Hilb Rogal & Hobbs of Massachusetts, LLC v. Sheppard

24 Mass. L. Rptr. 381
CourtMassachusetts Superior Court
DecidedJanuary 7, 2008
DocketNo. 075549BLS2
StatusPublished
Cited by1 cases

This text of 24 Mass. L. Rptr. 381 (Hilb Rogal & Hobbs of Massachusetts, LLC v. Sheppard) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hilb Rogal & Hobbs of Massachusetts, LLC v. Sheppard, 24 Mass. L. Rptr. 381 (Mass. Ct. App. 2008).

Opinion

Fabricant, Judith, J.

INTRODUCTION

This action presents the plaintiffs’ effort to enforce restrictive covenants in agreements with its former employees. Before the Court is the plaintiffs’ motion for preliminary injunction. After hearing, and review of voluminous materials submitted by both sides, the Court concludes as follows.

BACKGROUND

The record before the Court, consisting of the verified complaint and affidavits submitted by both sides, provides the following factual background. The plaintiffs, Hilb, Rogal & Hobbs Company (“HRH Company”) and its subsidiary, Hilbs, Rogal & Hobbs of Massachusetts, LLC (“HRH” or “HRH of Massachusetts”), provide risk management and insurance services for business and individual clients. HRH Company is the eighth largest insurance intermediary in the United States, and the tenth largest in the world. It has 120 offices in the United States and the United Kingdom, and reported revenue of 711 million dollars for 2006. HRH focuses on property and casualty insurance and employee benefits consulting.

In 2002, HRH acquired Hobbs/OFJ Acquisition Corp. (“Hobbs”). Hobbs had acquired O’Neill, Finnegan and Jordan Insurance Agency, Inc. (“OFJ”) in December 1998. Defendants Alan Breitman and J. Brent Finnegan had been owners of OFJ prior to its acquisition by Hobbs. In connection with their sale of their business to Hobbs, each of them signed an employment agreement with Hobbs providing for guaranteed employment for five years, at increased compensation, and prohibiting each from soliciting employees of the company and from soliciting or accepting business from its customers for a period of two years after termination of their employment. Each agreement defined “company” as “Hobbs/OFJ Acquisition Corp. and any of its subsidiaries, including OFJ, affiliates or successors,” and further provided that it would “inure to . . . the successors and assigns of the Company.” Defendants Thomas Bowen, Joan Cunnick, and Theresa Flynn were employees but not owners of OFJ at the time of its sale to Hobbs. Each of them signed an employment agreement containing the same restrictive covenants. In 2004, Hobbs merged into HRH.

In 2003, HRH acquired Sheppard Riley Coughlin, Inc. (“SRC”). Defendant Thomas Sheppard was the largest shareholder of SRC, and received some six million dollars as a result of the acquisition. Defendant Charles Robinson was also a shareholder of SRC; he received approximately $600,000 from its sale. Defendant Steven Richards was an employee of SRC, but not a shareholder.

An asset purchase agreement governed the acquisition of SRC, and included a provision prohibiting Sheppard from soliciting or accepting, other than on behalf of HRH, “any risk management, insurance, or bond business from any of the customers of Seller” as of the February 28, 2003, date of the purchase, for a period of five years from that date. The asset purchase agreement also made reference to an employment agreement executed by Sheppard, for which he was paid separate consideration of $100,000. The employment agreement made Sheppard president of HRH, and prohibited him from engaging in the “insurance agency business” in specified Massachusetts and [382]*382Rhode Island counties for three years following termination of his employment with HRH, from soliciting or accepting customers or prospective customers of HRH as of the time of his termination for the same three-year period, and from hiring or soliciting any of HRH’s employees for one year after his termination.1 The agreement granted the employer the option to seek liquidated damages in case of breach, according to a formula provided.

Robinson also signed both the asset purchase agreement and an employment agreement. His employment agreement guaranteed him employment for two years at higher compensation than he had previously received, but prohibited him from soliciting or accepting customers of HRH for two years after termination of his employment, and from hiring or soliciting HRH employees for one year. Richards signed a similar employment agreement, guaranteeing him employment for one year, at increased compensation, but prohibiting him from soliciting or accepting customers of HRH for two years after termination, and from hiring or soliciting HRH employees for one year.

Defendant Kevin Connelly became employed by HRH in 2004. In June of 2007, he signed a “Nonpiracy and Confidentiality Agreement,” which prohibits him from soliciting or accepting HRH customers, and from hiring or soliciting its employees, for two years after termination of his employment. In addition to the prohibitions recited, each of the employment agreements includes provisions barring use or disclosure of the employer’s trade secrets and confidential information, along with provisions authorizing enforcement by injunctive relief.

During their employment with HRH, each of the individual defendants interacted directly with customers and potential customers, and formed strong relationships with them or continued pre-exist-ing relationships. Some of these customer relationships began with referrals from within HRH, but others — most, it appears from the affidavits submitted — arose from networking and solicitation efforts made by the individual employees.

Robert Lockhart was president of HRH Company from 2003 to 2005, and was involved in its acquisition of SRC and hiring of Sheppard. He had a non-competition agreement with HRH Company, which expired in February 2007.2 In September 2006, Lockhart founded Kinloch Holdings, which he describes in his affidavit as “a new, venture-capital backed insurance brokerage based in New York City,” made up of two subsidiaries, Kinloch Partners, Inc., and Kinloch Consulting (collectively, “Kinloch”). Lockhart formed Kinloch Partners by acquiring a pre-existing insurance brokerage firm in New York; through that entity Kinloch offers property and casualty insurance and related products and services. Lockhart formed Kinloch Consulting in April 2007 by purchasing a New York office of HRH; Kinloch Consulting offers employee benefits plans and related consulting services. As of December 12, 2007, Kinloch employed 135 individuals in its two New York offices, and had annual revenue of approximately 27 million dollars, “placing it just inside the top 100 brokerage firms in the United States,” according to Lockhart’s affidavit.

In September 2007, Kinloch began preparing to establish a Boston office. It made arrangements' to purchase a small insurance brokerage in the Boston area, and expects to close that deal in January 2008. Lockhart began recruiting brokers, agents, and other personnel in the Boston area. First among them was Thomas Sheppard, whom Lockhart had known when he worked at HRH. Sheppard and Lockhart agreed that Sheppard would leave HRH to work for Kinloch, and that, according to Lockhart’s affidavit, Sheppard would work in Kinloch’s New York office so as to be outside the geographic range of his non-competition agreement with HRH, and would “focus on management of Kinloch’s operations and building relationships with providers, such as insurance companies.” Sheppard’s affidavit puts it somewhat differently; he asserts that he will work in New York “for the near term,” “focusing on developing relationships with insurance companies and other providers ... as well as serving Kinloch’s New York and national client base.”

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Bluebook (online)
24 Mass. L. Rptr. 381, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hilb-rogal-hobbs-of-massachusetts-llc-v-sheppard-masssuperct-2008.