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McGriff Seibels & Williams, Inc. v. Sparks

United States District Court, N.D. Alabama, Southern Division

September 23, 2019

McGRIFF SEIBELS & WILLIAMS, INC., Plaintiff,
v.
PAUL SPARKS, DARREN SONDERMAN, DAVID McMAHAN, JOHN TANNER, and J. GREGORY McCOLLISTER, Defendants.

          MEMORANDUM OPINION AND ORDER

          ANNEMARIE CARNEY AXON, UNITED STATES DISTRICT JUDGE

         This case is before the court on Plaintiff McGriff, Seibels & Williams, Inc.’s (“MSW”) request for a preliminary injunction. (Doc. 11 at ¶¶ 81–83; Doc. 12).

         Defendants Paul Sparks, Darren Sonderman, David McMahan, John Tanner, and J. Gregory McCollister previously worked for MSW in MSW’s Financial Services Division. Defendants now work for a MSW competitor. MSW alleges that Defendants have tortiously interfered with its business relations and breached the terms of their employment agreements with MSW by soliciting MSW clients and employees and using MSW’s confidential information.

         In its amended verified complaint, MSW asserts state law claims against Defendants for breach of contract, tortious interference with business relations, breach of fiduciary duty, and conspiracy to interfere with business relations. (Doc. 11). MSW seeks a preliminary injunction enjoining and restraining Defendants from soliciting MSW’s customers and employees; misappropriating MSW’s confidential, proprietary, and trade secret information; and intentionally interfering with MSW’s business relationships. (Doc. 11 at 21; see also Doc. 12).

         The court held a hearing on MSW’s request for a preliminary injunction. Having considered the entire record in this case, including the evidence presented at the hearing and the parties’ briefs, the court DENIES MSW’s request for a preliminary injunction.

         I. RELEVANT FACTS

         MSW’s amended verified complaint sets out its version of the facts supporting its request for the extraordinary remedy of a preliminary injunction. To hear MSW tell the tale, two of its former employees, Defendants Paul Sparks and Darren Sonderman, plotted to willfully violate their employment agreements with MSW by creating a new insurance broker (called CAC Specialty) directly in competition with MSW. (Doc. 11 at ¶ 38). As part of the “conspiracy, ” Messrs. Sparks and Sonderman allegedly isolated loyal MSW employees from valuable MSW clients in order to lure those clients away from MSW. (Id. at ¶ 39). They- along with the other Defendants-also allegedly solicited MSW’s best employees to leave the company and used MSW’s confidential, proprietary, and trade secret information to give their new company an unfair advantage and to undercut MSW. (Id. at ¶¶ 54, 66, 81).

         Based on these verified allegations, the court granted MSW’s August 14, 2019 request for a temporary restraining order in part and restrained Messrs. Sparks, Sonderman, and McCollister from directly or indirectly soliciting a number of identified clients or prospective clients of MSW, from directly or indirectly inducing any MSW employee to leave MSW, and from interfering with MSW’s business relationships. (Doc. 21 at 6). The court also set a hearing on MSW’s request for a preliminary injunction. (Doc. 19).

         Beginning on August 26, 2019 and continuing over the course of the following four days, the parties presented the court with evidence relating to MSW’s motion for a preliminary injunction. The evidence does not bear out MSW’s version of events. Although not directly relevant to the issue of whether Defendants breached their employment agreements, the court finds that the historic background of CAC is critical to understanding the facts giving rise to the lawsuit. For that purpose, its history is included for context followed by the facts directly related to the Defendants’ alleged breach of their employment agreement.

         A. The Creation of CAC

         1. A “Cool Opportunity”

         Bruce Denson, Jr. is the President and Chief Operating Officer of Cobbs Allen & Hall (“Cobbs Allen”), an insurance broker that competes with MSW. (Doc. 11 at ¶ 3). Over two years ago, Mr. Denson began working on the general concept of a specialty insurance broker and started recruiting potential employees. (Tr. at 431).

         Mr. Denson spotted an opening for the specialty brokerage in September 2018, when two insurance brokerage firms-Marsh and JLT- merged. (Tr. at 432, 547). Mr. Denson suspected that JLT employees might be looking for an opportunity to work somewhere else post-merger. (Tr. at 547). Based on that hunch, Mr. Denson began a targeted recruiting effort focused on former JLT employees. (Tr. at 547).

