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Aon hits back in battle over broker talent

Posted On: Feb. 28, 2016 12:00 AM CST

Aon P.L.C.'s suit against seven former employees and two units of rival insurance brokerage Jardine Lloyd Thompson Group P.L.C. shows how companies of all kinds are being more aggressive in trying to protect their human assets.

The suit, filed last week in Cook County Circuit Court in Chicago, accuses current JLT Specialty Insurance Services Inc. CEO Michael Rice and six others of violating their agreements not to compete against Aon for two years after leaving the company.

The suit also accuses JLT Specialty Insurance Services Inc. and JLT Re (North America) Inc. of inducing the former Aon employees to violate their noncompete agreements and a “coordinated effort” with “certain other former Aon and current JLT employees” to engage in “multiple raids on Aon's officers, employees and clients” since August 2014.

Aon said it had lost 55 employees and “millions” of dollars in business to JLT.

The suit seeks unspecified compensatory damages, an injunction enjoining the former employees from direct involvement with Aon competitors or clients for two years and an order forbidding JLT from inducing any Aon employee to breach their obligations to Aon.

The suit, on which JLT declined comment, also seeks costs and legal fees.

Poaching suits are not uncommon in the brokerage world. For example, Willis Ltd., part of what now is Willis Towers Watson P.L.C., sued JLT last year in a London court for luring its fine art, jewelry and specie division employees.

Aon also has sued Newport Beach, California-based Alliant Insurance Services Inc. for allegedly poaching key members of it construction practice.

While observers declined to comment on the specifics of the dispute between Aon and JLT, they agree such actions are becoming more common.

“I think it's industry practice that firms will be in court seeking a (temporary restraining order) and ultimately ask the courts to enforce the validity of covenants not to pirate,” said Timothy Cunningham, a principal at Chicago-based investment banking and consulting firm Optis Partners L.L.C.

“I have no empirical studies that show that there is an increase in suits among competitors for poaching,” said Daniel P. Hart, a partner at Seyfarth Shaw L.L.P. in Atlanta. “But anecdotally, it does seem there is increased litigation across industries by competitors arising out of poaching of their employees.”

Mr. Hart said employee nonrecruit and nonsolicitation covenants generally are more enforceable than customer nonsolicitation covenants.

“As a result, if an employer has evidence that one of its former employees has recruited a number of co-workers to leave and go to work for a competitor, the employer may be able to prove a breach of the nonrecruit convenant by the former employee as well as evidence of a claim for tortious interference by the new employer,” he said.

Such actions are “simply the inevitable outcome of a knowledge-based economy, when one of the most important resources that any company has is its people,” Mr. Hart said.

“There's always demand for top talent, and there's always shifts in the market when talented people perceive opportunities elsewhere,” said Terrence P. Canade, a partner at Locke Lord L.L.P. in Chicago.

“My sense is that there have always been disputes of this nature because the law remains somewhat unsettled from jurisdiction to jurisdiction,” which he said creates a challenge for judges, lawyers and employers and employees.

“The role of noncompete (agreements) in commerce in general has ramped up substantially,” said John L. Ward, CEO of Cincinnatus Partners L.L.C., a Loveland, Ohio-based private equity firm. “It's a big issue.”

Mergers and acquisitions are one driving force.

“When there are acquisitions, there are groups of people who don't want to stay with the new group,” Mr. Ward said. Whenever intellectual capital is involved, “it becomes an issue of protecting the corporate assets.”

Mr. Ward said attempts to enforce noncompete agreements across the economy are reaching beyond the ranks of top executives. “Once it was only senior executives and it's coming down into food chain,” he said.

“I don't know if it's become more aggressive,” but brokerages since the 2008 financial crisis have sought to control expenses, including compensation, said John Wicher, principal of John Wicher & Associates Inc. in San Francisco.

“People don't leave when they're happy,” he said. “In an industry where 99% of your assets walk out the door every evening, you're at risk when you have brokers who don't feel that they're being compensated adequately.”

On the other side of the equation, “making great hires is an alternative to making acquisitions,” he said.

JLT re-entered the U.S. retail market in 2014, and group CEO Dominic Burke last year told Business Insurance: “We've arrived on the shores of the United States. We've burnt our boats, and we are not going back.”