PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
PREPARED IN ANTICIPATION OF LITIGATION — DO NOT DISTRIBUTE
This document is protected from disclosure under the work product doctrine and the attorney-client privilege. Unauthorized distribution, copying, or disclosure of this document or its contents is strictly prohibited.
CALDERWOOD & HARKNESS LLP Counselors at Law 1301 K Street NW, Suite 1200 Washington, DC 20005
March 3, 2025
MEMORANDUM
TO: Theresa Yun-Park, General Counsel, Cascade Retail Holdings Inc.
FROM: Bernard Crawford, Responsible Partner, and James Underwood, Lead Associate, Calderwood & Harkness LLP
RE: Privileged Assessment of Litigation Position — Cascade Retail Holdings Inc. v. Rathore et al., Matter No. 1038-00006
PRIVILEGE NOTICE: This memorandum constitutes attorney work product prepared in anticipation of litigation and is protected from disclosure under the work product doctrine and the attorney-client privilege. It reflects the mental impressions, conclusions, opinions, and legal theories of counsel. Distribution of this memorandum is restricted to authorized client representatives of Cascade Retail Holdings Inc. who have a need to know for purposes of obtaining legal advice in connection with the above-referenced matter. No portion of this memorandum should be disclosed to any third party, including other employees of Cascade Retail Holdings Inc. not specifically authorized to receive it, without the prior written consent of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute waiver of any applicable privilege or protection.
I. Executive Summary
The purpose of this memorandum is to provide Cascade Retail Holdings Inc. ("CRH" or the "Company") and its General Counsel with a candid and comprehensive assessment of CRH's litigation strengths and vulnerabilities in connection with the anticipated filing of a Verified Complaint and a Motion for Temporary Restraining Order and Preliminary Injunction in the Delaware Court of Chancery against Priya Rathore and seven other former senior merchandising employees (collectively, the "Rathore Group"), as well as Verdana Commerce Group, Inc. ("Verdana" or "VCG"), a direct competitor of CRH in the omnichannel retail space.
The claims to be asserted in the Verified Complaint encompass the following causes of action:
1. Breach of Restrictive Covenant (against all eight individual defendants);
2. Breach of Confidentiality Obligations (against all eight individual defendants);
3. Misappropriation of Trade Secrets under the Delaware Uniform Trade Secrets Act, 6 Del. C. § 2001 et seq. ("DUTSA") (against all eight individual defendants and Verdana);
4. Tortious Interference with Contractual Relations (against Verdana); and
5. Civil Conspiracy (against all defendants and Verdana).
Based on our thorough review of the underlying employment agreements, the preliminary forensic findings of Pinnacle Forensics Group LLC ("Pinnacle Forensics"), the initial investigative report of Aurelian Investigations LLC ("Aurelian Investigations"), and all other materials made available to Calderwood & Harkness as of the date of this memorandum, it is our assessment that CRH has a strong overall litigation position, particularly with respect to the TRO and preliminary injunction proceedings. The evidence of a coordinated, pre-planned mass departure, coupled with compelling forensic evidence of large-scale data exfiltration and the strategic sensitivity of the materials taken, provides a powerful factual foundation for CRH's claims. The Company's restrictive covenant agreements are generally well-drafted and govern clearly competitive conduct by the departing employees.
However, there are identifiable weaknesses and vulnerabilities in CRH's position that defendants and their counsel will almost certainly raise. The most significant of these relate to: (i) potential overbreadth arguments under Delaware's reasonableness standard for restrictive covenants, particularly the nationwide geographic scope and the 18-month duration of certain non-competes; (ii) adequacy of consideration arguments as applied to certain mid-level employees, specifically Nathan Tsao and Kira Johansson, whose agreements may have been entered into during the course of employment without clearly documented independent consideration; and (iii) the inherent difficulty of proving actual damages with precision should the matter proceed beyond the injunctive relief stage to trial.
This assessment is based on information available to Calderwood & Harkness as of March 3, 2025, and is necessarily preliminary. The analysis incorporates: (a) Pinnacle Forensics' preliminary forensic analysis report dated February 26, 2025, prepared under the supervision of Dr. Rajiv Anand; (b) Aurelian Investigations' initial report dated February 24, 2025, prepared by lead investigator Sandra Fielding; and (c) Calderwood & Harkness's comprehensive review of all eight employment agreements, including the comparative analysis chart prepared on February 22, 2025. This assessment will be updated as additional evidence is developed.
II. Factual Background Summary (As Relevant to Assessment)
The following summary sets forth the key factual predicates relevant to this assessment. This section is intended to provide context for the strengths and weaknesses analysis that follows and is not exhaustive of all relevant facts. A more detailed factual chronology is being prepared separately for use in the Verified Complaint and supporting declarations.
A. The Departing Employees and Their Roles
Between June 2017 and May 2022, CRH employed the eight individuals comprising the Rathore Group in progressively senior roles within its Merchandising Division. Each of these individuals held a position that afforded direct access to CRH's most competitively sensitive strategic, operational, and financial information, and each was a party to an employment agreement containing restrictive covenant, confidentiality, and intellectual property assignment provisions governed by Delaware law.
The departing employees, their positions, tenure, compensation, and key covenant terms are summarized as follows:
Priya Rathore — Former Senior Vice President, Merchandising. Ms. Rathore was employed by CRH from June 3, 2019 through February 7, 2025, a period of approximately five years and eight months. She initially signed an Employment Agreement dated June 3, 2019 (the "Original Rathore Agreement") upon her hire as Vice President of Merchandising. Following her promotion to Senior Vice President, she executed an Amended and Restated Employment Agreement dated March 15, 2021 (the "A&R Rathore Agreement"), which superseded the Original Rathore Agreement in its entirety. At the time of her departure, Ms. Rathore's base salary was $485,000, with a target annual bonus of $290,000 (60% of base salary). In connection with her promotion and the execution of the A&R Rathore Agreement, Ms. Rathore received a one-time promotion bonus of $150,000 and a restricted stock unit ("RSU") grant valued at $725,000 with a four-year vesting schedule commencing March 15, 2021. The A&R Rathore Agreement contains an 18-month non-competition covenant covering the United States, a 24-month non-solicitation covenant (covering both employees and vendors of CRH), and perpetual confidentiality obligations. Ms. Rathore reported directly to CRH's Chief Operating Officer and was the most senior executive within the Merchandising Division.
