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FILED: NASSAU COUNTY CLERK 08/15/2018 02:50 PM INDEX NO. 609073/2016
NYSCEF DOC. NO. 93 RECEIVED NYSCEF: 08/15/2018
EXHIBIT J
FILED: NASSAU COUNTY CLERK 08/15/2018
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STATE OF NEW YORK
SUPREME COURT :: NASSAU COUNTY
__________________________________________
SCOTTISH AMERICAN CAPITAL, LLC and
SCOTTISH AMERICAN INSURANCE GENERAL
AGENCY, INC.,
Plaintiffs, FIRST AMENDED
VERIFIED COMPLAINT
-vs-
Index No. 609073/2016
ARTHUR GOLANN, NORTHEAST COVERAGES
INC.,
Defendants.
___________________________________________
Plaintiffs, Scottish American Capital, LLC and Scottish American Insurance General
Agency, Inc., by and through their undersigned counsel Woods Oviatt Gilman LLP, for their
First Amended Verified Complaint against Defendants, state as follows:
THE PARTIES
1. Scottish American Capital, LLC is, and was at all times relevant herein, a
company operating as a managing general agent (MGA) and brokerage in the insurance industry
("SAC").
2. SAC is a is a limited liability company organized and existing under the laws of
the State of Delaware and authorized to do business in New York, with a principal place of
business located at 2 Teleport Drive, Corporate Commons, Staten Island, New York 10311, in
the County of Richmond.
3. Scottish American Insurance General Agency, Inc. (formerly known as
Buckingham Badler Associates, Inc.) is a corporation incorporated and existing under the laws of
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the State of New York with a principal place of business located at 2 Teleport Drive, Corporate
Commons, Staten Island, New York 10311, in the County of Richmond ("BBA").
4. BBA is a subsidiary of SAC and a managing general agent and wholesaler in the
insurance industry.
5. Upon information and belief, Arthur Golann is, and was at all times relevant
herein, an individual residing at 353 Central Avenue, Deer Park, New York 11729, in the County
of Suffolk ("Golann").
6. Upon information and belief, Northeast Coverages Inc. is a corporation
incorporated and existing under the laws of the State of New York with a principal place of
business located at 1325 Franklin Ave., Suite 375, Garden City, New York 11530 ("Northeast").
7. Upon information and belief, Northeast is, and was at all times relevant herein, a
company operating as a managing general agent (MGA) and brokerage in the insurance industry.
8. Northeast is a direct competitor of SAC.
BACKGROUND
9. The insurance industry is an extremely competitive and sales-driven business.
10. Insurance wholesalers/MGAs act as intermediaries between insurance brokers and
insurance carriers. The actual insured client is sold the insurance by the brokerage.
11. Because insurance products are largely commoditized, the value of an insurance
MGA/wholesale business is largely predicated upon its goodwill and knowledge of actual
insurance accounts.
12. Managing general agent brokerages, such as SAC and BBA, are able to
underwrite and bind policies (in whole or in part) on behalf of insurance producers.
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13. Particularly in the case of MGAs, brokerages compete on service level and
goodwill is accumulated through years of working closely with clients to understand the specific
business drivers that create insurance needs.
14. This knowledge of clients' affairs is essential to constructing insurance solutions
that provide necessary coverage for complex business issues without gaps and bundling
insurance products in a manner that is cost effective.
15. This knowledge is not merely general business information; SAC and BBA
acquire granular data and information about the intimate operations of its clients' businesses in
the process of identifying needs and scoping insurance proposals.
16. Accordingly, SAC and BBA's client list, the above-described knowledge of each
client's business, the product mix developed for meeting each client's needs and the costs and
pricing for the products are major drivers of competitive advantage in the marketplace and a
substantial goodwill asset (the "Client Information").
17. Lacking this Client Information, competitors face a barrier in developing
proposals for insurance and quoting insurance that will underbid SAC and/or BBA.
18. The Client Information and end insured information is maintained confidentially
within SAC and BBA and not publicly accessible or generally known outside of SAC and BBA.
19. SAC and BBA's Client Information can only be acquired through the investment
of significant time and resources working with clients.
20. SAC and BBA have invested significant sums of information technology systems
for the centralization and protection of their Client Information and for the management of
access to the Client Information.
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21. The Client Information is extremely valuable to direct competitors such as
Northeast, a firm that sells the same or substantially similar insurance products.
22. Possession of the Client Information by competitors would permit such
competitors to immediately identify target end insureds, provide the optimal insurance solution
without any work expended in analyzing the clients' operations/needs or developing the product
mix, and ultimately equip competitors with the necessary information to underbid SAC and/or
BBA.
23. SAC and BBA have taken, and continue to take, significant measures to safeguard
and protect the Client Information, including requiring employees and contractors that are
exposed to this information to execute agreements containing confidentiality, non-solicitation
and non-compete provisions ("Restrictive Covenants").
24. Given the competitive conditions of the marketplace described above, Restrictive
Covenants are a widespread and standard industry practice as a condition of an engagement as a
sales representative with a brokerage.
Arthur Golann
25. Golann is, and was at all times relevant herein, an individual employed in the
capacity as an insurance salesperson and underwriter directly managing its sales relationships.
The producer/underwriter role in the insurance industry substantially involves sales functions
and management of client relationships irrespective of organization.
26. Golann was previously an owner of 20% of the membership interests in
Buckingham of LI, LLC, a former affiliate of SAC/BBA and a company that was engaged in the
insurance brokerage business.
