Ray v. Fifth Third Bank, National Association

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

DUANE RAY,

Plaintiff,

Case No. 1:21-cv-76

v. JUDGE DOUGLAS R. COLE

FIFTH THIRD BANK, N.A., et al.,

Defendants.

OPINION AND ORDER

Defendant Foundation Risk Partners (“FRP”) moves for a preliminary

injunction (Doc. 37) to enforce a restrictive covenant that, according to FRP, applies

to Plaintiff Duane Ray, a former employee of another defendant. Four settled

principles of law control the Court’s decision. First, a preliminary injunction is a

drastic remedy, and the party seeking it carries a heavy burden. Second, courts must

treat separate corporations as distinct entities, even when one such corporation is a

wholly-owned subsidiary of another. Third, courts must enforce contracts according

to their plain language. And fourth, restrictive covenants, especially those contained

in employment agreements, are disfavored, and accordingly courts will construe any

ambiguity both (1) in favor of narrow application, and (2) against the drafter.

Applying those four principles to the facts here, the Court concludes that it must

DENY FRP’s requested preliminary injunction (Doc. 37).

FACTUAL BACKGROUND

The Court has previously addressed the factual underpinnings of the business

transaction giving rise to the instant dispute in its recent decision in Hobbs v. Fifth

Third Bank, N.A., No. 1:20-cv-1040, 2021 WL 5577406 (S.D. Ohio Nov. 29, 2021).

That case, like this case, involves a former employee of Fifth Third Insurance (there

Hobbs, here Ray), against whom Foundation Risk Partners (who acquired the Fifth

Third Insurance business) is seeking to enforce a restrictive covenant. (The former

employees are the plaintiffs in both actions because they filed for declaratory relief,

asserting that the restrictive covenant at issue is not valid or enforceable.) Thus, the

Court will keep its description of the underlying business transaction in this Opinion

short and refer those wishing greater detail regarding that transaction to the

previous Opinion. See id. at *1–4.

Fifth Third Insurance (“FTI”) is a wholly-owned subsidiary of Fifth Third

Bank, N.A. (the “Bank”). The Bank, through FTI, purchased an insurance business

from Epic Insurance Solutions LLC (“Epic”) in late 2017. As part of the 2017

transaction between FTI and Epic, the Bank offered jobs to the insurance brokers

who had been employed at Epic, including Ray. (See 9/25/17 Offer Ltr., Am. Compl.

Ex. 1, Doc. 22-1). Unfortunately, as is the case with some of the other key documents

here, the exact identity of Ray’s new employer is a little murky. The offer letter is on

Fifth Third Bank letterhead, but it purports to offer Ray employment with “Epic

Insurance Solutions Agency LLC,1 which, following its acquisition by Fifth Third

1 Despite the similar name, this is a different entity from Epic Insurance Solutions LLC.

Insurance Agency, Inc., will become an indirectly wholly-owned subsidiary of Fifth

Third Bancorp (collectively ‘Fifth Third’).” (Id. at #167). But the letter goes on to note

that “the Bank offers employees” certain benefits, instructs Ray that any questions

should go to the Bank’s human resources department, and states that Ray will be

“accepting this offer of employment with Fifth Third,” i.e., the collective entity that

includes Epic Insurance Solutions Agency LLC, FTI, and Fifth Third Bancorp. (See

id. at #168–71).

In any event, the compensation that “Fifth Third” offered each prospective

employee included a grant of Fifth Third Bancorp stock (the amount varied depending

on the employee) subject to a three-year cliff vesting period. More specifically, the

employee would vest in the stock if he or she remained employed at “Fifth Third” on

the first day of the first full quarter that occurred more than three years after the

deal closed. (Id. at #167). (As the deal closed in November 2017, the vesting date was

January 1, 2021.) Fifth Third offered Ray $15,000 in such stock, subject to Board of

Director approval. (Id.).

The transaction between Epic and the Bank also involved the assignment of

certain restrictive covenants that had applied to the brokers when they worked at

Epic. Importantly for present purposes, though, at the evidentiary hearing FRP

specifically disclaimed any reliance on those restrictive covenants as a basis for the

relief it seeks. Thus, the Court need not consider the impact, if any, of those restrictive

covenants, and will not discuss them further here.

The Bank, however, also imposed its own restrictive covenant (or, technically,

a restrictive covenant subject to yearly renewal) on Ray in connection with his

employment there. And that restrictive covenant is relevant here. The Bank

accomplished this objective through an annual Incentive Compensation Program

(“ICP”) for its employees. Every year, the Bank announced a new ICP, and every year

Ray (and others), would electronically signify their acceptance of that ICP (i.e., use a

mouse to click a button on their computer screen).

The 2020 ICP (the ICP relevant here) is between the “Participant” and “Fifth

Third Bank, National Association (including its parent companies, subsidiaries, and

affiliates, collectively ‘Fifth Third,’ the ‘Bank,’ or ‘Employer’)” (2020 ICP, Pl. Hr’g Ex.

