Aon Risk Servs., Northeast v Cusack

[*1] Aon Risk Servs., Northeast v Cusack 2012 NY Slip Op 50366(U) Decided on February 28, 2012 Supreme Court, New York County Fried, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 28, 2012
Supreme Court, New York County

Aon Risk Services, Northeast, a New York Corporation and Aon Corporation, a Delaware Corporation, Plaintiffs,

against

Michael Cusack, an Individual, and Alliant Insurance Services, Inc., a Delaware Corporation, Defendants.



651673/11



For Plaintiffs:

DLA Piper LLP (US)

1251 Avenue of the Americas

New York, NY 10020

(Shand Stephens, Barbara Harris)

For Defendant Michael Cusack:

Fensterstock & Partners, LLP

30 Wall Street

New York, NY 10005

(Blair Fensterstock, Eugene Kublanovsky)

For Defendant Alliant Insurance Services, Inc.:

Weil, Gotshal & Manges, LLP

767 Fifth Avenue

New York, NY 10153

(Jeffrey S. Klein, Allan Dinkoff)

Bernard J. Fried, J.

In this action, plaintiffs Aon Corporation and Aon Risk Services Northeast, Inc. (Aon Northeast) (collectively, Aon) seek damages and injunctive relief against defendant Michael Cusack, a former Aon Senior Vice President and Managing Director, and his new employer, defendant Alliant Insurance Services, Inc., as a result of their orchestration and participation in a massive raid on the clients and employees of plaintiffs' Construction Services Group (Aon CSG). After weeks of planning, while still employed by Aon, Cusack, along with Peter Arkley, the former Chief Executive Officer of Aon CSG, and other senior executives, abruptly resigned on June 13, 2011 to join Alliant, and 15 Aon clients moved their business to Alliant. That same day, 38 Aon CSG employees left to join Alliant, including seven who reported directly or indirectly to Cusack. Since then, 60 employees in total have left Aon to join Alliant, and Aon has received more than 100 broker of record letters from clients transferring more than $20 million in revenue from Aon to Alliant.

Based on these facts, on September 28, 2011, I issued a temporary restraining order enjoining Cusack from soliciting business from or entering into any business relationship with any Aon client or customer for whom Cusack was the producer or on whose account he worked; soliciting any Aon CSG employees to work for Alliant; or using any information downloaded [*2]from Aon's computer system. I also ordered Cusack to return to Aon any documents taken by him. I also granted Aon's request to amend the complaint to add Alliant as a defendant. On October 13, 2011, I likewise temporarily enjoined Alliant and its employees who were formerly employed by Aon Northeast and who were subject to restrictive covenants with Aon Northeast from soliciting business from or entering into any business relationship with any Aon CSG client; soliciting any Aon CSG employees to work for Alliant; or using any information belonging to Aon, including any information downloaded from Aon's computers and subsequently uploaded to Alliant's computers. I also ordered Alliant to return to Aon any documents taken by any former Aon employee.

After the temporary restraining orders were entered, discovery was conducted, including depositions, document exchange, and forensic examination of computer information. On November 9 and 10, 2011, I conducted a hearing on the preliminary injunction motion. In a decision and order dated December 20, 2011, I found that plaintiffs would likely succeed on their claims for breach of contract, breach of fiduciary duty, breach of the duty of loyalty, aiding and abetting breach of fiduciary duty, conspiracy, intentional interference with contractual relations, and tortious interference with prospective economic advantage. I then entered a preliminary injunction against Cusack and Alliant, restraining them from, under defined circumstances, soliciting business from former Aon CSG clients, and from soliciting Aon CSG employees to work for Alliant.

Motion Sequence Nos. 002 and 005 are consolidated for disposition. In Motion Sequence No. 002, Cusack moves, pursuant to CPLR 3211 (a) (7) and (a) (1), to dismiss the amended complaint for failure to state a claim. In Motion Sequence No. 005, Alliant moves, pursuant to CPLR 327 (a), to dismiss the second amended complaint on the ground of forum non conveniens.

