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Church Mutual Insurance Co. v. Smith

United States District Court, W.D. Kentucky, Louisville Division

December 1, 2017

CHURCH MUTUAL INSURANCE COMPANY, PLAINTIFF
v.
VON SMITH, and CLAUDE REYNOLDS INSURANCE AGENCY, INC. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          Joseph H. McKinley, Jr., Chief Judge.

         This matter is before the Court on Defendant Claude Reynolds Insurance Agency's Motion for Partial Summary Judgment [DN 130]. Fully briefed, this matter is ripe for decision. For the following reasons, the Court holds that Defendant's Motion for Partial Summary Judgment is GRANTED IN PART and DENIED IN PART.

         I. Background

         Plaintiff Church Mutual Insurance Company brings this case against its former employee, Von Smith, and the company where he worked after leaving its employment, Claude Reynolds Insurance Agency. This Court previously summarized the facts of this case in deciding Defendant's Motion to Dismiss as follows:

         Church Mutual Insurance Company (“Church Mutual”) provides casualty and property insurance for churches and other religious institutions. Over many years, it has built a large electronic database that it claims contains a vast collection of proprietary information about its customers. This database includes contact information, details on existing policies, general underwriting policies, bids made to potential customers, and so on. It relies on “regional representatives” who service specific geographic areas. These regional representatives sell policies, service existing customers, and help the company build goodwill. To that end, each regional representative receives access to the electronic database of proprietary information.

         To protect this supposed proprietary information, Church Mutual utilizes password protection and data encryption. Additionally, regional representatives may access only the proprietary information pertinent to their assigned geographic areas. This prevents disgruntled or nefariously enterprising employees from leaving the company and accessing all of the company's data for the benefit of a competitor. Regional representatives must also sign non-disclosure agreements for the proprietary information, along with non-compete and non-solicitation agreements.

         Von Smith was a regional representative. He served various counties in western Kentucky. When hired in 2008, he signed an employment contract (“the 2008 Contract”) that included the non-disclosure, non-compete, and non-solicitation agreements. Originally, the non-compete and non-solicitation agreements extended for three years after his departure from Church Mutual. The contract's language also stipulated that he understood the electronic database was proprietary information, he knew he had no right to it, and he recognized the remedies Church Mutual would pursue if he violated the agreements. In December 2013, Smith signed a new contract (“the 2013 Contract”) with Church Mutual. This time, the non-compete and non-solicitation agreements extended for only two years. In March 2014, his employment with Church Mutual ended.

         Within mere days of the end of his Church Mutual tenure, Smith took employment with the Claude Reynolds Insurance Agency (“CRA”). CRA competes against Church Mutual. Three months after he left Church Mutual, Church Mutual began receiving tips that he was breaching his non-disclosure, non-compete, and non-solicitation agreements. At least three churches- former clients of Church Mutual that Smith serviced when he was at the company-admitted that Smith reached out to them and helped lure them away from Church Mutual. Church Mutual even received word from a former customer that, while at CRA, Smith telephoned the customer and told it that its Church Mutual policy was about to expire and that it could save money by buying a policy from CRA instead of renewing with Church Mutual. Because of these tips, Church Mutual sent Smith a cease and desist letter in July 2014. The letter warned that Church Mutual would take legal action against Smith and CRA. Smith never responded. Church Mutual sent a second letter in August 2014, and this time it also sent a copy to CRA. In August and September 2014, Church Mutual learned of other former customers whom Smith had contacted while at CRA.

         Church Mutual sued in November 2014. Towards the end of November 2014, the late Senior Judge John G. Heyburn II granted Church Mutual's motion for a temporary restraining order [DN 9]. In December 2014, CRA filed a motion to dismiss [DN 12], claiming that all claims against it should be dismissed pursuant to lack of subject matter jurisdiction and, in the alternative, failure to state a claim. This Court found that federal subject matter jurisdiction did exist and Church Mutual adequately stated a claim for all but one count of the Complaint. (Mem. and Opinion [DN 32].) Count X, asserting a claim of permanent injunction, was dismissed since injunctions are remedies rather than causes of action. However, because injunctive relief is still a requested remedy within the Complaint, this Court described CRA's motion to dismiss victory as “pyrrhic.”

         Then in November 2015, two additional parties joined this lawsuit. Brotherhood Mutual Insurance Company and Selective Insurance Company of America each utilize CRA representatives to sell their insurance policies. Both parties intervened in this lawsuit pursuant to Federal Rule of Civil Procedure 24 for the limited purpose of seeking a protective order for discovery requests propounded by Church Mutual. (Motions to Intervene [DN 37 & 41].) Magistrate Judge Lindsay entered a Protective Order [DN 81] on August 15, 2016.

         On September 9, 2017, CRA filed this Motion for Partial Summary Judgment. CRA claims that it is entitled to judgment as a matter of law on all of the claims remaining against it.

         II. Standard of Review

         Before the Court may grant a motion for summary judgment, it must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of specifying the basis for its motion and identifying that portion of the record that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies this burden, the non-moving party thereafter must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

         Although the Court must review the evidence in the light most favorable to the non-moving party, the non-moving party must do more than merely show that there is some “metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, the Federal Rules of Civil Procedure require the non-moving party to present specific facts showing that a genuine factual issue exists by “citing to particular parts of materials in the record” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute[.]” Fed.R.Civ.P. 56(c)(1). “The mere existence of a scintilla of evidence in support ...


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