Trade Secrets and Noncompete Blog
New York Court Finds Damage to Reputation of Commercial Insurance Broker Constitutes Irreparable Harm and Bars Solicitation of Broker's Clients and Employees
In an exhaustive opinion, dated December 21, 2011, in the case Aon Risk Services, Northeast v. Cusack, Index No. 651673/11, 2011 WL 6955890, Justice Bernard Fried of the Supreme Court of New York, New York County, awarded a preliminary injunction sought by Plaintiffs Aon Risk Services, Northeast and Aon Corporation (collectively, “Aon”) against Aon’s former employee Michael Cusack and its competitor Alliant Insurance Services, Inc. (“Alliant”).
The case arose from a raid upon Aon’s business by Mr. Cusack, a senior executive and Managing Director at Aon, who resigned with several other senior executives on June 13, 2011 to join Alliant. That same day, 38 Aon employees left Aon to join Alliant, and 15 Aon clients soon followed. In the ensuing few months, 60 employees in total resigned from Aon to join Alliant, and Aon received more than 100 broker of record letters from clients transferring more than $20 million in revenue from Aon to Alliant.
After issuing temporary restraining orders in September and October 2011, the Court held a two day preliminary injunction hearing in November 2011, and in December 2011 issued its preliminary injunction, barring Mr. Cusack, Alliant, and other former Aon employees who were subject to restrictive covenants from, during the pendency of the litigation, (1) soliciting business or entering into any business relationship with any Aon client on whose account they worked, or (2) soliciting any Aon Construction Services Group employees to work for Alliant.
The substantial scope of the damage suffered by Aon provided the basis for the Court’s finding of irreparable harm. The Court found credible Aon’s assertions that “the loss of 60 employees and dozens of clients doing business with [Aon] in hundreds of lines of insurance and surety harms Aon’s goodwill, reputation in the marketplace with its clients and prospects, and relations with its remaining employees, because it causes clients to question Aon’s ability to service the business” and that competitors would be encouraged to solicit Aon’s employees, clients and prospects because they believe Aon to be “wounded.” Aon also argued, credibly to the Court, that monetary damages could not compensate for the loss of expertise and relationships of both employees and clients suffered by Aon, and that it was impossible to put a value on the loss of 60 Aon employees in one week.
A company that has been raided and is seeking an injunction sometimes hesitates to articulate in court filings the true extent of damage to its business, for fear that it will suffer reputational harm in the marketplace. If, however, the damage is already well-known and the loss of marketplace confidence is clear, a comprehensive recounting of such facts could help to secure some relief from a court as the company tries to rebuild its business, as shown by this recent court New York decision.
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