• Damage to Insurance Broker's Reputation Held to Constitute Irreparable Harm; Court Bars Solicitation
  • February 27, 2012 | Author: Robert I. Gosseen
  • Law Firm: Ganfer & Shore, LLP - New York Office
  • Several senior executives of plaintiff insurance broker resigned on the same day to join a competing agency, taking with them 38 (later 60) employees. A significant number of clients also defected from the agency. Ultimately, the agency lost more than 100 clients and more than $20 million in revenue to the competitor. The agency sued and the New York Supreme Court issued a preliminary injunction barring the executives, the competing agency, and other former employees who were subject to restrictive covenants, from (1) soliciting business or entering into any business relationship with any client on whose account they had worked at the former employer, or (2) soliciting any employees to work for the competitor, while the litigation was pending. Aon Risk Servs. v. Cusack, 2011 WL 6955890 (Sup. Ct. N.Y. Co. Dec. 20, 2011).
    Although these injunctions are generally quite difficult to obtain, in this case the court determined that the substantial scope of the economic and reputational damage already suffered by the plaintiff agency, together with the court's belief that plaintiff's competitors would be encouraged to solicit plaintiff's employees, clients, and prospects because they believed the agency to be "wounded" by the wholesale defections of executives, employees, and clients constituted irreparable harm. The court found that monetary damages could not adequately compensate plaintiff for losses such as these.
    As the court observed, the loss of so many "employees and dozens of clients doing business with . . . [plaintiff] in hundreds of lines of insurance . . . harms [plaintiff's] goodwill, reputation in the marketplace with its clients and prospects, and relations with its remaining employees, because it causes clients to question . . . [plaintiff's] ability to service the business."