Chancery, have developed a substantial body of case law applying the DUTSA trade secret definition. The following survey of relevant precedent provides the analytical framework for our analysis.

Strategic Business Plans and Expansion Roadmaps. The Court of Chancery has recognized that strategic business plans and growth roadmaps can constitute protectable trade secrets where they reflect proprietary analysis, strategic thinking, and competitive intelligence that is not publicly available. In Beard Research, Inc. v. Kates, 8 A.3d 573 (Del. Ch. 2010), aff'd sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010), the court addressed claims of trade secret misappropriation involving confidential business strategies and recognized the broad scope of DUTSA's protections. Similarly, in Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002), the Delaware Supreme Court confirmed that DUTSA is to be broadly construed and that the statute was intended to provide comprehensive protection for proprietary information that derives value from its secrecy.

Pricing and Vendor Negotiation Data. Delaware courts have consistently treated pricing information, vendor terms, and negotiation strategies as the type of information that can qualify for trade secret protection. In Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102 (3d Cir. 2010), the Third Circuit, applying the substantially similar Pennsylvania trade secrets statute (which, like DUTSA, is based on the Uniform Trade Secrets Act), upheld a preliminary injunction based in part on trade secret claims involving pricing and vendor relationship information, reasoning that such information provides a direct competitive advantage. Delaware courts have applied analogous reasoning under DUTSA.

Customer Data and Segmentation Analytics. Customer lists, purchasing data, and analytical models derived from proprietary customer information have been recognized as trade secrets under DUTSA. In Elenza, Inc. v. Alcon Labs., Inc., C.A. No. 12-992-RGA, 2014 WL 1689454 (D. Del. Apr. 28, 2014), the court recognized that proprietary data and analytical frameworks can satisfy DUTSA's requirements. The Court of Chancery has similarly observed that customer data that is not publicly available and that has been developed through significant investment can derive independent economic value from its secrecy.

Employee Departures and Competitor Recruitment Scenarios. Delaware courts have been particularly attentive to trade secret claims arising in the context of coordinated employee departures to a direct competitor. In Sterling Reach Group v. Velmoran, C.A. No. 3512-VCS, 2010 WL 610725 (Del. Ch. Feb. 18, 2010), the Court of Chancery addressed a scenario involving the departure of key employees to a competitor and recognized that the circumstances of the departure — including evidence of pre-departure data downloads and coordinated resignations — are relevant to establishing both misappropriation and the likelihood of irreparable harm for injunctive relief purposes. The factual parallels to the present case are evident.

Compilations of Information as Trade Secrets. Perhaps most directly relevant to the Project Ridgeline analysis, Delaware courts have embraced the "mosaic" or compilation theory of trade secret protection. Under this theory, even where individual data points or components of a compilation may be partially known in the industry, the compilation itself can qualify as a trade secret if the selection, arrangement, and integration of those components into a coherent whole derives independent economic value from its secrecy. In Ashbury Enterprises v. SmithKline Beecham Pharm. Co., C.A. No. 15443-NC, 1999 WL 669354 (Del. Ch. Aug. 5, 1999), the court recognized that a compilation of information can qualify as a trade secret even if some of its component parts are individually available, provided that the compilation itself is not generally known or readily ascertainable. This principle has been reaffirmed in subsequent decisions and is well established in Delaware trade secret jurisprudence.

It bears emphasis that Delaware courts consistently hold that trade secret status is determined on a case-by-case basis, considering the totality of the circumstances. There is no bright-line rule dictating that particular types of information automatically qualify or fail to qualify as trade secrets. Rather, the analysis is inherently fact-specific and contextual, requiring examination of the nature of the information, the competitive environment, and the measures taken to preserve its secrecy.

IV. Analysis: Prong 1 — Independent Economic Value from Secrecy

A. Economic Value of Project Ridgeline as a Whole

Project Ridgeline represents years of investment, analysis, and strategic development by CRH's merchandising leadership team. The CRH merchandising division generated $2.3 billion in gross merchandise value in fiscal year 2024, and the Project Ridgeline roadmap was designed to guide strategic growth and capital allocation for that division — and for CRH as a whole — through fiscal year 2029. The resources invested in developing Project Ridgeline were substantial: a team of eight senior merchandising professionals, drawing on CRH's proprietary historical data, vendor relationships, and customer analytics, worked for approximately eighteen months to produce the final plan.

The independent economic value of the Project Ridgeline materials derives directly from their secrecy. The five-year category expansion roadmap identifies CRH's planned competitive moves with granular specificity — which product categories to enter or expand, in which markets, on what timeline, with what level of investment, and using which vendors and sourcing strategies. Disclosure of this information to a competitor like Verdana would allow that competitor to take a range of harmful actions: preemptively entering the same categories ahead of CRH, undercutting CRH's pricing strategies based on knowledge of CRH's vendor terms and margin targets, targeting CRH's exclusive supplier relationships, and tailoring its own customer acquisition efforts based on CRH's proprietary customer segmentation insights. In short, disclosure of Project Ridgeline would enable a competitor to neutralize the competitive advantages that CRH has spent years developing.

The competitive threat is not hypothetical. Verdana's January 2025 announcement of a "transformational growth initiative" targeting $4 billion in revenue by 2028 — with specific emphasis on expansion into private-label home goods and seasonal décor — directly implicates the strategic categories at the heart of Project Ridgeline. The fact that Verdana announced this initiative only weeks before recruiting the entire team that developed CRH's strategy for those very categories creates a reasonable and powerful inference that Verdana seeks to exploit the Rathore Group's knowledge of Project Ridgeline to accelerate its own competitive positioning.

Moreover, the economic value at stake is immense. CRH's merchandising division accounts for approximately one-third of the Company's total revenue. The five-year roadmap is designed to drive growth in that division, with projected incremental revenue targets that we understand (based on our review of the Ridgeline materials produced to us by CRH) to be in the hundreds of millions of dollars. If a competitor could replicate or preempt even a fraction of CRH's planned category expansions, the resulting competitive harm would be severe and difficult to remediate after the fact.

B. Vendor Negotiation Playbooks

The proprietary vendor negotiation playbooks contain highly specific and competitively sensitive information: exact pricing terms, rebate structures (including tiered volume rebate schedules), volume commitments, payment schedules, markdown allowances, cooperative advertising contributions, and return-to-vendor terms for CRH's top 50 vendors by spend. These top 50 vendors collectively account for approximately 68% of the merchandising division's cost of goods sold.

The economic value of these playbooks from their secrecy is straightforward. If a competitor possessed CRH's vendor negotiation playbooks, it could exploit that knowledge in multiple ways. It could approach CRH's vendors with knowledge of CRH's exact pricing and rebate terms, using that information to negotiate more favorable terms for itself. It could identify CRH's most strategically important vendor relationships and target those relationships for disruption. It could undercut CRH in vendor negotiations by offering terms calibrated to be marginally more attractive than what the competitor knows CRH is paying. And it could identify vulnerabilities in CRH's supply chain — for example, dependencies on particular vendors or SKU categories — and exploit those vulnerabilities competitively.

These materials are not publicly available. Vendor pricing terms, rebate structures, and negotiation histories are, by their nature, confidential between the parties to those transactions. CRH's vendors would not disclose these terms to CRH's competitors, and a competitor could not obtain this information through proper means. The playbooks are specific to CRH's vendor relationships and reflect CRH's proprietary negotiation strategy and historical data. They clearly derive independent economic value from their secrecy.

C. Seasonal Buying Algorithms

The seasonal buying algorithms represent proprietary quantitative models developed using CRH's proprietary historical sales data accumulated over years of retail operations across 387 store locations and the ecommerce platform. These algorithms incorporate point-of-sale transaction data, ecommerce browsing and purchasing patterns, weather correlation models, regional demographic overlays, promotional response curves, and a range of other CRH-specific inputs. They enable CRH to forecast seasonal demand with greater precision than industry-standard methods, optimize inventory allocation across its physical and digital channels, and time purchasing decisions to maximize margin and minimize markdown exposure.

The economic value of these algorithms is directly tied to their secrecy. The algorithms are not industry-standard tools available from third-party software vendors or through publicly available academic research. They are CRH-specific intellectual property, refined iteratively through application to CRH's unique operating environment. A competitor that obtained these algorithms — or even the underlying logic, parameters, and training data — could replicate CRH's demand forecasting and inventory optimization capabilities at a fraction of the time and cost required to develop them independently. This would directly erode CRH's competitive advantage in one of the most critical operational areas for any omnichannel retailer: getting the right product to the right location at the right time.

The seasonal buying algorithms satisfy the independent-economic-value element of the DUTSA definition. They are not generally known in the industry, they are not readily ascertainable by proper means, and a competitor would derive substantial economic value from their disclosure or use.

D. Private-Label Sourcing Strategies

CRH's private-label product lines represent a strategically important and rapidly growing segment of the Company's merchandising business, characterized by higher gross margins than branded products and greater control over product quality, pricing, and differentiation. The private-label sourcing strategies contain the operational blueprint for this business: factory-level cost models identifying specific manufacturing partners, per-unit production costs at each factory, quality benchmarks and inspection protocols, target gross margins by product category and SKU tier, and details regarding exclusive supplier relationships that CRH has cultivated over a period of years.

The independent economic value of these materials from their secrecy is evident. A competitor in possession of CRH's private-label sourcing strategies could replicate CRH's private-label program at dramatically reduced development cost and time. Instead of spending years identifying reliable manufacturing partners, negotiating factory-level pricing, developing quality benchmarks, and building exclusive supplier relationships, a competitor could simply adopt CRH's existing playbook. This is precisely the kind of "free riding" that trade secret law is designed to prevent.

