Opinion
24A-PL-260
08-30-2024
Liam Garvey, Appellant-Defendant v. First Merchants Corporation, Appellee-Plaintiff
ATTORNEY FOR APPELLANT Jennifer Schwendener Petrarca, Gleason, Boyle & Izzo, LLC Downers Grove, Illinois ATTORNEYS FOR APPELLEE Scott S. Morrisson Krieg DeVault LLP Carmel, Indiana Nancy Townsend Krieg DeVault LLP Merrillville, Indiana
Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision is not binding precedent for any court and may be cited only for persuasive value or to establish res judicata, collateral estoppel, or law of the case.
Appeal from the Lake Superior Court The Honorable Stephen E. Scheele, Judge Trial Court Cause No. 45D05-2306-PL-000453
ATTORNEY FOR APPELLANT
Jennifer Schwendener
Petrarca, Gleason, Boyle & Izzo, LLC
Downers Grove, Illinois
ATTORNEYS FOR APPELLEE
Scott S. Morrisson
Krieg DeVault LLP
Carmel, Indiana
Nancy Townsend
Krieg DeVault LLP
Merrillville, Indiana
MEMORANDUM DECISION
Felix, Judge.
Statement of the Case
[¶1] Liam Garvey worked for First Merchants Corporation ("FMC") as a financial adviser where he signed a Confidentiality and Non-Solicitation Agreement (the "Agreement"). Garvey left FMC to work for a different financial firm, and he began advising former FMC customers at the new firm. Believing that Garvey was violating the Agreement, FMC filed a complaint and sought a preliminary injunction to enforce the non-solicitation terms of the Agreement. The trial court granted the preliminary injunction. Garvey now appeals, presenting a single issue for our review: Whether the trial court abused its discretion in granting FMC's request for a preliminary injunction.
[¶2] We affirm. Facts and Procedural History
[¶3] Garvey began working as a senior financial advisor for FMC in January 2016. When he started with FMC, Garvey brought clients from his former employer to FMC. While Garvey was employed with FMC, FMC provided Garvey with client referrals, resources to develop and maintain relationships with current clients, and training to enhance his skills as a financial adviser. Garvey took advantage of these resources to maintain the clients he brought to FMC, work with existing FMC customers, and bring new clients to FMC.
[¶4] On August 24, 2021, Garvey executed the Agreement with FMC. Section II.A, one of the non-solicitation provisions of the Agreement, provides:
Employee shall not, at any time during or for a period of one (1) year after the termination of Employee's employment with Employer, whether such termination is voluntary or involuntary and whether initiated by Employer or Employee, directly or indirectly, on Employee's own behalf or for any other person, firm, corporation or other business entity: (1) solicit, seek to obtain, divert or otherwise attempt to take away any of the business of any of Employer's customers; (2) provide services to or accept the business of any of Employer's customers for the types of financial services offered by Employer; or (3) request or advise any of Employer's customers to terminate, reduce, limit or otherwise change their business relationship with Employer. For purposes of this Section II.A., "Employer's customers" shall mean those persons, firms, corporations and other business entities who are customers of Employer at the time of Employee's termination of employment with Employer or who were customers of Employer at any time during the two year period immediately preceding the termination of Employee's employment with Employer, whether or not Employee had direct contact with such customers on behalf of Employer.Appellant's App. Vol. II at 26.
[¶5] On January 3, 2023, Garvey resigned from FMC and began working at AFIN Family Wealth Management, Inc. as a senior financial advisor-the same position he had held at FMC. Shortly after he started working at AFIN, Garvey began advising 36 clients who had been his clients at FMC. The accounts associated with these customers totaled more than $14,000,000 in assets that were previously managed by FMC. On June 29, 2023, FMC filed a complaint, alleging that Garvey had breached Section II.A. of the Agreement and seeking a preliminary injunction to prohibit Garvey from providing financial services in violation of that section.
[¶6] Following a hearing, the trial court granted FMC's preliminary injunction on January 2, 2024. The injunction prohibits Garvey from (1) soliciting FMC customers, (2) providing financial services to FMC customers, and (3) requesting or advising FMC customers to change their relationship with FMC. The injunction remains in effect until January 2, 2025, but applies prospectively, meaning that Garvey can continue advising the 36 former FMC customers who are now with him at AFIN. Additionally, FMC stipulated that the injunction would not apply to any of Garvey's family members who are FMC customers.
