IP Law Daily, TRADE SECRETS—D. Or.: Insurance brokerage denied preliminary injunction against former employees, (Jun 21, 2022)

By Kevin M. Finson, J.D.

A brokerage firm was unable to establish likelihood of success on the merits in a trade secret dispute when it could not show that the documents allegedly transferred contained any trade secrets.

An insurance brokerage firm was not entitled to a preliminary injunction against its former employees and a competing firm, the federal district court in Eugene, Oregon, has held. One former employee and an competing brokerage firm he established had entered into a stipulated injunction. The brokerage firm did not show that it was likely to succeed on the merits of its claims against the remaining defendants or that it would suffer irreparable harm that could not be remedied by monetary relief (AssuredPartners of Oregon, LLC v. Reese, June 17, 2022, McShane, M.).

AssuredPartners of Oregon, LLC (AP) was an insurance brokerage firm. G. Scott Reese sold his insurance business to AP and then began working for AP as an employee. Along with co-defendants Swan, Whipple, and Holt, he worked in the specialized senior living facility market. Each signed non-disclosure, non-solicitation, and non-compete agreements. AP eventually discovered that Reese was operating a “shadow business,” called S&S Investments, placing certain AP clients in insurance captives, and directing the broker fees to S&S instead of to AP. AP terminated Reese, along with Swan and Whipple, on the belief that Swan and Whipple acted in concert with Reese. AP alleged that Swan and Whipple refused to timely return their company computers and that the three employees then solicited Holt, another AP employee to follow them to a new firm, Cobbs Allen. AP brought suit against all its former employees, S&S, and Cobbs Allen and sought a preliminary injunction. Reese and S&S entered into a stipulated injunction, while the remaining defendants opposed it.

Likelihood of success on the merits. AP’s claims of breach of contract, breach of fiduciary duty, trade secret misappropriation, and tortious interference all required a showing of wrongdoing by the defendants.

With respect to the defendants who still contested the injunction, the court found the evidence extremely lacking. AP alleged that Reese, Swan, and Whipple acted in concert to direct customers to S&S, but presented no evidence except to show that Swan and Whipple worked closely with Reese. There was no showing that Swan and Whipple knew or should have known that anything improper was occurring.

Specifically with regard to trade secrets, while AP’s expert testified that certain files were accessed on Swan’s and Whipple’s computers after their termination, the files in question were not provided to the court and the court could not determine from the expert report whether anything which was accessed constituted a trade secret. Claims against the remaining defendants necessarily failed based on the lack of evidence for a breach or misappropriation by the former employees. The court found that AP had not shown a likelihood of success on the merits as to any claim against any defendant.

Irreparable harm. The harm alleged by AP was loss of revenue and loss of client relationships. Because the value of any particular client account was readily ascertainable, the court held that monetary damages appeared sufficient to remedy any harm at this time.

The court denied AssuredPartners’ motion for a preliminary injunction.

The Case is No 6:22-cv-00673-MC.

Attorneys: James M. Barrett (Ogletree Deakins Nash Smoak & Stewart P.C.) for AssuredPartners of Oregon, LLC d/b/a Alliance Insurance Group d/b/a Alliance Senior Living. Arden J. Olson (Harrang Long Gary Rudnick, PC) for G. Scott Reese and Susan Reese. Alexandra M. Shulman (Buchalter, APC) for Carl Swan, Alex Whipple, S&S Investments Management, LLC and Shannon R. Holt. Karen L. O'Connor (Stoel Rives LLP) for Bruce Denson, Jr. and Cobbs Allen Capital, LLC d/b/a CAC Specialty.

Companies: AssuredPartners of Oregon, LLC; S&S Investments Management, LLC; Cobbs Allen Capital, LLC

Cases: TradeSecrets OregonNews