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Qbe Americas, Inc. v. McDermott

United States District Court, D. Minnesota

January 9, 2015

QBE Americas, Inc., Plaintiff,
v.
John McDermott, Defendant.

MEMORANDUM AND ORDER

PAUL A. MAGNUSON, District Judge.

This matter is before the Court on Plaintiff's Motion for a Preliminary Injunction. For the reasons that follow, the Motion is granted.

BACKGROUND

Defendant John McDermott was, until the end of November 2014, the Senior Vice President of Sales and Marketing at NAU Country Insurance Corporation, a subsidiary of Plaintiff QBE Americas, Inc. NAU provides crop insurance to farmers throughout the nation, and it is one of only 18 USDA-approved providers of such insurance. In his capacity as Senior Vice President, McDermott formulated the company's strategic plan and implemented sales, marketing, and business-development programs on a nationwide basis. (Compl. Ex. E (McDermott's QBE job description).) According to QBE, the crop insurance industry is highly competitive and requires insurance companies to maintain relationships with crop insurance agents and brokers. In addition, QBE asserts that nearly 90% of its crop insurance sales take place from January 1 to March 15, before the spring planting season begins. The significance of the next two-and-a-half months is a large part of the reason QBE is seeking an injunction against McDermott here.

McDermott began working at NAU in 2005. Starting with his first promotion in 2006, McDermott and NAU executed several employment agreements that included covenants not to compete, and confidentiality and non-solicitation provisions. (See id. Exs. A-D.) After the first agreement in 2006 (id. Ex. A), each subsequent agreement is denominated as an "amendment" to the previous agreements. (See, e.g., id. Ex. B at 1 ("This AMENDMENT TO EMPLOYMENT AGREEMENT....").) McDermott and NAU executed the last two of these amended agreements in April 2010, just before NAU and QBE merged. In exchange for executing the 2010 employment agreements, McDermott received a salary increase and eligibility for an increased bonus. The second of the April 2010 agreements also included a retention bonus to induce McDermott to remain at NAU through the merger. The second April 2010 agreement amended the first April 2010 in significant ways, including adding new confidentiality, noncompetition, and non-solicitation provisions. In relevant part, these provisions prohibited McDermott from:

communicat[ing] to anyone other than the Company and those designated by the Company any trade secrets, business plans or other confidential information, knowledge or data relating to the Company or any of its subsidiaries or affiliates[;]
* * *
for twelve (12) months after the Date of Termination... directly or indirectly engag[ing] in or becom[ing] associated with any Competitive Activity.... "Competitive Activity" means crop insurance or any other business or endeavor in which the Company is engaged at the Date of Termination[;] [or]
* * * for twelve (12) months after the Date of Termination... directly or indirectly, solicit[ing] for employment by other than the Company any person employed by the Company or any of its subsidiaries or affiliates.

(Compl. Ex. D. ¶¶ 6(a)(i), 6(b), 6(c).) The second April 2010 agreement provided, as had the others, that the noncompete, confidentiality, and non-solicitation provisions were in consideration for the benefits McDermott received in the form of increased bonus eligibility and increased salary, in addition to the retention bonus for remaining with the company for three months after the merger closed. (Id. ¶ 6(e).)

McDermott contends that sometime in 2012, he was informed that he was no longer an employee of NAU but was now an employee of QBE. (Def.'s Opp'n Mem. at 4) The implication is that he had little idea about the merger, which might cast doubt on the assignability of the covenants not to compete. But McDermott's claim of ignorance is belied by the second April 2010 agreement, which specifically references QBE several times. (See Compl. Ex. D ¶ 2(b) (discussing QBE Executive Committee's role in determining McDermott's bonus).)

In the fall of 2014, QBE informed McDermott that he would be laid off effective December 19, 2014, as part of a reduction in force. QBE offered McDermott a severance package of one year's salary. (Compl. ¶ 44.) According to QBE, McDermott told the company that he was willing to accept a different position, and the company intended to offer McDermott another position. Before it could do so, however, on November 25, 2014, McDermott resigned effective November 26, 2014. QBE reminded McDermott verbally and by letter of his obligations under the second April 2010 agreement's restrictive covenants.[1] McDermott responded to QBE's letter, saying that he had "accepted a position as National Account Manager for Hudson Insurance Company." (Compl. Ex. H.) Hudson is one of the other 18 companies USDA-approved to sell crop insurance. McDermott's correspondence with QBE made clear that he had informed Hudson of his restrictive covenants with QBE.

In early December, Hudson mailed flyers to approximately 6, 000 crop insurance agents nationwide, including its own agents as well as agents of QBE, regarding McDermott's employment with Hudson. (See id. Ex. L.) On December 15, 2014, Hudson's lawyers sent QBE a letter saying that Hudson disagreed with QBE "concerning the nature, extent and enforceability of the noncompetition provisions of Mr. McDermott's employment agreement...." (Id. Ex. M.) This litigation ensued shortly thereafter, with QBE raising claims for breach of contract, misappropriation of trade secrets, and tortious interference with business relations.

In this Motion, QBE asks for an injunction prohibiting McDermott from working at Hudson or any competitor until December 19, 2015, which is one year from the ...


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