The seven additional departing employees are:
Derek Linden — Former Vice President, Hardlines Merchandising. Mr. Linden served CRH for approximately seven years. His base salary at the time of departure was $340,000. His employment agreement contains an 18-month non-competition covenant and corresponding confidentiality and non-solicitation provisions.
Sonia Kaczmarek — Former Vice President, Softlines Merchandising. Ms. Kaczmarek served CRH for approximately five years. Her base salary at the time of departure was $325,000. Her employment agreement contains an 18-month non-competition covenant and corresponding confidentiality and non-solicitation provisions.
Amara Osei — Former Director, Private Label Merchandising. Ms. Osei served CRH for approximately four years. Her base salary at the time of departure was $265,000. Her employment agreement contains a 12-month non-competition covenant and corresponding confidentiality and non-solicitation provisions.
Brent Halvorsen — Former Director, Seasonal Planning. Mr. Halvorsen served CRH for approximately six years. His base salary at the time of departure was $258,000. His employment agreement contains a 12-month non-competition covenant and corresponding confidentiality and non-solicitation provisions.
Lucia Fernandez-Gill — Former Director, Vendor Relations. Ms. Fernandez-Gill served CRH for approximately five years. Her base salary at the time of departure was $248,000. Her employment agreement contains a 12-month non-competition covenant and corresponding confidentiality and non-solicitation provisions.
Nathan Tsao — Former Senior Manager, eCommerce Merchandising. Mr. Tsao served CRH for approximately three years. His base salary at the time of departure was $195,000. His employment agreement contains a 12-month non-competition covenant and corresponding confidentiality and non-solicitation provisions.
Kira Johansson — Former Senior Manager, Category Analytics. Ms. Johansson served CRH for approximately four years. Her base salary at the time of departure was $192,000. Her employment agreement contains a 12-month non-competition covenant and corresponding confidentiality and non-solicitation provisions.
All eight employment agreements are governed by Delaware law pursuant to express choice-of-law provisions. This internal consistency across the suite of agreements is a meaningful advantage, as it avoids the complications of multi-jurisdictional enforcement and allows CRH to proceed in a single forum under a unified body of law.
Critically, all eight departing employees had direct access to Project Ridgeline — CRH's five-year strategic category expansion roadmap, which was completed in October 2024 following approximately eighteen months of development. Project Ridgeline represents a comprehensive strategic blueprint for CRH's merchandising growth over the period from fiscal year 2025 through fiscal year 2029 and incorporates proprietary vendor negotiation playbooks, seasonal buying algorithms, private-label sourcing strategies, margin optimization models, and customer segmentation data. The development of Project Ridgeline involved significant investment of time and resources, and its contents are among CRH's most closely guarded trade secrets. In addition to Project Ridgeline, each departing employee had access, in varying degrees depending on their role, to CRH's broader library of confidential competitive intelligence, vendor relationship information, and merchandising operational data.
B. The Coordinated Departure
The evidence gathered to date paints a clear picture of a carefully orchestrated, pre-planned group departure engineered over a period of approximately five weeks, with the active involvement of Verdana and its private equity sponsor, Greystone Capital Partners.
January 6, 2025 — The Recruitment Dinner. Aurelian Investigations, through the work of lead investigator Sandra Fielding, has confirmed that on the evening of January 6, 2025, Ms. Rathore attended a private dinner at a restaurant in New York City with Warren Dietrich, the Chief Executive Officer of Verdana, and Elliot Westbrook, the Managing Partner of Greystone Capital Partners, which holds a majority equity stake in Verdana. The details of the conversation at this dinner are not yet known, but the meeting itself is highly probative: it establishes that Verdana's CEO and its PE sponsor's most senior partner were personally involved in recruiting CRH's most senior merchandising executive. The timing of this meeting — five weeks before the mass resignation — is consistent with the meeting serving as the catalyst for the subsequent coordinated departure.
January 10 – February 4, 2025 — Data Exfiltration. Commencing on January 10, 2025, just four days after the recruitment dinner, the Rathore Group began systematically downloading files from CRH's corporate systems. Pinnacle Forensics' preliminary analysis, conducted under the supervision of Dr. Rajiv Anand, has confirmed that a total of approximately 14,327 files comprising approximately 2.8 gigabytes of data were downloaded from CRH's Aldermere Systems environment and Pinnacle Health IT instance to personal cloud storage accounts associated with individual members of the Rathore Group during the period from January 10 through February 4, 2025. The downloaded files include, among other materials, Project Ridgeline presentations and supporting analyses, vendor negotiation term sheets and related correspondence, private-label cost models and margin analyses, seasonal buying plans and algorithms, and customer segmentation and behavioral data. The forensic evidence demonstrates that the downloads were targeted, focused on strategically significant categories, and conducted in a pattern consistent with deliberate exfiltration rather than routine work activity.
January 13 – 24, 2025 — Coordination Among the Rathore Group. Forensic analysis of CRH-issued devices recovered upon the departing employees' termination has revealed evidence of encrypted messaging exchanges among members of the Rathore Group during the period from January 13 through January 24, 2025. While the content of the encrypted messages has not yet been fully recovered, metadata analysis confirms the existence of a group communication channel and the frequency and timing of communications are consistent with the coordination of departure logistics and timing.
January 27, 2025 — Rathore Signs Verdana Offer Letter. On January 27, 2025, Ms. Rathore executed an offer letter with Verdana for the position of President, Merchandising & Strategy — a role that is not merely comparable to, but more senior than, her former position at CRH. The terms of Ms. Rathore's offer letter, which have been obtained through Aurelian Investigations, include: a base salary of $650,000 (a 34% increase over her CRH base salary); a sign-on bonus of $1,500,000; a target annual bonus of 80% of base salary ($520,000, an 80% increase over her CRH target bonus); and an equity stake representing 1.5% of VCG's fully diluted capitalization. The magnitude of this compensation package — particularly the sign-on bonus and equity stake — is notable and reflects the premium value that Verdana placed on Ms. Rathore's recruitment.
