Variable Annuity Life Ins. Co. v. Joiner

• Decision Date: 31 August 2006
• Docket Number: No. CIV A CV206-110.,CIV A CV206-110.
• Citation: 454 F.Supp.2d 1297
• Parties: The VARIABLE ANNUITY LIFE INSURANCE COMPANY, Plaintiff, v. William "Bobby" JOINER and Kimberly Joiner, Defendants.
• Court: U.S. District Court — Southern District of Georgia

454 F.Supp.2d 1297

The VARIABLE ANNUITY LIFE INSURANCE COMPANY, Plaintiff, v. William "Bobby" JOINER and Kimberly Joiner, Defendants.

No. CIV A CV206-110.

United States District Court, S.D. Georgia, Brunswick Division.

August 31, 2006.

COPYRIGHT MATERIAL OMITTED

Dionysia Johnson-Massie, Jacqueline E. Kalk, Latesa K. Bailey, Littler Mendelson, PC, Atlanta, GA, Larry Steven Pozner, Michael Andrew Rollin, Reilly, Pozner & Connelly, LLP, Denver, CO, for Plaintiff.

Kathleen Horne, Owen C. Murphy, Inglesby, Falligant, Horne, Courington & Chisholm, PC, Savannah, GA, Roy Harold Meeks, Pursley, Howell, Lowery & Meeks, Atlanta, GA, for Defendants.

ORDER

ALAIMO, District Judge.

Plaintiff, the Variable Annuity Life Insurance Company ("VALIC"), filed the above captioned diversity action against Defendants, William "Bobby" Joiner and Kimberly Joiner, (collectively, the "Joiners"), alleging numerous federal and state claims, including breach of contract and misappropriation of trade secrets, related to the Joiners' conduct prior and subsequent to tendering their letters of resignation to VALIC. The matter is presently before the Court on VALIC's motion for a preliminary injunction. VALIC seeks to enjoin the Joiners from inducing VALIC customers to roll their VALIC accounts to Merrill Lynch, the Joiners' new employer.

BACKGROUND

After conducting an evidentiary hearing, the Court entered a temporary restraining order on May 26, 2006, enjoining the Joiners from directly or indirectly using the identity and account information of VALIC clients to induce, either directly or indirectly, future roll outs of VALIC accounts to Merrill Lynch and, ordering the Joiners to return any VALIC property in their possession to VALIC.

Having shortly thereafter granted the Joiners' motion to compel arbitration and stay the proceedings in this Court, the Court mistakenly believed its role in this matter was finished. Once the National Association of Securities Dealers, Inc. Panel declined to exercise jurisdiction and dismissed the matter, however, the Joiners were left with no venue in which to seek relief from the temporary restraining order. Thus, the Court lifted the stay and VALIC's request for preliminary injunction came before the Court for a full evidentiary hearing on August 21, 2006. Pursuant to Federal Rule of Civil Procedure 52(a), and based on the evidence adduced at both hearings and the parties' moving papers, the Court makes the following Findings of Fact and Conclusions of Law.

FINDINGS OF FACT

1. William "Bobby" Joiner, began employment with VALIC; in July 1992 and Kimberly Joiner began in December 2003. (May 25, 2006 Hr'g Tr. 36:18-20, 136:23-24.)

2. The Joiners, as VALIC financial advisors, marketed and sold VALIC products, including tax exempt I.R.C. § 403(b) organization group accounts, VALIC's primary market. (See May 25, 2006 Hr'g Tr. 61:19-22.)

I. VFA Agreement

3. As a condition of employment, the Joiners were required to (a) execute a Registered Representative Agreement ("Agreement") with VALIC Financial Advisors Inc. ("VFA"), a wholly owned subsidiary of VALIC and a registered member of the National Association of Securities Dealers ("NASD") and (b) register and become licensed with NASD. (See May 25, 2006 Hr'g Tr. 38:25-39:8.)

4. The Agreement contains the following nonsolicitation covenant:

During the term of this Agreement and for a period of one (1) year after its termination, Registered Representative will not directly or indirectly induce or attempt to induce any Protected Customer to either (a) end or alter his or her relationship with Broker-Dealer or Protected Companies, or (b) accept business relating to competing products or services from any Protected Customer, except in the performance of his or her regular duties as a Registered Representative of Broker-Dealer. A "Protected Customer" is defined as any person who is or was a customer of Broker-Dealer or its Protected Companies, and who was within Registered Representative's Territory and assigned to Registered Representative at any time during the one-year period immediately preceding termination of this Agreement.

(Agreement § 4(h)(2).)

5. The Agreement also contains the following nondisclosure or use of trade secret covenant:

Trade Secrets. Broker-Dealer's and Protected Companies' Trade Secrets include, but are not limited to, their customer identities and account information and the materials, processes, data, documentation, and knowledge embodied in 4SIGHT, AgileNet, and other licensed software described in the Computer Schedule. Such information is a trade secret, whether contained in an electronic, printed or other format, or whether committed, in whole or part, to Registered Representative's memory. Broker-Dealer or Protected Companies will license said software to Registered Representative according to the terms set forth in the Computer Schedule. Registered Representative shall not, during the term of this Agreement, or at any time after its termination, disclose or use, directly or indirectly, any Trade Secrets of Broker-Dealer or Protected Companies, including but not limited to, customer identities and account information, except in the regular course of Registered Representative's business with Broker-Dealer or Protected Companies.

