Phillippy v. ANB Fin. Servs., LLC

• Decision Date: 26 October 2011
• Docket Number: No. CA 10–378.,CA 10–378.
• Parties: Sidney J. PHILLIPPY & Tina Dickey, Appellants v. ANB FINANCIAL SERVICES, LLC; Insurance Marketplace; and GL Holdings, LLC, Appellees.
• Court: Arkansas Court of Appeals

2011 Ark. App. 639

386 S.W.3d 553

Sidney J. PHILLIPPY & Tina Dickey, Appellants

v.ANB FINANCIAL SERVICES, LLC; Insurance Marketplace; and GL Holdings, LLC, Appellees.

No. CA 10–378.

Court of Appeals of Arkansas.

Oct. 26, 2011.

Kenneth Robert Shemin, Fayetteville, Timothy James Cullen, Andrew Mikeal Taylor, Tasha C. Taylor, Little Rock, for appellant.

Derrick Mark Davidson, Fayetteville, for appellee.

RAYMOND R. ABRAMSON, Judge.

[Ark. App. 1]Sidney Phillippy brings this interlocutory appeal from an order of the Benton County Circuit Court refusing to compel arbitration of breach-of-contract claims that appellees ANB Financial Services, LLC, a/k/a Insurance Marketplace (appellants' former employer), and GL Holdings, LLC, filed against him. He and appellant Tina Dickey also argue that the circuit court erred in refusing to dissolve a temporary restraining order prohibiting them from contacting IM's former clients. GL Holdings has cross-appealed from the entry of directed verdict on several claims concerning bid-rigging in GL's purchase of IM. We affirm on the direct appeal and reverse and remand on the cross-appeal.

Phillippy was an insurance agent for many years. He owned an insurance agency, later known as Insurance Marketplace (IM), that he sold to Arkansas National Bank (ANB) in [Ark. App. 2]2002. Dickey was also a licensed agent who worked with Phillippy for almost two decades. The Federal Deposit Insurance Corporation (FDIC) took over ANB in 2008 and solicited bids for the sale of IM. The bidders for IM included GL Holdings and Steve Standridge. Phillippy wanted Standridge to win the bid; after it became apparent that he was not likely to do so, appellants accepted offers to work for him. While still at IM, appellants exchanged emails about their letting a bidder (not GL) know that they were leaving. Phillippy sent an email to a friend stating that he intended to “pirate as many accounts” as he could if he left to work for another agency. GL ultimately won the bid. Appellants continued to work for IM for about a week after that. Because of Phillippy, some of IM's clients renewed their policies through Standridge's agency.

On June 27, 2008, appellees filed a complaint alleging that appellants had wrongly enlisted their customers and misappropriated IM's trade secrets, including its customer list and customer information. They brought claims for breach of contract; interference with contractual relations and business expectancy; theft of trade secrets ¹; conversion; violation of the Deceptive Trade Practices Act; and conspiracy, and asked for injunctive relief and damages. When Phillippy sold the agency to ANB, the parties entered into three agreements. They entered into an Agreement Plan of Merger, which covered the sale of the agency. It included a covenant-not-to-compete, wherein Phillippy agreed that, for three years from the later of the transaction's closing date, the termination of Phillippy's relationship with ANB [Ark. App. 3]under the Employment Agreement, or “any successor agreement,” Phillippy would not engage in any business in competition within a sixty-mile radius of Bentonville. He also agreed, for the same time period, not to disclose the identity of, or information about, customers or to directly or indirectly solicit other employees of ANB to terminate their employment or disrupt ANB's relationship with customers. The parties entered into a separate Covenant Not to Compete Agreement, which contained the same terms.

They also entered into an Employment Agreement, which provided that Phillippy would be an employee of ANB for a period of two years. The Employment Agreement contained a survival clause expressly agreeing that the terms and provisions set forth in sections 6, 7, and 9 of that agreement “shall survive the termination of this Agreement and shall be and remain valid, binding and enforceable upon all parties after such termination.” Section 6 provided in part: “In the event of ... the termination of this Agreement, so long as Phillippy does not Engage in Competition with ANB (as hereinafter defined) for a period of three (3) years from the date of such termination, ANB shall purchase from Phillippy or his heirs, as applicable, the Equitable Value” of the new insurance accounts sold and serviced by Phillippy, unless Phillippy were terminated for cause. Section 6.1 added:

As used in this Section 6, the term “Engage in Competition with ANB” means that Phillippy shall not directly or indirectly own, manage, operate, join, control, or participate in the ownership, management, operation, or control of, or be connected in any manner with, or assist others with any business which engages in competition with ANB within a sixty (60) mile radius of Bentonville, Arkansas.