7, at 1). The restrictive covenant appears in Section V of the document. It provides

that, in exchange for “the benefits that the Participant receives under this Plan, the

Bank’s providing Participants with portions of its Confidential Information … and

access to customers and customer goodwill, and continued employment,” that “for a

period of two [] years after the Termination of Employment, regardless of the reason

for the termination,” the Participant will not engage in certain activities. (Id. at 11).

As relevant here, the Participant (1) will not solicit any “customers with whom

Participant had contact … during the last two [] years of employment with Fifth

Third,” and (2) will not “[a]ccept business or orders” from such customers as to

“products or services competitive with those products and services as to which

Participant had material involvement ….” (Id.).

The 2020 ICP also separately addressed the extent to which “rights and

obligations” under the ICP could be assigned. In particular, Section IX, labeled

“Miscellaneous Provisions,” includes the following:

Participant may not assign or otherwise transfer Participant’s rights,

obligations, or duties contained in this Plan. Fifth Third retains the

right without further notice or consent to assign its rights and

obligations under the Plan to any successor in interest or purchaser of

substantially all of Fifth Third’s assets. In the event of such an

assignment, the benefits and burdens of this Plan shall inure to the

benefit of and is [sic] binding upon the successor or assignee of Fifth

Third.

(Id. at 15 (emphasis added)).

The final contract relevant to the current dispute is an Asset Purchase

Agreement (“APA”) between (as relevant here) FTI and Epic Insurance Solutions

Agency LLC (“Epic Agency”) (collectively the “Selling Parties”) and FRP (the “Buyer”).

The agreement is dated December 4, 2020, and called for the closing to occur at 11:59

p.m. on December 31, 2020 (i.e., one minute before the stock grants referred to above

were set to vest). (See APA, §§ 1.08, 1.18).2 The basic structure of the deal was that

the Selling Parties (i.e., FTI and Epic Agency) would sell all or substantially all of

their assets to the Buyer. Because FTI was the sole member of Epic Agency, one of

FTI’s assets was its sole membership interest in Epic Agency. Thus, as a result of the

transaction, Buyer purchased not only all of the assets of the two entities, but also

acquired the Epic Agency entity itself. And, important here, the assets that the

2 Although the APA was not admitted as physical evidence during the Preliminary Injunction

hearing, the parties stipulated to its authenticity and admissibility, and agreed that counsel

would email a copy of the APA and associated attachments to chambers after the hearing for

inclusion in the record, which counsel then did. (See 02/11/2022 Minute Entry).

Selling Parties transferred included “all rights of Selling Parties under any non-

competition, non-solicitation, non-piracy, or other restrictive covenant in favor of a

Selling Party ….” (Id. at § 2.01(c)).

In connection with the sale, the Selling Parties provided a list of employees

who were working in the insurance business. (Disclosure Schedule, APA Schedule

1.64). The list identified 79 such employees, including Duane Ray (and Myron Hobbs,

the plaintiff in the other lawsuit mentioned above). (Id.). The APA contemplated that

each listed employee (who the APA referred to as “Transferred Employees”) would

accept a job offer with FRP pursuant to employment agreements with FRP that

included restrictive covenants. (See APA §§ 1.64 (noting “Transferred Employees”

will sign “Employment Agreements”), 3.04(b) (defining “Employment Agreements” to

include a restrictive covenant)).

Because the closing was set to occur in advance of the stock grant vesting date

(by one minute), Fifth Third’s view was that it had no obligation to fulfill the previous

stock grants it had awarded to the Epic employees who joined “Fifth Third” in

connection with Fifth Third’s earlier purchase of Epic. To sweeten the pot on the FRP

employment offer, though, Fifth Third told Ray that, if he accepted the FRP

employment contract, and also signed a general release—whereby he would broadly

release any and all claims that he may have against Fifth Third—Fifth Third would

pay him a lump sum of $10,000, which was $5,000 less than the previously promised

stock grant. (See General Release of All Claims, Am. Compl. Ex. 6, Doc. 22-6, #210).

Ray (and Hobbs) declined to accept the FRP employment offer and refused to

sign Fifth Third’s proposed release. When Fifth Third learned in late December that

Ray would not accept the FRP offer, and thus would not become an FRP employee

upon closing, Fifth Third terminated Ray’s employment. As a result, Fifth Third did

not employ Ray as of the stock vesting date, and in turn did not grant him the

promised stock, or pay the monetary equivalent.3

Instead of joining FRP, Ray ventured off on his own to sell insurance,

apparently under the name of Big4 Insurance Agency. (See Big4 Ins. Announcement,

FRP Post-Hr’g Br. Ex. 3, Doc. 62-3, #965). In doing so, it is undisputed that Ray

contacted customers who he had serviced through FTI. By early fall of 2021, he had

obtained business from sixteen such clients. (See Customer List, FRP Post-Hr’g Br.