The exclusive supplier relationships documented in these materials are particularly valuable and particularly vulnerable to misappropriation. These relationships took years to develop and involve commitments from suppliers to provide CRH with preferential pricing, production priority, and exclusivity in certain product categories. If a competitor could identify these suppliers and approach them with knowledge of CRH's terms, it could undermine these exclusive relationships — causing harm that would be virtually impossible to remediate through after-the-fact damages.

E. Customer Segmentation Data

The customer segmentation data represents the output of CRH's proprietary analytics applied to one of the Company's most valuable assets: its customer base. The data includes detailed purchase behavior models, customer lifetime value calculations, propensity-to-purchase scores by product category, customer churn prediction models, and targeted merchandising recommendations. This data is derived from CRH's ecommerce platform and its loyalty program ("CRH Rewards"), which has approximately 14.2 million enrolled members as of December 2024.

This data is not publicly available. It is derived from CRH's proprietary systems and reflects the purchasing behavior and preferences of CRH's actual customers. A competitor in possession of this data could use it to target CRH's most valuable customer segments with competing offers, to design merchandising and promotional strategies calibrated to the preferences that CRH has identified, and to develop customer acquisition strategies that exploit CRH's proprietary insights. The economic value of such intelligence to a direct competitor is self-evident and substantial.

Moreover, the analytical models themselves — the lifetime value calculations, propensity-to-purchase scores, and churn prediction models — represent significant intellectual capital that CRH has developed over years of investment in data science and analytics capabilities. These models are not commodity tools; they are the product of CRH's specific investment in understanding its customers and translating that understanding into actionable merchandising strategies.

F. Compilation Theory

Even if defendants were to argue that certain individual data points contained within the Project Ridgeline materials — such as the identity of a particular vendor or the general existence of a product category — are partially known in the industry, the compilation of all five categories of Project Ridgeline materials into a coherent, integrated, and actionable strategic plan derives independent economic value from its secrecy under the well-established compilation theory recognized by Delaware courts.

The Project Ridgeline materials are not simply a collection of disparate data points. They represent the integrated output of years of strategic analysis by a team of eight senior merchandising professionals, synthesizing vendor negotiation intelligence, proprietary demand forecasting algorithms, private-label sourcing strategies, customer segmentation analytics, and competitive analysis into a unified five-year roadmap. The value of this compilation lies precisely in its integration — the way in which each component informs and enhances the others, and the way in which the whole plan, taken together, provides a comprehensive competitive blueprint.

As the Court of Chancery has recognized, the "mosaic" created by the combination of individually less sensitive pieces of information can itself constitute a trade secret. See Ashbury Enterprises v. SmithKline Beecham Pharm. Co., C.A. No. 15443-NC, 1999 WL 669354 (Del. Ch. Aug. 5, 1999). The effort, expense, and analytical sophistication required to assemble the Project Ridgeline compilation — an eighteen-month effort by eight senior professionals drawing on CRH's proprietary data and systems — reinforces the economic value of the compilation. A competitor that obtained the compiled plan would gain insights that could not be obtained by aggregating publicly available information, no matter how diligently collected.

The compilation theory is particularly powerful here because it addresses a potential defense argument head-on. Defendants may attempt to deconstruct the Project Ridgeline materials into individual components and argue that each component, standing alone, does not qualify as a trade secret. But that argument misses the point. Trade secret protection attaches to the compilation — the integrated strategic plan — and the whole is demonstrably greater than the sum of its parts.

G. Conclusion on Prong 1

For the reasons set forth above, we conclude that the Project Ridgeline materials — both individually and as a compilation — satisfy the independent-economic-value element of the DUTSA trade secret definition. The materials derive substantial actual and potential economic value from their secrecy, and disclosure to a direct competitor like Verdana would enable that competitor to exploit CRH's proprietary strategic intelligence to CRH's severe competitive detriment.

V. Analysis: Prong 2 — Reasonable Efforts to Maintain Secrecy

A. Contractual Protections

1. Employment Agreements with Restrictive Covenants

All eight departing employees signed employment agreements governed by Delaware law containing robust confidentiality obligations. These agreements establish a contractual framework that demonstrates CRH's commitment to protecting the secrecy of its proprietary information, including the Project Ridgeline materials.

Priya Rathore. Rathore's Amended and Restated Employment Agreement, dated March 15, 2021 (the "Rathore A&R Agreement"), includes a comprehensive definition of "Confidential Information" that expressly encompasses strategic plans, vendor terms, sourcing strategies, pricing data, customer data, and proprietary algorithms. Section 7(a) of the Rathore A&R Agreement imposes a perpetual confidentiality obligation prohibiting Rathore from disclosing, using, or otherwise exploiting CRH's Confidential Information at any time during or after her employment, except as required in the performance of her duties for CRH. Section 7(b) contains a non-competition restriction prohibiting Rathore from engaging in competitive activity for a period of eighteen (18) months following termination of employment. Section 7(c) contains a non-solicitation restriction prohibiting Rathore from soliciting CRH employees for twenty-four (24) months and CRH vendors for twenty-four (24) months following termination.

The Rathore A&R Agreement was supported by additional consideration: upon execution of the agreement in connection with her promotion to SVP, Merchandising in March 2021, Rathore received a $150,000 promotion bonus and a restricted stock unit ("RSU") grant valued at $725,000, subject to a four-year vesting schedule commencing March 15, 2021. This additional consideration reinforces the enforceability of the restrictive covenants under Delaware law.

Other Members of the Rathore Group. The remaining seven members of the Rathore Group — Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson — each signed employment agreements containing substantively similar confidentiality provisions, including perpetual confidentiality obligations covering the same categories of Confidential Information defined in the Rathore A&R Agreement. The non-compete periods for these individuals range from twelve (12) to eighteen (18) months, and the non-solicitation periods range from eighteen (18) to twenty-four (24) months for both employees and vendors, depending on the individual's seniority level at the time of execution. A detailed summary of each employee's restrictive covenant provisions is set forth in the separate Memorandum re: Summary of Restrictive Covenant Provisions, dated February 22, 2025, and is cross-referenced at Attachment 2 to this memorandum.

The existence of these contractual protections is a significant factor in the reasonable-efforts analysis. Delaware courts have repeatedly recognized that the imposition of contractual confidentiality obligations on employees with access to sensitive information is a hallmark of reasonable efforts to maintain secrecy. See, e.g., Beard Research, Inc. v. Kates, 8 A.3d 573, 600 (Del. Ch. 2010) (considering the existence of confidentiality agreements as part of the reasonable-efforts analysis). The fact that CRH imposed such obligations on every member of the Rathore Group — the individuals with the most comprehensive access to the Project Ridgeline materials — weighs strongly in CRH's favor.

2. Vendor and Third-Party NDAs

CRH's efforts to protect the secrecy of its proprietary information extend beyond its employees to its external business relationships. CRH maintains non-disclosure agreements ("NDAs") with its top vendors covering pricing terms, negotiation strategies, and sourcing data. These vendor NDAs impose mutual obligations of confidentiality that protect CRH's negotiation intelligence from disclosure by the vendors themselves. The vendor NDAs are reviewed and updated on a regular cycle as part of CRH's vendor management process.

In addition, CRH's internal policy requires the execution of NDAs before any Project Ridgeline materials — or any other information classified as "Confidential – Strategic" — may be shared with any external party, including consultants, advisors, and potential business partners. This policy was in effect throughout the period during which Project Ridgeline was developed and disseminated internally.

B. Technical and Physical Security Measures

1. Access Controls

CRH implemented role-based access controls on the digital repositories where Project Ridgeline documents were stored. Specifically, the Project Ridgeline materials were maintained on CRH's Aldermere Systems environment (within a dedicated site collection titled "MerchStrat-Ridgeline") and within designated folders in CRH's Pinnacle Health IT environment. Access to the MerchStrat-Ridgeline site collection was restricted through Active Directory group-based permissions to authorized merchandising division personnel — specifically, the members of the Rathore Group and a small number of senior executives with a demonstrated business need for access. Access logs confirm that the permissions group included no more than fifteen individuals at any given time.

CRH's IT systems require multi-factor authentication ("MFA") for all user logins, both on-premises and remote. Remote access to CRH's systems requires connection through a virtual private network ("VPN"), adding an additional layer of security for users accessing the systems from outside CRH's physical offices. These technical access controls ensure that only authenticated and authorized users could access the digital repositories where the Project Ridgeline materials were stored.

2. Document Classification

CRH maintains a formal information classification system as part of its Information Security Policy. Under this system, all corporate information is classified into one of four tiers: (i) Public, (ii) Internal Use Only, (iii) Confidential, and (iv) Confidential – Strategic. The Project Ridgeline materials were classified under the highest non-public tier — "Confidential – Strategic" — reflecting their exceptional sensitivity and competitive significance. An excerpt from CRH's Information Security Policy describing the classification tiers is attached hereto as Attachment 1.

In accordance with the "Confidential – Strategic" classification, all Project Ridgeline documents bore "CONFIDENTIAL" watermarks and proprietary legends stating: "This document contains confidential and proprietary information of Cascade Retail Holdings Inc. Unauthorized disclosure, copying, or distribution is strictly prohibited." These markings served both a practical and a legal purpose: they alerted anyone viewing the documents to their confidential status and reinforced CRH's position that it treated these materials as proprietary trade secrets.