Discussion and Decision
Standard of Review
[¶7] Garvey appeals from the trial court's grant of FMC's request for a preliminary injunction. "It is well settled that the grant of a preliminary injunction rests within the sound discretion of the trial court, and our review is limited to whether the court abused that discretion." Members of Med. Licensing Bd. of Ind. v. Planned Parenthood Great Nw., Haw., Ala., Ind., Ky., Inc., 211 N.E.3d 957, 969 (Ind. 2023) (citing Apple Glen Crossing, LLC v. Trademark Retail, Inc., 784 N.E.2d 484, 487 (Ind. 2003)), reh'g denied, 214 N.E.3d 348 (Ind. 2023). To the extent that our analysis requires us to answer legal questions, we review those issues de novo. Id. (citing Heraeus Med., LLC v. Zimmer, Inc., 135 N.E.3d 150, 152 (Ind. 2019)).
[¶8] To obtain a preliminary injunction, the movant must satisfy the following four-part test:
The moving party must demonstrate by a preponderance of the evidence: (1) a reasonable likelihood of success at trial; (2) the remedies at law are inadequate; (3) the threatened injury to the movant outweighs the potential harm to the nonmoving party from the granting of an injunction; and (4) the public interest would not be disserved by granting the requested injunction.Carroll v. Long Tail Corp., 167 N.E.3d 750, 756 (Ind.Ct.App. 2021) (citing Cent. Ind. Podiatry, P.C. v. Krueger, 882 N.E.2d 723, 727 (Ind. 2008)). Garvey contends that FMC failed to demonstrate all four elements. We address each claim in turn.
1. FMC Demonstrated a Reasonable Likelihood of Success at Trial
[¶9] Garvey argues that FMC failed to show a reasonable likelihood of success because (a) the scope of Section II.A in the Agreement is unreasonable, rendering Section II.A. unenforceable; and (b) even if Section II.A. is enforceable, FMC failed to show he violated the Agreement.
a. Section II.A. Is Enforceable
[¶10] Garvey claims that Section II.A. is overbroad and therefore unenforceable. "Noncompetition agreements restrict former employees from using valuable information obtained during their employment-such as trade secrets or confidential client data-to harm their former employers. But because these agreements 'are in restraint of trade,' courts enforce them only if they are reasonable." Heraeus, 135 N.E.3d at 152-53 (quoting Krueger, 882 N.E.2d at 728-29). "These agreements are thus strictly construed against employers." Id. at 153 (citing Krueger, 882 N.E.2d at 729).
[¶11] Garvey asks us to assess the reasonableness of Section II.A. Reasonableness is unique in this context:
"Unlike reasonableness in many other contexts, the reasonableness of a noncompetition agreement is a question of law." Krueger, 882 N.E.2d at 729. "In arguing the reasonableness of a non-competition agreement, the employer must first show that it has a legitimate interest to be protected by the agreement." Id. "The employer also bears the burden of establishing that the agreement is reasonable in scope as to the time, activity, and geographic area restricted." Id.Carroll, 167 N.E.3d at 756. Garvey argues that (i) FMC did not have a legitimate interest to be protected by the Agreement; and (ii) the scope of activities restricted by the Agreement are unreasonable.
i. FMC Has a Legitimate Protectable Interest
[¶12] "A legitimate protectable interest is an advantage possessed by an employer, the use of which by the employee after the end of the employment relationship would make it 'unfair to allow the employee to compete with the former employer.'" Coates v. Heat Wagons, Inc. 942 N.E.2d 905, 913 (Ind.Ct.App. 2011) (quoting MacGill v. Reid, 850 N.E.2d 926, 930 (Ind.Ct.App. 2006). We have held that the good will a company shares with its present customers is a legitimate protectible interest. MacGill, 850 N.E.2d at 930 (quoting Seach v. Richards, Dieterle & Co., 439 N.E.2d 208, 213 (Ind.Ct.App. 1982); Cohoon v. Financial Plans &Strategies, Inc. 760 N.E.2d 190, 194-95 (Ind.Ct.App. 2001). "[T]he advantageous familiarity and personal contact which employees derive from dealing with an employer's customers are elements of an employer's good will...." Carroll, 167 N.E.3d at 756 (internal quotation marks omitted) (quoting Krueger, 882 N.E.2d at 729).
