Brown & Brown of Ky., Inc. v. Walker, 2020-CA-1265-MR

Docket Number2020-CA-1265-MR, NO. 2020-CA-1322-MR
Decision Date15 April 2022
Citation652 S.W.3d 624
Parties BROWN & BROWN OF KENTUCKY, INC., Appellant v. David C. WALKER and CBI Holdings LLC, Appellees David C. Walker and CBI Holdings LLC, Appellants/Cross-Appellees v. Brown & Brown of Kentucky, Inc., Appellee/Cross-Appellant
CourtKentucky Court of Appeals

BRIEFS FOR APPELLANT/CROSS-APPELLEE: John T. Shapiro, pro hac vice, Chicago, Illinois, Brent R. Baughman, Louisville, Kentucky.

ORAL ARGUMENT FOR APPELLANT/CROSS-APPELLEE: John T. Shapiro, pro hac vice, Chicago, Illinois.

BRIEFS FOR APPELLEES/CROSS-APPELLANTS: Michael C. Merrick, Casey L. Hinkle, Louisville, Kentucky.

ORAL ARGUMENT FOR APPELLEES/CROSS-APPELLANTS: Michael C. Merrick, Louisville, Kentucky.

BEFORE: COMBS, DIXON, AND TAYLOR, JUDGES.

TAYLOR, JUDGE:

Brown & Brown of Kentucky, Inc. (Brown) brings Appeal No. 2020-CA-1265-MR and David Walker and CBI Holdings LLC (CBI) bring Cross-Appeal No. 2020-CA-1322-MR from Findings of Fact, Conclusions of Law, and Judgment of the Jefferson Circuit Court. We affirm in part, reverse in part, and remand Appeal No. 2020-CA-1265-MR and Cross-Appeal No. 2020-CA-1322-MR.

These appeals primarily revolve around an Employment Agreement entered between Brown and Walker.1 Brown provides insurance and risk management services and purchased Walker's business (Associated Insurance Company) by execution of Asset Purchase Agreement and Goodwill Purchase Agreement in January 2011. Concomitantly therewith, Walker and Brown executed the Employment Agreement, and Walker was hired as Executive Vice President and Profit Center Leader for Brown in Louisville, Kentucky. The Employment Agreement's effective date was January 1, 2011, and contained a broad noncompete and nonsolicitation restrictive covenant. While still employed by Brown, Walker formed CBI in late 2015. Walker eventually left Brown's employment on March 31, 2017, and then exclusively worked at CBI selling insurance products.

Shortly thereafter, on August 23, 2017, Brown filed a complaint and, on October 29, 2018, filed an amended complaint in Jefferson Circuit Court against Walker and CBI. Therein, Brown alleged, in relevant part:

12. CBI is a direct competitor of Brown. CBI purports to be in the business of providing insurance and other risk management services in Kentucky and the surrounding area....
13. Walker is an officer, member, and the manager of CBI, and has served in those capacities since at least January 19, 2016, as reflected in corporation filings with the Kentucky and Florida Secretary of State Offices (collectively attached as Exhibit B, 1-4). saIn [sic] these filings, Walker is described as "Manager," i.e., the person who has authority to manage, and Walker even signed his name as an "officer or chairman of the board" in one such filing.
....
20. ... Walker's Employment Agreement also contains critical non-solicitation covenants (the "Non-Solicitation Covenants"). The Non-Solicitation Covenants prohibit Walker from "directly or indirectly, in any capacity whatsoever other than on behalf of [Brown], solicit[ing] , accept[ing] , tak[ing] away , propos[ing], quot[ing], sell[ing], plac[ing], provid[ing], servic[ing] , renew[ing] or divert[ing] any Client Account [as defined below] ... or any Prospective Client Account [as defined below]" that Walker worked on or had any involvement with during his employment with Brown. The Non-Solicitation Covenants also prohibit Walker from "tak[ing] any action ... which reasonably may be expected to ... cause any Client Account or Prospective Client Account ... or other person or entity ... to cease, reduce or refrain from transacting business with [Brown] or its Affiliates."
....
27. The Employment Agreement expressly provided that the Confidentiality Covenants and Non-Solicitation Covenants survive the termination of Walker's employment with Brown (regardless of why his employment was terminated). Specifically, the Confidentiality Covenants continue indefinitely. Moreover, the Non-Solicitation Covenants continue for two years after Walker's employment with Brown ended, in addition to any time in which Walker was breaching such Non-Solicitation Covenants.
....
32. On October 22, 2016, Walker notified Brown that he planned to resign from his employment with Brown effective December 31, 2016, in order to pursue other, [noninsurance] related, business ventures. During a subsequent conversation with new Profit Center Leader Michael T. Neal, Walker was informed that bonus eligibility required that he remain employed through the payment date, sometime in early 2017. Accordingly, Walker delayed his departure to March 31, 2017.
33. Unbeknowst [sic] to Brown at that time, and long before Walker had notified Brown that he planned to resign to pursue other ventures, Walker had begun taking steps to compete against Brown and otherwise violate various obligations under the Asset Purchase Agreement, Goodwill Purchase Agreement, Employment Agreement and his other duties under the law. Specifically, in late 2015, Walker engaged legal counsel for CBI, formed CBI, had an operating agreement prepared for CBI, designed and purchased marketing materials for CBI, sought insurance regarding CBI, reserved website domain names for CBI, arranged to acquire business and agency software for CBI, obtained a Tax ID, and opened a business bank account for CBI. By January 2016, Walker had capitalized CBI and was serving as its managing agent.
....
46. At the time Walker resigned from his employment with Brown, Quantum Enterprises, Inc.[,] was a client of Brown. Walker knew this fact at all times relevant to the Complaint. Walker continued communicating with Quantum Enterprises, accepting business from it, engaging in client service activities for it, and otherwise violating his respective Agreements with respect to Quantum Enterprises, after Walker's employment with Brown ended.
47. Walker regularly worked with, helped Brown service, and otherwise was involved with Quantum Enterprises during his employment with Brown. CBI knew or had reason to know at all times relevant to the Complaint that Walker engaged in this conduct.
48. After Walker misappropriated certain Confidential Trade Secrets concerning Quantum Enterprises and Walker subsequently resigned from his employment with Brown, Quantum Enterprises stopped using Brown's services for its insurance business. Rather, effective July 11, 2017, or before, Quantum Enterprises changed its agent of record to CBI for the insurance and insurance services that Brown previously had provided (Certificate of Insurance, attached as Exhibit C).
....
51. CBI and Walker have serviced Quantum Enterprises since it stopped using Brown's services. CBI knew or had reason to know that Walker engaged in this conduct, and intended to cause Walker to engage in this conduct.

