BROWN & BROWN, INC. et al v. COLA et al
Filing
108
MEMORANDUM. SIGNED BY HONORABLE RONALD L. BUCKWALTER ON 6/15/2011. 6/16/2011 ENTERED AND COPIES E-MAILED.(lbs, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
BROWN & BROWN, INC., et al.,
BROWN & BROWN OF
PENNSYLVANIA, INC. and GRINSPEC,
INC.
Plaintiffs,
v.
ROBERT COLA, RYAN TOLA, and
DOYLE ALLIANCE GROUP,
Defendants.
:
:
:
:
:
:
:
:
:
:
:
:
:
CIVIL ACTION
NO. 10-3898
MEMORANDUM
BUCKWALTER, S. J.
June 15, 2011
FINDINGS OF FACT
1.
Plaintiff Brown & Brown, Inc. (“Brown & Brown”) is a national insurance
brokerage and service company. (Compl. ¶ 13.)
2.
Plaintiffs Brown & Brown of Pennsylvania, Inc. (“Brown-Pa.”) and Grinspec,
Inc. (“Grinspec”) are wholly-owned subsidiaries of Brown & Brown. (N.T. 3/29/2011, Robert
Cola, at 12:5-8; 20:4-7.)
3.
Brown & Brown and its subsidiaries, including Brown-Pa. and Grinspec, 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.)
4.
Brown & Brown has a number of subsidiary companies throughout the country,
with each focused on the insurance needs of its clients in a particular region or for particular
insurance products. Brown-Pa. and Grinspec are two of Brown & Brown’s subsidiaries, based
in Pennsylvania and New Jersey, respectively. (Id. ¶¶ 14-15.)
5.
One particular brokerage business in which Brown & Brown had an acquisition
interest – Doyle Consulting Group, Inc. and Doyle Consulting Group of New Jersey,
Inc. (collectively, “Doyle Consulting Group”) – was owned by Frank Doyle and Kevin Mullin.
(N.T. 3/29/2011, Robert Cola, at 7:17-8:1.)
6.
Discussions between Brown & Brown, on the one hand, and Doyle Consulting
Group, Doyle and Mullin, on the other hand, culminated in February 2004 with the execution of
an Asset Purchase Agreement through which Brown & Brown and the newly created Brown-Pa.
acquired the assets of Doyle Consulting Group.(N.T. 3/29/2011, Robert Cola, at 12:5-8.
7.
The closing on the Asset Purchase Agreement occurred on February 1, 2004. (See
Asset Purchase Agreement, attached as Exh. C to Pls.’ Resp. to Cola’s Mot. for Summ. J.)
8.
Following the closing and as part of the transaction, Doyle joined Brown-PA as its
Executive Vice President, and all of the customers and accounts of Doyle Consulting Group
became customers and accounts of Brown & Brown and its subsidiaries, including brown
Pa.(N.T. 3/29/2011, Robert Cola, at 13:15-25; 15:21-24.)
2004.
9.
Prior to February 2004, Defendant Robert Cola was an employee and key broker
for Doyle Consulting Group. (N.T. 3/29/2011, Robert Cola, at 20:11-13.)
-2
10.
Cola developed relationships with the clients of Doyle Consulting Group, clients
which he would continue to service after the business was purchased by Brown & Brown. (N.T.
3/29/2011, Robert Cola, at 110:9-16.)
11.
Prior to February 2004, Defendant Ryan Tola also was an employee and key
broker for Doyle Consulting Group. (N.T. 3/29/2011, Robert Cola, at 20:11-13; N.T. 3/29/2011,
Ryan Tola, at 136:21-137:1.)
12.
Section 7.17(a) of the Asset Purchase Agreement required Doyle Consulting
Group to terminate the employment of certain of its employees, including Cola and Tola, prior to
January 30, 2004. (See Asset Purchase Agreement, attached as Exh. C to Pls.’ Resp. to Cola’s
Mot. for Summ. J.)
13.
Accordingly, upon the acquisition of the assets of Doyle Consulting Group by
Brown & Brown and Brown-Pa., Cola and Tola’s respective employment with Doyle Consulting
Group ended. (Id.)
14.
