Cobbs, Allen & Hall, Inc. v. EPIC Holdings, Inc.

• Decision Date: 26 March 2021
• Docket Number: 1190687
• Citation: 335 So.3d 1115
• Parties: COBBS, ALLEN & HALL, INC., and CAH Holdings, Inc. v. EPIC HOLDINGS, INC., and Crawford E. McInnis
• Court: Alabama Supreme Court

335 So.3d 1115

COBBS, ALLEN & HALL, INC., and CAH Holdings, Inc.

v.EPIC HOLDINGS, INC., and Crawford E. McInnis

1190687

Supreme Court of Alabama.

March 26, 2021

J. Timothy Francis of Francis Law, LLC, Birmingham, for appellants.

Andrew P. Campbell and Cason M. Kirby of Campbell Partners, LLC, Birmingham, for appellee Crawford E. McInnis.

Ed R. Haden, Adam K. Israel, and Robert V. Baxley of Balch & Bingham LLP, Birmingham; and Will Hill Tankersley of Balch & Bingham LLP, Montgomery, for appellees Epic Holdings, Inc., Edgewood Partners Insurance Center, Inc., and EPIC Insurance Brokers and Consultants.^*

Thomas A. Woodall of Sirote & Permutt, PC, Birmingham, for amicus curiae Alabama Free and Fair Enterprise Institute, in support of the appellees.

Steven C. Emens, University of Alabama School of Law, Tuscaloosa, for amicus curiae Professor Steven C. Emens, in support of the appellees.

MENDHEIM, Justice.

Cobbs, Allen & Hall, Inc. ("Cobbs Allen"), and CAH Holdings, Inc. ("CAH Holdings") (Cobbs Allen and CAH Holdings are referred to collectively as "CAH"), appeal from a summary judgment entered against them and in favor of EPIC Holdings, Inc. ("EPIC"), and EPIC employee Crawford E. McInnis, with respect to CAH's claims of breach of contract and tortious interference with a prospective employment relationship. We affirm in part, reverse in part, and remand.

I. Facts

This is the second time these parties have been before us. In Cobbs, Allen & Hall, Inc. v. Epic Holdings, Inc., 224 So. 3d 157 (Ala. 2015), this Court affirmed, without an opinion, the Jefferson Circuit Court's denial of a preliminary injunction sought by CAH against EPIC, McInnis, and other defendants not relevant to the present action. Because the present action stems from a settlement agreement reached by the parties in that original action, it is necessary to briefly relate some of the facts underlying the original action.

Cobbs Allen is an Alabama corporation with its principal place of business in Jefferson County. CAH Holdings, a Delaware corporation, is the parent corporation of Cobbs Allen. Cobbs Allen is a regional insurance and risk-management firm specializing in traditional commercial insurance, surety services, employee-benefits services, personal-insurance services, and alternative-risk financing services. It is undisputed that CAH Holdings is a family-run business: Bruce Denson, Sr., is the chairman of the board, Grantland Rice III is the chief executive officer, Grantland Rice IV is the chief operating officer, and Bruce Denson, Jr., is the president. The Rices and the Densons control the majority, but, importantly for this case, less than 75 percent, of the stock in CAH Holdings. Employees who are "producers" for CAH have the opportunity to own stock in CAH Holdings, provided they meet certain sales thresholds, known as a "validation" number." In the insurance-brokerage business, a producer sells insurance products and acquires new business. For CAH Holdings, the equity arrangement in the company is dictated by the "Restated Restrictive Stock Transfer Agreement" ("the RSTA").

For several years, McInnis and other individuals who ended up being defendants in the first action were producers for CAH, and McInnis was also a shareholder in CAH Holdings. In the fall of 2014, a dispute arose between CAH and McInnis and those other producers concerning the management of CAH. That disagreement led McInnis and other CAH producers to have contact with EPIC, a competitor of CAH.¹ CAH alleged that McInnis and the other producers had violated restrictive covenants in their employment agreements with the aim of helping EPIC. Because of the dispute, CAH fired McInnis, allegedly "for cause," and in November 2014 McInnis went to work for EPIC, becoming the local branch manager at EPIC's Birmingham office.

In December 2014, CAH commenced an action against EPIC, McInnis, and other defendants, alleging that McInnis and other former employees had breached restrictive covenants in their employment agreements and that EPIC had aided and abetted those breaches. CAH sought preliminary and permanent injunctive relief prohibiting McInnis and the other former employees from further breaching those covenants. McInnis and the other former employees filed a counterclaim against CAH alleging, among other things, breach of contract and wrongful termination. The circuit court denied CAH's request for a preliminary injunction, and in the first appeal this Court affirmed the circuit court's judgment.

