Jarvis v. Taylor

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

NORTHERN DIVISION

CHRISTOPHER JARVIS, )

)

Plaintiff, )

)

v. )

)

TAYLORCHANDLER, LLC, T. )

BRITT TAYLOR, NORMAN )

CHANDLER, and JAMES R. ) Case No. 2:17-cv-396-ALB

JOHNSON, )

)

Defendants. )

MEMORANDUM OPINION

This case is a contract dispute between sophisticated businessmen. It has IRS

bulletins, complicated life insurance plans, and more accountants than a golf course

on April 16th. The Court held a multi-day bench trial at which the key players and

various experts testified. This opinion resolves the parties’ claims.

The parties were in the “captive insurance business.” A captive insurance

company is a subsidiary set up by a corporation to insure its risk. It is “captive” in

the sense that it serves as the insurer for only one insured—its parent. Section 831(b)

of the tax code allows individuals to do the same through privately held corporations

and LLCs. The upshot is that wealthy individuals can assuredly pay themselves to

insure themselves, thereby ensuring that a portion of their income and investment

gains are subject to lower taxes. Until recently, the mechanism could also be used to

avoid the estate tax by moving money between insurance companies owned by a

grandparent and grandchild.

Because creating and managing an insurance company is hard work with

regulatory, accounting, and other complications, there are “captive insurance

management” companies that form and manage these insurance companies for initial

and quarterly fees. In this case, both Defendants and Plaintiff owned firms that

formed and managed captives. But that is where their similarities ended. Plaintiff

Christopher Jarvis saw captive insurance as merely one way to solve a client’s

immediate tax avoidance, estate planning, and cash-flow needs. Defendants Britt

Taylor, Norman Chandler, and Johnny Johnson saw a captive insurance company as

a stable, tax-advantaged way to help clients fulfill their small business’s insurance

needs over decades. Jarvis is a risk-taker; Defendants are conservative. Jarvis self-

publishes books on financial planning and pitches doctors at medical conferences;

Defendants run an accounting firm.

When Defendants agreed to buy Plaintiff’s business and hire him as an

employee, the resulting deal was doomed before the ink was dry. It fell apart less

than a year after closing. Plaintiff filed this lawsuit alleging breach of contract, and

Defendants responded by filing a counter-claim alleging a wide array of business-

related misconduct.

PROCEDURAL HISTORY

This action was originally filed by Plaintiff on June 19, 2017. After two years,

four Judges, and scores of filings, the case was reassigned to the undersigned on

May 14, 2019. A second amended complaint was filed on July 15 and a second

amended counterclaim on July 31.

On November 12, 2019, Plaintiff filed a motion for summary judgment, see

Doc. 147, and Defendants filed a motion for partial summary judgment, see Doc.

141. Plaintiff’s summary judgment motion was denied, and Defendants’ motion was

mooted by Plaintiff’s voluntarily dismissal of certain claims. See Doc. 182.

The case went to trial between February 18 and February 21, 2020,

concluding, after a brief hiatus caused by witness unavailability, on February 26.

Plaintiff Christopher Jarvis and Defendants Britt Taylor, Norman Chandler, and

Johnny Johnson all testified at trial. The Court also received live testimony from

expert witnesses Richard Avery, John Mastin, and Gary Bowers. The Court received

deposition excerpts from Ved Aggarwal, Paul Playfair, Nick Burkett, Jason

Plummer, and Julia Stuart. Additional video deposition material of Julia Stuart was

submitted to the Court on March 16.

STANDARD

As this case involves no federal law, the relevant subject matter jurisdiction

is diversity jurisdiction. Defendants are citizens of Alabama; Plaintiff is a citizen of

Texas. When sitting in diversity, the appropriate role for a federal court is to apply

substantive state law. See Bielski v. Alfred Saliba Corp., 984 F. Supp. 2d 1170, 1176

(M.D. Ala. 2013). The Supreme Court has held that the standard of proof is a

substantive aspect of a claim. See Medtronic, Inc. v. Mirowski Family Ventures,

LLC, 571 U.S. 191, 192 (2014). Because Alabama law provides the substantive law

that applies to the parties’ dealings, Alabama law also provides the burden of

persuasion. In a civil case in Alabama, the factfinder is “authorized to find that a

controverted fact has been established if a preponderance of the evidence reasonably

satisfies [him] of its truth.” Battles v. Tallman, 406, 11 So. 247, 249 (Ala. 1892).

GENERAL FINDINGS OF FACT

I. The parties and other important players.

Plaintiff Christopher Jarvis is the proverbial man with the plan; the sort of

financial fixer that one sees in movies and television shows. He has written multiple

books about the concept of “success.” He holds an MBA from UCLA. He founded

Jade Risk with a partner to pitch wealthy small business owners on financial

planning services, including captive insurance.

Defendants Chandler, Johnson, and Taylor are successful Alabama

businessmen. Johnny Johnson spent twenty-five years with the Alabama Department

of Insurance before retiring as Deputy Commissioner of the Property and Casualty

Division. Britt Taylor is the former vice president of Colonial Bank. Norman

Chandler is a captive insurance prodigy who co-founded a captive management firm

fresh out of school. These three co-own the Montgomery-based accounting firm

TaylorChandler LLC. Defendants sought to merge Jarvis’s Jade Risk with Arsenal

Insurance, a wholly owned subsidiary of TaylorChandler.

Two administrative employees play a pronounced role in this litigation as

well. Stephanie Matlock worked for Jarvis before becoming an employee of the

Defendants after the acquisition. A military veteran, Matlock’s strictly no-nonsense

attitude led her to clash with Jarvis from time to time. Julia Stuart, a longtime

administrator for various financial institutions, was hired by Jarvis after the

acquisition and the two got along swimmingly to the end.

II. The Deal

Christopher Jarvis started Jade Risk, a captive insurance management

business, in 2011. A captive insurance management business generally involves

three tasks: (1) finding companies or high net worth individuals or families that

could benefit by establishing a wholly-owned captive insurance company, (2)

performing the accounting and regulatory tasks to create the captive insurance

company, and (3) ensuring ongoing compliance with state insurance regulations and

IRS tax regulations. Jarvis was talented at number 1, but he outsourced numbers 2

and 3 to outside lawyers and accountants. By 2015, Jade Risk was spending over

$800,000 annually on outside legal and accounting services for the captives it was

managing.

Jarvis eventually decided to sell Jade Risk. He had grown tired of paying so

much money to third parties, and a fellow investor in Jade Risk wanted out. Norman

Chandler offered Jarvis a solution. Chandler’s accounting firm had the manpower to

perform regulatory and administrative tasks entirely in-house, and Chandler himself

was a specialist in the tax and risk-pooling benefits of captive insurance companies.

By selling Jade Risk and its book of business to Chandler’s accounting firm, Jarvis

could focus on the part of his job he enjoyed: interacting with people and solving

their financial problems. By buying Jade Risk, Chandler’s own captive management

company, Arsenal, a subsidiary of TaylorChandler, would get a book of business

with ongoing regulatory and accounting needs that it could add to its preexisting

client base. It would also get Jarvis as an employee.

Thus began a lengthy negotiation process between Jarvis and the constituent

partners of TaylorChandler. By the end of 2015, the parties had agreed to a purchase

price of $3,000,000 for Jade Risk. They then sought to close the deal.

TaylorChandler applied to borrow money from Synovus Bank to complete the

purchase. Part of the money for the loan came from the Small Business

Administration and with it came an important limitation: if a loan from the SBA is

used to buy a business, the seller may not remain employed with that business for

longer than a year after the purchase. In tension with this requirement was the desire

of the bank (and Jarvis) that Jarvis stay on in some capacity. The parties developed

a work around. Although Jarvis could not be an employee of Arsenal, as its imminent

merger with Jade Risk would cause such an arrangement to violate the SBA

regulation, he could become an employee of TaylorChandler itself to satisfy the

bank.

Throughout 2016 Jarvis kept TaylorChandler apprised of changes to Jade

Risk’s book of business and conducted a new company valuation as late as July. To

assure TaylorChandler of Jade’s financial health, Jarvis sent an email on July 10,

2016 detailing prospective clients that could not move forward until the merger went

through. On August 9, Stephanie Matlock, Jarvis’s assistant, sent another email to

Chandler. This email represented that Jade Risk had 35 active captives and that at

least six of those captive clients would imminently surrender or dissolve. Matlock

emailed again on August 23 to detail the surrender or dissolution of a further six

captives. This brought the list of stable captives managed by Jade Risk down to 23.

The deal closed four weeks later without a change in terms or purchase price.

Jarvis made financial concessions to assuage TaylorChandler’s concerns that

surrendering captives and increased regulatory scrutiny would translate into a loss

on the deal. Jarvis volunteered to defer $175,000 of his salary and $750,000 of the

purchase price and suggested that the agreement include performance benchmarks

that could substantially reduce the deferred payments if he failed to meet them.

The deal closed in September with the signing of four documents, each with

an effective date of July 1, 2016.

First, the parties signed a membership interest purchase agreement that

transferred Jade Risk’s ownership from Lawrence Anderson1 and Christopher Jarvis

to Britt Taylor, Norman Chandler, Johnny Johnson. It sets the purchase price as

$3,000,000 with $2,250,000 in cash and $750,000 due under the terms of a

promissory note.

Second, they signed a 60-month employment agreement between Jarvis and

TaylorChandler. Section 2 of the employment agreement governs Jarvis’s duties to

TaylorChandler:

General Duties. During the term of employment, Employee will:

(a) Promote the interests, within the scope of his duties, of [TaylorChandler and

Arsenal];

(b) Serve as Director of Business Development of [TaylorChandler], reporting

directly to the members of [TaylorChandler] and any chief officer appointed

by such; and,

(c) Perform the duties and services consistent with the title and function of such

office, including, but not limited to:

a. Establish and build new relationships with existing and potential

clients, and referral sources for clients of [Arsenal];

b. Maintain existing relationships in order to preserve existing clients of

the [Arsenal];

1 Lawrence Anderson was a doctor and Christopher Jarvis’ silent partner in Jade Risk. Anderson

transferred his shares into a trust for Jarvis so Jarvis could unilaterally negotiate the sale.

c. Develop marketing strategies for increasing clients of [Arsenal];

d. Introduce and leverage other [TaylorChandler] and Affiliate programs

and services as appropriate; and

e. Coordinate organizational resources to drive engagement of new and

existing clients.

These specific provisions in the duty section are followed by a paragraph that

specifies the things Jarvis may do independently while employed by

TaylorChandler:

Notwithstanding [his duties to TaylorChandler], [Jarvis] is allowed to

pursue other business activities and other forms of compensation, and

[he] shall retain all revenue and profits therefrom, so long as [he] fulfills

his obligations herein and does not violate the terms of the Restrictive

Covenants Agreement….For the avoidance of doubt, [Jarvis] is allowed

to pursue other types of insurance, financial planning and other business

that are not competitive with [TaylorChandler’s outsourced oversight

of licensing, underwriting, claims, accounting and regulatory reporting

of a privately-held insurance company].2 Specifically, [Jarvis] is

allowed to sell insurance to clients of [TaylorChandler]; provided,

however, [he] may not sell any life insurance products to captive

insurance companies managed by [TaylorChandler] or Affiliates

without the prior written consent of [TaylorChandler].

Third, they signed a restrictive covenants agreement between Jarvis and Jade

Risk, now owned by Chandler, Johnson, and Taylor.

Fourth, they signed a promissory note including details for the gradual

payment of the remaining purchase price.

2 The employment agreement provides that Jarvis may not compete with the “Business” described

in the restrictive covenants agreement. “Business” is defined there as captive management services

and captive management services in turn is defined this way.

In addition to the $2,250,000 in cash, these agreements grant Jarvis a variety

of compensation sources, some of which are contingent upon the completion of

certain benchmarks. First, the employment agreement provides that he is to receive

$15,000 for each month from July-December 2016. Second, he is to receive

$175,000 of deferred salary within ninety days after the end of 2016 or, depending

on revenues, within ninety days after the end of 2017. Third, Jarvis is to receive a

one-time payment of $20,000 per new captive that he originates for TaylorChandler.

