United States District Court, D. New Hampshire
HCC Specialty Underwriters, Inc.
John Woodbury, et al.
MCCAFFERTY, UNITED STATES DISTRICT JUDGE
HCC Specialty Underwriters, Inc. (“HCC”) brings
suit against defendant John Woodbury, a former employee of
HCC, and defendant Buttine Underwriters Agency, LLC d/b/a
Prize and Promotion Insurance Services (“PPI”).
PPI is both Woodbury's current employer and a competitor
of HCC. HCC's claims arise out of Woodbury's alleged
breaches of noncompete and nondisclosure agreements. HCC
seeks a preliminary injunction requiring both defendants to
abide by the terms of Woodbury's noncompete and
nondisclosure restrictions. Defendants object. The court held
a two-day evidentiary hearing on HCC's motion. For the
following reasons, HCC's motion is granted in part and
denied in part.
obtain a preliminary injunction, a plaintiff “must
establish that he is likely to succeed on the merits, that he
is likely to suffer irreparable harm in the absence of
preliminary relief, that the balance of equities tips in his
favor, and that an injunction is in the public
interest.” Bruns v. Mayhew, 750 F.3d 61, 65
(1st Cir. 2014) (quoting Winter v. Nat. Res. Def.
Council, Inc., 555 U.S. 7, 20 (2008)). The first factor,
likelihood of success, is “[t]he sine qua non of [the]
four-part inquiry, ” New Comm Wireless Servs., Inc.
v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir. 2002), and
the second factor, irreparable harm, also “constitutes
a necessary threshold showing for an award of preliminary
injunctive relief, ” González-Droz v.
González-Colon, 573 F.3d 75, 79 (1st Cir. 2009).
The third factor focuses upon the “hardship to the
movant if an injunction does not issue as contrasted with the
hardship to the nonmovant if it does.”
Rosario-Urdaz v. Rivera-Hernandez, 350 F.3d 219, 221
(1st Cir. 2003). The final factor concerns “the effect,
if any, that an injunction (or the withholding of one) may
have on the public interest.” Corp. Techs., Inc. v.
Harnett, 731 F.3d 6, 9 (1st Cir. 2013).
movant bears the burden of establishing entitlement to
preliminary injunctive relief. See Esso Standard
Oil Co. (Puerto Rico) v. Monroig-Zayas, 445 F.3d 13, 18
(1st Cir. 2006).
delving into the evidence presented at the hearing, some
context will be helpful. The court therefore briefly
discusses the industry in which the parties operate, and
HCC's general allegations against defendants.
Specialty Insurance Industry
HCC and PPI are providers of specialized insurance products.
Relevant here are three types of insurance: prize indemnity,
contractual bonus, and over-redemption. Prize indemnity
insurance provides insurance for promotions where prizes are
distributed upon the occurrence of a specified contingency.
Examples include a half-court shot promotion at a basketball
game and a “spin-the-wheel” promotion at a
retailer. Contractual bonus insurance exists for contracts
under which an athlete or coach receives an incentive payment
if he or she meets a certain goal. Thus, if a professional
basketball player is contractually entitled to receive a
bonus payment for winning a league championship, contractual
bonus insurance covers that risk. Over-redemption insurance
protects against the risk that too many consumers will redeem
a coupon or discount issued by a business.
are a No. of different actors within the industry. Insurance
companies, like HCC and PPI, analyze risks and underwrite
policies. The insured can be the entity seeking to cover a
particular risk, like a store running a prize promotion for
customers. In the case of prize indemnity insurance, the
insured can also be a third-party promotional agency, which
runs the promotion on behalf of a business. There are also
insurance brokers, who act as intermediaries between entities
seeking insurance and the insurance companies providing such
insurance. Finally, there are reinsurers, who agree to cover
some of the risk underwritten by an insurance company in
exchange for a portion of the premium paid by the insured.
The arrangement between an insurance company and a reinsurer
may be negotiated as to each individual policy, or the
parties may have a standing agreement that allows the
insurance company to bind the reinsurer to a certain No. of
policies without requiring additional approval.
issued by insurance companies in this industry are generally
nonrenewable. That is, unlike other forms of insurance,
clients come to insurance companies to cover specific risks,
and the policies do not automatically renew once the policy
term has elapsed. When combined with the fact that promotions
tend to occur on an irregular basis, the result is that the
business of these insurance companies is not consistent, but
cyclical. Still, the record shows that brokers, promotional
agencies, and businesses tend to develop relationships with
certain insurance companies, such that insurance companies
have an expectation that a portion of their client base will
return when a particular risk or promotion needs to be
HCC's Allegations against Defendants
worked for HCC, or one of its predecessors,  from 1992 to June
2016. HCC alleges that, in that time, Woodbury signed two
agreements that restrict his ability to work for PPI. In
1996, Woodbury executed the first agreement with HCC (the
“1996 Agreement”). The 1996 Agreement imposes two
kinds of restrictions on Woodbury.
first relates to competition (the “noncompete
restrictions” or “noncompete obligations”).
