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Starbucks vs. Dunkin' Donuts: Here's What a Real Non-Compete Issue Looks Like...

We talk from time to time here at the Capitalist about non-competes.  They generate emotion from employees and are usually written so broadly that they're hard to enforce.  Most of the time, talent will sign a non-compete in one of three states of mind: They're A) in need of a job and will sign what you need them to sign, B) confident that you've written the agreement so broadly that it'll be difficult to enforce, or C) a combination of the two aforementioned states of mind.

So, non-competes are something we do, but messy to enforce on the back end.  Want to see what a real nonDunkin donuts -compete issue looks like?  Look no further than the following non-compete dustup occurring between Starbucks and Dunkin' Donuts, as reported by the Boston Herald.  I love the smell of decaffeinated non-competes in the morning:

"Paul Twohig, who had been in charge of Starbucks’ retail stores in the southeastern U.S., left the company in March. He received a severance package after signing a separation agreement in which he promised to honor an earlier noncompetition agreement that said he would not work for a Starbucks competitor for 18 months, according to a lawsuit filed Monday in U.S. District Court in Seattle.

Twohig, who did not return phone calls to his South Carolina home, asked Starbucks in August if he could be released from the agreement to work for Dunkin’ Donuts, the lawsuit said. Canton, Mass.-based Dunkin’ has a large presence in the eastern U.S. Starbucks declined Twohig’s request. At Starbucks, he had "participated in and was responsible for formulating business strategies to grow Starbucks business and respond to competitors, including Dunkin’ Donuts," the lawsuit said

In September, Dunkin’ Donuts’ head of human resources and another former Starbucks employee, Christine Deputy, contacted the coffee company. Starbucks said it told her that Twohig was "not in a position to accept a position" at Dunkin’. Within the past week, Starbucks learned through Internet searches that Twohig had apparently accepted a job as Dunkin’ Donuts’ brand-operations officer.

Twohig worked for Starbucks from 1996 to 2002, then left and became chief operating officer of Panera Bread. When he returned to the coffee company in 2004, he signed the noncompetition agreement, the lawsuit said."

Conventional wisdom says a couple of things with this one.  First of all, it's standard procedure that if you want an enforceable non-compete, you need to list the competitors included and perhaps even the geography.  We don't know those details, but a couple of other things would seem to come into play.  First, if Twohig elected to sign a severance document that referred again to the non-compete, that's a form of acknowledgment that might be viewed strongly by a judge.  Add that to the fact that Dunkin' thought enough of their position as a primary competitor to call Starbucks to inquire about Twohig's legal ability to work for them, and Starbucks looks to be in decent shape on this one heading into the courtroom.

With his Panera experience, if only Twohig would have brought the Cinnamon Crunch Bagel (or i's equivalent) to Starbucks - he might have been CEO by now and the move wouldn't have been necessary.


Chris Ferdinandi

Interesting case study, KD. I think Starbucks is on pretty solid ground on this one.

tom thomson

Sadly, Dunkin' Donuts is going to lose on this one, but I am not in the least surprised since Christine Deputy is involved. Dunkin' Donuts made a HUGE mistake hiring her (I tried to warn them) as she is, as my experiences with her have proved, very unethical, dishonest, and immoral. So this type of incident is just standard operating procedure for her. If you hire someone such as Christine Deputy then you can only expect to suffer from her actions. Nigel Travis you should have listened to me, if you wish to avoid future lawsuits you had better cut your losses and "cut" Christine Deputy now.

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