CHICAGO—Ryan Specialty Group Inc. won a round last week in its fight to keep dozens of former CRC Insurance Services Inc. employees, but the dispute between the rival wholesalers still is far from resolved.

In a ruling in U.S. District Court in Chicago, Judge James Zagel denied CRC's request for a preliminary injunction, which allows the former CRC employees to continue working at Ryan Specialty while the case proceeds.

Judge Zagel said although CRC demonstrated a “better-than-negligible” chance of success on the merits of its claims, any such move would result in “significant harm” to the 39 former CRC employees involved in the case.

CRC was seeking a preliminary injunction against Chicago-based Ryan Specialty; its founder, Patrick G. Ryan; its subsidiary RT Specialty L.L.C. and a group of former CRC employees, arguing “its very survival was in jeopardy,” according to court documents. The move would have restrained the former employees from being employed by or associated with any entity in competition with CRC in the state of Illinois, and from soliciting CRC's employees and customers for two years, as stipulated in the employees' respective employment contracts, according to court records.

In May, more than 120 CRC employees in Chicago, Philadelphia and California resigned to join Ryan Specialty. Both firms have filed lawsuits against each other over the departing employees' employment contracts.

CRC Chairman and CEO Tom Curtin said in an e-mail statement that he was “disappointed with the court's decision.”

“We are only at the beginning of what will be a protracted legal dispute. CRC intends to continue vigorously defending itself and protecting its business,” he said.

In its suit, Birmingham, Ala.-based CRC alleges, among other things, conspiracy and breach of contract and accuses Ryan Specialty of conducting a “well-choreographed raid.”

At issue in the suit is the enforceability of the employees' non-compete agreements, a confidentiality agreement, and a non-solicitation agreement, according to court documents. Both parties agree the confidentiality agreement is enforceable and Ryan Specialty has indicated to the court that it is complying with all confidentiality agreements, Judge Zagel said.

Ryan Specialty and a group of more than 60 former CRC employees will continue to pursue a lawsuit seeking “declaratory relief” from their employment contracts, Mr. Ryan said. An amended complaint was filed in U.S. District Court in Chicago last week.

After last week's ruling, the case becomes squarely about damages, legal experts say. If this case proceeds, “a judge or jury will have to decide if the restrictive covenants are enforceable. If so, were they breached? If so, what are the damages that flow from the breach?” said Gary B. Eidelman, a labor attorney with Saul Ewing L.L.P. in Baltimore.

“The damages could be quite substantial given the sheer size and scope of the people involved,” Mr. Eidelman said.

Although both sides have indicated they are determined to take the case to trial, legal experts say a settlement is a strong possibility.

“Ninety-five percent of these restrictive covenant suits resolve themselves through some form of settlement,” said Monica Latin, a partner with Carrington, Coleman, Sloman & Blumenthal L.L.P. in Dallas.

Industry experts said although CRC has suffered a blow, it likely will survive the setback. “As one of the nation's largest wholesalers, they will be able to rebuild,” said John Butler, managing director and head of investment bank Piper Jaffray & Co.'s insurance practice in New York.

“But the reality of this business is it's all about relationships, and if people leave, there's a good chance the business will follow,” he said.

Meanwhile, CRC said it will continue to pursue litigation in Alabama against Ed McCormack, a managing director of Ryan Specialty and former outside counsel to CRC. Among other things, CRC accuses Mr. McCormack of soliciting CRC employees and causing CRC employees to violate their employment contracts.

In addition, litigation is pending in California between former CRC President Timothy W. Turner and CRC over various restrictive covenants contained in Mr. Turner's CRC employment agreement. Mr. Turner joined Ryan Specialty in February as managing director.