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A Pennsylvania judge last week dismissed a request from Wells Fargo Insurance Services USA Inc. to stop a group of former brokers in Pittsburgh who joined rival EPIC Insurance Brokers & Consultants from soliciting business from their former clients.
According to the state court ruling, the noncompete agreements were unenforceable after banking giant Wells Fargo & Co. agreed to sell its insurance brokerage operations to USI Insurance Services L.L.C.
Judge Christine Ward of the Court of Common Pleas of Allegheny County in Pittsburgh on April 3 denied Wells Fargo Insurance’s petition for a preliminary injunction in Wells Fargo Insurance Services USA Inc. vs. Edgewood Partners Insurance Center, Sean Andreas, Zachery Mendelson, Charles Yorio, Phillip Wakim, Janice Zewe, Sally Krauss, Kurt Karstens, and Peter Kosorick.
According to the ruling, Wells Fargo announced in May 2017 it was exiting the commercial insurance business. USI Insurance Services agreed to acquire the business in June, and the purchase agreement included restrictive covenants precluding Wells Fargo from soliciting or competing with their former clients after the sale.
“The impending sale led the individual defendants to further contemplate alternative employment due to the business climate at Wells Fargo and their understanding of the working conditions at USI, their potential future employer,” the ruling states.
The brokers were given an October deadline to sign employment agreements with USI, the ruling states, but they began resigning individually at the end of September to join San Francisco-based EPIC.
“Upon their departure, the individual defendants sent emails to numerous contacts informing them of their new employment with EPIC and a link to learn more about their new employer if they were interested,” the ruling states.
According to earlier filings in the case, EPIC hired roughly 25% of Wells Fargo Insurance’s Pittsburgh employees who served over $4 million in client revenue.
In her decision, Judge Ward said non-compete covenants “are disfavored under Pennsylvania law” and Wells Fargo “failed to show a clear protectable interest” after the sale agreement with USI.
“Due to the fact that WFSI cannot do business with its former clients after handing them over to USI, it would be improper to enjoin the defendants from doing so.”
In addition, the emails that the brokers sent to former clients do to rise to the level of solicitation, the judge ruled, and Wells Fargo Insurance never established that it “had any remaining protectable interest after the sale of their commercial insurance business.”
“We greatly appreciate the time and attention given to this important matter by the court,” Mr. Andreas, Pittsburgh-based EPIC principal who was named in the suit, said in a statement. “The recent decision confirms what we’ve maintained all along, which is that Wells Fargo had no legal right to force a sale upon us and treat us and our longstanding client relationships without due consideration or deference to the client’s right to choose their insurance professionals.”
A Wells Fargo spokesman said the company would not comment on the ruling and referred inquiries to USI, which did not respond to a request for comment.
In an email, USI said: “USI generally does not comment on pending litigation but we feel it is important to make it clear that Wells Fargo Insurance Services Inc. – now known as USI Insurance Services National Inc. – is the plaintiff in the action against EPIC and the former employees. USI will continue to pursue what it considers violations of its former employees’ agreements.”
Wells Fargo Insurance Services USA Inc. on Thursday said Tim Prichard has been named head of the brokerage effective April 3, succeeding Laura Schupbach, who has accepted a new position within the company.