Arthur J. Gallagher & Co. v. O'Neill
ORDER AND REASONS granting 29 MOTION to Dismiss Defendant's Counterclaim with prejudice. Signed by Judge Martin L.C. Feldman on 7/26/2017. (clc)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ARTHUR J. GALLAGHER & CO.
BRIAN D. O’NEILL
ORDER AND REASONS
Before the Court is Arthur J. Gallagher & Co.’s Rule 12(b)(6)
following reasons, the motion is GRANTED.
This lawsuit arises out of an alleged breach of employment
agreements. On June 14, 2017, the Court issued an Order and Reasons
discussing the relevant facts leading to the lawsuit.
Briefly, Brian O’Neill worked for Gallagher until May 27,
2016; he then began employment with one of Gallagher’s competitors,
Marsh USA. During his employment with Gallagher, O’Neill executed
agreements precluded O’Neill from competing with Gallagher in
specific geographic areas for two years after the term of his
employment with Gallagher. Because O’Neill took a position with a
Gallagher competitor and allegedly began soliciting business from
Gallagher customers, Gallagher filed a lawsuit for injunctive
relief, breach of contract, misappropriation of trade secrets, and
breach of the duty of good faith. O’Neill filed a motion to dismiss
Gallagher’s claims; the Court denied that motion.
Then, in O’Neill’s answer to Gallagher’s complaint, O’Neill
filed a counterclaim against Gallagher. O’Neill’s counterclaim
alleges that Gallagher interfered with O’Neill’s contractual or
business relations and that the employment agreements are void.
Gallagher now moves the Court to dismiss O’Neill’s counterclaim
under Federal Rules of Civil Procedure Rule 12(b)(6) for failing
to state a claim.
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a party to move for dismissal of a complaint for failure to state
a claim upon which relief can be granted.
Such a motion is rarely
granted because it is viewed with disfavor.
See Lowrey v. Tex. A
& M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997) (quoting Kaiser
Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d
1045, 1050 (5th Cir. 1982)).
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure,
a pleading must contain a "short and plain statement of the claim
showing that the pleader is entitled to relief."
Iqbal, 556 U.S. 662, 678-79 (2009) (citing Fed. R. Civ. P. 8).
unadorned, the-defendant-unlawfully-harmed-me accusation." Id. at
678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
"accepts 'all well-pleaded facts as true, viewing them in the light
most favorable to the plaintiff.'"
See Martin K. Eby Constr. Co.
v. Dall. Area Rapid Transit, 369 F.3d 464 (5th Cir. 2004) (quoting
Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)).
deciding whether dismissal is warranted, the Court will not accept
conclusory allegations in the complaint as true.
Kaiser, 677 F.2d
Indeed, the Court must first identify allegations that
are conclusory and thus not entitled to the assumption of truth.
Iqbal, 556 U.S. at 678-79.
A corollary: legal conclusions "must
be supported by factual allegations." Id. at 678.
veracity of the well-pleaded factual allegations, the Court must
then determine "whether they plausibly give rise to an entitlement
to relief." Id. at 679.
"'To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.'"
Gonzalez v. Kay, 577 F.3d
600, 603 (5th Cir. 2009) (quoting Iqbal, 556 U.S. at 678) (internal
quotation marks omitted).
"Factual allegations must be enough to
raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true (even
if doubtful in fact)."
Twombly, 550 U.S. at 555 (citations and
"A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the
Iqbal, 556 U.S. at 678 ("The plausibility
standard is not akin to a 'probability requirement,' but it asks
for more than a sheer possibility that a defendant has acted
This is a "context-specific task that requires the
reviewing court to draw on its judicial experience and common
Id. at 679.
"Where a complaint pleads facts that are
merely consistent with a defendant's liability, it stops short of
the line between possibility and plausibility of entitlement to
relief." Id. at 678 (internal quotations omitted) (citing Twombly,
550 U.S. at 557).
"[A] plaintiff's obligation to provide the
'grounds' of his 'entitle[ment] to relief'" thus "requires more
than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do."
Twombly, 550 U.S. at
555 (alteration in original) (citation omitted).
In deciding a motion to dismiss, the Court may consider
documents that are essentially "part of the pleadings."
any documents attached to or incorporated in the plaintiff's
complaint that are central to the plaintiff's claim for relief.
Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th
Cir. 2004) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d
496, 498-99 (5th Cir. 2000)).
