2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4
5 USI INSURANCE SERVICES, LLC, Case No.: 4:23-CV-01070-YGR 6 7 Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR SUMMARY 8 vs. JUDGMENT;
9 KENNETH DIXON WRIGHT AND SURETY DENYING DEFENDANT’S MOTION FOR 10 RESOURCE CONNECTION, INC. DBA SRC SUMMARY JUDGMENT DIGITAL INSURANCE SERVICES, 11 Re: Dkt. Nos. 60 & 61 Defendants. 12 13 AND RELATED COUNTERCLAIM 14 15 Pending before the Court are parties’ cross-motions for summary judgment relative to 16 defendant and counterplaintiff Kenneth Dixon Wright’s amended counterclaim against plaintiff and 17 counterdefendant USI Insurance Services LLC. In short, the parties dispute whether a 2017 18 employment agreement to which Wright is a party supersedes an earlier-executed purchase agreement 19 which contains certain employment-related terms, but was executed in conjunction with a separate 20 employment agreement. Having carefully considered parties’ briefs and argument at the March 15, 21 2024 hearing, and for the reasons below, the Court determines that it does. 22 Accordingly, USI’s motion for summary judgment is GRANTED IN PART insofar as Wright seeks 23 declaratory relief related to the earlier-executed purchase agreement and DENIED IN PART insofar as he 24 seeks declaratory relief related to the 2017 agreement.1 Wright’s motion for summary judgment is 25 DENIED.
26 1 Wright seeks declaratory relief in the form of court order declaring that his conduct with respect to his company Surety Resource Connection, Inc. (“SRC”) “is fully permitted under the 27 parties’ agreements and as a matter of law.” See Dkt. No. 40, Wright’s First Amended Counterclaim 28 for Declaratory Judgment (“FACC”) at 7:5–11 (emphasis supplied). The Court determines the phrase “under the parties’ agreements” is ambiguous. It is unclear whether the FACC seeks declaratory relief 1 I. BACKGROUND 2 Parties do not, at this stage, genuinely dispute the underlying facts.2 Instead, their disagreement 3 concerns a purely legal question: which agreement controls? Thus, the Court identifies and summarizes 4 the three agreements relevant to the proceeding analysis. They are labeled: (i) Purchase Agreement;3 (ii) 5 Employment, Trade Secrets, and Non-Solicitation Agreement;4 and (iii) Employment Agreement.5 6 A. 2009 Purchase & Employment Agreements6 7 In 2009, Wright sold his insurance brokerage, Cailindsey Partnership, to Wells Fargo 8 Insurance Services of California, Inc. (“WF”) and memorialized the sale in a written purchase 9 agreement. Notably, the 2009 Purchase Agreement provides for Wright’s employment by WF after 10 the sale of his brokerage as well as certain terms of that employment. (See, e.g., id. § 5.5.1.) For 11 instance, the agreement imposes non-compete and non-solicitation terms on Wright. (See generally id. 12 §§ 2.1–2.3.) It also addresses, among other employment-related matters: (i) the eligibility of 13 Cailindsey employees, such as Wright, for WF “employee welfare and retirement plans” (id. § 5.5.2); 14 and (ii) the computation of additional payments to Wright based on his commissions and fees. (Id. § 15 3.1.) 16 17 relative to: (i) the 2017 Agreement and the 2009 Agreements collectively; or (ii) only as to the 2009 18 Agreements. This Order anticipates and addresses both potential approaches. 19 2 To the extent parties make substantive arguments about whether Wright violated the terms of 20 the any of the above-referenced agreements, the Court disregards such arguments as irrelevant to the pending motions, which address the narrow issue of whether the 2017 Employment Agreement 21 supersedes other, earlier-executed agreements. 22 3 See Dkt. No. 60-1, USI’s Motion for Summary Judgment (“USI Mot.”), Parties’ Appendix of 23 Joint Exhibits, Ex. A (“2009 Purchase Agreement”).
24 4 See Dkt. No. 60-1, USI Mot., Parties’ Appendix of Joint Exhibits, Ex. B (“2009 Employment 25 Agreement”).
26 5 See Dkt. No. 60-1, USI Mot., Parties’ Appendix of Joint Exhibits, Ex. C (“2017 Employment 27 Agreement”).
