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Allison v. CRC Insurance Services

June 21, 2010

CHONA ALLISON, ET AL., PLAINTIFFS,
v.
CRC INSURANCE SERVICES, INC., DEFENDANT/ COUNTER-PLAINTIFF
v.
MATT ANDERSON, ET AL., COUNTERCLAIM DEFENDANTS.



The opinion of the court was delivered by: Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

CRC Insurance Services, Inc. ("CRC") comes now with a motion for a preliminary injunction. Specifically, CRC seeks to enforce certain employment agreements as to former employees who have left CRC and are now employed by a competitor. While there are unknown facts regarding this dispute, there are few undisputed facts. What is presented here is a legal challenge to employment agreements. For the following reasons, I deny CRC's motion for a preliminary injunction.

I. STATEMENT OF FACTS

CRC is a commercial lines wholesale broker founded in 1982. As of May 3, 2010 CRC had over 800 employees in its wholesale brokerage operations and was one of the leading wholesale insurance brokers in the country. This motion arises out of the resignation of over 120 CRC employees who began working for a competitor.

While the motivation behind certain actions is contested, it is undisputed that Tim Turner ("Turner"), the former co-President of CRC, resigned from CRC on or about January 22, 2010 and joined CRC competitor Ryan Specialty Group ("RSG") as the Managing Director. Ed McCormack ("McCormack"), whose role as outside counsel is disputed, joined RSG on February 5, 2010. McCormack is a lawyer who had worked on employment agreement and restrictive covenant matters for CRC. On February 9, 2010 Patrick Ryan ("Ryan") and RSG announced that they would enter the wholesale insurance business with Turner. R-T Specialty ("RTS") was founded by Ryan and Turner on March 2, 2010. CRC alleges that McCormack solicited CRC employees to join the newly formed RTS.

It is undisputed that on or about May 4, 2010, over 120 CRC employees left CRC's wholesale insurance brokerage business and joined RTS and RSG. All Plaintiffs are former members of CRC's Chicago office. Included in Plaintiffs' Employment agreements are post-termination covenants. At issue in this lawsuit is the enforceability of the non-compete agreement, the confidentiality agreement, and the non-solicitation agreement.

Both parties agree that CRC's confidentiality agreement is enforceable, and Plaintiffs have represented to the Court that they are actively working to ensure that no former CRC employee breaches this agreement. To that effect, RTS's counsel prepared a "Dos and Don'ts" list that accompanied each prospective employee's offer letter. This list explicitly encouraged compliance with all confidentiality agreements. The two remaining employment agreements are disputed. CRC's non-compete agreement prohibits CRC employees from being "employed or associated with . . . any person, firm or corporation" that may be in competition with CRC Illinois for a period of two years from the date the employee ends his employment with CRC. CRC's non-solicitation agreement generally prohibits former CRC employees from soliciting or selling services or products to any present or prospective client of CRC with whom the former employee had personally performed services for or whom the employee had solicited during the past twelve months of the employee's employment at CRC. Former CRC employees are also prohibited from encouraging CRC employees from leaving their employement.

On January 25, 2010, Turner and RSG filed a lawsuit in California seeking a declaration that various restrictive covenants in the CRC employment agreement were unenforceable. Subsequently on April 20, 2010, upon learning that its employees were allegedly being solicited to leave its employment, CRC filed suit in Alabama state court. On May 4, 2010, former CRC employees, the individual Plaintiffs, and RTS filed a Complaint against CRC in the Circuit Court of Cook County, Chancery Division, alleging that notwithstanding certain restrictive covenants, RTS wished to hire CRC's employees to work for RTS and service those clients who "choose to" obtain wholesale brokerage insurance services from RTS.

On May 5, 2010, CRC amended its complaint in Alabama and sought a TRO and expedited discovery. On May 10, 2010, the Alabama court issued an Order ("Stand Still Order") providing expedited discovery and prohibiting McCormack, RTS, RSG and Ryan from causing the former CRC employees "to engage or participate in any business that is in competition in any manner whatsoever with the business of CRC" and "to solicit or accept any business from any customers with whom she/he worked with CRC." On Friday, May 28, 2010, the Stand Still Order expired as to RTS, RSG and Ryan because the Judge found that the Alabama court did not have jurisdiction over those parties. The case remains as to McCormack. CRC now comes before this Court seeking a preliminary injunction. On June 1, 2010, Defendant CRC removed the state court lawsuit filed in Cook County to federal court, answered the complaint and counterclaimed adding additional Counterclaim Defendants and other employees who had left CRC. On June 8, 2010, Plaintiffs sought leave to file an amended complaint in federal court. Leave was granted and the amended complaint has been filed.