Also, the Court is permitted to
consider matters of public record and other matters subject to
judicial notice without converting a motion to dismiss into one
for summary judgment.
See United States ex rel. Willard v. Humana
Health Plan of Tex. Inc.,
336 F.3d 375, 379 (5th Cir. 2003).
II. Enforceability of Employment Contracts
The threshold determination of whether O’Neill states a valid
claim against Gallagher is whether the employment agreements’ noncompete
employment are valid and enforceable. O’Neill contends they are
During O’Neill’s employment he entered into an “Executive
Agreement” and a Stock Option Award agreement. For purposes of
this motion, the Executive Agreement provides:
[T]he Executive [O’Neill] understands and agrees that
for a period of two (2) years following the termination
of his employment for any reason whatsoever, he will not
(i) directly or indirectly within the Company Business
Area (as defined below), solicit, place, accept, aid,
counsel or consult in the renewal, discontinuance or
replacement of any insurance or reinsurance by, or
handle self-insurance programs, insurance claims or
other insurance administrative functions (“insurance
services”) for, any existing Company account or any
actively solicited prospective account of the Company
for which he performed any of the foregoing functions
during the two-year period immediately preceding such
termination or (ii) provide any employee benefit
brokerage, consulting, or administrative services, in
the areas of group insurance, defined benefit and
defined contribution pension plans, human resources and
staffing services, individual life, disability and
capital accumulation products, and all other employee
benefit areas (“benefit services”) the Company is
involved with, for any existing Company account or any
actively solicited prospective account of the Company
for which he performed any of the foregoing functions
during the two-year period immediately preceding such
parishes as constituting the “Company Business Area,” referred to
in the Executive Agreement. Finally, the Executive Agreement also
contains a severability clause, which provides:
The provisions of this Agreement are intended to be
interpreted and construed in a manner which makes such
provisions valid, legal and enforceable. In the event
any provision of this Agreement is found to be partially
or wholly invalid, illegal or unenforceable, such
provision shall be modified or restricted to the extent
and in the manner necessary to render such provision
valid, legal and enforceable. It is expressly understood
and agreed between the parties that this modification or
restriction may be accomplished by mutual accord between
the parties or, alternatively, by disposition of a court
of law. If such provision cannot under any circumstances
be so modified or restricted, it shall be excised from
this Agreement without affecting the validity, legality
or enforceability of any remaining provisions.
Similar to the Executive Agreement, O’Neill’s Stock Option Award
Agreement includes in Paragraph 20:
(a)(i) If, at any time within (A) the seven-year term of
this grant; (B) two years after the termination of
employment; or (C) two years after the Participant
exercises any portion of this grant, whichever is the
latest, the Participant, in the determination of the
management of the Company, engages in any activity in
competition with any activity of the Company, or
inimical, contrary or harmful to the interests of the
Company, including, but not limited to:
(1) conduct related to his or her employment for
which either criminal or civil penalties against him or
her may be sought;
(2) violation of Company policies, including,
without limitation, the Company’s Global Standards of
Business Conduct and Insider Trader Policy;
(3) directly or indirectly, soliciting, placing,
accepting, aiding, counseling or providing consulting
for any Insurance Services for any existing Company
Account or any actively solicited Prospective Account of
the Company for which he or she performed any of the
immediately preceding such termination; or providing
Benefit Services the Company is involved with, for any
existing Company Account or any Prospective Account of
the Company for which the Participant performed any of
the foregoing functions during the two-year period
immediately preceding such termination…
then this grant of stock options and all other grants of
stock options held by the Participant shall terminate
effective as of the date on which the Participant enters
into such activity, unless terminated sooner by
operation of another term or condition of this Agreement
or the Plan… .
The Stock Option Award, however, does not separately define the
Participant’s geographic limitations in competition for the agreed
upon two-year term. Instead, it incorporates the geographic limits
set forth in the Executive Agreement in its definition for “Company
Account” as referenced in the clawback provision. The Stock Option
Award agreement defines “Company Account” to
include all users of insurance services or benefit
services including commercial and individual consumers,
risk managers, carriers, agents and other insurance
intermediaries; provided, that, if the Participant is
employed by the Company in, or primarily performing work
for the Company in LOUISIANA, Company Accounts are
further limited to the users of insurance services or
Participant’s employment agreement with the Company.
specifically reference geographic limitations, as required under
against any employment contract that prohibits an employee from
competing with a former employer.” Lemoine v. Baton Rouge Physical
Therapy, L.L.P., 135 So. 3d 771, 773 (La. Ct. App. 12/27/13); see
Louisiana Smoked Products, Inc. v. Savoie’s Sausage & Food Prods.,
Inc., 696 So. 2d 1373, 1379 (La. 1997). This policy of restricting
non-competition agreements was based on an underlying desire to
prevent an individual from contractually depriving himself of the
ability to support himself and consequently becoming a public
burden. See McAlpine v. McAlpine, 679 So. 2d 85, 91 (La. 1996).
