JTL Consulting, L.L.C. v. Shanahan

190 S.W.3d 389, 2006 Mo. App. LEXIS 92, 2006 WL 162745
CourtMissouri Court of Appeals
DecidedJanuary 24, 2006
DocketED 85578, ED 86054
StatusPublished
Cited by14 cases

This text of 190 S.W.3d 389 (JTL Consulting, L.L.C. v. Shanahan) is published on Counsel Stack Legal Research, covering Missouri Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
JTL Consulting, L.L.C. v. Shanahan, 190 S.W.3d 389, 2006 Mo. App. LEXIS 92, 2006 WL 162745 (Mo. Ct. App. 2006).

Opinion

KATHIANNE KNAUP CRANE, Presiding Judge.

Plaintiffs, a consulting company and its insurance broker client, appeal from a judgment in favor of defendant, a former member of the consulting company. The trial court entered summary judgment in defendant’s favor on Count I of plaintiffs’ lawsuit alleging breaches of customer non-solicitation clauses and awarded attorney’s fees and costs to defendant. We affirm for the reasons that 1) the consulting company did not have a protectable interest in the customers of its client, the insurance broker, and therefore could not enforce a covenant not to solicit its client’s customers against a former member; 2) the consulting agreement between the insurance broker and the consulting company and its members did not contain a nonsolicitation clause applicable to the situation in which a member’s interest was terminated by the consulting company; 3) the insurance broker was not a third-party beneficiary entitled to enforce the consulting company’s nonsolicitation clause contained in the consulting company’s operating agreement with its members; and 4) the claim for relief in Count I, on which the judgment was rendered, was limited to breach of the customer nonsolicitation clause. 1

FACTUAL AND PROCEDURAL BACKGROUND

The Parties

Plaintiff, Lockton Companies of St. Louis, Inc. (Lockton), was an independently owned insurance brokerage firm that was in the business of providing insurance products and services and related surety and risk management services. The other plaintiff, JTL Consulting, L.L.C. (JTL), was formed as a limited liability company under the laws of Delaware. JTL’s members worked as sales representatives, or “producers,” for Lockton’s products and services. Defendant, Michael F. Shana-han, Jr., became a member of JTL and a Lockton consultant after JTL was formed.

The Agreements

This case involves three agreements: 1) The Operating Agreement, executed by the members of JTL on December 31, 1993, 2) the Consulting Agreement, executed by JTL, its members, and Lockton, also on December 31,1993, and 3) the Additional Member Agreement, executed by JTL, Lockton, and defendant on May 16, 1995.

a. Relevant Terms of the Operating Agreement

The Operating Agreement required each member of JTL to submit all of his or her customers’ insurance-related businesses exclusively to Lockton.

6.4 Nature of Duties. Whereas the Members must act through Clients, each Member shall do all things necessary to maintain, promote and improve the business of the Company and the Client *393 which is a signatory to the Consulting Agreement with such Member.... Each Member shall, during the term of this Agreement, submit to such Client, solely and exclusively, all insurance related business from the Member’s customers served by the Member and all the customers hereafter procured by him or her while a Member, together with all renewals of all such business while a Member. 2

The Operating Agreement also provided that Lockton would become the owner of all customer accounts produced by a JTL member and that Section X would control solicitation of those accounts after a JTL member’s interest was terminated:

6.5 Ownership of Accounts. All Customer Accounts produced by a Member shall become the property of the Client through which such account is placed, and a Member shall have no right, title or interest in such Customer Account or in any records of Company or the Client pertaining to such Customer Accounts; provided, however, the provisions of Section X shall control the solicitation of such Customer Accounts following the termination of the Member’s interest in the Company.

Section X contained the following clause prohibiting a member’s solicitation of any of Lockton’s customer accounts for a two-year period after termination:

10.3 Solicitation of Customer Accounts. If a Member terminates or causes the termination of such Member’s Interest, for a period of two (2) years following the resulting termination of the Member’s affiliation with the Company, the Member shall not, on behalf of such Member of any other Person, call upon or solicit or in any way do business with any Customer Accounts owned by any Client or its Affiliates or owned by any other broker or employee associated with such Client or its Affiliates regardless of whether or not these Customer Accounts were acquired by such Client or its Affiliates during the Member’s affiliation or during the two (2) years following the termination of the Member’s affiliation with the Company and regardless of whether or not these Customer Accounts were produced for such Client or its Affiliate by the Member ....

The Operating Agreement also recited that it contained the parties’ entire agreement except for the Consulting Agreement and any other written agreement among JTL, Lockton, and the members of JTL:

12.4 Entire Agreement. Except as may be set forth in the Consulting Agreement among the Company, a Client and Members and any other written agreements, this Agreement contains the entire agreement and understanding among the parties hereto with respect to the terms herein referred to, and no representations, promises, agreements or understandings, written or oral, not herein contained shall be of any force or effect.

It further recited that “[n]one of the provisions contained in this Agreement shall be for the benefit of or enforceable by any third parties.... ” Section 12.13 allowed the prevailing party to recover attorney’s fees incurred to enforce the Operating Agreement.

b. Relevant Terms of the Consulting Agreement

In the Consulting Agreement, JTL and its members agreed to provide brokerage *394 services for Loekton’s insurance products and services in return for compensation paid by Lockton. Article V of the Consulting Agreement provided that all customer accounts produced by JTL’s members would become Lockton’s property, and the provisions of Article VII would control solicitation of those accounts after the termination of the Consulting Agreement or a JTL member’s interest in JTL:

All customer accounts produced by the Members shall become the property of Glient, and neither JTL nor any Member shall have right, title or interest in such accounts or in any records of Client pertaining to such accounts; provided, however, the provisions of Article VII shall control the solicitation of such accounts following the termination of this Agreement or a Member’s interest in JTL. 3

Only one section of Article VII contained a nonsolicitation clause pertaining to customer accounts. This section applied to two situations; if the Consulting Agreement was terminated by JTL, or if it was breached or terminated by Lockton:

7.03 Solicitation of Accounts.

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Cite This Page — Counsel Stack

Bluebook (online)
190 S.W.3d 389, 2006 Mo. App. LEXIS 92, 2006 WL 162745, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jtl-consulting-llc-v-shanahan-moctapp-2006.