Hobbs v. Fifth Third Bank
| Decision Date | 29 November 2021 |
| Docket Number | 1:20-cv-1040 |
| Parties | MYRON HOBBS, Plaintiff, v. FIFTH THIRD BANK, N.A., et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
This cause is before the Court on Plaintiff Myron Hobbs' Motion for Preliminary Injunction (Doc. 26). For the reasons discussed more fully below, the Court DENIES Hobbs' Motion.
Myron Hobbs began working for Epic Insurance Solutions, LLC (“Epic Solutions”) as an insurance broker in late 2014. (Am. Hobbs Aff., Doc. 37-2, #1466). When Hobbs joined Epic Solutions, he brought a book of business valued at approximately $852, 000. (2014 Empl. Agreement (“Epic Agreement”), Doc. 37-4, #1519). As consideration for the acquisition of “certain accounts” (i.e., the accounts that Hobbs brought with him), Epic Solutions paid Hobbs' previous employer, Insuramax, approximately $412 500. Epic Solutions also paid off a commercial loan between Hobbs and a bank in the amount of approximately $150, 000 and agreed to pay Hobbs $300, 000 in three annual installments of $100, 000 each. (Id.). The accounts that Hobbs brought to his new employer included some long-term commercial insurance customers with whom Hobbs had been working, in some cases, for decades. (See Am. Hobbs Aff., Doc. 37-2, #1466).
Hobbs' compensation arrangement with Epic Solutions included a commission structure. Specifically, Hobbs was to receive an assigned percentage (that varied as described below) of any commission payments that Epic Solutions received for policies Hobbs sold (whether to new or existing customers). The commission arrangement also specifically addressed the customers that Hobbs brought with him. As to those customers if Hobbs remained employed and retained those customers for four years from the time he came to work for Epic Solutions (or, in other words, until December 1, 2018), Epic Solutions agreed to fix his commission percentage at 40% on all policies written for those customers, whether new or renewal, “until the termination of [his] employment.” (Epic Agreement, Doc. 37-4, #1520). And the new or renewal part of that mattered-typically, agents are paid more on new business than on renewal business. ( )).
In addition to the commission arrangement. Hobbs also negotiated a changein-control bonus. This term provided that, if Epic Solutions was sold or changed hands, Hobbs would be immediately entitled to a lump-sum payout calculated by reference to his production from the previous year. (Epic Agreement, Doc. 37-4, #1523-24). However, Hobbs' entitlement to that bonus was contingent on Hobbs having been employed at Epic for ten years at the time the change in control occurred.
(Id. at #1523 (“In the event that Employee ceases to be employed by [Epic Solutions] before the one hundred and twenty [] month anniversary of ... this Agreement . then the [change-in-control bonus] ... shall be immediately ... cancelled ....”)). The Epic Agreement also included a non-solicitation provision which prohibited Hobbs from engaging with current or prospective Epic Solutions customers for twenty-four months following his termination from Epic Solutions, regardless of the reason for that termination. (Id. at #1521).
Fifth Third Insurance Agency, Inc. (“FTI”), a subsidiary of Fifth Third Bank, N.A. (“Fifth Third”), acquired Epic Solutions in 2017. (Interest Purchase Agreement, Doc. 37-7). The parties accomplished the acquisition through a two-step process. First, Epic Solutions assigned all of its contractual rights and assets to Epic Solutions Insurance Agency, LLC (“Epic Agency”), an entity that Epic Solutions formed to facilitate the transaction, and as to which Epic Solutions was the sole member. (See id. at #1592). Then, FTI purchased from Epic Solutions that LLC member interest, thereby becoming the sole owner of Epic Agency. (See id. at #1592, 1603). As part of this transaction, Epic Solutions had assigned to Epic Agency the existing contract (and included restrictive covenant) between Epic Solutions and Hobbs. Indeed, the documents detailing the transaction between Epic Solutions and FTI identify the Hobbs contract as one of the “Material” contracts that FTI would be acquiring through its acquisition of Epic Agency. (Id. at #1606).
