ST. LOUIS — A federal appeals court has ruled that two former Lockton producer members breached contractual notice and fiduciary-duty obligations when they left the insurance brokerage and consulting organization for competitor Alliant, reversing part of a lower court’s decision and sending the cases back for further proceedings.
In an opinion filed August 26, the U.S. Court of Appeals for the Eighth Circuit affirmed several rulings favoring Lockton, including enforcement of Missouri choice-of-law and forum-selection provisions and customer nonsolicitation covenants in the former members’ agreements.
The court also directed the U.S. District Court for the Western District of Missouri to determine Lockton’s actual damages arising from the former members’ breaches of the forum-selection clauses.
The consolidated appeals involve Eric D. Kaufman and Sallie F. Giblin, former producer members of Lockton entities. Lockton is headquartered in Missouri and provides commercial-insurance brokerage and consulting services through producer members and associates.
Kaufman and Giblin became Lockton producer members in 2007 and signed member agreements with Lockton’s Pacific Series, Lockton Investment Advisors and Lockton Investment Securities.
Giblin later became a producer partner and signed an additional agreement with Lockton Partners.
Their agreements included Missouri choice-of-law and forum-selection clauses, customer nonsolicitation provisions, fee-shifting language and requirements that they comply with Lockton operating agreements.
The court said the operating agreements required producer members to provide 30 days’ written notice before terminating their membership interests.
Kaufman informed Lockton by email on July 18, 2022, that he was resigning “effective immediately” and began working for Alliant about two days later.
Giblin notified Lockton on Nov. 29, 2022, that she was resigning “effective immediately” and began working for Alliant that day.
The district court had found that the 30-day provision was permissive and granted the former members summary judgment on Lockton’s claims that they breached the provision and their fiduciary duties.
The Eighth Circuit disagreed, holding that the provision set out the only way producer members could terminate their interests.
The appellate court said the former members did not dispute that they had failed to give the required notice if the provision was mandatory.
Nor did they dispute that working for a Lockton competitor before the 30 days elapsed would breach fiduciary duties owed as Lockton members, the court said.
The court therefore reversed the judgments on those claims and directed the district court to enter judgment for Lockton.
The appellate court also upheld the district court’s determination that the agreements’ Missouri choice-of-law and forum-selection clauses were enforceable.
Kaufman and Giblin had filed California state-court suits seeking declarations that the restrictive covenants and the forum-selection and choice-of-law provisions were unenforceable.
The California actions were funded by Alliant, which also paid the former members’ attorney fees in the federal cases, according to the opinion.
The district court had awarded Lockton only nominal damages for the forum-selection-clause breaches and declined to award Lockton fees incurred defending the California suits.
The appellate court vacated the nominal-damages awards, concluding that attorneys’ fees and costs incurred directly because of a forum-selection-clause breach can be recovered as damages under Missouri law.
It instructed the district court to determine the proper amount of Lockton’s actual damages on remand.
The court also affirmed fee and cost awards to Lockton in the federal actions. The district court had awarded Lockton $4,923,855.93 in fees in its suit against Giblin and $4,264,674.77 in its suit against Kaufman after finding Lockton was the prevailing party under the agreements.
Judge Ralph R. Erickson dissented.
In his dissent, he said he believed federal courts lacked subject-matter jurisdiction because Lockton did not litigate a substantial federal issue under the Defend Trade Secrets Act, a claim Lockton later voluntarily dismissed with prejudice.
Erickson said he would vacate the district court’s judgments and order dismissal for lack of jurisdiction.
U.S. Court of Appeals for the Eighth Circuit case number: 24-1072, 24-1074, 24-3528, 25-1019, 25-1278, 25-1369
