LP Insurance Services, LLC v. Heffernan Insurance Brokers

Background

LP Insurance Services, LLC brought breach-of-contract and trade-secret-misappropriation claims against former employees Barbara Galgiani and Sharon Lagier and their new employer, Heffernan Insurance Brokers. LP alleged that Galgiani and Lagier took confidential and proprietary information when they left LP and, together with Heffernan, took LP’s clients.

Defendants filed a partial motion to dismiss. They sought dismissal of claims for aiding and abetting a breach of the duty of loyalty against Heffernan, interference with contract against all defendants, and interference with prospective economic advantage against Heffernan. They also sought dismissal of LP’s request for punitive damages.

Request to Consider an Additional Document

Defendants asked the court to consider a generic Broker of Record form under the incorporation-by-reference doctrine. That doctrine can treat a document as part of the complaint when the plaintiff extensively refers to it or when it forms the basis of the claim. The court declined to consider the document. It found the request untimely because defendants offered the document for the first time in their reply, and it found that the generic form was not the specific Broker of Record notice described in the complaint. The court also stated that defendants could not use the doctrine to present their own version of disputed facts at the pleading stage.

Aiding and Abetting the Breach of the Duty of Loyalty

Under California law, this claim requires allegations that a third party breached a duty owed to the plaintiff, the defendant knew about the breach, the defendant substantially assisted or encouraged it, and the defendant’s conduct substantially contributed to the plaintiff’s harm.

The court held that LP adequately stated this claim against Heffernan. LP alleged that the employees left LP and that their clients began moving to Heffernan almost immediately. LP also alleged that changing brokers involved specialized insurance contracts, negotiations, approval by Heffernan, and preparation and submission of Broker of Record notices. The court concluded that these allegations supported an inference that Heffernan knew about and helped with the employees’ alleged breaches. LP also alleged that approximately $1.2 million in business moved to Heffernan during the two weeks after the employees’ departure.

Interference with Contract

Intentional interference with contract requires allegations of a valid contract between the plaintiff and another party, the defendant’s knowledge of that contract, intentional conduct designed to cause a breach or disruption, an actual breach or disruption, and resulting harm.

The court allowed the claim to proceed against Heffernan. LP alleged that Galgiani sent at least 45 emails containing LP’s trade secrets and confidential information to her personal account before leaving, that Lagier received similar suspicious emails, and that the employees did not return the information. LP alleged that the employees used the information to transfer customer relationships to Heffernan. The timing of those events and the near-immediate movement of clients supported an inference that Heffernan was involved in the alleged breaches of the employees’ confidentiality agreements.

The court dismissed the contract-interference claim against Galgiani and Lagier. It explained that a person generally cannot be liable for interfering with that person’s own contract, although one defendant may directly interfere with another defendant’s contract if the required elements are alleged. LP’s allegations that the employees coordinated their departure and engaged in similar conduct did not plausibly show that either employee interfered with the other’s confidentiality agreement. The court granted the motion as to this claim with leave to amend.

Interference with Prospective Economic Advantage

This claim requires allegations of an economic relationship likely to produce a future benefit, the defendant’s knowledge of that relationship, intentional conduct designed to disrupt it, actual disruption, and economic harm caused by the defendant’s conduct.

The court held that LP adequately pleaded this claim against Heffernan. The claim relied at least partly on the same conduct supporting the aiding-and-abetting claim, and the court found those allegations sufficient for the same reasons.

Punitive Damages

Under California law, punitive damages may be sought for an obligation not arising from contract when the defendant is proven to have acted with oppression, fraud, or malice by clear and convincing evidence. The court held that LP’s allegations were sufficient at the pleading stage. LP alleged that defendants misappropriated confidential information and clients and that LP lost more than $1.2 million in business during the first two weeks after Galgiani and Lagier left.

Disposition

Judge Jacqueline Scott Corley granted in part and denied in part defendants’ motion to dismiss. The motion was granted with leave to amend as to the contract-interference claim against Galgiani and Lagier and denied as to the remaining claims. Any amended complaint was due August 7, 2025. LP could not add new claims or defendants without prior court permission. The order disposed of Docket No. 14.