Palmer & Cay, Inc. v. Marsh & Mclennan Companies, No. 03-16248.

Decision Date01 April 2005
Docket NumberNo. 03-16248.
Citation404 F.3d 1297
PartiesPALMER & CAY, INC., a Georgia corporation, Plaintiff-Appellee-Cross-Appellant, James B. Meathe, Plaintiff-Counter-Defendant-Appellee-Cross-Appellant, v. MARSH & McLENNAN COMPANIES, INC., A Delaware corporation, Defendant-Counter-Claimant-Appellant-Cross-Appellee.
CourtU.S. Court of Appeals — Eleventh Circuit

William George Miossi, Winston & Strawn, Chicago, IL, Kathleen Horne, Inglesby, Falligant, Horne, Courington & Nash, P.C., Savannah, GA, for Marsh & McLennan Companies.

John M. Tatum, Hunter, Maclean, Exley & Dunn, PC, Savannah, GA, for Palmer & Cay.

Appeals from the United States District Court for the Southern District of Georgia.

Before BIRCH, BARKETT and COX, Circuit Judges.

BIRCH, Circuit Judge:

This appeal arises from two employee and client non-solicitation agreements entered into between James B. Meathe, an insurance executive, and Marsh and McLennan Companies, Inc. ("MMC"), his former employer. The district court granted judgment on the pleadings in favor of Meathe and his current employer, Palmer & Cay, Inc. ("P&C"), and held that the agreements were unenforceable "within the state of Georgia" under Georgia public policy. The district court enjoined MMC from attempting to enforce the agreements within the state. We must determine whether the district court correctly granted judgment on the pleadings, and if so, whether it correctly curtailed the geographic scope of the declaratory judgment and injunctive relief to Georgia. We AFFIRM in part, VACATE in part, and REMAND for proceedings consistent with this opinion.

I. BACKGROUND

As of March 1997, Meathe was employed at Johnson & Higgins ("J&H"), a national insurance brokerage. That spring, MMC acquired all outstanding shares of J&H, and J&H was merged into MMC. Meathe owned stock in J&H at the time of the sale.1 In the exchange, he received a cash payment and shares of MMC stock,2 and he agreed to be bound by certain customer and employee non-solicitation covenants incorporated into a written agreement ("the 1997 Agreement").3

The 1997 Agreement, entitled "STOCK PURCHASE AGREEMENT among JOHNSON & HIGGINS, THE STOCKHOLDERS OF JOHNSON & HIGGINS and MARSH & MCLENNAN COMPANIES, INC.," represents that it is between J&H, the "Seller[s]", or J&H stockholders listed on Annex A to the 1997 Agreement, and the "Buyer," MMC. R1-17, App. A, at 1. Although their submissions do not include Annex A, the parties do not dispute that Meathe sold his stock as part of the 1997 Agreement. Section 6.13(b) of the 1997 Agreement sets out the non-competition and non-solicitation provision applicable to Meathe, who was not a director of J&H:

Section 6.13 Non-Competition and Non-Solicitation.

....

(b) Each Seller who is not a director of the Company as of the date hereof hereby agrees that during the Non-Solicit Period, such Seller will not (x) solicit, accept or service business that competes with businesses conducted by the Company, Buyer or any of their Subsidiaries (i) from any clients or prospects of the Company or its affiliates who were solicited directly by Seller or where Seller supervised, directly or indirectly, in whole or in part, the solicitation activities related to such clients or prospects or (ii) from any former client who was such within two (2) years prior to such termination and who was solicited directly by Seller or where Seller supervised, directly or indirectly, in whole or in part, the solicitation activities related to such former client; or (y) solicit any employee of the Company or its affiliates to terminate his employment.

Id. at 69-70.4 The section also establishes the length of the non-solicitation period:

The Non-Solicit Period shall commence on the Closing Date and end on the later of the fifth anniversary of the Closing Date and the second anniversary of the date on which such Seller is no longer employed by the Company, Buyer or any of their respective Subsidiaries.

Id. at 70. The 1997 Agreement's "Definitions" section contains a list of five individuals whose actual knowledge could impute knowledge to J&H for purposes of the agreement. Meathe is not included on the list. Id. at 105, § 11.3(d). Additionally, the agreement contains a merger clause. Id. at 89, § 10.4.

MMC employed Meathe from March 1997 to 2003. By 2003, Meathe was Managing Director and Head of the Midwest Region for Marsh USA, Inc., one of MMC's subsidiary corporations. R2-25 at 13 ¶ 13; R2-27 at 4 ¶ 13. In this position, according to MMC, Meathe's duties included soliciting and servicing clients in Marsh's Midwest region, supervising 2,600 sales employees, formulating business strategy, managing Marsh's finances for the region, and crafting business policies and procedures. R2-25 at 13 ¶ 14.5 According to MMC, Meathe had access to confidential information relating to the servicing of clients. MMC alleges that this information, not known outside of the company, gives Marsh a competitive advantage in the marketplace.6 R2-25 at 14 ¶ 15. In 2003, MMC paid Meathe approximately $725,000 in salary and bonuses. R2-25 at 13 ¶ 13.