[¶13] Here, the trial court determined that FMC showed it had a legitimate protectible interest in its present customers. Garvey argues that FMC did not have legitimate interest in the former FMC customers who had moved to AFIN because he had been advising some of these customers prior to working for FMC. In essence, Garvey believes FMC does not have a protectible interest in any customer that he brought to FMC. However, Garvey utilized FMC resources to develop and foster these relationships. Garvey used FMC funds to take clients out to restaurants, and FMC paid for Garvey to participate in regular training and education seminars, which helped him provide better services to all his clients. Thus, FMC had a legitimate protectible interest in its customers, regardless of whether Garvey worked with them prior to his employment at FMC.
ii. The Scope of Activities Prohibited by Section II.A. Is Not Unreasonable
[¶14] Garvey claims that the scope of prohibited activities in Section II.A of the Agreement is unreasonable because the definition of "customers" is too broad. Section II.A. defines FMC "customers" as
those persons, firms, corporations and other business entities who are customers of [FMC] at the time of Employee's termination of employment with [FMC] or who were customers of [FMC] at any time during the two year period immediately preceding the termination of Employee's employment with [FMC], whether or not Employee had direct contact with such customers on behalf of [FMC].Appellant's App. Vol. II at 26 (emphasis added).
[¶15] Garvey claims the restrictions in Section II.A are overbroad because they apply to FMC customers that he never advised. He relies on our decision in Clark's Sales and Service, Inc. v. Smith, 4 N.E.3d 772, 781 (Ind.Ct.App. 2014), to support his claim. There, Clark's sought a preliminary injunction to enforce a non-compete agreement it entered with Smith, a former employee. Clark's, 4 N.E.3d at 775. The agreement provided that, for the two years following the termination of his employment with Clark's, Smith could not provide services offered by Clark's or those provided by him on behalf of Clark's. Id. at 781. This restriction applied to any customer of Clark's during Smith's 14-year tenure with the company, regardless of whether Smith had any contact with the customer. Id. We determined that "Clark's attempt to protect a customer base spanning the entire term of Smith's employment is overly broad and unreasonable." Id. at 782. Garvey claims that Section II.A. presents "the exact same scenario" as in Clark's because Section II.A. prohibits Garvey from engaging with all FMC customers. Appellant's Br. at 17. We cannot agree.
[¶16] The trial court and FMC rely on our decision in Carroll v. Long Tail Corp., 167 N.E.3d 750 (Ind.Ct.App. 2021), to distinguish the present case from Clark's. There, Carroll entered a non-solicitation agreement with Long Tail that prohibited him from soliciting any of Long Tail's customers for a period of two years following the termination of his employment. Carroll, 167 N.E.3d at 757. The agreement applied to any customer of Long Tail during the term of Carroll's five-year employment with the company. Id. at 757. We concluded that this restriction applying to an entire customer base over a five-year period was not too broad. Id. at 762-63. However, we note that the evidence showed that Carroll was involved with the entire customer base, id. at 763, so the agreement did not restrict solicitation of customers who never interacted with Carroll.
[¶17] We find our decision in Cohoon v. Financial Plans &Strategies, Inc., 760 N.E.2d 190 (Ind.Ct.App. 2001), instructive in this case. There, Cohoon worked as a financial planner for Financial Plans &Strategies ("FPS") for two years. Cohoon, 760 N.E.2d at 192-93. During his employment, Cohoon consulted with approximately a quarter of FPS's customer base and signed a nonsolicitation agreement. Id. The agreement prohibited Cohoon from soliciting any FPS customer from the year prior to the termination of his employment for a period of two years, regardless of whether he had consulted with the customer. Id. at 195. We determined that this restriction was not overly broad or unreasonable. Id. at 194-95.