Ex. 4, Doc. 62-4, #966–68 (identifying sixteen clients in column four)).

FRP maintains that Ray’s activities violate restrictive covenants that FRP has

a right to enforce. After FRP raised its concerns to Ray, Ray responded by filing this

lawsuit seeking declaratory and injunctive relief relating to the 2020 ICP. (See Am.

Compl., Doc. 22). In particular, Ray claimed that Fifth Third had materially breached

that agreement, rendering any restrictive covenant therein unenforceable. (Id. at

#132). Separately, Ray maintains that Fifth Third did not validly assign the

restrictive covenants under the 2020 ICP to FRP, meaning that FRP has no standing

to enforce those covenants. (Id.).

3 The Selling Parties and FRP also amended the APA such that “neither Walker, nor Duane

Ray, nor Myron Hobbs is required to execute an Employment Agreement or accept

employment with Buyer on or after the Closing Date as a condition precedent to the Closing.”

(See First Amendment to Asset Purchase Agreement, at 2 (Dec. 31, 2020)).

On October 7, 2021, the parties entered an agreed temporary restraining order

(“TRO”). (Doc. 44). That TRO provided that Ray could continue to service the sixteen

clients he had obtained as of September 2, 2021, but that Ray could not solicit or

accept any other former customers. (Id. at #611). The TRO further required FRP to

post a surety bond in the amount of $25,000. (Id.). Under the terms of the original

TRO, that prohibition would remain in place through a hearing on the instant motion

for preliminary injunction, which was then scheduled for December 1–2, 2021. (Id. at

#610). When the Court continued the hearing date, the parties entered an Amended

Agreed TRO extending the date through the new hearing date, which at that point

was yet undetermined (see Doc. 47), and increasing the surety bond to $50,000 (see

Doc. 52; Doc. 53), which Defendants posted.

On February 11, 2022, the Court held an evidentiary hearing. On February 18,

2022, the parties cross-filed post-hearing briefs. (Docs. 60, 62, 63). The matter is now

before the Court.

LAW AND ANALYSIS

“The party seeking the preliminary injunction bears the burden of justifying

such relief.” McNeilly v. Land, 684 F.3d 611, 615 (6th Cir. 2012). And this is a heavy

burden. As the Sixth Circuit has observed more than once, “preliminary injunctions

are ‘extraordinary and drastic remed[ies] … never awarded as of right.” Platt v. Bd.

of Comm’rs on Grievances and Discipline of Ohio Supreme Court, 769 F.3d 447, 453

(6th Cir. 2014) (quoting Munaf v. Geren, 553 U.S. 674, 689–90 (2008)); Am. Civ.

Liberties Union Fund of Mich. v. Livingston Cnty., 796 F.3d 636, 642 (6th Cir. 2015)

(same). Rather, such relief “should be granted only if the movant carries his or her

burden of proving that the circumstances clearly demand it.” Overstreet v. Lexington-

Fayette Urb. Cnty. Gov’t, 305 F.3d 566, 573 (6th Cir. 2002); see also Leary v.

Daeschner, 228 F.3d 729, 739 (6th Cir. 2000) (noting that a “preliminary injunction

is an ‘extraordinary remedy involving the exercise of a very far-reaching power, which

is to be applied only in the limited circumstances which clearly demand it’”) (quoting

Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 811 (4th Cir. 1991))

(brackets and internal quotation omitted).

The Court considers four factors in deciding whether to issue a preliminary

injunction: (1) whether the movant has a strong likelihood of success on the merits;

(2) whether the movant would suffer irreparable injury without the injunction;

(3) whether issuance of the injunction would cause substantial harm to others; and

(4) whether the public interest would be served by the issuance of the injunction.

Speech First, Inc. v. Schlissel, 939 F.3d 756, 763 (6th Cir. 2019). No one factor is

determinative, rather, the Court should “balance[] [the factors] against each other.”

Overstreet, 305 F.3d at 573 (citing United Food & Com. Workers Union, Local 1099 v.

Sw. Ohio Reg’l Transit Auth., 163 F.3d 341, 347 (6th Cir. 1998)). That said, a finding

that there is no likelihood of success on the merits tips that balance in such a way

that is “usually fatal” to the request for a preliminary injunction. Gonzales v. Nat’l

Bd. of Med. Exam’rs, 225 F.3d 620, 625 (6th Cir. 2000) (citing Mich. State AFL–CIO

v. Miller, 103 F.3d 1240, 1249 (6th Cir. 1997)). The Court considers each of those

factors in turn.

A. FRP Has Not Provided Sufficient Evidence To Conclude That FRP Has

A Strong Likelihood Of Success On The Merits.