On June 11, 2010, a preliminary injunction hearing was held.

II. STANDARD OF REVIEW

A preliminary injunction is an "extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden on persuasion." Boucher v. School Dist. of Greenfield, 134 F.3d 821, 823 (7th Cir. 1998). A court may grant temporary or preliminary injunctive relief to a party who (1) has some likelihood of success on the merits; (2) has no adequate remedy at law; and (3) will suffer irreparable harm if an injunction does not issue. Foodcomm Int'l v. Barry, 328 F.3d 300, 303 (7th Cir. 2003). If CRC meets this burden, then I must weigh the injury CRC will suffer if the injunction is denied against any harm Plaintiffs may suffer if the injunction is granted. Girl Scouts of Manitou Council, Inc. v. Girl Scouts of U.S. of America, Inc., 549 F.3d 1079, 1096 (7th Cir. 2008). In balancing the harms to each party, I will also consider any potential harm to the public interest. Id. at 1086; Goodman v. Illinois Dept. of Financial and Professional Regulation, 430 F.3d 432, 437 (7th Cir. 2005).

III. DISCUSSION

A. CRC Has Shown Likelihood of Success on the Merits

The demonstration of a likelihood of success is a threshold question and a low standard requiring only a "'better than negligible' chance of success on the merits." Girl Scouts of Manitou Council, Inc., 549 F.3d at 1096 (internal citation omitted). I find that CRC has met this standard.

1. CRC's Breach of Contract Claims

CRC contends that each former CRC employee who has joined RTS is in violation of their Employment Agreement's prohibition against being "employed by or associated with" a competitor to CRC in Illinois, soliciting or accepting business from CRC customers, and misappropriating confidential information. Certain obligations are not in dispute. For example, in regard to the confidentiality agreement, both parties agree that its provisions are enforceable and Plaintiffs have represented to the Court their intention to enforce the confidentiality provisions to the best of their ability. Additionally, the parties agree that Plaintiffs are barred from soliciting current CRC employees or CRC clients. The parties disagree as to the enforceability of the non-compete agreement and the scope of the non-solicitation agreements.

Plaintiffs argue that CRC cannot show possible success on the merits stating that the non-compete agreement is unenforceable because it contains a prohibition against former CRC employees working in their chosen profession of the wholesale insurance brokerage business. In support of this argument, Plaintiffs cite to cases in this Court as well as Alabama and Illinois state courts. Nobel Biocare USA, Inc. v. Lynch, No. 99 C 5774, 1999 WL 958501, at *1 (N.D. Ill. Sept. 15, 1999); Calhoun v. Brendle, Inc., 502 So. 2d 689, 693-94 (Ala. 1986); Lawrence & Allen, Inc. v. Cambridge Human Res. Group, Inc., 685 N.E.2d 434, 437 (Ill. App. Ct. 1997). In these cases, courts have held that agreements foreclosing an employee's right to work in his chosen profession are unenforceable.

CRC distinguishes these cases arguing that unlike here, the cases cited by Plaintiffs involve employees who were prevented from engaging in any aspect of their chosen profession, in some cases, on a global scale. Nobel Biocare USA, Inc. v. Lynch, No. 99 C 5774, 1999 WL 958501, at *1 (N.D. Ill. Sept. 15, 1999) (agreement prohibited employee from working for a direct or indirect competitor anywhere in the United States); Calhoun v. Brendle, Inc., 502 So. 2d 689, 693-94 (Ala. 1986) (agreement prevented employee from competing in fire equipment industry which was a particular hardship because it was the only business in which he was trained or had experience); Lawrence & Allen, Inc. v. Cambridge Human Res. Group, Inc., 685 N.E.2d 434, 437 (Ill. App. Ct. 1997) (agreement prevented competition encompassing the United States). Here, CRC argues that their former employees are free to work anywhere in the insurance business aside from wholesale brokerage within Illinois. Accordingly, CRC contends that its former employees will not be foreclosed from ...


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