Woodbury agreed that, during his employment and for a period
of two years following his termination, he would not engage
in certain types of competitive activities:
[T]he Employee shall not . . .
(i) divert or attempt to divert business from the Employer
including but not limited to soliciting, attempting to
solicit or accepting business from any policy holder, or
person or entity underwritten by the employer or any of the
employer's clients; . . .
(iii) interfere in any material respect with any business
relationship between the Employer and any other person; or
(iv) render any services as an officer, director, [or]
employee . . . to . . . any person who is engaged in
activities which, if performed by the Employee, would violate
Doc. no. 82-1 at 4 of 5. The Agreement goes on to state that
“[t]he foregoing restrictions are not intended to
restrict the Employee in securing employment in any other
insurance-related business endeavor.” Id.
second restriction relates to nondisclosure and
confidentiality (the “nondisclosure restrictions”
or “nondisclosure obligations”). Woodbury agreed
that he would not “at any time during or after the date
of this Agreement” disclose or use HCC's
confidential information without authorization. Id.
at 3 of 5. Confidential information is defined to include
“business strategies; customer lists; the particular
demands and requirements of customers and insureds generally;
client insurance, financial and commercial data including
underwriting information and guidelines, policy language and
premium data; and the business and financial records of the
agreed that, with respect to either set of restrictions,
“remedies at law for any breach” would be
inadequate and that “temporary or permanent injunctive
relief may be granted . . . without the necessity of proof of
actual damages.” Id. at 4 of 5. The Agreement
recites as consideration that Woodbury could receive
discretionary bonuses during his employment, and would be
entitled to receive a mandatory severance payment upon
termination of his employment. The severance payment would
increase depending on the length of Woodbury's
employment, up to a cap of $20, 000. The 1996 Agreement is
governed by Massachusetts law.
alleges that Woodbury later reaffirmed these restrictions in
a second agreement. Specifically, in October 2001, the parent
company of HCC (HCC Insurance Holdings, Inc.) entered into a
security purchase agreement with a predecessor of HCC (ASU
International), whereby HCC's parent company acquired the
stock of HCC's predecessor. Woodbury executed a release
as part of the acquisition (the “2001 Release”).
Under the 2001 Release, Woodbury confirmed his obligations
under “any applicable nondisclosure [or]
non-competition” agreements, and further agreed that
the provisions of such agreements would be
“specifically incorporated” into the Release.
Doc. no. 46-1 at 5 of 6. The consideration recited in the
2001 Release is the payments Woodbury would receive in
connection with the acquisition, which ultimately exceeded
$132, 000. The 2001 Release is governed by Delaware
present litigation arises from Woodbury's decision to
leave HCC in June 2016. Immediately after leaving HCC,
Woodbury joined Buttine Underwriters Agency
(“Buttine”), which created PPI-a new division
within the company-to provide insurance in the three
categories of insurance that Woodbury specialized in while at
HCC: prize indemnity, contractual bonus, and over-redemption.
HCC contends that since joining PPI, Woodbury has repeatedly
violated both the noncompete and nondisclosure covenants in
his agreements. Regarding competition, HCC alleges that
Woodbury has solicited businesses, promotional agencies, and
brokers that had active business relationships with
In some cases, Woodbury succeeded in enticing entities to
work with PPI over HCC. Regarding confidentiality, HCC
alleges that Woodbury has used HCC's confidential
information without authorization, by copying HCC policy
language for PPI's policies, and by using his knowledge
of HCC's pricing practices to undercut HCC's prices.
HCC further alleges that PPI has encouraged Woodbury to
violate his noncompete and nondisclosure restrictions.
amended complaint, HCC raises claims for specific performance
of the 1996 Agreement and 2001 Release (Count I); breach of
the 1996 Agreement by Woodbury (Count II); breach of the 2001
Release by Woodbury (Count III); misappropriation of trade
secrets by both defendants (Count IV); tortious interference
with the 1996 Agreement and 2001 Release by PPI (Count V); a
declaratory judgment that the 1996 Agreement and 2001 Release
are valid and enforceable (Count VI); and a claim against
both defendants under the New Hampshire Consumer Protection
Act (Count VII).
