Preliminary injunction dismissed in Alliant noncompete suit

A federal appeals court has vacated a preliminary injunction order issued by a lower court against Alliant Insurance Services Inc., which allegedly poached another broker’s employees, stating Alliant had been given inadequate notice of the injunction.

Four former employees of Camden, New Jersey-based Corporate Synergies Group LLC, Gregory Andrews, Simone Ur, Gerard Duff and Barbara Diggs, left the brokerage over a period of two months beginning in July 2018 to join Newport Beach, California-based Alliant, according to Tuesday’s ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in Corporate Synergies Group LLC v. Gregory Andrews; Simone Ur; Gerard Duff; Alliant Insurance Services Inc.; Barbara Diggs.

Alliant’s sales director, Daniel McCaffrey, then contacted CSG clients covered by the former workers’ non-solicitation and confidentiality agreements to solicit their business for Alliant, and former CSG employees attended meetings at which he made his sales pitch to some of those clients, said the ruling. Mr. McCaffrey also discussed CSG clients with the former employees.

After those meetings and conversations, five CSG clients, accounting for more than $500,000 in annual revenue, left CSG and became Alliant clients, according to the ruling.

In August 2018, CSG filed a complaint against Alliant and the former employees in U.S. District Court in Newark, New Jersey, alleging violations of the Federal Defend Trade Secrets Act and New Jersey law. 

The District Court issued a temporary restraining order against Mr. Andrews from calling upon or soliciting CSG clients or former clients in September 2018. The court also ordered expedited discovery and said it would schedule a preliminary injunction hearing after expedited discovery was completed.

At an October hearing over the issue of expanding the TRO’s scope, the District Court said it was issuing a preliminary injunction, which it did the next day, which “was the first point at which the District Court mentioned that a preliminary injunction was even under consideration,” said the ruling. The preliminary injunction was for a two-year period.

The defendants appealed, and the appeals court granted a stay of the preliminary injunction pending the appeal’s resolution.

The injunction “was issued without proper notice and, thus, contrary to due process,” said a unanimous three-judge appeals court panel. “A preliminary injunction is an extraordinary remedy never awarded as of right,” said the ruling, in quoting an earlier decision. 

The defendants in the case “had no notice that the broad injunctive relief that the district court ultimately ordered was even under consideration” at the September and October hearings, the ruling said. 

Although there were two hearings, “the jump from a six-week temporary restraint to a two-year injunction was not reasonably foreseeable, particularly given  the motion that the defendants were battling against did not request the expansive relief that the Court ordered,” said the ruling, in vacating the preliminary injunction.

“Nothing in this decision is intended to imply how the District Court should decide this matter on the merits after proper notice and hearing,” the ruling concluded.

Ivan R. Novich, a shareholder with Littler Mendelson P.C. in Newark, who represents CSG, said in a statement, “The appellate decision made clear that it was based on purely procedural grounds and not on the merits of plaintiff’s claims.” The appellate court “did not disturb the underlying factual or legal findings of the district court judge, and we expect the district court to continue to uphold the validity of our client’s restrictive covenants and grant renewed relief for Defendants’ breaches when presented with the facts again.”

Alliant’s attorney did not respond to a request for comment.

Earlier this year, Lockton Cos. LLC fired a barrage of litigation against Alliant Insurance Services Inc. for allegedly poaching 26 of its employees, including lawsuits filed in Delaware Chancery Court and state and federal courts in Missouri.