The bonus payments for captives originated in 2016 can be delayed in the same

fashion as the deferred salary if revenue targets are not met. Fourth, in January of

2017, Jarvis’s regular salary is replaced by an incentive system that provides a

monthly salary equal to $833.33 per captive he has originated since July 1, 2016,

provided that the Jade Risk book of business has at least thirty-six captives under

management. Fifth, Jarvis is entitled to the deferred $750,000 portion of the original

Jade Risk purchase price unless there is a revenue shortfall. The membership interest

purchase agreement provides that if revenue derived from former Jade Risk captives

and captives originated by Jarvis between July 1, 2016 and December 31, 2016 does

not amount to $1,010,000 then the $750,000 will be reduced by the difference

between that target and realized revenue.3 Sixth, Section 5.4 of the employment

3 This equation is known in the agreement as the “2016 Revenue Shortfall.” There is another

revenue shortfall equation for 2017. The agreement provides that the $750,000 is reduced by the

smaller of the two. Because Jarvis was fired only five months into 2017, the Court, like the parties,

agreement provides that, if Jarvis is terminated without cause, TaylorChandler will

owe him the “average monthly salary” he was receiving in 2017 until the end of the

sixty-month term of the employment contract.

Most of the parties’ dispute revolves around the interpretation and application

of these provisions. One point of contention is how the parties ought to calculate

revenue for the purposes of determining whether Jade Risk’s revenue hit the

$1,010,000 target. In one version of the employment agreement that was signed by

Jarvis but not Defendants, Section 3.1(b)(vii) specifies that “revenues shall include

only (A) cash in Jade’s checking account on the Effective Date and (B) cash

revenues actually received by Jade between the Effective Date and the last day of

the Initial Term.” This was referred to throughout the trial as the “cash-basis”

method. The version of the employment agreement signed by both parties had

Section 3.1(b)(vii) removed. The other contender is the “accrual” method, which

conforms with Generally Accepted Accounting Principles and counts as revenue,

not only cash received by the company by a set date, but also the cash owed for

services performed by that date. Experts agree that there was a revenue shortfall

under the cash basis method but not under the accrual method.

uses the 2016 revenue shortfall on the assumption that the 2017 shortfall would be significantly

higher.

The revenue shortfall was not something that became seriously contentious

until this litigation. Jarvis and Chandler had a series of informal communications

about Jade Risk’s revenue in 2016. At the end of 2016, Arsenal sent Jarvis a sales

summary showing the revenue streams relevant to his compensation: $457,286.88

in Jade Risk revenue and $302,500.00 in Arsenal revenue attributable to captives

that Jarvis had originated. Jarvis believed there were inaccuracies in the accounting

data he received, but he was fired before he could pursue it meaningfully with the

company. Although Jarvis believes TaylorChandler intentionally delayed or

otherwise manipulated payments to reduce total revenue, there is no evidence of that.

Instead, any delays or errors were due to difficulties in merging the two companies.

III. The Deal falls apart.

After the deal closed, the parties began to have difficulty merging Jade Risk

into Arsenal and converting Jarvis from an owner into an employee. There were two

reasons for these difficulties: adverse federal regulatory changes and fundamental

differences in business philosophy.

A. Federal regulatory challenges hurt the captive insurance industry.

The parties’ deal occurred against a backdrop of adverse federal regulatory

changes in the world of captive insurance.4 In December of 2015, the PATH Act was

4 Some of the information in this paragraph comes from Plaintiff’s expert Bowers and from

Plaintiff Jarvis, who both testified about regulatory issues in the captive insurance industry.

Defendants objected to both kinds of testimony.

passed. This legislation increased disclosure requirements for captive owners and

prevented estate tax avoidance by making all related captive owners the same person

for attribution purposes. Then, in November of 2016, the IRS promulgated Notice

2016-66. Notice 2016-66 announced that transactions by small insurance companies

would be viewed as “transactions of interest” and included an ex post facto

requirement that all captives render a detailed account of their transactions over the

last ten years. Chandler testified at trial that 2016-66 had a chilling effect on the

captive industry.

After 2016-66 was promulgated, Jarvis spent a great deal of time taking calls

from clients and trying to reassure them that maintaining a captive insurance

company was worth the trouble. He was not always successful.

In December of 2016, Nick Burkett, an accountant who worked on captives

with Jarvis, sent an email to Chandler with two surrendering captives not previously

Defendants moved to exclude Bowers’s testimony as inadmissible legal conclusions. See

Doc. 145. That motion is denied. Bowers has a great deal of experience in the captive insurance

industry and is more than qualified to opine on ordinary practices within the industry and about

how it was affected by regulatory changes. That his opinions touch on legal and regulatory changes

does not make them impermissible legal opinions, and they do not go to any ultimate legal issue

in the case.

Defendants erroneously argue that Jarvis should not be allowed to testify as an expert

because his witness disclosures were insufficient under Rule 26(a)(2)(C). See Doc. 145 at 3. The

appropriate inquiry when determining whether an expert is required to provide a disclosure is

whether he (1) had a connection to the specific events underlying the case, which qualifies for less

disclosure, or (2) provides a technical evaluation of evidence learned in preparation for trial, which

does not. See Prieto v. Malgor, 361 F.3d 1313, 1319 (11th Cir. 2004). Jarvis was not specially

retained, and his opinions were formed in real time based on first-hand factual knowledge of the

underlying dispute. Jarvis’s disclosures were sufficient.

listed by Matlock, one of which was shutting down due to regulatory pressure. After

these repeated surrenders, Jarvis texted Chandler in February and said “I would

never try to screw you guys. I hope you know that about me,” to which Chandler

responded, “I know.”

Between the end of 2016 and the beginning of 2017, Jarvis had conversations

with two doctors who owned captive insurance companies: Dr. Ved Aggarwal and

Dr. Paul Playfair. Aggarwal emailed Stephanie Matlock (now working for Arsenal)

on January 4, 2017 to say that he “had a meeting with Mr. Jarvis and [was now]

going to surrender” his captive. Defendants testified at trial that they deduced from

this email that Jarvis had caused Aggarwal to surrender his captive. But Aggarwal

explained in a signed declaration that Jarvis had never encouraged him to surrender

his captive and had instead attempted to convince him to keep it. Based on his

discussions with Aggarwal, Jarvis testified that he believes Aggarwal surrendered

due to the reporting requirements of 2016-66. Dr. Paul Playfair indicated an intent

to surrender in October of 2016. Playfair also confirmed in a deposition that Jarvis

had not encouraged him to surrender his captive. Jarvis testified that his discussions

with Playfair led him to believe that Playfair had concluded that his practice was no

longer large enough to justify a captive.

Jarvis continually texted Chandler throughout the end of December 2016 and

early January 2017 to ask whether the numbers were looking good and whether

Taylor and Johnson were pleased with his production. The parties agree that, before

the end of 2016, Jarvis originated at least 8 captives for Arsenal.

B. Fundamental differences in philosophy strain the parties’

relationship.

The parties also had difficulty merging their businesses because of

fundamental differences in their business philosophies. Jarvis is a risk-taking

entrepreneur who looks for creative (and potentially risky) ways to help clients save

money. TaylorChandler is a conservative accounting firm. There were bound to be

problems, and there were.

There were five main problems.

First, there were communication problems between Jarvis (in Texas) and

TaylorChandler (in Alabama). By January of 2017, Jarvis was complaining to

Chandler that he had significant concerns about the services Jade Risk clients were

receiving from the new organization. Chandler responded that it was due to “poor

organization and communication on [Chandler’s] part.” A month later, in February

of 2017, Chandler learned that Jarvis had switched the Arsenal phone number so that

it would be routed to Jarvis’s office in Grapevine, Texas. After Chandler had the

number switched back, the number was switched two more times. Eventually,

Jarvis’s Texas office was shut out of the account.

Second, the parties never assessed Jarvis’s 2017 salary as provided under the

employment agreement, and he was continuing to be paid at a flat rate of $15,000 a

month. An explicit condition of the continuing 2017 salary was that Jade Risk have

at least 36 active captives under management per 3.1(c) of the employment

agreement. But the parties disagree over whether Jade Risk had that many. Although

the emails sent by Matlock make clear that Jade Risk had only 23 captives when the

deal was formally signed, Jarvis claims he originated sixteen captives in the

remaining months of 2016. Six of those captives were reincarnations of captives that

had surrendered, “the Buckley captives,” and one of them was a captive owned by

Jarvis himself, for which he paid around 25% of the usual fee.

Jarvis testified that any captive that still owed fees ought to be considered an

active captive, even if it was in the process of surrendering. By that logic, Jarvis

testified that Jade Risk had the following active captives under management at the

end of 2016: ALS, Carodan, DK, K&L, KMJ, Monticello, Casualty Protection

Group, Commercial Exchange, Cosmetic Surety, Fox Bay, Granite, East River,

Global Indemnity, IDB Highlands, GTTX, Lakeside, Leadenhall, Loxford,

Middlegate, Next Generation, NIW, Pain Management, Pocono, Potomac, Premium

Capital, Tarpon Risk, Wellfleet, and Wimberly, ASC, Eastcliff 2, Clover Tool,

Central Texas, Vikas, CT Risk, and SSI in addition to others he could not remember

on the stand. Jarvis counted both the surrendered and reincarnated Buckley captives.

Twenty-two of the captives Jarvis counted displayed no invoice until 2017 in

Arsenal’s financial records.

Third, the parties had different views about what Jarvis was expected to do as

an employee. Defendants never provided Jarvis with a job description or a set of

objectives. Because no job description was forthcoming, Jarvis began to define his

own role within the new firm. He focused on developing his own brand to generate

captive referrals for Arsenal. Jarvis created a separate company—JarvisTower—

that he planned to use to sell life insurance, market books, and provide financial

consulting. On January 30, 2017, Jarvis told Chandler that he could make

TaylorChandler a lot of money if he set up an independent brokerage firm. He

believed there would be a symbiotic relationship between the two firms with Jarvis

as “the broker who looks for better solutions for clients and advisors (and [Arsenal]

is one [solution]).” Chandler responded that he “totally” agreed and believed that to

be the direction in which their relationship should move.

In addition to his new brokerage firm, Jarvis partnered with IPS Advisors, a

Texas firm that managed health insurance for publicly traded companies. Jarvis had

two deals with IPS. First, he and IPS would use the products of Lion Street, an

insurance wholesaler, and bonuses received from a sale by either Jarvis or IPS would

be based on their combined production. Second, Jarvis paid an IPS agent named

Dan Stanley $3,500 per month to do his underwriting for him. Jarvis also had an

IPS email account.

Although Chandler acquiesced to Jarvis’s plan by text message, his partners

were concerned about it. On January 31, Jarvis sent an email to Chandler announcing

that he had hired Jason Plummer and Julia Stuart to assist him with operations in

Texas. Plummer and Stuart worked for JarvisTower, and Jarvis paid them from his

own funds. Chandler emailed Jarvis on February 9 to set up a call with Taylor and

Johnson: “[t]hey want to hear from you what all is going on with Jarvis Tower and

the employees that you’ve hired. It seemed to come out of nowhere. There is a

potential conflict of interest and we need to ease their concerns.”

After the call, Jarvis sent an email to follow up. He says that JarvisTower is

the centerpiece of his “captive linchpin” strategy. Jarvis writes that “everything has

been done to continue to build my marketing around the ‘captive linchpin’ strategy.”

Jarvis explains he created JarvisTower because he “needed an entity that [he] could

use as a central point for consulting – which will lead to more captive and insurance

business,” writing that JarvisTower was “counting on future revenues from working

together with Arsenal and TaylorChandler.”

Although Jarvis’s employment agreement states that he is the Director of

Business Development for TaylorChandler, Jarvis reminded Defendants in the

February 22 email that they had agreed he would instead hold himself out as a

member of the Arsenal Board of Directors. At trial, Jarvis testified that this was to

(1) appear to give Arsenal strategic vision, (2) make Arsenal seem forward-thinking

by having consultants on the board, and (3) allow him to get in the door without

seeming like a salesman for an accounting firm. There is no reply in the record from

Defendants to the February 22 email, and there is no dispute that Jarvis had business

cards that listed him as a member of Arsenal’s Board of Directors.

