Ticor Title Ins. Co. v. Cohen

• Decision Date: 31 March 1999
• Docket Number: Docket No. 98-7904
• Citation: 173 F.3d 63,1999 WL 222965
• Parties: 14 IER Cases 1710 TICOR TITLE INSURANCE CO.; Chicago Title Insurance Co., Plaintiffs-Appellees, v. Kenneth C. COHEN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

Page 63

173 F.3d 63

14 IER Cases 1710

TICOR TITLE INSURANCE CO.; Chicago Title Insurance Co. Plaintiffs-Appellees, v. Kenneth C. COHEN, Defendant-Appellant.

Docket No. 98-7904.

United States Court of Appeals Second Circuit.

Argued Aug. 31, 1998.

Decided March 31, 1999.

Allen Kezsbom, New York, New York (Rana Dershowitz, Fried, Frank, Harris, Shriver & Jacobson, New York, New York; Ronald E. Richman, Morton Lorge, Molly Tatman, Schulte, Roth & Zabel LLP, New York, New York, of counsel), for Defendant-Appellant.

Steven M. Kayman, New York, New York (John Siegal, Jose-Manuel A. de Castro, Proskauer Rose LLP, New York, New York, of counsel), for Plaintiffs-Appellees.

Before: NEWMAN, CARDAMONE, and PARKER Circuit Judges.

CARDAMONE, Circuit Judge:

Defendant Kenneth C. Cohen (defendant or appellant) appeals from a judgment entered July 1, 1998 in the United States District Court for the Southern District of New York (Martin, J.) that issued a permanent injunction against him and in favor of plaintiffs Ticor Title Insurance Co. and Chicago Title Insurance Co. (Ticor). This panel filed a summary order affirming the judgment of the district court on November 19, 1998, and stating that this opinion would follow.

A principal question to be resolved is whether appellant's services as an employee were so unique to his employer as to provide a basis for injunctive relief. In analyzing whether an employee's services are unique, the focus today is less on the uniqueness of the individual person of the employee, testing whether such person is extraordinary in the sense, for example, of Beethoven as a composer, Einstein as a physicist, or Michelangelo as an artist, where one can fairly say that nature made them and then broke the mold. Instead, now the inquiry is more focused on the employee's relationship to the employer's business to ascertain whether his or her services and value to that operation may be said to be unique, special or extraordinary; that inquiry, because individual circumstances differ so widely, must of necessity be on a case-by-case basis.

BACKGROUND

Facts Relating to Employment

A. The Parties

Plaintiffs are affiliated companies that sell title insurance nationwide. Title insurance Defendant Cohen was employed by Ticor as a title insurance salesman. Title insurance salespeople contact real estate attorneys, handle title searches for them, and sell them policies; those salespeople from different title insurance companies compete to insure the same real estate transaction, seeking their business from the same group of widely-known attorneys. Due to the nature of the business, those attorneys commonly have relationships with more than one title insurance company.

insures the buyer of real property, or a lender secured by real property, against defects in the legal title to the property, and guarantees that, in the event a defect in title surfaces, the insurer will reimburse the insured for losses associated with the defect, or will take steps necessary to correct it. This kind of insurance is almost always purchased when real estate is conveyed. Ticor has been, and remains today, the leading title insurance company in New York State. It focuses primarily on multi-million dollar transactions that are handled by real estate lawyers. On large transactions more than one title insurance company is often employed in order to spread the risk.

Cohen began working for Ticor in 1981, shortly after graduating from college, as a sales account manager and within six years was a senior vice president in charge of several major accounts. Thus, he has been a title insurance salesman for Ticor for nearly all of his professional career. His clients have consisted almost exclusively of real estate attorneys in large New York law firms. As his supervisor testified, Cohen obtains his business due to his knowledge of the business, his professionalism, his ability to work through problems, and his ability to get things done.

B. Employment Contract

Ticor and Cohen, both represented by counsel, entered into an Employment Contract on October 1, 1995. There were extensive negotiations over its terms, including the covenant not to compete, which is at issue on this appeal. The contract's stated term is until December 31, 1999, although Cohen--but not Ticor--could terminate it without cause on 30 days' notice.