To satisfy the first prong, a movant must “show[] a strong or substantial

likelihood or probability of success on the merits.” Bossert v. Springfield Grp., Inc.,

579 F. Supp. 56, 66 (S.D. Ohio 1984); Warner v. Cent. Tr. Co., 715 F.2d 1121, 1124

(6th Cir. 1983) (“Since the district court did not find that appellant had shown a

strong or substantial likelihood that he could prove fraud in the transaction which

produced the letter of credit, the first ‘prong’ of the traditional test for a preliminary

injunction has not been met.”). Let’s start with the easy part—if the restrictive

covenant from the 2020 ICP applies to Ray, the overwhelming evidence shows that

he violated it. Indeed, he concedes as much. Thus, the likelihood-of-success-on-the-

merits prong comes down to whether FRP validly acquired the right to enforce that

covenant against Ray. On that issue, the Court concludes that FRP has failed to

establish a strong likelihood of success.

Understanding why that is so requires a close reading of the two key contracts

at issue: (1) the 2020 ICP, which creates the restrictive covenant in Fifth Third’s favor

in the first instance, and (2) the 2020 APA, which is the mechanism by which Fifth

Third (or, more accurately, FTI and Epic Agency) assigned certain contractual rights

to FRP. In particular, analyzing the Defendants’ likelihood of success requires careful

attention to exactly which entities are parties to each of these agreements, to exactly

what assignability rights the 2020 ICP creates, and to exactly what rights the 2020

APA assigns. And, in undertaking this interpretive task, the Court starts from the

well-settled proposition under Ohio law that courts must “presume that the intent of

the parties is reflected in the plain language of the contract.” Beverage Holdings, LLC

v. 5701 Lombardo, LLC, 150 N.E.3d 28, 31 (Ohio 2019).4

What creates much of the confusion is that Fifth Third (or FTI, or Epic Agency)

apparently was not always careful in specifying which Fifth Third entity (or entities)

was a party (or parties) to a particular contract. That matters, because “[g]enerally,

a parent and subsidiary are separate and distinct legal entities” under Ohio law. Mut.

Holding Co. v. Limbach, 641 N.E.2d 1080, 1081 (Ohio 1994). Thus, each separate

entity must establish its own right to enforce a contract. Where the drafter does not

carefully address that issue, though, things can get confusing quickly.

For example, look at the initial offer letter to Ray. At points, that offer letter

appears to suggest that Ray will be an employee of Epic Agency, which will be a

subsidiary of FTI, which in turn is a subsidiary of the Bank. (See Pl. Hr’g Ex. 2). But,

at other points, it appears that it is Fifth Third itself, i.e., the Bank, that is the

counterparty to the offer letter. Indeed, it appears that FRP understands the offer

letter in this latter way—its argument with respect to the promise of a $15,000 stock

grant is that any such promise bound only Fifth Third (the Bank), and not FTI, such

that any failure to perform that promise does not interfere with FTI’s right to enforce

the restrictive covenant. (See FRP Post-Hr’g Br., Doc. 62, #883–84). But FTI cannot

rely on corporate separateness only when that separateness redounds to FTI’s

benefit. If FTI is a party to the contract (as part of some collective “Fifth Third”

4 The two contracts both include choice of law provisions indicating that Ohio law applies.

entity), then “Fifth Third’s” failure to make good on its promises would extend to FTI,

as well.

Of course, the key contract here is the 2020 ICP, which contains the restrictive

covenant that FRP claims it acquired (through the APA), and now seeks to enforce.

What does that contract have to say about who the parties to that agreement are?

According to the document, it purports to “set[] forth each covered Participant’s

agreement with Fifth Third regarding incentive compensation and other matters.”

(Pl. Hr’g Ex. 7, § I (emphasis added)). To be sure, the agreement defines Fifth Third

to mean “Fifth Third Bank, National Association (including its parent companies,

subsidiaries and affiliates, collectively ‘Fifth Third,’ the ‘Bank,’ or ‘Employer’).” (Id.).

But even that makes it appear that the contract runs principally to the collective

entity as a whole, rather than to any particular subsidiary or affiliate.

Why does that matter? Ohio law provides that restrictive covenants are

assignable. Rogers v. Runfola & Assocs., Inc., 565 N.E.2d 540, 543 (1991). Indeed, as

FRP notes, that is the default rule. See Artromick Internatl., Inc. v. Koch, 759 N.E.2d

385, 387 (Ohio Ct. App. 2001); Safier’s, Inc., v. Bialer, 93 N.E.2d 734, 739 (Ohio Com.

Pl. 1950). So, if a contract that contains a restrictive covenant says nothing about the

assignability of that covenant, the presumption would be that it is assignable.

