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Brown & Brown, Inc., Brown & Brown of Pennsylvania, Inc. and v. Robert Cola

March 23, 2011

BROWN & BROWN, INC., BROWN & BROWN OF PENNSYLVANIA, INC. AND GRINSPEC, INC. PLAINTIFFS,
v.
ROBERT COLA, RYAN TOLA, AND DOYLE ALLIANCE GROUP, DEFENDANTS.



The opinion of the court was delivered by: Buckwalter, S. J.

MEMORANDUM

Currently pending before the Court are: (1) Defendant Robert Cola's Motion for Summary Judgment and (2) Defendant Ryan Tola's Motion for Summary Judgment. For the following reasons, the Motions are denied in part with prejudice and in part without prejudice.

I. FACTUAL BACKGROUND

Plaintiff Brown & Brown, Inc. ("Brown & Brown") is a national insurance brokerage and service company. (Compl. ¶ 13; Cola Answer ¶ 13; Tola Answer ¶ 13.) Brown & Brown and its subsidiaries, including Pennsylvania corporation Brown & Brown of Pennsylvania, Inc. ("Brown-PA"), and New Jersey corporation Grinspec, Inc. ("Grinspec") (collectively "Plaintiffs"), offer a broad range of insurance and reinsurance products and services, as well as risk management, third-party administration, insurance consulting, and other insurance-related services to both the public and private sectors. (Compl. ¶¶ 13, 15; Cola Answer ¶ 13; Tola Answer ¶ 13.) According to the Complaint, one of the most important ways that Plaintiffs invest in their critical client relationships is through the training and development of their brokers and producers, who are provided with detailed confidential and proprietary information about Plaintiffs' insurance services, business strategies, pricing, and customers. (Compl. ¶ 17.)

A. Brown & Brown Acquires Doyle Consulting Group, Inc.

As part of its ongoing strategy to acquire smaller insurance brokers, Brown & Brown identified a network of related businesses in Pennsylvania and New Jersey as potential partners. (Compl. ¶¶ 20-21.) One particular brokerage business -- Doyle Consulting Group, Inc. and Doyle Consulting Group of New Jersey, Inc. (collectively "DCG") -- was owned by Frank Doyle and Kevin Mullin. (Pls.' Resp. Cola Mot. Summ. J., Ex. A, Aff. of Ed Chorzelewski ¶ 2, Aug. 18, 2010 ("Chorzelewski Aff.").) Following preliminary discussions, Brown & Brown and Doyle Consulting executed an Asset Purchase Agreement through which Brown & Brown and Brown-PA acquired the assets of DCG. (Pls.' Resp. Cola Mot. Summ. J., Ex. B., Aff. of Thomas Riley, ¶ 3, Aug. 16, 2010 ("Riley Aff."); id. Ex. C.) Doyle and Mullin were signatories to this Agreement. (Id. Ex. C.) Plaintiffs purchased the full range of DCG's assets, including, among other things, DCG's current book of business, tangible personal property, seller contracts, governmental authorizations, records, intangible property such as intellectual property, claims against third parties, and good will. (Riley Aff. ¶ 4.) Plaintiffs' purchase of intellectual property assets from DCG included all trademarks and trade names, together with all derivatives of such trademarks and trade names. (Id. ¶ 6.) The Asset Purchase Agreement required DCG, Doyle, and Mullin to immediately cease using the corporate name "Doyle Consulting" and any other trademarks or trade names, and all derivatives thereof, in their business dealings. (Id. ¶ 7.) In consideration for these assets, Brown & Brown agreed to pay DCG an amount in excess of seventeen million dollars. (Id. ¶ 5.) The Asset Purchase Agreement deal closed on February 1, 2004. (Id. ¶ 8.)

After the closing, Frank Doyle joined Brown-PA as its new executive vice president, and the company hired several other former DCG employees. (Chorzelewski Aff. ¶ 3.) All customers and accounts of DCG became customers and accounts of Brown & Brown and its subsidiaries. (Id. ¶ 4.) Brown & Brown and Brown-PA used the name "Doyle Consulting" as a service mark in dealings with customers, employees, and the industry in general. (Id. ¶ 4.) Indeed, numerous previous employees of DCG, including Defendants Robert Cola and Ryan Tola, continued to use the internet domain name "@doyleconsultinggroup" or its derivative "@dcgbenefits.com" in e-mails sent in the ordinary course of performing and/or selling insurance services for Plaintiffs. (Id. ¶ 5.)

