Gill v. Marsh USA, Inc.

Background

Manpreet Gill sued his former employer, identified in the caption as Marsh USA, Inc. and described in the opinion as Marsh USA, LLC. The opinion states that Marsh is an insurance and risk-management-services limited liability company incorporated in Delaware. Gill worked at Marsh for nearly 20 years before resigning in March 2024 and accepting a similar position at Lockton, which the opinion describes as a Marsh competitor.

Marsh alleged that Gill, while still employed, solicited Marsh’s clients for Lockton. The allegations included increased and independent communications with clients, joining meetings he typically did not attend, taking credit for colleagues’ work, entertaining clients more frequently, failing to renew at least one client contract, and failing to pursue new business for Marsh. Marsh alleged that several active and potential accounts later moved to Lockton, along with at least one employee.

Gill moved to dismiss Marsh’s five counterclaims under Rule 12(b)(6), which tests whether a pleading contains enough factual allegations and a legally recognized theory to state a plausible claim. Gill separately moved under Rule 12(f) to strike Marsh’s request for attorney’s fees under California’s unfair-competition law and Marsh’s affirmative defense of unclean hands.

Breach of Fiduciary Duty

The court held that Delaware law governed Marsh’s breach-of-fiduciary-duty counterclaim under California’s internal-affairs doctrine. That doctrine generally applies the law of an entity’s state of incorporation to matters involving the entity’s internal affairs. The court rejected Marsh’s argument that the doctrine did not apply because the alleged conduct did not concern the company’s actual governance. It also found that Marsh had not shown a broader California interest or a relationship to California sufficient to invoke an exception to the doctrine.

Applying Delaware law, the court explained that a limited liability company may modify or impose fiduciary duties by contract. Without such a contractual provision, Delaware law generally imposes traditional fiduciary duties on managers and controlling members, but typically does not impose them on non-managing, non-controlling members. Marsh alleged that Gill participated in management and exercised discretionary authority, but did not allege whether he was a manager or controlling member or whether a contract imposed fiduciary duties on him. The court therefore granted the motion to dismiss this counterclaim, with leave to amend within 30 days of the order.

Breach of Duty of Loyalty

The court denied the motion to dismiss Marsh’s duty-of-loyalty counterclaim. It accepted that an employee may prepare to compete before resigning, but explained that California law does not allow an employee to transfer loyalty to a competitor while still employed.

Although Gill argued that his client communications merely informed clients about his upcoming move, the court considered Marsh’s allegations as a whole. It found that the allegations about Gill’s changed communications practices, increased involvement with clients, taking credit for colleagues’ work, entertaining clients, delaying renewals, and the later movement of clients to Lockton plausibly suggested that Gill solicited clients for Lockton before leaving Marsh. The court also found that Marsh plausibly alleged its injury was caused by Gill’s conduct. This counterclaim survived the motion to dismiss.

Tortious Interference Counterclaims

Marsh brought one counterclaim concerning existing business relationships with Clients A, J, and I, and another concerning a prospective business relationship with Client A. Under California law, these claims require allegations of an economic relationship, the defendant’s knowledge, intentional acts designed to disrupt the relationship, actual disruption, and resulting economic harm. A prospective-business-advantage claim also requires conduct wrongful for a reason beyond the interference itself.

The court denied the motion to dismiss both counterclaims. It found that Marsh plausibly alleged that Gill’s actions and omissions, viewed together, could constitute solicitation of Marsh’s clients for Lockton and wrongful interference with the relationships involving Clients A, J, and I. The court also found that Marsh plausibly alleged that Gill delayed responding to Client A’s request for proposals as an independent wrongful act that harmed Marsh’s prospective business relationship with that client.

Unfair-Competition Counterclaim

The court granted the motion to dismiss Marsh’s claim under California’s Unfair Competition Law. Marsh relied on the same alleged conduct underlying its other counterclaims and argued that Gill’s alleged breaches of loyalty and tortious interference constituted unlawful or unfair business practices.

The court concluded that Marsh had not supported its theory that the alleged common-law violations alone could serve as an unlawful-practices basis for an Unfair Competition Law claim. The court also found an independent pleading problem: the statute permits injunctive relief and restitution, but not damages or attorney’s fees. Marsh specifically pleaded expected lost profits and did not properly plead either an available restitution remedy or injunctive relief. The court granted dismissal with leave to amend within 30 days.

Motion to Strike

The court granted in part and denied in part Gill’s motion to strike. It struck Marsh’s request for attorney’s fees under the Unfair Competition Law because that statute does not permit attorney’s fees or damages. The court stated that amendment would be futile and therefore struck the request without leave to amend.

The court denied the request to strike Marsh’s unclean-hands defense. Although it was unclear how Marsh’s allegations about Gill’s conduct while employed related to Gill’s claims, the court found it possible that the defense could relate to those claims when the motion was viewed in the light most favorable to Marsh.

Disposition

The motion to dismiss was granted as to the breach-of-fiduciary-duty and Unfair Competition Law counterclaims, with leave to amend within 30 days, and denied as to the remaining counterclaims. Gill’s motion to strike was granted in part and denied in part. Marsh’s request for attorney’s fees under the Unfair Competition Law was stricken without leave to amend, while the unclean-hands defense remained.