Artromick, 759 N.E.2d at 387 (“Ohio case law … appears to … allow[] assignment of

covenants not to compete without specific provisions for their assignability.”). The

ICP, though—which, it bears noting, Fifth Third drafted—expressly addresses

assignability. And, as noted above, the contract’s plain language makes the covenant

assignable “to any successor in interest or purchaser of substantially all of Fifth

Third’s assets.” (2020 ICP, Pl. Hr’g Ex. 7, at 15). But if, as Fifth Third and FRP

maintain, “Fifth Third” refers to the collective entity comprised of Fifth Third and all

its subsidiaries and affiliates, it is undisputed that the APA did not involve the sale

of “substantially all of Fifth Third’s assets.” Indeed, Fifth Third and FRP concede that

point.

They offer two responses, though, neither of which the Court finds convincing.

First, they suggest that the Court rely on the default rule of assignability, rather than

the contract language addressing that topic. But default rules apply only to the extent

that parties do not change the default rules in their actual agreement. Here, the

parties did. If the parties intended the default rule to apply (i.e., that Fifth Third

could assign the covenant at will), then why would they include one specific instance

in which the covenant is assignable (i.e., upon the sale of substantially all of Fifth

Third’s assets)? In short, it makes no sense to assume that a contract includes rules

providing that both (1) the covenant is always assignable (i.e., the alleged default

rule), and (2) the covenant is assignable in one certain circumstance (i.e., the

expressly included rule). To the contrary, under basic principles of contract law, the

express inclusion of the latter negates the tacit inclusion of the former. See, e.g., Largo

Legacy Grp., LLC v. Charles, No. CV 2020-0105-MTZ, 2021 WL 2692426, at *15 (Del.

Ch. June 30, 2021) (“When parties cover a particular subject in an express manner,

their contractual choice governs and cannot be supplanted by the application of

inconsistent fiduciary duty principles that might otherwise apply as a default.”)

(quotation omitted); cf. ISHA, Inc. v. Risser, No. 1-12-47, 2013 WL 2316248, at *7

(Ohio Ct. App., May 28, 2013) (noting that “parties are free to change the default rule

by contract”). Accordingly, Defendants cannot rely on the default rule to escape the

contractual language that Fifth Third drafted here.

Undeterred, Fifth Third and FRP separately maintain that the express

language does allow for assignability on the facts here. They make two related

arguments in that regard. First, because the collective entity “Fifth Third” includes

each of Fifth Third’s affiliates or subsidiaries, they insist that the reference to the

sale of “substantially all of Fifth Third’s assets” likewise should be understood to

include the sale of substantially all the assets of any one or more of Fifth Third’s

affiliates or subsidiaries. (FRP Post-Hr’g Br., Doc. 62, #889). That argument is easily

disposed of. Courts do not interpret contracts to yield absurd results. Indeed, courts

hesitate to adopt such a result even when a contract’s plain language seems to compel

that answer. Cheatham I.R.A. v. Huntington Nat’l Bank, 137 N.E.3d 45, 54 (Ohio

2019) (contractual language is given its “plain and ordinary meaning unless … the

result is manifestly absurd”) (citing Alexander v. Buckeye Pipe Line Co., 374 N.E.2d

146 (1978) (syllabus)). Thus, courts necessarily would not construe ambiguous

language to create such a result. Yet, the reading that Defendants advance here,

where “substantially all of the assets” applies to any subsidiary, would permit Fifth

Third to transfer the covenants in connection with the sale of some subsidiary or

affiliate that had nothing to do with insurance. As the Defendants largely conceded

during the hearing, that result would be absurd. And yet that absurd possibility

ineluctably follows from Defendants’ Fifth-Third-means-any-Fifth-Third-affiliate-or-

subsidiary logic.

That leaves their other argument. They contend that, in context here, the

parties to the ICP should have understood “sale of substantially all of the assets of

Fifth Third” to mean, “of the Fifth Third entity at which you work.” They note, for

example, that the title of Ray’s ICP includes reference to FTI. (See, e.g., Fifth Third

Post-Hr’g Br., Doc. 63, #990–91). That is perhaps a closer call. At some level, after all,

one could understand why Fifth Third (i.e., the parent entity) would want to be able

to transfer restrictive covenants relating to insurance salespeople in connection with

the sale of its insurance business. But if that is what the parties meant, they certainly

did not say it clearly. For example, even if one understands the assignability provision

to mean the covenant is assignable upon transfer of the assets of the affiliate at which

an employee works (which is what Fifth Third seems to argue now), that

understanding only gives way to an underlying ambiguity: that is, as noted above,

there is at least some confusion surrounding exactly which corporate entity extended

the employment offer to Ray. Indeed, further compounding the confusion, the

testimony at the hearing indicated that Ray’s paychecks came from “Fifth Third”—

i.e., the Bank. And to the extent that the defendants are arguing that the passing

reference to FTI in the title of the document somehow supersedes the plain language

of the provision itself, the Court rejects that argument, at least for present purposes.