In connection with the acquisition, FTI formally offered Hobbs employment with the acquired entity (i.e., Epic Agency) through a letter dated September 26, 2017. (Offer Letter, Doc. 37-8). That letter provides that “following its acquisition by [FTI], [Epic Agency] will become an indirectly wholly-owned subsidiary of Fifth Third Bancorp (collectively “Fifth Third”).” (Id. at #1611). The Offer Letter appears to incorporate Hobbs' commission structure from the Epic Agreement into Hobbs' new employment arrangement, noting that Hobbs' “initial commission structure at Fifth Third [would] be consistent with [his] current commission structure.” (Id.). The Offer Letter did not contain any restrictive covenants, but did include a deferred incentive payment of $25, 000 in restricted stock units of Fifth Third Bancorp, subject to a three-year cliff vesting period (i.e., the stock units would all vest at the end of the three-year period, rather than vesting gradually over the term of his employment). According to the Offer Letter, that award would become “effective on the first business day of the quarter following [the third anniversary of] your start date.” (Id.). Hobbs accepted the offer and joined Epic Agency, which now had a new corporate parent, FTI.
In early 2018, these corporate machinations, coupled with various alleged exchanges between the parties, start making the operative facts here a little murky. For example, all agree that Hobbs' new employer instructed him to acknowledge a Fifth Third “Incentive Compensation Plan” (“IP”), but the identities of the exact parties to that agreement are not as clear. The agreement undoubtedly relates to Hobbs' compensation for providing insurance services on behalf of Epic Agency, but the document itself states that the counter-party is “Fifth Third, ” which is a defined term that refers to “Fifth Third Bank, National Association (including its parent companies, subsidiaries, and affiliates, collectively ‘Fifth Third, ['] the ‘Bank,' or ‘Employer').” (2018 IP, Doc. 37-13, #1652).
In addition to potential confusion surrounding the contracting parties, there also appears to be some dispute regarding the IP's operative effect. According to Hobbs, his boss, Donald Thompson, assured him that the IP was a “formality” and would not change the terms of his compensation under the Epic Agreement. Moreover, an email from Thompson seems consistent with Hobbs' assertion. (Am. Hobbs Aff., Doc. 37-2, #1468; Feb. 12 Thompson Email, Doc. 37-12, #1648 (“[N]o changes in your agreement, this is just their paperwork!!”)). But, while Thompson may have said that, the IP's plain language set out a commission structure of 40% on new business, but only 30% on renewal business. That differed from the 40%/40% structure set forth in the Epic Agreement (pursuant to the “grandfathered commission” provision) and the Offer Letter. (Compare 2018 IP, Doc. 37-13, #1653 with Epic Agreement, Doc. 37-4, § 1.9(b)(3), #1520).
The 2018 IP included a restrictive covenant in the form of a two-year nonsolicitation clause. That clause prohibited Hobbs from soliciting, attempting to solicit, or otherwise engaging with Fifth Third customers with whom Hobbs interacted while at Fifth Third for two years after he left his employment under the IP. (2018 IP, Doc. 37-13, #1660-61).
The 2018 IP also spoke to assignability. In particular, it states that Fifth Third “retains the right ... to assign its rights and obligations under the [2018 IP] to any successor in interest or purchaser of substantially all of Fifth Third's assets.” The IP then goes on to provide that “[i]n the event of such an assignment, the benefits and burdens of this [2018 IP] shall inure to the benefit of and is binding upon the successor or assignee of Fifth Third.” (Id. at #1664).
Hobbs asserts that, notwithstanding the language of the 2018 IP, Fifth Third actually continued to pay Hobbs throughout most of 2018 under the commission structure set forth in the Epic Agreement (i.e., 40%/40%), rather than the commission structure in the 2018 IP. (Hr'g Tr. Vol. 1, Doc. 35, #921). According to Hobbs, this was not surprising, as Thompson had told Hobbs-before Hobbs acknowledged the 2018 IP-that the IP was only paperwork and would not affect Hobbs' compensation. (See Feb. 12 Thompson Email, Doc. 37-12, #1648-49).
This understanding regarding commissions (to the extent that it existed) evidently changed in late 2018, at least from the Fifth Third side. In particular, Thompson informed Hobbs that, effective January 2019, the Epic Agreement's 40% “grandfathered commission” as to renewal business would no longer remain in place. (Hr'g Tr. Vol. 1, Doc. 35, #924-26; Hr'g Tr. Vol. 2, Doc. 36, #1197-98). Instead, Thompson said, Fifth Third would begin paying Hobbs based on the commission structure set forth in the upcoming 2019 IP (which mirrored the 40%/30% in the 2018 IP, not the 40%/40% grandfathered structure). (Hr'g Tr. Vol. 2, Doc. 36, #1197).
At the evidentiary hearing, Hobbs testified that reducing his commission percentage rate from 40% to 30% on renewal policies for long-term customers represented a loss in compensation to him of about $65, 000 per year. (Hr'g Tr Vol. 1, Doc. 35, #927). Hobbs says he expressed...
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