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Advisors Excel, LLC v. Zagula Kaye Consulting, LLC

United States District Court, D. Kansas

February 20, 2015

ADVISORS EXCEL, LLC, Plaintiff,
v.
ZAGULA KAYE CONSULTING, LLC and MATTHEW ZAGULA, Defendants.

MEMORANDUM AND ORDER

DANIEL D. CRABTREE, District Judge.

This matter comes before the Court on plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction (Doc. 4). On January 27 and 30, 2015, the Court conducted a hearing on plaintiff's motion for temporary restraining order, and based on the findings and conclusions set forth by the Court on the record of the hearing on January 30, 2015, the Court entered an Order granting in part and denying in part plaintiff's request for a temporary restraining order (Doc. 22). Under Fed.R.Civ.P. 65, the Court restrained and enjoined defendant Zagula Kaye Consulting, LLC from:

directly or indirectly contacting, soliciting, or recruiting any licensed insurance producer with the purpose or effect of inducing such licensed insurance producer to leave the Advisors Excel, LLC distribution hierarchy with any carrier.

(Doc. 22 at 1) The Order was to remain in effect for 14 days from the day it was entered (until February 14, 2015), or until modified by subsequent order. On February 13, 2015, the Court extended the temporary restraining order by an additional 14 days, or until February 28, 2015, or other order of this Court (Doc. 48). See Fed.R.Civ.P. 65(b)(2).

On February 12, 2015, the Court conducted a hearing on the portion of plaintiff's motion seeking a preliminary injunction. The Court is prepared now to rule on that issue. In reaching its decision, the Court has considered the evidence presented by the parties at the January 27 and 30, 2015 hearings on plaintiff's motion for a temporary restraining order, the evidence that the parties filed with the Court before the preliminary injunction hearing, [1] and the evidence presented by the parties at the preliminary injunction hearing on February 12, 2015. After considering the evidence, submissions, and the parties' arguments, the Court grants plaintiff's motion for preliminary injunction, as specified at the end of this order.

I. Factual Background

Plaintiff is a national independent marketing organization engaged in the business of marketing insurance products and services to licensed insurance producers and connecting those producers to insurance companies. Defendant Zagula Kaye Consulting, LLC ("ZK") is a licensed insurance and financial services producer that provides sales and marketing systems for other insurance producers and financial professionals. Defendant Matthew Zagula is a principal of ZK.

On May 1, 2012, plaintiff and ZK entered into a First Amended and Restated Purchase, Consultation and Commission Agreement ("Agreement"). Zagula signed the Agreement on ZK's behalf. Under the terms of the Agreement, ZK agreed to transfer all right, title, and interest in the "Centurion Coaching" training program to plaintiff. As consideration for this transfer of intellectual property, plaintiff agreed to pay ZK a onetime purchase price of $560, 000. Under the Agreement, ZK also agreed to provide training services, to recruit producers to affiliate with plaintiff, and to place its personal production exclusively through plaintiff. As consideration for these services, plaintiff agreed to pay ZK override compensation for production by producers who ZK recruited to join plaintiff after the date of the Agreement and to compensate ZK at its current compensation level for personal production of insurance products placed through plaintiff.

The Agreement specified a term of 30 months beginning on May 1, 2012, and continuing until November 30, 2014, when the Agreement would renew automatically for successive two-year terms unless either party terminated the Agreement in the manner it specified.

The Agreement also contained a non-solicitation clause. It provided:

For a period beginning on the effective date of this Agreement and continuing for thirty (30) months after [plaintiff's] final payment to ZK arising out of this Agreement, ZK agrees not to directly or indirectly contact, solicit, or recruit any producer with the purpose or effect of inducing such producer to leave the [plaintiff's] distribution hierarchy with any carrier.

Agreement at § 13(a) (Doc. 1-1 at 5). In the context of plaintiff's business model and the market it strives to serve, the term "producer" describes a group of individuals who are plaintiff's customers. The parties also agreed that any breach of the non-solicitation clause would cause plaintiff irreparable harm. Id. at § 13(b) (Doc. 1-1 at 5). Finally, the Agreement requires ZK to pay plaintiff "liquidated damages in an amount equal to all gross commission and override[2] received by [plaintiff] for the sale of insurance products in the previous twelve (12) months from the date of release for any and each agent who seeks and obtains a release from the [plaintiff's] Hierarchy with any carrier either directly or indirectly as a result of contact with ZK." Id.

On June 5, 2014, Mr. Zagula, on ZK's behalf, sent plaintiff a letter terminating the Agreement upon its expiration on November 30, 2014. Plaintiff asserts that ZK is violating the Agreement's non-solicitation clause because it has contacted plaintiff's producers and invited them to attend an event in San Diego, California, with the purpose of recruiting them to affiliate themselves with a competing marketing organization that defendants are in the process of creating. Plaintiff has filed a Motion for Preliminary Injunction asking that the Court enjoin defendants from improperly soliciting plaintiff's producers in violation of the Agreement.

II. Legal Standard

The limited purpose of a preliminary injunction under Fed.R.Civ.P. 65 is "merely to preserve the relative positions of the parties until a trial on the merits can be held." Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981). To prevail on a motion for preliminary injunction, the movant must prove that all four of the following equitable factors weigh in its favor: (1) it is substantially likely to succeed on the merits; (2) it will suffer irreparable injury if the injunction is denied; (3) its threatened injury outweighs the injury the opposing party will suffer under the injunction; and (4) the injunction, if issued, will not be adverse to the public interest. Gen. Motors Corp. v. Urban Gorilla, LLC, 500 F.3d 1222, 1226 (10th Cir. 2007) (citation omitted).

Whether to grant a preliminary injunction rests within the Court's sound discretion. Beltronics USA, Inc. v. Midwest Inventory Distrib., LLC, 562 F.3d 1067, 1070 (10th Cir. 2009) (citations omitted). A preliminary injunction is an extraordinary remedy, so the right to relief must be "clear and unequivocal." Id. "In general, a preliminary injunction... is the exception rather than the rule.'" Gen. Motors Corp., 500 F.3d at 1226 (quoting GTE Corp. v. Williams, 731 F.2d 676, 678 (10th Cir. 1984)).

III. ...


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