Lyons Insurance Agency Inc. v. Howard Wilson

CourtCourt of Chancery of Delaware
DecidedApril 29, 2021
DocketCA No. 2017-0092-SG
StatusPublished

This text of Lyons Insurance Agency Inc. v. Howard Wilson (Lyons Insurance Agency Inc. v. Howard Wilson) is published on Counsel Stack Legal Research, covering Court of Chancery of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lyons Insurance Agency Inc. v. Howard Wilson, (Del. Ct. App. 2021).

Opinion

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

LYONS INSURANCE AGENCY INC., ) a Delaware Corporation, ) ) Plaintiff, ) ) v. ) C.A. No. 2017-0092-SG ) HOWARD WILSON and GMG ) INSURANCE AGENCY, ) a Pennsylvania Limited Liability ) Company, ) ) Defendants. )

MEMORANDUM OPINION

Date Submitted: January 14, 2021 Date Decided: April 29, 2021

Michael P. Kelly, Andrew S. Dupre, and Janine L. Faben, of MCCARTER & ENGLISH, LLP, Wilmington, Delaware, Attorneys for Plaintiff.

Blake Bennett and Dean R. Roland, of COOCH & TAYLOR PA, Wilmington, Delaware, Attorneys for Defendant Howard Wilson.

Lawrence V. Cronin, of SMITH KATZENSTEIN & JENKINS LLP, Wilmington, Delaware, Attorneys for Defendant GMG Insurance Agency.

GLASSCOCK, Vice Chancellor In reference to an underpowered steamboat with a big whistle, a nineteenth-

century waterman supposedly said that she could go, or she could blow, but she

could not go and blow. The vessel had marginally enough steam to make way, but

when steam was diverted to blow the whistle, she went dead in the water.

The Defendants’ case in the damages phase of this litigation, described in this

post-trial Memorandum Opinion, is like that steamboat.

The case involves a non-compete in the employment contract of defendant

Howard Wilson, an insurance broker, with his employer, plaintiff Lyons Insurance

Agency, Inc. (“Lyons”). 1 That contract protected Lyons’ rights to Wilson’s “Book

of Business”—his list of clients with whom he had relations. Lyons in turn had hired

Wilson from another brokerage, non-party USI Insurance Services (“USI”). Lyons

spent two years litigating over a non-compete in that relationship, which it finally

settled by buying Wilson’s Book of Business from USI for more than half a million

dollars. Wilson then promptly quit Lyons and decamped for a competitor, Defendant

GMG Insurance Agency (“GMG”), where, per Lyons, he began servicing parts of

the Book of Business on GMG’s behalf. I first heard Lyons’ request for preliminary

injunction. I declined to enjoin Wilson’s work for GMG, based on the existence of

a buy-out provision in his employment agreement, which I found operated as a

1 See generally Lyons Ins. Agency, Inc. v. Wilson, 2018 WL 4677606 (Del. Ch. Sept. 28, 2018) [hereinafter Lyons I]. 1 liquidated damages clause to vitiate the likelihood of irreparable harm.2 At the

preliminary injunction hearing, Wilson testified that he had no choice but to follow

his most valuable clients to GMG because, despite his best efforts, he couldn’t entice

them to join him at Lyons.3 The parties then entered discovery and moved for

summary judgment. I found, via Memorandum Opinion of September 28, 2018, that

Wilson had broken the employment agreement when he went to work at GMG.4 I

also held that GMG had potential liability for tortious interference with that

contract.5 The Defendants maintained throughout that they had not intended to

purloin business from Lyons, and contested damages. I entered partial summary

judgment in favor of Lyons and directed the parties to prepare for a damages hearing.

The Defendants appeared to be making way towards a defense of the damages

phase of the action, in part because of the idiosyncratic liquidated damages provision

in the employment agreement, and the rather convoluted progress of the Book of

Business, which had been subject to an injunction during the Wilson/USI litigation.