Pursuant to the Asset Purchase Agreement, Doyle Consulting Group
terminated Tola’s and Cola’s employment effective February 1, 2004. (Id.)
15.
In turn, the newly-formed Brown-Pa. agreed to offer new employment to those
same employees, including Cola and Tola, following their termination by Doyle Consulting
Group. (Id.)
16.
Cola and Tola each accepted Brown-Pa.’s offer, signing Employment
Agreements that became effective on February 1, 2004 and contained the restrictive covenants at
issue here. (Pls.’ Exhs. 43, 68.)
-3
17.
To become an employee of Brown-Pa., Cola was required to sign an employment
agreement containing certain restrictive covenants. (Pls.’ Exh. 68.)
18.
Cola was presented with the Brown-Pa. employment agreement on Friday,
January 23, 2004. (Cola Aff. at ¶ 8, attached as Exh. A to Cola’s Mot. for Summ. J.)
19.
Cola then had three days to review that agreement and consult with an attorney of
his choice before he signed it. (Id. at ¶ 9.)
20.
During that time, Cola did, in fact, telephone an attorney, although he apparently
was unable to reach him.(Id. at ¶ 12.)
21.
Cola signed his Employment Agreement on January 26, 2004.(Pls.’ Exh.
68; N.T. 3/29/2011, Robert Cola, at 12:24-13:1.)
22.
Cola’s Employment Agreement with Brown-Pa. was also signed by Frank
Doyle. (Pls.’ Exh. 68; N.T. 3/29/2011, Robert Cola, at 13:2-7.)
23.
Section 8(e) contains, inter alia, the following statement:
Employee has carefully considered, and agrees that the provisions of this Section
are fair, reasonable, and not unduly restrictive on Employee, and that Employee
has had an opportunity to obtain legal advice before agreeing to its terms.
Id. § 8(e).
24.
In his Employment Agreement, Cola agreed to a series of restrictive
covenants designed to protect the business interests and goodwill that Plaintiffs purchased, as
well as the further goodwill earned by Plaintiffs through their own hard work. (Pls.’ Exh. 68.)
25.
There are a series of confidentiality provisions (paragraph 8 (a) and 10 of the
agreement) as well as a non-solicitation provision (paragraph 8(b) of the agreement, in the Cola
agreement.
-4
26.
In connection with and following Brown & Brown’s acquisition of Doyle
Consulting Group, Tola’s employment with Doyle Consulting Group ended, and he, like Cola,
became an employee of Brown-Pa., executing an employment agreement with Brown-Pa. dated
February 1, 2004. (Pls.’ Exh. 40.)
27.
Between March of 2000 and February of 2004, Tola worked for DCG as an
employee benefits junior consultant. (N.T., 3/29/11, 136:21-23.)
28.
At DCG, Tola learned the skills of an insurance broker and consultant, especially
in the area of employee benefits. Tola learned about all aspects of analyzing employee benefit
programs, marketing DCG’s services and servicing accounts in connection with employee benefit
programs. Tola also established relationships with accounts, most of whom were New Jersey
school districts. (N.T., 3/29/11, 173:9-174:24.)
29.
In early 2004, Tola learned that DCG was being sold to the Brown & Brown
organization. (N.T., 3/29/11, 137:25-138:5.)
30.
At the time of the acquisition, Tola considered himself to be an expert in the area
of employee benefits insurance. (N.T., 3/29/11, 174:21-23.)
31.
At that time, Tola was in charge of the public sector division of DCG.
32.
Years later, in April 2007, Tola was promoted and began employment as the
Profit Center Leader of Grinspec, a new Brown & Brown subsidiary. (N.T. 3/29/2011, Robert
Cola, at 20:14-17; N.T. 3/29/2011, Ryan Tola, at 141:15-142:3.)
33.
In connection with his new position and employment, Tola signed a new
employment agreement – this time with Grinspec, effective as of April 2, 2007. (Pls.’ Exh. 43.)
-5
34.
Tola’s employment agreement with Grinspec contains similar, although not
identical, provisions as in Cola’s agreement. For Tola’s provisions, see p. 43 8(a) 10 and 8(b)
and 9.
35.