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27. On December 31, 2009, Buckingham of LI, LLC redeemed Golann's membership
interest for the consideration of $200,000 and Buckingham of LI, LLC was merged into
Buckingham Badler Associates, Inc. (the "Redemption Transaction"). A true and correct copy of
the Redemption Agreement is attached herewith and made a part hereof as Exhibit A.
28. On January 1, 2010, as a condition of the Redemption Transaction, Golann
became an employee of BBA pursuant to an employment agreement of even date (the
"Employment Agreement #1"). A true and correct copy of Employment Agreement #1 is
attached herewith and made a part hereof as Exhibit B.
29. Employment Agreement #1 contained restrictions, inter alia, on Golann's use of
BBA's Client Information, solicitation of BBA's clients and competition with BBA after
termination of employment with BBA.
30. On or about January 1, 2012, BBA and Golann entered into an amended
agreement governing the terms of his employment with BBA ("Employment Agreement #2"). A
true and correct copy of Employment Agreement #2 is attached herewith and made a part hereof
as Exhibit C.
31. Employment Agreement #2 contained the same or substantially similar
Restrictive Covenants as contained in Employment Agreement #1, except that the restrictive
period was reduced from two years to eighteen months.
32. On or about December 28, 2012, BBA was acquired by SAC and BBA continued
at all times thereafter to operate as a subsidiary of SAC.
33. SAC is the direct beneficiary of BBA's goodwill and relationships with clients
and end insureds by virtue of being the sole shareholder of BBA.
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34. Golann continued to be employed by BBA pursuant to the terms of the
Employment Agreement #2 subsequent to the acquisition of BBA by SAC for a period of over
three and a half years.
35. At all times that Golann was employed by Buckingham of LI, LLC, BBA, and/or
SAC, Golann was employed as an insurance producer and underwriter and had access to, and
possession of, proprietary Client Information.
36. Golann's book of business and client relationships were the same on September
11, 2015, the date of his resignation, as they were on December 31, 2009, the date of the
Redemption transaction. SAC purchased those relationships form Golann as part of the
Redemption Transaction.
37. Golann also had access to and managed the accounts that he sold upon the
Redemption Transaction.
Golann Resigns from SAC and Starts With Competitor Northeast
38. In August 2014, BBA received a call from a client describing statements made by
Golann involving plans to leave BBA for Northeast. In the course of this call with the client,
BBA learned that Golann had divulged Client Information to Northeast.
39. After discussing the matter with Golann, Golann decided to stay working at BBA.
40. On or about September 11, 2015, though, Golann resigned from his position with
BBA.
41. Immediately following Golann's resignation from BBA, Golann commenced
employment with Northeast, a competing insurance MGA/wholesaler/brokerage business, as a
producer/underwriter.
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42. Golann's position as a salesperson with Northeast is the same or substantially
similar to his former position as a producer/underwriter with BBA.
43. Golann's responsibilities with Northeast involve identifying clients and marketing
and selling insurance products that are the same or substantially similar to the products sold by
SAC and/or BBA.
44. Northeast sells insurance products to the same types of clients and into the same
markets as SAC and/or BBA.
45. On the same date of Golann's resignation, Golann's secretary also resigned and
accepted employment with Northeast.
46. Prior to Golann's departure from BBA, Northeast had intentionally and
purposefully recruited no fewer than four other BBA employees that were subject to Restrictive
Covenants similar to those to which Golann agreed.
47. Upon information and belief, Northeast had knowledge that Golann was subject to
an agreement with BBA containing the Restrictive Covenants.
48. Upon Golann's resignation, BBA discovered that paper files and documents were
missing from Golann's office; access to certain online folders on SAC/BBA's information
technology system had been altered such that BBA could not gain access; electronic documents
and emails had been deleted from Golann's computer and/or email account; and an iPad issued
by BBA could not be located.
49. After due investigation, SAC and/or BBA had no explanation for the
disappearance of voluminous paper files and documents that had been present in Golann's office
at the time immediately preceding his resignation.
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50. Upon information and belief, paper files and documents were removed from
Golann's office at BBA prior to, or contemporaneous with, his resignation from BBA.
51. Upon information and belief, the paper files and documents removed from
Golann's office contain SAC and/or BBA's Client Information and continue to be in Golann
and/or Northeast's possession.
52. SAC also used, and continues to use, Dropbox for intra-office file sharing and
document storage.
53. Upon Golann's resignation, SAC discovered that the user names for SAC's
Dropbox account had been altered so that SAC staff could not access the Dropbox account.
54. Upon information and belief, prior to Golann’s resignation from SAC and while
Golann was still employed by SAC, Golann was secretly referring insurance leads and/or end
insureds to Northeast.
55. Upon information and belief, certain end insureds that could have, and should
have, had policies bound and/or placed by SAC were bound and/or placed by Northeast as a
direct result of the referrals made by Golann while still employed by SAC.
56. To date, SAC is aware of at least 12 end insureds that were illegally referred to
Northeast prior to Golann’s resignation from SAC (the names of which are excluded pursuant to
the parties’ Confidentiality Agreement and Stipulated Protective Order entered on July 13,
2017).
Golann and Northeast Improperly Solicit SAC's Clients
57. In September 2016, during the Restrictive Period, SAC and BBA learned that
Golann and/or Northeast were wrongly and unjustifiably soliciting and/or conducting business
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with SAC and BBA's clients and end insureds (the identities of which are omitted for protection
of client confidences and SAC/BBA's goodwill).
