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Worley Claims Services, LLC v. Jefferies

United States District Court, W.D. North Carolina, Charlotte Division

December 12, 2019

WORLEY CLAIMS SERVICES, LLC, Plaintiffs,
v.
TOM JEFFERIES; ALLCAT CLAIMS SERVICES, LLC; ROBERT WILKEY; and TIM SIMMONS, Defendants.

          ORDER

          Kenneth D. Bell, United States District Judge

         Plaintiff Worley Claims Services (“Worley”) is a company that provides, inter alia, claims adjusting services to insurance companies. The individual defendants Tom Jeffries, Robert Wilkey and Tim Simmons (collectively the “Individual Defendants”) are former Worley employees, and defendant Allcat Claims Services (“Allcat”) is their current employer and one of Worley's competitors. In this action, Worley asserts numerous contract and tort claims related to the defendant employees' departure from Worley and alleged breach of the non-competition and non-solicitation provisions in their employment related agreements.

         Now before the Court is Defendants' Motion for Summary Judgment on all claims (Doc. No. 56), and Worley's Motion for Partial Summary Judgment on its breach of contract claim against Defendants Wilkey and Jeffries (Doc. No. 41). The primary issues before the Court on these motions are which state's law applies to Worley's claims (the parties dispute the applicable law for both Worley's contract and tort claims), whether the restrictive covenants are enforceable and whether Worley's various tort claims can survive summary judgment.

         The Court has carefully considered these motions and the parties' briefs and exhibits and heard oral argument from the parties' counsel during a hearing on the motions held December 4, 2019. For the reasons discussed below, the Court finds that neither party is entitled to summary judgment on Worley's breach of contract claims and most of its tort claims, but that Defendants are entitled to summary judgment on a limited portion of Worley's claims for intentional interference with contract and unjust enrichment. Accordingly, the Court will in part GRANT and in part DENY the Defendants' Motion for Summary Judgment, DENY the Plaintiff's Motion for Partial Summary Judgment and enter Partial Summary Judgment in favor of Defendants as set forth below.

         I. LEGAL STANDARD

         Summary judgment must be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56. A factual dispute is considered genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “A fact is material if it might affect the outcome of the suit under the governing law.” Vannoy v. Federal Reserve Bank of Richmond, 827 F.3d 296, 300 (4th Cir. 2016) (quoting Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013)).

         The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact through citations to the pleadings, depositions, answers to interrogatories, admissions or affidavits in the record. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003). “The burden on the moving party may be discharged by ‘showing' ... an absence of evidence to support the nonmoving party's case.” Celotex, 477 U.S. at 325. Once this initial burden is met, the burden shifts to the nonmoving party. The nonmoving party “must set forth specific facts showing that there is a genuine issue for trial, ” Id. at 322 n.3. The nonmoving party may not rely upon mere allegations or denials of allegations in his pleadings to defeat a motion for summary judgment. Id. at 324.

         When ruling on a summary judgment motion, a court must view the evidence and any inferences from the evidence in the light most favorable to the nonmoving party. Tolan v. Cotton, 572 U.S. 650, 657 (2014); see also Anderson, 477 U.S. at 255. “Summary judgment cannot be granted merely because the court believes that the movant will prevail if the action is tried on the merits.” Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 568-69 (4th Cir. 2015) (quoting 10A Charles Alan Wright & Arthur R. Miller et al., Federal Practice & Procedure § 2728 (3d ed.1998)). “The court therefore cannot weigh the evidence or make credibility determinations.” Id. at 569 (citing Mercantile Peninsula Bank v. French (In re French), 499 F.3d 345, 352 (4th Cir. 2007)).

         However, “[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Ricci v. DeStefano, 557 U.S. 557, 586 (2009) (internal citations omitted). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Anderson, 477 U.S. at 248. Also, the mere argued existence of a factual dispute does not defeat an otherwise properly supported motion. Id. If the evidence is merely colorable, or is not significantly probative, summary judgment is appropriate. Id. at 249-50.

         In the end, the question posed by a summary judgment motion is whether the evidence as applied to the governing legal rules “is so one-sided that one party must prevail as a matter of law.” Id. at 252.

         II. FACTS AND PROCEDURAL HISTORY[1]

         Worley is a limited liability holding company organized under the laws of Delaware and through its subsidiaries is in the business of providing claims assessment, processing, and adjustment services for insurance carriers throughout the country. For example, after natural disasters Worley provides claims adjusters to insurance companies who do not have enough adjusters to handle the increased number of claims. Worley alleges that the market for its services is national and global and that the industry in which it competes is highly competitive.