[¶18] Here, Garvey worked at FMC for approximately seven years as a financial advisor. Section II.A of the Agreement prohibits Garvey from engaging any FMC customers who were customers within the two years prior to the termination of Garvey's employment, regardless of whether Garvey had contact with the customer. The facts here are more analogous to those in Cohoon and Carrol than they are to the facts of Clark's because of the time restrictions. In Clark's, the customer base spanned 14 years whereas, in Carrol and Cohoon, the customer base spanned only 6 years and 1 year respectively. Thus, we conclude that the restrictions of Section II.A. are not unreasonable regarding its definition of FMC customer.
[¶19] Garvey also claims that the restrictions are too broad because there would be no way for him to identify those FMC customers he had not worked with. The agreement in Clark's was found unreasonable, in part, due to the "impossibility of enforcement." Clark's, N.E.3d at 782. Clark's was a high-end appliance distributor, so the broad definition of "customer" in the non-compete agreement possibly limited Smith from working with someone who purchased an appliance 14 years prior to Smith's termination and never returned to Clark's. Id. at 781. Here, Section II.A. does not create such a difficulty in enforcement. Again, Section II.A. only applies to FMC customers in the two years prior to the termination of Garvey's employment. Also, Garvey testified that, during the onboarding process, he checks the previous financial accounts of prospective clients. Since Garvey could ascertain whether a prospective customer was an FMC customer, it would not be impossible to abide by the restrictions of Section II.A. See id. at 781-82. Thus, we conclude that the restrictions of Section II.A. are not unreasonable or overly broad.
b. Garvey Violated Section II.A.
[¶20] In the alternative, Garvey argues the evidence shows that he did not violate Section II.A. FMC alleged that Garvey violated Section II.A of the agreement, which prohibits Garvey from (1) soliciting FMC customers, (2) providing financial services to FMC customers, and (3) requesting or advising FMC customers to change their relationship with FMC. Garvey claims that FMC failed to demonstrate a reasonable likelihood of success because it did not provide any evidence that he solicited any FMC customers.
[¶21] Although FMC admitted at the hearing that it had no evidence that Garvey had solicited FMC customers after he left FMC, there is sufficient evidence showing Garvey provided financial services to FMC customers and advised them to change their relationship with FMC. In fact, both at trial and on appeal, Garvey admits that he continued working with customers he had advised during the last two years of his employment with FMC. Nevertheless, Garvey argues that these customers should not be "customers" as defined by Section II.A., reiterating his argument that FMC does not have a legitimate protectible interest in any customers that Garvey brought with him to FMC. Garvey recognizes that there is no Indiana caselaw supporting this argument, and he points us to an unpublished opinion decision from a Pennsylvania appellate court, which we find unpersuasive. Section II.A. is clear that "customers" includes all customers, regardless of their use of financial management services and regardless of whether they were clients when Garvey joined FMC. Garvey could have bargained for a narrower definition of "customers" when he entered the Agreement. Therefore, FMC produced evidence showing that Garvey violated Section II.A. and demonstrated a reasonable likelihood of success at trial.
2. Injunctive Relief Is Appropriate Because FMC's Remedies at Law Are Inadequate
[¶22] Next, Garvey claims that injunctive relief is inappropriate. Injunctive relief is unavailable when a breach of contract can be adequately satisfied by money damages. Krueger, 882 N.E.2d at 732. "However, a legal remedy is adequate only when it is 'as plain and complete and adequate-or, in other words, as practical and efficient to the ends of justice and its prompt administration-as the remedy in equity.'" Id. (quoting Washel v. Bryant, 770 N.E.2d 902, 907 (Ind.Ct.App. 2002)). In many circumstances, injunctive relief is the appropriate remedy for a breach of a non-solicitation agreement. Id. at 733; see also Carroll, 167 N.E.3d at 761-63; Robert's Hair Designers, Inc. v. Pearson, 780 N.E.2d 858, 865 (Ind.Ct.App. 2002).