Louisiana Revised Statute 23:921 provides:
A. (1) Every contract or agreement, or provision
thereof, by which any is restrained from exercising a
lawful profession, trade, or business of any kind,
except as provided in this Section, shall be null and
void. However, every contract or agreement, or provision
thereof, which meets the exceptions as provided in this
Section, shall be enforceable. …
C. Any person, including a corporation and the
individual shareholders of such corporation, who is
employed as an agent, servant, or employee may agree
with his employer to refrain from carrying on or engaging
in a business similar to that of the employer and/or
from soliciting customers of the employer within a
municipalities, or parts thereof, so long as the
employer carries on a like business therein, not to
exceed a period of two years from termination of
D. For the purposes of Subsections B and C of this
Section, a person who becomes employed by a competing
business, regardless of whether or not that person is an
owner or equity interest holder of that competing
business, may be deemed to be carrying on or engaging in
a business similar to that of the party having a
contractual right to prevent that person from competing.
effects of Agreements which incorporate overly broad and overencompassing
determined that overly broad geographic restrictions do not render
an entire agreement unenforceable when there is a severability
clause. Through the severability clause, courts will construe the
restriction enforceable as to the relevant parishes or geographic
areas affecting the parties; the agreement will be deemed invalid
and unenforceable as to the geographic locations deemed to not be
relevant to the agreement.
For example, in Arthur J. Gallagher & Co. v. Babcock, the
Fifth Circuit interpreted a non-compete agreement that included
limitation. 703 F.3d 284, 292 (5th Cir. 2012). The Court held that
the provision was “not invalid merely because [it] attempted to
reach every Louisiana parish.” Id. The Court upheld the district
court’s holding that eliminated the 55 parishes in which Gallagher
did not provide the specific services that were relevant to that
non-compete agreement. Id. The Court notably went on to reject the
egregious that it render[ed] the covenant invalid as to all sixtyfour parishes instead of just the fifty-five as noted by the
district court.” Id. The Court found it specific enough that the
geographic scope of “anywhere the employer does business.” Id.
Here, O’Neill’s Executive Agreement specifically references
geographic reach is too broad and the Executive Agreement is null
and void. However, O’Neill does concede that at least seven, of
business. As discussed, the mere fact that Gallagher’s geographic
list may have been overly broad does not deem the entire noncompete clause of the Executive Agreement void. See id. Rather,
Agreement’s non-compete clause enforceable as to the relevant
geographic areas included in the Agreement. See LA. REV. STAT. ANN.
§ 23:921; Arthur J. Gallagher, 703 F.3d at 292; Lemoine, 135 So.
requisite specificity of the Louisiana statute by specifically
contention that the non-competition provision of the Executive
Agreement is void is without merit.
The Court must next consider the validity of the non-compete
clause in the Stock Option Award. The Stock Option Award’s noncompete clause similarly prevents O’Neill from soliciting business
from a Gallagher account or client for two years after termination
of his employment with Gallagher, if he worked on that company
account within the two years before his termination. And, the Stock
Executive Agreement, through the definition of “Company Account”
as referenced in the Stock Option Award’s non-compete clause.
Because the Stock Option Award incorporates the geographic
limitations discussed above in the employment agreement, the same
reasoning applies here. O’Neill’s argument that the over-inclusive
nature of the restriction deeming the non-compete clause void is
again of no avail here. Therefore, to the extent that Gallagher
performs the requisite insurance services in some, or all, of the
referenced parishes included in the agreement, the non-compete
clause is effective as to those parishes.
Next, the Court must determine whether O’Neill states a valid
claim for interference with contractual or business relationships.