28 6 The Court refers herein to the 2009 Purchase Agreement and 2009 Employment Agreement collectively as the “2009 Agreements.” 1 The 2009 Purchase Agreement cross-references the separate 2009 Employment Agreement 2 which the parties executed contemporaneously. This agreement addresses, among others, Wright’s term 3 of employment by WF (id. § 1); compensation (id. § 3); and his obligations to safeguard WF trade secret, 4 confidential, and proprietary information. (Id. § 4.) 5 B. 2017 Employment Agreement 6 USI purchased WF in 2017. As part of the acquisition, USI entered into an employment 7 agreement with Wright. This agreement sets forth the terms of Wright’s employment by USI, 8 including, among others: (i) his compensation and benefits (id. § 3); (ii) the term of his employment 9 (2017 Employment Agreement §§ 2.5; 8); as well as (iii) his obligations to avoid conflicts of interest 10 (id. § 2.3), maintain the confidentiality of USI confidential and trade secret information (id. §§ 7.1– 11 7.3), and refrain from soliciting “[USI’s] Active Prospective Clients or Client Accounts.” (Id. § 7.5.) 12 Relevant here, the 2017 Employment Agreement contains an integration clause which reads: 13 ENTIRE AGREEMENT. No agreements or representations, oral or otherwise, express or implied, have been made with respect to [Wright]’s employment hereunder except as set forth 14 in this Agreement. This Agreement supersedes and preempts any prior oral or written understandings, agreements or representations by or between [Wright] and [USI] or any 15 Predecessor, including without limitation, any previous employment or other similar 16 agreement between [Wright] and [USI] or any Predecessor, which may have related to the subject matter hereof in any way. 17 18 (Id. at § 11 (emphasis supplied).) 19 C. Pending Cross-Motions for Summary Judgment 20 The parties seek summary judgment regarding the above-referenced agreements. USI’s 21 motion argues that: (i) the declaratory relief sought therein pertains to the 2009 Agreements; (ii) 22 such agreements were superseded by the 2017 Employment Agreement; and (iii) thus, there is no 23 justiciable controversy for the Court to adjudicate. (See generally USI Mot.) Wright argues the 24 contrary, namely “that the 2009 Purchase Agreement was not superseded by the 2017 Employment 25 Agreement and that it is currently in force and effect.” (See generally Dkt. No. 61, Wright’s Motion 26 for Summary Judgment (“Wright Mot.”) at 2:2–4.) 27 II. LEGAL FRAMEWORK The standard for cross-motions for summary judgment is well-known and not in dispute. 28 1 III. ANALYSIS 2 The parties agreed on the record at the March 15, 2024 hearing that the 2017 Employment 3 Agreement superseded the 2009 Employment Agreement. Thus, resolution of the pending motions 4 hinges on whether the 2017 Employment Agreement also supersedes the 2009 Purchase Agreement. 5 In relevant part, 2017 Employment Agreement’s integration clause states that it supersedes “any prior 6 oral or written” agreement between Wright and USI (including USI’s predecessor-in-interest WF) so 7 long as such prior agreements “relate[] to the subject matter” of the agreement “in any way.” (See 8 2017 Agreement § 11.) 9 The Court interprets the above-referenced language to express the shared understanding of 10 USI and Wright that the 2017 Employment Agreement supersedes the 2009 Purchase Agreement.7 11 Two reasons drive the analysis. First, the 2009 Purchase Agreement is a “prior oral or written” 12 agreement between Wright and USI’s predecessor-in-interest WF. Second, the subject matter of the 13 2017 Employment Agreement relates to the subject matter of the 2009 Purchase Agreement as both 14 agreements pertain, at least in part, to the terms of Wright’s employment in the insurance business.
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2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4
5 USI INSURANCE SERVICES, LLC, Case No.: 4:23-CV-01070-YGR 6 7 Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR SUMMARY 8 vs. JUDGMENT;
9 KENNETH DIXON WRIGHT AND SURETY DENYING DEFENDANT’S MOTION FOR 10 RESOURCE CONNECTION, INC. DBA SRC SUMMARY JUDGMENT DIGITAL INSURANCE SERVICES, 11 Re: Dkt. Nos. 60 & 61 Defendants. 12 13 AND RELATED COUNTERCLAIM 14 15 Pending before the Court are parties’ cross-motions for summary judgment relative to 16 defendant and counterplaintiff Kenneth Dixon Wright’s amended counterclaim against plaintiff and 17 counterdefendant USI Insurance Services LLC. In short, the parties dispute whether a 2017 18 employment agreement to which Wright is a party supersedes an earlier-executed purchase agreement 19 which contains certain employment-related terms, but was executed in conjunction with a separate 20 employment agreement. Having carefully considered parties’ briefs and argument at the March 15, 21 2024 hearing, and for the reasons below, the Court determines that it does. 22 Accordingly, USI’s motion for summary judgment is GRANTED IN PART insofar as Wright seeks 23 declaratory relief related to the earlier-executed purchase agreement and DENIED IN PART insofar as he 24 seeks declaratory relief related to the 2017 agreement.1 Wright’s motion for summary judgment is 25 DENIED.