3. Device Controls

CRH issued corporate laptops and mobile devices to each member of the Rathore Group, subject to CRH's corporate device management policies. These devices were equipped with endpoint security software, including data loss prevention ("DLP") tools designed to monitor and, in certain cases, restrict the transfer of sensitive data to unauthorized destinations, including personal email accounts, personal cloud storage services, and removable media.

We note, however — and address in greater detail in Section V.E below — that the Pinnacle Forensics preliminary analysis indicates that certain DLP controls were not configured to block uploads to personal cloud storage accounts (specifically, personal Hollowell Health IT, Larkspur Technologies, and Meridian Systems accounts). This gap in the DLP configuration permitted the Rathore Group to upload 14,327 files to personal cloud storage without triggering an automated block. While the DLP system did generate log entries for these uploads (which were instrumental in Pinnacle's forensic reconstruction of the exfiltration activity), the failure to block the uploads in real time represents a gap in CRH's technical security posture that defendants may seek to exploit. We address this issue and our recommended response in Section V.E.

4. Physical Security

CRH's physical security measures at its Seattle headquarters and other relevant offices include badge-controlled building access, security cameras in common areas, and visitor sign-in procedures. Within the headquarters facility, the merchandising division's strategic planning workspace — where Project Ridgeline work sessions were conducted and where physical copies of certain Ridgeline materials were maintained — required separate badge authorization beyond the general building access badge. Access to this workspace was limited to merchandising division personnel with appropriate authorization. Physical copies of Project Ridgeline materials were stored in locked cabinets within this secured workspace.

C. Internal Policies and Employee Training

1. Information Security Policy

CRH maintains a comprehensive written Information Security Policy (the "ISP") that governs the handling, storage, and protection of all corporate information. The ISP defines confidential information categories (including the four-tier classification system described above), sets forth employee responsibilities for protecting proprietary data, and explicitly prohibits the unauthorized removal, copying, downloading, or transmission of confidential information. The ISP provides that violations of the policy may result in disciplinary action up to and including termination of employment, as well as civil and criminal liability.

All CRH employees are required to acknowledge the ISP annually through a digital acknowledgment process administered by CRH's Human Resources and Information Security departments. Records maintained by CRH's Human Resources department confirm that each member of the Rathore Group signed the ISP acknowledgment within the twelve-month period preceding their resignations.

2. Onboarding and Ongoing Training

CRH's onboarding program for new employees includes a mandatory training module on confidentiality obligations and information security. This module covers the ISP, the employee's obligations under the confidentiality provisions of his or her employment agreement, examples of prohibited conduct (including unauthorized downloading, copying, and sharing of confidential information), and the consequences of violations.

In addition to onboarding training, CRH conducts annual refresher training on trade secret protection and data handling for all employees at the manager level and above. This annual training is administered through CRH's learning management system and includes updated content reflecting emerging cybersecurity threats and data security best practices. Completion of the annual training is tracked in CRH's Human Resources records. Records confirm that all eight members of the Rathore Group completed the most recent annual refresher training in the third quarter of 2024 — less than six months before their resignations.

3. Exit Procedures

CRH's standard exit process for departing employees includes the following requirements:

(a) Return of all company property and devices, including laptops, mobile phones, access badges, and any physical documents or media containing company information;

(b) Certification by the departing employee of the deletion of all company data from personal devices, personal email accounts, and personal cloud storage accounts;

(c) A reminder of the departing employee's continuing confidentiality obligations under his or her employment agreement and the ISP; and

(d) Deactivation of the departing employee's access to all CRH information systems, including Aldermere Systems, Pinnacle Health IT, email, and VPN access.

In the present case, the Rathore Group's execution of this exit process was significantly compromised by the manner in which the group resigned. The eight employees submitted simultaneous resignation letters on a Friday afternoon at 4:47 PM PST, effective immediately, without advance notice. This coordinated and immediate departure prevented CRH from conducting orderly exit interviews, securing the return of all company property in a supervised manner, or verifying compliance with the data deletion certification requirement.

Notwithstanding these challenges, CRH acted promptly upon learning of the departures on Monday, February 10, 2025. CRH's IT department immediately deactivated all system access for the departing employees and initiated preliminary audits of their account activity. CRH's in-house legal team confirmed the existence and terms of the employees' restrictive covenants by February 12, 2025. And CRH promptly engaged outside counsel (Calderwood & Harkness LLP, engaged February 18, 2025), forensic consultants (Pinnacle Forensics LLC, engaged February 20, 2025), and private investigators (Aurelian Investigations Group Inc., engaged February 21, 2025) to investigate the circumstances of the departures and the suspected data exfiltration.

D. Response to Suspected Misappropriation

CRH's swift and comprehensive response to the suspected misappropriation further demonstrates the reasonableness of its efforts to maintain the secrecy of the Project Ridgeline materials. The response timeline is as follows:

The speed and decisiveness of CRH's response — from initial discovery to engagement of specialized forensic and investigative resources to the planned filing of litigation — demonstrates that CRH treats the protection of its trade secrets as a matter of the highest priority. This response is itself a relevant factor in the reasonable-efforts analysis, as Delaware courts have recognized that a trade secret claimant's prompt response to suspected misappropriation reinforces its commitment to protecting its proprietary information.

E. Assessment of Potential Weaknesses

We anticipate that defendants will raise two principal arguments in an effort to challenge the reasonableness of CRH's secrecy-protection efforts. We address each below, together with our recommended counter-arguments.

DLP Configuration Gap. Defendants may argue that CRH's failure to configure its DLP tools to block uploads to personal cloud storage accounts demonstrates that CRH failed to take "reasonable" steps to protect its trade secrets. This argument has surface appeal, as the DLP gap was, in hindsight, the precise technical vulnerability that the Rathore Group exploited to exfiltrate the 14,327 files.

However, we believe this argument fails under the applicable legal standard. Delaware courts apply a reasonableness standard, not a perfection standard. The question is not whether CRH's security measures were impervious to all possible forms of data theft, but whether CRH's efforts, viewed in their totality, were reasonable under the circumstances. CRH implemented a comprehensive, multi-layered security framework that included contractual protections, role-based access controls, multi-factor authentication, VPN requirements, document classification and watermarking, endpoint security software, physical security, written policies, and employee training. The fact that a determined insider — an individual with authorized access to the relevant systems — was able to circumvent one technical control within this multi-layered framework does not negate the overall reasonableness of CRH's efforts.

Moreover, it would be unreasonable to impose a standard that requires a company to anticipate and prevent every possible mode of data exfiltration by a trusted insider with legitimate access. Trade secret law recognizes that perfect security is neither achievable nor required. The relevant inquiry is whether the claimant's overall security posture reflects a genuine and reasonable commitment to secrecy — and CRH's posture clearly does.

We recommend that, in the declarations and briefing supporting the TRO/PI motion, CRH affirmatively address the DLP gap by framing it in the context of CRH's comprehensive overall security posture and by emphasizing that the DLP logs — which recorded the uploads even though they did not block them — were instrumental in enabling CRH to detect and investigate the exfiltration.

Breadth of Internal Access. Defendants may also argue that the Project Ridgeline materials were shared with a sufficiently broad internal audience to undermine their secrecy. This argument would likely point to the fact that at least fifteen individuals — the eight members of the Rathore Group plus a small number of senior executives — had access to the materials.

This argument should be readily rebutted. Access to the Project Ridgeline materials was limited to the eight members of the merchandising leadership team who developed the plan and a small number of senior executives (including the CEO, General Counsel, and Chief People Officer) who reviewed and approved it. A total of approximately fifteen individuals represents a narrow group relative to CRH's total employee base, which exceeds 12,000 full-time employees. CRH's restriction of access to this small group of individuals with a demonstrated business need for the information is itself a reasonable secrecy measure. Broad internal sharing might undermine secrecy where a company distributes sensitive information to thousands of employees without restriction, but limiting access to a carefully defined group of fewer than twenty individuals — all of whom were subject to contractual confidentiality obligations — is well within the bounds of reasonable secrecy protection.

Delaware courts have recognized that perfect limitation of access is not required; what matters is whether the claimant took reasonable steps to restrict access to those with a need to know. CRH's access controls and confidentiality obligations satisfy that standard.

F. Conclusion on Prong 2

CRH's combination of contractual protections (perpetual confidentiality obligations, non-competition and non-solicitation covenants, and vendor NDAs), technical and physical security measures (role-based access controls, MFA, VPN, document classification and watermarking, endpoint security, badge-controlled physical access), internal policies and employee training (Information Security Policy, onboarding training, annual refresher training, and exit procedures), and prompt remedial response to the suspected misappropriation (engagement of outside counsel, forensic consultants, and investigators within days of discovering the exfiltration, followed by cease-and-desist letters and imminent litigation) — taken together — satisfies the "reasonable efforts" element under DUTSA. While no security system is perfect, CRH's multi-layered approach demonstrates a genuine, sustained, and objectively reasonable commitment to maintaining the secrecy of the Project Ridgeline materials.

VI. Additional Considerations

A. Categories of Information Beyond Project Ridgeline

While this memorandum focuses primarily on the Project Ridgeline materials as an integrated body of trade secrets, it is important to note that the 14,327 exfiltrated files identified by Pinnacle Forensics include additional categories of proprietary information that exist independently of the Ridgeline plan. These include, among other things, vendor negotiation term sheets reflecting specific pricing terms and rebate structures for individual vendor relationships; private-label cost models for product lines that may not be addressed in the Ridgeline roadmap; and customer segmentation data and analytical models that predate or extend beyond the scope of Project Ridgeline.