To be sure, it would have been straightforward to draft the ICP language to expressly

say what Defendants now contend it means. In fact, FRP offers an example of how

one could do so in its brief—substituting “sale of substantially all of [FTI’s] assets” in

lieu of “Fifth Third’s assets” in the ICP’s text. (Compare Mem. in Supp. of Mot. for

Prelim. Inj., Doc. 37, #506, with 2020 ICP, Pl. Hr’g Ex. 7, at 15). But that is not what

the operative agreement in fact says.

Finally, FRP asserts that “the law permits a parent and a subsidiary to enforce

a restrictive covenant, like the one included in the 2020 IP,” (FRP Post-Hr’g Br., Doc.

62, #888), a proposition FRP claims to find in Masco Cabinetry Middlefield, LLC v.

Cefla N. Am., Inc., 637 F. App’x192, 201 (6th Cir. 2005). But, as this Court noted in

rejecting that same argument in Hobbs, “the authorities that Defendants cite do not

support the fungible view of corporate identities that Defendants advocate.” To be

sure, in Masco, “the Sixth Circuit … held that both a parent and subsidiary could

assert a two-year contractual limitations period even where the parent company was

not an explicit party to the contract.” Hobbs, 2021 WL 5577406, at *7. But, as this

Court also noted, “that case considered whether ‘separate corporate existence should

be disregarded in relation to contractual responsibilities [] because the subsidiary

acted as mere instrumentality or adjunct of the parent’ in entering the contract.” Id.

(citing Masco, 637 F. App’x at 201) (quotations omitted). Here, as in Hobbs, there is

no indication that the Bank was acting as a “mere instrumentality” of FTI in entering

the 2020 ICP.

When all is said and done, at least for current purposes, the best one could say

is that the 2020 ICP is ambiguous regarding assignability. But that leads to

additional problems for Defendants. In the face of contractual ambiguity, the Court

is to consider extrinsic evidence of the parties’ meaning. Campbell v. 1 Spring, LLC,

No. 18AP-94, 2019 WL 852115, at *3 (Ohio Ct. App. Feb. 21, 2019) (“[W]hen the

language of a contract is unclear or ambiguous … extrinsic evidence can be used to

ascertain the intent of the parties.” (quoting Drs. Kristal & Forche, D.D.S., Inc. v.

Erkis, No. 09AP-06, 2009 WL 3465916, at *4 (Ohio Ct. App. Oct. 27 2009))). But here,

both Ray’s supervisor at FTI, and Ray himself, testified that they had not given any

thought to the assignability provision. Indeed, they both frankly admitted that they

had nothing to do with drafting or negotiating any of the language in the ICP.

That brings some other rules into play. First, as a general matter, courts

construe residual ambiguity (i.e., ambiguity remaining after considering any

available extrinsic evidence) against the drafter. LublinSussman Grp. LLP v. Lee,

107 N.E.3d 724, 729 (Ohio Ct. App 2018) (citing Reida v. Thermal Seal, No. 02AP-

308, 2002 WL 31819831, at *3 (Ohio Ct. App Dec. 17, 2002)). Here, as noted, all agree

that the drafter is Fifth Third, the Bank.

Second, the rule regarding ambiguity takes on special significance in the

context of covenants not to compete. At common law, courts typically declined to

enforce such provisions at all, or at least understood them very narrowly, as such

provisions were deemed a “restraint on trade.” Ohio Urology, Inc. v. Poll, 594 N.E.2d

1027, 1031 (Ohio Ct. App. 1991) (“Traditionally, agreements not to compete were

viewed as restraints of trade and, therefore, were held invalid ….”). To be sure, Ohio

law now enforces such agreements, assuming certain circumstances are met. See

Raimonde v. Van Vlerah, 325 N.E.2d 544, 547 (Ohio 1975). But even so, Ohio courts

continue to cast a chary eye.

That is especially true with regard to such covenants in employment

agreements, as opposed to those entered in connection with the sale of a business. See

Century Bus. Servs., Inc. v. Urb., 900 N.E.2d 1048, 1054 (Ohio Ct. App. 2008)

(“[G]enerally, restrictive covenants in employment agreements have been disfavored

by courts ….”). When selling a business, of course, the seller typically has received,

as part of the sale price, the present value of the future goodwill the seller is

transferring. And, in such cases, courts recognize that it would be inequitable to allow

the seller to obtain that value in the course of the sale, and then seek to recapture

that value (and therefore deprive the buyer of it), by competing down the road.

Accordingly, courts are more willing to enforce such covenants when they form part

of the consideration in the sale of the restricted person’s business. See, e.g.,

Blakeman’s Valley Off. Equip., Inc. v. Bierdeman, 786 N.E.2d 914, 919 (Ohio Ct. App.

2003) (“We must note that the matter before us does not involve the typical scenario

of a sophisticated employer attempting to enforce a noncompetition clause against an

unsophisticated employee. The clause at issue in this case was bargained for between

two businesses, not between an employer and an employee. The covenant formed part

of the consideration in the sale of appellee’s business to appellant.”) (emphasis added).

