Kohlís argues former executive violated non-compete clause
Sides attempt to define Ďdirect competitorí

By Katherine Michalets - Freeman Staff

Aug. 7, 2015

WAUKESHA - The arguments during Thursdayís hearing regarding whether Kohlís former chief information officer, Janet Schalk, violated the non-complete clause of her contract when she accepted the same position with Hudson Bay Company centered on whether the two retailers are direct competitors.

Kohlís attorney, John Kirtley, also contended that the knowledge Schalk had about Kohlís operations was desirable and useful for HBC, which includes Saks Fifth Avenue, Saks Off Fifth and Lord and Taylor.

Ryan Festerling, senior vice president of human resources for Kohlís, said that by sitting on the companyís executive committee, Schalk would have access to confidential information regarding the companyís plans, referred to as its Greatness Agenda, and to the implementation strategies called Bold Moves. Festerling testified that Schalk was assigned to four of the 10 Bold Moves.

While Greatness Agenda is not a secret, its implementation is. ďThatís the secret sauce of getting it done,Ē Festerling said. Schalk also sat on the information technology steering committee for Kohlís.

At Kohlís, Schalk was behind the gathering of ďbig dataĒ and instrumental in the planning of Kohlís Innovation Center.

For her work, Schalk was compensated about $1.5 million annually. Her contract for HBC was about $2.337 million per year and a document presented Thursday showed after spending five years with the company sheíd stand to make about $12 million. At 10 years, the amount would be closer to $30 million.

Schalkís attorney, Bernard Bobber, questioned Festerling about whether HBC could be considered a direct competitor of Kohlís. Bobber pointed out that the contract listed several companies that would be considered direct competitors, including Sears, Target and JC Penney, but said the list did not include HBC.

Bobber also argued that the contracts for other primary executives, including the chief merchandising officer and the chief financial officer, did not include HBC.

Bobber argued as well that Kohlís and HBC are not direct competitors because Kohlís describes its merchandise as moderately priced, while HBCís stores sell luxury items.

Under questioning, Festerling referred to Schalk as a ďcompetitive  threatĒ and that by hiring her, HBC could help to close the gap it has with Kohlís.

Before joining Kohlís, Schalk served as CIO for Target. Festerling said Kohlís hired her because the company leaders believed she could ďtransform us.Ē

Some of the confidential knowledge that Schalk has, Festerling said, is the brands Kohlís intends to buy and the architecture for its systems.

Dan Caspersen, executive vice president of human resources for HBC, said the company actively recruited Schalk based on her previous work experience and her ability to merge multiple systems within one company for a unified technology platform.

Different drafts of the contract presented to Schalk were admitted as evidence Thursday. An earlier draft listed Kohlís as a competitor in the non-compete section of the contract, but was later revised because HBC general counsel realized a mistake was made, Caspersen said. He also said that neither he nor the companyís CEO listed Kohlís as a direct competitor and their contracts said they could not go to work for a luxury retailer for one year after leaving HBC.

A hearing will reconvene 8 a.m. Monday in the Waukesha County Courthouse, 515 W. Moreland Blvd. Schalk is expected to testify.

Email: kmichalets@conleynet.com