Wells Fargo Ins. Servs. USA, Inc. v. McQuate

• Decision Date: 01 August 2016
• Docket Number: Civil Action No. 1:14–cv–2565–RM–MJW
• Citation: 276 F.Supp.3d 1089
• Parties: WELLS FARGO INSURANCE SERVICES USA, INC., Plaintiff, v. Glenn W. MCQUATE, Paul Prouty, and Mary Wong, Defendants.
• Court: U.S. District Court — District of Colorado

276 F.Supp.3d 1089

WELLS FARGO INSURANCE SERVICES USA, INC., Plaintiff,

v.Glenn W. MCQUATE, Paul Prouty, and Mary Wong, Defendants.

Civil Action No. 1:14–cv–2565–RM–MJW

United States District Court, D. Colorado.

Signed August 1, 2016

Filed August 2, 2016

Christopher T. Patrick, Timothy Michael Kratz, Jackson Lewis, P.C., Denver, CO, Peter R. Bulmer, Jackson Lewis, P.C., Chicago, IL, for Plaintiff.

Amy L. Miletich, Brendan Daniel Benson, Miletich PC, Denver, CO, for Defendants.

AMENDED ORDER¹

RAYMOND P. MOORE, United States District Judge

This matter is before the Court Defendants' Motion for Summary Judgment ("Motion") (ECF No. 57) on Plaintiff Wells Fargo Insurance Services USA, Inc.'s ("Wells Fargo") claims arising from allegations that Defendants engaged in wrongful conduct, designed to harm Wells Fargo, before and after their en masse departure of employment to open the office of a competitor, McGriff, Seibels & Williams ("McGriff"). Upon consideration of the Motion, Response, Reply, the applicable statutes and case law, and being otherwise fully advised, the Motion is GRANTED in part and DENIED in part .

I. PROCEDURAL AND FACTUAL BACKGROUND²

A. Plaintiff's Business and Defendants' Employment

Wells Fargo is in the business of procuring and servicing insurance coverages for various business lines, including the ones at issue here—energy and mining. Defendants were three of about 35 employees based in Wells Fargo's Denver, Colorado office. Defendants had a good working relationship with each other; they considered themselves a "team."

In this business, Wells Fargo does not underwrite the insurance policies but, rather, has relationships with insurance writers and brokers the insurance coverages on behalf of its business clients. Some clients require Wells Fargo to execute non-disclosure agreements prior to providing Wells Fargo information to obtain coverage while other clients do not. Even in the absence of a nondisclosure agreement with a client, Wells Fargo does not disclose that information to anyone outside their office other than when attempting to place coverage for clients. In those instances, Wells Fargo shares selected client information, such as renewal dates, premium information, and sometimes deductible information, with various insurance companies in order to place coverage for clients even though Wells Fargo does not have non-disclosure agreements with the carriers. Clients may—and do—share their policies with other brokerages if they are considering changing brokers, which may occur for any number of reasons.

Wells Fargo considers various information to be confidential and trade secrets, including the combination of information it receives from clients and how it uses that information to place coverage. As Jon Lindstrom, Managing Director of Wells Fargo's Denver office, explained: "A deductible is one piece of the entire insurance negotiation. ... [T]here's terms and conditions, there's layering of coverages. All of these come into play as part of the package of a trade secret." (ECF No. 64–5, pages 194.) Wells Fargo considers its CRIP reports to be "trade secrets"; these are monthly reports which list significant current policies that will renew within 120–150 days. These reports contain information on those accounts, including the client, line of business, underlying insurance carrier, types of policies, revenues associated with each insurance policy, and renewal date. These reports are generated from information contained in Wells Fargo's password protected system called "Nexsure." Wells Fargo uses these reports for renewals. And, although one or more of Defendants have testified to the contrary, the evidence shows they too have used their reports to perform their duties and responsibilities.

Wells Fargo also considers how it markets itself to be a trade secret. However, if a Wells Fargo marketing presentation was left with a client, and the client chose to do so, it could be given to a Wells Fargo competitor or other entity.

In January 2014, Wells Fargo sold 42 of its offices to USI Insurance Services ("USI"), which sale was completed around May 2, 2014. Defendants all had concerns about the sale. For example, Ms. Wong and Mr. Prouty expressed concerns about Wells Fargo's ability to service the remaining clients. Mr. McQuate complained because about 75% of his book of business and the office he reported to and relied on for support were sold to USI. After the sale, Defendants reported to Jon Lindstrom, the Managing Director of Wells Fargo's Denver office. Mr. Lindstom was one of three levels of management above Defendants.

