Since late 2019, Rolling Meadows-based Gallagher said in its complaint, Alliant has lured 39 employees from Gallagher offices in San Francisco, West Palm Beach, Fla., and Dallas, and has attempted to recruit another from the Atlanta office.
“The precise revenue lost or at risk because of defendants’ ongoing unlawful conduct cannot at this time be readily quantified, but easily rises to the level of tens of millions of dollars,” according to the complaint.
Alliant didn’t respond to a request for comment.
“Over the course of the past 10 months, and up through today, Gallagher has been forced to play whack-a-mole as Alliant targets Gallagher offices and practice groups across the country and continues to steal Gallagher’s employees and clients away, resulting in lawsuits across the United States,” the Gallagher complaint said.
Poaching in the insurance-brokerage business is common and has been going on for decades. Gallagher is the world’s fourth-largest brokerage and has grown largely through acquisitions of privately held brokers that number in the dozens each year. Alliant is a top 10 U.S. broker.
Commonplace in the business are contracts that individual brokers sign with their employers, which typically bar them from soliciting their old clients for a period of time—usually one or two years—after going to work for a competitor. Courts have ruled generally that those contracts are enforceable. But, often when a large-scale “raid” takes place, so many clients move with their broker when he or she goes to a rival that it’s difficult to determine damages. The cases frequently settle, with the losers often grumbling that they received less for their lost business than they would have gotten in a negotiated transaction. So in their view the violation of non-solicitation contracts essentially is rewarded.
“Defendants’ conduct here is particularly brazen,” Gallagher claimed in its complaint. “Earlier this year, Alliant approached Gallagher with a threat couched as an offer: Sell Alliant the books of business it covets, or face the consequences. When Gallagher refused Alliant’s ‘offer,’ the consequence Gallagher faced, and continues to face, was a large-scale raid on Gallagher’s personnel and Gallagher’s clients, conducted in blatant disregard for, and actively inducement to violate, the fiduciary and contractual duties those personnel owed to Gallagher.”
Alliant doesn’t make a secret of its strategy. The company describes it as “leveraged hires,” essentially recruiting top producers from competing brokerages. There’s nothing inherently wrong with that. Gallagher and other competitors allege that Alliant induces producers to sign on by agreeing to boost their pay substantially and even offering stock in the company that will pay off when Stone Point ultimately cashes out. (Stone Point acquired Alliant in 2015.) Alliant also often agrees to indemnify the new recruits from the inevitable lawsuits they will face from their former employers, according to Gallagher’s complaint.
The only way to make that method pay is for those brokers to bring their clients immediately to Alliant, according to the plaintiffs.
What’s more, according to Gallagher’s lawsuit, the payouts Alliant makes to defecting brokers often depend on how much of their client roster they can bring over.
Lockton, another broker that sued Alliant, won an injunction in 2019 against Alliant in which the defendant was required not only to stop recruiting Lockton brokers but also to stop serving the clients it already had lured. That injunction was made permanent in January.
In reaction, according to Gallagher’s complaint, Alliant moved its corporate domicile from Delaware to California in late January. “This move was a transparent gambit to avoid this (Delaware) court, which had unequivocally found Alliant’s conduct to be unlawful,” Gallagher said.
Gallagher in its lawsuit seeks the same kind of injunction Lockton obtained, as well as damages.
In the past two years, Alliant has been a defendant in 13 other poaching lawsuits brought by numerous plaintiffs, including the two largest in the business, New York-based Marsh & McLennan and London-based Aon, according to Gallagher’s complaint. Seven of those have settled, according to the complaint.