But that concern does not arise in the “typical scenario,” see id., in play here,

where an employer is seeking to enforce a covenant against an employee (rather than

against a business seller, who may also be an employee). As to that form of restrictive

covenant, Ohio law is clear: “[c]ovenants not to compete should in general be strictly

construed, since such covenants are normally written by the employer and are in

restraint of trade and the right to a livelihood.” Gen. Med., P.C. v. Manolache, No.

88809, 2007 WL 2325829, at *1 (Ohio Ct. App. Aug. 16, 2007); see also, e.g., Darrow

v. Kolczun, No. 90CA4759, 1991 WL 35120, at *2 (Ohio Ct. App. Mar. 6, 1991) (same);

Avki v. Avery, No. 13504, 1993 WL 187923, at *2 (Ohio Ct. App. June 3, 1993) (noting

that restrictive covenants in employment agreements “are generally not favored in

the law and are strictly construed against enforcement”). Accordingly, “the burden is

on the former employer to prove that the restraint is reasonable and the agreement

is valid.” See, e.g., J&B Fleet Indus. Supply v. Miller, No. 09MA173, 2011 WL

2536668, at *14 (Ohio Ct. App. June 16, 2011).

As a result, to ultimately prevail here, FRP would be required first to show

that it validly holds (or at least has the right to enforce) the covenant, with all

ambiguity on that front construed against it, and then must show that the provision,

as written, is enforceable under the nine-factor test that Raimonde adopts.

Accordingly, to establish it is entitled to the injunction it seeks, FRP must show that

it is likely to prevail on both those issues.

Let’s start with the former. Under the APA, FRP purchased “all rights of a

Selling Party under all Contracts … including all rights of Selling Parties under any

non-competition, non-solicitation, non-piracy, or other restrictive covenant in favor of

a Selling Party ….” (APA § 2.01(c), at 10). And “Selling Party” includes Fifth Third

Insurance Agency, R.G. McGraw Insurance Agency, Inc.,5 and Epic Insurance

Solutions Agency LLC. (Id. at 1).

In light of the discussion above, the problem with that language should be

immediately apparent. It is not at all clear that the restrictive covenant in the 2020

ICP runs “in favor of” Epic Agency or FTI (as opposed to “Fifth Third”). And, more

fundamentally, even if it does, the promise to assign rights under the APA naturally

can extend only to those rights that are assignable. On that front, as also noted above,

given the language of the ICP, it is not at all clear that the category “assignable

rights” includes the rights under the restrictive covenant (which are transferable only

to a “successor in interest” or “purchaser of all or substantially all of Fifth Third’s

assets”). (2020 ICP, Pl. Hr’g Ex. 7, at 15).

Given that restrictive covenants are “strictly construed against enforcement,”

see Avki, 1993 WL 187923, at *2, and that any residual ambiguity is construed

against the drafter (Fifth Third), the Court concludes that the ambiguity surrounding

these questions precludes Defendants from establishing the requisite likelihood of

success on the merits to warrant injunctive relief. And, because Defendants have

failed in establishing their right to enforce the covenant as a threshold matter, the

Court need not, and thus does not, consider whether the terms of the restrictive

covenant meet Raimonde’s nine-factor test. (Of course, if this matter proceeds to a

trial on the merits, not only will Defendants need to establish the validity of any

5 No party has suggested that the McGraw entity is in any way relevant to the Court’s

decision in this matter. Accordingly, the Court does not discuss that entity further.

assignment, but they will also need to show that the covenant is enforceable under

Raimonde.)

In short, for all of the above reasons, the Court concludes that Defendants have

failed to show “a strong or substantial likelihood … of success on the merits,” and

thus have fallen short of carrying their burden on the first prong of the test for a

preliminary injunction. Bossert, 579 F. Supp. at 66; Warner, 715 F.2d at 1123.

B. The Remaining Prongs Do Not Strongly Favor Injunctive Relief.

Where the party seeking injunctive relief falls short on the first prong, there is

at least some case law suggesting that “it is not necessary, strictly speaking, to

address the remaining three parts of the test to conclude that [the movants] are not

entitled to the preliminary relief they seek.” Bossert, 579 F. Supp. at 66. But that may

overstate the point. It is probably more accurate to say that “a finding that there is

simply no likelihood of success on the merits is usually fatal.” Gonzales, 225 F.3d at

625 (noting that a finding of no likelihood of success is “usually fatal” to a request for

injunctive relief (citing Mich. State AFL–CIO, 103 F.3d at 1249)). Here, while the

Court concludes that Defendants have not made the necessary showing on the first

prong (i.e., that they have not shown a significant likelihood of success), the Court is

unwilling to say that they have “no likelihood of success.” Accordingly, the Court

reviews the remaining prongs, but concludes that, on balance, they do not strongly

favor injunctive relief here.