January 28 – February 4, 2025 — Remaining Seven Sign VCG Offer Letters. Over the course of the following week, between January 28 and February 4, 2025, each of the remaining seven members of the Rathore Group executed offer letters with Verdana. The aggregate sign-on bonuses paid to all eight departing employees totaled $6,200,000. The compressed timeline over which all eight offer letters were signed — within nine calendar days of one another — further evidences the coordinated nature of the departure.
February 7, 2025 — Simultaneous Mass Resignation. At 4:47 PM Pacific Standard Time on Friday, February 7, 2025, all eight members of the Rathore Group submitted their resignations from CRH simultaneously. The precision of the timing — eight separate resignation emails or communications delivered within minutes of one another, on a Friday afternoon at the close of the business week — is, in and of itself, powerful evidence of premeditation and coordination. The resignations were effective immediately.
February 14, 2025 — Verdana Press Release. On February 14, 2025, one week after the mass resignation, Verdana issued a press release titled "Verdana Commerce Welcomes Industry-Leading Merchandising Team to Accelerate Growth." The press release celebrated the arrival of the Rathore Group as a "team" and positioned the hires as a key component of Verdana's strategic growth initiative. The press release effectively constitutes an admission by Verdana that it recruited and hired a coordinated group of employees from a single competitor, rather than making independent, unrelated hiring decisions.
C. The Competitive Landscape
Cascade Retail Holdings Inc. CRH is a publicly traded (Nasdaq: CRHL) omnichannel retail company operating 387 stores across 34 states. CRH's fiscal year 2024 revenue was approximately $6.82 billion, with the Merchandising Division contributing approximately $2.3 billion in gross merchandise value ("GMV"). CRH's market capitalization as of the date of this memorandum is approximately $4.1 billion. CRH competes across a broad range of product categories including home goods, apparel, seasonal and holiday décor, hardlines, softlines, and private-label merchandise. CRH's competitive position is significantly dependent on the proprietary merchandising strategies, vendor relationships, and analytical capabilities developed by its Merchandising Division — the very division from which the Rathore Group departed.
Verdana Commerce Group, Inc. Verdana is an omnichannel retail company with operations focused on home goods, apparel, and seasonal décor. Verdana's fiscal year 2024 revenue was approximately $1.9 billion — substantially smaller than CRH but positioned as an aggressive growth competitor. In the third quarter of 2023, Greystone Capital Partners (through Fund VII, with $8.5 billion in committed capital) acquired a majority equity stake in Verdana at an enterprise value of approximately $2.4 billion. Since the Greystone acquisition, Verdana has publicly announced a "transformational growth initiative" with a stated objective of reaching $4 billion in annual revenue by 2028, specifically citing expansion into categories that represent CRH's core competitive strengths. CRH and Verdana directly compete in no fewer than 28 overlapping product categories, and the geographic overlap of their store footprints and online customer bases is substantial. The strategic alignment between Verdana's announced growth categories and CRH's most profitable merchandising segments — including private-label home goods, seasonal décor, and eCommerce merchandising — creates a direct and concrete competitive threat that is materially exacerbated by the Rathore Group's departure.
III. Strengths of CRH's Position
This section sets forth the principal strengths of CRH's litigation position. These strengths support the filing of a Verified Complaint and TRO/preliminary injunction motion and, taken together, provide CRH with substantial leverage for either contested litigation or negotiated resolution.
A. Clear and Well-Drafted Restrictive Covenant Language
CRH's eight employment agreements contain express non-competition, non-solicitation, and confidentiality provisions that are, on the whole, clearly drafted and comprehensive. The restrictive covenants identify the obligations of each employee with specificity, define the scope of restricted activities in concrete terms, and are supported by recitals acknowledging the employee's access to confidential information and the employer's legitimate business interests in protection of that information.
Ms. Rathore's Amended and Restated Employment Agreement, dated March 15, 2021, is particularly robust. It contains: (i) an 18-month non-competition covenant covering the United States, which prohibits Ms. Rathore from directly or indirectly engaging in, being employed by, or providing services to any "Competitive Business" (defined broadly to encompass any entity engaged in omnichannel or multi-channel retail sales in product categories in which CRH operates); (ii) a 24-month non-solicitation covenant covering both CRH employees and CRH vendors with whom Ms. Rathore had material contact during her last two years of employment; and (iii) perpetual confidentiality obligations that survive termination of employment regardless of the reason for separation. The definition of "Competitive Business" in the A&R Rathore Agreement is drafted broadly enough to unambiguously encompass Verdana, which operates in the same industry and competes directly with CRH in 28 overlapping product categories.
The remaining seven employment agreements contain materially similar restrictive covenant provisions, with variations in duration (12 months for directors and senior managers versus 18 months for VPs and the SVP) and in certain defined terms. All eight agreements are governed by Delaware law pursuant to express choice-of-law provisions, and these provisions are internally consistent across the full suite of agreements. This consistency simplifies enforcement by enabling CRH to bring a single action in a single forum under a uniform body of governing law, rather than contending with multi-jurisdictional issues.
While Delaware applies a reasonableness test to the enforcement of restrictive covenants (discussed further in Section IV.A below), the state does enforce such covenants when they are supported by adequate consideration and tailored to protect the employer's legitimate business interests. CRH's covenants are well-positioned to satisfy this standard, particularly given the seniority of the departing employees, their demonstrated access to highly sensitive trade secrets and competitive intelligence, and the clear competitive relationship between CRH and Verdana.