[¶23] Garvey claims that injunctive relief was unnecessary because money damages could have been calculated by determining the lost revenue from the accounts that left FMC to work with Garvey. Even if it was possible to calculate the exact amount diverted from FMC, lost revenue alone fails to show the complete effect when an employee violates a non-solicitation agreement. See Krueger, 882 N.E.2d at 733. For instance, it is possible that FMC could also lose the benefit of referrals or word of mouth exposure from FMC customers who might move from FMC to work with Garvey at AFIN. See id. Additionally, we note that, when Garvey signed the Agreement, he agreed that "a breach of this agreement at any time, including during litigation, will produce severe damage and injury to [FMC], not wholly compensable by money damages." Appellant's App. Vol. II at 27. Thus, we conclude that remedies at law are inadequate and injunctive relief is appropriate.
3. The Threatened Injury to FMC Outweighs Any Possible Harm to Garvey
[¶24] Garvey argues that the trial court erred in granting the injunction in part because it is too harmful to him. Here, injunctive relief would be proper only if the threatened injury to FMC outweighs the potential harm to Garvey. Krueger, 882 N.E.2d at 733. Garvey claims that there was no evidence regarding the possible injury to FMC while alleging that he will suffer "tremendous personal financial loss if an injunction is granted." Appellant's Br. at 23. We cannot agree.
[¶25] First, we note that FMC provided sufficient evidence to demonstrate its possible injury. FMC provided evidence that Garvey had taken dozens of FMC accounts, totaling more than $14,000,000 in assets, from FMC to AFIN. In addition to the lost fees from the accounts, FMC also loses other benefits, such as referrals, that are derived from the relationships with those customers. See Krueger, 882 N.E.2d at 733. Second, there is limited evidence to demonstrate that granting the injunction will cause Garvey significant financial harm. The injunction is prospective, meaning that Garvey is able to maintain the customers and related accounts he has already taken from FMC. Also, Garvey testified that he has developed his own customer base at AFIN beyond the FMC customers who followed him there. In balancing the prospective harms, we conclude that FMC's threatened injury outweighs the possible harm the injunction would cause to Garvey.
4. Granting the Injunction Does Not Disserve the Public Interest
[¶26] Garvey claims that enforcing the Agreement violates public policy. Garvey cites our decision in Mercho-Roushdi-Shoemaker-Dilley Thoraco-Vascular Corp. v. Blatchford, 900 N.E.2d 786 (Ind.Ct.App. 2009), for his claim that enforcing Section II.A. would harm the public. There, we determined that the enforcement of a non-compete agreement for a heart surgeon was against public policy and therefore unenforceable. Blatchford, 900 N.E.2d at 797-99. In Blatchford, multiple doctors testified that, due to a limited number of surgeons in the area, if the non-compete was enforced, patients might not be able to receive emergency surgery in a timely manner. Id. The facts here are distinct from Blatchford. Here, three of Garvey's current customers testified about the importance of Garvey's financial advising services, but the preliminary injunction does not prohibit Garvey from continuing to work with them.
Garvey also points us to a rule issued by the Financial Industry Regulatory Authority ("FINRA"), which is a non-profit that provides tools and regulations for financial brokers-dealers who elect to be members of the organization. The rule prohibits members of FINRA from interfering with a customer's request to transfer accounts. Here, the trial court correctly concluded that this rule is inapplicable in this case because FMC is not a member of FINRA. The only evidence Garvey provides to demonstrate that FMC is a member of FINRA is deposition testimony from FMC's representative Brett Fisher where he incorrectly testified that FMC was a member of FINRA. After receiving a copy of his deposition testimony, Fisher edited the deposition to correct his misstatement, signed the corrected deposition, and sent it to Garvey. Fisher later testified that FMC is not a member of FINRA. Thus, we conclude the trial court correctly determined that FINRA rules do not apply to FMC.
Additionally, any prospective customers prohibited from working with Garvey going forward are free to work with Garvey after the injunction's one-year time limitation has passed, and Garvey provided no evidence that there is an insufficient number of available financial advisers. Thus, Garvey has failed to show that the restrictions in Section II.A. are against public policy. See id.
Conclusion
[¶27] The trial court did not err in determining that FMC showed (1) a reasonable likelihood of success at trial; (2) the remedies at law are inadequate; (3) the threatened injury to FMC outweighs the potential harm to Garvey; and (4) the public interest would not be disserved by granting the requested injunction. We conclude that the trial court did not abuse its discretion in granting FMC's request for a preliminary injunction.
[¶28] Affirmed.
Riley, J., and Kenworthy, J., concur.