58. Upon information and belief, the solicitation and/or conduct of business with SAC
and BBA's clients and end insureds by Northeast is occurring at the direction of Golann and/or
with the use of SAC and BBA's Client Information acquired from Golann.
59. In March 2016, Northeast and/or Golann solicited an existing SAC/BBA client in
an effort of placing a commercial lines insurance policy with said client ("BBA Client #1").
60. A true and correct copy of a commercial lines insurance quote issued by Golann
in March 2016 to BBA Client #1 is attached herewith and made a part hereof as Exhibit D
(client information redacted for protection of client confidences and SAC/BBA's goodwill).
61. A true and correct copy of an email between Golann and Chubb, an insurance
producer, preparing an insurance quote for BBA Client #1 is attached herewith and made a part
hereof as Exhibit E (client information redacted for protection of client confidences and
SAC/BBA's goodwill). The email was inadvertently sent by Chubb to Golann's former BBA
email account.
62. In April 2016, Northeast and/or Golann solicited another existing SAC/BBA
client in an effort of placing a commercial lines insurance policy with said client ("BBA Client
#2").
63. A true and correct copy of a commercial lines insurance quote issued by
Northeast in April 2016 with BBA Client #2 is attached herewith and made a part hereof as
Exhibit F (client information redacted for protection of client confidences and SAC/BBA's
goodwill).
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64. A true and correct copy of an email between Golann and Century Insurance
Group, an insurance producer, preparing an insurance quote for BBA Client #2 is attached
herewith and made a part hereof as Exhibit G (client information redacted for protection of
client confidences and SAC/BBA's goodwill). The email was inadvertently sent by Century
Insurance Group to Golann's former BBA email account.
65. In September 2016, Northeast and/or Golann solicited another SAC/BBA client
(the third client presently known by SAC and BBA) and placed a commercial lines insurance
policy with said client ("BBA Client #3").
66. A true and correct copy of the commercial lines insurance policy placed by
Northeast in September 2016 with BBA Client #3 is attached herewith and made a part hereof as
Exhibit H (client information redacted for protection of client confidences and SAC/BBA's
goodwill).
67. Golann and/or Northeast have solicited, and continue to solicit, sales from other
clients of SAC and/or BBA during the Restrictive Period as of the filing of this action.
68. Upon information and belief, there are many more SAC and/or BBA clients that
have been solicited by Golann and/or Northeast of which SAC and BBA are not presently aware.
69. Pursuant to the terms of Employment Agreement #2, Golann consented to entry
of an injunction against him restraining actions in violation of the Restrictive Covenants therein.
70. Pursuant to the terms of Employment Agreement #2, Golann admitted that his
actions in violation of the Restrictive Covenants therein would cause irreparable and injury to
SAC and BBA and could not be adequately remedied through money damages.
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AS AND FOR A FIRST CAUSE OF ACTION
Breach of Contract Against Golann
71. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 70
with the same force and effect as if fully set forth herein.
72. Golann entered into valid and binding agreements with BBA in the form of the
Redemption Agreement, Employment Agreement #1 and Employment Agreement #2.
73. SAC is the sole shareholder of BBA.
74. Employment Agreement #2 prohibits Golann from soliciting BBA's clients for a
period of eighteen (18) months following termination (the "Restrictive Period").
75. Employment Agreement #2 prohibits Golann from divulging Confidential
Information to third parties during the Restrictive Period.
76. The Redemption Agreement was conditioned upon Golann's entry into
Employment Agreement #1 and Employment Agreement #2 and the Restrictive Covenants
therewith.
77. Golann terminated his employment with BBA on or about September 11, 2015.
78. Golann breached Employment Agreement #2 by, inter alia, soliciting business
from SAC and/or BBA's past, present and/or prospective clients during the Restrictive Period.
79. Golann breached Employment Agreement #2 by, inter alia, divulging the Client
Information to Northeast during the Restrictive Period.
80. BBA performed all of its obligations to Golann pursuant to Employment
Agreement #2.
81. As a direct and proximate result of the breach by Golann, SAC and BBA have
suffered damages in an amount to be proven at trial, including, without limitation, $200,000 paid
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to Golann pursuant to the Redemption Agreement, lost profits and irreparable damage to its
goodwill.
AS AND FOR A SECOND CAUSE OF ACTION
Unfair Competition/Misappropriation of Trade Secrets
Against Northeast
82. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 81
with the same force and effect as if fully set forth herein.
83. SAC and BBA have expended substantial time and financial resources in
developing the Client Information.
84. Northeast, a direct competitor of SAC and BBA, solicited the employment of
Golann and/or employed Golann to acquire the Client Information known by him.
85. By virtue of the employment of Golann, Northeast is presently in possession of
SAC and BBA's Client Information.
86. Upon information and belief, Northeast knew about, or intentionally neglected to
inquire about, the Restrictive Covenants to which Golann is bound prior to his employment.
87. Northeast is wrongfully and unjustifiably using the Client Information obtained
through Golann to solicit SAC and BBA's clients, generate sales for Northeast and/or compete
with SAC and/or BBA.
88. As a direct and proximate result of the actions by Northeast, SAC and BBA have
suffered damages, including lost profits and irreparable damage to its goodwill, in an amount to
be proven at trial.
AS AND FOR A THIRD CAUSE OF ACTION
Tortious Interference Against Northeast
89. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 88
with the same force and effect as if fully set forth herein.
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90. BBA and Golann are parties to a valid and binding contract in Employment
Agreement #2.