In January 2018, on the eve of trial, the parties reached a "Settlement Agreement and Mutual Release" concerning all claims they had asserted against one another ("the settlement agreement"). The settlement agreement provided that the circuit court would retain jurisdiction "for the resolution of any disputes that arise related to the [settlement agreement]." Additionally, paragraph 11 of the settlement agreement provided:

"11. The Parties will take reasonable efforts to instruct their officers, directors, shareholders, accountants, financial advisors, and attorneys not to disparage any other party. The statement: ‘The Parties were able to reach a mutually agreeable business resolution’ is not disparagement under this provision. The terms of this non-disparagement provision apply, without limitation, to any generalized comments about fee resolution of this case to any trial reporting services."

(Emphasis added.) As a party to the settlement agreement, McInnis read the settlement agreement before signing it. According to McInnis, before executing the settlement agreement, Dan Crawford, EPIC's executive vice president and general counsel, discussed the settlement agreement with him:

"A. Okay. [Dan Crawford] told us that we had to follow what the agreement said, and there were a couple of different provisions in there, one being the do not disparage provision that were highlighted to us. That provision along with the particular clients that we were not supposed to solicit business from for a period of time. Those were the two main ones.

"[Counsel for CAH:] Did Mr. Crawford tell you that you were not to disparage anyone at Cobbs, Allen & Hall?

"A. He did.

"Q. Okay."

Crawford testified that, a month after the settlement agreement was executed, EPIC held an executive-committee meeting in California at which Crawford told EPIC's senior corporate management about the settlement agreement:

"[Counsel for CAH:] And what did you tell them?

"A. I told them -- I went further than what Paragraph 11 said, and I said to everybody in the room that, ‘The Cobbs Allen settlement -- the Cobbs Allen case in Birmingham has been resolved. It's the subject of a confidential Settlement Agreement, and that no one at the company should talk about the terms of the Settlement Agreement.’ I went further, even though there's no requirement to do so, and said, ‘I don't want anybody talking about the facts and circumstances and the evidence of the litigation.’ And I said, ‘If you are contacted by anybody to talk about this, you should either direct those people to me or respond with the agreed statement in the Settlement Agreement.’ "

In June 2018, CAH began negotiating with Michael Mercer, an account executive in the Houston, Texas, office of Lockton Insurance Brokers ("Lockton"), in an attempt to have Mercer come work as a producer at Cobbs Allen's Houston office. As an account executive, Mercer's responsibilities for Lockton focused on handling existing client needs and maintaining client relationships. CAH's offer to become a producer was appealing to Mercer because of the potential for an increased salary and benefits, including the opportunity to become a stockholder in CAH Holdings, something that was not possible for Mercer at Lockton. Mercer orally accepted a job offer from CAH extended to him on July 22, 2018, and he tendered his resignation from employment to Lockton. Lockton then made a series of counteroffers to Mercer in an effort to keep him from leaving Lockton for CAH. CAH, in turn, increased its offers to Mercer each time Lockton offered more compensation to Mercer for staying with Lockton. On July 29, 2018, Mercer orally reaffirmed his commitment to take CAH's job offer. Despite doing so, Mercer admitted in his deposition that, at the time he reaffirmed his commitment, he was still struggling with whether moving to CAH was the right decision. Mercer testified that one factor that made him have second thoughts was that CAH would require him to reach a validation number of $795,000 in annual sales -- three times his base salary -- in order to purchase equity in CAH Holdings, and he was not sure he could reach that number. On a related note, Mercer also admitted to having difficulty understanding the RSTA.

Mercer told John Stillwell, a producer at Lockton, about his difficulty in deciding what to do concerning CAH's job offer. Stillwell suggested that Mercer talk to a friend of his, McInnis, who had formerly worked for CAH. Mercer was open to talking to McInnis because, as Mercer put it: "At that point, you know, I'm willing to talk to anybody who has an -- has an opinion so I can kind of make my decision, and Stillwell recommended that I speak to Crawford [McInnis]." Mercer called McInnis twice: the first time on July 30, 2018, a conversation that lasted about 15 minutes, and the second time on July 31, 2018, a conversation that lasted about 5 minutes. Neither Mercer nor McInnis could remember the substance of the second conversation, but in his deposition Mercer summarized what he remembered about the July 30, 2018, conversation.

"[Counsel for EPIC:] And what did Mr. McInnis tell you that you recall?

"A. Uhm -- well, I'm not a finance person so I had a lot of questions about how [CAH's equity plan] worked and he articulated it well, but I still found -- you know, it was still confusing to me because it wasn't a -- you know, ‘We're going to give you 5 percent of the company and that's you know, that's yours in the

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