On February 27, Jarvis emailed a ten-step marketing plan for Arsenal to

Taylor, Chandler, and Johnson. The plan was extensive and detailed. The first step,

titled “Confirm Goals,” sets out his vision for the relationship between Jarvis and

Defendants. In Step I(b)(i), Jarvis sets the goal of maintaining 80% of the old Jade

Risk captives. In Step I(b)(ii), Jarvis also discusses “[i]ntroduc[ing] Arsenal to 100

advisors and prospects via webinar, telephone, or conference.” As part of efforts to

build the brand in Step I(c)(vi), Jarvis commits to writing E-Newsletters, articles for

mailed statements, books, and webinars. Jarvis also devotes substantial space in

Step I(d) to strategies for increasing revenue through life insurance sales. Steps 2-4

discuss Jade Risk transition logistics. Steps 5-6 discuss the education of prospective

clients through publication; Step 6 predominantly discusses Jarvis’s personalization

of his book “Wealth Secrets for Physicians” for the state of Alabama and

disseminating a publication called “Wealth Secrets for Alabama Physicians.” Step 7

is titled “National Branding of Jarvis.” It includes book publishing, memberships in

various financial organizations, and a budget for marketing Jarvis/JarvisTower, as

well as for a separate client services director and executive assistant for JarvisTower.

The plan explains that these costs will be borne by JarvisTower. Steps 8 and 9 are

broad references to exposure driven by published materials and strategic

partnerships, and Step 10 calls for regular review of the plan.

On March 24, Taylor, Chandler, and Johnson responded to Jarvis with an

edited and approved version of the marketing plan. Step 7 escaped comment. The

only comment that could be considered corrective was made on Step I(c)(iii) which

is the “Work with Peralta to update CIC Packet” subsection. Chandler commented

that the packet needed to “cut a good bit of the tax and estate planning talk.” The

Smith Paving Case Study, right above the CIC packet, also escaped comment. One

comment highlighted the material Jarvis was disseminating—books, newsletters,

and webinars—and made clear that TaylorChandler wanted to review them “before

publishing.”

Fourth, there were disputes about Jarvis’s marketing materials and strategies.

On April 21, Jarvis emailed Chandler a copy of a PowerPoint webinar that he had

given the day before to CPAs. Jarvis’s bio on the first page mentioned that he was

on the board of directors of Arsenal, and that it was both rated a top captive manager

by Captive Review Magazine and the largest manager in Oklahoma and Alabama.

The PowerPoint also mentioned Arsenal as the owner of the Smith Paving

Case Study. This was a hypothetical case study created by Jarvis before he sold Jade

Risk to illustrate how a construction company could dramatically reduce its tax

liability by using a captive. Chandler testified at trial that, because it framed captives

as a tax dodge and would draw the ire of the IRS, he had told Jarvis that he didn’t

want Arsenal’s name on it. Jarvis denies being told this. Having observed the

witnesses, the Court finds that Chandler never told Jarvis not to use the case study,

although he clearly did not want Jarvis to use it.

Fifth, the apex of the parties’ philosophical disagreement was Jarvis’s model

to use PLLCs to draw money out of a captive insurance company in an aggressively

tax-advantaged way. Although the particulars of the plan are not clear on the record,

the gist of it is as follows. Under Jarvis’s plan, the captive would purchase preferred

interests in a Preferred Limited Liability Corporation that have priority when

distributions occur. But these distributions would not occur until years in the future,

thus reducing the investment’s valuation for tax purposes. Other investors would

purchase common interests. The common interest-holders would make investments

that could be used to pay the captive’s claims. In return for their capital exposure,

the common interest-holders get most of the PLLC’s investment proceeds if the

returns are better than expected. The PLLC then purchases a life insurance policy in

the name of the captive’s owner that has the effect of moving money from the PLLC

to the owner in a tax advantaged way.

Jarvis discussed the PLLC structure with Defendants at a meeting in Dallas

before the deal closed. Taylor testified at trial that he did not fully understand the

PLLC presentation and that he remembered Jarvis saying the structure could be used

“way down the road when a captive is ready to shut down.” Chandler testified that

the PLLC structure was risky and likely to draw the unfavorable attention of the IRS:

“So you’re now sort of double dipping the tax benefits. So you put it in [the captive]

with, you know, a tax—a big tax break, you pull it out with a very significant tax

break, and you’ve paid very little tax on this whole transaction.” The Court credits

Defendants’ testimony that they viewed the PLLC structure as risky from a

regulatory and tax perspective. But the Court credits Jarvis’s testimony that nothing

about his proposed use of a PLLC to wind down a captive that had served its

purposes was inconsistent with the formation and maintenance of another captive

insurance company.

IV. Jarvis is terminated.

In early May 2017, Chandler flew to Dallas to meet with Jarvis. In this

meeting he expressed that, going forward, Taylor and Johnson wanted to satisfy

Jarvis’s remaining remuneration on an incentive basis, ridding themselves of the

deferred salary obligations owed to Jarvis at that point. Jarvis refused to change the

deal. When Chandler called Jarvis in late May to tell him that he needed to either

renegotiate his deal or face for-cause termination, Jarvis once again refused to budge.

Jarvis was then sent a termination letter in the mail on May 25.

The letter stated that Jarvis “materially breached [his] duties contained in

Section 2.2, in addition to violating [his] duty of loyalty to the companies” and

“violated Sections 2, 3, and 5 of the Restrictive Covenants Agreement” to “enrich[]

[him]self at the cost of the Companies.” Jarvis had done this, according to the letter,

by, among other things, “advising current captive insurance company clients to

dissolve their captives so that [he] may sell them life insurance products; and using

confidential information and products to promote [his] own venture, JarvisTower,

including conducting a webinar without any references to services provided by the

Companies and holding JarvisTower out as a direct competitor to the Companies.”

Jarvis was also accused of violating Sections 2.3, 2.5, and 2.11 of the membership

interest purchase agreement “by including revenues of captives in financial

information that had either not been formed or had to be shut down soon after closing

(or were encouraged to be shut down by [Jarvis])…fraudulently represent[ing] the

number of captives under management or committed to be formed in 2016, of which

at least 11 were engagements that were fabricated and never existed;

and…breach[ing] Section 4.1 by encouraging captive clients to dissolve instead of

encouraging clients to maintain their business with the Companies.” At trial,

Defendants made clear that an additional reason, not listed in the letter, was

insubordination.

V. Jarvis fails to preserve documents.

Jarvis was terminated by TaylorChandler on May 25. Julia Stuart testified that

Jarvis did not tell her to preserve emails for his defense or wipe data from the desktop

computer in the Grapevine office, but she did both of those things anyway.5 In her

initial deposition, Julia Stuart said she did not delete anything from the computer,

but in a subsequent affidavit she said that she had deleted everything. Stuart also

shredded all the hard documents that were on site. At trial, Jarvis testified that he

had no knowledge of the destruction of documents because he was overseas when it

occurred. Prior to trial, Jarvis wrote in an affidavit that he authorized the shredding

because he did not want the documents to be discovered by other office tenants.

Whatever authorization took place, Julia Stuart began to solicit bids from third party

shredding vendors and eventually purchased the services of Sierra Shred, who

showed up on June 12, 2017 and shredded 15 boxes of documents in 20 minutes.

The rationale offered by Stuart for her actions was that the Grapevine office was

“open-concept” and anyone in the building could have gained access to the files.

However, defense counsel paid a visit to the Grapevine office and took pictures

showing that there was nothing “open-concept” about the office at all; it has hallways

and doors that lock.

FINDINGS OF FACT AND CONCLUSIONS OF LAW AS TO

SPOLIATION, DEFENDANTS’ COUNTERCLAIMS, AND PLAINTIFF’S

CLAIMS

There are three main issues for the Court to resolve. First, Defendants filed a

substantial motion for spoliation sanctions. Second, the Court makes findings of fact

and conclusions of law as to Defendants’ counter-claims. Third, the Court makes

findings of fact and conclusions of law as to Plaintiff’s claims.

I. Spoliation sanctions are warranted.

Defendants move that Plaintiff be sanctioned for destroying documents and

deleting electronic files. The test governing spoliation of physical documents is

slightly different than the test governing spoliation of electronic documents. But the

result is the same in this case.

A. There was spoliation.

As an initial matter, the Court finds that there was spoliation. Defendants

allege two acts of spoliation: the deletion of digital data from the Grapevine desktop

and the shredding of paper documents stored in the Grapevine office.

To establish spoliation of physical documents, Defendants must prove that a

destructive act occurred, that litigation was reasonably foreseeable at the time, and

that the act was undertaken in bad faith. See Morrison v. Veale, 2017 WL 372980,

5 Whether or not Jarvis asked her to save emails for his defense, Stuart did. She emailed Jarvis a

list of emails in chronological order that were relevant to his termination letter.

at *5 (M.D. Ala. Jan. 25, 2017); see also Speaker v. U.S. Dep't of Health & Human

Servs. Centers for Disease Control & Prevention, 2012 WL 13071495, at *17 (N.D.

Ga. Mar. 14, 2012). Bad faith may be established through direct evidence, by

showing that the opposing party acted with “willful and premeditated” intent, see

Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107, 134 (S.D. Fla. 1987), or

through circumstantial evidence, by showing that (1) evidence once existed that

could fairly be supposed to have been material to the proof or defense of a claim at

issue in the case, (2) the spoliating party engaged in an affirmative act causing the

evidence to be lost, (3) the spoliating party did so while it knew or should have

known of its duty to preserve the evidence, and (4) the affirmative act causing the

loss cannot be credibly explained as not involving bad faith by the reason proffered

by the spoliator. See Calixto v. Watson Bowman Acme Corp., 2009 WL 3823390, at

*16 (S.D. Fla. Nov. 16, 2009). See Alabama Aircraft Indus., Inc. v. Boeing Co., 319

F.R.D. 730, 746 (N.D. Ala. 2017) (applying this test to request for sanctions under

Rule 37); Bell Aerospace Servs., Inc. v. U.S. Aero Servs., Inc., 2010 WL 11425322,

at *2 (M.D. Ala. Feb. 18, 2010) (citing and approving the bad faith test from

Calixto).

To establish spoliation of electronic documents, Rule 37 of the Federal Rules

of Civil Procedure requires a party to establish that the evidence (1) should have

been preserved in the anticipation or conduct of litigation, (2) is lost because a party

failed to take reasonable steps to preserve it, and (3) cannot be restored or replaced

through additional discovery. Fed. R. Civ. P. 37(e). See also Sosa v. Carnival Corp.,

2018 WL 6335178, at 10 (S.D. Fla. Dec. 4, 2018); In re Abilify (Aripiprazole) Prod.

Liab. Litig., 2018 WL 4856767, at 2 (N.D. Fla. Oct. 5, 2018). Butzer as Next of

Friend C.W. v. Corecivic, Inc., 2018 WL 7144285, at *2 (M.D. Fla. Sept. 12, 2018).

The Court finds that evidence was destroyed that should have been preserved

in anticipation of litigation. In the Eleventh Circuit, the duty to preserve is triggered

when litigation becomes reasonably foreseeable. See Graff v. Baja Marine Corp.,

310 F. App'x 298, 301 (11th Cir. 2009). The day before Jarvis was terminated, he

contemplated the involvement of lawyers during a phone call with Chandler. Just

over three weeks later, on June 16, 2017, Jarvis filed this lawsuit. Jarvis explicitly

requested that Stuart help him preserve documents by May 31, only seven days after

his firing. TaylorChandler also contemplated litigation and warned Jarvis not to

destroy documents.

The destroyed evidence was relevant to the anticipated litigation. Although

there are no specific paper documents that Defendants point to as relevant, Matlock

has attested that the shredded boxes contained Jade Risk client records, which are

relevant to the subject of Jarvis’s interactions with those clients. On the digital front,

Defendants point to 154 files deleted by Stuart after Jarvis’s May 24 termination.