B. Overwhelming Evidence of Coordinated, Pre-Planned Departure
The factual record developed to date provides overwhelming evidence that the departure of the Rathore Group was not a series of independent employment decisions but rather a carefully orchestrated, pre-planned mass defection to a direct competitor. This evidence is critically important to CRH's case for several reasons: it undermines any defense based on innocent or independent action; it supports the tortious interference and civil conspiracy claims against Verdana; and it strongly bolsters the argument for irreparable harm at the TRO/preliminary injunction stage.
The key evidence of coordination includes the following:
The simultaneous resignation. All eight members of the Rathore Group submitted their resignations at precisely 4:47 PM PST on Friday, February 7, 2025. The probability that eight senior employees in the same division would independently decide to resign at the identical moment is, for all practical purposes, zero. The timing is a virtual certainty of premeditation and orchestration.
Encrypted messaging exchanges. Forensic analysis of CRH-issued devices has confirmed the existence of encrypted messaging communications among members of the Rathore Group during the period from January 13 through January 24, 2025 — a period that falls squarely between the Rathore-Dietrich-Westbrook dinner (January 6) and the commencement of offer letter execution (January 27). The use of encrypted channels for these communications is itself probative of the participants' consciousness of the impropriety of their conduct.
The January 6 recruitment dinner. The confirmed meeting between Ms. Rathore, Verdana CEO Warren Dietrich, and Greystone Managing Partner Elliot Westbrook on January 6, 2025 establishes that the competitor and its private equity sponsor were actively and personally involved in recruiting CRH's most senior merchandising executive. This is not a case of a passive employer receiving unsolicited applications; Verdana and Greystone affirmatively sought out CRH's leadership talent.
Compressed offer letter timeline. All eight Verdana offer letters were signed within a nine-day window between January 27 and February 4, 2025. This compressed timeline is consistent with a pre-arranged sequence in which Ms. Rathore signed first (as the senior member and the individual with the direct relationship to Verdana's leadership), followed rapidly by the remaining seven members of her team.
Verdana's press release. Verdana's February 14, 2025 press release, titled "Verdana Commerce Welcomes Industry-Leading Merchandising Team to Accelerate Growth," celebrates the arrival of the Rathore Group as a "team" — not as eight separate hires. This public statement effectively constitutes an admission that Verdana recruited and hired a coordinated group of employees from a single competitor, and it is admissible evidence of Verdana's intent and awareness.
Taken together, this evidence of coordination is particularly powerful for CRH's tortious interference and civil conspiracy claims against Verdana and will be a central element of the TRO briefing.
C. Compelling Evidence of Data Exfiltration and Trade Secret Misappropriation
The forensic evidence of data exfiltration is among the strongest elements of CRH's case and will be the centerpiece of the Company's application for emergency injunctive relief.
Pinnacle Forensics, under the supervision of Dr. Rajiv Anand, has conducted a preliminary forensic analysis that confirms the following: between January 10, 2025 and February 4, 2025, members of the Rathore Group downloaded approximately 14,327 files comprising approximately 2.8 gigabytes of data from CRH's Aldermere Systems environment and Pinnacle Health IT instance to personal cloud storage accounts. The volume and nature of these downloads are far outside the range of normal work activity. The files identified in the preliminary analysis include: Project Ridgeline strategic presentations and supporting analyses; vendor negotiation term sheets and pricing data; private-label cost models and gross margin targets; seasonal buying plans and proprietary purchasing algorithms; customer segmentation data and behavioral analytics reports; and vendor relationship management records.
Each of these categories of information falls squarely within the definition of "Confidential Information" as set forth in the employment agreements and, as discussed further in Section III.D below, qualifies as protectable trade secret information under DUTSA. The fact that the exfiltration commenced on January 10, 2025 — just four days after the confirmed Rathore-Dietrich-Westbrook recruitment dinner — creates a compelling inference that the downloads were made in anticipation of the departing employees' move to Verdana and for the purpose of use in their new roles.
The volume and specificity of the downloaded materials further demonstrate intent rather than inadvertence. The files are not a random or haphazard collection of workplace documents. Rather, they are concentrated in strategically significant categories that align precisely with Verdana's announced growth initiative — a pattern that suggests targeted, purposeful acquisition of competitive intelligence. This evidence is critical for CRH's DUTSA claims and strongly supports the showing of irreparable harm required for TRO and preliminary injunction purposes.
D. Project Ridgeline as a Protectable Trade Secret
A detailed analysis of the trade secret classification of Project Ridgeline and related materials is set forth in a separate memorandum dated March 2, 2025. For purposes of this assessment, the key points are summarized here.
Project Ridgeline is CRH's five-year strategic category expansion plan, completed in October 2024 following approximately eighteen months of cross-functional development. The plan encompasses: detailed category-by-category growth strategies for each of CRH's merchandising segments; proprietary vendor negotiation frameworks, including specific term sheets, pricing models, and relationship management playbooks; private-label margin targets and sourcing strategies; eCommerce assortment optimization algorithms developed in collaboration with CRH's data science team; customer segmentation models derived from analysis of CRH's proprietary customer data; and financial projections, investment requirements, and return expectations for each strategic initiative.
The information contained in Project Ridgeline has substantial independent economic value that derives specifically from its secrecy. A competitor in possession of Project Ridgeline would have a detailed roadmap of CRH's strategic priorities, pricing structures, vendor leverage points, and growth investments for the next five years — information that could be used to preemptively compete, undercut vendor negotiations, or replicate CRH's strategic approach at substantially reduced cost and time.
CRH maintained reasonable measures to protect the secrecy of Project Ridgeline, consistent with the requirements of DUTSA. Access was restricted to senior merchandising personnel on a need-to-know basis; all Project Ridgeline documents were marked as confidential; materials were stored on an access-controlled Aldermere Systems environment with role-based permissions; and each of the eight departing employees who had access to the materials was subject to confidentiality obligations under their respective employment agreements.
This combination of independent economic value and reasonable secrecy measures satisfies the definition of "trade secret" under 6 Del. C. § 2001(4). Moreover, Verdana's publicly announced growth initiative specifically targets the same categories that are the focus of Project Ridgeline — private-label home goods, seasonal décor, eCommerce merchandise optimization, and hardlines/softlines category expansion — creating a strong and direct inference that the misappropriated information would be directly useful to Verdana in executing its competitive strategy.
