What Miyoko’s Creamery lawsuit alleges Miyoko Schinner did

& what a few other good lawyers think of the case

            SONOMA,  California––Perhaps the most surprising part of Miyoko’s PBC vs. Miyoko Schinner,  the lawsuit filed on February 16,  2022 by Miyoko’s Creamery against the ousted founder of the company,  is the demand for a jury trial.

As a legal ploy,  that makes sense:  preparing for a jury trial will cost Schinner more,  and make the cost of defending against the allegations more intimidating.

But in the opinions of lawyers who have looked at the case,  the outcome of a bench trial would likely hinge on niceties of contract law,  whereas a jury of laypeople might see the case chiefly in terms of big bucks financiers vs. the small grey-haired vegan chef whose innovations have helped to make (or keep) some of her adversaries rich.

Accused of theft

Schinner,  65,  is accused of breach of contract,  violation of the Defend Trade Secrets Act,  violation of the Uniform Trade Secrets Act,  breach of duty of loyalty,  and breach of promissory note.

According to the introduction to the case,  “This is an action by the company [Miyoko’s PBC] to recover its trade secrets and confidential information from its founder and former chief executive officer Miyoko Schinner,  and to seek redress for Schinner’s theft of this information.”

(See Canned Miyoko: the ballad of Jon Blair & Miyoko Schinner,   How Miyoko Schinner got the same shaft as Paul Watson,  and Miyoko’s Creamery sues Miyoko Schinner for allegedly stealing recipes.)

Wrongful dismissal?

The Miyoko’s Creamery plaintiffs will have to establish,  first of all,  that they and not Schinner are the rightful owners of any “trade secrets and confidential information.”

This will depend upon establishing,  in part,  that Schinner was legally and ethically removed from her former position as chief executive officer.

What the Miyoko’s Creamery plaintiffs have to say about that,  restated several times without specific supporting evidence being offered,  is that “During her tenure as the company’s CEO, Schinner proved time and again that she could not manage a rapidly expanding business and could not correct performance deficiencies.  Schinner’s business management and leadership skills were deficient and did not improve over time.”

Zero to $260 million a year

What the public record shows is that under Schinner,  Miyoko’s Creamery grew from nothing at start-up in 2014 into a $260-million-a-year corporation today,  selling products in a third of the grocery stores in the United States.

Along the way,  Miyoko’s Creamery appears to have avoided any conflicts with either state or federal regulation.

The one exception was a temporary injunction filed by the California Department of Food & Agriculture in 2020 against the Miyoko Creamery use of terms usually applied to dairy products,  such as butter.

Miyoko’s Creamery decisively won that round in court.

(See Miyoko court win: the world doesn’t owe Big Dairy a living.)

“Missed targets”

Continue the Miyoko’s Creamery plaintiffs,  “She [Schinner] could not even maintain a consistent team of executives and repeatedly missed performance and financial targets.

“For years,”  allegedly beginning in 2018,  “the company’s board worked with Schinner to improve the numerous performance deficiencies she exhibited as chief executive officer,”  the Miyoko’s Creamery plaintiffs contend.

In translation from business jargon to plain English,  “could not even maintain a consistent team of executives” is somewhat like alleging that an athletic coach replaces players as circumstances suggest.  “Repeatedly missed performance and financial targets” during the economic disruptions of the COVID-19 years is essentially blaming Schinner for the state of the national economy.

“Unanimous” with three dissenters?

Despite that,  Schinner kept Miyoko’s Creamery profitable while more than 330,000 U.S. businesses failed.

“After she did not address the deficiencies,  the board unanimously terminated her,”  the Miyoko’s PBC lawsuit says.

Whether that decision was “unanimous” may also be disputed.  Schinner herself was and is one board member.  Two others,  including Plant-Based Food Association founder and attorney Michelle Simon,  and MALK Organics founder and former chief executive August Vega,  “have posted on LinkedIn in support of Schinner,”  pointed out Carol Ortenberg of Nosh.com on February 20,  2023.