26 1 Wright seeks declaratory relief in the form of court order declaring that his conduct with respect to his company Surety Resource Connection, Inc. (“SRC”) “is fully permitted under the 27 parties’ agreements and as a matter of law.” See Dkt. No. 40, Wright’s First Amended Counterclaim 28 for Declaratory Judgment (“FACC”) at 7:5–11 (emphasis supplied). The Court determines the phrase “under the parties’ agreements” is ambiguous. It is unclear whether the FACC seeks declaratory relief 1 I. BACKGROUND 2 Parties do not, at this stage, genuinely dispute the underlying facts.2 Instead, their disagreement 3 concerns a purely legal question: which agreement controls? Thus, the Court identifies and summarizes 4 the three agreements relevant to the proceeding analysis. They are labeled: (i) Purchase Agreement;3 (ii) 5 Employment, Trade Secrets, and Non-Solicitation Agreement;4 and (iii) Employment Agreement.5 6 A. 2009 Purchase & Employment Agreements6 7 In 2009, Wright sold his insurance brokerage, Cailindsey Partnership, to Wells Fargo 8 Insurance Services of California, Inc. (“WF”) and memorialized the sale in a written purchase 9 agreement. Notably, the 2009 Purchase Agreement provides for Wright’s employment by WF after 10 the sale of his brokerage as well as certain terms of that employment. (See, e.g., id. § 5.5.1.) For 11 instance, the agreement imposes non-compete and non-solicitation terms on Wright. (See generally id. 12 §§ 2.1–2.3.) It also addresses, among other employment-related matters: (i) the eligibility of 13 Cailindsey employees, such as Wright, for WF “employee welfare and retirement plans” (id. § 5.5.2); 14 and (ii) the computation of additional payments to Wright based on his commissions and fees. (Id. § 15 3.1.) 16 17 relative to: (i) the 2017 Agreement and the 2009 Agreements collectively; or (ii) only as to the 2009 18 Agreements. This Order anticipates and addresses both potential approaches. 19 2 To the extent parties make substantive arguments about whether Wright violated the terms of 20 the any of the above-referenced agreements, the Court disregards such arguments as irrelevant to the pending motions, which address the narrow issue of whether the 2017 Employment Agreement 21 supersedes other, earlier-executed agreements. 22 3 See Dkt. No. 60-1, USI’s Motion for Summary Judgment (“USI Mot.”), Parties’ Appendix of 23 Joint Exhibits, Ex. A (“2009 Purchase Agreement”).
24 4 See Dkt. No. 60-1, USI Mot., Parties’ Appendix of Joint Exhibits, Ex. B (“2009 Employment 25 Agreement”).
26 5 See Dkt. No. 60-1, USI Mot., Parties’ Appendix of Joint Exhibits, Ex. C (“2017 Employment 27 Agreement”).
