A legal struggle between insurance and surety brokerages Aon and Alliant entered a new contentious phase on Jan. 17 as attorneys for both sides clashed in a Manhattan courtroom over e-mailed party invitations. The wrangling over the invitations is the latest episode in a complex battle over the alleged poaching of 60 employees and 100 accounts from Aon by Alliant.
Had the party invitations been sent to contractors by a former Aon employee who switched last June to work for competitor Alliant? Did the invitations constitute a solicitation that violated non-compete clauses in employment contracts signed by some of the key former Aon executives?
Based on the invitations, an attorney for Aon asked New York State Supreme Court Judge Bernard Fried to hold Alliant in contempt for allegedly violating the judge's preliminary injunction, issued last month, limiting some former Aon Risk Services Northeast employees' contact with clients. The attorney, Shand Stephens, suggested that the invitations to the Jan. 12 party were a solicitation of construction clients that amounted to "driving a freight train" through the judge's order.
Jeffrey Klein, Alliant's attorney, replied that the invitations were consistent with the judge's ruling but agreed to produce the list of invitees for Fried later in the month.
Klein says Fried's preliminary injunction narrowed the limits on the former Aon Risk Services Northeast employees that Fried had imposed in a prior temporary restraining order. Fried limited only those who had restrictive covenants in their employment agreements with Aon, but he required them to "refrain from soliciting business or doing business with any client or customer for whom the former Aon employee was the producer or on whose account he or she worked during the year prior to June 13."
In the prior injunction Fried placed restrictions on Michael Cusack, one of the key Aon executives who had switched to Alliant, Alliant Insurance Services and any construction group employees formerly employed by Aon Risk Services Northeast.
June 13 was the day that Cusack and Peter Arkley, another key Aon executive with restrictive covenants in his contract, resigned from Aon and joined Alliant. Within 72 hours, 50 Aon construction group employees had made the switch; in the following weeks, the total reached 60. All together, about 100 construction industry accounts—including Tutor Perini—worth about $24 million in annual revenue switched to Alliant from Aon in the weeks following the migration.
Change of Status
The new hires quickly made Alliant a significant player in construction insurance and surety. Aon, for its part, has a much bigger construction industry business that is supported by a staff of hundreds.
The unsettled question at the nub of the lawsuits is whether the departures involved solicitation of clients that violated non-compete clauses in employment contracts, as Aon claims, or whether the departing brokers made no solicitation violating their Aon contracts, asAlliant maintains.
A key part of Alliant's defense is the primacy of the relationship between individual brokers-producers and their clients. Arkley has close relationships with some of the biggest companies in the industry, including Turner and Tutor Perini, where he has been a director. Some of these relationships originated before he joined Aon. Unconvinced by Alliant's argument, Fried in his injunction termed the switches to Alliant from Aon "a systematic and coordinated raid."
Based on broker defections in the past years that had been smoothed over with payments, Alliant had set aside about $19 million to settle any claims against it by Aon, court filings show.
Aon appears to want significantly more. The accounts that have left Aon for Alliant will stay, but there could be a large damage award if the matter is ever fully tried on its merits, says Stephens, Aon's attorney.
In its argument against the injunction subsequently granted to Aon by Fried, Alliant says that "it is common for the loss of clients and personnel to be monetized when brokers move between firms." Both Alliant and Aon have acquired other brokerages to obtain clients and settled disagreements over books of business through payments, Alliant claims.
Even with the departure of so many construction accounts, Alliant argued, Aon's construction group remains "stronger than the construction services groups at Willis and Marsh, its largest competitors." Since the 60 employees departed to Alliant, Aon has hired several high-level executives to replace those who left in the June 13 migration. According to Alliant, Aon has hired Paul Healy, former Willis executive vice president, and former Marsh Managing Director David Langman.
In its suit, Aon has noted that Alliant also entered into employment agreements with the former Aon employees and that these agreements contained restrictive covenants, or non-compete clauses.