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 fall, USI Insurance Services LLC v. Alliant Insurance Services Inc., William J. Havard II, et al.filed in U.S. District Court in Phoenix in January, USI sought a temporary restraining order and preliminary injunction preventing Alliant from encouraging any USI employee to violate 60-day notice periods, causing all former USI employees to violate restrictive covenants terms of their employment contracts, and hire Mr. Havard and his colleague Robert Engles during their 60-day notice period.
Mr. Havard was head of USI̵7;s Phoenix environmental 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 departures, along with two support staff, in late January, court papers say.
USI claimed that Mr. Havard attempted to move at least two clients to Alliant and served other former USI clients when he joined Alliant, violating non-solicitation and non-service clauses in his employment agreement. USI also claimed that Mr. Engles requested at least one USI client.
Among other things, Judge Susan Brnovich found that the clients’ intention to follow Mr. Havard — with whom they had developed a professional relationship — to their new employer “does not necessarily constitute solicitation.”
The court also found that another Alliant employee used Mr. Engle’s connection to a former client to solicit business and Mr. Engles did not inspire the conversation.
Additionally, the court found that the non-service agreement in Mr. Havard’s contract, which prohibited him from providing services to a USI client the firm has served in the past two years for a two-year period. “unreasonably broad.”
According to the ruling, USI did not meet the legal burden of proving that its restrictive covenants were enforceable.
Given the high turnover of clients common in the insurance brokerage industry and the length of non-solicitation agreements, “the Court is not currently convinced that the two-year periods … are sufficiently tailored to protect client goodwill. However, the Court invites further information,” says the judgment.
Additionally, the court ruled that USI is unlikely to succeed in its claim that Alliant interfered with the brokers’ employment agreements, noting that the brokerage did not advise Mr. Havard and Mr. Engles to resign immediately and did not provide legal advice, although Alliant recommends and funds independent legal advice.
“The court agrees that Alliant’s conduct is consistent with legitimate competitive purposes,” the court ruled.
USI declined to comment on the ruling.