E. Irreparable Harm Is Readily Demonstrable
CRH's showing of irreparable harm is substantial and should be a focal point of the TRO application. The Delaware Court of Chancery has long recognized that breach of restrictive covenants, particularly where accompanied by trade secret misappropriation, creates a form of competitive harm that is not easily remedied by an award of monetary damages alone.
Several factors contribute to CRH's strong showing of irreparable harm:
First, CRH's Merchandising Division accounts for approximately $2.3 billion in annual GMV. The competitive harm from having eight senior merchandising employees — including the division's most senior leader — operating at a direct competitor with access to CRH's proprietary strategies, vendor relationships, and analytical tools is acute, ongoing, and compounding in nature. Each day that the Rathore Group operates at Verdana in roles that directly compete with CRH, the harm to CRH's competitive position deepens.
Second, confidential vendor relationships and strategic plans, once disclosed, cannot be "unlearned" or retrieved. If Ms. Rathore and her team share CRH's vendor negotiation strategies with Verdana — or even unconsciously apply knowledge derived from Project Ridgeline to Verdana's vendor negotiations — the competitive advantage CRH invested years in developing will be irretrievably lost. No amount of after-the-fact monetary damages can restore a competitive secret to secrecy.
Third, Verdana's stated goal of reaching $4 billion in annual revenue by 2028, with specific emphasis on expansion into CRH's core categories, makes the competitive threat concrete, imminent, and quantitatively significant. This is not a theoretical or speculative harm; Verdana has publicly committed to a growth strategy that directly targets CRH's market position.
Fourth, while Veltrano Consulting Group (Dr. Franklin Oberg), which was engaged on March 3, 2025, will develop a damages quantification model, the nature of the harm inherently involves components — loss of competitive advantage, disruption of vendor relationships, erosion of strategic positioning — that are difficult to reduce to a precise dollar figure, which is itself a traditional hallmark of irreparable harm.
F. Adequate Consideration for Rathore's Covenants
The adequacy of consideration supporting Ms. Rathore's restrictive covenants is a particular strength of CRH's position. Under Delaware law, the analysis varies depending on when the covenant was executed relative to the inception of employment.
Ms. Rathore's Original Employment Agreement, dated June 3, 2019, was executed at the inception of her employment with CRH. Under well-established Delaware law, the offer and commencement of employment constitutes adequate consideration for a restrictive covenant entered into at the time of hire. There is no meaningful vulnerability on the consideration issue as to the original agreement.
Ms. Rathore's Amended and Restated Employment Agreement, dated March 15, 2021, which superseded the original agreement and contains the current restrictive covenant terms, was executed during the course of Ms. Rathore's employment. However, this agreement was supported by substantial independent consideration beyond continued employment: Ms. Rathore received a promotion to Senior Vice President, a one-time promotion bonus of $150,000, and an RSU grant valued at $725,000 with a four-year vesting schedule. These benefits — totaling approximately $875,000 in additional value at the time of execution — constitute clearly adequate independent consideration for the revised and extended restrictive covenants contained in the A&R Rathore Agreement.
The strength of the consideration supporting Ms. Rathore's covenants is significant because she is the lead defendant and the individual against whom the restrictive covenant claims are most important. If the Court finds the consideration adequate as to Rathore — which we believe is highly likely — this anchor finding supports the overall enforceability framework of CRH's position.
G. Verdana's Tortious Interference Exposure
CRH's tortious interference with contractual relations claim against Verdana is well-supported by the factual record. Under Delaware law, a claim for tortious interference requires: (1) the existence of a contract; (2) knowledge by the interfering party of the contract's existence; (3) intentional interference inducing or causing breach; (4) lack of justification; and (5) resulting damages. CRH can make a strong showing on each element.
Verdana had actual knowledge, or at minimum constructive knowledge, of the existence of CRH's employment agreements and the restrictive covenants contained therein. It is standard industry practice for senior-level employees in the retail industry to be subject to restrictive covenants, and Verdana — as a direct competitor of CRH operating in the same industry — was aware or should have been aware of this fact. Furthermore, the seniority of the departing employees and the terms of their offer packages (which include substantial sign-on bonuses clearly designed to compensate for covenant-related risk) strongly suggest that Verdana conducted at least some level of due diligence regarding the existence of restrictive obligations.
Verdana's proactive recruitment — including the personal involvement of CEO Warren Dietrich and Greystone Managing Partner Elliot Westbrook in a face-to-face dinner with Ms. Rathore — demonstrates intentional, targeted interference rather than passive acceptance of employee applications. The aggregate $6.2 million in sign-on bonuses paid to a coordinated team of eight employees departing simultaneously from a single competitor constitutes powerful evidence of inducement. These bonuses were manifestly designed not merely to attract talent but to overcome the impediment posed by the departing employees' restrictive covenant obligations to CRH.
The involvement of Greystone Capital Partners — specifically, Managing Partner Elliot Westbrook's personal participation in the recruitment dinner — broadens the factual foundation for the tortious interference claim and demonstrates that the recruitment strategy was endorsed at the highest levels of Verdana's ownership structure. While, as discussed in Section IV.F below, naming Greystone as a formal defendant presents complexities, the evidence of Greystone's involvement materially strengthens the tortious interference claim against Verdana itself by demonstrating the institutional, strategic nature of the recruitment effort.
IV. Weaknesses and Vulnerabilities
This section sets forth the principal weaknesses and vulnerabilities of CRH's litigation position. Understanding and preparing for these issues is essential to effective litigation strategy, both for the TRO/preliminary injunction proceedings and for any subsequent merits litigation or settlement negotiations. Each weakness is accompanied by our assessment of its risk level and recommendations for mitigation.
A. Overbreadth Arguments Under Delaware's Reasonableness Standard
Risk Assessment: This is the defendants' strongest argument.