As set forth below, Cusack's motion to dismiss is denied, except as to Aon's causes of action for misappropriation of trade secrets. Alliant's motion to dismiss on the ground of forum non conveniens is likewise denied.

The underlying facts are set forth in my December 20, 2010 decision and order, and will be referred to herein only as necessary for clarification.

Cusack's Motion to Dismiss (Motion Sequence No. 002)

"The scope of a court's inquiry on a motion to dismiss under CPLR 3211 is narrowly circumscribed" (P.T. Bank Cent. Asia v ABN AMRO Bank N.V., 301 AD2d 373, 375 [1st Dept 2003]). Thus, on "a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction" (Leon v Martinez, 84 NY2d 83, 87 [1994]). The court "must accept as true the facts as alleged in the complaint and submissions in opposition to the motion, accord plaintiffs the benefit of every possible favorable inference and determine only whether the facts as alleged fit within any cognizable legal theory" (Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414 [2001]).

Aon's breach of contract claims are grounded on the restrictive covenants contained in Cusack's agreements with Aon. Specifically, Cusack's January 1, 2006 employment agreement with Aon Northeast (the Employment Agreement) contained a "Covenant Not to Compete," pursuant to which Cusack expressly agreed, for a two-year period following the termination of his employment, not to compete directly or indirectly with Aon's business, including not entering into a business relationship with Aon's existing customers. The Employment Agreement also contained a "Covenant Not to Hire," pursuant to which Cusack agreed not to solicit any employees of Aon to leave Aon's employ, for a period of two years after the end of his employment. Finally, the Employment Agreement contained a section entitled "Trade Secrets and Confidential Information," which provided that Cusack could not disclose any trade secrets or confidential or proprietary information belonging to Aon, including client and customer lists, data, records, computer programs, and the like.

In addition to his obligations to Aon Northeast under the Employment Agreement, Cusack owed contractual obligations to plaintiff Aon Corporation under two stock incentive [*3]plans: the Aon Construction Group Performance Incentive Program (the Performance Plan), and the Aon Corporation Leadership Performance Program for 2009-2011 (the Leadership Program). Under both plans, Cusack received a grant of Aon Corporation common stock, in exchange for which he agreed to a Covenant Not to Compete and a Covenant Not to Hire substantially identical to those contained in the Employment Agreement. All of these agreements contained an Illinois choice of law provision.

In support of his motion to dismiss, Cusack argues that, because the Employment Agreement expired by its terms and was not renewed, all of the "terms" of the Employment Agreement expired on April 30, 2011 (Def Mem., at 4-5). I reject this argument. Section 3 (d) of the Employment Agreement provides that the restrictive covenants at issue survive the expiration of the agreement:

Survival of Certain Obligations. Upon the effective date of termination, or other expiration of this Agreement, the obligations of the parties under this Agreement, other than the Employee's obligations under Sections 3 (c), 4 (d) [Covenant Not to Compete], 4 (e) [Covenant Not to Hire], 5 [Company's Right to Injunctive Relief], 6 [Trade Secrets and Confidential Information], and 8 (e) [Agreement to Be Available in Future Proceedings], and the Company's obligations under Sections 3 (b) [severance under certain circumstances] shall cease; provided further that any other provision which contemplates performance or observance by either or both parties subsequent to any termination of this Agreement shall survive any termination of this Agreement and continue in full force and effect.

Cusack further argues that the contract claims, as well as the claim for breach of the covenant of good faith and fair dealing, must all be dismissed because he has no contractual relationship with or obligation to Aon Corporation, as Aon Corporation is not a party to the Employment Agreement (Def Mem., at 5-6). However, Aon Corporation is a proper plaintiff to this action by virtue of its own contractual agreement with Cusack, not because Aon Corporation is a party to the Employment Agreement. As a participant in both Aon Corporation's Performance Plan and Leadership Program, Cusack separately agreed to a Covenant Not to Compete and Covenant Not to Hire directly with Aon Corporation.