These materials independently qualify as trade secrets under the same two-prong DUTSA analysis set forth above. They derive independent economic value from their secrecy (they reflect proprietary, competitively sensitive information that is not publicly available) and they were the subject of reasonable efforts to maintain their secrecy (they were stored on the same secured systems, subject to the same access controls and classification policies, and covered by the same contractual confidentiality obligations as the Project Ridgeline materials). In addition, these materials independently constitute "Confidential Information" as defined in each departing employee's employment agreement, providing an alternative basis for relief under the breach of confidentiality claims (Count 2 of the anticipated Verified Complaint).

We recommend that the Verified Complaint identify these additional categories of exfiltrated information as separate trade secrets, in addition to the Project Ridgeline compilation, to ensure that CRH's claims are comprehensive and that the requested injunctive relief covers the full scope of the misappropriated materials.

B. Federal Defend Trade Secrets Act (DTSA)

CRH may also have viable claims under the federal Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836 et seq., which was enacted in 2016 and provides a federal cause of action for trade secret misappropriation. The DTSA applies a definition of "trade secret" that is substantially similar to DUTSA's two-prong test and additionally requires that the trade secret be "related to a product or service used in, or intended for use in, interstate or foreign commerce." 18 U.S.C. § 1839(3).

Given the nature of CRH's business — an omnichannel retail company operating 387 stores across 34 states and a direct-to-consumer ecommerce platform serving customers nationwide — the interstate commerce nexus is easily satisfied. The Project Ridgeline materials relate directly to CRH's retail merchandising operations, which inherently involve the purchase, transportation, and sale of goods in interstate commerce.

We recommend evaluating whether to include a DTSA count in the Verified Complaint. A DTSA claim would provide C

