QBE Americas, Inc. v. Allen

Background

QBE Americas, Inc., doing business as QBE North America, brought two related actions involving former employees of its aviation-insurance division and Applied Underwriters, Inc., a rival insurance company. The Allen action concerned QBE’s arbitration claims against Steven Allen and Gregory Dekker. The related action concerned QBE’s claims against Kristina Orcutt, Kristina Mulligan, and Applied. QBE alleged that former employees took confidential QBE information and that Allen, Dekker, and Applied used it to establish and compete through Applied’s new aviation-insurance unit.

QBE had previously obtained temporary restraining orders. Those orders barred the defendants from disclosing or using allegedly confidential QBE documents, restricted Allen, Dekker, and Applied from soliciting certain QBE policyholders, and barred them from soliciting QBE aviation-division employees to leave QBE. QBE asked the court to replace those temporary orders with preliminary injunctions. Orcutt and Mulligan separately moved to dismiss for lack of personal jurisdiction.

Personal jurisdiction over Orcutt and Mulligan

The court granted Orcutt and Mulligan’s motion to dismiss under Federal Rule of Civil Procedure 12(b)(2). Neither defendant was domiciled in New York, so New York’s general jurisdiction statute did not apply. The court considered three possible provisions of New York’s long-arm statute.

First, the court rejected QBE’s argument that Allen’s meetings in New York could establish jurisdiction through a conspiracy. The evidence showed that Allen first discussed moving to Applied with Orcutt after his August 12, 2021 New York meeting, and QBE presented no evidence that he had discussed such a plan with Orcutt or Mulligan before either New York meeting. The court therefore found no basis to conclude that they were members of a conspiracy when Allen acted in New York or that he acted there at their direction or on their behalf.

Second, the court rejected jurisdiction based on business transactions in New York. Orcutt and Mulligan’s work-related trips to New York were unrelated to the claims, and QBE did not establish that Allen acted as their agent or under their control.

Third, the court rejected jurisdiction based on alleged tortious acts outside New York that supposedly injured QBE in New York. The court found QBE’s claimed injury too speculative because it depended on a later pitch meeting and the possibility of future lost business. It also found that Orcutt and Mulligan would not reasonably have expected their conduct in Arizona and Georgia to cause injury specifically in New York. The court therefore granted the motion to dismiss QBE’s complaint against Orcutt and Mulligan. The complaint remained effective against Applied, which did not join that motion.

Preliminary injunction standard

A preliminary injunction is an early court order requiring or forbidding conduct while a case continues. QBE had to show irreparable harm, a likelihood of success on at least one claim or sufficiently serious legal questions combined with a hardship balance favoring QBE, and consistency with the public interest. The court concluded that QBE met those requirements as to specified claims against Allen, Dekker, and Applied.

Confidential information and trade secrets

The court found that QBE was likely to succeed on its claim that Allen, Dekker, and Applied misappropriated confidential information, at least for some documents and data. The information included aviation-division business strategies, financial data concerning historical and projected performance, and certain customer lists.

The court was particularly persuaded by evidence that Applied used QBE’s financial data and information from QBE’s Large Loss Mitigation Plan in a reinsurance pitch deck. The court found that QBE’s financial data were not shown to be publicly available, had strategic competitive value, and were protected by QBE. It concluded that QBE was likely to prove that the financial data were trade secrets and that Applied used them to help obtain competitively important reinsurance coverage.

The court did not decide whether QBE would likely prevail on every alleged category of information. It did not need to resolve the trade-secret status of all Large Loss Mitigation Plan information or the customer lists because the financial data were sufficient to support preliminary relief.

Contract claims against Allen and Dekker

QBE asserted that Allen and Dekker breached restrictive covenants in their employment agreements. The court found that QBE was likely to succeed in part.

The court found that QBE was likely to prove that Allen breached his confidentiality obligation because he emailed QBE documents to his personal account and later to his Applied account, and some of those documents contained confidential financial data. The court found that QBE was not likely to succeed on the same claim against Dekker because QBE did not allege that Dekker emailed confidential information to himself.

The court found that QBE was likely to prove that both Allen and Dekker breached their contractual obligation to give 90 days’ notice before leaving. They resigned on September 20, 2021, began working at Applied by at least November 1, 2021, and therefore began that work less than 90 days after resigning.

The court rejected QBE’s claim that Allen and Dekker likely breached their agreements by helping recruit other QBE aviation employees. Under the court’s analysis of New York law, the employee-solicitation restrictions did not protect a legally recognized employer interest merely by preventing coordinated departures or employees from joining a rival. The court therefore denied injunctive relief based on that theory.

The court found that QBE was likely to obtain partial enforcement of the policyholder non-solicitation covenant. The covenant could protect QBE from competition based on Applied’s use of QBE’s confidential information, but it was overbroad in some respects. The court concluded that it should not apply to certain preexisting clients that came to QBE solely through Dekker’s independent relationships or to clients that moved to Applied on their own initiative. It did conclude that the restriction could apply to clients whom Allen and Dekker had not personally serviced, because Applied’s alleged use of QBE’s confidential information could make competition for those clients unfair.

Duty of loyalty and other injunction factors

The court also found that QBE was likely to succeed on its claims that Allen and Dekker breached their duties of loyalty by misappropriating confidential information. QBE also alleged that Allen breached that duty by meeting secretly with Applied while still working for QBE and by using QBE information and an expense account, and that Allen and Dekker breached the duty by beginning work for Applied during their 90-day notice periods.

The court found that QBE would suffer irreparable harm without an injunction because the harm from using trade secrets to launch a competing business would be difficult to measure precisely. It also found that the relief would not harm the public interest.

Disposition and scope of relief

The court granted in part and denied in part QBE’s motions for preliminary injunction. Allen, Dekker, and Applied, including Applied employees, were barred from possessing documents containing alleged trade-secret information taken from QBE by former aviation employees. They also could not use, disclose, or share those documents or other QBE confidential information in their possession.

The court also restricted Allen, Dekker, and Applied from directly or indirectly soliciting or discouraging certain covered QBE aviation-insurance policyholders from doing business with QBE. The restriction applied from the date of the preliminary injunction through the earlier of October 1, 2022, or the end of the litigation. The parties were directed to prepare a list identifying the policyholders within the restriction’s enforceable scope. Until that list and the preliminary injunction were issued, the temporary restraining orders remained in effect.

The court denied QBE’s request to prohibit Allen, Dekker, and Applied from soliciting QBE aviation employees to join Applied. It also approved shifting the existing aggregate $20,000 bond from the temporary restraining orders to the preliminary injunctions rather than requiring the $1 million bond requested by Allen, Dekker, and Applied.