These files are mainly from Julia Stuart’s deleted email account. Defendants’

forensic expert was able to recover fragments of emails and, judging from their titles

and the relevance of other emails that were recovered, they are relevant.

There is no meaningful dispute that these documents cannot be recovered

through additional discovery. Defendants hired a forensic expert who recovered

fragments of emails, but not all the emails. Of the 9,162 files deleted from the

Grapevine desktop computer in 2017, 154 files were deleted between May 24 and

June 8, the period immediately following Jarvis’s termination. Some of them

referenced marketing and insurance proposals. These documents cannot be

recovered. Similarly, the shredded physical documents are irretrievably lost.

The Court also finds that this evidence was destroyed in bad faith. Although

there is no direct evidence of a premeditated scheme, circumstantial evidence of bad

faith abounds. First, because the boxes of Jade Risk client files in Grapevine could

fairly be supposed to be connected to litigation that involved those clients, the Court

finds as fact that material evidence was destroyed. This is also true of the electronic

documents. Second, Stuart admitted that she engaged in acts that caused the evidence

to be lost. Third, Jarvis should have known that he was under an obligation to

preserve the information at the time Stuart, his agent, destroyed it; Defendants’

counsel requested that all Jade Risk information be preserved on June 2 and Stuart

supervised the physical document shredding on June 12. Likewise, electronic

documents were wiped from the Grapevine desktop after Jarvis contemplated

litigation, triggering a duty to preserve them. Fourth, Plaintiff has not credibly

explained why these documents were destroyed instead of preserved. Jarvis testified

at one point that he ordered the documents to be destroyed, but he testified at trial

that he did not even know it was happening at the time it occurred. Jarvis and Stuart

at one point said that they destroyed the documents for security reasons arising from

their “open-concept” office environment, but pictures introduced as exhibits at trial

establish that the Grapevine office is a normal office with locking doors. Jarvis’s

inability to explain why the documents were destroyed, despite anticipated litigation,

weighs heavily in favor of bad faith.

Defendants have established the spoliation of physical and electronic evidence

that should have been preserved.

B. Monetary sanctions are warranted for the destruction of physical

evidence.

Having found that Jarvis committed spoliation of physical paper evidence, the

Court concludes that monetary sanctions are appropriate. A five-factor test governs

the propriety of sanctions when physical evidence is destroyed: (1) the importance

of the evidence destroyed, (2) the culpability of the offending party, (3) fundamental

fairness, (4) alternative sources of the information obtainable from the evidence

destroyed, and (5) the possible effectiveness of other sanctions less severe than

dismissal. Story v. RAJ Properties, Inc., 909 So.2d 797, 803 (Ala. 2005).6 These

factors point toward the imposition of monetary sanctions.

First, the physical evidence destroyed was arguably not very important.

Matlock’s affidavit characterized the documents as financial records reflecting

ongoing management or other “miscellaneous captive documents.” These

documents were certainly relevant to this litigation, but there is no reason to believe

they held any smoking guns. For example, it is not likely that, whenever Jarvis sent

an email about PLLCs, he hurried to print out a copy and store it in a box. Moreover,

Jarvis has admitted at trial that he discussed PLLCs with everyone and that he

marketed captives with JarvisTower. While the shredded client files are certainly

relevant, they are not particularly important.

Second, the culpability of the offending party is grave. Jarvis admitted in an

affidavit that he authorized document shredding but backed away from that

testimony at trial, claiming that he had been out of the country. Stuart said that she

shredded the documents on Jarvis’s instructions ten days after his counsel had

received a letter requesting document preservation. Whether or not the dissembling

was intentional, the culpability is greatly increased by the proposed justification:

6 Although federal law governs the imposition of sanctions in a diversity suit because they are an

evidentiary matter, the Eleventh Circuit looks to factors enumerated by state law when “evaluating

the need for sanctions, because federal law does not set forth specific guidelines regarding

sanctions for spoliation.” Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005).

both Jarvis and Stuart claimed that they had destroyed the documents because the

Grapevine office was “open concept.” This modern term has a specific and

unmistakable connotation: an “office in which numerous desks were situated in a

large open space with no partitions.” Moriarty v. Dyson, Inc., 2010 WL 2745969, at

*1 (N.D. Ill. July 8, 2010). But, at trial, Defendants presented photos of the office

space to the Court. Grapevine is far from an open-concept office. It has walls,

locking doors, and hallways. This mischaracterization may not have been

intentional, but it is an obvious post hoc justification for destroying documents even

though they should have been preserved.

Third, although the loss of this evidence is not ideal, it is not “fundamentally

unfair” to ask Defendants to “defend themselves” without it. Story v. RAJ Properties,

Inc., 909 So. 2d 797, 805 (Ala. 2005). In Story, the plaintiff sued a building company

for making his house with defective synthetic stucco, but before the company could

inspect the damaged material, the plaintiff removed all of it and had the house

repaired. The court in Story ruled that it would be fundamentally unfair to ask the

company to defend itself without the ability to examine the damaged material. Here,

Defendants are not missing any such dispositive or crucial evidence.

Fourth, there are alternative sources of information about Jarvis’s activities

before and after the deal. Defendants’ main complaint is not the absence of evidence

on a critical issue; it is that the available evidence does not support their theories, so

they want some more. For example, if Defendants want evidence about what Jarvis

said to his clients about their plans to surrender captives, they do not need

documents; they need to ask the clients. They did, and Drs. Aggarwal and Playfair

testified that Jarvis encouraged them to keep their captives open. Case-ending

spoliation sanctions are not appropriate just because one party’s document

destruction prevents another party’s fishing expedition. The Court also finds it

relevant that Defendants chose to terminate Jarvis based on allegations of

misconduct and only later sought to develop evidence through civil discovery about

whether their allegations were true. Usually, an employer develops evidence that

justifies a termination before the termination.

Fifth, and finally, the Court finds that there is a sanction other than dismissal

that is better suited to handling the misconduct at issue here. The destroyed evidence

was not going to be dispositive as to any of Defendants’ claims. But Jarvis’s flouting

of the rules cannot go unaddressed. The Supreme Court of Alabama has held that

monetary sanctions can be appropriate for the destruction of physical evidence

where spoliation does not render a party unable to bring a claim. See Smith v.

Atkinson, 771 So. 2d 429, 437 (Ala. 2000). Accordingly, monetary sanctions are

appropriate to serve the purposes of deterrence and fairness. See, e.g., T & E Inv.

Grp. LLC v. Faulkner, 2014 WL 550596, at *19 (N.D. Tex. Feb. 12, 2014) (a

monetary sanction “like an[] adverse inference instruction…can deter spoliation and

compensate the moving party for additional costs incurred.”); Herman v. City of New

York, 2020 WL 873970, at *11 (E.D.N.Y. Feb. 18, 2020) (holding that monetary

sanctions, and not an adverse inference, were appropriate even though the spoliating

party had been “grossly negligent” because, although a police officer’s notes might

have provided more detail, the electronic record was sufficient for Plaintiff’s claim).

C. A sanction is appropriate for deleting electronic files.

A monetary sanction is also appropriate for the deleted computer files. Rule

37(e) provides that a court, “upon finding prejudice to another party from loss of the

information, may order measures no greater than necessary to cure the prejudice.” If

a court finds “that the party acted with the intent to deprive another party of the

information’s use in the litigation,” then the court may “presume that the lost

information was unfavorable to the party, instruct the jury that it may or must

presume the information was unfavorable to the party, or dismiss the action or enter

a default judgment.” Fed. R. Civ. P. 37(e).

Defendants have been prejudiced by the deletion of files. The committee notes

on 37(e) provide that “[t]he rule does not place a burden of proving or disproving

prejudice on one party….[T]he content to the lost information may be fairly

evident…or the abundance of preserved information may appear sufficient…The

rule leaves judges with discretion to determine how best to assess prejudice in

particular cases.” Here, Defendants’ forensic expert has provided clues to potential

prejudice by recovering files with suggestive titles. Defendants have provided a

“demonstrative list” of these files that suggests they are relevant to this litigation and

may have helped Defendants prove their claims. One of the files, an article written

by Jarvis, has a section titled “reasons to close down a captive.” Such an article

would obviously be relevant to Defendants’ claim that Jarvis was encouraging

clients to shut down their captives. While these files were recovered, and therefore

not effectively spoliated, their existence and non-production encourages a finding

that the other destroyed electronic files are also relevant to this litigation.

Specifically, Defendants located the titles of certain documents, including “Gerry’s

Insurance Proposal” and “Marketing Piece,” but were unable to locate the substance

of either document.

The Court also finds that these documents were deleted with the intent to

deprive. “Rule 37(e)(2) deals with more severe measures, but they may be used only

if the court finds that the party that failed to preserve the information acted with the

intent to deprive another party of the information's use in the litigation.” 8B Charles

Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2284.2 (3d ed.

1998). Courts in the Eleventh Circuit have held that the bad faith test in Calixto is

the test for “intent to deprive” under Rule 37(e). See Alabama Aircraft Indus., Inc.

v. Boeing Co., 319 F.R.D. 730, 746 (N.D. Ala. 2017); Living Color Enterprises, Inc.

v. New Era Aquaculture, Ltd., 2016 WL 1105297, at *6 (S.D. Fla. Mar. 22, 2016).

As explained above, Defendants have ample evidence of bad faith under the Calixto

test.

For the same reasons as explained above with respect to the paper documents,

monetary sanctions are appropriate here. Many federal courts have concluded that

monetary sanctions are appropriate in situations where the missing evidence is not

dispositive.7 It is highly likely that these computer files are relevant, but, as with the

missing paper documents, it is highly unlikely that they would have materially

changed the case. For example, these files cannot change the fact that, after years of

discovery, Defendants have not found a single current or former client to testify that

Jarvis advised them to close their captive insurance company.

* * *

Both tangible evidence and electronically stored information was spoliated

with the knowledge of impending litigation. This conduct is exacerbated by Jarvis’s

7 Ahcom, Ltd. v. Smeding, 2011 WL 3443499, at *8 (N.D. Cal. Aug. 8, 2011) (holding that even

though a party wiped a computer “in the course of cleaning up after bankruptcy” in spite of

multiple discovery requests and deposition notifications of the need for the information, only

monetary sanctions were appropriate where the information sought was “unlikely to have

materially impacted the case.”); PersonalWeb Techs., LLC v. Google Inc., 2014 WL 5422933, at

*3 (N.D. Cal. Oct. 24, 2014) (affirming magistrate judge’s decision to impose only monetary

sanctions where bad faith was found and the monetary sanctions could be adjusted to the degree

of prejudice, which was not great); Stream Companies, Inc. v. Windward Advert., 2013 WL

3761281, at *5 (E.D. Pa. July 17, 2013) (holding that monetary sanctions were appropriate where

emails were deleted, evidence of bad faith conduct was “strong,” and the conduct had

“significantly hamstrung” plaintiff’s efforts); Padgett v. City of Monte Sereno, 2007 WL 878575,

at *4 (N.D. Cal. Mar. 20, 2007) (holding that monetary sanctions were appropriate for destruction

in bad faith).

confused and misleading attempts to justify it. Therefore, the Court will award

Taylor, Chandler, Johnson, and TaylorChandler all costs and fees associated with

the evidence that was spoliated. See, e.g., E.I. du Pont de Nemours & Co. v. Kolon

Indus., Inc., 803 F. Supp. 2d 469, 510 (E.D. Va. 2011).

II. Except for Count VII, Defendants’ counterclaims fail.

In a real sense, Defendants are the plaintiffs in this case. They started the legal

fight by terminating Jarvis for alleged breach of contract, and they cite his pre-deal

conduct as a reason not to pay him the remainder of the purchase price. Accordingly,

the Court will deal with their claims first.