91. Employment Agreement #2 contains Restrictive Covenants.
92. Employment Agreement #2 prohibits Golann from, inter alia, soliciting BBA's
clients during the Restrictive Period.
93. Employment Agreement #2 prohibits Golann from, inter alia, divulging Client
Information to third parties during the Restrictive Period.
94. Upon information and belief, Northeast knew that Golann was subject to
Employment Agreement #2 and/or the Restrictive Covenants.
95. Northeast wrongfully and unjustifiably employed, and continues to employ,
Golann in a position that would cause him to breach Employment Agreement #2 by violating the
Restrictive Covenants.
96. Northeast wrongfully and unjustifiably has provided, and continues to provide,
material assistance and financial incentives to Golann for generating sales in a manner that
violates the Restrictive Covenants.
97. Golann has breached the Restrictive Covenants by, inter alia, soliciting SAC and
BBA's clients and disclosing SAC and BBA's Client Information to Northeast and such actions
were induced, encouraged and/or sanctioned by Northeast.
98. Northeast has wrongfully and unjustifiably obtained pecuniary and economic
gain, including sales, due to its interference with Employment Agreement #2.
99. As a direct and proximate result of the actions by Northeast, SAC and BBA have
suffered damages, including lost profits and irreparable damage to its goodwill, in an amount to
be proven at trial.
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AS AND FOR A FOURTH CAUSE OF ACTION
Breach of Fiduciary Duty Against Golann
100. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 99
with the same force and effect as if fully set forth herein.
101. Golann was a former employee of BBA and/or SAC.
102. At all times during his employment with BBA and/or SAC, by virtue of his status
an employee, Golann owed BBA and/or SAC a fiduciary duty of undivided loyalty and care.
103. On or about September 11, 2015, Golann resigned from BBA and/or SAC.
104. From approximately January 1, 2010 through September 11, 2015, Golann
remained continuously employed by BBA and/or SAC.
105. During his period of employment with BBA and/or SAC, Golann secretly and
unlawfully transacted business for his own benefit and for the benefit of Northeast, a direct
competitor, by referring leads and/or end insureds to Northeast.
106. The referral of leads and/or end insureds to Northeast by Golann as described
above involved the unlawful transmission and/or misappropriation of BBA and/or SAC’s Client
Information to Northeast.
107. Upon information and belief, the leads and/or end insureds referred to Northeast
by Golann resulted in insurance policies being placed by Northeast.
108. Upon information and belief, the leads and/or end insureds referred to Northeast
by Golann conferred material economic benefits on Northeast and Golann to the detriment of
BBA and/or SAC.
109. The above-described actions were taken by Golann without the knowledge and/or
consent of BBA and/or SAC.
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110. The names of the specific leads and/or end insureds referred by Golann to
Northeast are excluded pursuant to the Confidentiality Agreement and Stipulated Protective
Order entered on July 13, 2017.
111. Golann illegally and unlawfully utilized the property and/or resources of BBA
and/or SAC for the purposes of transacting business for his own benefit and the benefit of
Northeast to the detriment of BBA and/or SAC.
112. As a direct and proximate result of the foregoing actions, BBA and/or SAC have
suffered damages, including direct damages in wages and commissions paid to Golann and lost
profits, in an amount to be proven at trial.
AS AND FOR A FIFTH CAUSE OF ACTION
Aiding and Abetting Breach of Fiduciary Duty by Northeast
113. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 111
with the same force and effect as if fully set forth herein.
114. Northeast knowingly and intentionally induced and participated in Golann’s
breach of fiduciary duty by, inter alia, providing resources, support, and assistance to Golann
with respect to the underwriting and/or placement of insurance policies illegally referred to
Northeast by Golann.
115. At the time of the above-described breaches of fiduciary duty by Golann,
Northeast knew Golann remained employed by BBA and/or SAC, a direct competitor, and that
Golann was unlawfully using and/or misappropriating the property of BBA and/or SAC,
including the Client Information, for the benefit of Northeast.
116. As a direct and proximate result of the foregoing actions, BBA and/or SAC have
suffered damages, including direct damages in wages and commissions paid to Golann and lost
profits, in an amount to be proven at trial.
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WHEREFORE, Plaintiff Scottish American Capital, LLC and Scottish American
Insurance General Agency, Inc. demand that this Court enter Judgment against Defendants as
follows:
1. An Order temporarily restraining: (a) any and all actions by Golann and/or
Northeast in violation of, or interference with, Employment Agreement #2; and (b) use and/or
possession of the Client Information by Golann and/or Northeast.
2. Preliminary and permanent injunction restraining: (a) any and all actions by
Golann and/or Northeast in violation of, or interference with, Employment Agreement #2; and
(b) use and/or possession of the Client Information by Golann and/or Northeast.
3. Awarding damages in an amount to be proven at trial;
4. Awarding punitive damages in an amount to be proven at trial;
5. Attorney's fees as provided under Employment Agreement #2;
6. Fees and costs of this action;
7. Pre-judgment and post-judgment interest; and
8. Such further and other relief as this Court deems just and proper.
Dated: Buffalo, New York
September 18, 2017
WOODS OVIATT GILMAN LLP
By: /s/ Robert C. Carbone
Christian J. Henrich
Robert C. Carbone
Attorneys for Plaintiffs, Scottish American
Capital, LLC and Scottish American
Insurance General Agency, Inc.
