QBE Americas, Inc. v. Orcutt

Background

The opinion addresses three motions in two related actions. QBE Americas, Inc., doing business as QBE North America, sued or pursued arbitration against former employees Steven Allen and Gregory Dekker, former employees Kristina Orcutt and Kristina Mulligan, and Applied Underwriters, Inc., a rival insurance company. QBE alleged that former employees took confidential QBE documents and that Allen, Dekker, and Applied used the information to establish and compete through a new aviation insurance unit.

QBE had previously obtained temporary restraining orders barring the defendants from possessing, disclosing, or using allegedly confidential QBE information. The orders also restricted Allen, Dekker, and Applied from soliciting certain QBE aviation policyholders and QBE Aviation Division employees. QBE sought preliminary injunctions continuing and modifying those restrictions during its arbitration against Allen and Dekker and its lawsuit against Orcutt, Mulligan, and Applied.

Motion to dismiss Orcutt and Mulligan

Orcutt and Mulligan moved under Federal Rule of Civil Procedure 12(b)(2), which permits dismissal when the court lacks personal jurisdiction over a defendant. Orcutt had lived and worked in Arizona, and Mulligan had lived and worked in Georgia. Both had made limited work-related trips to New York, but the court found those trips unrelated to the claims at issue.

The court held that New York’s general jurisdiction statute did not apply because neither woman was domiciled in New York. It also rejected QBE’s three proposed bases for specific jurisdiction under New York’s long-arm statute:

- Under the provision covering tortious acts committed in New York, QBE argued that Allen acted as Orcutt’s and Mulligan’s co-conspirator or agent during meetings in New York. The court found no evidence that either woman had joined a plan to move to Applied before Allen’s New York meetings. It also found no evidence that Allen acted at either woman’s direction, under her control, or on her behalf. - Under the provision covering business transactions in New York, the court held that a co-conspirator’s alleged conduct was not enough. QBE did not show a qualifying agency relationship or a substantial relationship between either woman’s New York activities and the claims. - Under the provision covering out-of-state torts causing foreseeable New York injury, the court found QBE’s asserted injury too speculative. QBE relied on a meeting involving a broker and the possibility of future lost business, but the court found the alleged causal chain too indirect and concluded that Orcutt and Mulligan would not reasonably have expected their conduct in Arizona and Georgia to cause the claimed New York injury.

The court therefore granted Orcutt and Mulligan’s motion to dismiss QBE’s complaint against them. The complaint remained effective against Applied, which did not join that motion.

Preliminary injunction standards and findings

A preliminary injunction is a temporary order designed to prevent harm before a case is finally resolved. QBE had to show likely irreparable harm, a likelihood of success on at least one claim or sufficiently serious legal questions combined with a favorable hardship balance, and consistency with the public interest. The court found that QBE satisfied these requirements as to specified relief against Allen, Dekker, and Applied.

Confidential information and trade secrets

The court found that QBE was likely to succeed on at least part of its claim that Allen, Dekker, and Applied misappropriated confidential information. Under New York law, a trade-secret claim requires proof that the information was a trade secret and that the defendants used it in violation of an agreement, confidential relationship, or duty, or obtained it improperly.

The court focused on QBE documents containing operational and business strategies, financial data about the aviation division’s historical and projected performance, and certain customer-list information. It found that QBE’s financial data were not shown to be publicly available, had strategic competitive value, and were protected by QBE. The court found that Applied used QBE data in a reinsurance pitch deck and that the information helped Applied obtain a reinsurance contract that strengthened its ability to compete. The court did not need to decide at that stage whether QBE would also prevail on the portions involving all Large Loss Mitigation Plan information or customer lists.

Contract claims against Allen and Dekker

QBE was pursuing arbitration claims against Allen and Dekker for alleged breaches of restrictive covenants in their employment contracts. The court found that QBE was likely to succeed on some of those claims.

The court found that QBE was likely to prove Allen breached his confidentiality obligations by sending certain QBE documents to personal and later Applied email accounts. It found no comparable allegation that Dekker emailed QBE’s confidential information to himself and therefore found QBE was not likely to succeed on that confidentiality claim against Dekker.

The court also found that Allen and Dekker were likely to have breached contractual provisions requiring 90 days’ notice before leaving QBE. They resigned on September 20, 2021, began working for Applied by at least November 1, 2021, and had not completed 90 days after resigning.

The court rejected QBE’s claim that Allen likely breached his employment agreement by helping Applied recruit other QBE aviation employees. It held that the employee non-solicitation provisions were not likely enforceable to prevent at-will employees from coordinating departures or encouraging coworkers to join a rival.

The court reached a different conclusion regarding solicitation of QBE aviation policyholders. It held that QBE was likely to obtain partial enforcement of the customer non-solicitation covenant after excluding overbroad applications. The enforceable relief could cover certain active QBE aviation policyholders whom QBE sought to renew, but not limited categories such as certain clients who came to QBE solely through Dekker’s independent relationships or clients who moved to Applied on their own without prior solicitation. The court found that the covenant could apply even to clients Allen and Dekker had not personally serviced because Applied’s competition was allegedly aided by QBE’s misappropriated confidential information.

Duty of loyalty and other claims

The court found that QBE was likely to succeed on its claims that Allen and Dekker breached duties of loyalty by misappropriating confidential documents and, as to Allen, by meeting with Applied while still working for QBE and misusing QBE information and an expense account. The court found it unnecessary to address QBE’s unfair-competition claims after finding likely success on other claims.

Scope and disposition of the preliminary injunctions

The court found that QBE would suffer irreparable harm if Applied could use QBE’s trade secrets to establish a competing aviation insurance division. It also found that the injunction would not disserve the public interest.

The court granted in part and denied in part QBE’s motions for preliminary injunction. The order barred Allen, Dekker, and Applied, including Applied employees, from possessing documents containing alleged QBE aviation-division trade-secret information taken by former QBE aviation employees. It also barred them from using, disclosing, or sharing those documents or other QBE confidential information in their possession.

The order further barred direct or indirect solicitation, through the earlier of October 1, 2022, or the end of the litigation, of qualifying QBE aviation policyholders who had been QBE policyholders since October 1, 2020 and remained active policyholders when the injunction issued. It also barred discouraging those policyholders from continuing to do business with QBE. The parties were directed to prepare a list of policyholders within the likely enforceable scope. Until that list and the injunction were issued, the temporary restraining orders remained in effect.

The court did not impose the requested $1 million bond. Instead, it agreed with QBE that the existing aggregate $20,000 bond should be shifted from the temporary restraining orders to the preliminary injunctions.

Disposition

The court granted Orcutt and Mulligan’s motion to dismiss QBE’s complaint against them. It granted in part and denied in part QBE’s motions for preliminary injunctions, leaving Allen, Dekker, and Applied subject to the specified restrictions.