On 27 December 2002, Meathe signed another client and employee non-solicitation agreement ("the 2002 Agreement") in exchange for rights to exercise certain MMC stock options.7 R2-25 at 12-13 ¶¶ 11, 12. In the 2002 Agreement, Meathe agreed to be bound by customer and employee non-solicitation covenants set to expire two years after Meathe's last day of work at MMC, provided his employment with MMC ended within three years of his exercising the stock options. Meathe promised not to:

(a) solicit or accept business of the type offered by the Company during my term of employment with the Company, or perform or supervise the performance of any services related to such type of business, from or for (i) clients or prospects of the Company or its affiliates who were solicited or serviced directly by me or where I supervised, directly or indirectly, in whole or in part, the solicitation or servicing activities related to such clients or prospects; or (ii) any former client of the Company or its affiliates who was such within two (2) years prior to my termination of employment and who was solicited or serviced directly by me or where I supervised, directly or indirectly, in whole or in part, the solicitation or servicing activities related to such former clients; or

(b) solicit any employee of the Company who reported to me directly or indirectly to terminate his employment with the Company for the purpose of competing with the Company.

R1-17 at App. B. Meathe also recognized and acknowledged MMC's trade secrets and confidential proprietary information and promised not to disclose them or use them for the benefit of himself or an entity other than Marsh.8

Meathe left Marsh's employ on 1 January 2003. R2-25 at 13 ¶ 13; R2-27 at 4 ¶ 13.9 In February 2003, Meathe became President of P&C, an insurance brokerage company and direct competitor of Marsh. R2-25 at 14 ¶ 16; R2-27 at 4 ¶ 16. Meathe moved to Georgia around that time. According to MMC, MMC informed Meathe on 24 July 2003 that it would not attempt to enforce the contract term in the 2002 Agreement that prohibited Meathe from accepting business from clients who switched, on their own and unsolicited by Meathe, to P&C. R2-22 at 14 ¶ 17. MMC contends that it took this measure to modify the 2002 Agreement so as to bring it into conformance with Georgia law.

Although the 1997 Agreement's five-year non-solicitation period had expired by the time P&C employed Meathe, both the 1997 Agreement and 2002 Agreement's two-year non-solicitation periods, set to expire 1 January 2005, were still in effect. In district court, Meathe and P&C sought a judgment enjoining MMC from enforcing the 1997 Agreement and the 2002 Agreement. MMC counterclaimed, arguing, inter alia, that Meathe violated covenants of the 1997 and 2002 Agreements in order to expand P&C's business in the Midwest.10 Meathe and P&C moved for judgments on the pleadings. Granting their motions in part, the district court declared the 1997 and 2002 Agreements "unenforceable within the State of Georgia" and enjoined MMC from enforcing the covenants "against Meathe in Georgia." Palmer & Cay, Inc. v. Marsh & McLennan Cos., No. 403CV094 at 11 (S.D.Ga. Nov. 11, 2003) (order granting judgment on the pleadings).

On 26 November 2003, MMC filed a timely notice of interlocutory appeal under 28 U.S.C. § 1292(a)(1). On 1 December 2003, the district court ruled sua sponte that there was "no just reason for delay" and certified the case for immediate appeal, pursuant to Federal Rule of Civil Procedure 54(b). R2-30. In its order, the district court stayed discovery pending appeal and administratively closed the case, subject to a reopen motion by any party with standing. P&C and Meathe filed a timely notice of cross appeal.

On appeal, MMC argues that the district court erred by (1) failing to follow the standard for judgments on the pleadings, dictated by Federal Rule of Civil Procedure 12(c), by drawing factual inferences against MMC, the non-movant; and (2) concluding that the 1997 and 2002 Agreements were unenforceable under Georgia law.11 On cross-appeal, P&C and Meathe contend that the district court erred in limiting the scope of its injunction and declaratory judgment to Georgia under Keener v. Convergys Corp., 342 F.3d 1264 (11th Cir.2003).

II. DISCUSSION
A. Standard of Review

We review the district court's grant of judgment on the pleadings de novo. Horsley v. Feldt, 304 F.3d 1125, 1131 (11th Cir.2002). "`Judgment on the pleadings is appropriate where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law.'" Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1291 (11th Cir.2002) (citation omitted). The court must view the facts "in the light most favorable to the nonmoving party," and it can grant the motion only if...

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