1900 Main Place Tower
350 Main Street
Buffalo, New York 14202
Telephone: (716) 248-3215
Facsimile: (716) 248-3315
rcarbone@woodsoviatt.com
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Preview
FILED: NASSAU COUNTY CLERK 08/15/2018 02:50 PM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 RECEIVED NYSCEF: 08/15/2018 EXHIBIT J FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 STATE OF NEW YORK SUPREME COURT :: NASSAU COUNTY __________________________________________ SCOTTISH AMERICAN CAPITAL, LLC and SCOTTISH AMERICAN INSURANCE GENERAL AGENCY, INC., Plaintiffs, FIRST AMENDED VERIFIED COMPLAINT -vs- Index No. 609073/2016 ARTHUR GOLANN, NORTHEAST COVERAGES INC., Defendants. ___________________________________________ Plaintiffs, Scottish American Capital, LLC and Scottish American Insurance General Agency, Inc., by and through their undersigned counsel Woods Oviatt Gilman LLP, for their First Amended Verified Complaint against Defendants, state as follows: THE PARTIES 1. Scottish American Capital, LLC is, and was at all times relevant herein, a company operating as a managing general agent (MGA) and brokerage in the insurance industry ("SAC"). 2. SAC is a is a limited liability company organized and existing under the laws of the State of Delaware and authorized to do business in New York, with a principal place of business located at 2 Teleport Drive, Corporate Commons, Staten Island, New York 10311, in the County of Richmond. 3. Scottish American Insurance General Agency, Inc. (formerly known as Buckingham Badler Associates, Inc.) is a corporation incorporated and existing under the laws of 1 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 the State of New York with a principal place of business located at 2 Teleport Drive, Corporate Commons, Staten Island, New York 10311, in the County of Richmond ("BBA"). 4. BBA is a subsidiary of SAC and a managing general agent and wholesaler in the insurance industry. 5. Upon information and belief, Arthur Golann is, and was at all times relevant herein, an individual residing at 353 Central Avenue, Deer Park, New York 11729, in the County of Suffolk ("Golann"). 6. Upon information and belief, Northeast Coverages Inc. is a corporation incorporated and existing under the laws of the State of New York with a principal place of business located at 1325 Franklin Ave., Suite 375, Garden City, New York 11530 ("Northeast"). 7. Upon information and belief, Northeast is, and was at all times relevant herein, a company operating as a managing general agent (MGA) and brokerage in the insurance industry. 8. Northeast is a direct competitor of SAC. BACKGROUND 9. The insurance industry is an extremely competitive and sales-driven business. 10. Insurance wholesalers/MGAs act as intermediaries between insurance brokers and insurance carriers. The actual insured client is sold the insurance by the brokerage. 11. Because insurance products are largely commoditized, the value of an insurance MGA/wholesale business is largely predicated upon its goodwill and knowledge of actual insurance accounts. 12. Managing general agent brokerages, such as SAC and BBA, are able to underwrite and bind policies (in whole or in part) on behalf of insurance producers. 2 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 13. Particularly in the case of MGAs, brokerages compete on service level and goodwill is accumulated through years of working closely with clients to understand the specific business drivers that create insurance needs. 14. This knowledge of clients' affairs is essential to constructing insurance solutions that provide necessary coverage for complex business issues without gaps and bundling insurance products in a manner that is cost effective. 15. This knowledge is not merely general business information; SAC and BBA acquire granular data and information about the intimate operations of its clients' businesses in the process of identifying needs and scoping insurance proposals. 16. Accordingly, SAC and BBA's client list, the above-described knowledge of each client's business, the product mix developed for meeting each client's needs and the costs and pricing for the products are major drivers of competitive advantage in the marketplace and a substantial goodwill asset (the "Client Information"). 17. Lacking this Client Information, competitors face a barrier in developing proposals for insurance and quoting insurance that will underbid SAC and/or BBA. 18. The Client Information and end insured information is maintained confidentially within SAC and BBA and not publicly accessible or generally known outside of SAC and BBA. 19. SAC and BBA's Client Information can only be acquired through the investment of significant time and resources working with clients. 20. SAC and BBA have invested significant sums of information technology systems for the centralization and protection of their Client Information and for the management of access to the Client Information. 3 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 21. The Client Information is extremely valuable to direct competitors such as Northeast, a firm that sells the same or substantially similar insurance products. 22. Possession of the Client Information by competitors would permit such competitors to immediately identify target end insureds, provide the optimal insurance solution without any work expended in analyzing the clients' operations/needs or developing the product mix, and ultimately equip competitors with the necessary information to underbid SAC and/or BBA. 23. SAC and BBA have taken, and continue to take, significant measures to safeguard and protect the Client Information, including requiring employees and contractors that are exposed to this information to execute agreements containing confidentiality, non-solicitation and non-compete provisions ("Restrictive Covenants"). 24. Given the competitive conditions of the marketplace described above, Restrictive Covenants are a widespread and standard industry practice as a condition of an engagement as a sales representative with a brokerage. Arthur Golann 25. Golann is, and was at all times relevant herein, an individual employed in the capacity as an insurance salesperson and underwriter directly managing its sales relationships. The producer/underwriter role in the insurance industry substantially involves sales functions and management of client relationships irrespective of organization. 