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the named recipient(s) and should not be disclosed, copied, or distributed without the express written authorization of Calderwood & Harkness LLP.
MEMORANDUM
TO: Bernard Crawford, Responsible Partner
FROM: James Underwood, Lead Associate
DATE: March 2, 2025
RE: Trade Secret Classification Analysis — Project Ridgeline Materials; Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)
MATTER NO.: 1038-00006
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I. Executive Summary
The purpose of this memorandum is to analyze whether Cascade Retail Holdings Inc.'s ("CRH" or the "Company") Project Ridgeline materials qualify as "trade secrets" under the Delaware Uniform Trade Secrets Act, 6 Del. C. § 2001 et seq. ("DUTSA"), in connection with CRH's claims against the eight departing merchandising employees — Priya Rathore, Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, and Kira Johansson (collectively, the "Rathore Group") — and their new employer, Verdana Commerce Group, Inc. ("Verdana").
Based on our analysis of the relevant statutory provisions, applicable Delaware case law, the factual record developed to date, and the preliminary findings of our forensic and investigative consultants, we conclude that the Project Ridgeline materials — taken individually and, more powerfully, as a compilation — satisfy each element of the DUTSA trade secret definition. Specifically:
• The Project Ridgeline materials derive substantial independent economic value, both actual and potential, from their secrecy. Disclosure of these materials to a direct competitor like Verdana would enable that competitor to replicate CRH's five-year strategic roadmap, undercut its vendor relationships, and erode the competitive advantages CRH has built over years of investment in proprietary data analytics, vendor negotiation strategies, and private-label sourcing infrastructure.
• CRH undertook reasonable efforts to maintain the secrecy of the Project Ridgeline materials through a multi-layered system of contractual protections (including perpetual confidentiality obligations, non-competition covenants, and non-solicitation restrictions), technical and physical security measures (including role-based access controls, multi-factor authentication, document classification and watermarking, and endpoint security with data loss prevention tools), internal information security policies and employee training, and prompt remedial action upon discovery of the suspected misappropriation.
Accordingly, the Project Ridgeline materials should be classified as protectable trade secrets for purposes of the Verified Complaint and motion for a temporary restraining order and preliminary injunction ("TRO/PI motion") to be filed in the Delaware Court of Chancery.
This memorandum supplements the restrictive covenant summary memorandum dated February 22, 2025, and incorporates preliminary findings from two engagement teams: Pinnacle Forensics LLC's forensic analysis of data exfiltration activity (engagement date: February 20, 2025; engagement lead: Dr. Rajiv Anand) and Aurelian Investigations Group Inc.'s investigation into the timeline and circumstances of Verdana's recruitment of the Rathore Group (engagement date: February 21, 2025). References to factual findings from those engagements should be understood as preliminary and subject to revision as those investigations progress.
II. Background and Factual Context
A. Project Ridgeline Overview
Project Ridgeline is a confidential five-year strategic category expansion plan developed by CRH's merchandising division and completed in final form in October 2024. The project represents a comprehensive and integrated strategic blueprint designed to guide CRH's merchandising strategy, capital allocation, vendor relationships, private-label development, and customer segmentation approach through fiscal year 2029.
Project Ridgeline was developed under the direct supervision of Priya Rathore, who at the time held the title of Senior Vice President, Merchandising. Rathore led the effort with contributions from the entirety of her leadership team — the seven other members of what we refer to as the Rathore Group:
• Derek Linden, Vice President, Hardlines Merchandising
• Sonia Kaczmarek, Vice President, Softlines Merchandising
• Amara Osei, Director, Private Label Strategy
• Brent Halvorsen, Director, Seasonal Planning & Analytics
• Lucia Fernandez-Gill, Director, Vendor Relations, Domestic
• Nathan Tsao, Senior Manager, eCommerce Merchandising
• Kira Johansson, Senior Manager, Category Analytics
The development of Project Ridgeline spanned approximately eighteen months, beginning in the spring of 2023, with the final deliverable presented to CRH's executive leadership team (including the Chief Executive Officer, Chief Financial Officer, General Counsel, and Chief People Officer) in October 2024. The project drew upon CRH's proprietary historical sales data, vendor relationship intelligence, customer analytics, and the collective strategic expertise of the merchandising leadership team.
To appreciate the significance of Project Ridgeline, it is necessary to understand the scale of CRH's merchandising operations. CRH is a publicly traded omnichannel retail company, listed on the Nasdaq Stock Market under the ticker symbol "CRHL." The Company is incorporated in the State of Delaware and maintains its corporate headquarters at 2200 Elliott Avenue West, Suite 3400, Seattle, Washington 98119. CRH operates 387 brick-and-mortar retail locations across 34 states, as well as a direct-to-consumer ecommerce platform. In fiscal year 2024, CRH generated total revenue of approximately $6.82 billion. Of that total, the merchandising division — the division at the center of this dispute — accounted for approximately $2.3 billion in gross merchandise value ("GMV"), representing a significant and strategically critical portion of the Company's overall business.
Project Ridgeline was not merely an academic exercise or a preliminary brainstorming document. It was the definitive strategic plan upon which CRH intended to base billions of dollars of merchandising decisions over the next five years, including decisions about which product categories to enter or expand, how much capital to invest, which vendors to cultivate or develop, how to optimize its private-label programs, and how to allocate inventory across its 387 physical locations and its ecommerce channel.
B. Components of Project Ridgeline
The Project Ridgeline materials encompass the following five principal categories of proprietary information, each of which is described in greater detail below:
1. Proprietary Vendor Negotiation Playbooks. These materials consist of detailed scripts, strategies, and historical negotiation data used by CRH's merchandising team in its vendor procurement processes. The playbooks cover pricing terms, volume commitments, rebate structures (including tiered rebate schedules tied to volume thresholds), payment schedules, markdown allowances, cooperative advertising contributions, and return-to-vendor terms across CRH's top 50 vendors by spend. These top 50 vendors collectively account for approximately 68% of CRH's total cost of goods sold within the merchandising division. The playbooks reflect years of negotiation history and embody the accumulated knowledge of CRH's vendor relations team regarding each vendor's pricing flexibility, negotiation tendencies, competitive vulnerabilities, and strategic priorities. They are, in effect, a competitive weapon that enables CRH's buyers to negotiate from a position of informational advantage.
2. Seasonal Buying Algorithms. These are proprietary quantitative models used to forecast seasonal demand, optimize inventory allocation across CRH's 387 store locations and its ecommerce channel, and time purchasing decisions to maximize margin and minimize markdowns. The algorithms were developed over multiple years using CRH's proprietary historical sales data — encompassing point-of-sale transaction data, ecommerce browsing and purchasing data, weather correlation models, regional demographic overlays, and promotional response curves. These are not off-the-shelf industry tools or standard forecasting methodologies available from third-party software vendors. They are CRH-specific intellectual property, refined iteratively through application to CRH's unique store footprint, product mix, and customer base. The seasonal buying algorithms were principally developed and maintained by Brent Halvorsen (Director, Seasonal Planning & Analytics) and Kira Johansson (Senior Manager, Category Analytics), with input from Nathan Tsao (Senior Manager, eCommerce Merchandising) on the digital channel components.
3. Private-Label Sourcing Strategies. These materials comprise detailed sourcing plans for CRH's private-label product lines, which represent a rapidly growing and high-margin segment of CRH's merchandising business. The private-label sourcing strategies include factory-level cost models identifying specific manufacturing partners (both domestic and international), per-unit production costs, quality benchmarks and inspection protocols, target gross margins by product category and SKU tier, and details regarding exclusive supplier relationships that CRH has cultivated over a period of years. These exclusive relationships, in particular, represent significant competitive advantages that would be difficult and time-consuming for a competitor to replicate. The private-label sourcing strategies were principally developed and maintained by Amara Osei (Director, Private Label Strategy) and Lucia Fernandez-Gill (Director, Vendor Relations, Domestic).
4. Five-Year Category Expansion Roadmap. This is the central strategic document within the Project Ridgeline suite. It is a comprehensive plan identifying specific product categories that CRH intends to enter or expand over the five-year period from 2025 through 2029, including home goods, seasonal décor, and private-label apparel. The roadmap includes projected revenue targets for each category, required investment budgets (encompassing capital expenditure, inventory investment, and marketing spend), store rollout timetables specifying which of CRH's 387 locations will carry each new category and on what timeline, ecommerce assortment strategies, competitive positioning analyses, and identified risks and contingencies. The roadmap represents the distillation of the other four categories of Project Ridgeline materials into a single, actionable strategic plan. It is, in essence, CRH's competitive playbook for the next five years.
5. Customer Segmentation Data. These materials consist of proprietary analytics on CRH's customer base, including detailed purchase behavior models, customer lifetime value ("CLV") calculations, propensity-to-purchase scores by product category, customer churn prediction models, and targeted merchandising recommendations derived from CRH's ecommerce platform and its loyalty program (branded as "CRH Rewards," with approximately 14.2 million enrolled members as of December 2024). The customer segmentation data enables CRH to tailor its merchandising strategy — including assortment, pricing, and promotional decisions — to the specific behaviors and preferences of its most valuable customer segments. These analytics were principally developed and maintained by Kira Johansson (Senior Manager, Category Analytics) and Nathan Tsao (Senior Manager, eCommerce Merchandising).
C. Competitive Significance
The competitive significance of the Project Ridgeline materials is underscored by the identity and strategic posture of the entity that recruited the Rathore Group: Verdana Commerce Group, Inc.
Verdana is a Delaware corporation headquartered at 400 Christiana Gateway, Suite 700, Wilmington, Delaware 19801. It is a direct competitor of CRH in the omnichannel retail space, with estimated fiscal year 2024 revenue of approximately $1.9 billion. Verdana directly competes with CRH in 28 overlapping product categories, spanning hardlines, softlines, home goods, and seasonal merchandise. The two companies compete for many of the same customers, vendors, and retail real estate opportunities.
Several facts highlight the strategic context in which the Rathore Group's departure and recruitment occurred:
First, in January 2025 — approximately one month before the Rathore Group resigned — Verdana publicly announced what it described as a "transformational growth initiative" targeting $4 billion in revenue by 2028. In its public statements accompanying that announcement, Verdana specifically cited expansion into private-label home goods and seasonal décor as pillars of its growth strategy. These are the very product categories at the heart of Project Ridgeline's five-year category expansion roadmap. The temporal proximity and substantive overlap between Verdana's announced strategy and the content of Project Ridgeline are striking and, in our view, unlikely to be coincidental given the subsequent recruitment of the entire team that developed Ridgeline.
Second, Verdana is backed by significant private equity capital. Greystone Capital Partners, LP, a private equity firm headquartered at 680 Park Avenue, 22nd Floor, New York, New York 10065, acquired a majority stake in Verdana through Greystone Capital Fund VII, LP in the third quarter of 2023 at an enterprise value of $2.4 billion. Fund VII has $8.5 billion in committed capital, providing Verdana with substantial financial resources to execute an aggressive growth strategy — including the acquisition of strategic talent from competitors.
Third, the economic terms on which the Rathore Group was recruited underscore the value Verdana placed on the knowledge and strategic insights these employees carried. The Rathore Group received aggregate sign-on bonuses of $6,200,000 from Verdana. Rathore herself received a sign-on bonus of $1,500,000. These figures are extraordinary for merchandising executives and suggest that Verdana was willing to pay a significant premium to acquire not just talent but the specific institutional knowledge and strategic intelligence that the Rathore Group developed at CRH — including, we submit, the Project Ridgeline materials.
D. Data Exfiltration
The preliminary forensic analysis conducted by Pinnacle Forensics LLC under the direction of Dr. Rajiv Anand has revealed substantial evidence of data exfiltration by members of the Rathore Group in the weeks preceding their simultaneous resignations.