28 6 The Court refers herein to the 2009 Purchase Agreement and 2009 Employment Agreement collectively as the “2009 Agreements.” 1 The 2009 Purchase Agreement cross-references the separate 2009 Employment Agreement 2 which the parties executed contemporaneously. This agreement addresses, among others, Wright’s term 3 of employment by WF (id. § 1); compensation (id. § 3); and his obligations to safeguard WF trade secret, 4 confidential, and proprietary information. (Id. § 4.) 5 B. 2017 Employment Agreement 6 USI purchased WF in 2017. As part of the acquisition, USI entered into an employment 7 agreement with Wright. This agreement sets forth the terms of Wright’s employment by USI, 8 including, among others: (i) his compensation and benefits (id. § 3); (ii) the term of his employment 9 (2017 Employment Agreement §§ 2.5; 8); as well as (iii) his obligations to avoid conflicts of interest 10 (id. § 2.3), maintain the confidentiality of USI confidential and trade secret information (id. §§ 7.1– 11 7.3), and refrain from soliciting “[USI’s] Active Prospective Clients or Client Accounts.” (Id. § 7.5.) 12 Relevant here, the 2017 Employment Agreement contains an integration clause which reads: 13 ENTIRE AGREEMENT. No agreements or representations, oral or otherwise, express or implied, have been made with respect to [Wright]’s employment hereunder except as set forth 14 in this Agreement. This Agreement supersedes and preempts any prior oral or written understandings, agreements or representations by or between [Wright] and [USI] or any 15 Predecessor, including without limitation, any previous employment or other similar 16 agreement between [Wright] and [USI] or any Predecessor, which may have related to the subject matter hereof in any way. 17 18 (Id. at § 11 (emphasis supplied).) 19 C. Pending Cross-Motions for Summary Judgment 20 The parties seek summary judgment regarding the above-referenced agreements. USI’s 21 motion argues that: (i) the declaratory relief sought therein pertains to the 2009 Agreements; (ii) 22 such agreements were superseded by the 2017 Employment Agreement; and (iii) thus, there is no 23 justiciable controversy for the Court to adjudicate. (See generally USI Mot.) Wright argues the 24 contrary, namely “that the 2009 Purchase Agreement was not superseded by the 2017 Employment 25 Agreement and that it is currently in force and effect.” (See generally Dkt. No. 61, Wright’s Motion 26 for Summary Judgment (“Wright Mot.”) at 2:2–4.) 27 II. LEGAL FRAMEWORK The standard for cross-motions for summary judgment is well-known and not in dispute. 28 1 III. ANALYSIS 2 The parties agreed on the record at the March 15, 2024 hearing that the 2017 Employment 3 Agreement superseded the 2009 Employment Agreement. Thus, resolution of the pending motions 4 hinges on whether the 2017 Employment Agreement also supersedes the 2009 Purchase Agreement. 5 In relevant part, 2017 Employment Agreement’s integration clause states that it supersedes “any prior 6 oral or written” agreement between Wright and USI (including USI’s predecessor-in-interest WF) so 7 long as such prior agreements “relate[] to the subject matter” of the agreement “in any way.” (See 8 2017 Agreement § 11.) 9 The Court interprets the above-referenced language to express the shared understanding of 10 USI and Wright that the 2017 Employment Agreement supersedes the 2009 Purchase Agreement.7 11 Two reasons drive the analysis. First, the 2009 Purchase Agreement is a “prior oral or written” 12 agreement between Wright and USI’s predecessor-in-interest WF. Second, the subject matter of the 13 2017 Employment Agreement relates to the subject matter of the 2009 Purchase Agreement as both 14 agreements pertain, at least in part, to the terms of Wright’s employment in the insurance business. 15 Thus, the Court finds that the 2017 Employment Agreement supersedes the 2009 Purchase 16 Agreement per the plain text of the 2017 Agreement’s integration clause. Wright’s FACC therefore 17 states no justiciable claim relative to the 2009 Purchase Agreement as that agreement does not 18 control. See 28 U.S.C. § 2201(a) (permitting courts to enter declaratory judgment only where, among 19 other prerequisites, an “actual controversy” exists); see also S. California Painters & Allied Trades, 20 Dist. Council No. 36 v. Rodin & Co., 558 F.3d 1028, 1035 (9th Cir. 2009) (holding that, where an 21 agreement is no longer in force, a request for declaratory judgment requiring the court to parse such 22 agreement does not constitute a “substantial controversy” and the matter is moot); see also id. (“There 23 is no basis for awarding declaratory relief on an expired agreement.”). 24 Wright’s two main counterarguments fail to compel a different result. First, Wright contends that 25 the 2017 Employment Agreement does not supersede the 2009 Purchase Agreement because the 2017 26 Employment Agreement was executed by different parties, relied on different consideration, and the