B. Facts Relevant to Defendant Robert Cola

1. Plaintiffs' Hiring of Robert Cola

Defendant Robert Cola, a resident of Pennsylvania, has worked in the employee benefits industry for more than twenty years. (Def. Cola's Mot. Summ. J., Ex. A, ¶ 3 ("Cola Aff.").) In September of 1996, Cola became an employee of DCG, where he worked for almost eight years, until February of 2004. (Id. ¶ 4.) During that time, he established and developed relationships with DCG's clients and his work was primarily focused in the Pennsylvania and New Jersey regions. (Id. ¶ 6.)

In early 2004, when DCG was to be acquired by Brown & Brown, Cola was directed to sign an employment agreement with Brown & Brown subsidiary, Brown-PA. (Id. ¶ 7.) According to Cola, he was given the Brown-PA employment agreement at 5:00 p.m. on Friday, January 23, 2004, and told to sign it by the end of the day on Monday January 26, 2005. (Id. ¶¶ 8-9.) When Cola expressed some hesitation about the restrictiveness of the agreement and requested time to consult with an attorney, Kevin Mullin, DCG's president, told him it was non-negotiable and that he would no longer be employed if he did not sign it by the end of the day. (Id. ¶¶ 10-11.) Following unsuccessful efforts to contact his attorney, Cola signed the employment agreement on January 26, 2004 ("Cola Employment Agreement"). (Id. ¶¶ 12-13.)

The Cola Employment Agreement contained a non-solicitation of customers provision prohibiting him from directly or indirectly soliciting or inducing any existing or prospective customers of Brown & Brown and Brown-PA, or any of their affiliates, both during his employment with Brown-PA and for twenty-four months after the termination of his employment. (Riley Aff. ¶ 15.) Plaintiffs interpreted this to mean that for a period of time following cessation of employment, Cola was to have no contact with Brown & Brown customers. (Def. Cola's Mot. Summ. J., Ex. B., Dep. of Ed Chorzelewski, 261:16-262:17, Jan. 10, 2011 ("Chorzelewski Dep.").) This provision did not prevent Cola from working for a competitor, so long as he did not solicit or accept business from Plaintiffs' customers, and he advised any prospective future employers of his contractual non-solicitation obligations. (Riley Aff. ¶ 16.) In addition, Cola expressly agreed not to use or disclose any confidential proprietary information of Brown & Brown or its affiliates both during or after his employment with Brown-PA. Such information included customer lists; insurance carriers; accounts and prospect lists; policy forms and/or rating information; expiration dates; information on risk characteristics; information concerning insurance markets for large or unusual risks; business, selling, and customers' strategies and plans; and customer specifications, such as preferences, practices, idiosyncrasies, pricing minimums and maximums, usual needs, time constraints, names, and addresses. (Id. ¶¶ 16-17.) Cola further contracted that, both during his employment with Brown-PA and for two years after the cessation of such employment, he would not, directly or indirectly, solicit employees of Brown-PA or Brown & Brown to work for a competitor. (Id. ¶ 18.) Finally, Cola agreed that, during his employment with Brown-PA, he would "not undertake the active planning or organizing of any business activity competitive with the work Employee performs." (Id. ¶ 19.) In addition to the Employment Agreement, Cola also signed a detailed Employee Handbook, which noted that Plaintiffs' employees were charged with retaining the confidentiality of much of the information they received in the course of their employment. (Id. ¶¶ 21-22.)

The day after signing the Employment Agreement, Cola consulted his attorney and learned the full extent of the restrictive covenant. (Cola Aff. ¶ 14.) Following his conversations with counsel, Cola believed that he had been given no consideration to support the new Employment Agreement. (Id. ¶ 18.)*fn1 Cola thereafter recorded the circumstances surrounding his execution of the Brown-PA Employment Agreement in a memorandum to file. (Id. ¶ 15; Def. Cola's Mot. Summ. J. Ex. E.)

2. Cola's Employment with Plaintiffs

Cola began his employment with Brown-PA in February 2004, as a producer. (Compl. ¶ 66; Cola Answer ¶ 66.) Immediately after the acquisition, he continued to report to Frank Doyle -- who was the Profit Center Leader of Brown-PA -- to operate out of the same office, and to work with the same staff. (Cola Aff. ¶ 16.) Cola and the others at Brown-PA also still operated under the name "Doyle Consulting Group" until efforts were made in 2006 and 2007 to strictly use the "Brown & Brown Consulting" name. (Id. ¶ 17.) His job description and daily responsibilities did not change. (Id. ¶ 18.) Additionally, he was told that his compensation at Brown-PA would be the same as at DCG, which was structured through an annual salary plus a bonus based on profits. (Id. ¶ 19.) He understood that, pursuant to section five of the Cola Employment Agreement, if there were to be future changes to his compensation, he would be informed in advance and given an opportunity to negotiate changes. (Id. ¶ 19.)