According to Pinnacle's preliminary findings, a total of 14,327 files comprising approximately 2.8 gigabytes of data were downloaded from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts (including personal Hollowell Health IT, Larkspur Technologies, and Meridian Systems accounts) between January 10 and February 4, 2025. The downloads were conducted by multiple members of the Rathore Group using their CRH-issued credentials. The pattern of downloads was concentrated in the final weeks of January and the first few days of February 2025, with a notable spike in activity on January 28 and January 29, 2025.
The exfiltrated files include, but are not limited to:
• Project Ridgeline presentations (Northgate Services Inc. and PDF formats), including the final October 2024 executive presentation and supporting appendices;
• Vendor negotiation term sheets for CRH's top 50 vendors;
• Private-label cost models and factory-level sourcing specifications;
• Customer segmentation data exports and CLV analysis workbooks;
• Seasonal buying algorithm documentation and model parameters; and
• Internal communications (email and Northgate Data Systems messages) regarding Project Ridgeline strategy, implementation timelines, and competitive analysis.
The Rathore Group submitted simultaneous resignation letters on February 7, 2025, at 4:47 PM Pacific Standard Time, effective immediately. The timing — late on a Friday afternoon — appears calculated to minimize CRH's ability to conduct orderly exit interviews, secure return of company property, and investigate potential data exfiltration before the departing employees began their new positions at Verdana. CRH became aware of the full scope of the resignations on Monday, February 10, 2025, when its Chief People Officer reviewed the resignation letters submitted over the weekend.
On February 14, 2025, Verdana publicly announced the hiring of the Rathore Group in a press release titled "Verdana Commerce Welcomes Industry-Leading Merchandising Team to Accelerate Growth." The press release described the Rathore Group as "a world-class merchandising leadership team that will spearhead Verdana's ambitious growth plans across key strategic categories."
The timeline of events — from the commencement of data exfiltration on January 10, 2025, through the coordinated Friday-afternoon resignations on February 7, 2025, to Verdana's public announcement on February 14, 2025 — strongly suggests a coordinated plan by the Rathore Group and Verdana to extract CRH's most sensitive strategic materials and transplant CRH's merchandising leadership team, wholesale, to a direct competitor.
III. Legal Framework — DUTSA Trade Secret Definition
A. Statutory Text
The applicable statutory provision is 6 Del. C. § 2001(4), which defines a "trade secret" as follows:
"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique or process, that:
(i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
6 Del. C. § 2001(4). This definition tracks the language of the Uniform Trade Secrets Act as adopted by the majority of states and provides a broad and flexible framework for identifying protectable trade secret information.
B. Two-Prong Analysis Required
As the statutory text makes clear, a two-prong analysis is required to determine whether particular information qualifies as a trade secret under DUTSA:
Prong 1: Independent Economic Value from Secrecy. The information must derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. This prong focuses on whether the information provides a competitive advantage by virtue of its secrecy — that is, whether a competitor would gain economic value from having access to the information, and whether the information is not otherwise publicly available or readily ascertainable through legitimate means.
Prong 2: Reasonable Efforts to Maintain Secrecy. The information must be the subject of efforts that are reasonable under the circumstances to maintain its secrecy. This prong requires the trade secret claimant to demonstrate that it took affirmative steps to protect the confidentiality of the information. The standard is one of reasonableness — not perfection. The question is whether the claimant's efforts, viewed in their totality and in light of the circumstances, were reasonable to protect the information from disclosure.
Importantly, DUTSA broadly defines the categories of qualifying information. The statute expressly identifies "compilations" as a type of protectable information. This is significant because compilations of otherwise non-secret information can qualify as trade secrets if the compilation itself — that is, the selection, arrangement, and integration of the component information into a coherent whole — derives independent economic value from its secrecy. See 6 Del. C. § 2001(4) (including "compilation" within the definition). This compilation theory is directly relevant to the Project Ridgeline materials, which integrate multiple categories of information into a unified strategic plan.
C. Relevant Delaware Precedent
Delaware courts, particularly the Court of Chancery, have developed a substantial body of case law applying the DUTSA trade secret definition. The following survey of relevant precedent provides the analytical framework for our analysis.
Strategic Business Plans and Expansion Roadmaps. The Court of Chancery has recognized that strategic business plans and growth roadmaps can constitute protectable trade secrets where they reflect proprietary analysis, strategic thinking, and competitive intelligence that is not publicly available. In Beard Research, Inc. v. Kates, 8 A.3d 573 (Del. Ch. 2010), aff'd sub nom. ASDI, Inc. v. Beard Research, Inc., 11 A.3d 749 (Del. 2010), the court addressed claims of trade secret misappropriation involving confidential business strategies and recognized the broad scope of DUTSA's protections. Similarly, in Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002), the Delaware Supreme Court confirmed that DUTSA is to be broadly construed and that the statute was intended to provide comprehensive protection for proprietary information that derives value from its secrecy.
Pricing and Vendor Negotiation Data. Delaware courts have consistently treated pricing information, vendor terms, and negotiation strategies as the type of information that can qualify for trade secret protection. In Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102 (3d Cir. 2010), the Third Circuit, applying the substantially similar Pennsylvania trade secrets statute (which, like DUTSA, is based on the Uniform Trade Secrets Act), upheld a preliminary injunction based in part on trade secret claims involving pricing and vendor relationship information, reasoning that such information provides a direct competitive advantage. Delaware courts have applied analogous reasoning under DUTSA.
Customer Data and Segmentation Analytics. Customer lists, purchasing data, and analytical models derived from proprietary customer information have been recognized as trade secrets under DUTSA. In Elenza, Inc. v. Alcon Labs., Inc., C.A. No. 12-992-RGA, 2014 WL 1689454 (D. Del. Apr. 28, 2014), the court recognized that proprietary data and analytical frameworks can satisfy DUTSA's requirements. The Court of Chancery has similarly observed that customer data that is not publicly available and that has been developed through significant investment can derive independent economic value from its secrecy.
Employee Departures and Competitor Recruitment Scenarios. Delaware courts have been particularly attentive to trade secret claims arising in the context of coordinated employee departures to a direct competitor. In Sterling Reach Group v. Velmoran, C.A. No. 3512-VCS, 2010 WL 610725 (Del. Ch. Feb. 18, 2010), the Court of Chancery addressed a scenario involving the departure of key employees to a competitor and recognized that the circumstances of the departure — including evidence of pre-departure data downloads and coordinated resignations — are relevant to establishing both misappropriation and the likelihood of irreparable harm for injunctive relief purposes. The factual parallels to the present case are evident.
Compilations of Information as Trade Secrets. Perhaps most directly relevant to the Project Ridgeline analysis, Delaware courts have embraced the "mosaic" or compilation theory of trade secret protection. Under this theory, even where individual data points or components of a compilation may be partially known in the industry, the compilation itself can qualify as a trade secret if the selection, arrangement, and integration of those components into a coherent whole derives independent economic value from its secrecy. In Ashbury Enterprises v. SmithKline Beecham Pharm. Co., C.A. No. 15443-NC, 1999 WL 669354 (Del. Ch. Aug. 5, 1999), the court recognized that a compilation of information can qualify as a trade secret even if some of its component parts are individually available, provided that the compilation itself is not generally known or readily ascertainable. This principle has been reaffirmed in subsequent decisions and is well established in Delaware trade secret jurisprudence.
It bears emphasis that Delaware courts consistently hold that trade secret status is determined on a case-by-case basis, considering the totality of the circumstances. There is no bright-line rule dictating that particular types of information automatically qualify or fail to qualify as trade secrets. Rather, the analysis is inherently fact-specific and contextual, requiring examination of the nature of the information, the competitive environment, and the measures taken to preserve its secrecy.
IV. Analysis: Prong 1 — Independent Economic Value from Secrecy
A. Economic Value of Project Ridgeline as a Whole
Project Ridgeline represents years of investment, analysis, and strategic development by CRH's merchandising leadership team. The CRH merchandising division generated $2.3 billion in gross merchandise value in fiscal year 2024, and the Project Ridgeline roadmap was designed to guide strategic growth and capital allocation for that division — and for CRH as a whole — through fiscal year 2029. The resources invested in developing Project Ridgeline were substantial: a team of eight senior merchandising professionals, drawing on CRH's proprietary historical data, vendor relationships, and customer analytics, worked for approximately eighteen months to produce the final plan.
The independent economic value of the Project Ridgeline materials derives directly from their secrecy. The five-year category expansion roadmap identifies CRH's planned competitive moves with granular specificity — which product categories to enter or expand, in which markets, on what timeline, with what level of investment, and using which vendors and sourcing strategies. Disclosure of this information to a competitor like Verdana would allow that competitor to take a range of harmful actions: preemptively entering the same categories ahead of CRH, undercutting CRH's pricing strategies based on knowledge of CRH's vendor terms and margin targets, targeting CRH's exclusive supplier relationships, and tailoring its own customer acquisition efforts based on CRH's proprietary customer segmentation insights. In short, disclosure of Project Ridgeline would enable a competitor to neutralize the competitive advantages that CRH has spent years developing.
The competitive threat is not hypothetical. Verdana's January 2025 announcement of a "transformational growth initiative" targeting $4 billion in revenue by 2028 — with specific emphasis on expansion into private-label home goods and seasonal décor — directly implicates the strategic categories at the heart of Project Ridgeline. The fact that Verdana announced this initiative only weeks before recruiting the entire team that developed CRH's strategy for those very categories creates a reasonable and powerful inference that Verdana seeks to exploit the Rathore Group's knowledge of Project Ridgeline to accelerate its own competitive positioning.
Moreover, the economic value at stake is immense. CRH's merchandising division accounts for approximately one-third of the Company's total revenue. The five-year roadmap is designed to drive growth in that division, with projected incremental revenue targets that we understand (based on our review of the Ridgeline materials produced to us by CRH) to be in the hundreds of millions of dollars. If a competitor could replicate or preempt even a fraction of CRH's planned category expansions, the resulting competitive harm would be severe and difficult to remediate after the fact.
B. Vendor Negotiation Playbooks
The proprietary vendor negotiation playbooks contain highly specific and competitively sensitive information: exact pricing terms, rebate structures (including tiered volume rebate schedules), volume commitments, payment schedules, markdown allowances, cooperative advertising contributions, and return-to-vendor terms for CRH's top 50 vendors by spend. These top 50 vendors collectively account for approximately 68% of the merchandising division's cost of goods sold.
The economic value of these playbooks from their secrecy is straightforward. If a competitor possessed CRH's vendor negotiation playbooks, it could exploit that knowledge in multiple ways. It could approach CRH's vendors with knowledge of CRH's exact pricing and rebate terms, using that information to negotiate more favorable terms for itself. It could identify CRH's most strategically important vendor relationships and target those relationships for disruption. It could undercut CRH in vendor negotiations by offering terms calibrated to be marginally more attractive than what the competitor knows CRH is paying. And it could identify vulnerabilities in CRH's supply chain — for example, dependencies on particular vendors or SKU categories — and exploit those vulnerabilities competitively.
These materials are not publicly available. Vendor pricing terms, rebate structures, and negotiation histories are, by their nature, confidential between the parties to those transactions. CRH's vendors would not disclose these terms to CRH's competitors, and a competitor could not obtain this information through proper means. The playbooks are specific to CRH's vendor relationships and reflect CRH's proprietary negotiation strategy and historical data. They clearly derive independent economic value from their secrecy.
C. Seasonal Buying Algorithms
The seasonal buying algorithms represent proprietary quantitative models developed using CRH's proprietary historical sales data accumulated over years of retail operations across 387 store locations and the ecommerce platform. These algorithms incorporate point-of-sale transaction data, ecommerce browsing and purchasing patterns, weather correlation models, regional demographic overlays, promotional response curves, and a range of other CRH-specific inputs. They enable CRH to forecast seasonal demand with greater precision than industry-standard methods, optimize inventory allocation across its physical and digital channels, and time purchasing decisions to maximize margin and minimize markdown exposure.