In its motion to dismiss, Gallagher contends that under Louisiana
law, O’Neill fails to state a claim for interference with a
contractual relationship because O’Neill’s claim is against a
corporation and not an officer. In response, O’Neill submits that
he does state a valid claim for interference with a business
relationship. It also appears that he attempts to argue that courts
interchangeably, as it refers to a claim for interference. However,
O’Neill fails to clarify how this should directly affect the issue
currently before the Court.
(1) the existence of a contract or legally protected
interest between the plaintiff and the corporation; (2)
the corporate officer’s knowledge of the contract; (3)
the officer’s intentional inducement or causation of the
corporation to breach the contract or his intentional
rendition of its performance impossible or more
burdensome; (4) absence of justification on the part of
the officer; (5) causation of damages to the plaintiff
by the breach of contract or difficulty of its
performance brought about by the officer.
9 to 5 Fashions, Inc. v. Spurney, 538 So. 2d 228, 234 (La. 1989).
The underlying requirement for a contractual relation interference
claim, however, is that it is “only a corporate officer’s duty to
refrain from intentional and unjustified interference with the
contractual relation between his employer and a third person.” Id.
Therefore, the plaintiff must allege this claim against a corporate
officer, not the corporation itself. See id. Here, O’Neill’s
counterclaim is against a corporation, Gallagher. His counterclaim
is void of any allegations against a specific corporate officer.
O’Neill further contends that Gallagher’s attempt to enforce
agreements, namely the non-compete provisions of two agreements,
that are void is a clear demonstration of willful intent on behalf
of Gallagher. Such willful intent supports O’Neill’s claim for
Conversely, Gallagher contends that its request to enforce an
enforceable and valid non-compete and non-solicitation agreement
necessarily means it could not have acted with the requisite
willful intent that O’Neill alleges.
O’Neill relies on Gearheard v. De Puy Orthopedics, Inc.. No.
99-1091, 2000 WL 533352 (E.D.La. Mar. 17, 2000). The court in
Gearheard allowed a former employee to bring a claim for inference
with contractual relations when a former employer sought to enforce
an invalid non-compete agreement. Id. at *7-8. O’Neill’s reliance
is misplaced. The crux of the court’s finding in Gearheard was
that the former employer sought to enforce an invalid non-compete.
See id. Here, the Court has determined that on the record before
it, Gallagher attempts to enforce valid non-compete agreements.
interference with contractual relations and business relations.
Gallagher has attempted to restrain O’Neill’s personal services
pursuant to agreements that lack the statutorily required scope,
Gallagher has intentionally interfered with O’Neill’s employment
relationship with his current employer and is liable therefor.”
Paragraph 19 goes on to claim: “Gallagher’s attempt to enforce an
agreement that is clearly void on its face demonstrates a willful
intent on Gallagher’s part to interfere with O’Neill’s contractual
O’Neill’s claim for interference with business relations.
“‘Louisiana law protects the businessman from malicious and
wanton interference, permitting only interferences designed to
protect a legitimate interest of the actor.’” Junior Money Bags,
Ltd. v. Segal, 970 F.2d 1, 10 (5th Cir. 1992) (quoting Dussouy v.
Gulf Coast Inv. Corp., 660 F.2d 594, 601 (5th Cir. 1981)) (internal
interference with business suit must show by a preponderance of
the evidence that the defendant improperly influenced others not
to deal with the plaintiff.’” Junior Money Bags, 970 F.2d at 10
(quoting McCoin v. McGehee, 498 So. 2d 272, 274 (La. App. 1st Cir.
1986)). Where a plaintiff has made no showing that an officer or
a corporation influenced third parties not to do business with the
plaintiff (former employee), the plaintiff has not stated a claim
for tortious interference with business relations under Louisiana
law. See Junior Money Bags, 970 F.2d at 10-11; McCoin, 498 So. 2d
at 274 (citing Utisca Enterprises, Inc. v. Costello, 434 So. 2d
137, 140 (La. App. 5th Cir. 1983)).
business relations, the plaintiff must prove that the former
employer “‘improperly influenced others not to deal with the
plaintiff.’” Junior Money Bags, 970 F.2d at 10 (quoting McCoin,
498 So. 2d at 274). O’Neill’s counterclaim fails to even attempt
to allege that Gallagher “improperly influenced” a third party
from dealing with him. The record on this is silent. Therefore,
O’Neill patently fails to state a claim for interference with
business relations, to the extent he seeks to allege this as a
dismiss O’Neill’s counterclaim with prejudice is GRANTED.
New Orleans, Louisiana, July 26, 2017
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE
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