257 F. Supp. 3d 892
S.D. Ohio2017Background
- Horter Investment Management (RIA) required IARs to sign an independent contractor agreement; in March 2014 Cutter signed a bespoke IAR Agreement with additional restrictive covenants (noncompete and nonsolicitation), tied to his role in an "ELITE" advisor group and his marketing company, Radical.
- Cutter and fellow IAR Pete Lang left Horter in Feb 2015 and registered with a newly formed RIA, Precision/PCM, whose formation and early marketing involved Cutter, Borer, and Radical; 24 Horter IARs subsequently moved to PCM (four were ELITE advisors).
- Horter sued Cutter and Borer/PCM asserting breach of contract (against Cutter), breach of fiduciary duty (against Cutter), tortious interference with contract (against Borer/PCM), tortious interference with business relations (against all defendants), and seeking injunctive relief.
- Defendants moved for summary judgment. Central legal question: enforceability and scope of Cutter’s 2014 restrictive covenants and whether defendants caused breaches or improperly interfered with Horter’s IAR relationships.
- The court modified several overbroad covenant clauses (adding a 12‑month temporal limit and definitional/geographic limits) and denied summary judgment on most claims, granting only Cutter’s motion on the fiduciary duty claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of 2014 restrictive covenants (consideration & reasonableness) | Covenants supported by continued at‑will relationship and legitimate interest in protecting ELITE group, Radical ties, and Horter’s business goodwill | Covenants lack consideration (failed referral fee promise) and are overbroad/unenforceable against independent contractors | Court: reasonable juror could find continued at‑will relationship provided consideration; covenants were overbroad but court narrowly reformed them (12 months; defined scope) and found them enforceable as modified |
| Breach of contract — did Cutter establish or help create PCM / solicit IARs in breach? | Cutter/associated entities (Radical) and Borer/PCM coordinated PCM formation and recruitment; documentary and testimonial evidence creates genuine factual disputes | Defendants deny that Cutter established PCM or solicited IARs; corporate formation documents do not list Cutter as owner | Court: denied summary judgment; sufficient evidence to create triable issues whether Cutter "established" or "set up" PCM or solicited Horter IARs in breach of modified covenants |
| Breach of fiduciary duty (Cutter) | Horter: Cutter entrusted to develop ELITE program and market Radical to Horter advisors, creating a position of special confidence | Cutter: relationship was at‑will/contractual and did not create fiduciary obligations beyond contract; no primary‑benefit obligation shown | Court: summary judgment for Cutter — Horter failed to show mutual, special fiduciary relationship or that Cutter agreed to act primarily for Horter’s benefit |
| Tortious interference (Borer/PCM and Cutter) | Defendants intentionally procured breaches/terminations of Horter’s contractual and at‑will IAR relationships (PCM formation, recruitment, Atlanta conference) causing damages | Defendants contend they competed fairly, lacked wrongful means, and that conduct was proper business competition; dispute causation and damages | Court: denied summary judgment for defendants; triable issues exist as to knowledge, intent, wrongful means, causation, and damages (including fair‑competition defense unresolved) |
Key Cases Cited
- Lake Land Emp. Group of Akron, LLC v. Columber, 101 Ohio St.3d 242, 804 N.E.2d 27 (Ohio 2004) (continued at‑will employment can provide consideration for post‑employment restrictive covenants)
- Raimonde v. Van Vlerah, 42 Ohio St.2d 21, 325 N.E.2d 544 (Ohio 1975) (adopted reasonableness test for noncompetition clauses: protection, hardship, public injury)
- Basicomputer Corp. v. Scott, 973 F.2d 507 (6th Cir. 1992) (factors for assessing reasonableness of covenants and customer/contact considerations)
- Fred Siegel Co. L.P.A. v. Arter & Hadden, 85 Ohio St.3d 171, 707 N.E.2d 853 (Ohio 1999) (elements and Restatement factors for tortious interference with contract)
- UZ Engineered Prod. Co. v. Midwest Motor Supply Co., 147 Ohio App.3d 382, 770 N.E.2d 1068 (Ohio Ct. App. 2001) (legitimate employer interests include protecting relationships and use of skills/confidential info)
- Cintas Corp. v. Perry, 517 F.3d 459 (7th Cir. 2008) (permitting reformation/modification of overbroad restrictive covenants to effect parties’ intent)