For more than four years, two competitors in the senior-citizen insurance space had battled through a $17 million trade secrets dispute in a Chicago federal court. This week, a judge held that Bankers Life and Casualty Co. was entitled to just $2 in damages.
For more than a decade, Bankers Life and Casualty Company has butted heads with American Senior Benefits, accusing the company of poaching its agents who left with trade secrets — namely detailed client lists and information — in tow. Bankers Life filed this lawsuit in January 2022 against ASB and related entities Integrity Marketing Group, Key Retirement Solutions, Heartland Retirement Group and The Assurance Group.
About three months before a bench trial, the defendants brought on Lynn Pinker Hurst & Schwegmann to handle the case. Mike Lynn told The Texas Lawbook in an interview Wednesday that the trial team immediately set to work getting up to speed on the 4-year-old case, reading through thousands of documents and 48 depositions. Initially, Bankers was seeking $10 million in compensatory damages and $7 million in punitive damages.
“They started off pie in the sky,” he said of the damages request. “And they came down a lot at the beginning of trial.”
By the time the seven-day bench trial began in March before U.S. District Judge Rebecca Pallmeyer, Bankers had dropped its requested damages to about $940,000.
Lynn credited a skillful cross examination of Bankers’ damages expert by “star associate” Jamie Drillette as the reason Bankers further dropped its damages request in posttrial briefing to about $105,000.
“She had figured out that a lot of their assumptions were that certain people had left and gone with the offending companies, when in fact they had not done that,” Lynn said. “…And there were a series of five or six different categories like that that, once eliminated, started cutting down the damages. It was a technical cross and it went on for a long time.”
Lawyers for Bankers did not immediately respond to a request for comment Wednesday.
Judge Pallmeyer wrote that “the most troubling aspect of this case” was the damages model presented by Bankers.
The judge wrote that Bankers failed to show it was entitled to damages for two reasons: Its damages expert was “thoroughly impeached at trial,” and the model “makes no effort to trace the damages to particular breaches of the protocol.” The “protocol” refers to certain terms in a settlement reached between Bankers and ASB in 2018, stemming from a trade secrets lawsuit Bankers filed in 2015. The list of measures was intended to protect Bankers from the misuse of its confidential information, according to the opinion, including requiring ASB to not recruit Bankers employees and to inform Bankers if they hired an employee who left Bankers within the previous two years.
But the settlement did not create lasting peace between the competitors, and Bankers filed this lawsuit against ASB and affiliated entities, alleging theft of trade secrets and breach of the 2018 agreement.
“Here, even if the damages model was trustworthy (it is not), the court cannot award damages without guessing which harms were caused by violations of the protocol,” the judge wrote.
Evidence presented to the court showed Bankers has a high turnover rate of its agents, with its president testifying that the company contacts a million prospective agents each year with hopes of recruiting between 5,000 and 6,000. Only one in five remains at the company for more than a year, and many leave to join ASB, Heartland or Key.
In her opinion and order, Judge Pallmeyer wrote that the evidence showed ASB exhibited “substantial non-compliance” with its obligations under the 2018 agreement.
“There was overwhelming evidence at trial that ASB’s compliance with the protocol was lackluster, at best,” she wrote.
For example, ASB agents who had left Bankers contacted former colleagues to recruit them to ASB, and many of those agents who did so left with their client lists. That spawned separate litigation brought by Bankers against the individual agents, where the agents admitted to taking detailed customer lists.
“ASB did not discipline or terminate any of these agents, nor did they notify Bankers Life that they had been onboarded, in apparent violation of the protocol,” the opinion reads.
Judge Pallmeyer wrote that, while circumstantial, there was “overwhelming” evidence that the agents stole client lists, but it was “less clear” if ASB was aware the agents it hired were misappropriating trade secrets.
While ASB is liable for breaching the protocol, Judge Pallmeyer wrote “the evidence is not compelling” that the company was liable for other wrongdoing, such as intentionally interfering with Bankers’ contractual relations of that it “knowingly accepted or ratified” its agents’ misappropriation of trade secrets.
“The court has no praise for ASB’s failure to discipline or exercise oversight over its agents, but the evidence did not support a finding of tortious interference, theft of trade secrets, or vicarious liability for agent wrongdoing,” she wrote.
The court’s determination was different, though, as it related to the claims against Key Retirement Solutions and its owner, Matthew Ruddick, who admitted at trial he recruited about 30 Bankers agents to join him at Key. At least seven of those agents were later found to have taken the confidential information from Bankers.
“Mr. Ruddick was certainly aware of the restrictive covenants between these agents and Bankers, given that he himself is an alumnus of Bankers Life,” the court wrote, concluding Key ratified its agents’ misappropriation of trade secrets.
Careful not to blame Bankers’ expert witness for the issue, the judge wrote that it was Bankers or its lawyers that had provided its expert with flawed data on which to base the damages model. Working off a list of all Bankers-to-ASB agents, the model “assumed, without any independent investigation or analysis, that any policy written by those agents that lapsed or terminated within two years did so due to agent misconduct.”
Under cross-examination, the court wrote, Bankers’ expert conceded the “vast majority” of policies included in the calculation “should never have been included in the model in the first place.” Some agents included had left Bankers for other companies, not ASB, as well, according to the opinion.
“And perhaps most importantly, many of the agents included in the model were never mentioned at all at trial, leaving the court guessing as to whether they committed any misconduct at all,” the court wrote.
The “exposed shortcomings” in the model “dramatically reduced plaintiff’s damages claims,” and Judge Pallmeyer wrote that she “cannot help but question the accuracy of this new model,” too, noting at least seven of the agents identified in the model “were not mentioned in plaintiff’s post-trial briefing at all, so the court is left to guess about the misconduct (if any) these agents engaged in.”
“The court concludes that plaintiff’s damages model is unpersuasive and unreliable, and does not present an accurate estimation of the damages Bankers Life suffered,” she wrote.
Additionally, the court found ASB had breached the contract with Bankers, but rejected the argument that ASB had tortiously interfered with Bankers contractual relations.
As for trade secret misappropriation, the court wrote that there was insufficient evidence to find ASB vicariously liable for its agents’ misappropriation, but that there was evidence to support a finding Key had ratified that misappropriation.
“The court is reasonably certain that the company suffered some financial harm as a result of ASB’s violations of the protocol and by Key’s misappropriation of trade secrets, and that a liability verdict in favor of plaintiff is therefore appropriate. In light of the troubles with plaintiff’s damages model, however, Bankers Life has not shown it is entitled to anything beyond nominal damages,” the court wrote. “The court will award damages of $1.00 in favor of Bankers Life from both ASB and Key, for a total recovery of $2.00.”
Lynn said that Bankers’ first several witnesses at trial were company executives, who testified about the alleged damages suffered by the company because of the misappropriation.
“There’s more than one way to win a trial, and sometimes, if you have to concede liability in certain instances, then you have to challenge the damages,” he said. “It worked out in this instance, and we’re very proud of the result.”
Bankers Life is represented by Aimee Alvarez, Giel Stein and Jonathan Lipper of Clark Hill and Steven Huffer and Adam Cotter of SK Huffer & Associates.
The defendants are also represented by Josh Lang, who handled closing arguments in the case, and Andy Kim of Lynn Pinker Hurst & Schwegmann.
The case number is 3:22-cv-50009.