We all know lateral moves by lawyers can be fraught, what with squabbles over notice provisions and the return of capital—not to mention the occasional firmwide nasty email.

But bar rules put the kibosh on outright non-compete clauses. If lawyers want to leave one firm for another, and their clients want to follow, well, that's life.

Count yourselves lucky.

Because wow, things are brutal in the insurance brokerage industry.

Last week, Delaware Vice Chancellor Travis Laster issued a remarkable ruling in a fight that began in March when 26 insurance professionals quit the Denver office of Lockton Cos. LLC—the ninth-largest brokerage in the U.S., according to Business Insurance—to launch a Denver office for No. 10, Alliant Insurance Services Inc.. They took at least 50 commercial clients with them, and attempted to solicit many more.

If they were lawyers, my legal press colleagues would write a story or two. Maybe the firm that got poached would issue a grudging quote about wishing their ex-partners well, while subtly (or not so subtly) suggesting they wanted them to leave anyway and will be totally fine without them, thank you very much.

And then MoFo would have a new Miami office courtesy of Greenberg Traurig or Manatt gets a Boston outpost thanks to Holland & Knight or McDermott Will & Emery grabs three groups of partners from DLA Piper. It's Big Law business as usual.

But throw a non-compete into the mix and it all blows up.

Vice Chancellor Laster came down squarely on the side of Lockton, represented by Quinn Emanuel Urquhart & Sullivan, issuing a preliminary injunction that absolutely clobbers Alliant.

He also had some harsh things to say about Alliant's outside counsel from Morgan, Lewis & Bockius.

According to Laster, Alliant's outside counsel gave instructions for an ex-Lockton employee “to delete documents, recognizing that it would not prevent them from being gathered from the Lockton server but calling the destruction 'a start,'” Laster wrote. “It now seems possible that the crime/fraud exception to the attorney-client privilege would provide an independent basis for ordering production of at least some of the entries on Alliant's log.”

A Morgan Lewis spokeswoman declined comment, noting that the case remains pending.

Some background:

Lockton was clearly unhappy about losing the Denver group, which included two big-shot partners—one of whom was offered nearly $20 million in guaranteed pay plus the possibility of earnout compensation worth $15 million more by Alliant to jump ship, according to court papers. (Also, who knew insurance brokers in Denver could make so much money?)

The Denver Post quoted texts that Lockton founding family member Steve Lockton sent to those who left including “No loyalty no honesty although I didn't expect anything different from the two of you” and “You are going down” and “You will be in court for years.”

He may be right about the court part.

The employees who left all had contracts with Lockton prohibiting the solicitation of customers or company personnel for two or four years depending on seniority, as well as a bar on disclosing confidential information. They were also supposed to give 30 days' notice before quitting.

The employees were based in Colorado, where state law looks askance at such restrictions. Alliant filed a preemptory suit there seeking a declaratory judgment that the covenants were void.

Nice try, but no dice—the employment agreements specify Lockton's home state of Missouri in the forum selection clause.

And indeed, Lockton counsel from Bryan Cave Leighton Paisner  predictably filed suit in Missouri against the ex-employees (who are all indemnified by Alliant) to enforce the post-employment restrictions.

Lockton asked for a TRO—and was denied.

But Lockton also tapped Quinn Emanuel's Mike Carlinsky, who made an unpredictable move. Rather than sue Alliant—the actual company, not the individual employees it poached—in Missouri, Lockton went after its rival in Delaware Chancery Court.

Wait, Delaware?  

Vice Chancellor Laster let the suit proceed, though not because he thinks Delaware is the best forum for the fight. He doesn't.

“I continue to believe that a Missouri court is better positioned to decide this case on the merits,” he wrote.  “I also believe that it would be preferable (although not necessary) for a single jurisdiction to consider both the claims against the former employees and the claims against Alliant.”

But he didn't punt the case back to Missouri because the state court judge there is so swamped with other work.

“For understandable reasons resulting from the pressure of managing both a criminal and a civil docket, the Missouri court has had to give priority to pending criminal cases and has not been able to schedule a prompt hearing on an application for injunctive relief,” Laster wrote. “Consequently, only this court is in a position to address in a timely fashion the interim relief that Lockton has requested.”