         Cobbs Allen recruited outside of JLT as well. (Tr. at 433). Mr. Denson soon discovered a pattern of discontent among MSW employees. (Tr. at 436). Mr. Denson believed that this discontent might make MSW a fertile recruiting ground for Cobbs Allen and began communicating with MSW employees in the fall of 2018. (Tr. at 436, 567). Although generally discontented, none of the MSW employees seemed interested in the idea of CAC. That began to change in February 2019, when MSW’s parent company, BB&T, announced a merger of equals with SunTrust Bank. (Tr. at 12).

         In late February 2019, Cobbs Allen contacted Defendant Paul Sparks on the recommendation of one of Mr. Sparks’ friends and colleagues. (Tr. at 187). At the time, Mr. Sparks was the Senior Executive Vice President of MSW responsible for the overall leadership of MSW’s Financial Services Department. (Doc 11. at ¶ 13). Mr. Sparks, at Cobbs Allen’s invitation, went to dinner with Mr. Denson to discuss a “cool opportunity” that Cobbs Allen was trying to put together. (Tr. at 193). Mr. Sparks invited MSW’s claims counsel, Defendant John Tanner, to join them for dinner. (Tr. at 194).

         At the dinner, Mr. Denson pitched the idea of a specialty brokerage. During the conversation, Mr. Sparks echoed the concerns Mr. Denson had heard about MSW from other MSW employees. (Tr. at 195). But, Mr. Sparks left the dinner unconvinced that Cobbs Allen’s proposed venture would ever work and wished Mr. Denson good luck. (Tr. at 194, 197). Undeterred by Mr. Sparks’ lack of enthusiasm, Mr. Denson continued to recruit Mr. Sparks throughout the spring.[1](Tr. at 213).

         2. The Pitch

         Mr. Sparks was not the only MSW employee who met with Mr. Denson in the spring of 2019. Mr. Denson independently reached out to a significant number of MSW employees, including all of the other defendants. (See e.g., Tr. at 440, 445, 447, 457-58, 499, 501, 504, 523). Unfortunately for Mr. Denson, they like Mr. Sparks, expressed skepticism about the proposed venture. Regardless, Mr. Denson persisted with all of his MSW recruits all the while fine tuning the business model for CAC.

         There is no secret formula for recruiting. According to Mr. Sparks, if you are looking for the top producers in a particular insurance line, you call companies to see who represents them and underwriters to ask them to identify the big producers at a specific firm. (Tr. at 119, 212) Or, if you have experience in that specific field, you know the top people in the industry based on their reputation. (Tr. at 211). Armed with general information about the top producers in the industry, Mr. Denson went after them.

         Mr. Denson selected the people he was interested in recruiting and reached out to most of them through LinkedIn (tr. at 496, 523), a professional networking website. If the recruit responded to his connection request, Mr. Denson would meet the individual and pitch the concept-and the opportunities for ownership- to them. (Tr. at 527-28). In these meetings, people would either offer information about their current salary or Mr. Denson would ask. (Tr. at 510, 528). They might also speak generally about the clients they served and the amount of new business they brought in annually. (Tr. at 396-97). None of these individuals provided a list of their clients. (Tr. at 466).

         Diligently and relentlessly, Mr. Denson recruited the top producers from two larger insurance brokers at a time when those brokers were left vulnerable by a merger. All told, and over the span of two years, Mr. Denson reached out to hundreds of people within the insurance industry in an attempt to recruit them to the new venture. (Tr. at 503). At least 40 of those people were MSW employees. (Tr. at 524).

         3. The Sale

         Mr. Sparks became intrigued with Cobbs Allen’s idea and met with Mr. Denson and Jack Leventhal, Mr. Denson’s banking partner, several times between March and July. (Tr. at 200). The purpose of the meetings was to flesh out a general, workable concept of the new business. (Tr. at 200, 434). The men collaborated on how to structure the company, how to recruit JLT employees and other industry talent, and how to capitalize on being a “really unique specialty broker.” (Tr. at 200). Finally, the specialty brokerage came to fruition as CAC Specialty, an affiliate of Cobbs Allen. (Tr. at 427).

         Mr. Sparks left MSW in July (tr. 205) and was the first person to sign on to work for CAC (tr. at 560). Having someone with Mr. Sparks’ ability and stature in the insurance industry sign on to CAC was a game changer. (Tr. at 560). According to Mr. Denson, Mr. Sparks’ decision to join CAC was “absolutely” important to CAC’s ability to close the deal with JLT employees. (Tr. at 561). It also naturally had an impact on MSW employees’ decision on whether to join CAC. (Tr. at 603). Once Mr. Sparks signed on, Mr. Denson wasn’t just calling people; people were calling him. (Tr. at 561). According to Mr. Denson, the number of potential recruits reaching out to him after hearing Mr. Sparks joined CAC “has gone through the roof.” (Id.).