Delaware applies a well-established reasonableness test to the enforceability of restrictive covenants, examining whether the restraint is: (i) reasonable in geographic scope; (ii) reasonable in temporal duration; and (iii) necessary to protect a legitimate business interest of the employer. The reasonableness inquiry is fact-intensive and conducted with reference to the specific circumstances of each employee, including the employee's role, seniority, access to confidential information, and the nature of the employer's business.
Geographic scope. Ms. Rathore's non-competition covenant covers the entire United States. While CRH operates in 34 states and its eCommerce platform serves customers nationwide, defendants will argue that a coast-to-coast geographic restriction is overbroad, particularly as applied to employees whose functional roles were not truly national in scope. For example, Lucia Fernandez-Gill, as Director of Vendor Relations, worked primarily with domestic vendor relationships that, while geographically dispersed, did not require Ms. Fernandez-Gill to be personally active in all 50 states. Similarly, Nathan Tsao, as Senior Manager of eCommerce Merchandising, operated within a specific functional domain that, while relevant to CRH's national online presence, may not justify a nationwide restriction on his employment. The defendants will argue that the geographic scope should be limited to the states in which CRH actually operates stores or, alternatively, to specific geographic regions in which the individual employee was active.
CRH's response should emphasize several countervailing points: (a) CRH's business is inherently national in scope, with operations in 34 states and an eCommerce platform with nationwide reach; (b) the merchandising strategies, vendor relationships, and trade secrets at issue are not localized but are deployed across CRH's entire operations; (c) Verdana is also a national competitor, and limiting the geographic scope of the covenants would permit the departing employees to work for Verdana in roles that could still cause competitive harm to CRH; and (d) the Court should evaluate geographic reasonableness with reference to the employer's business footprint, not the employee's physical location.
Temporal duration. The 18-month non-competition periods applicable to Ms. Rathore, Mr. Linden, and Ms. Kaczmarek may face challenge as exceeding what is reasonably necessary to protect CRH's legitimate business interests. Delaware courts have generally been more comfortable enforcing 12-month non-competition periods and have subjected longer durations to heightened scrutiny. Defendants will argue that the retail industry moves quickly, that seasonal merchandising strategies have a natural shelf life of 12 months or less, and that an 18-month restriction is disproportionate to the pace of competitive change in the industry.
CRH's response should emphasize that Ms. Rathore, Mr. Linden, and Ms. Kaczmarek held the three most senior positions in the departing group (SVP and two VPs, respectively) and had access to the broadest and most strategically significant information, including the entirety of Project Ridgeline — a five-year strategic plan whose competitive value will persist well beyond 18 months. The longer duration is justified by the longer competitive half-life of the information to which these employees had access. Moreover, an 18-month period is not extreme by the standards of Delaware jurisprudence, particularly for senior executives with deep access to trade secrets and strategic plans.
Delaware's reluctance to blue-pencil. A related and important concern is Delaware's historical approach to overbroad restrictive covenants. Unlike some jurisdictions that routinely "blue-pencil" or reform overbroad covenants by narrowing them to an enforceable scope, Delaware courts have historically shown some reluctance to reform restrictive covenants, preferring in certain cases to strike an unreasonable covenant entirely rather than rewrite it to make it enforceable. While more recent Court of Chancery precedent has reflected a somewhat greater willingness to modify overbroad covenants — particularly where the employer drafted the agreement and the core of the restriction is reasonable even if the margins are not — this willingness is not guaranteed. If the Court concludes that the geographic scope or temporal duration of any covenant is unreasonable, it could decline to enforce the covenant at all, rather than narrowing it to a reasonable scope.
This risk is mitigated to some degree by the quality and specificity of CRH's covenant language, which includes severability provisions and, in the A&R Rathore Agreement, an express modification clause authorizing the Court to reform the covenants to the maximum enforceable extent. The enforceability of such provisions is itself a subject of some uncertainty under Delaware law, but their inclusion in the agreements strengthens CRH's position relative to a covenant lacking any such provision.
Mitigation strategy. Calderwood & Harkness recommends that the TRO briefing proactively address the reasonableness issue by framing CRH's requested relief in terms that the Court is most likely to find reasonable. Specifically, we should consider requesting injunctive relief that is explicitly targeted to the most sensitive categories (e.g., private-label, seasonal planning, vendor negotiations) and the most egregious conduct (data exfiltration, use of Project Ridgeline), rather than relying solely on a broad bar of all employment at Verdana. This approach gives the Court a framework for granting meaningful relief even if it is not prepared to enforce the full breadth of the as-written covenants.
B. Adequacy of Consideration for Certain Mid-Level Employees
Risk Assessment: Moderate risk for Tsao and Johansson; lower risk for VPs Linden and Kaczmarek.
While the adequacy of consideration for Ms. Rathore's covenants is strong (as discussed in Section III.F), the consideration analysis is weaker with respect to certain of the remaining seven employees. Under Delaware law, the adequacy of consideration for a restrictive covenant depends on when the covenant was executed. A covenant entered into at the inception of employment is supported by the employment itself as consideration. A covenant entered into during the course of an existing employment relationship, however, requires independent consideration — such as a promotion, a salary increase, a bonus, an equity grant, or some other new benefit conferred contemporaneously with the covenant — to be enforceable.
The employees most vulnerable to consideration challenges are Nathan Tsao (three years at CRH, $195,000 base salary, Senior Manager level) and Kira Johansson (four years at CRH, $192,000 base salary, Senior Manager level). Defendants may argue that these employees' restrictive covenants were imposed during employment without independent consideration beyond continued employment, particularly if their agreements were signed after the commencement of their employment in connection with a policy change or administrative process rather than a promotion or compensation enhancement.
Under Delaware law, continued employment alone can constitute adequate consideration for a restrictive covenant signed during an existing employment relationship, but this principle is not universally settled and is fact-dependent. Courts generally look for evidence that the employee received some additional benefit — whether in the form of a raise, a bonus, a promotion, access to new confidential information, or even a meaningful change in job responsibilities — contemporaneous with the execution of the covenant. Where no such benefit is identified, the covenant may be found to lack consideration and therefore be unenforceable.
