Breach of contract involving California prohibition on non-compete agreements. Defense verdict. Orange County.

Facts and Background

• Facts and Background:

  Neal Rubin was a highly experienced employee benefits insurance producer who began employment with CBIZ in March 2012 after having developed a substantial book of business for his own company throughout his 30-year career.

  CBIZ and Rubin entered into an employment agreement that contained a provision which, on its face, required Rubin to purchase CBIZ clients that moved with him should Rubin leave the employ of CBIZ. In June 2016, Rubin left CBIZ to work for defendant Millennium Corporate Solutions. Following his CBIZ exit, Rubin sent a letter to his pre-CBIZ client network notifying of his new contact information at his new place of business. Although Rubin did not actually solicit any clients away from CBIZ, some of these pre-CBIZ clients followed him to Millennium.

• Plaintiff's Contentions:

  CBIZ contended that Rubin breached the provision of the employment agreement that required Rubin to purchase all clients that moved with him to Millennium for the amount of revenue CBIZ received from any such client in the preceding 24 months (the "buy back" provision).

  Throughout the entire five-year period this case was in pre-trial litigation, CBIZ sought approximately $750,000 in compensatory damages from Rubin, plus pre-judgment interest and punitive damages.

  At trial, however, CBIZ dropped the punitive damage claim and sought only the $437,242 (plus pre-judgment interest) for the client accounts it claimed it purchased from Rubin ("Exhibit C clients"). Specifically, CBIZ contended its payment of an "elevated commission" (50% for the first two years) to Rubin for his pre-CBIZ client accounts listed in Exhibit C to the employment agreement and brought to CBIZ by way of broker of record appointment within his first year of employment constituted an agreement to purchase/sell Rubin's book of business and goodwill, thereby falling within the statutory exception (Bus. & Prof. Code, § 16601) to the California's broad prohibition of any restraint of trade (Bus. & Prof. Code, § 16600).

  CBIZ also alleged that Rubin's new employer, Millennium, acted wrongfully by, among other things, conspiring with Rubin, and failing to discharge its alleged duty to honor the buy-back provision; hence, CBIZ claimed that Millennium owed CBIZ substantial restitution for the revenues Millennium allegedly wrongfully obtained.

• Defendant's Contentions:

  Rubin contended the buy-back provision was an illegal and unenforceable restraint on trade pursuant to California Business and Professions Code section 16600. Rubin also contended: the statutory exception (Bus. & Prof. Code, § 16601) had no application because, most notably, the fully integrated employment agreement which, by its terms, represented the entire understanding between the parties, did not include any language whatsoever providing that the parties agreed that CBIZ purchased and/or that Rubin sold his book of business and goodwill. The "elevated commission" agreement regarding the Exhibit C clients was merely a product of negotiations to incentivize a high-quality producer like Rubin to work for CBIZ in the Orange County marketplace – a location in which CBIZ lacked any physical presence before hiring Rubin.

  Millennium claimed it did absolutely nothing wrong – certainly, it had no duty whatsoever to CBIZ regarding agreements it may have previously entered into with former employees and, moreover, saw absolutely nothing in the employment agreement which said that CBIZ purchased or Rubin sold a book of business and/or goodwill.