         Within two weeks of Mr. Sparks’ departure from MSW, a number of JLT employees signed on to join Mr. Sparks at CAC. So too did Messrs. Sonderman, McCollister, Tanner, and McMahan. (Tr. at 153, 261, 306, 411). In addition to Defendants, eight other MSW employees left for CAC within a month of Mr. Sparks’ departure from MSW. (Tr. at 494).

         B. The MSW Employment Agreements

         All Defendants executed restrictive covenants (“Agreements”) with MSW. (Pl. Exs. 1–5). Messrs. Sonderman, Sparks, Tanner, and McCollister executed a Nonpiracy and Covenant Not to Compete restricting them from contacting, soliciting, making sales to, or attempting to procure business from any MSW clients or prospective clients located in nine states: Georgia, Florida, Alabama, Mississippi, Texas, Tennessee, Louisiana, South Carolina, and North Carolina (the “Southeast”). (Pl. Exs. 1, 2, 4, 5).

         Mr. McMahan’s executed an Employment Agreement restricting him from soliciting, diverting, or taking away or attempting to solicit, divert, or take away clients or prospective clients with which he or MSW had had contact for some period of time prior to his departure from MSW. (Pl. Ex. 3).

         All Defendants agreed not to solicit-directly or indirectly-MSW employees to leave MSW or use or disclose MSW’s confidential information in subsequent employment. (Pl. Exs. 1–5).

         MSW contends that Defendants breached their Agreements and interfered with MSW’s business relationships. The court examines the evidence (or lack thereof) in support of those claims below.

         1. Defendants’ Contact with MSW Clients in the Southeast

         MSW alleges that Defendants contacted various MSW clients in the Southeast in violation of their Agreements and in tortious interference with its business relationships. The court addresses each Defendant in turn.

         a. Mr. Sonderman

         Mr. Sonderman contacted four MSW clients located in the Southeast. The first is Synovus. According to Mr. Sonderman, he and Mr. Sparks jointly managed the Synovus account. The week before Mr. Sparks left MSW, Messrs. Sonderman and Sparks had gone through the preliminary stages of renewing Synovus’s insurance. After Mr. Sparks resigned and Mr. Sonderman had decided to leave MSW-but before he actually left-he reached out to Synovus to inform it that Mr. Sparks had retired. (Tr. at 124).

         Mr. Sonderman denies that he solicited Synovus after he left MSW, but MSW alleges Mr. Sonderman solicited Synovus by contacting Synovus twice after his resignation. MSW’s only support for this allegation is two statements made through three levels of hearsay.[2] First, Dusten Cahill, a current MSW employee, testified that Ryan Harrison (another MSW employee) stated that a Synovus contact had stated that Mr. Sonderman was “pushing hard for a meeting.” (Tr. at 51). Second, Mr. Cahill testified that Mr. Harrison also told him that another Synovus contact said that Mr. Sonderman had left several voice messages and sent a text message indicating that he wanted to discuss “banking relationships” with CAC. (Id.).

         Mr. Sonderman also contacted First U.S. Bancshares, McWane, Inc., and Regions Financial Corporation, all of which are based in Alabama. Mr. Sonderman testified that since his resignation, he has had limited contact with each of them. Mr. Sonderman told First U.S. Bancshares that he had left MSW, but he testified that he did not solicit its business and did not express frustrations with MSW. (Tr. at 126). When Mr. Sonderman called McWane, he learned that MSW had already contacted McWane to inform it that Mr. Sonderman left, and MSW intended to re-staff the account. (Tr. at 127). However, McWane informed MSW that it was “probably going to follow [Mr. Sonderman] wherever he goes next.” (Tr. at 127). Finally, Mr. Sonderman called Regions to apologize for leaving MSW two days before Regions’ renewal meetings with MSW. (Tr. at 128). MSW did not present any testimony to refute Mr. Sonderman’s account of his conversations with those clients.

         b. Mr. Sparks

         After his retirement from MSW, Mr. Sparks had discussions with two MSW clients in the Southeast. Those clients are Synovus Bank and Southern Company. (Tr. at 218, 225).