Defendants Taylor, Chandler, Johnson, and TaylorChandler allege seven

counts against Jarvis.8 Count I is alleged only by Defendant TaylorChandler,

because, even though the first paragraph of the count says that “Defendants adopt

all preceding allegations,” TaylorChandler was the only Defendant signatory to the

employment agreement and only TaylorChandler claims injury as a result of Jarvis’s

alleged breach thereof. Count VIII (fraud) and IX (suppression) relate to activity

that took place before the signing of the contract; Defendants allege that Jarvis

knowingly provided misleading information about Jade Risk’s financials and

knowingly omitted other information. Five counts are based on Jarvis’s contractual

8 Defendants voluntarily dismissed Count VI of the Second Amended Counterclaim at trial.

duties and other actions he took that Defendants view as disloyal: Count I (breach

of the employment agreement), II (breach of the restrictive covenants agreement),

III (breach of the membership purchase agreement), IV (breach of fiduciary duty to

Jade Risk), and V (breach of fiduciary duty to TaylorChandler). Finally, Count VII

(conversion) is about a Jade Risk laptop that Jarvis has not returned and that

Defendants claim as their property.

A. Fraud (Count VIII) and Suppression (Count IX) – Jarvis did not

misrepresent or fail to disclose the true state of Jade Risk’s book of

business.

As the relevant factual allegations are the same and the failure of the counts

turns on the same elements, the Court will address the fraud and suppression counts

in tandem. In Alabama, “[t]he elements of fraud are (1) a false representation (2) of

a material existing fact (3) reasonably relied upon by the plaintiff (4) who suffered

damage as a proximate consequence of the misrepresentation.” Exxon Mobil Corp.

v. Alabama Dep't of Conservation & Nat. Res., 986 So. 2d 1093, 1114 (Ala. 2007)

(emphasis in original). The complaining party must have been induced to act to its

injury. See id. The elements of a suppression claim in Alabama are “(1) a duty on

the part of the defendant to disclose facts; (2) concealment or nondisclosure of

material facts by the defendant; (3) inducement of the plaintiff to act; (4) action by

the plaintiff to his or her injury.” Freightliner, LLC. v. Whatley Contract Carriers,

LLC., 932 So. 2d 883, 891 (Ala. 2005).

The Court finds as fact that Jarvis did not tell Defendants anything false or

suppress anything true that reasonably induced reliance. Defendants allege that,

through informal representations, Jarvis promised 75 total captives would

materialize soon after the acquisition. Defendants purportedly arrived at their

expectation of 75 captives by adding the list of “engaged” captives in a July 10 email

to the total number of active, committed, and engaged captives present on a 2015

Jade Risk financial spreadsheet. The evidence at trial did not support these

allegations.

First, Jarvis never told Defendants that Jade had seventy-five captives under

management or that Defendants would acquire seventy-five captives shortly after

completing the deal. Defendants’ allegations of fraud are based on two documents.

The first is a record documenting 2015 Jade Risk operating expenses that Jarvis sent

to Chandler. This list includes fifty-eight captive insurance companies, of which

Defendants chose nine as the basis for their fraud claims. Eight of these nine are

listed as “engaged.”9 The second document is an email Jarvis sent in July of 2016

with bulleted updates for Defendants regarding Jade Risk’s business outlook.

9 They claim Steele, Treliant 3, Mitchell Prop, JD Long 1, JD Long 2, CSS, Ball Ventures, and

Ball Ventures II never formed. The ninth, Providence, was listed as an active captive instead of

an engaged one. It was not listed in Matlock’s final pre-deal email. The fraud analysis for an

active captive is easier. Even though no engaged captives were listed in Stephanie Matlock’s final

August email, it is conceivable that an assurance concerning them might still be part of the deal as

they are ephemeral by nature and Jarvis might be working behind the scenes still to bring them to

fruition. What is not conceivable is that, even though the email purported to list all active captives,

Defendants relied on Jarvis to have one that wasn’t included.

In their closing argument, Defendants claimed that “Mr. Jarvis promised”

these captives. Taylor testified that Defendants decided not to pay Jarvis’s

promissory note because “engaged and committed” captives were “not there

anymore.” Having reviewed these communications and observed these witnesses at

trial, the Court finds that Jarvis never promised seventy-five captives under

management or suppressed the number of captives under management. These

documents were updates about Jarvis’s ongoing efforts to solicit business; he sent

them to people who would be his supervisors after the deal was finalized. He used

loose language about potential future business. But it was not fraudulent.

Second, Defendants did not rely on the notion that they would have seventy-

five captives under management. Instead, there was overwhelming evidence

presented at trial that the parties expected approximately thirty-six captives to come

shortly after the deal. Taylor stated in his deposition that, although he wasn’t sure

how many captives the purchasers were expecting, he “believe[d] it was 39.”

Johnson stated in his deposition that the purchasers expected only thirty-six. Thirty-

six was the only captive quantity listed in the agreements; by hitting that number,

Jarvis would earn a 2017 salary. If either party had expected the deal to yield

seventy-five captives, it would have made no sense to set the quota for Jarvis’s

incentive pay at thirty-six.

Chandler testified that the original purchase price was based on the

multiplication of seventy-five by a set value because he assumed the deal would net

the new company seventy-five new captives to manage.10 But the Court finds that

assertion not credible. Chandler sent an email discussing a purchase price of $3

million on December 14, 2015, eight months before (based on his testimony) he

came up with the seventy-five-captive figure. Moreover, it was undisputed that

Jarvis made concessions on the $3,000,000 purchase price so that some of it would

be contingent on future performance. Those performance-based concessions are

keyed to annual revenue targets and having thirty-six captives under management.

Had the purchase price been based on the expectation that seventy-five captives

would be under management, the incentives would have been based on a target

somewhere in that range. Defendants’ position that they believed they would acquire

seventy-five captives as part of the deal is contrary to the evidence.

Third, and in any event, Defendants cannot show that it was reasonable for

them to rely on an expectation of 75 captives. In Alabama, reliance is not reasonable

“if the circumstances are such that a reasonably prudent person who exercised

10 Defendants put forward Chandler as a non-retained expert witness and provided a limited

witness disclosure. Jarvis objected to this disclosure. Jarvis also filed a motion to strike

Defendants’ new damages theory, which includes Chandler’s calculations. See Doc. 179. These

motions are denied. First, the damages theory is moot in light of the Court’s conclusions on the

fraud and suppression claims. Second, the declaration in which the damages calculations appear

is merely a correction of previous testimony. Finally, the Court finds that Chandler’s disclosures

adequately addressed his opinions about captive management insurance at trial.

ordinary care would have discovered the true facts before acting on the alleged

misrepresentation.” Exxon Mobil Corp. 986 So. 2d at 1114. Here, before the deal

closed, Defendants continued to receive updates about the number of captives under

management. But Defendants closed anyway.

In addition to their general allegation that Jarvis promised seventy-five

captives under management and did not deliver, Defendants argue that Jarvis

suppressed information about captives that were dissolving or terminating. The

Court finds that Jarvis did not suppress this information. First, it is undisputed that

Jarvis helped shutter a series of captives known as the “Cliffs” so their assets could

be used to form a PLLC. But this information was disclosed to Defendants before

the deal closed through Matlock’s emails. After the deal had closed, Jarvis helped

the family office underlying the Cliffs to form new captives with Arsenal. Second,

Defendants contend that Jarvis suppressed his attempts to convince D’Alessandro,

Playfair, and Aggarwal to shut down their captives, but these allegations have been

exposed as unsubstantiated throughout the course of the trial. Playfair and Aggarwal

themselves have explicitly denied the accusations, and Taylor admitted on the stand

that he asked Jarvis to speak to D’Alessandro about insurance. Finally, the final pre-

closing email Defendants received from Jade Risk correctly identified the captives

that were remaining and those that were closing. Jarvis is not liable for suppressing

information about existing captives that were closing.

Defendants’ fraud and suppression claims fail.

B. Breach of the Employment Agreement (Count I) – Jarvis did not fail

to perform his obligations under the contract.

In addition to their fraud claims, Defendants main contention at trial was that

Jarvis breached the employment agreement. It is incumbent upon Jarvis, under

Section 2 of the employment agreement, to promote the interests of Defendants

within the scope of his employment. Defendants accuse Jarvis of breaching the

employment agreement by, “among other reasons,” failing to promote their interests

because he encouraged captive clients to dissolve and form new limited liability

companies that could purchase life insurance from JarvisTower. As evidence,

Defendants point to clients who surrendered their captives after contact with Jarvis

and clients to whom Jarvis marketed PLLCs. Jarvis denies encouraging any captive

to surrender and believes that the creation of a PLLC is not mutually exclusive with

the maintenance of a captive insurance company.

In Alabama, “to recover on a breach-of-contract claim, a party must establish:

(1) the existence of a valid contract binding the parties; (2) the plaintiff’s

performance under the contract; (3) the defendant’s nonperformance; and (4)

damages.” Capmark Bank v. RGR, LLC, 81 So. 3d 1258, 1267 (Ala. 2011). It is

undisputed that the contract between the parties was valid.

Jarvis’s full contractual performance is discussed below. Here, it is enough

to say that the Court finds that Jarvis did not fail to perform his obligations under the

contract by encouraging clients to dissolve their captives or marketing a PLLC

structure as a way to remove capital from a captive insurance company. Defendants

allege that Jarvis encouraged clients to dissolve their captives and to funnel those

funds into PLLCs. At trial, they cited four examples: Dr. Aggarwal, Dr. Playfair,

Steven Sands, and Gerry D’Alessandro. Both Aggarwal and Playfair testified in their

depositions that Jarvis never advised them to shut down their captives. The Court

finds the deposition testimony of Aggarwal and Playfair to be credible. They had no

reason to lie.

Although neither Sands nor D’Alessandro were deposed, the record makes

clear that Jarvis did not encourage them to surrender their captives. Instead, Jarvis

introduced Sands and D’Alessandro to the PLLC model of removing capital from a

captive insurance company in a tax-advantaged way. The only question is whether

there is something uniquely inconsistent with that model and the maintenance of a

captive insurance company. The Court finds that there is not.

Jarvis’s PLLC model is an aggressive tax strategy to unwind a captive’s

investments after it has run its useful life, but it is not the same thing as advocating

for a captive insurance company to dissolve. The Court posed numerous questions

to Defendants during trial about why they contended the PLLC model was

inconsistent with captive insurance. And the Court was consistently unsatisfied by

their answers. Defendants obviously have a skeptical view of Jarvis’s tax avoidance

strategy, but Defendants could never explain how Jarvis’s actions undermined their

ability to make money managing captive insurance companies.

The Court also notes that Jarvis performed work as assigned. Jarvis was hired

to maintain and increase the captive insurance business of Arsenal. He came up with

a plan to do this: he would market himself as a financial guru with a boutique

financial consulting firm and refer captive clients to Arsenal. He referred to this plan

in a text with Chandler as early as January 2017. He made this strategy explicit in

the marketing plan he sent to Taylor, Chandler, and Johnson. The three men

registered no systemic issues or complaints with Jarvis’s plan. And Defendants

concede that Jarvis originated at least eight captive insurance companies. Having

reviewed the entire record, observed the key players testify at trial, and posed its

own questions about this matter during the trial, the Court finds that Jarvis did not

breach his duties in the way Defendants allege.

C. Breach of the Restrictive Covenants Agreement (Count II) – Jarvis

did not compete with TaylorChandler or misuse the company’s

proprietary information.

