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A federal judge in Arizona on Friday denied USI Insurance Services LLC’s motion for a preliminary injunction against Alliant Insurance Services Inc. and former USI producers who joined the rival brokerage.
In the case, USI Insurance Services LLC v. Alliant Insurance Services Inc., William J. Havard II, et al., which was filed in U.S. District Court in Phoenix in January, USI sought a temporary restraining order and preliminary injunction stopping Alliant from encouraging any USI employee to breach 60-day notice periods, causing any former USI employees to breach restrictive covenants in their employment agreements, and employing Mr. Havard and his colleague Robert Engles during their 60-day notice period.
Mr. Havard was head of USI’s Phoenix environment pollution and liability team, and Mr. Engles specialized in commercial property/casualty insurance. Both brokers had become dissatisfied with their positions at USI before their separate resignations, along with two support staff, in late January, court papers say.
USI alleged that Mr. Havard sought to move at least two clients to Alliant and serviced other former USI clients when he joined Alliant, breaching nonsolicitation and nonservice clauses in his employment contract. USI also alleged that Mr. Engles solicited at least one USI client.
Among other things, Judge Susan Brnovich found that the intention of the clients to follow Mr. Havard – with whom they had developed a professional relationship – to his new employer “does not necessarily amount to solicitation.”
The court also found another Alliant employee used Mr. Engles’ connection to a former client to solicit business and Mr. Engles did not inspire the call.
In addition, the court found that the nonservice agreement in Mr. Havard’s contract, which prohibited him from providing services to a USI client that the company serviced over the past two years for a two-year period appeared “unreasonably broad.”
According to the ruling, USI did not meet the legal burden to prove that its restrictive covenants were enforceable.
Given the high turnover of clients that is usual in the insurance brokerage sector and the length of the nonsolicitation agreements, “the Court is currently unpersuaded that the two-year periods … is sufficiently tailored to protect client goodwill. However, the Court invites additional briefing,” the ruling states.
In addition, the court ruled that USI is unlikely to succeed in its claim that Alliant interfered with the brokers’ employment contracts, noting that the brokerage did not advise Mr. Havard and Mr. Engles to resign immediately and did not provide legal advice, although Alliant does recommend and fund independent legal counsel.
“The Court agrees that Alliant’s conduct is consistent with legitimate competitive purposes,” the court ruled.
USI declined to comment on the ruling.