Arthur J. Gallagher Service, Co., et al v. Thomas Egan

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 12-14857
Non-Argument Calendar
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D.C. Docket No. 9:12-cv-80361-KLR
ARTHUR J. GALLAGHER SERVICE CO.,
RISK PLACEMENT SERVICES, INC.,
llllllllllllllllllllllllllllllllllllllll Plaintiffs-Counter Defendants-
Appellees,
versus
THOMAS EGAN,
llllllllllllllllllllllllllllllllllllllll Defendant-Counter Claimant-
Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
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(March 25, 2013)
Before WILSON, PRYOR and ANDERSON, Circuit Judges.
PER CURIAM:
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Thomas Egan appeals a preliminary injunction entered against him and in
favor of Arthur J. Gallagher Service Company and Risk Placement Services, Inc.,
to enforce nondisclosure and noncompetition covenants in an employment
agreement. Egan argues that Gallagher Service and Risk Placement Services lack
standing to enforce the covenant not to compete and first breached the employment
agreement and that the district court abused its discretion in entering the
preliminary injunction. We affirm.
I. BACKGROUND
Gallagher Service and Risk Placement Services are wholly owned
subsidiaries of Arthur J. Gallagher & Company (“Gallagher”). Gallagher is an
insurance brokerage company that sells property and casualty insurance and
administers employee benefits programs. Gallagher conducted its wholesale
insurance operations through Risk Placement Services and its human resource
operations through Gallagher Service.
Glenn Yanoff, an area president of Risk Placement Services, offered Egan a
position as an Assistant Vice President to sell and service accounts for the “RPS
organization.” In a letter containing “an outline of an offer of employment,”
Yanoff proposed that Egan receive an annual salary of $265,000 and incentive
payments based on the net revenues derived from his sales. The written offer was
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“subject to” a “Signed copy of AJGCo. Code of Ethics” and a standard
probationary period.
Egan signed the letter and an Executive Agreement with “ARTHUR J.
GALLAGHER & CO. (‘Corporation’), its subsidiaries, divisions and affiliated and
related companies (hereafter collectively referred to as the ‘Company’)” that was
executed by the Vice President of Gallagher. The agreement contained the terms
of employment, fiduciary obligations, post-employment obligations, and remedies
for enforcement of those obligations. Paragraphs one and two of the agreement
provided that Egan was an employee of the Company and would receive a salary
and other benefits with the “underst[anding] and agree[ment] that the Company
may from time to time modify the specific terms and conditions of these
entitlements.” In paragraph 14, Egan “recognize[d] the Company’s legitimate
interest in protecting . . . those Company accounts with which [he] [would] be
associated during his employment” and “agree[d] that for a period of two (2) years
following the termination of his employment for any reason whatsoever,” he would
not solicit for insurance services or provide group insurance or benefit services for
“any existing Company account or any actively solicited prospective account of the
Company for which he performed any of the [specified] functions during the two-
year period immediately preceding [his] termination.” And paragraph 14 provided
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that “[t]he term Company account . . . shall be construed as Insured’s written via
Risk Placement Services, Inc.” In paragraph 17, Egan “recognize[d]” that his
“rights and privileges, . . . his services and his corresponding covenants to the
Company, are of a special, unique and extraordinary character, the loss of which
cannot reasonably or adequately be compensated for in damages,” and he
“underst[ood] and agree[d] that the Company [would] be entitled to equitable
relief, including a temporary restraining order and preliminary and permanent
injunctive relief, to prevent a breach of [the] Agreement.” Paragraph 21 provided
that the “Agreement supersede[d] all existing Company policies, and all previous
agreements between the parties, to the extent that such policies and agreements
consider[ed] subject matters herein addressed,” and paragraph 22 stated that the
“Agreement . . . may be enforced by any subsidiary of the Company for whom
[Egan] has provided services hereunder.”
Egan worked for Gallagher more than four years before he resigned and
accepted employment with a competitor, Genesee Special Brokerage. Egan left
Gallagher a few months after it reduced his salary and changed his incentive plan.
After Egan changed employers, Gallagher learned that Egan was soliciting his
former customers on behalf of Genesee.
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Gallagher Service and Risk Placement Services filed a complaint for
damages and to enjoin Egan from “violating the terms of the Agreement.” The
companies alleged that Egan had misappropriated confidential information and
induced existing customers of Risk Placement Services to move their accounts to
Genesee. Egan filed a counterclaim for breach of contract and to recover unpaid
wages. Egan alleged that the reduction of his salary and incentive plan invalidated
the agreement and that he was not bound by its covenants.
The companies moved for a preliminary injunction. During a hearing on the
motion, Egan testified that the President of Risk Placement Services, John Head,
had promised never to reduce Egan’s salary, but Head testified that he had never
made such a promise. In addition, Egan argued that he had developed a “mature”
clientele before accepting employment with Gallagher that it now sought to
appropriate. The companies responded that Gallagher had purchased a customer
list from Egan’s former employer and paid that company $140,000 to release Egan
from a noncompetition agreement and that Egan had developed “a large part of”
his clientele while employed by Gallagher.
The district court preliminarily enjoined Egan from violating his
nondisclosure and noncompetition covenants. The district court concluded that the
covenants were reasonable and formulated to protect legitimate business interests
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of Gallagher. The district court also concluded that the companies were likely to
prevail on their complaint about a breach of contract and that Egan was unlikely to
prevail on his counterclaim about an antecedent breach by Gallagher. The district
court discredited Egan’s testimony and found “there [was] no credible evidence to
show that [Egan] was guaranteed to receive the compensation set forth in the
employment offer for the duration of his employment” when the agreement
“indicate[d] that [Gallagher] [was] entitled to modify [Egan’s] compensation at
their discretion.” In the alternative, the district court ruled that, even had it
credited Egan’s testimony, he failed to “properly ple[ad] an oral modification of
his written employment contract.” The district court also concluded that the
factors of irreparable harm, balance of harms, and interest of the public weighed in
favor of issuing a preliminary injunction.
