Professional Liability Consultants, Inc. v. Todd

468 S.E.2d 578, 122 N.C. App. 212, 1996 N.C. App. LEXIS 254
CourtCourt of Appeals of North Carolina
DecidedApril 16, 1996
DocketCOA95-726
StatusPublished
Cited by10 cases

This text of 468 S.E.2d 578 (Professional Liability Consultants, Inc. v. Todd) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Professional Liability Consultants, Inc. v. Todd, 468 S.E.2d 578, 122 N.C. App. 212, 1996 N.C. App. LEXIS 254 (N.C. Ct. App. 1996).

Opinions

GREENE, Judge.

Homer U. Todd (Todd) and Insurance Management Consultants, Inc. (defendants), a corporation owned solely by Todd, appeal an order granting Professional Liability Consultants, Inc.’s (plaintiff) request for a preliminary injunction enforcing a covenant not to compete (covenant) against defendants.

Plaintiff is an insurance agency, selling and servicing liability and malpractice insurance to professionals. Todd was employed by plaintiff as an insurance sales and service representative from July 1989 to July 1993. Plaintiff and Todd entered into an employment contract, including the covenant, which reads:
[Todd] recognizes and acknowledges that information regarding the customers and clients of [plaintiff] ... is a valuable and unique asset of its businesses.
Accordingly, [Todd] agrees that during the term of his agreement with [plaintiff] and for a period of five (5) years thereafter he will not, unless acting as an officer or employee of the [plaintiff] or with its prior written consent, directly or indirectly: (i) contact or in any way attempt to solicit insurance business from any individual, corporation or organization which is then or during the preceding three years was such a customer or client of [plaintiff], or (ii) disclose any information ... which would enable any other individual, corporation or organization to solicit insurance business from such customers or clients.
[Todd] acknowledges that the remedies at law for any breach by him of this Agreement will be inadequate and that the [plaintiff], as the injured party, shall be entitled to injunctive relief therefor, in addition to all other remedies available to it for any such breach ....

Todd left plaintiffs employment in August 1993 and opened his own insurance agency actively competing with the plaintiff. In March 1995, the plaintiff filed a complaint alleging that Todd was engaged in soliciting and writing “insurance business for clients who were [214]*214clients and customers of the Plaintiff during . . . Todd’s employment with the Plaintiff.” The plaintiff claimed, among other things, a breach of contract. The plaintiff requested a preliminary and permanent injunction, as well as damages.

At a hearing on the preliminary injunction, evidence was presented that while Todd was an employee “he became fully acquainted with Plaintiffs methods in conducting its business and . . . personally acquainted with Plaintiff’s clients and . . . [their] accounts, including . . . the nature of the clients’ business, services required, past informational records, billings, expiration dates, renewal dates, claims information and premiums.” Plaintiff also “confirmed with [eight]. . . former clients that Mr. Todd has solicited and written their insurance business since his termination with the Plaintiff.” These former clients were “clients and customers of the Plaintiff during Mr. Todd’s employment with the Plaintiff.”

The trial court found the following pertinent facts:

15. Plaintiff’s legitimate business interests include certain aspects of its clients’ accounts known to the Defendant only through his employment with the Plaintiff, including the nature of the clients’ business, services required, past informational records, billings, expiration dates, renewal dates, claims information and premiums.
20. During the time of his employment, Defendant Todd became fully acquainted with Plaintiff’s methods of conducting its business, and became personally acquainted with Plaintiff’s clients and the various aspects of such clients’ accounts, including among other things, the nature of the clients’ business, services required, past informational records, billings, expiration dates, renewal dates, claims information and premiums.

The court also found the covenant to be “reasonable and necessary for the protection of the legitimate business interests of the Plaintiff,” Todd breached the covenant by “indirectly contacting, soliciting and writing insurance business,” and “[i]t appears likely that Plaintiff will prevail on the merits of its claims at trial.” The trial court granted plaintiff a preliminary injunction, restraining defendants from:

1. Directly or indirectly contacting or in any way attempting to solicit insurance business from any individual, corporation or [215]*215organization who was a client or customer of the Plaintiff while [Todd] was employed by the Plaintiff or who were customers or clients of the Plaintiff within the previous three years from his date of termination.
5. However, occasional, inadvertent, and casual social contact or conversation with such clients about matters unrelated to insurance or to the issuance, quoting or renewal of insurance policies, and that does not otherwise provide insurance information or counseling, shall not be deemed to be a violation of this Order.

The issues are whether (I) the covenant is valid and enforceable; and if so, (II) defendant breached the covenant.

I

A preliminary injunction may be issued by the trial court when the evidence reveals that (1) plaintiff is likely to succeed on the merits of its case and (2) will suffer irreparable loss unless the injunction is issued. Milner Airco, Inc. v. Morris, 111 N.C. App. 866, 868, 433 S.E.2d 811, 813 (1993). The defendants only argue that the plaintiff failed in showing that it is likely to succeed on the merits and we address only that issue.

Employment agreements in restraint of trade (covenants), in writing, part of the employment contract and based on reasonable consideration, are valid if they are reasonably necessary for the protection of a legitimate business interest and reasonable as to time and territory. A.E.P. Indus. v. McClure, 308 N.C. 393, 404, 302 S.E.2d 754, 761 (1983). A covenant is reasonably necessary for the protection of a legitimate business interest if:

the nature of the employment is such [1] as will bring the employee in personal contact with patrons or customers of the employer, or [2] enable him to acquire valuable information as to the nature and character of the business and the names and requirements of the patrons or customers ....

United Labs., Inc. v. Kuykendall, 322 N.C. 643, 650, 370 S.E.2d 375, 380-81 (1988) (quoting McClure, 308 N.C. at 408, 302 S.E.2d at 763). The defendants do not dispute that the covenant at issue was in writing, a part of an employment contract and for valuable consideration.

[216]*216 Legitimate Business Interest

The findings in this case, which are not disputed by the defendants, are that Todd had access to certain aspects of plaintiff’s accounts (nature of client’s business, expiration dates, services required, etc.) and was fully acquainted with plaintiff’s methods of conducting business. Protection against use of this information by Todd to further his own personal interest is “well recognized as a legitimate protectable interest of the employer,” Kuykendall, 322 N.C.

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Professional Liability Consultants, Inc. v. Todd
468 S.E.2d 578 (Court of Appeals of North Carolina, 1996)

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Bluebook (online)
468 S.E.2d 578, 122 N.C. App. 212, 1996 N.C. App. LEXIS 254, Counsel Stack Legal Research, https://law.counselstack.com/opinion/professional-liability-consultants-inc-v-todd-ncctapp-1996.