(Agreement § 4(g)(3)(a).)

6. Finally, the Agreement contains the following nondisclosure or use of confidential and proprietary information covenant:

Other Confidential and Proprietary Information. Broker-Dealer's and Protected Companies' Other Confidential and Proprietary Information includes, but is not limited to, customer requirements and other software and marketing plans provided to Registered Representative by Broker-Dealer or Protected Companies, whether maintained electronically or otherwise. As to this Other Confidential and Proprietary information, Registered Representative shall not, during the term of this Agreement, and for a period of two (2) years following its termination, disclose or use any such Other Confidential and Proprietary Information, directly or indirectly, except in the regular conduct of Registered Representative's business with Broker-Dealer or Protected companies.

(Agreement § 4(g)(3)(b).)

II. The Joiners' Move to Merrill Lynch

7. The Joiners surreptitiously planned their move from VALIC to Merrill Lynch. The Joiners began "thinking about" leaving VALIC and joining Merrill Lynch no later than January 1, 2006, (Joiner Dep. 61:17-63:2), and had "meeting[s] of substance" with Merrill Lynch management about transferring to Merrill Lynch no later than January 12, 2006, (Joiner Dep. 69:5-15).

8. One topic of discussion with Merrill Lynch management was how many of the Joiners' VALIC clients could be moved from VALIC to Merrill Lynch. (Joiner Dep. 70:19-72:5.)

9. The Joiners knew they were going to work at Merrill Lynch by the last week of February 2006. (Joiner Dep. 14:7-10.)

10. Mr. Joiner began employment with Merrill Lynch, VALIC's competitor, and his NASD registration with Merrill Lynch became effective, on March 21, 2006, the same day the Joiners tendered letters of resignation to VALIC. (See May 25, 2006 Hr'g Tr. 41:14-42:11; Pl.'s Ex. C, Mr. Joiner's NASD Registration.)

III. Breach of Agreement

11. At the time Mr. Joiner signed the Agreement, he believed the restrictive covenants contained in the Agreement were unenforceable. (May 25, 2006 Hr'g Tr. 60:8-61:11.)

12. The Joiners breached the terms of the Agreement by soliciting their former VALIC customers to roll their VALIC accounts to Merrill Lynch because Defendants did not believe the nonsolicitation provision was valid. (Joiner Dep. 24:1-17.)

13. The Joiners targeted the forty (40) highest balance VALIC customers to induce or attempt to induce to roll their VALIC accounts to Merrill Lynch. (Joiner Dep. 101:5-24.)

14. The Joiners attempted to induce former group clients to open payroll slots with Merrill Lynch. (Joiner Dep. 71:18-72:5; May 25, 2006 Hr'g Tr. 68:25-69:3.)

15. The Joiners directly solicited 90% of the clients who rolled out accounts from VALIC to Merrill Lynch. (May 25, 2006 Hr'g Tr. 100:8-19.)

16. The Joiners contacted former customers based on their memory of the customer financial status and contact information. (Joiner Dep. 87:17-88:16, 89:5-14, 101:15-102:3; May 25, 2006 Hr'g Tr. 52:2-14.)

17. The sources of the information contained in the Joiners' 2006 day planners and retained in the Joiners' memory after tendering their resignations to VALIC, are customers, AgileNet, 4SIGHT, the VALIC Care Center, and communications from VALIC. (Joiner Dep. 55:19-56:22.)

18. The Joiners understood client identification and account information to be the most valuable information VALIC owns. (May 25, 2006 Hr'g Tr. 73:8-22.)

19. In the two months between the Joiners' tendering their resignations to VALIC and the May 25, 2006 hearing, at least 32 accounts belonging to 27 VALIC customers, totaling approximately $4.5 million dollars, had been rolled out of VALIC accounts to accounts managed by Merrill Lynch, Defendants' current employer. (See May 25, 2006 Hr'g Ex. C1.)

20. Since May 25, 2006, seven additional accounts previously assigned to the Joiners, totaling approximately $1.1 million dollars, have been rolled out of VALIC accounts and into accounts managed by Merrill Lynch. (See August 21, 2006 Hr'g Pl.'s Ex. G.)

21. The Joiners concede that, absent judicial order, they will continue to solicit VALIC individual and group clients to roll their VALIC accounts to accounts managed by Merrill Lynch. (May 25, 2006 Hr'g Tr. 86:18-87:10.)

CONCLUSIONS OF LAW

I. Preliminary Injunction Standard

1. To be entitled to preliminary injunctive relief, VALIC must demonstrate: (a) a substantial likelihood of success on the merits; (b) that irreparable harm will be suffered unless the injunction is issued; (c) the threatened injury to the moving party outweighs whatever damage the proposed injunction...