II. STANDARDS OF REVIEW
This appeal requires that we apply three standards of review. “We review
standing determinations de novo.” Interface Kanner, LLC v. JPMorgan Chase
Bank, N.A., 704 F.3d 927, 931 (11th Cir. 2013). After the district court issues a
preliminary injunction, we review de novo its legal conclusions, its findings of fact
for clear error, and its balancing of the factors for abuse of discretion. Mesa Air
Group, Inc. v. Delta Air Lines, Inc., 573 F.3d 1124, 1128 (11th Cir. 2009). To
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obtain temporary injunctive relief, the complainant must have proved that he
would suffer irreparable harm without the injunction and an adequate remedy at
law was unavailable; there existed a substantial likelihood that he would succeed
on the merits; the threatened injury outweighed any possible harm to the
respondent; and a temporary injunction would serve the public interest. Ferrero v.
Associated Materials Inc., 923 F.2d 1441, 1448 (11th Cir. 1991).
III. DISCUSSION
Egan challenges the preliminary injunction entered in favor of Gallagher
Service and Risk Placement Services. Egan argues that the companies lack
standing to enforce the nondisclosure and noncompetition covenants because they
were not parties to the agreement or identified as third-party beneficiaries of the
agreement. Egan also argues that he can prevail on his counterclaim about an
antecedent breach of the agreement; the companies will not suffer irreparable harm
in the absence of a preliminary injunction; and the balancing of harms weigh in his
favor. We address these arguments in turn.
The district court did not err in its determination that the companies had
standing to enforce the covenants. When “[t]he language employed in [an]
agreement is clear and unambiguous[,]” its “parties are bound by the contractual
language.” Envtl. Servs., Inc. v. Carter, 9 So. 3d 1258, 1264 (Fla. Dist. Ct. App.
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2009). The plain language of the agreement provided that the covenants extended
to “Arthur J. Gallagher & Co. . . [and] its subsidiaries,” and Egan admits that “RPS
and AJG Service are each wholly-owned subsidiaries of AJG.” See Gory
Associated Indus., Inc. v. Griffin, 397 So. 2d 1054, 1055–56 (Fla. Dist. Ct. App.
1981) (covenant not to compete in employment contract between employer “and its
affiliates” enforceable by wholly-owned subsidiary of employer when subsidiary
met the contractual definition of affiliate and employee did not deny affiliate
status); see also Churchville v. GACS Inc., 973 So. 2d 1212, 1215–16 (Fla. Dist.
Ct. App. 2008) (release in worker’s compensation settlement agreement covered
employer’s sister company when agreement executed between the employer “and
its affiliates”). Because Gallagher Service and Risk Placement Services are parties
to the agreement, we need not address Egan’s argument that the companies do not
qualify as third-party beneficiaries of the agreement.
The district court did not abuse its discretion when it determined that
Gallagher Service and Risk Placement Services were likely to prevail on the merits
on their complaint of breach of contract. The companies established that Egan had
violated the restrictive covenants and that they would likely prevail against Egan’s
proffered defense that Gallagher first breached the contract. See Supinski v. Omni
Healthcare, P.A., 853 So. 2d 526, 532 (Fla. Dist. Ct. App. 2003). The district court
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had to “read and construe [the offer and the agreement] together,” to evaluate the
merits of Egan’s defense, Murphy v. Chitty, 739 So. 2d 697, 698 (Fla. Dist. Ct.
App. 1999) (internal quotation marks omitted), and reasonably concluded that the
companies would likely succeed on the merits. Egan contends that the written
offer created a specific “promise to pay [him] a salary of $265,000 per year . . .
without qualification or benchmarks” that superseded a general right of
modification reserved in the agreement, but his argument cannot be squared with
the agreement. Although the offer stated that Egan would receive a “$265,000
annual salary paid on the 15th and last day of the month,” paragraph two of the
agreement allowed “the Company . . . from time to time modify the specific terms
and conditions” of his “semi-annual monthly payment of compensation.” And
paragraph 21 provided that “the Agreement supersede[d] . . . all previous
agreements between the parties[] to the extent . . . [they] consider[ed] subject
matters herein addressed.” We cannot say that the district court abused its
discretion in determining that Egan was unlikely to prevail on his defense that he
was relieved of his obligations under the restrictive covenants because Gallagher
Service breached the contract.
The district court also did not abuse its discretion when it determined that
the factors of irreparable harm and balance of harms weighed in favor of issuing a
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preliminary injunction. Gallagher Service and Risk Placement Services
established that they would suffer irreparable harm without an injunction. “An
injury is ‘irreparable’ only if it cannot be undone through monetary remedies.”
Ferrero, 923 F.2d at 1449 (quoting Cate v. Oldham, 707 F.2d 1176, 1189 (11th Cir.
1983)). The district court found that, if Egan continued to solicit his former
clients, the companies stood to lose accounts in which they had invested significant
resources, revenues from the renewal of those accounts, and goodwill cultivated
with those clients. The loss of longstanding clients and goodwill is an irreparable
injury. See id. And Egan failed to establish that the harm he suffered outweighed
that faced by the companies. Although Egan lost the ability for two years to solicit
clients with whom the companies had an ongoing relationship, he retained the
ability to compete with the companies for new accounts. These factors favored
preliminarily enjoining Egan from violating the restrictive covenants.
We AFFIRM the preliminary injunction against Egan.
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