         Mr. Sparks called his contact at Synovus Bank to apologize for not telling her when he last saw her that he would be leaving MSW the next day. (Tr. at 218). During that call, Mr. Sparks assured Synovus that it had “a great team of people” at MSW. (Id.). Mr. Sparks believes he told his client contact about the general structure of CAC’s business model, but he did not tell Synovus that he could offer better services through CAC. (Tr. at 228). MSW’s only evidence to the contrary is, again, buried under three levels of hearsay. Mr. Cahill testified that Mr. Harrison said that Mr. Sparks had told his Synovus contact that (1) everyone at MSW was miserable and (2) Mr. Sparks would not be surprised if the entire team was gone by the time Synovus renewed for the following year, and he was going to CAC which could provide all the same products that MSW provides. (Tr. at 58).[3]

         Mr. Sparks also had breakfast with Southern Company’s Risk Manager, who is a personal friend of Mr. Sparks. (Tr. at 226). Mr. McCollister attended the breakfast as well. Southern Company is a Georgia-based account. (Pl. Ex. 45). During this meeting, Mr. Sparks testified that the client asked about CAC, and Mr. Sparks gave her information about the new company. (Tr. at 226). Mr. Sparks told the client that he had a non-solicitation covenant in his MSW Agreement, and he intended to honor it. (Id.). According to Mr. Sparks, he did not discuss moving Southern Company’s business to CAC or provide details on how Southern Company could do so. (Tr. at 227). MSW has not presented any evidence to refute Mr. Sparks’ account of that conversation.

         c. Mr. Tanner

         There is no evidence that Mr. Tanner communicated in any way with MSW clients in the Southeast after his resignation.

         d. Mr. McCollister

         After he resigned, Mr. McCollister communicated with one MSW client in the Southeast: Southern Company. (Tr. at 407). As previously stated, Mr. McCollister attended Mr. Sparks’ breakfast meeting with the Southern Company’s Risk Manager. (Tr. at 412). Prior to that meeting, however, Mr. McCollister called the Risk Manager to tell her that he left MSW, but he had a non-solicitation agreement that applied to her. (Id.). According to Mr. McCollister, the Risk Manager simply wished him luck in his new endeavor. (Tr. at 412).

         e. Mr. McMahan

         Mr. McMahan communicated with three of his MSW clients before and after his resignation. First, on the day before he resigned, Mr. McMahan conducted a prescheduled call with his contact at Ocwen. (Tr. at 365). The Ocwen representative gave Mr. McMahan some information on how Ocwen was going to pursue its renewal. (Id.). Mr. McMahan then informed him that he was leaving MSW but would be sure to connect him with someone else at MSW to “ensure that he had a successful renewal process.” (Id.).

         Since his resignation from MSW, Mr. McMahan has contacted two of his MSW accounts: Rayonier and Mohawk. (Tr. at 354). Mr. McMahan informed both Rayonier and Mohawk that he had left MSW, that he had a nonsolicitation agreement, and that he could not solicit their business. (Tr. at 360–361). In the case of Mohawk, Mr. McMahan reached out to Mohawk only after a charitable donation he made on MSW’s behalf was returned, which necessitated Mr. McMahan’s call to explain he was no longer at MSW. (Tr. at 361).

         In addition to these few direct contacts, Mr. McMahan sent a “blast email” to a number of individuals explaining that Mr. McMahan had joined CAC Specialty. (Tr. at 357). The email outlined the new firm and contained a link to CAC’s website but did not discuss in detail what services CAC could offer. (Id.). Based on the evidence presented, Rayonier is the only MSW client who received the email. (Tr. at 356-58).

         2. Defendants’ Contact with MSW Clients Outside the Southeast

         In addition to contact with MSW clients in the Southeast, MSW contends that Defendants’ have contacted other MSW clients, all resulting in tortious interference with its business relationships. The court addresses each Defendant separately below and then reviews what other evidence MSW presented in support of its tortious interference claim.

         a. Mr. Sonderman

         After he resigned, Mr. Sonderman called Hawaiian Electric to explain that he was no longer at MSW. (Tr. at 129). Mr. Sonderman did not discuss CAC services with Hawaiian Electric but told the client that he hoped when the time was right, they could continue to work together. (Id.).

         Mr. Sonderman also met with Major League Baseball and Alvarez & Marsal in New York to discuss CAC services. (Tr. 242–243, 293).

         b. Mr. Sparks

         Six MSW clients contacted Mr. Sparks after MSW announced he had left the company. All six of the clients are located outside the Southeastern region. Those clients include: Major League Baseball, Alvarez & Marsal, Magellan, Williams Companies, Dominion Energy, and AEP Corporation. (Tr. at 219). During his conversations with these clients, Mr. Sparks told them that he was leaving to work for a new specialty broker and that he hoped to have an opportunity to connect with those clients to “chat” about the new business one day. (See Tr. at 220–21). Mr. ...


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