By February 2006, Cola held the highest executive position at Brown-PA as a "Profit Center Leader," responsible for the overall operation of the office, its employees, and its customers. (Compl. ¶ 66; Cola Answer ¶ 66; Chorzelewski Aff. ¶ 10.) During the course of his job performance, Cola acquired and developed trade secrets and confidential and proprietary information with regard to the business of Brown & Brown and Brown-PA. (Chorzelewski Aff. ¶ 10.) Cola had access to all of his employer's documents and information, including materials related to customers, policies, and renewal dates. (Id. ¶ 11.)

As his compensation was heavily reliant upon bonuses, Cola resolved to grow Brown-PA and, in 2005, his office was the Retail Office of the Year. (Cola Aff. ¶ 21.) From the years 2004 through 2009, Cola's compensation, including bonuses, went from $184,036 to $566,953. (Id. ¶ 21.) Nonetheless, he became increasingly dissatisfied at Brown-PA. (Id. ¶ 22.) According to Cola, his supervisor, Thomas Riley -- who was the Regional President for Brown & Brown -- repeatedly engaged in unprofessional conduct towards him in front of his employees and other Employee Benefits professionals. (Id. ¶ 23.) Numerous potential clients also expressed their unwillingness to do business with Brown-PA due to Riley's inappropriate behavior and comments. (Id.) In June 2007, Cola documented an incident wherein Riley became intoxicated during an industry conference and loudly embarrassed Cola in front of other employees. (Def. Cola's Mot. Summ. J., Ex. H.) In light of his growing concerns, Cola began speaking with other firms about leaving Brown-PA. (Cola Aff. ¶ 26.) As a result of the restrictions in his Employment Agreement, however, he had problems making a deal with any of the prospects. (Id.)

On December 1, 2009, Cola learned from Brown-PA.'s accounting manager, Dean Saperstein, that Brown & Brown had decided to separate Brown-PA's wholesale operations from its retail (or consulting) operations, effective January 1, 2010. (Cola Aff. ¶ 27.) Cola was greatly concerned because this split would undermine the retail group's success and financial viability, jeopardize the quality of service provided to the retail customers, and serve to significantly decrease Cola's bonus entitlement and total compensation. (Id. ¶ 28.) Cola raised his concerns about the separation with both Riley and Powell Brown, Brown & Brown's CEO. (Id. ¶¶ 29-32.) He explained that he had serious concerns that the retail branch would not be able to produce an Operating Profit of 28% -- which is what Brown & Brown demanded -- on its own. (Id. ¶ 35.) Riley responded that if the retail branch was running at a profit margin of less than 28%, he could move some expenses over to the wholesale brokerage profit center so that retail's profit margin would be over 28%. (Id. ¶ 37.) Cola believed this to be a violation of the Sarbanes Oxley Act and wanted no part of it. (Id.) In light of the impact on his bonuses, Cola also believed this to be in contravention of his Employment Agreement. (Id. ¶ 40.) He again documented his concerns in a memo to file dated December 2, 2009. (Def. Cola's Mot. Summ. J., Ex. G.)

Shortly after learning of the split of the wholesale and retail branches, Cola became privy to a highly confidential potential merger of Brown & Brown with an equally prominent firm. (Cola Aff. ¶ 43.) Cola was concerned that if the merger went through, the Brown-PA staff would be reduced, compromising his ability to deliver services to his clients. (Id. ¶ 43.) Based on his growing dissatisfaction and his concern about the company's future, Cola resigned from Brown-PA on June 11, 2010. (Id. ¶ 46.)

3. Cola's Alleged Wrongful Conduct

According to the Complaint, Frank Doyle formed a new insurance brokerage firm, in March 2010, named Doyle Alliance Group ("Doyle Alliance"), and allegedly began operations to compete with Brown & Brown in the insurance agency, brokerage, and consulting business. (Compl. ¶ 84.) Doyle purportedly recruited and offered employment to Cola and encouraged him to solicit and take Plaintiffs' customers and use Plaintiffs' confidential business information. (Id. ¶ 87.)