Cusack next argues that the restrictive covenants are "radically overbroad" because they are not sufficiently limited in geographic scope, and do not serve to protect any limited business interest. This argument fails, because I already determined, in my decision granting plaintiffs a preliminary injunction, that the covenants were enforceable (see Preliminary Injunction Decision, at 21). Likewise, Cusack's arguments that Aon has not sufficiently pled its causes of action for breach of fiduciary duty, breach of the duty of loyalty, conspiracy, intentional interference with contractual relations, and intentional interference with prospective economic advantage all fail, because, in the Preliminary Injunction Decision, I previously found that Aon sufficiently established a likelihood of success on the merits with respect to all of these claims (see id. at 24-26, 28-30).

However, I do agree with Cusack's arguments that Aon's fourth and fifth causes of action for misappropriation of trade secrets must be dismissed. After hearing testimony and receiving documents in evidence at the preliminary injunction hearing, I concluded that Aon had failed to establish a likelihood of success on the merits with respect to its claim that Cusack had misappropriated its confidential information because Aon had not shown that any such information was actually taken, or that it was disclosed to, or used by, Alliant (see id. 26-28). Accordingly, the fourth and fifth causes of action are dismissed.

Motion to Dismiss on Forum Non Conveniens Grounds (Motion Sequence No. 005)

Aon Northeast is a New York corporation. Aon CSG is a division of Aon Northeast with its largest office, by revenue, in New York (Arkley Dep., at 66 [10/31/11 Aff. of Shand Stevens, Exh A]). Jerold D. Hall, Alliant's corporate designee and chief operating officer, testified that Alliant's hiring of Aon's principal senior employees, including Cusack, began in New York, [*4]through Richard Ferrucci (Hall Dep., at 70 [Stephens Aff., Exh B]). Ferrucci, the head of Alliant's new Construction Services Group, works in Alliant's office in New York (id. at 48-49). Ferrucci, working from New York, initiated and orchestrated the raid by soliciting Aon producers across the United States, including Peter Arkley in California, Cusack in Boston, and Richard Leveroni in Connecticut (Hall Dep., at 52, 56, 70, 138).

The roughly 60 Aon employees who left for Alliant came from Massachusetts, Connecticut, New York, California, and other states (see Alliant's Answers and Objections to Plaintiffs' Expedited Discovery, dated July 15, 2011 [Stephens Aff., Exh F]). According to Alliant's disclosures, the clients that transferred from Aon to Alliant are located in New York, Connecticut, Massachusetts, New Hampshire, Nevada, Rhode Island, Colorado, Texas, Florida, Maryland, Hawaii, Washington and California (id).

Alliant, a Delaware corporation, is a privately held company, owned by the Blackstone Group, an investment bank headquartered in New York. Alliant's Board of Directors include at least two New York members, and members of Alliant's executive committee are also based in New York (Hall Dep,. at 50-51, 122; see also Alliant's corporate website).

In early June 2011, before they resigned from Aon, Arkley and Cusack obtained a broker of record letter from Turner Construction which transferred their surety business to Aon (9/26/11 Aff. of Kevin White, ¶ 11). They obtained this letter after meeting with Turner in New York on June 5, 2011 (id.). Cusack and Arkley concealed this broker of record letter from Aon and did not file with it with the insurance companies in order to perfect the transfer of the business (id.). Two days after they resigned on June 13, 2011, Cusack and Arkley met with Turner in New York, and obtained this same business for Alliant, their new employer (id.).

On the morning of June 13th, within an hour of their resignations, Arkley, Parizino and Caldwell, all represented by the same lawyer hired by Alliant, filed a lawsuit in Los Angeles, California. In the California action, Arkley, Parizino and Caldwell sought a declaration, via a temporary restraining order (TRO), that the Aon restrictive covenants were unenforceable, as contrary to California public policy. The California court denied the TRO, finding that the covenants were controlled by Illinois law, and were enforceable.