         Worley has four subsidiaries. Two of the subsidiaries - Worley Specialty Services, LLC and Worley Catastrophe Services, LLC - focus on claims administration, specialty staffing, governmental services, and environmental services. The other two subsidiaries - Alacrity Renovation Services, LLC (“Alacrity”) and Nexxus Solutions Group, LLC (“Nexxus”) - provide a general contractor network to manage contractors and to coordinate emergency mitigation work. None of the Individual Defendants were involved with either the business of Alacrity or Nexxus. Both Jefferies and Wilkey were, however, managerial level employees at Worley. Jefferies was Vice President of Claims and Wilkey was Director of Flood. Both individuals managed Worley's relationships with some of its largest customers and supervised Worley's regional business operations, while simultaneously supervising lower tier employees.

         Wilkey and Jefferies joined Worley subsidiaries following Worley's October 30, 2015 acquisition transaction with their prior employer, North Carolina-based Reid, Jones, McRorie and Williams (“RJMW”).[2] Simmons has been employed by Worley and its affiliates since approximately 2011. There is no dispute that Jeffries and Wilkey were aware of the pending acquisition and knowingly planned to continue working with Worley after the closing.[3]

         Indeed, on October 30, 2015, the same day as the acquisition, Jefferies and Wilkey each executed a “Retention Bonus, Noncompete/Nonsolicitation and Confidentiality Agreement” (the “Retention Agreement” or “RA”).[4] This Retention Agreement contains the restrictive covenants that are primarily at issue in this action. In the RA, Worley and the employees agreed that they would receive a $100, 000 retention bonus (the “Retention Bonus”) payable in annual equal installments for two (2) years. As part of the consideration for the Retention Bonus, the RA contains the following non-solicitation[5] provision:

         During the Restricted Period, Employee agrees to not do the following:

(1) Directly or indirectly contact, solicit or encourage a Customer of RJMW Group to deal with Employee, a Competitor of RJMW Group, or any person or entity other than RJMW Group; or
(2) Directly or indirectly accept business from a Customer of RJMW Group; or
(3) Request or advise any customer of RJMW Group to withdraw, curtail, or cease doing business with RJMW Group; or
(4) Employ, hire, solicit for employment or services, advise or recommend to any other person or entity that it employ or solicit for employment or services any then-current employee, consultant, independent contractor, sales or other representative of RJMW Group; or
(5) Advise, recommend, encourage or solicit any then-current employee, consultant, independent contractor, sales or other representative of RJMW Group to leave RJMW Group's employment or services; or
(6) Directly or indirectly solicit, encourage, or materially assist others to engage in any of the activities restricted of Employee in this Agreement.

         Following Worley's acquisition of RJMW, Jefferies and Wilkey were retained and employed by Worley pursuant to their Retention Agreements. Worley entrusted Jefferies and Wilkey to continue to work with the same insurance carriers they previously serviced. Jefferies testified he would frequently visit customers to maintain relationships after Worley's acquisition of RJMW. On March 31, 2017, Jefferies signed a Unit Grant Agreement in which he was given an ownership interest in Worley as part of a performance bonus he received. This Unit Grant Agreement also contained post-employment restrictive covenants that are similar to, but not the same as, those in the Retention Agreement.

         On April 24, 2018, Jefferies resigned from Worley. Jefferies disclosed to Worley his intention to work for Allcat. By email, Worley reminded Jefferies of his restrictive covenants after his resignation. Jefferies and Worley later negotiated and executed an agreement (the “2018 Agreement”) that released Jefferies from the non-competition obligations in the Unit Grant Agreement. As discussed further below, the parties dispute the effect of the 2018 Agreement on the earlier Retention Agreement. However, there is no dispute that the 2018 Agreement absolved Jeffries of any duty to abide by the restrictive covenants in the Unit Agreement (upon the forfeiture of his equity units).

         On May 25, 2018, Simmons, whom Worley had designated to replace Jefferies, also resigned. Simmons did not disclose his intent to work for Allcat. His last day with Worley was June 8, 2018. Unbeknownst to Worley, Simmons had been pursuing employment with Allcat since May 23, 2018. On August 13, 2018, Wilkey resigned from Worley. At the time of his resignation, Wilkey informed Jim Pearl, Worley's CEO, he planned to work for an “insurance company.” However, Worley has presented evidence that Wilkey signed an employment agreement with Allcat five days before giving his resignation and had no job offers from any insurance carriers.