If Defendants’ Count I alleges a sin of omission, Count II accuses Jarvis of a

sin of commission. Specifically, Defendants accuse Jarvis of persuading captive

clients to close so that he could set up PLLCs, but this time in the context of sections

2, 3, and 4 of the Restrictive Covenants Agreement. These sections pertain to non-

disclosure of confidential information, non-competition, and non-solicitation

respectively. A unique allegation in this section of the operative complaint is that

Jarvis used proprietary materials from Jade Risk, now owned by Defendants, to

market the services of JarvisTower. In Alabama, “restrictive covenants will be

recognized and enforced when established by contract, but they are not favored and

will be strictly construed.” Slaby v. Mountain River Estates Residential Ass'n, Inc.,

100 So. 3d 569, 578 (Ala. Civ. App. 2012).

The exact language of each section is important:

Section 2 – Non-Disclosure of Confidential Information. Jarvis

acknowledges that the Confidential Information11 obtained by him

while he was an employee, member, manager or officer of [Jade Risk]

is the property of [Jade Risk]. Jarvis agrees that he shall not, during the

Restricted Period,12 disclose nor use for his own or any other purposes

any Confidential Information without the prior written consent of

[Defendants], unless and to the extent that (a) the Confidential

Information becomes generally known to, and available for use by, the

public other than as a result of Jarvis’ acts or omissions or (b) Jarvis is

ordered by a court of competent jurisdiction to disclose Confidential

Information;…

Section 3 – Non-Competition. Jarvis acknowledges that in the course

of his management of and direct or indirect ownership in [Jade Risk]

he has to become familiar with [Jade Risk’s] trade secrets and with

other Confidential Information concerning the Company, including but

not limited to, client lists and referral sources, and that his services have

been of special, unique and extraordinary value to the Company. Jarvis

agrees that during the Restricted Period he shall not, directly or

11 A precise description of the term “Confidential Information” can be found in Section 1, but, for

the sake of concision, the definition lists every conceivable form of work product that Jarvis could

have produced while working at Jade Risk. Both the Smith Paving Case Study, as well as the

brochures he is accused of handing out at meetings fall under subsection (vi) of the definition

section, which labels as “Confidential Information” any “notes, analysis, compilations, studies,

summaries, or other material prepared by or for [Jade Risk]…”

12 This period lasts at least for two years following the execution of the agreement.

indirectly, anywhere in the Applicable Area, on his own account, or as

an employee, consultant, agent, partner, joint venture, owner or officer

of any other person, firm, partnership, corporation or other entity, or

through his wife’s ownership of entities or her activities, or in any other

capacity:

(a) act in a capacity, or provide services, similar to those in which Jarvis

acted or which Jarvis provided for the Company, for any entity that

engages in business that (i) is the same as, or substantially similar

to, the Business, or (ii) directly or indirectly competes with the

Business;

(b) supervise, manage or oversee others engaging in any of the activities

described above;

(c) engage in the Business or otherwise engage in any business, venture

or activity that is competitive with the Business; or

(d) own any interest in, consult with, render services to or otherwise

assist any person that does any of the foregoing.

Nothing herein shall prohibit Jarvis from (A) being a passive owner of

not more than one percent (1%) of the outstanding stock of any class of

a corporation which is publicly traded, so long as Jarvis has no active

participation in the business of such corporation, nor (B)participation

in an Excluded Business as defined in the Employment Agreement by

and between Jarvis and TaylorChandler, LLC, dated the same date

herewith (the "Employment Agreement").

Section 4 - Non-Solicitation. During the Restricted Period, Jarvis shall

not directly or indirectly in any manner (whether as an owner, officer,

director, partner, employee, contractor, consultant or otherwise) (i)

solicit or induce or attempt to solicit or induce any employee of, or

consultant to, the Company or Affiliates, to leave the employ of the

Company or Affiliates, or in any way interfere with the relationship

between the Company or Affiliates, and any of their employees or

consultants, (ii) hire any person who was an employee of or consultant

to the Company or Affiliates (provided, however that Jarvis may hire

former employees and consultants to the Company or Affiliates after

such former employees or consultants have ceased to be employed or

otherwise engaged by the Company or Affiliates for a period of at least

twelve(12) months), (iii) call on, solicit or service any customer of the

Company or Affiliates with the intent of selling or attempting to sell

any service or product similar to the Business provided by the Company

or Affiliates, (iv) call on or solicit any vendor or supplier of the

Company or Affiliates with the intent of obtaining products or Services

that the Company or Affiliates obtained from that supplier and that are

used in or relate to the Business provided by the Company or Affiliates,

or (v) in any way interfere with the relationship between any customer,

vendor, supplier, licensee or other business relation and the Company

or Affiliates (including, without limitation, making any negative or

disparaging statements or communications regarding the Company,

Affiliates or any of their operations, officers, members, managers or

investors).

Defendants argue that Jarvis breached the restrictive covenants agreement in

four ways. The Court finds that Jarvis did not breach the restrictive covenants

agreement.

First, Defendants allege that “Jarvis used confidential information about the

captive clients of Jade Risk LLC to promote JarvisTower to persuade them to shut

down so that he could establish limited liability companies…in violation of Sections

2, 3, and 4 of the Restrictive Covenants Agreement.” Doc. 89 ¶113. In Section 1 of

the restrictive covenants agreement, “information regarding [Jade Risk] customers

and suppliers of [Jade Risk’s captive management services]” falls under the

definition of “Confidential Information.” Therefore, any information about Jade

Risk customers that Jarvis might have used qualifies as confidential information.

Presumably this allegation is a reference to Jarvis’s alleged use of clients’

contact information to communicate about PLLCs, but Defendants made no mention

at trial of Jarvis’s misuse of clients’ confidential information. Defendants did not

elicit witness testimony, articulate argument, or in any way prosecute this alleged

misuse of confidential client information. Because no evidence relating to the misuse

of client information was adduced at trial, Defendants have not met their burden and

the Court concludes that Jarvis did not misuse confidential client information within

the meaning of the restrictive covenants agreement. See, e.g., In re Hirsch, 36 B.R.

643, 647 (Bankr. S.D. Fla. 1984) (holding that, “although included in the complaint,

at trial plaintiffs did not press the argument that the conversion of whole life

insurance to term insurance prior to bankruptcy was a fraudulent transfer, and the

court believes that there is no basis for such a conclusion. Therefore, there is no

ground upon which the debtors' discharges should be denied.”).

Second, Defendants allege that “Jarvis’ creation of JarvisTower and its

promotions were in direct competition with the Companies and in violation of

Section 3 of the Restrictive Covenants Agreement.” Doc. 89 ¶114. This allegation is

answered by a comparison of the business of JarvisTower and the “Business”

defined in the restrictive covenants agreement.13 “Business” is defined as Jade Risk’s

“current business of providing captive management services,” which is the

“oversight of licensing, underwriting, claims, accounting and regulatory reporting

of a privately held insurance company.” The employment agreement specifically

provides that “[f]or avoidance of doubt, [Jarvis] is allowed to pursue other types of

13 The last paragraph of Section 3 states that Jarvis may participate in “an Excluded Business as

defined in the Employment Agreement.” But no such term is defined in the employment

agreement.

insurance, financial planning and other business that are (sic) not competitive with

the ‘Business’ described in the Restrictive Covenants Agreement.” Therefore, if

JarvisTower engaged in the management of captive insurance companies, Jarvis

would be in violation of this agreement. However, at no point during the litigation

have Defendants alleged that JarvisTower managed any captive insurance

companies. It was undisputed at trial that JarvisTower had no captive management

license. Chandler testified that he knew JarvisTower was not managing captives, that

the definition of “Business” was limited to captive management, and that his sole

evidence of competition was Jarvis’s “continued insistence on marketing

JarvisTower.” The Court finds as fact that JarvisTower was never engaged in the

management of captive insurance companies.

Defendants also rely on Sections 3 and 4 of the restrictive covenants

agreement. Section 3 provides that Jarvis may not directly or indirectly provide

services similar to those he provided for Jade Risk for any entity that engages in

business substantially similar to the provision of captive management services. He

also may not consult with any person who works for a company that competes with

Jade Risk’s provision of captive management services. Section 4 provides that Jarvis

may not directly or indirectly solicit any customer of Jade Risk with the intent of

selling any service or product similar to captive management or interfere with the

relationship between Defendants and their clients.

Defendants argue that Jarvis’s activity in pitching his PLLC model indirectly

competed with their management of captive insurance companies. Defendants

analogize to Benchmark Medical Holdings, Inc. v. Rehab Solutions, LLC, 307 F.

Supp.2d 1249 (M.D. Ala. 2004), where a man named Rocky sold his rehab clinic

called “Rehab Associates” to a medical management company, signed a non-

compete that would last five years and required him to devote his “full business time

and attention to the performance of his duties and responsibilities,” and then a year

later promptly violated the whole thing by forming a new rehab company called

“Rehab Solutions” in his living room. This case is different for a host of obvious

reasons. The dispositive one, though, is that Jarvis and Rocky signed materially

different agreements. Rocky was required by his employment agreement to commit

his full time to his new job, but Jarvis’s employment agreement expressly gave him

the freedom to pursue another financial consultancy as long as he did not compete

with Defendants’ captive management business. Defendants’ view of competition—

i.e., Jarvis spending his time on another finance-related project instead of marketing

captive insurance companies—would effectively eliminate this provision from their

agreement.

Third, in the termination letter sent to Jarvis on May 25, 2017, Defendants

allege that Jarvis conducted a webinar “without any references to services provided

by the Companies and holding JarvisTower out as a direct competitor to the

Companies.” At trial, Chandler confirmed that this statement was a reference to the

April webinar. However, the April webinar mentions that Arsenal was named the

“captive manager of the year” and also uses the “Arsenal Insurance Management”

header on the Smith Paving Case Study. The Court finds as fact that Jarvis mentioned

Arsenal and made its services explicit in his webinar. The webinar also did not

suggest that JarvisTower provided captive management services in competition with

Arsenal.

The Court also finds highly persuasive Jarvis’s testimony that he had no

financial incentive to compete with Arsenal, sabotage its activities, or misuse its

information. Jarvis’s compensation with Arsenal was commission-based. Because

JarvisTower had no way to establish or manage a captive insurance company, Jarvis

depended on his relationship with Arsenal to monetize captive insurance leads that

he generated. His email communications announced an explicit plan to market

captives and stated that his marketing activities would be paid for by JarvisTower.

Defendants approved this plan.

Fourth, Defendants allege that Jarvis used “case studies and Jade Risk seminar

materials in conducting certain webinars…” Doc. 89 ¶115. At trial, only two webinar

documents were mentioned in relation to confidentiality. The first was a Jade Risk

informational brochure Jarvis rebranded for JarvisTower. The second was the Smith

Paving Case Study; a hypothetical study that Jarvis created to show the tax benefits

of using a captive. Under Section 1 of the restrictive covenants agreement, a

“summary” or “stud[y]” that is “based, in whole or in part” on “information relating

to the…processes” of the captive management business qualifies as confidential.

Neither of these materials were confidential—they were expressly designed

to be disseminated to potential clients. Although they contradicted this position at

trial, neither Taylor nor Johnson believed that the Smith Paving Case Study qualified

as confidential when they were deposed. Taylor testified that he was upset to learn

about the presentation format of the April webinar. When asked about the webinar

invite Jarvis had sent him, Taylor responded, “I didn’t know what was going on.”

Chandler testified that the Case Study was not identified as confidential in the

termination letter and that, although he never told Jarvis not to use it, he had removed

it from a marketing materials folder. This refers to a comment attached to an item

below the Case Study on the marketing plan that reads “cut a good bit of the tax and

estate planning talk.” Jarvis was never told not to use the Case Study and it escaped

any negative comment in the marketing plan. The Court finds as fact that Defendants

approved its use.

There is similar confusion over the brochure. Much of what it contained was

public information about the process of captive formation. None of the Defendants

addressed the confidential status of the brochure at trial. Although Jarvis did not

explicitly reference rebranding Jade Risk materials for JarvisTower, he referenced

rebranding in the marketing plan and that JarvisTower would be bearing the cost of

his marketing scheme. The Court finds as fact that Jarvis’s use of the brochure was

implicitly approved.

In short, Jarvis presented JarvisTower as a vehicle to drive sales and produce

referrals. Although this may have been an unusual way to perform his contractual

obligations, there is no evidence that JarvisTower was engaged in captive

management or that Jarvis engaged in the unauthorized use of confidential or

proprietary information. Defendants failed to provide Jarvis with a job description

and tacitly approved the creation of his new brokerage. They also explicitly

approved Jarvis’s marketing plan which included rebranding and JarvisTower. Jarvis

did not violate the restrictive covenants agreement.

D. Breach of Fiduciary Duty to Jade Risk (Count IV) and

TaylorChandler (Count V) – Jarvis did not breach his fiduciary duties

to JadeRisk or TaylorChandler.

