A federal district court in Arkansas has ruled that Arthur J. Gallagher’s non-compete provision for its agents and consultants is valid, after the clause was brought into question by a lawsuit.
Jeff Goff had agreed to work for Gallagher after the company acquired a material portion of Hagan Newkirk Financial Services – an insurance brokerage firm that Goff owned equity in. The transaction also included a separate employment agreement, which stipulated that Goff would be hired as a senior benefits consultant with Gallagher, and that he would not compete with the company for a period of five years within a 25-mile radius of any client Gallagher purchased from him.
Goff served Gallagher for over three years. However, when he left, he emailed himself a copy of his entire contact list. For this, Gallagher sought injunctive relief – to which Goff responded by moving for summary judgment contending that the noncompetition covenant should be invalidated.
According to Judge Robert T. Dawson of the US District Court for the Western District of Arkansas, while non-compete provisions are typically disfavored in employment contracts, they receive more acceptance where the sale of business is involved.
The court determined that the non-compete provision was valid. The clause aims to prevent unfair competition in the business areas where Gallagher operates, and is designed to prevent competition with the clients it purchased, the court added.
The federal court also said that both the geographic restriction and the five-year duration were reasonable. Five years may seem like a lot of time, but the court reasoned that it is designed to protect Gallagher from unfair competition by Goff – particularly when Goff has expertise of the local market and had previously worked with the clients, the court said.
Bloomberg reported that Goff was represented by Brad Hendricks Law Firm; Gallagher was represented by Ogletree Deakins Nash Smoak & Stewart.
