Nebraska Court Upholds Non Solicitation Agreement Post Merger

Interesting decision from Nebraska this month regarding enforcement of a nonsolicitation agreement. In Aon Consulting, Inc. v. Pearson the employee signed a non solicitation agreement in 1981 with his original employer, “A&A”.  The employee was an account executive selling and servicing group health insurance plans.  He worked his way up in the company, eventually becoming a vice president and manager of two regional offices.  In 1997, Aon Consulting merged with A&A and employee remained with Aon as an officer and employee until 2001, when he resigned and went to work for a competitor.  In his new employment the employee chose to solicit customers with whom he had worked at Aon.  Aon sued the employee for damages due to lost business.  The Nebraska Court of Appeals affirmed the $123,063 judgment against the employee for unlawfully taking business away from Aon in breach of contract.

Interestingly, in anticipation of the merger the employee was asked to sign a new nonsolicitation agreement that specifically stated it was assignable without his consent and he refused.  Also, prior to taking the job at the competitor the employee did seek legal advice and was told that the agreement could not be assigned to Aon by A&A and therefore was invalid.  Neither of these facts apparently carried any weight with the court however.

I think two things are key to the outcome in this case.  The first is the fact that the documents governing the merger of the two companies stated the merger was to be governed by Maryland law, and Maryland has a specific statute which the court interpreted to mean that covenants not to compete (and non solicitation agreements) were assets that could be transferred through a merger.  The second crucial fact was the employee’s choice to solicit Aon customers once at his new place of employment.  The court made a distinction between “ordinary competition” and “unfair competition”, stating the 1981 nonsolicitation agreement was meant to protect unfair competition and protect A&A/Aon’s customer goodwill.  Evidence in the record demonstrated that employee could have worked for competitor and met his goals without contacting former Aon customers, but he chose to call on customers with whom he had a prior relationship.  As is often the situation in these cases, the court ruled against the party who arguably had unclean hands.