Amended Complaint at 3-4, 6, 9, 11, 15. Brown also similarly alleged that Walker and/or CBI breached the restrictive covenant in the Employment Agreement by providing insurance services to other former Brown clients – East Wolcott Winona, McMillen Mechanical, Wilhite Limited, Inc., Steve Rauch, Banta Consulting, LOUCASH – 502 Bar Bistro, Moon Leasing/Moon Portables, Stanley Brothers Produce, Backyard Properties, Stuart Real Estate, and Home Staging Specialists. In the complaints, Brown also alleged CBI tortiously interfered with Walker's performance of the Employment Agreement:

COUNT VI: TORTIOUS INTERFERENCE WITH CONTRACT BY DEFENDANTS – DAMAGES
....
148. By engaging in the conduct described above in Parts III.D to III.F, CBI tortiously interfered with Walker's Agreements with Brown.
149. Defendants’ actions described above have caused Brown to sustain damages including, but not limited to, lost income, lost client relationships and future lost client relationships, lost or diminished competitive advantages, and injury to its goodwill and reputation.
150. Accordingly, Brown is entitled to relief including, but not limited to, the damages and disgorgement remedies described in the Prayer for Relief below.

Amended Complaint at 29.

Walker and CBI filed an answer and counterclaim. In the answer, Walker admitted that he was an officer of CBI, and CBI admitted that it provided insurance and risk management services in Kentucky. However, Walker and CBI generally denied the remaining allegations. In the counterclaim, Walker claimed that Brown initially breached the Employment Agreement by refusing to timely pay him a bonus. As a result, Walker could not resign as planned on January 1, 2017, but was required to remain employed by Brown until March 31, 2017. Walker also asserted that the Employment Agreement did not prevent him from servicing former Brown clients who left Brown due to poor customer service issues. Walker further maintained that Brown was unjustly enriched by Walker's assistance to Brown after leaving its employment.

Eventually, Brown filed a motion for partial summary judgment. Relevant herein, Brown maintained that based upon undisputed facts, Walker breached the restrictive covenant in the Employment Agreement by providing services to Brown's clients while employed by Brown and after leaving Brown during his employment with CBI:

CBI is a Kentucky limited liability company with its principal place of business in Louisville. Answer ¶ 5. Like Brown & Brown, CBI is in the business of providing a full array of insurance brokerage services. Id. ¶ 12; see also FBT 000001-000035 (attached as Exhibit 5) (CBI Operating Agreement at FBT 000001: the purpose of CBI "is to own and operate an insurance consulting and brokerage firm based in Kentucky, and to engage in all business activities related thereto."); Walker [Deposition], 17:22-18:23; 101:10-102:4. In March 2015, while still a Brown & Brown Executive Vice President and leader of its Louisville Profit Center, Walker incorporated CBI. Ex. 5; see also Ex. 3, Answer to Interrog. 8 ("Walker states that
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