“I will start my own shop”

“On July 12,  2022,”  the Miyoko’s PBC lawsuit continued,  “the company informed its workforce that Schinner was stepping down as chief executive officer.

“From that point forward, Schinner intentionally disrupted company operations and signaled her intent to start her own company to compete with the company.

“For example, on July 15, 2022,  she wrote the following to the company’s president,”  apparently chief financial officer and interim president Jon Blair,  ‘I will start my own retail shop or another company.’”

Intelligence

Note that a retail shop would not “compete with the company,”  since Miyoko’s Creamery does not sell retail,  and “another company” would not compete with Miyoko’s Creamery unless it manufactured a comparable product line.

At that point,  though,  according to the Miyoko’s PBC lawsuit,  Schinner began collecting “amounts of data,  including research and development materials containing the company’s most valuable intellectual property:  its proprietary recipes and plant-based culture configurations,”  many of them initially developed by Schinner herself,  before Miyoko’s Creamery existed.

Conspiracy?

“This highly proprietary information was not stored in a location accessible to board members,”  the Miyoko’s PBC lawsuit says,  “but Schinner retained access to this information by virtue of her continued employment with the company after the board removed her as chief executive officer.  She also enlisted the help of now-former company employees to carry out her scheme.”

Further,  the Miyoko’s PBC lawsuit alleges,  “Schinner also stole the company’s physical property.  After Schinner’s employment ended,  she enlisted a former employee,  Jennifer Kirkham,  to rifle through the company’s research and development facility and warehouse.  Video surveillance captured the two removing property from the warehouse,  removing cheese cultures and unreleased product prototypes from the company’s industrial refrigerator—all illegally and without the Company’s authorization.”

Cat litter?

Video surveillance images included in the Miyoko’s PBC lawsuit show Schinner and a second person,  apparently Kirkham,  wheeling a blue steel handcart carrying a small cardboard box,  an open-topped white plastic bucket,  and two yellow plastic buckets with closed tops,  resembling five-gallon containers of cat litter.

Kirkham is not named in the case filed against Schinner.

“On September 8,  2022,”  the Miyoko’s PBC lawsuit continues,  “the company discovered Schinner’s plot.  The company issued two separate notices to Schinner’s counsel advising her of her legal obligations to preserve” anything that might be proprietary data.

“Miyoko’s Creamery Files”

Instead,  Schinner allegedly “created a folder called ‘Miyoko’s Creamery Files,’ synced it to her personal Dropbox,  and uploaded” what the Miyoko’s PBC lawsuit contends was stolen proprietary data.

In other words,  Schinner is said to have been bright enough to hack into the Miyoko’s Creamery electronic files,  selectively remove materials,  and take steps to cover her electronic tracks,  the Miyoko’s PBC lawsuit charges,  but dim-witted enough,  after doing all that,  to give those materials a file label identifying them by source.

Bagged vegan cheese shreds

Issues contributing to Schinner’s ouster,  the Miyoko’s PBC lawsuit indicates,  include that “In 2020 Schinner championed the release of new cheese products that came in both slices and shreds.  But then she unilaterally discontinued these products in early September 2021,  revealing her decision to the board only after she told key retail customers about the discontinuation of a major product line.”

Not discussed in the Miyoko’s PBC lawsuit is whether introducing the slices and shreds was Schinner’s decision in the first place,  presumably ratified by the board if there was any controversy about it.  If Schinner made the initial decision to sell the slices and shreds,  then discontinuing those products would logically also be her decision to make first,  as the person in charge of day-to-day operations.

Louis Kanganis

A second issue was that Schinner allegedly blamed failure to meet board-set “performance targets” on then-Miyoko’s Creamery company president Louis Kanganis,  fired in February 2022.

A third issue mentioned in the Miyoko’s PBC lawsuit is that Schinner in September 2020 borrowed $112,500 from Miyoko’s Creamery.