26. Golann was previously an owner of 20% of the membership interests in Buckingham of LI, LLC, a former affiliate of SAC/BBA and a company that was engaged in the insurance brokerage business. 4 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 27. On December 31, 2009, Buckingham of LI, LLC redeemed Golann's membership interest for the consideration of $200,000 and Buckingham of LI, LLC was merged into Buckingham Badler Associates, Inc. (the "Redemption Transaction"). A true and correct copy of the Redemption Agreement is attached herewith and made a part hereof as Exhibit A. 28. On January 1, 2010, as a condition of the Redemption Transaction, Golann became an employee of BBA pursuant to an employment agreement of even date (the "Employment Agreement #1"). A true and correct copy of Employment Agreement #1 is attached herewith and made a part hereof as Exhibit B. 29. Employment Agreement #1 contained restrictions, inter alia, on Golann's use of BBA's Client Information, solicitation of BBA's clients and competition with BBA after termination of employment with BBA. 30. On or about January 1, 2012, BBA and Golann entered into an amended agreement governing the terms of his employment with BBA ("Employment Agreement #2"). A true and correct copy of Employment Agreement #2 is attached herewith and made a part hereof as Exhibit C. 31. Employment Agreement #2 contained the same or substantially similar Restrictive Covenants as contained in Employment Agreement #1, except that the restrictive period was reduced from two years to eighteen months. 32. On or about December 28, 2012, BBA was acquired by SAC and BBA continued at all times thereafter to operate as a subsidiary of SAC. 33. SAC is the direct beneficiary of BBA's goodwill and relationships with clients and end insureds by virtue of being the sole shareholder of BBA. 5 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 34. Golann continued to be employed by BBA pursuant to the terms of the Employment Agreement #2 subsequent to the acquisition of BBA by SAC for a period of over three and a half years. 35. At all times that Golann was employed by Buckingham of LI, LLC, BBA, and/or SAC, Golann was employed as an insurance producer and underwriter and had access to, and possession of, proprietary Client Information. 36. Golann's book of business and client relationships were the same on September 11, 2015, the date of his resignation, as they were on December 31, 2009, the date of the Redemption transaction. SAC purchased those relationships form Golann as part of the Redemption Transaction. 37. Golann also had access to and managed the accounts that he sold upon the Redemption Transaction. Golann Resigns from SAC and Starts With Competitor Northeast 38. In August 2014, BBA received a call from a client describing statements made by Golann involving plans to leave BBA for Northeast. In the course of this call with the client, BBA learned that Golann had divulged Client Information to Northeast. 39. After discussing the matter with Golann, Golann decided to stay working at BBA. 40. On or about September 11, 2015, though, Golann resigned from his position with BBA. 41. Immediately following Golann's resignation from BBA, Golann commenced employment with Northeast, a competing insurance MGA/wholesaler/brokerage business, as a producer/underwriter. 6 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 42. Golann's position as a salesperson with Northeast is the same or substantially similar to his former position as a producer/underwriter with BBA. 43. Golann's responsibilities with Northeast involve identifying clients and marketing and selling insurance products that are the same or substantially similar to the products sold by SAC and/or BBA. 44. Northeast sells insurance products to the same types of clients and into the same markets as SAC and/or BBA. 45. On the same date of Golann's resignation, Golann's secretary also resigned and accepted employment with Northeast. 46. Prior to Golann's departure from BBA, Northeast had intentionally and purposefully recruited no fewer than four other BBA employees that were subject to Restrictive Covenants similar to those to which Golann agreed. 47. Upon information and belief, Northeast had knowledge that Golann was subject to an agreement with BBA containing the Restrictive Covenants. 48. Upon Golann's resignation, BBA discovered that paper files and documents were missing from Golann's office; access to certain online folders on SAC/BBA's information technology system had been altered such that BBA could not gain access; electronic documents and emails had been deleted from Golann's computer and/or email account; and an iPad issued by BBA could not be located. 49. After due investigation, SAC and/or BBA had no explanation for the disappearance of voluminous paper files and documents that had been present in Golann's office at the time immediately preceding his resignation. 7 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 50. Upon information and belief, paper files and documents were removed from Golann's office at BBA prior to, or contemporaneous with, his resignation from BBA. 51. Upon information and belief, the paper files and documents removed from Golann's office contain SAC and/or BBA's Client Information and continue to be in Golann and/or Northeast's possession. 52. SAC also used, and continues to use, Dropbox for intra-office file sharing and document storage. 53. Upon Golann's resignation, SAC discovered that the user names for SAC's Dropbox account had been altered so that SAC staff could not access the Dropbox account. 54. Upon information and belief, prior to Golann’s resignation from SAC and while Golann was still employed by SAC, Golann was secretly referring insurance leads and/or end insureds to Northeast. 55. Upon information and belief, certain end insureds that could have, and should have, had policies bound and/or placed by SAC were bound and/or placed by Northeast as a direct result of the referrals made by Golann while still employed by SAC. 56. To date, SAC is aware of at least 12 end insureds that were illegally referred to Northeast prior to Golann’s resignation from SAC (the names of which are excluded pursuant to the parties’ Confidentiality Agreement and Stipulated Protective Order entered on July 13, 2017). Golann and Northeast Improperly Solicit SAC's Clients 57. In September 2016, during the Restrictive Period, SAC and BBA learned that Golann and/or Northeast were wrongly and unjustifiably soliciting and/or conducting business 8 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 with SAC and BBA's clients and end insureds (the identities of which are omitted for protection of client confidences and SAC/BBA's goodwill). 