Without referring to specific events, Defendants allege in Counts IV and V

that Jarvis breached his fiduciary duties to Jade Risk and TaylorChandler under

Alabama Code § 10A-5A-4.08, which governs those with responsibilities for

direction and oversight in limited liability companies. See Doc. 89 ¶132, ¶122-125.

As the duties owed to each and the offenses against each are identical, the counts are

disposed of in tandem. The duties owed are those of loyalty and care. See Brooks v.

Hill, 717 So. 2d 759, 764 (Ala. 1998). To establish that one of these duties was

violated, Defendants must show the existence of the duty, a breach, and damage

suffered as a result. See Aliant Bank, a Div. of USAmeribank v. Four Star

Investments, Inc., 244 So. 3d 896, 907 (Ala. 2017). These duties are not excused by

inefficiency on the part of Taylor, Chandler, or Johnson. At trial, Jarvis testified that

he took certain actions, such as changing phone lines, because TaylorChandler was

not moving quickly enough. However, it is settled law in Alabama that, when

judging actions that may violate a fiduciary duty, the efficiency of the employer is

immaterial. See Edwards v. Allied Home Mortg. Capital Corp., 962 So. 2d 194, 207

(Ala. 2007).

In Alabama, the fiduciary duty owed by a corporate director “is divided into

two parts: a duty of care, which requires officers and directors to act as ordinarily

prudent and diligent men under similar circumstances, and a duty of loyalty, which

prohibits faithlessness and self-dealing by corporate directors.” Massey v. Disc Mfg.,

Inc., 601 So. 2d 449, 456 (Ala. 1992). Although fiduciary duties were not mentioned

by Defendants at trial, Jarvis’s marketing efforts comported with his duty of care

and his PLLC activities comported with his duty of loyalty. Jarvis violated no

fiduciary duties owed to TaylorChandler or Jade Risk.

Defendants claim that Jarvis promulgated information adverse to captives,

such as mentioning in one presentation that people should wait to form captives in

the current regulatory environment. Jarvis also sent an email to prospective clients

that listed things to do before shutting down a captive. However, the federal

regulatory environment surrounding captives at the end of 2016 was hostile.

Chandler testified that IRS Policy 2016-66 scared people and caused captive

formations to decline across the industry. Some clients, such as Aggarwal, feared

that 2016-66 put them in danger of crossing the IRS. In some jurisdictions,

marketing a product that one knows is dangerous is enough to violate the duty of

care in negligence law. See, e.g., Lance v. Wyeth, 85 A.3d 434, 458 (Penn. 2014). In

this instance, Jarvis did nothing to violate his duty. Because Jarvis’s marketing

strategy involved increasing his profile as a financial consultant, his credibility in

that role was of paramount importance. The Court concludes that Jarvis acted as an

ordinarily prudent man would have under similar circumstances.

Jarvis also did not take any action that was “faithless” or “self-dealing,” as

opposed to directly competitive. Here, Jarvis is accused of telling current clients

about the benefits of a PLLC as a way to wind down a captive insurance company.

As discussed above, Jarvis’s advice about PLLCs was not a breach of his

employment agreement. In fact, he was explicitly permitted to engage in any

business that was not the management of captive insurance companies.

E. Breach of the Purchase Agreement (Count III) – Jarvis did not fail to

perform his obligations under the purchase agreement.

Finally, Defendants allege that Jarvis materially breached the membership

interest purchase agreement by “making false and/or materially misleading

statements or omitting material information with respect to the financial disclosures”

and “by failing to cooperate with [Defendants] to continue and maintain client

relationships…” Doc. 89 at 15-16. Jarvis had a duty to make financial disclosures

under Sections 2.3, 2.5, and 2.11 of the purchase agreement as well as a duty to help

maintain existing Jade Risk clients under Section 4.1. Defendants’ factual

contentions here are identical to the factual contentions that underlie Counts VIII

and IX—that Jarvis lied about the financial condition of Jade Risk and promised to

deliver captives that he did not deliver. They also allege that Jarvis breached these

duties when he allegedly encouraged clients to close their captives and started a

competing business, which are the same contentions that underlie Counts II, IV, and

V.

As the Court discussed above, Jarvis did not misrepresent or suppress

information, compete with the company, or violate his fiduciary duties. Defendants’

breach of contract claim regarding the purchase agreement fails for the same reasons

that the rest of Defendants’ claims fail.

F. Conversion (Count VII) – Jarvis’s laptop must be returned to

TaylorChandler.

Even before this litigation, Jarvis has maintained possession and control of a

MacBook Pro laptop that was listed as a business expense on Jade Risk’s tax forms

and was therefore ostensibly the property of Jade Risk at the time it was bought by

TaylorChandler. Doc. 89 at ¶148. Because Defendants acquired all rights to Jade

Risk, they lay claim to the laptop and allege that Jarvis’s possession of it amounts to

conversion. Jarvis has refused to return it. To establish conversion in Alabama, “a

plaintiff must show a wrongful taking, an illegal assumption of ownership, an illegal

use or misuse of another’s property, or a wrongful detention or interference with

another’s property.” Huntsville Golf Dev., Inc. v. Ratcliff, Inc., 646 So. 2d 1334,

1336 (Ala. 1994).

The Court finds that Jarvis converted the laptop. At trial, Jarvis testified that,

prior to the deal, he and his passive partner in Jade Risk, Dr. Anderson, had made

distributions to themselves of their individual laptops. Jarvis has also stated that he

cannot find any documentation supporting this claim. However, Defendants have

shown that the laptop appeared on a tax asset detail report that names the laptop as

a Jade Risk tax asset for the entire 2016 year. Because TaylorChandler acquired Jade

Risk in September of 2016 and the laptop was still on the Jade Risk tax asset detail

report as of December, the laptop belonged to TaylorChandler as of the day of

acquisition. Jarvis has converted the laptop by refusing to return it.

III. Jarvis has established breach of the employment agreement and

promissory note.

Jarvis alleges five counts against Defendants.14 Counts IV (breach of the

employment agreement) and VI (breach of the promissory note) relate to Jarvis’s

14 Jarvis voluntarily dismissed several counts in the Second Amended Complaint shortly before

trial and additional counts during trial.

compensation as an employee and for the sale of the company. Count IV alleges that

TaylorChandler owes him origination bonuses, deferred salary, and severance pay.

Count VI alleges that the individual defendants, Taylor, Chandler, and Johnson, owe

him the remaining purchase price of the company. Counts VII and VIII are both

requests for declaratory judgement; if the Court finds against Jarvis on the issue of

breach of contract, he argues that he is entitled to a declaratory judgment that he is

nonetheless owed money. Finally, Count X is an allegation of civil conspiracy; Jarvis

believes that Taylor, Chandler, Johnson, and TaylorChandler conspired to refuse to

pay him in violation of their agreements.

A. Breach of Employment Agreement (Count IV) - TaylorChandler

breached the Employment Agreement.

The employment agreement contains a provision allowing Jarvis deferred

compensation and severance pay if he is terminated without cause. Jarvis alleges he

was terminated without cause and Defendants have refused to pay him severance

and deferred compensation. “In order to recover on a breach-of-contract claim, a

party must establish: (1) the existence of a valid contract binding the parties; (2) the

plaintiff's performance under the contract; (3) the defendant's nonperformance; and

(4) damages.” Capmark Bank v. RGR, LLC, 81 So. 3d 1258, 1267 (Ala. 2011). It is

undisputed that the contract between the parties is valid.

1. Jarvis substantively performed.

The Court finds that Jarvis substantially performed his obligations under the

contract such that Defendants’ performance was triggered. It is axiomatic that if one

party substantially performs a contract, not precisely to specifications but enough

that the other party has obtained the benefit of the bargain, then the other party must

perform as well. The “substantial performance of a contract does not contemplate

exact performance of every detail, but performance of all important parts.” Bay City

Const. Co. v. Hayes, 624 So. 2d 1031, 1034 (Ala. 1993).

Jarvis had several duties under the employment agreement. Jarvis needed to

promote the interests of Defendants by serving as the Director of Business

Development, reporting to the directors of TaylorChandler, maintaining and

expanding the captive client base, developing and executing marketing strategies,

and coordinating resources and services to drive business. This agreement also

prohibited Jarvis from entering the captive insurance management business himself

or selling life insurance to captive insurance companies managed by Arsenal without

prior written consent.

Jarvis did a great deal in service of Arsenal and TaylorChandler. In addition

to trying to convince clients to maintain their captives in the face of new regulatory

scrutiny, Jarvis originated at least eight captives in 2016. Jarvis developed a

marketing plan, which he submitted to Defendants. Even before this written plan,

Jarvis informed Defendants that he planned “to continue to build [his] marketing

around the ‘captive linchpin’ strategy” as a “central point for consulting-which will

lead to more captive and insurance business.” Chandler sent a text message to Jarvis

telling him that this was the right direction. Jarvis then submitted a marketing plan

to Defendants, prominently including his strategy to promote himself and have

JarvisTower pay for it, which they subsequently approved with relatively few

additions. Jarvis acted to execute the marketing plan by working on book deals,

holding webinars, forming his own consultancy and raising his profile so that he

could refer captive business to Arsenal.

Jarvis also did a number of smaller things. Jarvis’s employees, Stuart and

Plummer, shared process flow research to help Arsenal with a project that ended up

saving tens of thousands of dollars. Jarvis did his own research into the creation of

a health pool to help ignite Arsenal’s business in the area.

Defendants argue that Jarvis breached the employment agreement because he

sabotaged their business, advised clients to close down captives, and set up a

competing company. The Court has already rejected that position.

2. Defendants owe Jarvis deferred salary and bonuses.

As a result of Jarvis’s substantial performance under the employment

agreement, Defendants’ obligations under the contracts have come due and

Defendants have declined performance. Defendants are now in breach of the

employment agreement. See e.g. Superior Wall & Paver, LLC v. Gacek, 73 So. 3d

714, 723 (Ala. Civ. App. 2011) (homeowner was forced to pay a builder, even

though the builder had not used the appropriate brand of internal piping specified in

the contract, because the builder had substantially performed); Kohn v. Johnson, 565

So. 2d 165, 169 (Ala. 1990) (same); Bruner v. Hines, 324 So. 2d 265, 269 (Ala.

1975) (same). Specifically, Defendants have not paid Jarvis his deferred salary and

2016 origination bonuses. These monies are due because Jarvis substantially

performed his obligations under the contract.

There is no dispute about the amount of Jarvis’s deferred salary. It is

$175,000.

There is, however, a dispute about the amount of origination bonus Jarvis

earned. Section 3.1 of the Employment Agreement provides that Jarvis is entitled

to a $20,000 bonus for each new captive that (1) is “originated by” Jarvis; and (2)

“becomes licensed after the Effective Date.” These monies were due by March 30,

2018 at the latest. Jarvis claims that he originated twenty captives. See Doc. 224.

Defendants concede that he originated eight captives, but dispute twelve. See Doc.

225.

Defendants split the twelve disputed captives into three categories: The

Buckleys, the Cliffs, and miscellaneous captives. Six of the disputed captives were

created for Buckley Sandler LLP by Jade Risk in Oklahoma. These were

surrendered and replaced with “six new Alabama insurance entities” that assumed

“any outstanding risk from the surrendering six Oklahoma entities.” The next four

were Cliffs, created for the Belmont family office. The Cliffs, named Eastcliff,

Edgecliff, Greycliff, and Northcliff, surrendered at the end of 2016, and reformed in

Alabama in 2017 under the creative monikers Eastcliff II, Edgecliff II, Greycliff II,

and Northcliff II. The final two disputed captives are Cosmetic Surety and Pain

Management. Cosmetic Surety was a captive that belonged to Jarvis and he argues

that, because he sold it to someone else who was prepared to pay full management

fees, he ought to be entitled to a bonus. Pain Management was produced by the same

process as the Buckleys and Cliffs; Dr. Dar maintained a captive called Intervention

Pain Management with Jade Risk before surrendering that captive and reforming in

Alabama under the name Pain Management.