“Repayment for the principal amount and interest accrued on the outstanding principal was due following the 60th day after Schinner’s termination of employment,”  Ortenberg summarized. “Having not made such a payment,  the company said in the suit,  Schinner is now in default.”

“Trying to re-invent myself”

“Schinner said she couldn’t get into details about specific allegations in the lawsuit,”  Elaine Watson of AgFunderNews reported,  “but said she ‘did not steal trade secrets’ and has no plans to start a new consumer packaged goods company.”

“It’s been a very dark week,”  Schinner told Watson.   “I’m 65 years old and I am trying to reinvent myself again.  I just want to save animals and promote the vegan lifestyle.”

Financiers held four of seven board seats

Wrote Watson,  “Her focus is now on nonprofit work,  getting back into cooking and teaching,  and starting a YouTube channel,  claimed Schinner, who remains a major shareholder and controls three of the company’s seven board seats.  One she occupies herself.  The other two are held by Michele Simon and August Vega.  The other seats are held by investors including PowerPlant Partners,  Obvious Ventures,  and Cult Capital.”

Obvious Ventures founder and chief executive James Joaquin prominently defended the decision to boot Schinner,  after the news broke late on February 17,  2023.

Lawyer’s opinion

Continued Watson,  “Dale Giali,  partner at law firm King & Spalding,”  who is not involved on either side of the case,  “told AgFunderNews he was surprised Miyoko’s had not sought a preliminary injunction or temporary restraining order to stop the defendant from using or disposing the trade secrets,  which ‘might suggest it’s more for show than them being really concerned.’”

Added Giali,  “It undermines a claim of trade secret misappropriation if you’re letting her keep her company computer after you’ve terminated her,  and after she’s told you she’s starting a new company.

“Miyoko has right to compete”

“Miyoko absolutely has the right to start a competing business,”  Giali continued to Watson, “using her know-how and any and all information from the company that is not a trade secret or confidential.  So she would not be allowed to take specific recipes or prototypes,  for example.”

Giali also flagged as unusual that “two other employees referenced in the lawsuit who allegedly assisted Schinner in securing documents or physical items are not named as defendants,”  Watson wrote.  “If you name them, they are subject to the rules of discovery and have to accept notices of deposition and document requests.”

August Vega

Posted Miyoko’s Creamery board member August Vega to LinkedIn,  “I am not a candidate for chief executive officer at Miyokos,  I appreciate and feel flattered that the assumption was made due to me being tagged in posts,”  Vega said.

However,  she qualified,  “I joined the board to bring a founder’s lens to the mix, a female founder’s lens.  Yes, that distinction is important.

“Having a founder’s perspective at a board level is important.  I also believe most anything can be resolved no matter how far the scale seems to have tipped in one direction,”  Vega mentioned,  hinting at a possible future role as conciliator.

Michelle Simon

Michelle Simon,  from her perspective as both an attorney and as founder of the Plant-Based Food Association,  had quite a bit more to say.

“I can only conclude that this is part of an ongoing, deliberately planned smear campaign to disparage Miyoko’s stellar reputation,”  Simon told Watson.

Simon on October 4,  2022 posted a web essay entitled “How Smear Campaigns Can Destroy,”  which in hindsight may describe her assessment of the Miyoko’s Creamery ouster of Miyoko Schinner herself.

“Founders fired so others can take what they built”

“By becoming a leader,”  Simon began,  “women have stepped out of our ‘proper place.’  Accusing us of bad behavior is a way to put us back down.  In most cases,  founders are being fired or pushed out so that others can take control of what they built.

“In my experience,”  Simon said,  “there are at least four phases or components to a smear campaign,  beginning with “when the abuser is conning you into believing he’s your friend,  or at least a supportive colleague.  He will likely present himself as highly skilled at something you need help with,  such as raising money or helping you grow your company.