Plaintiffs allege, upon information and belief, that immediately after his resignation, Cola began to work as an insurance broker and consultant for Doyle Alliance. (Id. ¶ 91.) Plaintiffs also contend that while Cola was still employed by Brown & Brown, he was actively engaged in building a competitive business by meeting with Doyle, setting up an office, soliciting Brown & Brown's customers, and using Brown & Brown's proprietary information. (Id. ¶¶ 92-95.) As evidence of this conduct, Plaintiffs note that in April 2010, while still employed as Profit Center Leader of Brown-PA, Cola reviewed at least one solicitation letter on behalf of Doyle Alliance Group, targeting a then-current Brown-PA customer, Sayreville Board of Education. This letter was then forwarded to Doyle Alliance Group's lawyers, signed by Frank Doyle, and sent to the Sayreville Board of Education. (Pls.' Resp. Def. Cola's Mot. Summ. J., Ex. E, Dep. of Robert Cola, 133:22-140:18, Jan. 21, 2011 ("Cola Dep.".))*fn2 Also, shortly before he resigned, Cola admitted to having conversations with Brown-PA employee Jana Jim about becoming an employee at Doyle Alliance Group. (Id. at 185:13-186:13, 197:2-190:22.) Cola further conceded having discussions with Al Danish, another Brown-PA employee, about joining Doyle Alliance Group. (Id. at 193:6-200:8.) Finally, Cola indicated that, in the first six months of 2010, while still employed with Brown-PA, he was involved in helping to set up and organize the business that became the Doyle Alliance Group, including logistics involving office space, IT vendors, computers, fax machines, copiers, etc. (Id. at 111:7-21.)

C. Facts Relevant to Defendant Ryan Tola

1. Plaintiffs' Hiring of Ryan Tola

Defendant Ryan Tola, a resident of New Jersey, is a licensed insurance broker and has worked in the insurance consulting and brokerage business since March 2000. (Def. Tola's Mot. Summ. J., Ex. A, Aff. of Ryan Tola, ¶¶ 3-4, Dec. 20, 2010 ("Tola Aff.").) On March 28, 2000, he became an employee of DCG, where he worked through February of 2004. (Id. ¶ 7.) While employed by DCG, he learned about all aspects of analyzing employee benefit programs, marketing the services of DCG, and serving clients in connection with employee benefit programs. (Id. ¶ 8-9.) In addition, he established relationships with clients, most of whom were New Jersey school districts, and continued to service and sell to those clients after DCG was later acquired by Brown & Brown. (Id. ¶ 10.) All of his work at DCG was in the area of insurance for employee benefit programs, and more than 80% of the customers he serviced while at DCG were public sector clients, including New Jersey school districts and municipalities. (Id. ¶ 11.)

In early 2004, Tola learned that DCG was being sold to Brown & Brown. (Id. ¶ 12.) Some time in late January 2004, he was provided an employment agreement with Brown-PA and was asked to sign the agreement by the end of the day if he wanted to be employed by the Brown & Brown organization. (Id. ¶ 14.) Although he requested to have it reviewed by an attorney prior to signing, no time was permitted for such a review. (Id. ¶ 15.) He signed the employment agreement and began working at Brown-PA. (Id.) Thereafter, between February 2004 and early 2007, Tola remained employed at Brown-PA, where he serviced the clients he had worked with at DCG. (Id. ¶ 16.)

In late 2006 or early 2007, Thomas Riley advised Tola that Brown & Brown was in the process of acquiring Grinspec, Inc., a New Jersey brokerage firm that was a family-owned business doing only New Jersey public sector work. (Id. ¶¶ 17-18.) Riley explained that Grinspec's principals would not be acquired and that he wanted Tola to manage the Grinspec subsidiary. (Id. ¶¶ 19-20.) In connection with Tola's move to Grinspec, Riley, Tola, and Cola discussed Tola's transition, the terms of which were purportedly memorialized in a February 23, 2007 e-mail sent from Cola to both Tola and Riley. (Tola Aff. ¶ 21; Def. Tola's Mot. Summ. J., Ex. 1.) The e-mail stated as follows:

To recap the meeting that we had here on Wednesday regarding Ryan's transition to Grinspec, here is what we discussed:

* Ryan's book of business will remain here, will be serviced here, and Ryan will remain involved in key accounts by maintaining key relationships.

* We will compensate his office for his involvement in those accounts

* Ryan's Comp:

G Ryan's base will be between $250,000 and $275,000 G $70,000 will be added to his compensation, which will be paid by the compensation we ...


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