When it came time to sound off at trial, however, the Defendants’ case lost all

momentum. Wilson submitted an affidavit shortly before the hearing recanting his

prior testimony as perjurious; he admitted that he had plotted with GMG principals

2 See Telephonic Rulings on Pl.’s Mot. for Prelim. Inj. 12:2–13:16. 3 See, e.g., Tr. of Oral Arg. on Pl.’s Mot. for Prelim. Inj. 125:20–129:14, 132:18–136:6, Dkt. No. 81. 4 See Lyons I at *6–*8. A more abundant recitation of the facts leading to my findings on summary judgment can be found in Lyons I. I also rely on those facts here. 5 Id. at *8. 2 to breach the employment agreement and come to work at GMG, where he could

service the Book of Business.6 Faced with this new testimony, GMG settled with

the Plaintiff on the eve of the hearing, leaving Wilson alone in that Lyons’ den.

Wilson testified at the damages hearing, contrary to his earlier sworn testimony but

consistent with the eleventh-hour affidavit, that he had conspired with the GMG

principals to leave Lyons and come to GMG to service accounts that were part of

the Book of Business, and further to lie about those facts in this action. 7

In this Memorandum Opinion, I address damages for Wilson’s breach of

contract. I also consider Lyon’s oral motion for fee shifting, under the bad faith

exception to the American Rule under which each party is ordinarily responsible for

its own legal fees. Lyons’ counsel made perhaps the most cogent, and certainly the

briefest, argument for fee shifting under the bad faith exception I have been

privileged to hear: “perjury is bad faith.”8 True. Not only is perjury a criminal and

immoral act, it is precisely inimical to the business of a court: the search for truth in

way of doing justice. Moreover, had Wilson been truthful from the beginning of this

litigation, its course would have been brief. Instead, Lyons has undergone a long

and expensive litigation slog. Thus, both as incentive against perjury and,

6 See Suppl. Aff. of Howard Wilson, Dkt. No. 183. 7 Trial Tr. 21:4–25:20, Dkt. No. 188. 8 Trial Tr. 36:21–36:22, Dkt. No. 188 (emphasis added). 3 independently, because it is required in the interest of justice, I grant Lyons’ motion

to shift fees.

A brief recitation of the background is followed by my reasoning, below.

I. BACKGROUND 9

A. The Parties

Plaintiff Lyons, a Delaware corporation, is an insurance broker with its

principal place of business in Wilmington, Delaware. 10 Lyons’ clientele includes

commercial clients in Delaware, Pennsylvania, and elsewhere in the United States.11

Defendant Howard Wilson worked for Lyons as a risk advisor from July 2014

to August 2016. 12 Prior to joining Lyons, Mr. Wilson was employed in a similar

role at USI. 13 Wilson began working at GMG on August 15, 2016, after leaving

Lyons.14

9 I recite the facts as I find them based upon the evidence submitted by the parties. To the extent there was conflicting evidence, I have weighed the evidence and made findings based on the preponderance of the evidence. In pursuit of brevity, I sometimes omit from this Background discussion testimony in conflict with the preponderance of the evidence. In such cases, I considered the conflicting testimony, and I rejected it. Citations to Joint Trial Exhibits (“JX”) are expressed as JX __, at __. For clarity, certain citations to JXs reference the section number of a document (§) instead of the JX page. Citations in the form “Stip. ¶ __” refer to the Joint Pre-Trial Stipulation and Order. 10 Stip. ¶ 1, Dkt. No. 172. 11 Stip. ¶ 1. 12 See Lyons I at *1; Stip. ¶ 3. 13 Stip. ¶ 4. 14 Lyons I at *2. 4 Defendant GMG is an insurance broker serving clients in Delaware,

Pennsylvania, and elsewhere in the United States.15

B. Relevant Facts

1. Wilson Joins Lyons and USI Sues

Because the insurance business is based on personal relationships, insurance

professionals such as Wilson are said to have a Book of Business consisting of their

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