Motor City Bagels, LLC v. American Bagel Co.

Motor City Bagels, LLC (Motor City) (plaintiff) signed a series of franchise agreements with American Bagel Co. (defendant) in 1993 and 1995 to open several bagel shops. Motor City’s owners were two college friends who had both earned MBAs and conducted lengthy research into potential franchises and into American Bagel’s franchise opportunity specifically. Their research included a review of American Bagel’s 1993 franchisee circular, which provided estimated costs to start an American Bagel franchise. Motor City’s owners drafted a lengthy and detailed business plan for their American Bagel franchises, relying on estimated costs from American Bagel’s circular. Motor City shared its business plan with several investors, including American Bagel, and obtained confidentiality agreements with some of those investors, in which the investors agreed not to distribute the plan. American Bagel released updated circulars in 1994 and 1995, increasing its estimated franchise startup costs. Motor City claimed it never received the updated circulars. Motor City’s actual costs to open its first couple of bagel shops were significantly higher than its business plan’s estimates and the estimates published in American Bagel’s 1993 circular. Motor City refused to open any of the additional shops contemplated in the franchise agreement, stopped paying franchise fees, and sued American Bagel in federal court, asserting misappropriation of trade secrets because American Bagel shared copies of Motor City’s business plan with nonparties, in addition to other franchise-related claims. American Bagel filed for summary judgment, asserting that Motor City’s business plan did not constitute a protected trade secret.