When Cola and Tola began working for Brown & Brown, after being with the
Doyle Consulting Group (DCG), many of DCG’s clients such as Northwestern Human Services,
Inc. (“NHS”), Elwyn, Inc. and New Courtland became clients of Brown-PA. (N.T., 3/29/11,
13:15-25; 15:21-24.) These clients all had long standing relationships with Doyle and were
Doyle’s clients prior to the asset acquisition. (N.T., 3/30/11, 70:14-21; see also 100:1-23;
106:23-107:18.)
36.
Following the acquisition, the Brown & Brown organization’s management did
not attempt to change the manner by which DCG had previously conducted business. (N.T.,
3/29/11, 175:23-176:20.)
37.
Following the acquisition, the Brown & Brown organization did not change any of
DCG’s marketing materials or change the way that DCG went about marketing its services.
(N.T., 3/29/11, 176:21-177:1.)
38.
Following the acquisition, the DCG employees conducted their business in
the same way that they had prior to the acquisition. (N.T., 3/29/11, 174:25-175:4.)
39.
In February 2006,Cola ascended to the highest executive position at
Brown-Pa. following the resignation of Doyle from the position. Cola was the “Profit Center
Leader,” a term used by Brown & Brown companies to signify the leader of each business unit.
-6
(N.T. 3/29/2011, Robert Cola, at 15:3-8.) Similarly, Tola, who began with Brown-Pa. in
February 2004, became Profit Center Leader of Grinspec in April 2007. (N.T. 3/29/2011, Ryan
Tola, at 141:18-25.)
40.
In 2006, Doyle stepped down as Profit Center Leader but he remained employed
by Brown-PA until October 2007. (N.T., 3/29/11, 14:5-15:6.) Thereafter, Cola took Doyle’s
place as Profit Center Leader of Brown-PA in 2007. (N.T., 3/29/11, 15:3-20.)
41.
After resigning from Brown-PA in 2007, Doyle remained connected with his
former clients through, inter alia, his work on various boards and foundations. For example,
Doyle was a longtime member of both the Elwyn, Inc. and the NHS Foundation boards. (N.T.,
3/29/11, 71:21-72:6; see also N.T., 3/30/11, 29:24-31:4.)
42.
Any restrictions on Doyle’s ability to compete in the marketplace, including his
ability to solicit Plaintiffs’ employees or clients, expired at the latest in October 2009. (See
Exhibit C to Cola Summary Judgment Motion, Asset Purchase Agreement, (“APA”) at Section
7.5 & Doyle’s Employment Agreement with Brown-PA at p. 4; see also N.T., 3/30/11, 73:8-20.)
43.
Plaintiffs admit that there is no evidence demonstrating that Doyle violated any
alleged restrictions imposed on him by the APA or his employment agreement and Plaintiffs
admitted that Doyle was free to utilize his skills and know how when soliciting Plaintiffs’ former
customers:
Q:
A:
Q:
A:
You were aware in 2010 that Frank Doyle was under no restriction,
correct?
Correct.
That he was free to compete for each and every one of these customers
that’s on this list, correct?
Correct.
-7
Q:
A:
Q:
A:
And you’re aware that he’s still free to compete for each and every one of
these customers, correct?
As the agreement reads, yes.
And you’re aware that whatever was in his brain, Frank Doyle’s brain, he
was under no covenant restricting his use of that either, was he?
No.
(N.T., 3/30/11, 73:8-20.)
44.
In 2009 and early 2010, Cola, Tola, and Doyle planned the formation of a new
company that would compete with Brown & Brown in acquiring the business of a number of
Brown & Brown’s then-current customers.
45.
To this end, Cola, Tola, and Doyle created a new company, Doyle Alliance
Group, to compete directly against Plaintiffs.
46.
Cola, Tola, and Doyle’s first began the planning and formation of Doyle Alliance
Group as early as December 2009, nearly seven months before Cola and Tola actually resigned
from their positions as the top-ranking officers of Brown-Pa. and Grinspec, respectively. (N.T.
3/29/2011, Ryan Tola, at 144:20-145:24.)
47.
Cola and Tola each have admitted that, while still employed by Brown & Brown,
they planned and formed Doyle Alliance Group in violation of their respective Employment
Agreements. (N.T. 3/29/2011, Robert Cola, at 32:18-33:10; N.T. 3/29/2011, Ryan Tola, at
151:6-15.)
