Woodmen of the World Life Insurance Society v. Weathersbee et al
MEMORANDUM AND ORDER - The defendants' motion to dismiss (filing 23 ) is denied. This matter is referred to the Magistrate Judge for case progression. Ordered by Judge John M. Gerrard. (GJG)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
WOODMEN OF THE WORLD LIFE
MEMORANDUM AND ORDER
ROBERT WEATHERSBEE and
The plaintiff, Woodmen of the World Life Insurance, has sued two of its
former employees, Robert Weathersbee and Maxie Bondurant, for breach of a
non-solicitation agreement. Weathersbee and Bondurant move to dismiss
Woodmen's complaint under Fed. R. Civ. P. 12(b)(6). For the reasons
explained below, the defendants' motion will be denied.
Woodmen's allegations are briefly summarized as follows. In 2008,
Woodmen hired Maxie Bondurant to sell life insurance and annuity products
as an independent contractor. Filing 1 at 2. Three years later, in 2011, the
company hired Robert Weathersbee as a recruiting salesperson. As a
condition of their employment, Weathersbee and Bondurant signed an
agreement which contained, among other provisions, a non-solicitation
clause. Pursuant to that clause, former employees of Woodmen cannot, for a
period of 2 years following the termination of their employment contract,
(i) induce or attempt to induce any WoodmenLife member or
certificate owner with whom the WoodmenLife Representative
did business and had personal contact during the term of this
contract, to surrender, cancel, lapse, forfeit, or otherwise
terminate any WoodmenLife insurance certificates or annuity
certificates . . . .
(iii) induce or attempt to induce any WoodmenLife employee or
sales representative with whom the [employee] actually worked
and had personal contact while employed by WoodmenLife, to
terminate their relationship with WoodmenLife, except to the
extent such inducement or solicitation is for an enterprise that is
not competitive with the business, products or services [the
employee] offered or provided on behalf of WoodmenLife and
cannot adversely affect WoodmenLife's relationship or volume of
Filing 1 at 4-5; filing 1-1 at 5; filing 1-2 at 5. According to Woodmen, these
provisions are necessary to protect its business interests and ensure a stable
workforce. Filing 33 at 4.
In August 2016, Weathersbee announced that he was leaving Woodmen
to join TransAmerica Premier Life Insurance—a competitor of Woodmen.
Filing 1 at 5. After doing so, but before his official termination date,
Weathersbee allegedly contacted other Woodmen employees and encouraged
them to do the same. Bondurant, Woodmen says, was one of those
employees—and he, too, decided to leave Woodmen for TransAmerica.
Woodmen claims that Weathersbee and Bondurant, upon arriving at
TransAmerica, violated their non-solicitation obligations in at least two
respects. First, Woodmen claims that Weathersbee and Bondurant—using
information they obtained while employed with Woodmen—encouraged
Woodmen's customers to transfer their insurance policies to TransAmerica.
Filing 1 at 5-6. At least 11 customers did so, Woodmen says, resulting in over
$850,000.00 in damages. Filing 1 at 9. Second, Woodmen alleges that
Weathersbee contacted current Woodmen employees and encouraged them to
join TransAmerica's sales team. Those communications allegedly violated
subsection iii of Weathersbee's agreement, which prohibits him from
soliciting Woodmen employees on behalf of a competitor. Filing 1 at 4.
Woodmen seeks injunctive relief to "to prevent Weathersbee and
Bondurant from further violating their non-solicitation obligations." Filing 33
at 3; filing 1 at 11. Weathersbee and Bondurant move to dismiss Woodmen's
complaint, arguing that the non-solicitation provisions are unenforceable
under Nebraska law. See filing 23.1
STANDARD OF REVIEW
A complaint must set forth a short and plain statement of the claim
showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). This
standard does not require detailed factual allegations, but it demands more
than an unadorned accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
The complaint need not contain detailed factual allegations, but must provide
more than labels and conclusions; and a formulaic recitation of the elements
of a cause of action will not suffice. Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007). For the purposes of a motion to dismiss a court must take all of
the factual allegations in the complaint as true, but is not bound to accept as
true a legal conclusion couched as a factual allegation. Id.
The parties agree that Nebraska law governs.
And to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a
complaint must also contain sufficient factual matter, accepted as true, to
state a claim for relief that is plausible on its face. Iqbal, 556 U.S. at 678. A
claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged. Id. Where the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct, the complaint has
alleged—but has not shown—that the pleader is entitled to relief. Id. at 679.
Determining whether a complaint states a plausible claim for relief will
require the reviewing court to draw on its judicial experience and common
sense. Id. The facts alleged must raise a reasonable expectation that
discovery will reveal evidence to substantiate the necessary elements of the
plaintiff's claim. See Twombly, 550 U.S. at 545. The court must assume the
truth of the plaintiff's factual allegations, and a well-pleaded complaint may
proceed, even if it strikes a savvy judge that actual proof of those facts is
improbable, and that recovery is very remote and unlikely. Id. at 556.