“The goal at this stage is to earn your trust.  All the while, he is learning more about you, especially your weaknesses, to be able to exploit them later.  He will also use this phase to get close to those in decision-making authority,  likely even through your own connections.”

“Fake concern”

Later,  Simon wrote,  “The liar begins to plant seeds behind your back to those in power.  He will likely do so out of fake ‘concern’ for the company or organization.”

Finally,  Simon explained,  “Some incident happens,  which may or not be true,  and it’s used as ‘proof’ of what the liar has been saying about you all along.

“Even after most of the damage is done,  the abuser continues to double down.  Now the company’s board and/or lawyer gets involved.  The scenario looks something like this:

“Management has made a hasty decision to get rid of the founder,  chief executive officer,  or other senior executive.  Chaos ensues,  because after all,  they just completely destabilized the company or organization by suddenly removing its leader.  In addition,  the target may try to fight back, especially if it’s to save her own company.

Witch hunt

“Now management realizes they have botched things,”  Simon said,  “so they must now justify their bad decision-making.  Instead of trying to course-correct,  management engages in a witch hunt to ‘prove’ they made the right decision.

“All kinds of crazy accusations can get made at this stage,”  Simon warned.  “Anything you do can be used against you. They will take a kernel of truth and blow it all out of proportion.  Make a minor mistake?  It becomes a federal offense.

“For example,”  Simon specified,  “twisting something you did innocently or with permission,  which is then denied by the person in power who granted you permission.  You could be accused of stealing company property or sharing trade secrets,  or other unethical or even potentially illegal activity.

“Lawyers may be brought in”

“Lawyers may be brought in to conduct a sham ‘investigation.’”

“The goals of the witch hunt,”  Simon enumerated,  “include to:  intimidate and scare you into backing down from fighting them;  justify their hasty,  incompetent,  and cruel treatment of you;  prove to other decision-makers who may still on the fence,  or having second thoughts,  that you really must go;  stop these decision-makers from speaking with you as a human,  to isolate you from anyone who might be helpful;  mitigate their potential legal liability in a wrongful termination action;  and minimize any potential payout in severance or other settlement agreement.”

“The only move left,”  Simon advised,  “is to hire a good employment attorney.”

Sell the company?

ANIMALS 24-7 consulted an attorney with relevant experience,  who like Giali is not involved on either side of the Miyoko’s PBC vs. Miyoko Schinner case,  to gain additional perspective.

Speaking on the understanding that the attorney would not be quoted by name,  the attorney suggested that the outcome “depends on how much was tied down in contracts when Miyoko’s Creamery was formed.

“The law firm suing Schinner,”  Mintz Levin Cohn Ferris Glovsky and Popeo P.C.,  “is blue chip,  so someone has a lot of money to spend on a lawsuit,”  the attorney said.

ANIMALS 24-7 mentioned that food industry pundits seem to believe the Miyoko’s Creamery board majority strategy may be to oust Schinner,  then sell the company,  which would otherwise have been done over her objections.

“A year’s supply of butter”

“Now that makes perfect sense,”  the attorney said.  “I predict that the quality will go down, prices will go up,  and the selection will be slashed.  Maybe now is a good time to organize a boycott?  The company won’t be worth selling,  or buying,  if sales take a nose dive.

“A lot of people are very loyal to Miyoko,  including myself,”  the attorney observed,  adding that,  “Before any boycott,  I will stock up with a year’s supply of her butter.”

In terms of legal strategy,  the attorney offered,  “The complaint [by Miyoko’s PBC] will no doubt be the subject of a motion to dismiss for failure to state a cause of action.  They will have to be more specific. However,  if the company owns her recipes and she took them back or starts using them,  that could be a problem.

“What doesn’t make sense,”  the attorney said,  “is that since she created the recipes you would think she still has her own notes/memory and wouldn’t need company records.

“Really,  it’s too early to make any meaningful analysis of the case,”  the attorney concluded,  but added,  “I would love to be part of Miyoko’s legal team.”

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