Allstate Ins. Co. v. Fougere

79 F.4th 172

ALLSTATE INSURANCE COMPANY, Plaintiff, Appellee, v. James FOUGERE, Sarah Brody-Isbill, a Better Insurance Agency, Inc.a/k/a ABIA, Defendants, Appellants.

No. 22-1258

United States Court of Appeals, First Circuit

August 29, 2023

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Judith G. Dein, U.S. Magistrate Judge]

Timothy K. Cutler, with whom Cutler & Wilensky LLP was on brief, for appellants.

J. Scott Humphrey, with whom Benesch, Friedlander, Coplan & Aronoff LLP was on brief, for appellee.

Before Gelpí, Lynch, and Thompson, Circuit Judges.

THOMPSON, Circuit Judge.

This appeal arises from a dispute between Allstate Insurance Company ("Allstate") and two of its former agents -- Appellants James Fougere and Sarah Brody-Isbill -- as well as a third Appellant, A Better Insurance Agency, Inc. ("ABIA"). At the heart of this suit are spreadsheets which, according to Allstate, contain trade secrets misappropriated by Fougere and Brody-Isbill in breach of their contracts with it. A district court agreed and entered summary judgment favoring Allstate against all three Appellants.¹ On appeal we are asked to review these findings. Also in the mix are two counterclaims brought by Appellants against Allstate, which the district court dismissed, and which Appellants seek to resuscitate on appeal.

As we consider Appellants' arguments, we first lay out the factual background of this case and from there, consider the district court's sundry legal rulings against Appellants. Because we conclude the district court committed no error, we affirm each of them in turn.

I. Background

In February 2013, Fougere signed an exclusive agency agreement ("EA agreement") with Allstate to sell the company's auto and casualty insurance products in Massachusetts and thereafter began operating an agency in Framingham. Prior to joining Allstate, Fougere had managed ABIA. Once his Allstate agency was up and running, Fougere hired Brody-Isbill to work for him. The following year, in April 2014, Brody-Isbill entered into a separate EA agreement with Allstate, and opened up her own Allstate agency in Auburn, MA.

Under their agreements, Brody-Isbill and Fougere committed to working as "scratch" agents, so named because in this role they were expected to solicit new customers and build new books of business for the company from scratch (as opposed to receiving existing Allstate customers or accounts), in exchange for commissions for the company policies they sold. The EA agreements sketched out numerous responsibilities for the agents. Among other requirements, the agreements mandated that Fougere and Brody-Isbill exclusively represent Allstate, which meant they were prohibited from directly or indirectly soliciting, selling, or servicing insurance from other insurance companies without Allstate's approval. Central to this appeal, the agents also committed to maintaining information identified by Allstate as confidential² and promised that they would not misuse or improperly disclose the information, they would return the information to Allstate when their agency relationships terminated, and they would not use the information for any improper purpose.

According to Allstate, despite Fougere's financial success, his Allstate agency quickly raised red flags due to its alleged noncompliance with Allstate regulations and Massachusetts state law. Over a year into the contract, in September 2014, an Allstate employee working with both Fougere and Brody-Isbill³ emailed corporate management claiming that, among several other troubling practices, the two Allstate agents had been commingling business, with Fougere being significantly involved in Brody-Isbill's agency and the two of them sharing confidential Allstate information between their agencies (in violation of their EA agreements, as Allstate sees it). Allstate further claims that Fougere was also sharing this information with two other entities: ABIA and an organization named Thumbs Up Marketing, Inc. ("Thumbs Up"), which Fougere formed after becoming an Allstate agent. Allstate describes Thumbs Up as another insurance agency.⁴

Much of what followed once Allstate's concerns surfaced is disputed by the two parties,⁵ and largely immaterial to this appeal, but suffice it to say that in November 2014, Allstate terminated its EA agreement with Fougere. Then, in October 2015, the company did the same with Brody-Isbill's agreement.⁶ With the terminations, Allstate cut off each former agent's access to the company's online electronic records portal and collected any physical files located in their Allstate agency offices.