Preliminary Injunction Hearing
court now summarizes the relevant testimony and evidence
presented by the parties at the preliminary injunction
hearing. The court organizes the testimony and evidence
chronologically, by witness.
Defendant John Woodbury
began working at HCC in 1992, after serving as an intern at
the company. Woodbury described his tenure at HCC as one
involving a steady increase in responsibilities, authority,
and pay. He first held the position of risk analyst. Woodbury
described the position as involving “special
projects” as well as administrative work. He would
create spreadsheets, conduct research on different risks,
perform data entry, and answer phones. By 1994, he was
working in the prize indemnity market, preparing and
proofreading policies, conducting research, and coordinating
with reinsurers on policies.
became an account manager in 1995. As an account manager,
Woodbury's principal tasks were to manage client
relationships and analyze risks. Generally, Woodbury
testified that his basic duties and expectations over the
next two decades remained the same-assess risks, manage
clients, and, to a lesser degree, market the company-but that
the scope and autonomy of his duties increased and
“evolved” over time. That is, as he was promoted,
he had more autonomy in assessing risks, issuing policies,
managing accounts, and generating business. In addition, his
responsibility to generate business became a more central
part of his job over time.
hearing, Woodbury downplayed the nature and extent of his
responsibilities as an account manager in 1996. He asserted
that generating business was not a significant duty- rather,
the company handled the marketing-and that his
responsibilities were more circumscribed and subject to
oversight than in later years. The evidence supporting
Woodbury's claim is mixed. On the one hand, there is
evidence that, in September 1996, his responsibilities of
preparing quotes, issuing policies, and conducting marketing
in the three relevant product categories required the
approval of superiors. But there is also evidence that, by
February 1997, Woodbury was managing the prize indemnity,
contractual bonus, and over-redemption division,
administering hundreds of accounts, creating new promotional
ideas, and assessing complex risks.
of the exact time at which he became involved in generating
business, Woodbury testified that HCC took active steps to
assist Woodbury in marketing the company. During
Woodbury's tenure, HCC hired a marketing consultant,
joined a promotional marketing association, and reimbursed
Woodbury for expenses associated with cultivating and
maintaining client relationships-for example, by reimbursing
Woodbury for the cost of dinners with HCC clients. Woodbury
came to develop strong relationships with businesses,
brokers, and promotional agencies, some of whom would run the
same promotion, and obtain the same insurance from HCC, year
after year. In Woodbury's words, these clients simply
“liked working with me, ” which Woodbury
attributed to his professionalism and honesty. As a result,
Woodbury had intimate knowledge of certain repeat promotions.
2001, HCC promoted Woodbury to senior vice president, the
position he would hold until his resignation. In that role,
Woodbury came to oversee his division, handle more and larger
accounts, and underwrite policies on his own authority.
respect to the 2001 Release, Woodbury testified that, while
he does not recall executing it, he does not dispute its
authenticity. He testified that he did receive payments as a
result of the 2001 acquisition of ASU International by
HCC's parent company, totaling more than $200, 000 over
the course of several years. In addition to those payments,
Woodbury also executed two stock option agreements with
HCC's parent company in 2001 and 2007. These stock option
agreements contained clauses requiring Woodbury to forfeit
any gains he made from the agreements if he competed against,
or misused the confidential information of, HCC within one
year of his termination.
in January 2016, Woodbury discussed the possibility of moving
to Buttine with Rejean Audet, one of Buttine's
principals. They had multiple meetings, the exact
content of which Woodbury could not recall at the hearing.
Documentary evidence, such as email correspondence, sheds
some light on the content of those discussions. At a meeting
in late January, Woodbury disclosed details of his work at
HCC, including (1) the percentage of clients he had that were
businesses and the percentage that were intermediaries like
promotional agencies and brokers; (2) his expectation for the
amount of business he could underwrite at Buttine; (3) the
fact that he was the only point person at HCC for a
substantial portion of his clients; and (4) his overall
“book of business” at HCC.
was also evidence that, during these negotiations, Woodbury
pitched his potential move to Buttine as one where Buttine
was essentially buying a “book of business, ”
which Woodbury estimated could amount to $3-$5 million in
gross premiums. At the hearing, Woodbury narrowly defined a
“book of business” to mean “business that
would want to work with me.” He testified that he would
not be taking clients away from HCC once he sought out their
business for Buttine, because those clients were free to
choose their insurer.
of Woodbury's negotiations with Audet, Buttine hired an
attorney to examine the 1996 Agreement. Woodbury testified
that, despite his belief that the 1996 Agreement was not
enforceable, he was concerned that HCC would attempt to
enforce it. Prior to resigning from HCC, Woodbury reviewed
his personnel file; neither the 2001 Release nor the stock
option agreements were in that file.