Calderwood & Harkness has prepared a comparative analysis chart (dated February 22, 2025) that maps each employee's agreement execution date against their hire date, compensation history, and promotion timeline. We recommend that CRH's human resources team confirm, for each of the eight employees, the precise circumstances under which their restrictive covenant was executed — specifically, whether the covenant was part of the initial offer letter and executed before or concurrently with the commencement of employment, or whether it was signed subsequently. If any agreements were signed mid-employment without accompanying consideration events, this presents a vulnerability that must be addressed.
The consideration risk is lower for the VP-level employees (Derek Linden and Sonia Kaczmarek), who received higher base compensation, more significant equity packages, and held roles of greater seniority. The magnitude of their compensation and the scope of their responsibilities, including access to CRH's most sensitive competitive intelligence, strengthen the argument that CRH conferred substantial value on these employees in exchange for their covenant obligations.
C. Potential Argument That Covenants Impose Undue Hardship
Risk Assessment: Low to moderate.
Defendants will likely argue that enforcing the non-competition covenants imposes undue hardship on the individual defendants by preventing eight skilled professionals from earning a livelihood in their primary area of professional expertise. Delaware courts, in evaluating the reasonableness of restrictive covenants, consider the hardship imposed on the employee as one factor in the overall reasonableness calculus, and a covenant that effectively prevents an employee from working in any capacity will be viewed with skepticism.
Ms. Rathore, in particular, could argue that her entire career — spanning more than fifteen years — has been in retail merchandising and that a nationwide 18-month non-competition ban effectively prevents her from any meaningful employment in her field. The other departing employees would raise similar arguments, tailored to their individual circumstances.
However, the hardship argument is substantially undercut by several factors. First, the seniority and compensation levels of the departing employees are significant. These are not entry-level or mid-career employees who would face genuine financial distress from a temporary employment restriction. Ms. Rathore's combined compensation at CRH exceeded $775,000 annually, and her Verdana offer package is worth substantially more. The other departing employees had base salaries ranging from $192,000 to $340,000 — well above median income levels and indicative of financial resources to sustain a period of non-compete compliance. Second, the non-competition covenants do not prohibit all employment; they restrict competitive employment in a specifically defined set of activities. The departing employees retain the ability to work in non-competing industries, in non-competing roles within the retail sector, or in capacities that do not directly compete with CRH. Third, the hardship argument has less force where, as here, the employees themselves chose to breach their covenants by joining a direct competitor rather than exploring compliant employment alternatives.
The hardship argument has somewhat more force as applied to the lower-compensated Senior Managers (Tsao and Johansson), whose compensation levels are lower and whose career mobility may be more constrained. Calderwood & Harkness should be prepared to address the hardship issue on an employee-by-employee basis, acknowledging the Court's legitimate concern for employee welfare while emphasizing the proportionality of the restriction relative to the competitive threat.
D. Challenge of Proving Actual Damages with Precision
Risk Assessment: Lower priority at current stage; becomes significant only if settlement is not achieved and the case proceeds to trial.
While the showing of irreparable harm supports CRH's application for injunctive relief, if the case proceeds beyond the TRO and preliminary injunction stage to merits litigation, CRH will need to quantify actual damages with a reasonable degree of certainty. This is an inherently complex undertaking in trade secret and restrictive covenant cases, where the causal link between the defendant's misconduct and the plaintiff's financial losses is often indirect and mediated by numerous intervening variables.
Veltrano Consulting Group, under the direction of Dr. Franklin Oberg, has been engaged as of March 3, 2025 to develop a damages model. However, establishing a direct causal connection between the departures, the data exfiltration, and specific lost revenue or margin erosion at CRH will require sophisticated economic analysis and will be subject to vigorous challenge by defendants' experts. Defendants will argue that any competitive losses suffered by CRH are attributable to independent market forces, Verdana's pre-existing capabilities, general competitive dynamics in the retail industry, or CRH's own operational challenges — not to the specific knowledge or information that the departing employees brought to Verdana.
This weakness, however, is largely irrelevant to the TRO and preliminary injunction stage, where CRH's burden is to demonstrate a likelihood of irreparable harm rather than to quantify actual damages. The damages challenge becomes material only if the case proceeds to trial or if settlement discussions require CRH to articulate a specific damages figure supported by economic analysis. At the current stage of the matter (pre-filing), this issue is a lower priority, but it should be kept in view as the case develops.
E. Enforceability of Perpetual Confidentiality Obligations
Risk Assessment: Low.
All eight employment agreements contain confidentiality obligations that are perpetual in duration — they survive termination of employment indefinitely and contain no express expiration date. While Delaware courts generally enforce confidentiality provisions more readily than non-competition covenants, and typically accept longer or even perpetual durations for obligations directed at the protection of truly confidential information (as distinct from the broader employment restrictions imposed by non-competes), a perpetual obligation without any temporal limit is not entirely immune from challenge.
Defendants may argue that the value of the information subject to the confidentiality obligations depreciates over time and that a perpetual restriction is therefore disproportionate. Specifically, defendants could contend that vendor pricing terms become stale as contracts are renegotiated; seasonal buying strategies are superseded by subsequent planning cycles; customer segmentation models are updated as consumer behavior evolves; and merchandising algorithms are refined and replaced as technology advances.
CRH has strong counter-arguments. Project Ridgeline is a five-year strategic plan completed in October 2024; its strategic value will persist for most, if not all, of the five-year planning horizon (through fiscal year 2029). Customer segmentation data and vendor relationship information have inherently longer-term value, as the relationships themselves persist over multi-year periods and the analytical frameworks applied to them have enduring utility. Moreover, the confidentiality provisions in the employment agreements define "Confidential Information" to include information that retains economic value from its secrecy, which provides an implicit temporal limitation: the obligation endures only so long as the information retains its confidential character.
This is a secondary argument for defendants and is unlikely to be a material factor in the Court's analysis, particularly at the TRO/preliminary injunction stage.