58. Upon information and belief, the solicitation and/or conduct of business with SAC and BBA's clients and end insureds by Northeast is occurring at the direction of Golann and/or with the use of SAC and BBA's Client Information acquired from Golann. 59. In March 2016, Northeast and/or Golann solicited an existing SAC/BBA client in an effort of placing a commercial lines insurance policy with said client ("BBA Client #1"). 60. A true and correct copy of a commercial lines insurance quote issued by Golann in March 2016 to BBA Client #1 is attached herewith and made a part hereof as Exhibit D (client information redacted for protection of client confidences and SAC/BBA's goodwill). 61. A true and correct copy of an email between Golann and Chubb, an insurance producer, preparing an insurance quote for BBA Client #1 is attached herewith and made a part hereof as Exhibit E (client information redacted for protection of client confidences and SAC/BBA's goodwill). The email was inadvertently sent by Chubb to Golann's former BBA email account. 62. In April 2016, Northeast and/or Golann solicited another existing SAC/BBA client in an effort of placing a commercial lines insurance policy with said client ("BBA Client #2"). 63. A true and correct copy of a commercial lines insurance quote issued by Northeast in April 2016 with BBA Client #2 is attached herewith and made a part hereof as Exhibit F (client information redacted for protection of client confidences and SAC/BBA's goodwill). 9 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 64. A true and correct copy of an email between Golann and Century Insurance Group, an insurance producer, preparing an insurance quote for BBA Client #2 is attached herewith and made a part hereof as Exhibit G (client information redacted for protection of client confidences and SAC/BBA's goodwill). The email was inadvertently sent by Century Insurance Group to Golann's former BBA email account. 65. In September 2016, Northeast and/or Golann solicited another SAC/BBA client (the third client presently known by SAC and BBA) and placed a commercial lines insurance policy with said client ("BBA Client #3"). 66. A true and correct copy of the commercial lines insurance policy placed by Northeast in September 2016 with BBA Client #3 is attached herewith and made a part hereof as Exhibit H (client information redacted for protection of client confidences and SAC/BBA's goodwill). 67. Golann and/or Northeast have solicited, and continue to solicit, sales from other clients of SAC and/or BBA during the Restrictive Period as of the filing of this action. 68. Upon information and belief, there are many more SAC and/or BBA clients that have been solicited by Golann and/or Northeast of which SAC and BBA are not presently aware. 69. Pursuant to the terms of Employment Agreement #2, Golann consented to entry of an injunction against him restraining actions in violation of the Restrictive Covenants therein. 70. Pursuant to the terms of Employment Agreement #2, Golann admitted that his actions in violation of the Restrictive Covenants therein would cause irreparable and injury to SAC and BBA and could not be adequately remedied through money damages. 10 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 AS AND FOR A FIRST CAUSE OF ACTION Breach of Contract Against Golann 71. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 70 with the same force and effect as if fully set forth herein. 72. Golann entered into valid and binding agreements with BBA in the form of the Redemption Agreement, Employment Agreement #1 and Employment Agreement #2. 73. SAC is the sole shareholder of BBA. 74. Employment Agreement #2 prohibits Golann from soliciting BBA's clients for a period of eighteen (18) months following termination (the "Restrictive Period"). 75. Employment Agreement #2 prohibits Golann from divulging Confidential Information to third parties during the Restrictive Period. 76. The Redemption Agreement was conditioned upon Golann's entry into Employment Agreement #1 and Employment Agreement #2 and the Restrictive Covenants therewith. 77. Golann terminated his employment with BBA on or about September 11, 2015. 78. Golann breached Employment Agreement #2 by, inter alia, soliciting business from SAC and/or BBA's past, present and/or prospective clients during the Restrictive Period. 79. Golann breached Employment Agreement #2 by, inter alia, divulging the Client Information to Northeast during the Restrictive Period. 80. BBA performed all of its obligations to Golann pursuant to Employment Agreement #2. 81. As a direct and proximate result of the breach by Golann, SAC and BBA have suffered damages in an amount to be proven at trial, including, without limitation, $200,000 paid 11 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 to Golann pursuant to the Redemption Agreement, lost profits and irreparable damage to its goodwill. AS AND FOR A SECOND CAUSE OF ACTION Unfair Competition/Misappropriation of Trade Secrets Against Northeast 82. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 81 with the same force and effect as if fully set forth herein. 83. SAC and BBA have expended substantial time and financial resources in developing the Client Information. 84. Northeast, a direct competitor of SAC and BBA, solicited the employment of Golann and/or employed Golann to acquire the Client Information known by him. 85. By virtue of the employment of Golann, Northeast is presently in possession of SAC and BBA's Client Information. 86. Upon information and belief, Northeast knew about, or intentionally neglected to inquire about, the Restrictive Covenants to which Golann is bound prior to his employment. 87. Northeast is wrongfully and unjustifiably using the Client Information obtained through Golann to solicit SAC and BBA's clients, generate sales for Northeast and/or compete with SAC and/or BBA. 88. As a direct and proximate result of the actions by Northeast, SAC and BBA have suffered damages, including lost profits and irreparable damage to its goodwill, in an amount to be proven at trial. AS AND FOR A THIRD CAUSE OF ACTION Tortious Interference Against Northeast 89. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 88 with the same force and effect as if fully set forth herein. 