documentary evidence suggests that, by May 2016, Woodbury had
agreed to join Buttine and run PPI. Woodbury testified that
his final employment agreement with PPI tied his compensation
to the revenue he generated. Woodbury agreed that, by joining
PPI, he would “probably be competing” with HCC.
morning of June 30, 2016, Woodbury delivered a resignation
letter to William Hubbard, chairman of HCC, and notified
Hubbard that he accepted a position at Buttine. Woodbury
intended for his resignation to be effective as of July 8,
2016. After learning of Woodbury's resignation, Matthew
Overlan, then HCC's chief operating officer, sent two
letters to him: one informed Woodbury that his final day
would be June 30, not July 8; the other reminded Woodbury of
his noncompete and nondisclosure obligations under the 1996
also deposited approximately $12, 000 into Woodbury's
bank account. Upon receiving the payment, Woodbury wrote
a letter dated July 7, 2016 to Overlan, explaining that he
viewed the 1996 Agreement as unenforceable. Woodbury also
informed Overlan that he had returned all HCC documents and
files in his possession, and that he would honor his
confidentiality obligations. Believing the $12, 000 deposit
to be the severance payment to which he was entitled under
the 1996 Agreement, Woodbury included a $20, 000 check with
his letter. Woodbury explained to Overlan that, in light of
the unenforceability of the 1996 Agreement, it would be wrong
to accept the deposit.
began working at Buttine on July 1. Buttine officially
launched PPI in mid-July, and issued a press release
announcing the launch. The press release states that PPI
would be led by Woodbury.
testified that, in mid-August 2016, he began contacting
businesses with whom he had worked while at HCC. The record
is replete with evidence that Woodbury actively solicited
businesses, brokers, and promotional agencies that had
longstanding relationships with HCC. Woodbury testified that
he went on to write policies for some of these entities.
Nevertheless, Woodbury denied that, in doing so, he had
diverted business from HCC.
denied using any of HCC's confidential information while
at PPI. The evidence relating to Woodbury's use of
confidential information is largely circumstantial. There is
evidence that Woodbury retained company information after his
resignation. For example, Woodbury conceded that he had
compiled a list of email addresses of HCC clients prior to
his resignation. He also took cell phone pictures of emails
regarding a particular HCC promotion. And, on the day before
tendering his resignation, Woodbury took a picture of
HCC's 2016 budget with his cell phone. Woodbury could not
explain why he took the picture; he conceded that it was not
for “HCC business purposes.” Finally, Woodbury
acknowledged that other HCC information remained on his
personal email account and wife's computer even after he
left HCC-including communications with HCC clients and a 2011
prize indemnity policy-but he claims this was unintentional.
piece of compelling circumstantial evidence that Woodbury
used confidential information is worth highlighting. Woodbury
acknowledged that, in May 2016, he informed HCC executives
that his division had incorporated a rate increase with
respect to some “hole-in-one” promotions. After
joining PPI, Woodbury was able to convince some of those
promotions to work with PPI. This circumstantial evidence
suggests that Woodbury was able to use his knowledge of
HCC's pricing to compete against HCC for those clients.
professed to have a narrow view of what constitutes
confidential information. Woodbury testified that he did not
believe that quotes, pricing, and client lists were
necessarily confidential, because “a lot of information
is . . . publicly known and publicly transferred, ” and
because some of that information, like an insurance policy,
is disseminated to the customer. Nevertheless, Woodbury
conceded that he does not generally share price quotes,
client lists, policy terms, premium amounts, or budget
information to competitors, and he did not dispute that the
1996 Agreement broadly defined “confidential
information” to include such materials.
hearing, Woodbury described the specialty insurance market in
which he worked while at HCC. The market is national, rather
than regional, and Woodbury would seek out business
throughout the country. He testified that his general task
was to assess risks and manage client relationships. Some
clients would run annual promotions and seek out insurance
from HCC on a regular basis. When asked who HCC's client
would be in a situation where a promotional agency is acting
on behalf of a business to obtain insurance, Woodbury
responded that “neither of them would be
considered” HCC's client. He went on to explain
that the business would be the promotional agency's
customer, and the promotional agency “acts like a
broker and . . . can go to other insurers if they choose
the end of his testimony, Woodbury emphasized that if he were
precluded from working with insurance brokers, it would not
only severely harm his business, it would limit brokers'
ability to select the insurance executive whose judgment they
Rejean Audet (President of Buttine)
Audet is a partner and president of Buttine. Prior to joining
Buttine, Audet worked at HCC. Audet worked at HCC for four
years; he started in 1999 and left in 2003.