Aon then sued Alliant and Arkley in Illinois, and sought a TRO pending a preliminary injunction hearing. On June 17, 2011, the Illinois Chancery Court granted Aon's application, and issued a TRO prohibiting Alliant, Arkley, and all other former Aon CSG employees, including Cusack, from soliciting Aon's clients and employees, pending a preliminary injunction hearing. Subsequently, Alliant moved to dismiss the Illinois action on the ground of forum non conveniens, arguing that California was a more convenient forum than Illinois for Aon to litigate its claims against Arkley. The Illinois court granted the forum non conveniens motion.

In support of its motion to dismiss on forum non conveniens grounds, Alliant contends that Aon's case against Alliant belongs in California because: Alliant is based in California, and virtually all of the activities for which Aon seeks to hold Alliant responsible occurred in California; 52 of the 60 employees who quit Aon to join Alliant live and work in California; only four of those 60 have employment agreements, and those agreements provide for the application of Illinois law; all but one of the four employees with employment contracts live in California; under New York choice-of-law rules, this court will be required to apply California law to this dispute, at least for those who live in California; and this controversy has been the subject of an action pending in California for the last four months.

It is well settled that, New York courts "need not entertain causes of action lacking a substantial nexus with New York" (Martin v Mieth, 35 NY2d 414, 418 [1974]). The doctrine of forum non conveniens, codified in CPLR 327 (a), "permits a court to stay or dismiss such actions where it is determined that the action, although jurisdictionally sound, would be better adjudicated elsewhere" (Islamic Republic of Iran v Pahlavi, 62 NY2d 474, 478-479 [1984], cert denied, 469 US 1108 [1985]). The central focus of the forum non conveniens inquiry is to ensure that trial will be convenient, and will best serve the ends of justice (see Piper Aircraft Co. v Reyno, 454 US 235 [1981]; Capital Currency Exch., N.V. v National Westminster Bank PLC, [*5]155 F3d 603 [2d Cir 1998], cert denied 526 US 1067 [1999]). If the balance of conveniences indicates that trial in plaintiff's chosen forum would be unnecessarily burdensome for the defendant or the court, then dismissal is proper (see id.).

New York courts consider the availability of an adequate alternative forum and certain other private and public interest factors when evaluating New York's nexus to a particular action, and deciding whether to dismiss an action on the ground of forum non conveniens (Islamic Republic of Iran v Pahlavi, 62 NY2d 474, supra). The burden is on the defendant challenging the forum to demonstrate the relevant private or public interest factors which militate against accepting the litigation (Brodherson v V. Ponte & Sons, 209 AD2d 276, 277 [1st Dept 1994] ["It is well settled that the burden of establishing that New York is an inconvenient forum rests squarely with the party challenging that forum"]).

That burden, however, is a difficult one to satisfy (Bank Hapoalim (Switzerland) Ltd. v Banca Intesa S.P.A., 26 AD3d 286 [1st Dept 2006]). "Generally, unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed'" (Anagnostou v Stifel, 204 AD2d 61, 61 [1st Dept 1994] [citation omitted]); see also Sweeney v Hertz Corp., 250 AD2d 385, 386 [1st Dept 1998] ["It is well settled that a plaintiff's choice of forum should not be disturbed absent a balance of factors strongly favoring the defendants"]). In addition, plaintiff Aon Northeast is a New York corporation and while "[a] defendant has a heavy burden in attempting to establish that New York is an inappropriate forum ... This burden becomes even more onerous where the plaintiff is a New York resident, as is the case here" (Highgate Pictures, Inc. v De Paul, 153 AD2d 126, 129 [1st Dept 1990]; Kronengold v Hilton Hotels Corp., 166 AD2d 325 [1st Dept 1990]).Although not every factor is necessarily articulated in every case, collectively, the courts consider and balance the following factors in determining an application for dismissal based on forum non conveniens: existence of an adequate alternative forum; situs of the underlying transaction; residency of the parties; the potential hardship to the defendant; location of documents; the location of a majority of the witnesses; and the burden on New York courts (see Islamic Republic of Iran v Pahlavi, 62 NY2d 474, supra; World Point Trading PTE, Ltd. v Credito Italiano, 225 AD2d 153 [1st Dept 1996]; Evdokias v Oppenheimer, 123 AD2d 598 [2d Dept 1986]). The state of plaintiff's residence "is generally the most significant factor'" in determining a forum non conveniens motion (Sweeney v Hertz Corp., 250 AD2d at 386 [citation omitted]). A motion to dismiss on the ground of forum non conveniens is subject to the discretion of the trial court, and no one factor is controlling (Islamic Republic of Iran v Pahlavi, 62 NY2d 474, supra; see also Matter of New York City Asbestos Litigation, 239 AD2d 303 [1st Dept 1997])