The non-compete provision, enforced by the district court, stated that during his employment with Ticor and "for a period ending on the earlier of ... June 30, 2000 or ... 180 days following [his] termination of employment," Cohen would not:

for himself, or on behalf of any other person, or in conjunction with any other person, firm, partnership, corporation or other entity, engage in the business of Title Insurance ... in the State of New York.

For the purposes of this provision, the Employment Contract provides that:

"Title Insurance" shall be defined ... as the sale, service or rental of any product, process or service [of Ticor] ... which had been developed, sold or offered for sale by [Ticor] in the State of New York during the 365 days preceding the date of [Cohen's] termination of employment ...

It also contains the following express representation regarding the material nature of the covenant not to compete:

[Ticor] is willing to enter into this Contract only on condition that [Cohen] accept certain post-employment restrictions with respect to subsequent reemployment set forth herein and [Cohen] is prepared to accept such condition.

Negotiation of the post-employment non-competition provision of the Employment Contract (p 9) culminated in a fax from Cohen's counsel to Ticor's counsel dated October 27, 1995 in which Cohen's counsel provided a proposed final version that included some additional modifications. Ticor accepted this proposed final version, and it was embodied, verbatim, in the final executed agreement. Thus, the non-compete provision defendant now asserts Cohen enjoyed exclusive responsibility for key Ticor accounts throughout the entire term of his employment. A number of the accounts for which defendant had exclusive responsibility predated his 17-year employment, and no other Ticor sales representative was permitted to service them during the term of the Employment Contract.

is unenforceable was drafted (in its final form) by his own lawyer.

In consideration for Cohen's agreeing to the recited post-employment restrictions, he was made one of the highest paid Ticor sales representatives, being guaranteed during the term of the Employment Contract annual compensation of $600,000, consisting of a base salary of $200,000 plus commissions. His total compensation in 1997 exceeded $1.1 million.

In addition to compensation, defendant received expense account reimbursements that by 1997 exceeded $150,000 per year, and which included fully paid memberships in exclusive clubs, as well as tickets to New York's professional sporting events and Broadway shows. His fringe benefits went far beyond those provided other Ticor sales representatives whose expense reimbursements are generally limited to $30,000 per year. Cohen also had his own six person staff at Ticor, all of whom reported directly to him. No other Ticor representative had such staff support.

C. Breach of Contract

On April 20, 1998 TitleServ, a direct competitor of Ticor, offered to employ Cohen. As part of that offer, TitleServ agreed to indemnify Cohen by paying him a salary during the six-month period (i.e., the 180 days hiatus from employment) in the event that the covenant not to compete was enforced. Defendant sent plaintiff a letter on April 21, 1998 notifying it of his resignation effective May 21, 1998 and agreed to begin working for TitleServ on May 27, 1998.

Appellant commenced employment with his new employer on that date. His employment contract there guarantees him a minimum salary of $750,000 and a signing bonus of $2 million dollars, regardless of the outcome of this litigation. Cohen has received this signing bonus and has begun receiving salary payments, as scheduled. He admits to speaking with 20 Ticor customers about TitleServ before submitting his letter of resignation, and telling each of them that he was considering leaving Ticor and joining a competitor firm. Cohen maintains that this was an effort on his part to learn more information about TitleServ, including its ability to service the New York market and the opportunity he was being offered.

During the course of this due diligence, Cohen insists he never discussed transferring any business from Ticor to TitleServ, nor did he discuss any specific deals. However, this assertion is undermined by defendant's deposition testimony concerning conversations with Martin Polevoy of the Bachner Tally law firm, in which he admits he directly solicited Polevoy's business for TitleServ and, after initial resistance from Polevoy, eventually secured a promise that Polevoy would follow him by taking his firm's insurance business to TitleServ.

Prior Proceedings

Ticor commenced this action on June 5, 1998 and applied that day for a temporary restraining order and preliminary injunction. After receiving Cohen's opposition papers and hearing argument, the district court entered a temporary restraining order. The parties conducted expedited discovery and briefed the relevant issues over the ensuing ten days. On June 19, 1998 the district court heard further argument and extended the temporary restraining order for an additional ten days. It scheduled an evidentiary hearing, held on June 29, 1998, at the close of which the parties consented to consolidate the hearing with a On July 1, 1998 the district court issued its opinion and order permanently enjoining Cohen from working in the title insurance business and from appropriating Ticor's corporate opportunities with its current or prospective customers for a period of six months. Applying New York law, it found this case...