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A Colorado cannabis company with business in Indiana is suing a former employee for allegedly breaching his non-compete contract by simultaneously working for a competitor.
The lawsuit, filed in Marion Superior Court on Jan. 27, claims defendant Michael McDonough had been employed at 3C LLC for more than a year when the company discovered he was selling a competitor’s product while serving 3C customers.
Indiana Lawyer was unable to immediately find contact information for McDonough.
3C specializes in hemp-containing products and cannabinoid research, according to the lawsuit. The company was the first in the United States to offer a federally legal THC-dominant product.
3C says it maintains a large amount of confidential information, including product formulas and recipes, consumer data, and marketing analytics and that these trade secrets are disclosed to some employees through an employment handbook.
As part of their employment, employees must agree to avoid engaging in conflicts of interest and protect 3C’s trade secrets.
McDonough was hired by 3C as a salesperson in January 2022. At that time, he received an employee handbook and entered into an agreement stating he would protect the company’s confidential information and would not compete against 3C during his employment and for two years after the end of his employment, the lawsuit says.
As a condition of his continued employment, McDonough entered into a confidentiality and limited non-compete agreement with 3C on Oct. 19, 2022. That agreement stated he could not divert business from 3C to other companies during his employment and for 12 months after the end of his employment.
3C said it learned from a customer in 2023 that McDonough was openly talking about leaving the company, and that he was selling a competitor’s product while working for 3C, according to the lawsuit.
At that time, 3C said it noticed McDonough’s sales for their company were less than usual.
On or around Oct. 18, 2023, 3C contacted McDonough to discuss the information, and McDonough responded on Oct. 19 announcing his intention to resign, the lawsuit alleges.
His employment with 3C ended on or around Oct. 23, 2023. On Nov. 8, he received a letter from 3C reminding him of his contractual and legal obligations to the company.
After he left 3C, 3C said it learned McDonough was working for Florida-based Arvida Labs LLC, a competing cannabinoid business.
3C is suing McDonough for breach of contract and breach of fiduciary duty of loyalty. The company is requesting relief in the form of actual and compensatory damages, punitive damages, and prejudgment interest.
The case is 3C, LLC v. Michael McDonough, 49D01-2501-PL-004343.
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