Arthur J. Gallagher & Company v. Clayton Ba
703 F.3d 284
5th Cir.2012Background
- Diversity suit for breach of restrictive employment agreements under Louisiana law.
- GBSI, Gallagher Benefits Services, Inc., purchased Babcock Consulting, Inc. in 2003; Babcock signed a non-competition and other covenants.
- Employees Babcock, Alexi, Hardouin, and Copeland signed restrictive covenants; they later left to Ellsworth, a Gallagher competitor.
- Addendum II and Exhibit A listed 64 parishes; district court later limited application to nine parishes where Gallagher provided services.
- Jury awarded $1.2 million damages and $310,000 in fees; on appeal, court affirmed verdict on breach but vacated damages and fees and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of non-competition and related covenants | Gallagher's covenants are valid under La. R.S. 23:921. | Covenants overbroad or improperly combined (non-compete + non-solicit). | Non-competition and related covenants are enforceable under 23:921; not void for combination. |
| Geographic scope of the covenants | Addendum II/Exhibit A validly list all parishes; severability allows narrowing to nine parishes. | Listing all parishes renders covenants overbroad; geographic scope should be limited to parishes where Gallagher conducted similar business. | Geographic scope upheld as to nine parishes; severability permitted excision of non-relevant parishes. |
| Directed verdict on breach of contract | Defendants admitted working on the same accounts for Ellsworth after departure; reasonable jury could find breach. | Factual disputes on breach; directed verdict inappropriate. | Directed verdict affirmed on breach; Breach established by admitted conduct. |
| Damages admissibility and calculation | Caraher’s lost profits methodology admissible; projections based on past performance are proper. | Damages calculations rely on an irrelevant or speculative theory (lost clients not followed). | Damages vacated due to error in Caraher's testimony; remand for new damages calculation. |
| Attorneys’ fees on appeal | Partial success supports some award of fees on appeal. | No clear entitlement to full appellate fees without final outcome. | Vacated pending remand; reassess on district court. |
Key Cases Cited
- Team Envtl. Servs., Inc. v. Addison, 2 F.3d 124 (5th Cir. 1993) (contract enforceability; standard of review for contract ambiguity)
- Aon Risk Servs. of La., Inc. v. Ryan, 807 So.2d 1058 (La. Ct. App. 2002) (statutory scope of RS 23:921(C) and geographic limitations)
- Green Clinic, L.L.C. v. Finley, 30 So.3d 1094 (La. Ct. App. 2010) (narrow construction of noncompete; legislative amendments to RS 23:921)
- Mayo v. La. Ct. App., 38 So.3d 944 (La. Ct. App. 2010) (evidence and damages standards in lost profits cases)