Two owners earned tens of millions - the fine print still caught them
A federal appeals court has ruled that two high-earning insurance producers breached their contracts by resigning overnight and moving to a rival firm.
The Eighth Circuit's August 26 decision reversed several trial-court rulings that had favored the pair, former producer members of Lockton, a Missouri-based insurance brokerage. Both quit in 2022, declared their memberships terminated "effective immediately," and joined competitor Alliant.
The court read Lockton's operating agreement to mean what it said. Producers "may be terminated" on 30 days' written notice - and the court held that was the only way out, not one option among several. By leaving immediately and joining a rival before their interests ended, the two breached both the notice rule and the fiduciary duties they owed as members. That reversed the trial court, which had treated the notice as optional.
These were owners, not ordinary staff. Over 15 years, one producer earned roughly $15.7 million and the other about $14.3 million in profit distributions. The court leaned on that ownership status, noting California - where both lived and worked - is far less hostile to competitive restrictions tied to business owners than to those binding rank-and-file employees.
That distinction mattered because the whole fight was about which state's law applied. Lockton had lobbied Missouri's legislature to make its restrictive covenants "more friendly and enforceable," as one person who negotiated the agreements put it, then wrote Missouri law and a Missouri forum into its contracts. The court upheld those clauses, even though the pair serviced mostly California clients from California offices.
It also upheld the non-solicitation covenants - not as written, which barred contact with every Lockton client, but trimmed to the customers each producer actually served: 79 accounts in one case, 49 in the other. Missouri lets courts narrow an overbroad covenant rather than strike it. The covenants ran two years in one case and four in the other.
Lockton, which hired three major firms and spent about $9 million, kept its fee awards of roughly $4.9 million and $4.3 million. The court also opened the door to recovering its California litigation costs as damages.
One producer alleged they left after being "harassed and retaliated against" for raising concerns about the firm's "workplace culture and staffing procedures" - claims filed in a separate California suit and not decided here.
A dissenting judge would have dismissed the case entirely for lack of jurisdiction, calling Lockton's federal trade-secrets claim "a ruse to get into federal court." The court sent the case back to set damages.