48.
When asked, “[Y]ou planned and organized a business activity competitive
against Brown & Brown, right?” Cola responded, “Yes.” (N.T. 3/29/2011, Robert Cola, at
32:18-33:10.)
-8
49.
Similarly, when asked, “You and I can agree that you . . . were involved in
aspects of planning and organizing a competitive business activity, namely Doyle Alliance
Group?” Tola responded, “Yes.” (N.T. 3/29/2011, Ryan Tola, at 151:12-15.)
50.
Months prior to their resignations, and while they were being paid by Plaintiffs,
Cola and Tola were actively engaged in building that competitive business – deciding on office
space, technology and other components for the new business. (Pls.’ Exhs. 4-5; N.T. 3/29/2011,
Robert Cola, at 26:24-31:16; N.T. 3/29/2011, Ryan Tola, at 147:18-150:11.) During the first six
months of 2010, Cola and Tola had meetings, communications and conversations with Doyle
and others affiliated with Doyle Alliance Group during which they discussed their intention to
combine efforts and take Plaintiffs’ customers and employees to the new Doyle Alliance Group.
(N.T. 3/29/2011, Ryan Tola, at 146:10-19.)
51.
Cola understood that Doyle was free of his contractual obligations not to compete
with Brown-PA or to solicit Brown-PA customers or employees. (N.T., 3/29/11, 70:6-12; see
also N.T., 3/30/11, 73:8-16.)
52.
Because of Doyle’s numerous business connections and the relationships Doyle
maintained with his former clients, Cola understood the significant threat to Brown-PA’s
business that Doyle’s return presented. (N.T., 3/29/11, 70:1-73:22; 81:23-83:4.)
53.
It was, in fact, Doyle who originally established the relationships with customers
such as NHS, New Courtland, and Elwyn, as they had each been customers of DCG before
becoming customers of Brown-PA. (N.T., 3/29/11, 110:17– 11:14; N.T., 3/30/11, 70:14-21;
72:2-7.)
-9
54.
Cola and others in the Brown-PA office believed that these customers
would leave Brown-PA for Doyle as soon as DAG started up, and Cola would be
powerless to stop them from leaving Brown-PA for Doyle. (N.T., 3/29/11, 81:23-82:11.
55.
Cola did not believe that his relationship with these customers could
overcome Doyle’s relationship with them—to these clients, Cola was “the guy who
worked for Frank.” (N.T., 3/29/11, 81:25-83:4; 85:1-13.)
56.
When Cola learned of Doyle’s intention to compete with Brown-PA, Cola
immediately warned Riley, Regional President of Brown-PA, of the serious impact Doyle
could have on Brown-PA’s business. (N.T., 3/29/11, 71:4-73:22.)
57.
Riley, however, never took any action, despite repeated warnings by Cola
that Doyle would lure away Brown-PA’s customers. (N.T., 3/29/11, 72:10-73:22.)
58.
Cola believed he had no option but to consider joining DAG, as he had a
family to provide for and, despite years of trying, he had not been able to obtain other
employment due to the restrictive covenant in his Brown-PA Employment Agreement.
(N.T., 3/29/11, 86:4-14.)
59.
In furtherance of their plan to establish Doyle Alliance Group as a
competitor to Plaintiffs, and while still employed by Plaintiffs, Cola and Tola copied or
took with them confidential and proprietary information of Brown & Brown, Brown-Pa.
and Grinspec to use those materials in their new employment with Doyle Alliance
Group.
-10
60.
In March 2010, Doyle formed DAG to provide employee health and
welfare benefits brokerage services in New Jersey and Pennsylvania. Doyle is DAG’s
lone shareholder.
61.
Prior to forming DAG, Doyle worked in employee health and welfare
benefits brokerage industry for over twenty years and he gained significant background
knowledge and experience regarding the industry and industry practice. In that time,
Doyle also made a myriad of business contacts, serviced a number of clients (including
the clients at issue in this litigation) and gained vast amounts of experience running a
successful employee health and welfare benefits brokerage firm. (See e.g., N.T., 3/30/11,
70:l4-73:20).
62.