came to know Woodbury while working at HCC. Audet testified
that, in late 2015, he reached out to Woodbury about joining
Buttine. That discussion progressed such that, by January
2016, Woodbury had sent Buttine a copy of the 1996 Agreement
and Buttine had received evaluations from attorneys regarding
the enforceability and effect of the Agreement. Audet
testified that he was not aware of the 2001 Release when
Buttine was evaluating whether to hire Woodbury.
email sent by Audet to Buttine's other partners shows
that Buttine intended to hire Woodbury as of January 22. In
the email, Audet sets out his plan for Woodbury's hiring:
Buttine would establish a new division providing prize
indemnity, over redemption, and contractual bonus insurance;
Buttine would provide Woodbury with administrative,
licensing, and legal support; and both Buttine and Woodbury
would share in the profits of the business Woodbury
developed. One reasonable inference from this email is that,
from the beginning, Audet's recruitment of Woodbury was
premised on the idea that Woodbury's role would be to
bring HCC's clients to Buttine. Audet did not dispute
that the book of business Woodbury would bring to Buttine
would be the business that he had developed while at HCC.
Audet described Woodbury as one of the “two or three
biggest names” in this niche market, and he conceded
that his intent was that Woodbury would bring the business
that he had developed to Buttine.
email chain between Woodbury and Audet shows that, in May
2016, Buttine and Woodbury reached a final agreement on the
terms of Woodbury's employment. In the email chain,
Woodbury states that there would be “no
guarantees” regarding the amount of business he could
generate “if HCC is playing hardball and
undercutting.” Audet testified that he understood
Woodbury's point to be that PPI would be in competition
with HCC. Audet also testified that he knew Woodbury was
contacting brokers, businesses, and promotional agencies that
had relationships with HCC in order to obtain their business
testified that, to his knowledge, Woodbury did not bring any
confidential information to HCC or use any of HCC's
confidential information while at PPI. Audet conceded,
however, that during their negotiations he asked Woodbury
about the financial results Woodbury had obtained during the
prior three years at HCC.
respect to HCC's allegation that Woodbury had compiled
and taken a list of HCC customers, Audet stated that PPI
obtained information about potential customers through
publicly available sources. Audet believed Woodbury was using
that publicly-sourced information to initiate contact with
potential customers. Audet also testified that the identities
of the brokers and promotional agencies that bring business
to insurance companies are “not a secret” in the
industry. With respect to HCC's allegations that Woodbury
had taken and misused confidential information relating to
the terms and structure of various promotions, Audet
testified that the broker or promotional agency provides that
information to the insurance company.
Robin Lang (Vice President of HCC)
Lang is the vice president of HCC. She has worked at HCC for
almost fifteen years, and currently works in the promotions
division, which covers prize indemnity, over redemption, and
contractual bonus insurance. She worked with Woodbury on a
daily basis from 2005 until his resignation.
testified about the business of the promotions division
generally. She stated that HCC's clients include brokers,
promotional agencies, and businesses holding promotions. Lang
explained that, although insurance policies in the promotions
division are generally nonrenewable, HCC develops ongoing
relationships with brokers and promotional agencies which
creates a likelihood of repeat business. Lang stated that HCC
continues to have “ongoing discussions” with
brokers and promotional agencies even when no active policies
are in place. Lang testified that, while at HCC, Woodbury was
the primary contact for most of the brokers, promotional
agencies, and other insureds with whom HCC did business.
also discussed the effect that Woodbury's move to PPI has
had on HCC. In January 2017, Lang first discovered that
Woodbury had diverted an HCC client to PPI. Specifically,
Lang testified that when she contacted Creative Promotional
Solutions, Inc.,  which had previously obtained insurance
through HCC for one of its promotions, the agency informed
her that it intended to obtain insurance through Woodbury
instead. Then, in February, Lang learned that Woodbury was
attempting to take the business of another longstanding
promotion by undercutting HCC's pricing. Ultimately, HCC
was able to retain that client by reducing its pricing for
the promotion. Finally, in March, Creative Promotional
Solutions informed HCC that it would be obtaining insurance
for a second promotion through Woodbury.
testified that Woodbury's and PPI's actions have had
an impact on HCC's business for all three relevant
insurance products, and that HCC has lost a No. of
significant clients to Woodbury and PPI.
Matthew Overlan (CEO of HCC)
Overlan is HCC's CEO. He summarized the corporate history
of HCC. Originally, HCC was named American Sports
Underwriters Incorporated. It then changed its name twice, to
American Specialty ...