Here, a balancing of the relevant factors reveals that Alliant has not met the "heavy burden" of demonstrating that this action should be dismissed on forum non conveniens grounds (see Yoshida Printing Co. v Aiba, 213 AD2d 275 [1st Dept 1995]). To the contrary, each one of the factors demonstrates that New York is the appropriate forum for this dispute. Thus, Alliant's motion to dismiss is denied.

First, the record indicates that there is a substantial nexus between this action and New York. The location of the conduct at issue is New York and the Northeast. Aon's claims center on misconduct that was begun, planned and executed in or around New York, and consummated in New York and at least 12 other states. Ferrucci, the head of Alliant's new Constructive Services Group, which consists almost entirely of Aon employees hired during the raid, runs Alliant's Construction Services Group, a nationwide operation, out of New York. Arkley was recruited and interviewed by Ferrucci in New York. Cusack was interviewed and recruited in New York by Ferrucci and Hall. While Arkley and Cusack were still Aon employees, they came to New York and solicited Turner's surety business for Aon. After they left Aon and began working for Alliant, Arkley and Cusack came again to New York to see Turner, which then switched its business to Alliant.

Given this evidence, it is clear that there is a strong nexus between New York and the misconduct alleged in this action. (see Nordkap Bank AG v Standard Chartered Bank, 32 Misc [*6]3d 1216[A], 2011 NY Slip Op 51342[U], *4 [Sup Ct, NY County 2011] [denying forum non conveniens motion on ground that all transactions at issue took place in New York, and that thus, New York had a "strong nexus" to the dispute]; see also Bodea v Trans Natl. Express, 286 AD2d 5 [4th Dept 2011] [denying forum non conveniens motion of non-resident defendant against non-resident plaintiff where accident at issue occurred in New York]).

Although Alliant relies upon the fact that the Illinois Action was dismissed on the ground of forum non conveniens in favor of California, in support of its argument that the nexus of this dispute is in California, I reject this argument. While the Illinois Action arose out the same raid of Aon CSG, that lawsuit involved different parties, including three individual California residents. The Illinois court found that none of the Aon plaintiffs were residents of Illinois, that no tort had been committed in Illinois, that no solicitation had been made in Illinois, and that the raid had not been planned or executed in Illinois. That is not the case here.

New York is also a proper forum because Aon Northeast, Cusack's previous employer, is a resident of New York. Where, as here, the plaintiff is a resident of New York, the defendant bears a "heavy burden in attempting to establish that New York is an inappropriate forum" (Highgate Pictures, Inc. v De Paul, 153 AD2d at 126; Chestnut Ridge Air, Ltd. v 1260269 Ontario, Inc., 13 Misc 3d 807, 811 [Sup Ct, NY County 2006] ["a New York plaintiff will not be deprived of its home forum unless it plainly appears that New York is an inconvenient forum and that another is available which will best serve the ends of justice and convenience of the parties'"] [citation omitted]). Alliant does not even come close to meeting its "heavy burden" of depriving Aon Northeast of its home forum.

Alliant has also failed to show that this litigation would be an "undue burden" on a New York court. To the contrary, New York has a vested interest in this dispute, given the facts that Aon Northeast is a New York resident; all defendants regularly conduct business in New York and are subject to jurisdiction here; and Cusack allegedly committed breaches of his employment agreement and torts in New York.