When Doyle established DAG in March 2010, he was completely privileged to
compete in the marketplace and there were no restrictions on his ability to solicit, service, hire
and/or contact any of Plaintiffs’ customers or employees. (Id.).
63.
To form DAG, Doyle re-integrated himself into the relevant business marketplace
and contacted many of his former clients, business contacts and friends to alert them that he was
in the process of establishing a company that would compete with Brown-PA. (See e.g.,
Affidavit of Andrew Seibert (“Seibert Aff.”) at ¶¶ 12, 14-17 & Affidavit of M. Joseph Rocks
(“Rocks Aff.”) at ¶¶ 12–16).
64.
Doyle had maintained close contacts with customers Brown-PA had
acquired through its acquisition of DCG in 2004, including the Elwyn Inc. and NHS.
(N.T., 3/30/11, 71:21-72:9.)
-11
65.
In April 2010, at the request of one of Doyle’s former clients, Elwyn, Inc.’s
president, Dr. Sandra Cornelius, Doyle sponsored a charity event for Fragile X Syndrome at the
Union League. (N.T., 3/30/11, 46:15-24).
66.
Doyle also met with a number of other individuals including his long time
contacts, Senator M. Joseph Rocks, the Chairman and CEO of NHS Human Services, and Drew
Seibert, the CFO of New Courtland Elder Services. (Rocks Aff. at ¶¶ 12-16; Seibert Aff. at ¶¶
12, 14-17).
67.
NHS, along with two of its subsidiaries, Allegheny Valley School and The
Association for Independent Growth (“TAIG”), are one of the largest not-for-profit human
services providers in the United States employing approximately 11,000 individuals in various
capacities. (Rocks Aff. at ¶¶ 2, 7-8).
68.
Like NHS, New Courtland is a diverse, human services organization with
approximately 2,200 employees serving individuals at 37 locations throughout the City of
Philadelphia. (Seibert Aff. at ¶¶ 2, 7-8).
69.
NHS, AVS, TAIG, New Courtland and Elwyn were all potential clients of DAG
who, based upon their relationship with Doyle, issued broker of record letters in favor of DAG
after its formation.
70.
Cola has avoided soliciting Brown & Brown’s former customers. (N.T., 3/29/11,
90:20-91:9.) There is one instance as pointed out by Plaintiff, “when Cola provided ideas for an
Elwyn proposal.” (N.T., 3/29/11, 50).
-12
71.
With the exception of one time when, after his resignation from Brown-PA, NHS
asked Cola to assist them with a mandatory mailing to its employees because Brown-PA had
refused, Cola has avoided servicing Brown & Brown’s former customers who have chosen to
become customers of DAG. (N.T., 3/29/11, 54:9-12; 86:15-89:19; 90:20-91:9.)
72.
Tola has not used any of the information the Brown & Brown organization
attempts to define in Paragraph 8(a) of the Grinspec Agreement as confidential in his
employment with DAG. (N.T., 208:17-23.)
73.
Tola sent e-mails to some of the accounts he serviced while he was employed by
Grinspec advising them of his change in employment, but he did not solicit their business. (N.T.,
3/29/11, 156:3-159:11; 162:23-163:3.)
74.
The employee health and welfare benefits industry is a highly regulated industry
that is a constantly changing and evolving. (Affidavit of Thomas Pappas (“Pappas Aff.”) at ¶¶
13-18).
75.
Information relating to clients and potential clients such as census data, claims
history renewal dates, premiums, types of plans and rate history is constantly fluctuating and
changing. (Pappas Aff. at ¶¶ 13-18; see also, N.T., 3/30/11, 31:5-35:19.)
76.
These changes may be brought about by the changing size of an employer’s work
force, by legislation such as the Health Care Reform Act, by changes in the industry and/or
changes in the marketplace. (Pappas Aff. at ¶¶ 13-18; see also, N.T., 3/30/11, 31:5-35:19.)
-13
77.
Because of this, information such as employee census data, claims history renewal
dates, premiums, types of plans and rate history that may have been relevant at some point
becomes obsolete very quickly. (Pappas Aff. at ¶¶ 13-18; see also, N.T., 3/30/11, 31:535:19.)
78.