The economic value of these algorithms is directly tied to their secrecy. The algorithms are not industry-standard tools available from third-party software vendors or through publicly available academic research. They are CRH-specific intellectual property, refined iteratively through application to CRH's unique operating environment. A competitor that obtained these algorithms — or even the underlying logic, parameters, and training data — could replicate CRH's demand forecasting and inventory optimization capabilities at a fraction of the time and cost required to develop them independently. This would directly erode CRH's competitive advantage in one of the most critical operational areas for any omnichannel retailer: getting the right product to the right location at the right time.
The seasonal buying algorithms satisfy the independent-economic-value element of the DUTSA definition. They are not generally known in the industry, they are not readily ascertainable by proper means, and a competitor would derive substantial economic value from their disclosure or use.
D. Private-Label Sourcing Strategies
CRH's private-label product lines represent a strategically important and rapidly growing segment of the Company's merchandising business, characterized by higher gross margins than branded products and greater control over product quality, pricing, and differentiation. The private-label sourcing strategies contain the operational blueprint for this business: factory-level cost models identifying specific manufacturing partners, per-unit production costs at each factory, quality benchmarks and inspection protocols, target gross margins by product category and SKU tier, and details regarding exclusive supplier relationships that CRH has cultivated over a period of years.
The independent economic value of these materials from their secrecy is evident. A competitor in possession of CRH's private-label sourcing strategies could replicate CRH's private-label program at dramatically reduced development cost and time. Instead of spending years identifying reliable manufacturing partners, negotiating factory-level pricing, developing quality benchmarks, and building exclusive supplier relationships, a competitor could simply adopt CRH's existing playbook. This is precisely the kind of "free riding" that trade secret law is designed to prevent.
The exclusive supplier relationships documented in these materials are particularly valuable and particularly vulnerable to misappropriation. These relationships took years to develop and involve commitments from suppliers to provide CRH with preferential pricing, production priority, and exclusivity in certain product categories. If a competitor could identify these suppliers and approach them with knowledge of CRH's terms, it could undermine these exclusive relationships — causing harm that would be virtually impossible to remediate through after-the-fact damages.
E. Customer Segmentation Data
The customer segmentation data represents the output of CRH's proprietary analytics applied to one of the Company's most valuable assets: its customer base. The data includes detailed purchase behavior models, customer lifetime value calculations, propensity-to-purchase scores by product category, customer churn prediction models, and targeted merchandising recommendations. This data is derived from CRH's ecommerce platform and its loyalty program ("CRH Rewards"), which has approximately 14.2 million enrolled members as of December 2024.
This data is not publicly available. It is derived from CRH's proprietary systems and reflects the purchasing behavior and preferences of CRH's actual customers. A competitor in possession of this data could use it to target CRH's most valuable customer segments with competing offers, to design merchandising and promotional strategies calibrated to the preferences that CRH has identified, and to develop customer acquisition strategies that exploit CRH's proprietary insights. The economic value of such intelligence to a direct competitor is self-evident and substantial.
Moreover, the analytical models themselves — the lifetime value calculations, propensity-to-purchase scores, and churn prediction models — represent significant intellectual capital that CRH has developed over years of investment in data science and analytics capabilities. These models are not commodity tools; they are the product of CRH's specific investment in understanding its customers and translating that understanding into actionable merchandising strategies.
F. Compilation Theory
Even if defendants were to argue that certain individual data points contained within the Project Ridgeline materials — such as the identity of a particular vendor or the general existence of a product category — are partially known in the industry, the compilation of all five categories of Project Ridgeline materials into a coherent, integrated, and actionable strategic plan derives independent economic value from its secrecy under the well-established compilation theory recognized by Delaware courts.
The Project Ridgeline materials are not simply a collection of disparate data points. They represent the integrated output of years of strategic analysis by a team of eight senior merchandising professionals, synthesizing vendor negotiation intelligence, proprietary demand forecasting algorithms, private-label sourcing strategies, customer segmentation analytics, and competitive analysis into a unified five-year roadmap. The value of this compilation lies precisely in its integration — the way in which each component informs and enhances the others, and the way in which the whole plan, taken together, provides a comprehensive competitive blueprint.
As the Court of Chancery has recognized, the "mosaic" created by the combination of individually less sensitive pieces of information can itself constitute a trade secret. See Ashbury Enterprises v. SmithKline Beecham Pharm. Co., C.A. No. 15443-NC, 1999 WL 669354 (Del. Ch. Aug. 5, 1999). The effort, expense, and analytical sophistication required to assemble the Project Ridgeline compilation — an eighteen-month effort by eight senior professionals drawing on CRH's proprietary data and systems — reinforces the economic value of the compilation. A competitor that obtained the compiled plan would gain insights that could not be obtained by aggregating publicly available information, no matter how diligently collected.
The compilation theory is particularly powerful here because it addresses a potential defense argument head-on. Defendants may attempt to deconstruct the Project Ridgeline materials into individual components and argue that each component, standing alone, does not qualify as a trade secret. But that argument misses the point. Trade secret protection attaches to the compilation — the integrated strategic plan — and the whole is demonstrably greater than the sum of its parts.
G. Conclusion on Prong 1
For the reasons set forth above, we conclude that the Project Ridgeline materials — both individually and as a compilation — satisfy the independent-economic-value element of the DUTSA trade secret definition. The materials derive substantial actual and potential economic value from their secrecy, and disclosure to a direct competitor like Verdana would enable that competitor to exploit CRH's proprietary strategic intelligence to CRH's severe competitive detriment.
V. Analysis: Prong 2 — Reasonable Efforts to Maintain Secrecy
A. Contractual Protections
1. Employment Agreements with Restrictive Covenants
All eight departing employees signed employment agreements governed by Delaware law containing robust confidentiality obligations. These agreements establish a contractual framework that demonstrates CRH's commitment to protecting the secrecy of its proprietary information, including the Project Ridgeline materials.
Priya Rathore. Rathore's Amended and Restated Employment Agreement, dated March 15, 2021 (the "Rathore A&R Agreement"), includes a comprehensive definition of "Confidential Information" that expressly encompasses strategic plans, vendor terms, sourcing strategies, pricing data, customer data, and proprietary algorithms. Section 7(a) of the Rathore A&R Agreement imposes a perpetual confidentiality obligation prohibiting Rathore from disclosing, using, or otherwise exploiting CRH's Confidential Information at any time during or after her employment, except as required in the performance of her duties for CRH. Section 7(b) contains a non-competition restriction prohibiting Rathore from engaging in competitive activity for a period of eighteen (18) months following termination of employment. Section 7(c) contains a non-solicitation restriction prohibiting Rathore from soliciting CRH employees for twenty-four (24) months and CRH vendors for twenty-four (24) months following termination.
The Rathore A&R Agreement was supported by additional consideration: upon execution of the agreement in connection with her promotion to SVP, Merchandising in March 2021, Rathore received a $150,000 promotion bonus and a restricted stock unit ("RSU") grant valued at $725,000, subject to a four-year vesting schedule commencing March 15, 2021. This additional consideration reinforces the enforceability of the restrictive covenants under Delaware law.
Other Members of the Rathore Group. The remaining seven members of the Rathore Group — Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson — each signed employment agreements containing substantively similar confidentiality provisions, including perpetual confidentiality obligations covering the same categories of Confidential Information defined in the Rathore A&R Agreement. The non-compete periods for these individuals range from twelve (12) to eighteen (18) months, and the non-solicitation periods range from eighteen (18) to twenty-four (24) months for both employees and vendors, depending on the individual's seniority level at the time of execution. A detailed summary of each employee's restrictive covenant provisions is set forth in the separate Memorandum re: Summary of Restrictive Covenant Provisions, dated February 22, 2025, and is cross-referenced at Attachment 2 to this memorandum.
The existence of these contractual protections is a significant factor in the reasonable-efforts analysis. Delaware courts have repeatedly recognized that the imposition of contractual confidentiality obligations on employees with access to sensitive information is a hallmark of reasonable efforts to maintain secrecy. See, e.g., Beard Research, Inc. v. Kates, 8 A.3d 573, 600 (Del. Ch. 2010) (considering the existence of confidentiality agreements as part of the reasonable-efforts analysis). The fact that CRH imposed such obligations on every member of the Rathore Group — the individuals with the most comprehensive access to the Project Ridgeline materials — weighs strongly in CRH's favor.
2. Vendor and Third-Party NDAs
CRH's efforts to protect the secrecy of its proprietary information extend beyond its employees to its external business relationships. CRH maintains non-disclosure agreements ("NDAs") with its top vendors covering pricing terms, negotiation strategies, and sourcing data. These vendor NDAs impose mutual obligations of confidentiality that protect CRH's negotiation intelligence from disclosure by the vendors themselves. The vendor NDAs are reviewed and updated on a regular cycle as part of CRH's vendor management process.
In addition, CRH's internal policy requires the execution of NDAs before any Project Ridgeline materials — or any other information classified as "Confidential – Strategic" — may be shared with any external party, including consultants, advisors, and potential business partners. This policy was in effect throughout the period during which Project Ridgeline was developed and disseminated internally.
B. Technical and Physical Security Measures
1. Access Controls
CRH implemented role-based access controls on the digital repositories where Project Ridgeline documents were stored. Specifically, the Project Ridgeline materials were maintained on CRH's Aldermere Systems environment (within a dedicated site collection titled "MerchStrat-Ridgeline") and within designated folders in CRH's Pinnacle Health IT environment. Access to the MerchStrat-Ridgeline site collection was restricted through Active Directory group-based permissions to authorized merchandising division personnel — specifically, the members of the Rathore Group and a small number of senior executives with a demonstrated business need for access. Access logs confirm that the permissions group included no more than fifteen individuals at any given time.
CRH's IT systems require multi-factor authentication ("MFA") for all user logins, both on-premises and remote. Remote access to CRH's systems requires connection through a virtual private network ("VPN"), adding an additional layer of security for users accessing the systems from outside CRH's physical offices. These technical access controls ensure that only authenticated and authorized users could access the digital repositories where the Project Ridgeline materials were stored.
2. Document Classification
CRH maintains a formal information classification system as part of its Information Security Policy. Under this system, all corporate information is classified into one of four tiers: (i) Public, (ii) Internal Use Only, (iii) Confidential, and (iv) Confidential – Strategic. The Project Ridgeline materials were classified under the highest non-public tier — "Confidential – Strategic" — reflecting their exceptional sensitivity and competitive significance. An excerpt from CRH's Information Security Policy describing the classification tiers is attached hereto as Attachment 1.
In accordance with the "Confidential – Strategic" classification, all Project Ridgeline documents bore "CONFIDENTIAL" watermarks and proprietary legends stating: "This document contains confidential and proprietary information of Cascade Retail Holdings Inc. Unauthorized disclosure, copying, or distribution is strictly prohibited." These markings served both a practical and a legal purpose: they alerted anyone viewing the documents to their confidential status and reinforced CRH's position that it treated these materials as proprietary trade secrets.
3. Device Controls
CRH issued corporate laptops and mobile devices to each member of the Rathore Group, subject to CRH's corporate device management policies. These devices were equipped with endpoint security software, including data loss prevention ("DLP") tools designed to monitor and, in certain cases, restrict the transfer of sensitive data to unauthorized destinations, including personal email accounts, personal cloud storage services, and removable media.