Central to this dispute is Allstate's contention that, after terminating their EA agreements, Fougere and Brody-Isbill breached their contractual requirement to, post-termination, return all confidential information to Allstate and refrain from using any of it in the future.⁷ In November 2015, Allstate, through counsel, sent a letter to Fougere stating that it had reason to believe he had retained confidential information belonging to Allstate, and had been using it to solicit Allstate customers on behalf of ABIA. Fougere's attorney responded with a letter denying the allegation, reassuring all that Fougere had not utilized any confidential information to solicit clients, and guaranteeing that the former agent would "continue to respect and not disclose any confidential information of Allstate[.]"

Several of Fougere's former employees, this time ones who had worked under him at ABIA, contradicted this account. In July 2016, three former ABIA employees emailed Allstate that Fougere had confidential information for thousands of Allstate customers, and that he had been directing his agents to contact those customers.⁸ From there, the former employees more specifically alleged that Fougere had given his ABIA agents access to files, on a restricted Google Drive, named "Framingham Allstate book of business" and "Allstate Auburn book of business," which included the "names, addresses, phone numbers, email addresses, renewal dates, types of insurance policies, and premiums paid by insurance customers." According to the former employees, Fougere had directed ABIA employees to solicit the customers contained within the spreadsheets, and had acknowledged, in Brody-Isbill's presence, that the files were retained from both of their former Allstate insurance agencies. After making additional allegations about Fougere and Brody-Isbill misusing Allstate's confidential information, the former ABIA employees forwarded copies of portions of spreadsheets entitled "Framingham Allstate book of business" and "Allstate Auburn book of business" to Allstate, which they claim contained information verifying their assertions.

Allstate's Suit Against Appellants

Weeks later, in August 2016, Allstate filed suit against Fougere and Brody-Isbill, and soon after, amended its complaint to include ABIA as a defendant.⁹ Allstate's operative pleading brought breach of contract and trade secret claims (alleging trade secret misappropriation under both common law and the Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836) against Fougere and Brody-Isbill; DTSA and tortious interference with advantageous business relationship claims against ABIA; and claims against all three Appellants for unfair competition in violation of Mass. Gen. Laws ch. 93A.

For their part, the three defendants denied wrongdoing, listed numerous affirmative defenses, and filed counterclaims of their own. They alleged that Allstate had breached Fougere's and Brody-Isbill's contracts, violated Mass. Gen. Laws ch. 175, § 163 by failing to provide adequate notice before their terminations, violated Mass. Gen. Laws ch. 175, § 162F by misappropriating information that belonged to them, wrongfully interfered with Fougere's contractual relations, and violated Mass. Gen. Laws ch. 93A by engaging in bad faith business practices.

A few weeks later, the parties filed a joint motion requesting the court enter an agreed-upon preliminary injunction. The court did so in November 2016, entering a stipulated order under which Appellants were "enjoined from, directly or indirectly, accessing, using, possessing, or having access to Allstate Confidential Information" and using or accessing four documents contained on Fougere's or ABIA's databases entitled TU Framingham, TU Auburn, Allstate Framingham, and Allstate Auburn.

In the course of discovery, Allstate requested and the court ordered a forensic examination of Appellants' electronic systems, databases, and servers. Through the order, Allstate was granted permission to take and retain screenshots of the four spreadsheets identified in the preliminary injunction. However, by the time the forensic exam was finally conducted, two of the "Allstate" documents -- Allstate Framingham and Allstate Auburn -- had been permanently deleted.

Nonetheless, Allstate was able to procure screenshots of TU Framingham and TU Auburn, both of which closely matched Allstate's audits of Fougere's and Brody-Isbill's books of customer information while they were still with the company. According to Allstate, of the 35 names in the TU Framingham screenshot, 34 were Allstate customers affiliated with Fougere's agency prior to his termination. Allstate found similarly for 22 of the 29 customers listed in the TU Auburn screenshot, who had been with Brody-Isbill's agency before her termination. While Appellants quibbled over the validity of these comparisons,¹⁰ they ultimately produced the full TU Framingham and TU Auburn spreadsheets ("the spreadsheets") and eventually conceded that they "each contain the names of thousands of Allstate customers, along with their renewal dates, premiums, types of insurance, Allstate policy numbers, driver's license numbers, home addresses, phone numbers, and email addresses."

Following the close of discovery, both sides filed partial motions for summary judgment, which were...