Further, information relating to Plaintiffs’ and DAG’s customers and clients is
available in the public domain from a number of sources. (Pappas Aff. at ¶¶ 13-18; see also,
N.T., 3/30/11, 31:5-35:19; 94:1-97:19.)
79.
For example, there are numerous websites like FreeErisa.com and other statutes
such as the Freedom of Information Act that permit entities like DAG access to information
relating to clients and potential clients’ businesses. (N.T., 3/29/11, 94:1-97:19; 164:11-165:13.)
80.
Likewise, brokers competing in the public sector market in New Jersey also can
obtain customer lists and customer contact information through various trade organizations.
(N.T., 3/29/11, 167:23-168:9.)
81.
Currently, DAG employs twelve individuals in its Philadelphia, PA and
Woodbridge, NJ offices. (N.T., 3/29/11, 92: 4-13).
82.
One of these employees is Jana Jim who is a former Brown-PA employee and
long term contact of Cola. (N.T., 3/29/11, 92: 4-8 & N.T., 3/30/11, 99: 15-22; 111:11-112:11.)
83.
As a DAG employee, Jim is not servicing any of Plaintiff’s former clients. (N.T.,
3/29/11, 92: 4-8; N.T., 3/30/11, 99:15-22, 111:11-112:11.)
84.
Jim is an employee with many years of experience in the employee health
and welfare benefits industry. (N.T., 3/29/11, 92: 4-8; N.T., 3/30/11, 99:15-22;
111:11-112:11.)
-14
85.
Doyle offered Jim a position with DAG only after learning she was
unhappy working at Brown-PA. (N.T., 3/30/11, 112: 15-113:13; 113:14-115:13.)
86.
Cola similarly solicited another Brown-PA employee, Al Danish, for
employment with Doyle Alliance Group. (N.T. 3/29/11, Cola, at 56:2-3).
87.
As in the case of Jana Jim, Danish, when told Cola was leaving, expressed
an interest immediately in going with him, although he subsequently did not. (N.T.
3/29/11, Cola at 57:8-25, 58:1).
CONCLUSIONS OF LAW
There is no question that while Cola and Tola were working for Plaintiffs, they
both were involved in the start up of a competitor.
However, the evidence is not at all clear that after Cola and Tola left Plaintiff’s
employment that they violated the covenants of their respective agreements with
Plaintiffs.
Because both parties are aware of the applicable law regarding preliminary
injunctions, I will not rehash it in this opinion.
It suffices to say that while there may be a likelihood of success as to some of
Plaintiffs’ complaint (clearly Cola and Tola violating portions of their respective
agreements while they were still employees of Plaintiffs), there is a substantial likelihood
that Plaintiffs will not prevail in any of the allegations of conduct on the part of Cola and
Tola since they left the employment of Plaintiffs. The testimony I heard and the facts I
-15
have found (specifically Findings of Fact 70, 71, 72, 73 and 83) from the hearing on the
preliminary injunction supports this conclusion.
This is not to suggest that Plaintiffs’ arguments when presumptively augmented
by other testimony at a trial of this case will not succeed. But I have only the record of
the hearing and exhibits before me and on that, Plaintiffs have failed to persuade me that
it has a likelihood of success.
The immediate irreparable harm element for injunctive relief is missing as well.
The evidence from the hearing supports a conclusion that any harm Plaintiffs have
suffered from Defendants’ breach of contract can be adequately remedied by money
damages. There simply is not a clear showing of immediate irreparable harm based on
my findings that neither Cola or Tola are violating the agreement as of the date of the
hearing.
From the hearing, I determined that both Cola and Tola are aware of the terms of
their agreement with Plaintiffs and are acting in a manner consistent with its prohibitions;
i.e., they are not using confidential information of soliciting or servicing customers of
Plaintiffs. Thus, as Defendants have suggested in their brief, no great harm will result to
Plaintiffs if the injunction is not granted. By contrast, the same cannot be said of
Defendants Cola and Tola if the court were to enter the requested injunctive relief.
Based upon the foregoing, the order to be entered here is obvious based as it is on
the limited evidence presented at a short day and a half of testimony. Defendants should
-16
keep in mind (to paraphrase an old adage) that while they have won this battle, they have
not won the war.
An order follows.
-17
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?