         Following these employees' departures from Worley to Allcat, Allcat sought business from customers who had done business with Worley and who had relationships with the Individual Defendants. Also, Allcat sought to use a number of the same independent adjusters whom Worley had previously used in responding to business opportunities after Hurricane Florence formed in September 2018. The parties hotly dispute the details and legal import of these various contacts and sales efforts. Worley contends that Jeffries and Wilkey have directly and/or indirectly violated the non-solicitation obligations in the Retention Agreements and the Defendants deny they have done so. For its part, Allcat contends that it was unaware of the Individual Defendants' restrictive covenants “at the time their offers were extended, ” but acknowledges that it knew about Jeffries' restrictions in May 2018, not long after his resignation and months before Wilkey joined Allcat.

         On October 9, 2018, Worley filed this action seeking injunctive relief and monetary damages. Worley has alleged claims for Breach of Contract as to Wilkey and Jefferies (“Count I”); Breach of Contract as to Simmons (“Count II”); Breach of Fiduciary Duty of Loyalty as to Wilkey and Jefferies (“Count III”); Intentional Interference with Contract as to all Defendants (“Count IV”); Intentional Interference with Prospective Economic Advantage as to all Defendants (“Count V”); Aiding and Abetting Breach of Fiduciary Duty of Loyalty as to all Defendants (“Count VI”); Civil Conspiracy as to all Defendants (“Count X”); and Unjust Enrichment as to all Defendants (“Count XI”).

         III. DISCUSSION

         A. Choice of Law

         In this action, the Court's jurisdiction is based upon diversity of citizenship; therefore, the Court must “apply the substantive law of the state in which it sits, including the state's choice of law rules.” Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 599-600 (4th Cir.2004) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); Klaxon Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487 (1941) (“We are of opinion that the prohibition declared in Erie Railroad ... against such independent determinations by the federal courts extends to the field of conflict of laws.”)). Accordingly, the Court must follow North Carolina's choice of law rules in determining which state's or states' law governs this action.

         1. Contract Claims

         Under North Carolina choice of law rules, “the interpretation of a contract is governed by the law of the place where the contract was made.” Bueltel v. Lumber Mut. Ins. Co., 134 N.C.App. 626, 631 (1999) (citing Tanglewood Land Co., Inc. v. Byrd, 299 N.C. 260, 262, 261 S.E.2d 655, 656 (1980)). However, “where parties to a contract have agreed that a given jurisdiction's substantive law shall govern the interpretation of the contract, such a contractual provision will be given effect.” Id.; Volvo, 386 F.3d at 600-01 (finding that North Carolina typically gives effect to choice of law provisions). This rule has been applied in the context of covenants not to compete. See Bueltel v. Lumber Mut. Ins. Co., 134 N.C.App. 626, 631 (1999).

         Under certain circumstances, however, “North Carolina courts will not honor a choice of law provision.” Cable Tel. Servs., Inc. v. Overland Contr'g, Inc., 154 N.C.App. 639, 642 (2002):

The law of the state chosen by the parties to govern their contractual rights and duties will be applied ... unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of a particular issue and which, under the rule of § 188 [of the Restatement (Second) of Conflict of Laws], would be the state of applicable law in the absence of an effective choice of law by the parties.

Id. at 643.

         There is no dispute that both of the contracts at issue - the Retention Agreement and the Unit Agreement - contain choice of law provisions in which the parties agreed that Delaware law would govern the contract. Therefore, unless the Court finds either that Delaware “has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice” or application of Delaware law would be contrary to a fundamental policy of the state which would have been the state of applicable law in the absence of a valid choice by the parties, then Delaware law should apply.

         The Court finds that there is a reasonable basis for the parties' choice of Delaware law. Both RJMW and Worley were incorporated in Delaware at the time the contracts were executed. See Akzo Nobel Coatings, Inc. v. Rogers, 2011 NCBC 41, 2011 NCBC LEXIS 42 ( N.C. Super. Nov. 3, 2011) (“There is no question that Delaware law has a substantial relationship to the transactions [because] Akzo Nobel is a Delaware corporation, and both the Rogers and Taylor Agreements were made with Akzo Nobel.”). Further, although Defendants contend that the Individual Defendants' RJMW relationship was based out of a North Carolina office, the Retention Agreements were entered into with Jeffries (a South Carolina resident), Wilkey (a Connecticut resident) and other employees residing in different states. Thus, it is reasonable for RJMW and Worley to choose a single state's law (Delaware, the state of its incorporation which has well-established and robust corporate law precedents) to govern its ...


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