Nationwide Mutual Insurance v. Mortensen

606 F.3d 22, 95 U.S.P.Q. 2d (BNA) 1305, 2010 U.S. App. LEXIS 9627
CourtCourt of Appeals for the Second Circuit
DecidedMay 11, 2010
Docket08-5214-cv, 08-5256-cv, 08-5258-cv, 08-5450-cv, 08-5231-cv, 08-5427-cv, 08-5233-cv, 08-5413-cv, 08-5234-cv, 08-5412-cv
StatusPublished
Cited by20 cases

This text of 606 F.3d 22 (Nationwide Mutual Insurance v. Mortensen) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nationwide Mutual Insurance v. Mortensen, 606 F.3d 22, 95 U.S.P.Q. 2d (BNA) 1305, 2010 U.S. App. LEXIS 9627 (2d Cir. 2010).

Opinion

B.D. PARKER, JR., Circuit Judge:

The parties appeal from a judgment of the United States District Court for the District of Connecticut (Chatigny, J.) dismissing claims and counterclaims related to the retention of policyholder information by insurance agents after they terminated their exclusive agency agreement with Nationwide Mutual Insurance Co. (“Nationwide”). In 1999, the defendants — insurance agents who had long sold Nationwide insurance policies — began to terminate their agency agreements in order to work for Nationwide’s competitors. This appeal considers whether policyholder information compiled by the agents and stored in various formats constitutes a protected “trade secret” or other confidential information belonging to Nationwide. The agents, for their part, raise counterclaims arguing that Nationwide violated their contract by seeking to deprive them of this policyholder information and, in the alternative, that they are entitled to certain deferred compensation they accrued. Because we find that the policyholder files do not constitute trade secrets or confidential information protected by Connecticut law, we reject Nationwide’s trade secrets and related claims. In addition, we conclude that the district court correctly dismissed the agents’ counterclaims.

I. BACKGROUND

The facts of the case are ably described by the district court’s summary judgment opinion. See Nationwide Mut. Ins. Co. v. Bland, No. 99-cv-2005, 2003 WL 23354137 (D.Conn. Mar.30, 2003). We recount only those facts essential to our opinion. Unless otherwise noted, they are not disputed.

A. The Agent’s Agreement

When each defendant began to work as a Nationwide insurance agent, he or she signed an identical, standard-form contract with Nationwide called an Agent’s Agreement. By the terms of the contract, each defendant’s relationship with the company was that of an exclusive agent and “independent contractor.” See Agent’s Agreement ¶¶ 1, 4. As Nationwide agents, the defendants were not permitted to sell or solicit insurance for any Nationwide competitor, but otherwise they were permitted to operate their individual businesses as they saw fit.

Initially, the agents were given a large number of policyholder files of preexisting Nationwide customers. From then on, they serviced these customers and solicited new ones. In the course of this work, they maintained physical policyholder files containing information relevant to the customers’ insurance needs, including documentation that they received from both the customers and Nationwide.

*26 The agents also used Nationwide’s Agency Office Automation (“AOA”) computer system, which they were required to lease from Nationwide. This database linked them with Nationwide’s central computers, permitting them to access insurance quotes in real-time, and it gathered and sorted the information collected in the policyholder files. The AOA system was password-protected.

The Agent’s Agreement also included provisions relating to deferred compensation. The defendants could qualify for deferred compensation, payable after termination of the agency relationship, so long as they complied with the conditions set out in Paragraph 11(f), which read as follows:

f. Cessation of Agency Security Compensation.
All liability of the Companies for Agency Security Compensation provided for in paragraph 11 and its subparagraphs shall cease and terminate in the event any one or more of the following shall occur:
(1) You either directly or indirectly, by and for yourself or as an agent for another, or through others as their agent, engage in or be licensed as an agent, solicitor, representative, or broker or in anyways [sic] be connected with the ... insurance business, within one year following cancellation within a 25 mile radius of your business location at that time; or
(2) You fail to return in good condition within ten days, all materials, records, and supplies furnished to you by the Companies during the course of this Agreement, together with any copies thereof; or
(3) After cancellation of this Agreement, you directly or indirectly induce, attempt to induce, or assist anyone else in inducing or attempting to induce policyholders to lapse, cancel, or replace any insurance contract in force with [Nationwide]; furnish any other person or organization with the name of any policyholder of [Nationwide] so as to facilitate the solicitation by others of any policyholder for insurance or for any other purpose.

An agent who violated any of these terms forfeited the right to the deferred compensation that had accrued over the period they solicited business for Nationwide. In many cases, that deferred compensation amounted to hundreds of thousands of dollars.

B. The agents’ departure and the subsequent litigation

In late 1999 and early 2000, the defendants terminated their agency relationships with Nationwide. In the months leading up to the terminations, they met with representatives of other insurance companies to discuss possible employment. During these meetings, they allegedly shared with the companies information contained in Nationwide’s policyholder files concerning prices, computer printouts of policyholder information from the AOA computer system (“screen prints”), and copies of documents they received from Nationwide relating to their sales and commissions. After terminating the Agent’s Agreement, they began to compete with Nationwide by selling policies issued by its competitors. At least initially, they asserted no right to the unpaid deferred compensation.

On learning of the defendants’ activities, Nationwide filed this suit in diversity, contending that the agents had violated numerous provisions of Connecticut law. In particular, Nationwide claimed that the agents’ retention and use of policyholder files violated the Agent’s Agreement, the agents’ fiduciary duties, and *27 state law protecting trade secrets. All told, Nationwide asserted eleven separate claims: (1) breach of duty of loyalty (for the agents’ post-termination conduct); 1 (2) breach of contract; (3) conversion; (4) civil theft; (5) breach of fiduciary duty (for the agents’ pre-termination conduct); (6) violation of the Connecticut Uniform Trade Secrets Act (CUTSA), Conn. Gen.Stat. § 35-50 et seq.; (7) violation of the Connecticut Unfair Trade Practices Act (CUTPA), Conn. Gen.Stat. § 42-110a et seq.; (8) tortious interference with contract; (9) tortious interference with business expectancies; (10) civil violation of the Connecticut computer crime statute, Conn. Gen.Stat. §§ 52-570b, 53a-251; and (11) unjust enrichment. 2

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Bluebook (online)
606 F.3d 22, 95 U.S.P.Q. 2d (BNA) 1305, 2010 U.S. App. LEXIS 9627, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nationwide-mutual-insurance-v-mortensen-ca2-2010.