Alliant also argues that because it is headquartered in Orange County, California, defending this action in New York would be an "unwarranted burden." However, courts have repeatedly held that large corporations with ample resources have little difficulty in bringing foreign witnesses or documents to New York courts (see Nordkap Bank AG v Standard Chartered Bank, 32 Misc 3d 1216[A] at *4 ["defendant is a large international bank with ample resources to bring witnesses to New York if needed, a fact which makes any hardship minimal"]; Mionis v Bank Julius Baer & Co., 9 AD3d 280, 282 [1st Dept 2004] [foreign defendant had a New York branch, and "any hardship in bringing witnesses or documents in New York would be minimal, since both parties consist, at least in part, of multinational corporations with ample resources"]).

Moreover, it is clear that if a defendant, like Alliant here, has a presence in New York, or regularly transactions business in New York, courts will not give credence to the complaint that New York is an inconvenient forum (Weston v Club Mediterranee, S.A., 197 AD2d 453, 545 [1st Dept 1993] [rejecting non-resident defendants' forum non conveniens motion, and holding that "[t]he burdens of litigation in a foreign country is part of the price which may properly be demanded of those who extensively engage in international trade"] [citation omitted]).

Thus, contrary to its argument, there can be no undue hardship on Alliant resulting from defending this case in New York. Alliant is a billion-dollar global insurance service company, with six offices in New York alone. Moreover, Ferrucci, the leader of its new-formed Construction Services Group, is headquartered in New York (Hall Dep., at 50-51). In addition, at least two of Alliant's board members are located in New York, and members of Alliant's executive committee are also based in New York (Hall Dep., at 121-122). Accordingly, because Alliant clearly has a significant presence in New York, and also has "ample resources" to bring relevant witnesses or documents to New York, it is not unduly burdened by litigating here.

Courts also consider the viability of an alternative forum for the dispute (Highgate Pictures, Inc. v De Paul, 153 AD2d 126, supra). Although Alliant argues that "California [*7]remains a logical alternative forum" to this dispute (Def Mem., at 14), I reject this argument, as Alliant fails to demonstrate that Cusack is subject to jurisdiction in California.

Finally, Alliant argues that California law applies to this action, and that "the necessity of applying foreign law is the strongest factor in favor of dismissal" on this motion (id. at 8-12). However, contrary to Alliant's arguments, California law has no applicability to this action, as the contracts at issue specify the application of Illinois law. Moreover, even if California law did apply, the Appellate Division, First Department, has routinely rejected the notion that the necessity of applying foreign law should result in a forum non conveniens dismissal, and has repeatedly held that New York Courts are capable of interpreting and applying the law of other states, and even foreign countries (see Travelers Cas. and Sur. Co. v Honeywell, Intl., Inc., 48 AD3d 225, 226 [1st Dept 2008] ["while the choice-of-law issues presented by this litigation have not yet been adjudicated, New York courts are capable of applying New Jersey law should that necessity arise"]; Mionis v Bank Julius Baer & Co., 9 AD3d at 282 ["the courts of this State are fully capable of applying Greek law, should such law be found governing in this case"]; Yoshida Printing Co. , Ltd. v Aiba, 213 AD2d at 275 ["Neither the fact that plaintiff is a Japanese corporation, whose witnesses may speak Japanese, nor the potential necessity of applying Japanese law, renders New York an inconvenient forum"]).

Accordingly, a balancing of the equities demonstrates that New York is an appropriate forum, and that no superior forum for this matter exists. Therefore, Alliant's motion to dismiss on forum non conveniens grounds is denied.

I have considered the remaining arguments, and find them to be without merit.

Accordingly, it is

ORDERED that the motion of defendant Michael Cusack to dismiss the amended complaint (Motion Sequence No. 005) is granted to the limited extent that the fourth and fifth causes of action for misappropriation of trade secrets are dismissed, and the motion is denied in all other respects; and it is further

ORDERED that the motion of defendant Alliant Insurance Company for dismissal of the second amended complaint on the ground of forum non conveniens is denied; and it is further

ORDERED that defendants are directed to serve an answer to the second amended complaint within 20 days after service of a copy of this order with notice of entry.

Dated: February __, 2012

ENTER:

_______________________

J.S.C.