Section 7 defined ANB's “property” as follows:

[Ark. App. 4]Except as provided in Section 6 of this Agreement, Phillippy agrees that all insurance business placed upon the books of ANB and all Confidential Customer Information (as defined herein) obtained by or through Phillippy's efforts, either directly or indirectly, and whether handled by ANB or Phillippy, shall be and remain the sole and exclusive property and assets of ANB. Except as provided in Section 6 of this Agreement, Phillippy shall have no right to or interest in any such insurance business or Confidential Customer Information, or in the renewals of such business, or in any expiration information, records, contracts, or documents (“Business Information”) whether produced by Phillippy or ANB or any other producers of ANB. Phillippy agrees and acknowledges that the disclosure, removal or transfer of the Business Information or Confidential Customer Information would give an unfair business advantage to Phillippy and/or competitors of ANB and be grounds for immediate termination of Phillippy.

For purposes of this Agreement, “Confidential Customer Information” shall mean all nonpublic personally identifiable risk and financial information:

(a) a customer provides to Phillippy to obtain an insurance product or service;

(b) about a customer resulting from a transaction involving an insurance product or service; or

(c) Phillippy otherwise obtains about a customer in connection with providing an insurance product or service for that customer.

The Employment Agreement also contained an arbitration clause agreeing to arbitrate any dispute “arising out of or relating to this Agreement.” In August 2008, Phillippy filed a motion to compel arbitration of the contract claims. Appellees argued that the arbitration clause did not apply, because they had brought no claims under the Employment Agreement. They also asserted that, while continuing to work at IM on an at-will basis after the Employment Agreement expired, Phillippy did so under an unwritten “successor agreement,” as contemplated in the Agreement Plan of Merger, thereby keeping the noncompete [Ark. App. 5]agreements in effect until three years from Phillippy's last day of work at IM. Appellants, however, have contended that there was no successor agreement.

The trial court entered an ex parte temporary restraining order (TRO), which it extended after a hearing. Phillippy moved to dissolve the TRO in October 2008. The court held a hearing on that motion in December 2008. In February 2009, the trial court entered an order denying the motion to dissolve the TRO. In that order, the court found that the numerous measures that IM took to protect its customer list and information were sufficient to guard their secrecy. The court also found that there was a substantial likelihood that IM would prevail on the merits of its case at trial (that its customer names and information were trade secrets) and that IM's business would suffer irreparable harm if the TRO did not remain in effect.

Appellees filed a second amended complaint adding claims for wrongful disruption of honest competition in the bidding process for the sale of IM. On the basis of the arbitration clause, Phillippy filed a motion in limine as to all contract-related claims in July 2009. Trial began in August 2009 before a jury and proceeded for several days. At the conclusion of appellees' case-in-chief, Phillippy moved again to compel arbitration of the contract claims, which the trial court denied, noting its inclination to agree with appellees' position that the Employment Agreement's arbitration provision did not apply to the noncompetition agreements. The trial court granted appellants' motion for directed verdict on appellees' bid-rigging claims. Appellants renewed their motion to dissolve the TRO, which the trial court [Ark. App. 6]denied. Phillippy stated that he wished to pursue his right to an immediate appeal of the denial of his motion to compel arbitration. Upon the parties' agreement, the trial court continued the trial. On August 10, 2009, the circuit court entered an order stating that appellees' claims for interference with contractual relations, conversion, deceptive trade practices, and conspiracy were dismissed without prejudice, and that the bid-rigging claims were dismissed in accordance with appellants' motion for directed verdict.

On September 10, 2009, the trial court entered an order denying appellants' motion to compel arbitration; granting appellees' motion to continue the trial of other claims; denying appellants' motion to dissolve the temporary restraining order; and granting appellants' motion for directed verdict on appellees' claims related to bid-rigging because the evidence of damages was too speculative. The court also entered a certificate under Arkansas Rule of Civil Procedure 54(b) to facilitate an interlocutory appeal of the directed verdict on the bid-rigging claims and the denial of the motion to dissolve the TRO.² Appellants then pursued this appeal, and appellees filed a cross-appeal.

Appellants argue that the circuit court erred in refusing to dissolve the TRO. They do not dispute that appellees met...