GALLAGHER HEALTHCARE INS. v. Vogelsang

• Decision Date: 04 February 2010
• Docket Number: No. 01-07-00478-CV.,01-07-00478-CV.
• Citation: 312 S.W.3d 640
• Parties: GALLAGHER HEALTHCARE INSURANCE SERVICES, Appellant, v. Page M. VOGELSANG, Appellee.
• Court: Texas Court of Appeals

312 S.W.3d 640

GALLAGHER HEALTHCARE INSURANCE SERVICES, Appellant, v. Page M. VOGELSANG, Appellee.

No. 01-07-00478-CV.

Court of Appeals of Texas, Houston (1st Dist.).

August 21, 2009.

Rehearing Overruled February 4, 2010.

COPYRIGHT MATERIAL OMITTED

David L. Countiss, Walter J. Cicack, Seyfarth Shaw LLP, Richard N. Countiss, Countiss Law Firm, Houston, TX, for Appellant.

Alejandro Gonzalez, Melanie Gray, Scarlett Elizabeth Collings, Weil, Gotshal & Manges, LLP, Charles Alfred Sturm, Howard L. Steele, Jr., Steele Sturm, LLP, Kimberly Goodling, Doyle Raizner LLP, Murry B. Cohen, Akin Gump Strauss Hauer & Feld L.L.P., Houston, TX, for Appellee.

Panel consists of Justices JENNINGS, KEYES, and HIGLEY.

OPINION

EVELYN V. KEYES, Justice.

In this breach of contract suit, appellant, Gallagher Healthcare Insurance Services ("GHIS"), challenges the trial court's summary judgment order that denied its motion for summary judgment and granted summary judgment in favor of appellee, Page M. Vogelsang. In one issue on appeal, GHIS contends that the trial court erred in holding that the covenant-not-to-compete provision in Vogelsang's employment agreement was unenforceable.

We reverse and remand.

Background

Vogelsang started working for the Galtney Group, Inc. in 1994 as an insurance broker. In 2001, GHIS purchased Galtney and acquired the services of Vogelsang as a "Producer." GHIS, a second tier subsidiary of Arthur J. Gallagher & Co., provides insurance and reinsurance services. As a Producer for GHIS, Vogelsang "had a large responsibility to renew existing business and secure new business."

As part of the purchase of Galtney, GHIS required Vogelsang to enter into an employment agreement with GHIS. In relevant part, the agreement provided:

Section 7. Trade Secrets and Confidential Information.

(a) The Executive acknowledges that the Corporation's business depends to a significant degree upon the possession of information which is not generally known to others, and that the profitability of the Corporation's business requires that this information remain proprietary to the Corporation. The Executive agrees that all intellectual property, such as computer programs, systems or software, developed during his employment or as a result of his employment is work for hire performed by the Executive in the scope of his employment. The Corporation shall retain all proprietary rights to any and all such intellectual property. Executive agrees to execute any documents necessary to perfect Corporation's interest in such intellectual property upon Corporation's request.

(b) The Executive recognizes that by virtue of his employment by the Corporation, he will be granted otherwise prohibited access to confidential and proprietary data of AJG and the Corporation which is not known either to its competitors or within the insurance agency and brokerage business generally. This information (hereinafter referred to as "Confidential Information") includes, but is not limited to, data relating to AJG and the Corporation's unique marketing and servicing programs, procedures and techniques; the criteria and formulae used by AJG and the Corporation in pricing its insurance and employee benefits products and claims management, loss control and information management services; the structure and pricing of special insurance packages that AJG and the Corporation has negotiated with various underwriters; lists of prospects compiled by AJG and the Corporation's management and research staff; the identity, authority and responsibilities of key contacts at AJG and the Corporation accounts, including accounts of the Acquired Business; the composition and organization of accounts' businesses; the peculiar risks inherent in their operations, highly sensitive details concerning the structure, conditions and extent of their existing insurance coverages; policy expiration dates; premium amounts; commission rates; risk management service arrangements; loss histories; and other data showing the particularized insurance requirements and preferences of the accounts. The Executive recognizes that this Confidential Information constitutes a valuable property of the Corporation, developed over a long period of time and at substantial expense. Accordingly, the Executive agrees that he will not, at any time during his employment by the Corporation, divulge such Confidential Information or make use of it for his own purposes or the purposes of another.

