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ALEXANDER & ALEXANDER, INC. v. DRAYTON

July 2, 1974

ALEXANDER & ALEXANDER, INC.
v.
BENJAMIN R. DRAYTON and WARREN & WELSH COMPANY


Higginbotham, J.


The opinion of the court was delivered by: HIGGINBOTHAM

The plaintiff, Alexander & Alexander, seeks a judicial decree enforcing specific performance of a restrictive covenant contract which by its terms precludes defendant Benjamin R. Drayton (plaintiff's former assistant vice-president) from engaging in activities in competition with plaintiff's business enterprise. Having carefully considered the testimony of the preliminary injunction hearing and after inspecting the various exhibits admitted into evidence, I find that plaintiff is entitled to injunctive relief.

 I.

 Findings of Fact

 A. The Parties

 (1) Plaintiff Alexander & Alexander, Inc. is a corporation organized and existing under the laws of the State of Maryland with its principal place of business in a state other than the Commonwealth of Pennsylvania. It is engaged in the insurance brokerage and agency business in the Philadelphia area.

 (2) The defendant, Benjamin R. Drayton, is presently 52 years of age and is a citizen of the Commonwealth of Pennsylvania. From on or about June 1, 1965 to October 1, 1967, Drayton was a partner in the firm of Lukens, Savage & Washburn and had engaged in the insurance brokerage and agency business primarily in the areas of Philadelphia and New York.

 (4) On or about September 29, 1967, the partners of Lukens, Savage & Washburn, including the defendant Drayton entered into an Agreement which is attached as Exhibit "A" to the Complaint in this action.

 (5) This Agreement was executed by all of the partners of Lukens, Savage & Washburn, including Drayton and representatives of Alexander & Alexander, Inc. The consideration to which reference is made in said Agreement was paid to Lukens, Savage & Washburn at the time of settlement on or about October 2, 1967.

 (6) Pursuant to the terms and conditions of the Agreement between Lukens, Savage & Washburn and Alexander & Alexander, Inc. the defendant Drayton was employed by Alexander & Alexander, Inc. in its Philadelphia office and was an assistant vice-president of Alexander & Alexander, Inc. at all times from October 1, 1967 to April 30, 1974 at which time his employment with Alexander & Alexander, Inc. was terminated. On April 11 or 12, 1974, Drayton accepted an offer of employment made by defendant Warren and Welsh Company.

 (7) Warren & Welsh Company is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania with its principal place of business at the Irwin Building, King of Prussia, Pennsylvania. It is engaged in the insurance brokerage and agency business and is a competitor of Alexander & Alexander in the Philadelphia area.

 (8) The Agreement between Alexander & Alexander, Inc. and Lukens, Savage & Washburn dated September 29, 1967 was negotiated by the Standing Committee of Lukens, Savage & Washburn.

 (9) Pursuant to the Agreement, Alexander & Alexander purchased the insurance accounts, customer accounts, expiration lists and other good will of Lukens, Savage & Washburn for a consideration of $300,000, which was paid in cash at the time of settlement.

 (10) Pursuant to the Agreement, Alexander & Alexander paid approximately $90,000 for all of the common stock of Lukens, Savage, Parker & West.

 (11) Pursuant to the Agreement, the former partners of Lukens, Savage & Washburn, including Drayton, became employees and stockholders of Alexander & Alexander.

 (12) Pursuant to the Agreement, the defendant Drayton became an Assistant Vice-President with Alexander & Alexander.

 (13) Pursuant to Paragraph 19 of the Agreement between Alexander & Alexander and Lukens, Savage & Washburn dated September 29, 1967, the defendant Drayton was paid a bonus of $1,500 by Alexander & Alexander, Inc.

 (14) As a result of the Agreement between Alexander & Alexander, Inc. and Lukens, Savage & Washburn dated September 29, 1967, the defendant Drayton realized a net long-term gain from sale of capital assets in the amount of $7,564.

 (15) At the commencement of the fiscal year of Lukens, Savage & Washburn on May 31, 1968 the defendant Drayton's capital account has a credit in the amount of $32,858., which consisted in part, of a $25,000 capital contribution which had been made by the defendant Drayton.

 (16) The defendant Drayton exercised the option set forth in Paragraph 14 of the Agreement between Alexander & Alexander and Lukens, Savage & Washburn and acquired 70 shares of Class C common stock of Alexander & Alexander at a price of $85. per share for a total consideration of $5,950. After several stock splits, the stock purchases by the defendant Drayton is now 5600 shares and is traded over the counter with its current market value being approximately $128,000.

 (18) The scope of the employment of the defendant Drayton by Alexander & Alexander, Inc. included, inter alia, the sale and service of insurance for which the defendant Drayton was paid by Alexander & Alexander, Inc. during the time of his employment.

 (19) During the calendar year 1973, Alexander & Alexander, Inc. received commission income from approximately 276 separate accounts sold and/or serviced by the defendant Drayton. The gross commission income to Alexander & Alexander during 1973 from business either sold and/or serviced by the defendant Drayton was $125,812.92.

 (20) During the course of his employment by Alexander & Alexander, Inc. the defendant Drayton came into possession of records of customer accounts, customer lists, expiration lists, production records, and other customer information pertaining to the customer accounts of Alexander & Alexander.

 B. The Agreement

 (21) Paragraph 25 of the Lukens, Savage & Washburn-Alexander & Alexander merger Agreement states as follows:

 
"25. Upon the termination of employment any Partner entitled to receive the termination payments described in Paragraph 24 will not directly or indirectly own, manage, or operate, in whole or in part, or as an officer, employee, agent, broker, solicitor, partner, stockholder, director, trustee, creditor or otherwise be connected with an insurance agency, brokerage, solicitor or consultant business or actuarial or employee benefit reporting business within any point less than one hundred (100) miles from the city limits of Philadelphia, Pennsylvania, New York, New York, Boston, Massachusetts, or any city where Partner was employed by A & A on a permanent basis at any time within three (3) years prior to his termination of employment, until he receives the last termination payment under the aforesaid Paragraph 24. This paragraph shall not prohibit ownership of a minority interest in capital stock of a company whose shares are publicly traded if the Partner in question does not participate in the operation of such company."

 (22) Paragraph 26 of the Lukens, Savage & Washburn-Alexander & Alexander merger ...


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