960 F.2d 942 (11th Cir. 1992), 89-8765, A.L. Williams & Associates v. Stelk
|Docket Nº:||89-8765, 90-8855.|
|Citation:||960 F.2d 942|
|Party Name:||A.L. WILLIAMS & ASSOCIATES; Massachusetts Indemnity and Life Insurance Company, Plaintiffs-Appellees, Counter-Defendants, v. Randy STELK; Timothy Hunter; Willard H. Colson, Jr., d/b/a Mid-American Investors, Defendants-Appellants, Counter-Claimants, Investors Life Insurance Company of Nebraska, Defendant, Amerishare Investors, Inc., Defendant-Appel|
|Case Date:||May 18, 1992|
|Court:||United States Courts of Appeals, Court of Appeals for the Eleventh Circuit|
Irwin W. Stolz, Jr., Seaton D. Purdom, Gambrell, Clarke, Anderson & Stoltz, Atlanta, Ga., for Colson.
C.B. Rogers, Rogers & Hardin, Phillip S. McKinney, Peter W. Schneider, Atlanta, Ga., for Stelk, Hunter and Amerishare.
Sidney O. Smith, Jr., Oscar N. Persons, Anne S. Rampacek, Alston & Bird, Atlanta, Ga., for A.L. Williams & Associates, et al.
Jeffrey W. Kelley, Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., for Investor Life Ins. Co.
James D. Meadows, Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., for amicus curiae.
Appeals from the United States District Court for the Northern District of Georgia.
Before COX and DUBINA, Circuit Judges, and GODBOLD, Senior Circuit Judge.
DUBINA, Circuit Judge:
Appellants Randy Stelk, Timothy Hunter and Willard H. Colson, Jr., (the "Agents") appeal the district court's entry of a preliminary injunction enjoining them from certain activities related to the sale of insurance. The injunction was issued pursuant to restrictive covenants contained in several employment contracts between the Agents and the appellees, Massachusetts Indemnity and Life Insurance Company ("MILICO") and A.L. Williams & Associates ("Williams"). The Agents seek to set aside the preliminary injunction on the ground that the restrictive covenants at issue are unenforceable under Georgia law. For the reasons which follow, we affirm in part and reverse in part.
I. STATEMENT OF THE CASE
A. Background Facts
Williams is the exclusive general agent of MILICO, an underwriter of term life insurance incorporated in Massachusetts. Williams and MILICO are owned by the Arthur L. Williams Corporation. The Agents are former members of Williams' sales force who left to start their own insurance companies.
MILICO insurance policies are sold by agents recruited, trained and supervised by Williams. These agents are licensed to use Williams' registered trade name and service mark and are authorized to use Williams' copyrighted materials. Over 200,000 such agents sell MILICO insurance in 49 states, plus Canada, Guam, Puerto Rico, the Virgin Islands and the Northern Mariana Islands.
MILICO insurance is sold through a pyramid-type marketing plan by which Williams' agents both sell and recruit others to sell insurance. Agents, most of whom work part-time, earn commissions from personal sales and the sales of each agent they recruit.
The sales force is organized according to a hierarchy by which "up-line" agents supervise and train the lower level agents they have recruited. Up-line agents are
successful sales agents who have become, in ascending order, regional vice-presidents ("RVP"), senior-vice presidents ("SVP") and national sales directors ("NSD"). Up-line agents are not part of Williams' corporate structure. Rather, their titles are rewards for success. Each up-line agent works full-time and oversees the work of each down-line agent in his or her chain. A new agent is placed in a specific RVP's hierarchy and is trained by the RVP at the RVP's expense. RVPs earn commissions from insurance sales made by each agent in his or her hierarchy.
New recruits must sign two contracts: (1) an independent contractor agreement with Williams called "My Agreement with A.L. Williams & Associates, Inc.," which includes a trademark license agreement ("Williams Agreement"); and (2) a life insurance agent contract with MILICO ("MILICO Agreement"). Agents who become RVPs sign a third contract called "A.L. Williams & Associates, Inc. Agreement for Independent Business of Regional Vice President" ("RVP Agreement"). 1 RVPs must reexecute the Williams Agreement and MILICO Agreement concurrently with execution of the RVP Agreement.
The Agreements contain restrictive covenants, which limit the activities of agents who leave Williams' employ. Generally, the covenants prohibit former agents from (1) replacing certain MILICO policies with those of another insurance company; (2) recruiting or attempting to recruit Williams agents into a competitor's insurance company; (3) disclosing the names of Williams and MILICO customers for the benefit of another insurance company; and (4) using the Williams trademark and service mark in a manner not approved by Williams.
During their time of employment with Williams, the Agents each attained the level of at least SVP. Colson, an SVP, left Williams in October 1988. Stelk left in September 1987 as an NSD. Hunter, also an NSD, left in September 1988. While with Williams, the Agents executed numerous agent contracts including the Williams Agreement, MILICO Agreement and RVP Agreement.
After leaving Williams, Colson formed Mid-American Investors ("Mid-America"), an independent insurance company in North Carolina. Stelk and Hunter also formed an independent insurance company, Amerishare Investors, Inc. ("Amerishare"), in Jacksonville, Florida. In late 1988, Mid-America and Amerishare each entered into agency agreements with Investors Life Insurance of America ("Investors"), a wholesaler of insurance products. Investors is a direct competitor of MILICO.
B. Procedural History
Williams and MILICO filed an action in federal district court seeking injunctive relief. In their complaint, Williams and MILICO alleged, inter alia, breach of the non-replacement, non-pirating, non-disclosure and trademark covenants in the A.L. Williams, Inc. agreements.
More specifically, Williams and MILICO alleged that the Agents and their agencies, assisted and encouraged by Investors, violated the restrictive covenants in their employment contracts by seeking to recruit members of Williams' sales force and soliciting their customers to replace MILICO policies with those of their own. Williams and MILICO also alleged that Amerishare infringed Williams' trade name and service marks by using them on marketing materials. The district court granted Williams and MILICO a temporary restraining order and later granted their motion for preliminary injunction.
The district court then issued another order upholding the covenants at issue and entered a modified preliminary injunction granting the relief sought by Williams and MILICO as to the Agents and their agencies, but not Investors. This appeal followed.
II. STANDARD OF REVIEW
This court reverses a district court's grant of a preliminary injunction only when the district court abuses its discretion. Planned Parenthood Ass'n v. Miller, 934 F.2d 1462, 1471 (11th Cir.1991). Findings of fact made in connection with a grant of a preliminary injunction are set aside only if clearly erroneous. Id.; Fed.R.Civ.P. 52(a). But where questions of law are presented, we have plenary review over the district court's determinations. Georgia Power Co. v. Baker, 830 F.2d 163, 165 (11th...
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