(c) The Executive recognizes the highly sensitive nature of the confidential Information to which he will have access during his employment, and acknowledges the Corporation's legitimate interest in safeguarding same from disclosure. Accordingly, the Executive agrees that, for a period of two (2) years following the termination of his employment for any reason whatsoever, he will not divulge AJG's or the corporations's Confidential Information or make use of it for his own purpose or the purpose of another.

Section 8. Protection of Corporation's Business

(a) The Executive recognizes the Corporation's legitimate interest in protecting, for a reasonable period of time following the termination of the Executive's employment, those Corporation accounts with which the Executive will be associated during his employment. Accordingly, the Executive understands and agrees that for a period of two (2) years following the termination of his employment for any reason whatsoever, he will not, directly or indirectly, solicit, place, market, accept, aid, counsel or consult in the renewal, discontinuance or replacement of any insurance (including self-insurance) by, or handle self-insurance programs, insurance claims, risk management services or other insurance administrative or service functions for, any AJG or Corporation account for which he performed any of the foregoing functions during the two-year period immediately preceding such termination. For purposes of Sections 7 and 8 hereof, all references to "Corporation" shall be deemed to include the Acquired Business.

(Emphasis added). Vogelsang resigned from GHIS on February 15, 2006 and began working for Lockton Companies, Inc., a direct competitor of GHIS. On the same day that Vogelsang resigned, her entire service team also moved to Lockton.

GHIS sued Vogelsang, Michelle Friede, Patti Philippone, Trisha Birdsong, and Lockton Companies, Inc. for breach of contract and injunctive relief, among other causes of action. In its petition in the trial court, GHIS stated that it "fosters and develops goodwill with its clients by making a team of insurance professionals available to them. The Producer is vital to GHIS' ability to maintain goodwill with clients and in most cases the Producer is the person who interfaces with the client and builds a strong personal relationship." GHIS further pled that "a fundamental and important part of GHIS' business is the development and maintenance of confidential information, including, but not limited to, client lists and contacts, client insurance needs, risk characteristics and budget limits, pricing structures, product and marketing information, and specific information regarding each client's insurance policies, including the expiration dates, terms, and premiums." GHIS alleged that after signing the agreement and throughout her employment, Vogelsang received confidential information consisting of

employment arrangements, salary, compensation and other confidential information, regarding certain personnel in the Houston office. GHIS also gave Vogelsang confidential and trade secret information concerning GHIS's business plans, compensation plans, clients lists, client-related information (e.g. insurance proposals, coverages, limits to purchase, insurance binders, insurance program structures, loss histories, exposures, premiums and premium pricing, renewal dates, products purchased, etc.), client prospects databases, and the clients or "books of business" that were serviced by everyone in the Houston office, but especially the books of business for whom she was the Producer.

Both sides moved for summary judgment.

In its motion for summary judgment, GHIS contended that Vogelsang's covenant-not-to-compete was enforceable because GHIS "promised to and provided Vogelsang with confidential information, which Vogelsang agreed not to disclose" and that Vogelsang's agreement not to disclose the confidential information was ancillary to GHIS's promise to provide the confidential information. GHIS also argued that the covenant-not-to-compete was reasonable because it only prohibited Vogelsang "from soliciting clients with whom she had actually worked while at GHIS" for a period of two years after termination.

In her cross-motion for summary judgment, Vogelsang contended that the covenant-not-to-compete was unenforceable because GHIS did not make an express promise to provide confidential information and that even if a promise was made, GHIS did not

actually perform that promise by providing new consideration in the form of confidential information.... Third the covenant is also overbroad as a matter of law. Finally, GHIS has not established an interest worthy of protection, as required by Sheshunoff,¹ because all of the information it claims to be confidential is publicly available.

On February 9, 2007 after a two-day hearing, the trial court held, among other things, that the "non-competition promise" in the Employment Agreement was unenforceable, and therefore, "GHIS shall TAKE NOTHING by the claim that Vogelsang has breached the non-competition promise in the Employment." After the trial court's interlocutory order, the trial court granted the parties' joint motion to non-suit all claims and parties except "GHIS's claim against Page M. Vogelsang that she breached the covenant-not-to-compete provision of the GHIS employment agreement." GHIS retained its "rights to (i) to appeal the Court's judgment that the covenant-not-to-compete...