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W. R. Berkley Corp. v. Niemela

United States District Court, D. Delaware

October 25, 2019

W.R. BERKLEY CORPORATION, Plaintiff/ Counterclaim-Defendant,
JASON R. NIEMELA, Defendant/ Counterclaim-Plaintiff.

          Scott A. Holt, Curtis J. Crowther, Young Conaway Stargatt & Taylor, LLP, Wilmington, DE. Counsel for Plaintiff, Counterclaim Defendant.

          John A. Sensing, Jesse L. Noa, Potter Anderson & Corroon, LLP, Wilmington, DE. Counsel for Defendant and Counterclaim Plaintiff.



         This case involves the enforcement of an anti-recruitment covenant, sometimes also called a non-solicitation clause or an anti-raiding clause. Plaintiff W. R. Berkley Corporation (“Berkley”) commenced this action against its former employee Defendant Jason Niemela (“Niemela”), seeking to recapture the value of certain stock units previously awarded to Niemela through several Restricted Stock Unit Agreements (“RSU Agreements”) and a Long-Term Incentive Program Agreement (“LTIP Agreement, ” and collectively, the “Agreements”). The Agreements grant Berkley recapture rights if Niemela breaches a covenant not to recruit employees of his former employer Berkley Aviation, which is an operating unit of a Berkley subsidiary.[1] Currently pending before the Court are the parties' cross-motions for summary judgment. (D.I. 87; D.I. 91). The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332. For the following reasons, the parties' motions for summary judgment are DENIED.

         I. BACKGROUND

         Niemela was employed as President of Berkley Aviation from December 2005 to April 2016. (D.I. 20 ¶ 8; D.I. 92-1, Ex. 15). Berkley Aviation underwrites aviation insurance. (D.I. 112 ¶¶ 2, 8). During his employment, Niemela signed several RSU Agreements and one LTIP Agreement. (D.I. 90 at ¶ 219 - A313). Each agreement granted Niemela restricted stock units as employee performance awards and provides that the stock units can be forfeited or recaptured if certain events occur. (See, e.g., Id. at A230 (§ 3(d)).

         Relevant here, the Agreements provided that the value of the stock units can be recaptured if a grantee, such as Niemela, engages in “Competitive Action” within one year of the termination of his employment (hereinafter, “recapture rights”). (See, e.g., Id. at ¶ 230, § 3(d)(B)). The definition of Competitive Action includes actions by a grantee, “on behalf of any person or entity engaged in business activities competitive with the business activities of the Company, ” to “solicit[] or induce[], or in any manner attempt[] to solicit or induce, any person employed by, or as an agent of, the Company to terminate such person's employment with the Company, ” (hereinafter, “the anti-recruitment covenant”). (Id. at ¶ 231, § 3(e)(iii)). Pursuant to the Agreements, “[t]he determination of whether the Grantee has engaged in a Competitive Action . . . shall be made by the Committee in its sole and absolute discretion.” (Id.). The “Committee” refers to the Compensation Committee of the Board of Directors of Berkley. (Id. at ¶ 229, § 1).

         In April 2016, the same month he submitted his resignation letter, Niemela established Air Centurion Insurance Services, LLC (“Air Centurion”). In October 2016, three employees resigned from Berkley Aviation and started working at Air Centurion. (D.I. 112 ¶¶ 13-14). At a meeting on December 20, 2016, the Committee decided that Niemela had engaged in Competitive Action by recruiting the three former employees to work for Air Centurion, which is a business that competes with Berkley Aviation. (Id. ¶¶ 41, 46). The Committee further decided that the Company should exercise its rights under the Agreements to recapture the value of the awarded stock units. (D.I. 1 ¶ 31).

         Niemela denies that he solicited the three former employees and claims that each of them responded to a online job advertisement that he posted on September 30, 2016. (D.I. 20 ¶¶ 26, 33). Berkley believes the Craigslist ad was a ruse, because it did not name the hiring company, it did not provide job titles or job descriptions, all three former employees responded to the ad within one day of its posting, and those are the only three employees Niemela hired at his new company. (D.I. 86 ¶¶ 4-9). On January 11, 2017, Berkley filed this action to enforce its contract rights. (Id.).


         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party bears the burden of demonstrating the absence of a genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n.10 (1986). A party asserting that a fact cannot be - or, alternatively, is - genuinely disputed must support its assertion either by citing to “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for the purposes of the motions only), admissions, interrogatory answers, or other materials, ” or by “showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1)(A) & (B). If the moving party has carried its burden, the nonmovant must then “come forward with specific facts showing that there is a genuine issue for trial.” Matsushita, 475 U.S. at 587 (internal quotation marks omitted). The Court will “draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000).

         To defeat a motion for summary judgment, the non-moving party “must present more than just bare assertions, conclusory allegations or suspicions to show the existence of a genuine issue.” Podobnik v. U.S. Postal Serv., 409 F.3d 584, 594 (3d Cir. 2005) (internal quotation marks omitted). However, the “mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment;” a factual dispute is genuine only where “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Id. at 249-50 (internal citations omitted).


         Each party asks the Court to enter judgment in its favor on Berkley's claim that it has the right, under the Agreements, to recapture the value of the previously awarded stock units, because Niemela breached the anti-recruitment covenants. Before the Court can address the merits of that issue, however, it must first address several threshold issues raised by Niemela, including: (1) whether California or Delaware law governs the Agreements; (2) whether the recapture rights are unenforceable penalties; (3) whether the ...

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