And he sided with Lockton all the way.

The employment contracts were valid, Laster found, noting that “Alliant appears to have manufactured its position that the restrictive covenants are invalid under Colorado law solely for purposes of litigation. When Alliant analyzed the member agreements during the recruiting process, its counsel concluded that the restrictive covenants were likely governed by Missouri law, would be valid under Missouri law, and were even likely to be valid under Colorado law.”

Which by the way is not a piece of information you'd expect to see made public. (Hello, privilege?)

Laster in a footnote explained that “Lockton obtained the legal memoranda in which Alliant's counsel analyzed the member agreements because Alliant prepared a grossly defective privilege log.”  And he blasted Alliant's lawyers from Morgan Lewis for “attempting to invoke privilege expansively to hide problematic documents.”

“For example,” he continued, “Alliant used two virtually identical and generic descriptions for 98% of the documents on its log, and Alliant combined the recipient, copy recipient, and blind copy recipient fields into a single column, so that Lockton had no way to know whether a lawyer was a primary or secondary recipient of a document. The latter maneuver also suggested that Alliant was invoking privilege broadly whenever a lawyer appeared on a document, regardless of whether the document contained legal advice, and had copied lawyers on documents to generate a basis for claiming privilege.”

The result? “By failing to assert its privilege claims properly, Alliant waived them,” Laster said.

With seemingly little hesitation, the vice chancellor determined that a trier of fact would likely find Alliant intentionally induced the Lockton employees to breach their non-solicit and confidentiality agreements.

But what to do about it?

Laster found Lockton was suffering ongoing harm, but also that it would be difficult to put a price tag on the damages. And here, a vigorous defense by the Morgan Lewis team actually backfired.

Alliant's arguments “ended up supporting Lockton's application for injunctive relief by demonstrating the myriad issues that this court would have to confront in a damages analysis,” Laster wrote.

So injunctive relief then—but what kind?

Laster made it clear he doesn't think much of Alliant and the ex-Lockton employees, writing that they “have demonstrated their willingness and ability to engage in secretive and underhanded behavior in violation of contractual obligations and legal requirements” and to “mask their activities under a façade of compliance measures and through misleading representations and averments.”

He opted for extreme measures. No one at Alliant—not the ex-Lockton employees nor regular Alliant staff—will be allowed to service any clients that followed the group when they quit.

“Pending the outcome of this litigation, Alliant will not be able to service their business, so they will have to go elsewhere,” Laster wrote.

He recognized this is a burden for the clients, especially since they just went through the hassle of switching their business from Lockton to Alliant, but oh well.

“[T]he record indicates that the insurance brokerage industry is highly competitive, and there appear to be multiple firms that can provide the necessary services,” Laster wrote. “If customers are upset, they can blame Alliant.”

Also—the senior employees, including the one with the $20 million salary? Their full compensation is guaranteed for three years, Laster noted. They'll still get paid, even if they have no business.

Ouch.

Worst. Lateral. Acquisition. Ever.

Look, I don't know anything about the intricacies of the insurance brokerage business, but Laster's cavalier attitude about the customers—hey, they can just hire someone else—contrasts poorly with the position taken by the ABA when it comes to lawyers.

The legal services industry is also highly competitive, with multiple firms that can provide the necessary services, but that doesn't override the right of clients to hire whom they please when it comes to lawyers.

Why not insurance brokers?

The bigger issue with this case isn't that Alliant did something so terrible or unheard of (even if it was, ahem, technically illegal). After all, Lockton has been sued for similar conduct, as have other brokerages.

To me, the real problem here is agreements that restrict the ability of people to change jobs and prevent customers from doing business with whom they choose.

The legal profession enjoys a special exemption from non-competes—but it shouldn't be limited to lawyers. Free agency may be messy and disruptive, but it's honest and it reflects the demand of the market.

Also (and I mean this in the nicest way possible) would Lockton's outside counsel Quinn Emanuel—which was founded in 1986 and has grown to 800-plus lawyers—be what it is today without it?