It was after the sale to USI that Defendants decided to look for other employment. A look at Defendants' employment history prior to their departure from Wells Fargo, construed in a light most favorable to Wells Fargo, shows the following,

Defendant McQuate. Mr. McQuate began working in the insurance industry in 1977. In about 1995, Mr. McQuate entered into an Employment Agreement (the "Acordia Agreement") with Acordia of West Virginia. As relevant to the issues, that agreement contains the following provisions:

• "8. Confidentiality and Restrictive Covenants"

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"(a) During and following Employee's employment with Employer, Employee will not disclose to any person or entity not associated with Employer any business, financial or other confidential and/or proprietary information of Employer and/or its customers, clients or insureds.

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"(c) Upon termination of Employee's employment with Employer, regardless of the reason for termination or whether the termination was initiated by Employer or by Employee, within three (3) days Employee shall deliver to Employer all data, manuals, lists, notes, writings, client lists, photographs, microfilm, tape-recordings, computer software and/or hardware, and all other documents or tangible materials whatsoever, including all copies or duplicates thereof, concerning the business or financial activities of Employer and/or its customers, clients or insureds. All such documents and tangible materials, and copies or duplicates thereof, are the sole property of Employer. Upon delivery of all such documents and tangible materials, and any and all copies and duplicates thereof, Employee shall certify in writing to Employer that all such documents and tangible materials have been returned and delivered to Employer and have not been further copied or disclosed to any person or entity not directly associated with Employer."

"(d) For a period of two (2) years after Employee's employment relationship with Employer has terminated for any reason, regardless of whether the termination was initiated by Employer or by Employee, Employee shall not, on Employee's own behalf or on behalf of any other person, firm, corporation, association or other entity, either directly or indirectly, solicit, sell, service, create, manage or implement any kind of service or product offered by Employer to any person, company, firm or corporation: (1) who is a client, customer or insured of Employer at the time during Employee's employment with Employer is terminated; (2) who was a client, customer or insured of Employer at any time within the two (2) year period immediately preceding Employee's termination; or (3) whom Employee called upon while in the employ of Employer as a prospective client, customer or insured during the two (2) year period immediately preceding the termination of Employee's employment."

"(e) For a period of two (2) years after Employee's employment relationship with Employer has terminated for any reason ... Employee shall not, on Employee's own behalf or on behalf of any other person, corporation or entity, either directly or indirectly, solicit, induce, recruit or cause another person in the employ of Employer to terminate his or her employment for the purpose of joining, associating or becoming an employee with any business which is in competition with any business or activity engaged in by Employer."

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"... Employee also hereby ... specifically waives any defense of lack of protect[a]ble business interest on the part of Employer."

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• "20. Severability. The invalidity or unenforceability of any of the provisions or clauses in this Agreement shall in no way affect the validity or enforceability of any other clause or provision hereof."

• "21. Applicable Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of West Virginia."

At Acordia, Mr. McQuate was a profit center manager where he was responsible for office results and managed a staff of about 35 people. He worked for Acordia in Virginia until Acordia sold its business to Wells Fargo in 2001. At that time, Mr. McQuate became an employee of Wells Fargo and the Acordia Agreement was assigned to Wells Fargo. After the sale, Mr. McQuate continued to work in Virginia as a profit center manager. In approximately 2005, however, he became a Sales Executive where his duties were to secure new business and to service existing clients; he no longer had management responsibility.

In approximately 2010, at the request of Wells Fargo, Mr. McQuate moved to Denver. Mr. McQuate became a Senior Sales Executive and was paid on commission until Wells Fargo's sale of offices to USI; thereafter, he had a forgivable draw. Although Mr. McQuate reported to Mr. Lindstrom, employees who worked on his accounts also reported to him as Mr. McQuate managed their time and work, e.g., directing what work they performed. Nonetheless, Mr. McQuate did not have authority to determine the compensation of an employee; to transfer an employee from one department to another; to suspend an employee; to promote an employee; to discipline an employee; or to reward an employee. His authority was limited to making recommendations, such as to suspend, to promote, and to reward.

During his employment at Wells Fargo, Mr. McQuate received information he considered confidential from Wells Fargo customers, such...