F. Greystone Capital Partners as a Potential Defendant
Risk Assessment: Moderate complexity; recommend not naming Greystone as a formal defendant at this stage.
CRH issued a cease-and-desist letter to Greystone Capital Partners on February 19, 2025, and may consider naming Greystone as a defendant in the Verified Complaint on theories of civil conspiracy or aiding and abetting. However, establishing that a private equity sponsor is independently liable for the tortious conduct of its portfolio company is a difficult undertaking under Delaware law.
Greystone will invoke the corporate separateness of Verdana and argue that, as a minority or majority equity holder, it is not the alter ego of Verdana and does not directly control Verdana's day-to-day hiring decisions. The presence of Greystone Managing Partner Elliot Westbrook at the January 6, 2025 recruitment dinner is probative of Greystone's involvement, but Greystone will argue that Mr. Westbrook attended in an advisory capacity, that his presence reflects Greystone's general oversight role as a significant equity investor, and that all hiring decisions were made by Verdana's management team independently. Piercing the corporate veil or establishing direct liability against a PE sponsor in the context of a portfolio company's employee recruitment decisions is a high bar under Delaware law and would require evidence that Greystone exercised such dominion and control over Verdana's hiring decisions as to render the corporate separateness a mere fiction.
Naming Greystone as a formal defendant adds complexity to the litigation, may distract the Court's attention from the core claims against the Rathore Group and Verdana, and will almost certainly result in a motion to dismiss by Greystone that consumes briefing resources and litigation bandwidth. At the same time, the evidence of Greystone's involvement is valuable regardless of whether Greystone is named as a defendant: it can be used to bolster the tortious interference and civil conspiracy claims against Verdana by demonstrating the institutional endorsement and strategic orchestration of the recruitment effort.
Current recommendation. Calderwood & Harkness recommends that CRH not name Greystone Capital Partners as a defendant in the initial Verified Complaint but preserve the ability to add Greystone as a party at a later stage if discovery reveals additional evidence of direct involvement. The evidence of Greystone's participation in the recruitment — particularly Mr. Westbrook's presence at the January 6 dinner — should be prominently featured in the Verified Complaint and TRO briefing as part of the factual narrative supporting the claims against Verdana.
G. Defendants' Potential Affirmative Defenses
Risk Assessment: Standard defenses; unlikely to succeed on the merits but require preparation.
The defendants and Verdana will likely raise a series of affirmative defenses, the most significant of which are addressed below.
Unclean hands. Defendants may argue that CRH acted inequitably by, for example, failing to pay earned compensation upon termination, creating a hostile or constructive discharge environment, or engaging in other conduct that renders CRH an unfit petitioner for equitable relief. To mitigate this risk, Calderwood & Harkness recommends that CRH confirm that all final compensation payments — including accrued salary, earned but unpaid bonuses, and any vested equity — were processed correctly and in a timely manner for each of the eight departing employees. Any deficiency in final payments, however minor, could be seized upon by defendants as evidence of unclean hands.
Waiver and estoppel. If CRH has failed to enforce similar restrictive covenants against other departing employees in the past, defendants could argue selective enforcement or waiver. This defense has the potential to undermine CRH's credibility with the Court if the Company has a pattern of allowing covenant breaches to go unchallenged. Calderwood & Harkness recommends that CRH compile a complete history of its enforcement of restrictive covenants over at least the past five years, including any instances in which enforcement was considered but not pursued, to enable a proactive assessment of this risk.
General knowledge and skills. Defendants will draw a distinction between protectable trade secrets and confidential information on the one hand, and general industry knowledge, skills, and experience on the other. They will argue that the Rathore Group's value to Verdana stems from their talent, industry expertise, and leadership ability — qualities that are personal to the employees and not proprietary to CRH — rather than from CRH's confidential information. This is a standard defense in restrictive covenant cases and, while it has some conceptual force, is substantially undermined by the evidence of data exfiltration. The defendants cannot credibly argue that they left CRH with nothing but their general knowledge and skills while simultaneously downloading 14,327 files of proprietary information to personal cloud storage.
These defenses are well-worn tools of restrictive covenant litigation and are unlikely to succeed on the merits in light of the strength of CRH's evidentiary position. However, each requires careful preparation and responsive evidence.
V. Assessment of Specific Claims
This section provides an individualized assessment of each count to be asserted in the Verified Complaint, including the strength of the claim, the key risks, and the estimated likelihood of success at the preliminary injunction stage.
A. Count 1: Breach of Restrictive Covenant (All Eight Individual Defendants)
Strength: Strong.
The elements of this claim are straightforward: each individual defendant executed an employment agreement containing non-competition and non-solicitation covenants; each defendant took a position at Verdana, a direct competitor of CRH that falls squarely within the definition of "Competitive Business" in the respective employment agreements; and each defendant's Verdana role involves responsibilities that are within the scope of the restricted activities. The match between the defendants' CRH roles and their Verdana roles is direct and unambiguous — Ms. Rathore went from SVP of Merchandising at CRH to President of Merchandising & Strategy at Verdana; Mr. Linden went from VP of Hardlines Merchandising at CRH to an equivalent role at Verdana; and so forth throughout the group.
Key risks. As discussed in Sections IV.A and IV.B, the principal risks are: (i) overbreadth/reasonableness challenges to the geographic scope and temporal duration of the covenants; and (ii) adequacy of consideration arguments for certain mid-level employees, particularly Tsao and Johansson.
Likelihood of success at PI stage. We assess the likelihood of success on this count at the preliminary injunction stage as follows:
• Rathore, Linden, and Kaczmarek (SVP and VPs): High (70–80%). The seniority of these employees, the depth of their access to CRH's trade secrets, and the robust consideration supporting their covenants make enforcement highly probable, although the Court may narrow the scope or duration.
• Osei, Halvorsen, Fernandez-Gill (Directors): Moderate-High (60–70%). The 12-month duration is more defensible, but the nationwide geographic scope may face scrutiny depending on the individual's role.
• Tsao and Johansson (Senior Managers): Moderate (5