12 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 90. BBA and Golann are parties to a valid and binding contract in Employment Agreement #2. 91. Employment Agreement #2 contains Restrictive Covenants. 92. Employment Agreement #2 prohibits Golann from, inter alia, soliciting BBA's clients during the Restrictive Period. 93. Employment Agreement #2 prohibits Golann from, inter alia, divulging Client Information to third parties during the Restrictive Period. 94. Upon information and belief, Northeast knew that Golann was subject to Employment Agreement #2 and/or the Restrictive Covenants. 95. Northeast wrongfully and unjustifiably employed, and continues to employ, Golann in a position that would cause him to breach Employment Agreement #2 by violating the Restrictive Covenants. 96. Northeast wrongfully and unjustifiably has provided, and continues to provide, material assistance and financial incentives to Golann for generating sales in a manner that violates the Restrictive Covenants. 97. Golann has breached the Restrictive Covenants by, inter alia, soliciting SAC and BBA's clients and disclosing SAC and BBA's Client Information to Northeast and such actions were induced, encouraged and/or sanctioned by Northeast. 98. Northeast has wrongfully and unjustifiably obtained pecuniary and economic gain, including sales, due to its interference with Employment Agreement #2. 99. As a direct and proximate result of the actions by Northeast, SAC and BBA have suffered damages, including lost profits and irreparable damage to its goodwill, in an amount to be proven at trial. 13 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 AS AND FOR A FOURTH CAUSE OF ACTION Breach of Fiduciary Duty Against Golann 100. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 99 with the same force and effect as if fully set forth herein. 101. Golann was a former employee of BBA and/or SAC. 102. At all times during his employment with BBA and/or SAC, by virtue of his status an employee, Golann owed BBA and/or SAC a fiduciary duty of undivided loyalty and care. 103. On or about September 11, 2015, Golann resigned from BBA and/or SAC. 104. From approximately January 1, 2010 through September 11, 2015, Golann remained continuously employed by BBA and/or SAC. 105. During his period of employment with BBA and/or SAC, Golann secretly and unlawfully transacted business for his own benefit and for the benefit of Northeast, a direct competitor, by referring leads and/or end insureds to Northeast. 106. The referral of leads and/or end insureds to Northeast by Golann as described above involved the unlawful transmission and/or misappropriation of BBA and/or SAC’s Client Information to Northeast. 107. Upon information and belief, the leads and/or end insureds referred to Northeast by Golann resulted in insurance policies being placed by Northeast. 108. Upon information and belief, the leads and/or end insureds referred to Northeast by Golann conferred material economic benefits on Northeast and Golann to the detriment of BBA and/or SAC. 109. The above-described actions were taken by Golann without the knowledge and/or consent of BBA and/or SAC. 14 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 110. The names of the specific leads and/or end insureds referred by Golann to Northeast are excluded pursuant to the Confidentiality Agreement and Stipulated Protective Order entered on July 13, 2017. 111. Golann illegally and unlawfully utilized the property and/or resources of BBA and/or SAC for the purposes of transacting business for his own benefit and the benefit of Northeast to the detriment of BBA and/or SAC. 112. As a direct and proximate result of the foregoing actions, BBA and/or SAC have suffered damages, including direct damages in wages and commissions paid to Golann and lost profits, in an amount to be proven at trial. AS AND FOR A FIFTH CAUSE OF ACTION Aiding and Abetting Breach of Fiduciary Duty by Northeast 113. SAC and BBA repeat and re-allege the allegations in paragraphs 1 through 111 with the same force and effect as if fully set forth herein. 114. Northeast knowingly and intentionally induced and participated in Golann’s breach of fiduciary duty by, inter alia, providing resources, support, and assistance to Golann with respect to the underwriting and/or placement of insurance policies illegally referred to Northeast by Golann. 115. At the time of the above-described breaches of fiduciary duty by Golann, Northeast knew Golann remained employed by BBA and/or SAC, a direct competitor, and that Golann was unlawfully using and/or misappropriating the property of BBA and/or SAC, including the Client Information, for the benefit of Northeast. 116. As a direct and proximate result of the foregoing actions, BBA and/or SAC have suffered damages, including direct damages in wages and commissions paid to Golann and lost profits, in an amount to be proven at trial. 15 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 09/19/2017 02:50 11:27 PM AM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 63 RECEIVED NYSCEF: 08/15/2018 09/19/2017 WHEREFORE, Plaintiff Scottish American Capital, LLC and Scottish American Insurance General Agency, Inc. demand that this Court enter Judgment against Defendants as follows: 1. An Order temporarily restraining: (a) any and all actions by Golann and/or Northeast in violation of, or interference with, Employment Agreement #2; and (b) use and/or possession of the Client Information by Golann and/or Northeast. 2. Preliminary and permanent injunction restraining: (a) any and all actions by Golann and/or Northeast in violation of, or interference with, Employment Agreement #2; and (b) use and/or possession of the Client Information by Golann and/or Northeast. 3. Awarding damages in an amount to be proven at trial; 4. Awarding punitive damages in an amount to be proven at trial; 5. Attorney's fees as provided under Employment Agreement #2; 6. Fees and costs of this action; 7. Pre-judgment and post-judgment interest; and 8. Such further and other relief as this Court deems just and proper. Dated: Buffalo, New York September 18, 2017 WOODS OVIATT GILMAN LLP By: /s/ Robert C. Carbone Christian J. Henrich Robert C. Carbone Attorneys for Plaintiffs, Scottish American Capital, LLC and Scottish American Insurance General Agency, Inc. 1900 Main Place Tower 350 Main Street Buffalo, New York 14202 Telephone: (716) 248-3215 Facsimile: (716) 248-3315 rcarbone@woodsoviatt.com 16 of 17 FILED: NASSAU COUNTY CLERK 08/15/2018 02:50 PM INDEX NO. 609073/2016 NYSCEF DOC. NO. 93 RECEIVED NYSCEF: 08/15/2018