27 7 Because the Court determines the 2017 Employment Agreement supersedes the 2009 28 Purchase Agreement in full, it does not consider parties’ arguments regarding whether the “code exception” in the 2009 Purchase Agreement was superseded by the 2017 Employment Agreement. 1 language regarding Wright’s work with SRC differs. (See generally Dkt. No. 62, Wright’s Opposition to 2 USI’s Mot. (“Wright Opp’n”) at 3–5.) The Court finds this argument only partially persuasive. While the 3 2009 Purchase Agreement differs in some respects from the 2017 Employment Agreement (chief among 4 them, providing for the sale of Wright’s brokerage), it simply cannot be said that the 2009 Purchase 5 Agreement does not “relate[] to the subject matter” of the 2017 Employment Agreement “in any way.” 6 (See 2017 Agreement § 11.) As set forth at length above, the 2009 Purchase Agreement contains 7 numerous terms purporting to govern Wright’s employment. (See 2009 Purchase Agreement §§ 2.1–2.3; 8 3.1; 5.5.2 (described supra).) This is enough to render the 2009 Purchase Agreement, at the very least, 9 minimally related to the 2017 Employment Agreement. That is sufficient, under the integration clause, 10 for it to be superseded. 11 Second, Wright argues that USI should be judicially estopped from asserting the 2009 12 Purchase Agreement is superseded by the 2017 Employment Agreement because it previously 13 brought a breach of contract claim against Wright under the 2009 Purchase Agreement. Wright relies 14 on the U.S. Supreme Court case New Hampshire v. Maine, 532 U.S. 742 (2001) for support of this 15 theory. (See Wright Opp’n at 6:19–23 (quoting New Hampshire, 532 U.S. at 743).) However, 16 Wright’s citation is suspect. He appears to quote from the syllabus, which is not part of the Supreme 17 Court’s opinion, thereby misquoting and misrepresenting the case. He omits, for instance, a critical 18 sentence from the actual opinion which states that the doctrine of judicial estoppel is typically not 19 applied where a Court has not previously ruled in favor of the contrary position alleged to have been 20 taken.8 See New Hampshire, 532 U.S. at 750–51(“Absent success in a prior proceeding, a party’s 21 later inconsistent position introduces no risk of inconsistent court determinations, and thus poses 22 little threat to judicial integrity.”) (cleaned up). As USI correctly notes in their reply, this Court 23 denied the motion in which USI previously argued that Wright should be held liable under the 2009 24 Purchase Agreement. In fact, the Court has never ruled in USI’s favor on the merits of the breach of 25 26 8 The Court admonishes counsel for Wright to review their Rule 11 obligations of candor to 27 the Court. Such obligations are particularly salient where, as here, counsel purport to invoke 28 controlling authority in the form of a U.S. Supreme Court case. 1 || contract claim they previously pursued relative to the 2009 Purchase Agreement.’ Wright knows 2 || this.!° As such, the New Hampshire standard has not been satisfied, and application of the judicial 3 || estoppel doctrine here would be inappropriate. 4 ||IV. CONCLUSION 5 For the foregoing reasons, the Court determines the 2017 Employment Agreement supersede 6 || the 2009 Purchase Agreement. The Court therefore GRANTS IN PART USI’s motion for summary 7 || judgment insofar as the FACC seeks declaratory relief related to the 2009 Purchase Agreement, and 8 || DENIES IN PART the motion insofar as the FACC seeks declaratory relief related to the 2017 9 ||Employment Agreement.'! Wright’s motion is DENIED. 10 The Court sets a case management conference for April 29, 2024 at 2:00 p.m. The parties 11 || shall meet and confer and provide a joint statement concerning the efficient resolution of this action 12 || given this Order. 3 13 This terminates Dkt. Nos. 60 & 61.
= 14 IT Is SO ORDERED.
1s 3 A 16 || Dated: April 1, 2024
17 YVONNE GONZALEZ ROGER ITED STATES DISTRICT COURT JUDGE 18 19 20 21 ? See Dkt. Nos. 12 (order denying request for temporary restraining order on such grounds); 22 || (order denying request for preliminary injunction on such grounds); see also Dkt. Nos. 51 & 52 (in which USI voluntarily dismissed their breach of contract claim against Wright for violating the 2005 23 || Purchase Agreement, and the Court approved the dismissal). ‘0 For example, he begins one of his briefs with the following: “When Plaintiff USI filed its 25 || complaint nearly a year ago and pressed the court for a TRO and preliminary injunction, both of which were denied, it had asserted in its first cause of action a claim for breach of the 2009 Purchase 26 || Agreement, seeking to enforce its covenant not to compete.” Wright Opp’n at 1:2-4 (emphasis 47 supplied). 28 '! Given this, the Court does not reach USI’s alternative request that the Court exercise its discretion to dismiss the FACC as a redundant “mirror image” of the complaint.