We note, however — and address in greater detail in Section V.E below — that the Pinnacle Forensics preliminary analysis indicates that certain DLP controls were not configured to block uploads to personal cloud storage accounts (specifically, personal Hollowell Health IT, Larkspur Technologies, and Meridian Systems accounts). This gap in the DLP configuration permitted the Rathore Group to upload 14,327 files to personal cloud storage without triggering an automated block. While the DLP system did generate log entries for these uploads (which were instrumental in Pinnacle's forensic reconstruction of the exfiltration activity), the failure to block the uploads in real time represents a gap in CRH's technical security posture that defendants may seek to exploit. We address this issue and our recommended response in Section V.E.
4. Physical Security
CRH's physical security measures at its Seattle headquarters and other relevant offices include badge-controlled building access, security cameras in common areas, and visitor sign-in procedures. Within the headquarters facility, the merchandising division's strategic planning workspace — where Project Ridgeline work sessions were conducted and where physical copies of certain Ridgeline materials were maintained — required separate badge authorization beyond the general building access badge. Access to this workspace was limited to merchandising division personnel with appropriate authorization. Physical copies of Project Ridgeline materials were stored in locked cabinets within this secured workspace.
C. Internal Policies and Employee Training
1. Information Security Policy
CRH maintains a comprehensive written Information Security Policy (the "ISP") that governs the handling, storage, and protection of all corporate information. The ISP defines confidential information categories (including the four-tier classification system described above), sets forth employee responsibilities for protecting proprietary data, and explicitly prohibits the unauthorized removal, copying, downloading, or transmission of confidential information. The ISP provides that violations of the policy may result in disciplinary action up to and including termination of employment, as well as civil and criminal liability.
All CRH employees are required to acknowledge the ISP annually through a digital acknowledgment process administered by CRH's Human Resources and Information Security departments. Records maintained by CRH's Human Resources department confirm that each member of the Rathore Group signed the ISP acknowledgment within the twelve-month period preceding their resignations.
2. Onboarding and Ongoing Training
CRH's onboarding program for new employees includes a mandatory training module on confidentiality obligations and information security. This module covers the ISP, the employee's obligations under the confidentiality provisions of his or her employment agreement, examples of prohibited conduct (including unauthorized downloading, copying, and sharing of confidential information), and the consequences of violations.
In addition to onboarding training, CRH conducts annual refresher training on trade secret protection and data handling for all employees at the manager level and above. This annual training is administered through CRH's learning management system and includes updated content reflecting emerging cybersecurity threats and data security best practices. Completion of the annual training is tracked in CRH's Human Resources records. Records confirm that all eight members of the Rathore Group completed the most recent annual refresher training in the third quarter of 2024 — less than six months before their resignations.
3. Exit Procedures
CRH's standard exit process for departing employees includes the following requirements:
(a) Return of all company property and devices, including laptops, mobile phones, access badges, and any physical documents or media containing company information;
(b) Certification by the departing employee of the deletion of all company data from personal devices, personal email accounts, and personal cloud storage accounts;
(c) A reminder of the departing employee's continuing confidentiality obligations under his or her employment agreement and the ISP; and
(d) Deactivation of the departing employee's access to all CRH information systems, including Aldermere Systems, Pinnacle Health IT, email, and VPN access.
In the present case, the Rathore Group's execution of this exit process was significantly compromised by the manner in which the group resigned. The eight employees submitted simultaneous resignation letters on a Friday afternoon at 4:47 PM PST, effective immediately, without advance notice. This coordinated and immediate departure prevented CRH from conducting orderly exit interviews, securing the return of all company property in a supervised manner, or verifying compliance with the data deletion certification requirement.
Notwithstanding these challenges, CRH acted promptly upon learning of the departures on Monday, February 10, 2025. CRH's IT department immediately deactivated all system access for the departing employees and initiated preliminary audits of their account activity. CRH's in-house legal team confirmed the existence and terms of the employees' restrictive covenants by February 12, 2025. And CRH promptly engaged outside counsel (Calderwood & Harkness LLP, engaged February 18, 2025), forensic consultants (Pinnacle Forensics LLC, engaged February 20, 2025), and private investigators (Aurelian Investigations Group Inc., engaged February 21, 2025) to investigate the circumstances of the departures and the suspected data exfiltration.
D. Response to Suspected Misappropriation
CRH's swift and comprehensive response to the suspected misappropriation further demonstrates the reasonableness of its efforts to maintain the secrecy of the Project Ridgeline materials. The response timeline is as follows:
The speed and decisiveness of CRH's response — from initial discovery to engagement of specialized forensic and investigative resources to the planned filing of litigation — demonstrates that CRH treats the protection of its trade secrets as a matter of the highest priority. This response is itself a relevant factor in the reasonable-efforts analysis, as Delaware courts have recognized that a trade secret claimant's prompt response to suspected misappropriation reinforces its commitment to protecting its proprietary information.
E. Assessment of Potential Weaknesses
We anticipate that defendants will raise two principal arguments in an effort to challenge the reasonableness of CRH's secrecy-protection efforts. We address each below, together with our recommended counter-arguments.
DLP Configuration Gap. Defendants may argue that CRH's failure to configure its DLP tools to block uploads to personal cloud storage accounts demonstrates that CRH failed to take "reasonable" steps to protect its trade secrets. This argument has surface appeal, as the DLP gap was, in hindsight, the precise technical vulnerability that the Rathore Group exploited to exfiltrate the 14,327 files.
However, we believe this argument fails under the applicable legal standard. Delaware courts apply a reasonableness standard, not a perfection standard. The question is not whether CRH's security measures were impervious to all possible forms of data theft, but whether CRH's efforts, viewed in their totality, were reasonable under the circumstances. CRH implemented a comprehensive, multi-layered security framework that included contractual protections, role-based access controls, multi-factor authentication, VPN requirements, document classification and watermarking, endpoint security software, physical security, written policies, and employee training. The fact that a determined insider — an individual with authorized access to the relevant systems — was able to circumvent one technical control within this multi-layered framework does not negate the overall reasonableness of CRH's efforts.
Moreover, it would be unreasonable to impose a standard that requires a company to anticipate and prevent every possible mode of data exfiltration by a trusted insider with legitimate access. Trade secret law recognizes that perfect security is neither achievable nor required. The relevant inquiry is whether the claimant's overall security posture reflects a genuine and reasonable commitment to secrecy — and CRH's posture clearly does.
We recommend that, in the declarations and briefing supporting the TRO/PI motion, CRH affirmatively address the DLP gap by framing it in the context of CRH's comprehensive overall security posture and by emphasizing that the DLP logs — which recorded the uploads even though they did not block them — were instrumental in enabling CRH to detect and investigate the exfiltration.
Breadth of Internal Access. Defendants may also argue that the Project Ridgeline materials were shared with a sufficiently broad internal audience to undermine their secrecy. This argument would likely point to the fact that at least fifteen individuals — the eight members of the Rathore Group plus a small number of senior executives — had access to the materials.
This argument should be readily rebutted. Access to the Project Ridgeline materials was limited to the eight members of the merchandising leadership team who developed the plan and a small number of senior executives (including the CEO, General Counsel, and Chief People Officer) who reviewed and approved it. A total of approximately fifteen individuals represents a narrow group relative to CRH's total employee base, which exceeds 12,000 full-time employees. CRH's restriction of access to this small group of individuals with a demonstrated business need for the information is itself a reasonable secrecy measure. Broad internal sharing might undermine secrecy where a company distributes sensitive information to thousands of employees without restriction, but limiting access to a carefully defined group of fewer than twenty individuals — all of whom were subject to contractual confidentiality obligations — is well within the bounds of reasonable secrecy protection.
Delaware courts have recognized that perfect limitation of access is not required; what matters is whether the claimant took reasonable steps to restrict access to those with a need to know. CRH's access controls and confidentiality obligations satisfy that standard.
F. Conclusion on Prong 2
CRH's combination of contractual protections (perpetual confidentiality obligations, non-competition and non-solicitation covenants, and vendor NDAs), technical and physical security measures (role-based access controls, MFA, VPN, document classification and watermarking, endpoint security, badge-controlled physical access), internal policies and employee training (Information Security Policy, onboarding training, annual refresher training, and exit procedures), and prompt remedial response to the suspected misappropriation (engagement of outside counsel, forensic consultants, and investigators within days of discovering the exfiltration, followed by cease-and-desist letters and imminent litigation) — taken together — satisfies the "reasonable efforts" element under DUTSA. While no security system is perfect, CRH's multi-layered approach demonstrates a genuine, sustained, and objectively reasonable commitment to maintaining the secrecy of the Project Ridgeline materials.
VI. Additional Considerations
A. Categories of Information Beyond Project Ridgeline
While this memorandum focuses primarily on the Project Ridgeline materials as an integrated body of trade secrets, it is important to note that the 14,327 exfiltrated files identified by Pinnacle Forensics include additional categories of proprietary information that exist independently of the Ridgeline plan. These include, among other things, vendor negotiation term sheets reflecting specific pricing terms and rebate structures for individual vendor relationships; private-label cost models for product lines that may not be addressed in the Ridgeline roadmap; and customer segmentation data and analytical models that predate or extend beyond the scope of Project Ridgeline.
These materials independently qualify as trade secrets under the same two-prong DUTSA analysis set forth above. They derive independent economic value from their secrecy (they reflect proprietary, competitively sensitive information that is not publicly available) and they were the subject of reasonable efforts to maintain their secrecy (they were stored on the same secured systems, subject to the same access controls and classification policies, and covered by the same contractual confidentiality obligations as the Project Ridgeline materials). In addition, these materials independently constitute "Confidential Information" as defined in each departing employee's employment agreement, providing an alternative basis for relief under the breach of confidentiality claims (Count 2 of the anticipated Verified Complaint).
We recommend that the Verified Complaint identify these additional categories of exfiltrated information as separate trade secrets, in addition to the Project Ridgeline compilation, to ensure that CRH's claims are comprehensive and that the requested injunctive relief covers the full scope of the misappropriated materials.
B. Federal Defend Trade Secrets Act (DTSA)
CRH may also have viable claims under the federal Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836 et seq., which was enacted in 2016 and provides a federal cause of action for trade secret misappropriation. The DTSA applies a definition of "trade secret" that is substantially similar to DUTSA's two-prong test and additionally requires that the trade secret be "related to a product or service used in, or intended for use in, interstate or foreign commerce." 18 U.S.C. § 1839(3).
Given the nature of CRH's business — an omnichannel retail company operating 387 stores across 34 states and a direct-to-consumer ecommerce platform serving customers nationwide — the interstate commerce nexus is easily satisfied. The Project Ridgeline materials relate directly to CRH's retail merchandising operations, which inherently involve the purchase, transportation, and sale of goods in interstate commerce.
We recommend evaluating whether to include a DTSA count in the Verified Complaint. A DTSA claim would provide C

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MATTER NO.: 1038-00006

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