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Farm Bureau Life Insurance Co. v. Dolly

Supreme Court of South Dakota

March 21, 2018

FARM BUREAU LIFE INSURANCE COMPANY and FARM BUREAU PROPERTY & CASUALTY INSURANCE COMPANY, Plaintiffs and Appellants,
v.
RYAN DOLLY, Defendant and Appellee.

          CONSIDERED ON BRIEFS ON JANUARY 8, 2018

          APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE MATTHEW M. BROWN Judge

          CASSIDY M. STALLEY of Lynn, Jackson, Shultz & Lebrun, P.C. Rapid City, South Dakota Attorneys for plaintiffs and appellants.

          SARAH E. BARON HOUY KELSEY B. PARKER of Bangs, McCullen, Butler, Foye & Simmons, LLP Rapid City, South Dakota Attorneys for defendant and appellee.

          GILBERTSON, Chief Justice

         [¶1.] Farm Bureau Life Insurance Co. and Farm Bureau Property and Casualty Insurance Co. appeal the circuit court's partial denial of their request for preliminary injunctive relief against their former agent Ryan Dolly. They argue the court erred by enjoining Dolly only from soliciting business from Farm Bureau's existing customers without also enjoining Dolly from selling to those customers. We affirm.

         Facts and Procedural History

         [¶2.] On December 10, 2012, Dolly entered into two agency contracts with Farm Bureau Life Insurance Co. and Farm Bureau Property and Casualty Insurance Co. (collectively, "Farm Bureau"). Under the contracts, Dolly operated as a captive agent-an independent contractor limited to selling insurance and financial products produced or approved by Farm Bureau. Unlike an independent insurance agent, Dolly did not obtain ownership of renewals on the policies he sold; Farm Bureau retained ownership. Dolly's contracts with Farm Bureau were terminated on January 12, 2017, after Dolly notified Farm Bureau that he was leaving to work for a competing insurer, American National Insurance Co.

         [¶3.] The contracts at issue contain provisions that expressly restrain Dolly's post-termination conduct. Paragraph 11 of the contracts states, in part:

It is hereby understood and agreed that upon the termination of this . . . [c]ontract for any reason, [Dolly] will neither sell nor solicit, directly or indirectly, or initiate replacements or exchanges of any insurance or annuity product, with respect to any policyholder of [Farm Bureau], its subsidiaries or affiliates or any company with which [Farm Bureau] has a marketing agreement, within any counties in which [Dolly] sold or serviced any products pursuant to this [c]ontract. . . . This provision will be enforceable for a period of eighteen (18) months following the termination of this [c]ontract.

         And paragraph 18 states, in part:

In performing his . . . duties as an [a]gent, [Dolly] will have access to and receive certain confidential or proprietary information from or on behalf of [Farm Bureau] (hereinafter "Confidential Information"). [Dolly] shall take all reasonable steps necessary to protect the confidential and proprietary nature of all Confidential Information . . . . [Dolly] shall not directly or indirectly disclose or make available to any third party any Confidential Information. [Dolly] agrees not to appropriate any Confidential Information for his . . . own use either during the course of or subsequent to termination of this [c]ontract. Confidential Information shall include, but not be limited to, any information received by [Dolly] from or on behalf of [Farm Bureau], including but not limited to customer and consumer information.

Less than three months after leaving Farm Bureau, Dolly sold American National insurance policies to clients to whom he had previously sold Farm Bureau policies.

         [¶4.] On April 7, 2017, concluding that Dolly had breached paragraphs 11 and 18 of the agency contracts, Farm Bureau filed an action against Dolly seeking damages and injunctive relief. That same day, Farm Bureau also filed a motion requesting a temporary restraining order and a preliminary injunction. On April 11, the circuit court granted Farm Bureau's request for a temporary restraining order and enjoined Dolly from "selling or soliciting, or initiating replacements or exchange of any insurance or annuity product, directly or indirectly, to [Farm Bureau's] policyholders within the counties Dolly sold [Farm Bureau's] insurance products for a period of eighteen months from January 12, 2017."

         [¶5.] On April 18, 2017, the circuit court held an evidentiary hearing to consider Farm Bureau's request for a preliminary injunction. Dolly testified at the hearing. On cross-examination, he admitted to having direct contact with, and selling replacement policies to, Farm Bureau's existing customers:

[Farm Bureau's attorney]: Okay. Since leaving Farm Bureau, you've been posting to Facebook, signing customers to American National, and you've had direct contact with Farm Bureau policyholders; right?
[Dolly's attorney]: I'm going to object. It's compound.
[Circuit court]: Sustained.
[Farm Bureau's attorney]: You've texted, e-mailed, and contact-directly contacted Farm Bureau policyholders; right?
[Dolly's attorney]: I'm going to object to the extent the question is vague and doesn't seek to clarify who initiated the contact.
[Circuit court]: Well, she said you have. Set a time frame.
[Farm Bureau's attorney]: Since leaving Farm ...

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