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Broker twice thwarted in bid to keep former clients

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Broker twice thwarted in bid to keep former clients

A commercial insurance broker who was barred from soliciting his previous clients when he joined a rival brokerage breached his employment contract with the second firm when he subsequently joined a third firm and tried to bring those previous clients with him, a Delaware court ruled.

In Lyons Insurance Agency Inc. v. Howard Wilson and GMG Insurance Agency, Judge Sam Glasscock of the Delaware Court of Chancery in Wilmington found on Friday that Mr. Wilson — who left USI Insurance Services LLC in 2014 to join Lyons, but then left Lyons to join GMG in 2016 — sought to take his book of business with him on both occasions.

Beginning his decision with, “Madness, Einstein is famously (but apparently inaccurately) credited with saying, is illustrated by doing the same thing repeatedly while expecting different results,” Judge Glasscock found that Mr. Wilson and his new employer owed Lyons damages.

According to the ruling, when Mr. Wilson left USI, many of his clients joined him at Wilmington-based Lyons. USI sued and obtained an injunction preventing Lyons and Mr. Wilson from providing insurance to his former clients.

Lyons kept Mr. Wilson on as an employee, paying him $205,000 a year, in addition to a $50,000 signing bonus plus benefits, the ruling stated.

“Wilson generated no income from his Book of Business because of the USI injunction. Furthermore, he generated only $30,000 to $40,000 in new business during his employment with Lyons,” the ruling said.

After, two years Lyons bought out Mr. Wilson’s book of business from USI for $525,000, anticipating that he would encourage the clients to move to Lyons.

“Wilson, however, doubted his ability to retrieve his former customers, some of whom had engaged another brokerage, GMG Insurance Agency, at Wilson's suggestion during the pendency of the injunction. Instead of working to entice the customers to return to Wilson at Lyons, Wilson took an easier path: He joined GMG and began servicing some of the customers in his book of business there,” according to the ruling.

Mr. Wilson had contacted his largest client, OTG Management Inc., which was being serviced by GMG, to gauge its interest in moving to Lyons and left Lyons to join GMG shortly after OTG indicated it would be staying with Lyons, the ruling said.

The annual revenue from clients he’d originally serviced at USI but had moved to GMG was about $500,000, the ruling said.

Mr. Wilson then attempted to lure other former USI clients, now serviced by Lyons, to GMG, the ruling says.

Mr. Wilson had signed an employment agreement with Lyons that forbade him from working for a competitor for two years or to impair any relationships between Lyons and its customer.

“By servicing his book of business at GMG, Wilson helped ensure that none of those clients would move to Lyons. As such, he impaired Lyons’ relationships with its prospective customers, in breach of the employment agreement,” Judge Glasscock ruled.

Dismissing several other claims by Lyons, Judge Glasscock found that it was unclear how much damages should be paid by GMG to Lyons, given that not all clients moved and some moved during the USI injunction.

“The parties should confer regarding the appropriate remedy. By Oct. 22, 2018, the parties should inform me whether they have been able to reach an agreement, or whether further Court involvement is needed and what that involvement might entail,” the judge ruled.

 

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