When deciding a motion to dismiss under Rule 12(b)(6), the Court is
normally limited to considering the facts alleged in the complaint. If the
Court considers matters outside the pleadings, the motion to dismiss must be
converted to one for summary judgment. Fed. R. Civ. P. 12(d). However, the
Court may consider exhibits attached to the complaint and materials that are
necessarily embraced by the pleadings without converting the motion. Mattes
v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003). Documents
necessarily embraced by the pleadings include those whose contents are
alleged in a complaint and whose authenticity no party questions, but which
are not physically attached to the pleading. Ashanti v. City of Golden Valley,
666 F.3d 1148, 1151 (8th Cir. 2012).
As noted above, the underlying employment agreements contain a nonsolicitation provision which generally prohibit Weathersbee and Bondurant
from soliciting Woodmen's customers and personnel. The defendants
acknowledge that such post-employment restrictions may be enforceable so
long as they are necessary and reasonable. Filing 24 at 5. But, they argue,
Woodmen's 2-year restriction on the solicitation of its employees (the "nonrecruitment clause") is neither necessary nor reasonable, and is therefore
unenforceable. See filing 24 at 4. And because it is unenforceable, so too is
Woodmen's restriction on the solicitation of its customers. After all, they
argue, "if any portion of the covenant . . . is invalid, the remainder of the
covenant is likewise invalid and unenforceable." Filing 24 at 11-12 (citing H
& R Block Tax Servs. v. Circle A Enters., 693 N.W.2d 548, 553 (Neb. 2005)).
The Nebraska Supreme Court has not yet considered the enforceability
of a non-recruitment clause. But this restriction shares a similar purpose
with more commonplace covenants not to compete and other provisions
partially restraining trade—namely, to prevent Weathersbee and Bondurant
from soliciting the employment of Woodmen personnel on behalf of a direct
competitor. As such, the Court looks to Nebraska's three-part test for
determining the provision's validity. See Gaver v. Schneider's O.K. Tire Co.,
856 N.W.2d 121, 130 (Neb. 2014). Pursuant to that test, a partial restraint on
trade is valid if it is (1) not injurious to the public; (2) no greater than
reasonably necessary to protect the employer in some legitimate business
interest; and (3) not unduly harsh and oppressive on the party against whom
it is asserted. H & R Block, 693 N.W.2d at 553-54. At issue here is the second
requirement: whether Woodmen's non-recruitment clause is no greater than
is reasonably necessary to protect a legitimate business interest.
Woodmen claims that it is, citing its "legitimate interest" in a stable
workforce. To this end, Woodmen contends that the restriction is necessary
to prevent its former employees from using relationships they developed
during their employment to "poach employees from Woodmen for the
purpose of competing with Woodmen." Filing 33 at 8. And, they argue, the
restriction advances this interest in a "narrowly tailored" fashion—
prohibiting communications only between the signatory and current
employees with whom they "actually worked and had personal contact[.]"
Filing 1 at 3; filing 33 at 8. Accordingly, Woodmen argues, Nebraska courts
would likely enforce its non-solicitation provision.
Weathersbee and Bondurant disagree. They argue that Woodmen's
stated business interest—a "stable workforce"—is vague and under-defined,
and therefore insufficient to justify the restriction. Filing 36 at 4. They also
appeal to Nebraska's general "disfavor" of restrictive covenants, noting that
such restrictions are to be "construed narrowly." Filing 24 at 5-6; see Gaver,
856 N.W.2d at 131; Securities Acceptance Corp. v. Brown, 106 N.W.2d 456,
462 (Neb. 1960) (at common law, restraints of trade were against public
policy and void). Thus, they argue, given the state's restrictive approach to
such clauses, it is "highly unlikely" that Nebraska courts would recognize and
enforce the non-solicitation provision at issue here. Filing 24 at 8.
The Court is not convinced that dismissal is warranted at this early
stage of the proceeding. Indeed, the validity of such provisions can be fact
specific, so courts look not only to the terms of the provisions, but to the
evidence adduced. See, Gaver, 856 N.W.2d at 132; H & R Block, 693 N.W.2d
at 556-57; Polly v. Ray D. Hilderman, 407 N.W.2d 751, 755 (Neb. 1987);
Boisen v. Petersen Flying Servs., 383 N.W.2d 29, 32-35 (Neb. 1986).2 And that
None of the cases cited by the parties was decided on the pleadings.
evidence typically includes detailed testimony regarding the nature of the
former employee's job responsibilities, see Boisen, 383 N.W.2d at 32, and the
employer's justification for the contested restraint, see H & R Block, 693
N.W.2d at 556. Here, given the preliminary nature of this case, no such
evidence exists—rather, the Court is confined to the plaintiff's complaint and
the exhibits necessarily embraced by it. ABC Plastics, Inc., 323 F.3d at 697
n.4. Accordingly, because factual issues remain, the defendants' motion to
dismiss will be denied.
IT IS ORDERED:
The defendants' motion to dismiss (filing 23) is denied.
This matter is referred to the Magistrate Judge for case
Dated this 21st day of July, 2017.
BY THE COURT:
John M. Gerrard
United States District Judge
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