To establish the second prong, irreparable injury, the movant must show

injuries that are not fully compensable in money damages. Basicomputer Corp. v.

Scott, 973 F.2d 507, 511 (6th Cir. 1992). Here, that is admittedly something of a close

call. Of course, to the extent that Defendants ultimately prove that Ray is not entitled

to solicit or accept business from the clients he served at Fifth Third, one measure of

damages may be the revenues (or perhaps profits) that he generated from those

clients. At the same time, that measure of damages may undervalue the harm that

FRP incurs. After all, the point of the non-compete is to allow FRP an opportunity to

establish a relationship with those clients without interference from Ray. And, if FRP

succeeds in doing so, it presumably may generate profits from that relationship for

multiple years to come. Thus, perhaps not surprisingly, “[t]he Sixth Circuit has found

that the breach of a non-competition clause typically is likely to cause irreparable

harm to an employer.” Ever-Seal, Inc. v. Halferty, No. 3:22-CV-00082, 2022 WL

418692, at *8 (M.D. Tenn. Feb. 10, 2022) (citing Basicomputer, 973 F.2d at 512). And,

particularly relevant here, one of the cases that the Sixth Circuit relied on for that

proposition in Basicomputer was an Eighth Circuit case holding that irreparable

harm can be inferred from an insurance sales representative’s breach of a non-

competition covenant. See Basicomputer, 973 F.2d at 512 (citing Overholt Crop Ins.

Serv. v. Travis, 941 F.2d 1361, 1371 (8th Cir. 1991)). Thus, this prong cuts at least

somewhat in favor of the requested preliminary injunctive relief here.

The third prong requires the Court to consider the potential impact on other

parties, principally the non-moving party. See, e.g., Johnson v. Bobbitt, No. CV 621-

022, 2021 WL 1792125, at *4 (S.D. Ga. May 5, 2021) (“Plaintiff also completely fails

to satisfy the third and fourth prongs regarding the threatened injury to him

outweighing whatever damage the proposed injunction may cause the opposing party

and whether if issued, the injunction would be adverse to the public interest.”); Kohler

v. City of Cincinnati, No. 1:20-CV-889, 2021 WL 761630, at *13 (S.D. Ohio Feb. 27,

2021), report and recommendation adopted, No. 1:20-CV-889, 2021 WL 1558334 (S.D.

Ohio Apr. 21, 2021) (noting that “[t]he third and fourth prongs of the preliminary

injunction analysis” require “assessing the harm to the opposing party and weighing

the public interest”).

Here, the Court is cognizant that the covenant at issue does not prevent Ray

from seeking to sell insurance at all, but rather only to clients that he serviced while

employed as a Fifth Third subsidiary. At the same time, the evidence at the hearing

tended to suggest that Ray’s existing clients, many of whom apparently were clients

of his even before he came to Fifth Third, let alone to FRP, were the principal source

of income that he could expect from selling insurance in the short term. Accordingly,

the Court concludes that Ray would be likely to suffer significant harm, including to

his ability to support his family, if the Court were to enter the requested injunctive

relief. Especially in light of Defendants’ failure to establish a strong likelihood of

success, the Court concludes that this factor counts against injunctive relief here. See

In re DeLorean Motor Co., 755 F.2d 1223, 1229 (6th Cir. 1985) (noting that the

preliminary injunction considerations are “factors to be balanced”).

That leaves the public interest. The Court concludes that this prong does not

count strongly in favor of, or against, preliminary injunctive relief. Of course, as a

general matter, the public has an interest in contracts being performed according to

their terms. But, as noted above, what the contracts at issue here require is, at best,

a bit of a mystery at this point. Moreover, to the extent that clients prefer to purchase

their insurance from Ray, entering the requested relief would interfere with those

preferences. So that cuts, at least to some extent, in the other direction. While that

harm to third parties is inherent in the nature of a non-competition agreement, here,

Defendants’ failure to make the necessary showing as to the first prong means that

those third parties ultimately may suffer that harm for no valid reason. Accordingly,

the Court concludes that this prong does not change the calculus much in either

direction.

In sum, the Court’s analysis of the remaining three prongs fails to identify any

basis for overcoming Defendants’ failure to make the necessary showing on the first

prong of the test for preliminary injunctive relief.

CONCLUSION

For the foregoing reasons, the Court concludes that Defendants have not met

the heavy burden they must carry to warrant a preliminary injunction. Accordingly,

the Court DENIES FRP’s Motion for Preliminary Injunction (Doc. 37) and

VACATES the previously entered Amended Agreed Temporary Restraining Order

(Doc. 47). However, the Court DIRECTS the Clerk to RETAIN the $50,000 surety

bond associated with the Amended Agreed Temporary Restraining Order (Doc. 47)

pending further Order of the Court.

SO ORDERED.

March 31, 2022 :

DATE DOUGLAS R. COLE

UNITED STATES DISTRICT JUDGE

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