This dispute boils down to the definition of the word “originate.” There is no

definition of this word in any agreement between the parties. To determine the plain

meaning of a word, the Eleventh Circuit looks to the common usage or ordinary

meaning of the word and uses dictionary definitions for guidance. See United States

v. McNab, 331 F.3d 1228, 1237 (11th Cir. 2003); CBS Inc. v. PrimeTime 24 Joint

Venture, 245 F.3d 1217, 1223 (11th Cir. 2001). In its common usage in business,

origination involves the development of new clients. See, e.g., Grewal v. Cuneo

Gilbert & LaDuca LLP, No. 13-CV-6836 (RA), 2017 WL 1215752, at *9 (S.D.N.Y.

Mar. 31, 2017), aff'd, 803 F. App’x 457 (2d Cir. 2020) (finding that, despite the

ambiguity of the contractual “originate” term, a reasonable juror could find that the

plaintiff originated work because she met with dozens of prospective clients and

signed forty of them). That was also how the parties used the term here: Jarvis was

to be paid a bonus for each new client that began to pay Arsenal because of him. He

was paid for existing clients in the purchase of Jade Risk.

The term “originate” demands that the substance of the entities be new. But

Jarvis did not originate these entities as new clients or new business for

TaylorChandler. Instead, he converted the form of certain entities that were already

under management into new entities that could be managed by the new company.

The Court finds that counting these twelve captives as “employee originated

captives” within the meaning of the employment agreement is inappropriate. The

Court also finds that Jarvis originated eight captives and is owed $160,000 in bonus

payments for those.

3. Defendants do not owe Jarvis severance.

Under the employment agreement, Jarvis must be paid severance in the

amount of his “average monthly salary” if he is fired without cause. Defendants

argue that they had cause to fire Jarvis and that, even if they did not, Jarvis’s average

monthly salary under the agreement is zero because he never produced a sufficient

number of captives. Jarvis argues that he was fired without cause and that his average

monthly salary was $15,000 because that is what, in fact, he was paid on a monthly

basis in 2017. The Court agrees with Jarvis on the first issue but with Defendants

on the second.

a. Jarvis was fired without cause.

The question of whether an employer has cause to fire an employee is usually

simple; an employee does something, his employers warn him not to do so again,

and he is fired when he does. Indeed, in Alabama, if there is a warning, a finding

that an individual was terminated for cause will not be found contrary to the weight

of the evidence. See Kelly v. Pate, 668 So. 2d 32, 34 (Ala. Civ. App. 1995)

(neglecting to overturn a lower court finding based on that warning). Defendants

did not follow that tried and true formula to terminate Jarvis.

The Court therefore turns to the authorized causes in the employment

agreement. Section 5.2(b) of the employment agreement provides that Jarvis may be

fired immediately for cause and defines the following as “causes:”

(i) An act of theft, fraud, embezzlement, or intentional and material

disloyalty or dishonesty with respect to the company;

(ii) An act of willful misconduct;

(iii) Intentional negligence in performing stated duties;

(iv) Violation of any law, rule, or regulation applicable to the business of

Arsenal;

(v) Material breach of any provision of the signed agreements.

By specifying these five “causes,” the contract precludes any other reason from

being a “cause” for termination. See Avis Rent A Car Sys., Inc. v. Heilman, 876 So.

2d 1111, 1122 (Ala. 2003) (applying the canons noscitur a sociis and ejusdem

generis in the context of contractual interpretation); Beckman v. Cybertary

Franchising LLC, 424 P.3d 1016, 1029 (Utah App. 2018) (“the Employment

Agreement [in this case] narrowed the scope of permissible bases for termination to

those specifically identified”).

Defendants sent Jarvis a termination letter that said the reasons for his

termination included, but were “not limited to,” (i) advising captive clients to shut

down their captives, (ii) using confidential information to promote JarvisTower, and

(iii) holding out JarvisTower as a direct competitor to Arsenal. The Court has already

found that the facts do not support these three charges.

At trial, Defendants gave another reason for terminating Jarvis:

insubordination. It is clear from the record and the submissions at trial that Jarvis

believed himself to be the captain of his ship. Jarvis referred to himself as the “rising

tide [that] raises all boats.” He expressed to Chandler that “[i]f [Taylor and Johnson]

are going to attempt to micromanage me…this isn’t going to end well.” Jarvis gave

the distinct impression that he saw himself as an equal to Taylor, Chandler, and

Johnson, instead of an employee.

But Defendants never told Jarvis to do something that he refused to do. Contra

Payne v. Dir. of Dep't of Indus. Relations, 405 So. 2d 1322, 1323 (Ala. Civ. App.

1981) (finding refusal by an employee to operate a machine is insubordinate

misconduct); Kelly v. Pate, 668 So. 2d 32, 34 (Ala. Civ. App. 1995) (denying

unemployment benefits where employee, after receiving oral and written warnings

regarding sexual harassment, repeatedly harassed other employees in the same

fashion). The closest Defendants ever came to directing Jarvis to do anything was

the following email that Chandler sent Jarvis about a negligent fictional employee.

What if...JarvisTower hired an employee (let’s call him Plummer) and

that employee had specific duties for JarvisTower…Eventually

JarvisTower says, “Hey, we need you to do the job we hired you to do.”

So Plummer goes out and does some work related to his duties at

JarvisTower. However, in the course of doing this, Plummer…does no

promotion of JarvisTower. When JarvisTower says, “Hey, we are

paying you to perform duties for JarvisTower, not your own company.”

Plummer responds…“What does it matter how we get new captives as

long as we get there? It’ll ultimately be good for everyone involved.”…

Chris, in all due respect, it seems clear to all of us that your intentions

are to promote your own company. That’s fine. However, we don’t

need to continue to pay someone that isn’t going to perform the duties

that we have all agreed that you would do. If you aren’t going to

perform your duties as directed, we will be left with no other choice.

When Jarvis responded that he had not been given a job description or transition plan

and that he would be eager to see a list of goals and expectations, Chandler simply

forwarded him a copy of the marketing plan that Jarvis had designed and Defendants

had approved with few comments.

If anything, this email shows that Jarvis was adequately subordinate. Even in

his analogy, Chandler concedes that Jarvis has procured new captives for Arsenal,

his primary duty. The point Chandler misses with his analogy is that, according to

multiple communications between himself and Jarvis as well as the marketing plan

that he forwarded, a primary purpose of JarvisTower was to refer business to

Arsenal. In promoting JarvisTower, Jarvis was executing a plan that had already

been discussed and approved. Jarvis was undoubtedly difficult to manage, but there

is no evidence that he was insubordinate.

b. Jarvis never earned a salary under the terms of the

employment agreement.

Because Jarvis was terminated without cause, he may be due severance pay.

The amount of severance pay is laid out at section 5.4 of the employment agreement.

Section 5.2(a) of the employment agreement allows Defendants to terminate Jarvis

without cause and, if they do, requires them to pay a monthly payment until the end

of the term equal to Jarvis’s average monthly salary in 2017 under section 3.1(c).

That section provides that Jarvis will receive, every month, $833.33 per captive

originated by him after the effective date of the acquisition “if and only if” Jade Risk

was managing thirty-six captives when the salary came due.

Defendants argue that Jarvis never earned a salary under the terms of section

3.1(c) of the contract because there were never thirty-six captives under management

as defined by the contract. Accordingly, Defendants argue that Jarvis’s “average

monthly salary” was zero. The Court gave Jarvis an opportunity to argue at trial and

in post-trial briefing that he earned a salary under section 3.1(c) of the contract. He

chose not to do so. Instead, Jarvis has consistently argued that, because he was paid

$15,000 per month in 2017, $15,000 is necessarily his “average monthly salary” for

the purposes of computing severance.

The Court disagrees with Jarvis for two reasons.

First, the Court finds as fact that these payments were simply a continuation

of the monthly salary that Jarvis was paid in 2016 and that Jarvis’s salary was never

reassessed under the actual terms in the agreement. Evidence at trial established that

Defendants were not even familiar with the contractual provisions that governed

Jarvis’s salary in early 2017. For example, Chandler sent an email at the beginning

of 2017 in which he told Jarvis that Chandler (erroneously) believed Jarvis’s salary

would continue at $15,000 because there were fewer than thirty-six captives under

management. In fact, the plain text of the contract (everyone now agrees) establishes

that a condition of Jarvis earning any salary was the existence of thirty-six captives

under management. As a factual matter, the $15,000 per month payments were not

based on the contract.

Second, “average monthly salary” is a defined term in the contract and must

be calculated on that basis. The contract provides a severance that “is equal to the

average monthly salary in Section 3.1(a) or 3.1(c), whichever is applicable, during

the year of the termination of the Term, subject to satisfaction of the conditions set

forth in Section 3.1(b).” Accordingly, one must look to section 3.1(c), which

governs Jarvis’s 2017 salary, to determine the appropriate severance amount.

Jarvis argues that “average monthly salary” means whatever he was paid, even

if the contract did not require the payments. But that argument makes no sense. A

counterfactual hypothetical proves this point. Assume that Defendants had owed

Jarvis $20,000 a month in 2017 under the contract, paid him $5,000 a month, and

had fired him without cause. They would not have been able to avoid severance pay

based on his “average monthly salary” of $20,000 simply because they never in fact

paid him that amount. The converse is true here: the mere fact that Defendants

erroneously paid Jarvis $15,000 a month in 2017 does not establish that he is due

severance pay in that amount. The terms of the contract govern.

The record establishes that Jade Risk did not have thirty-six captives under

management in 2017. That fact makes Jarvis’s “average monthly salary” zero under

the employment agreement. Under section 1.2 of the contract, Jarvis’ employment

term was to be sixty months beginning on the effective date, which was July 2016.

Defendants fired Jarvis after ten months, but they owe him zero dollars (0 x 50) in

severance.

* * *

The Court finds that TaylorChandler breached the employment agreement.

Section 8.2 of the employment agreement provides that, in the event of litigation,

the loser will pay the winner’s “costs and expenses (including attorney’s fees).”

Accordingly, Jarvis is due to receive deferred salary, bonuses, and his expenses and

attorneys’ fees for litigating this action.

B. Breach of the Membership Purchase Agreement and Promissory Note

(Count VI) – Defendants breached the membership purchase agreement

and promissory note by failing to pay the balance of the purchase price.

It is undisputed that Jarvis has not been paid the $750,000 owed under the

promissory note. Again, “in order to recover on a breach-of-contract claim, a party

must establish: (1) the existence of a valid contract binding the parties; (2) the

plaintiff's performance under the contract; (3) the defendant's nonperformance; and

(4) damages.” Capmark Bank v. RGR, LLC, 81 So. 3d 1258, 1267 (Ala. 2011). It is

undisputed that the contract is valid. It is undisputed that Jarvis performed his

obligations under the note, which are separate from the employment agreement, and

it is undisputed that Defendants have refused to pay the note. The only question is

how much of the note must be paid.

Under the membership purchase agreement, the amount owed under the

promissory note is reduced by the lesser of either the “2016 Revenue Shortfall” or

the “2017 Revenue Shortfall.” The agreement provides that, if Jade Risk generates

less than $1,010,000 in revenue between July 1, 2016 and December 31, 2016, then

there would be a 2016 revenue shortfall. The 2017 revenue shortfall is defined as

“$3,260,000 minus the cash revenues received by the Company for the period

between July 1, 2016 and December 31, 2017 plus the outstanding accounts

receivable as of December 31, 2017.” The principal of the note is reduced by the

smaller of the two differences between the actual revenues generated and the target

revenues. Because Jarvis was fired only five months into 2017, the 2017 shortfall is

presumably far in excess of the 2016 shortfall. Accordingly, the parties agreed

during trial that the 2016 revenue shortfall is the only potential shortfall at issue.

The parties disagree over the accounting method to calculate revenue.

Defendants calculate 2016 revenue using the cash basis method, which counts

revenue when cash is received. Plaintiff calculates it using the accrual method, which

counts revenue when the services that generated the revenue are performed. The

parties each submitted expert testimony on this point.15 The Court concludes that, on

the facts of this case, the cash basis method is most appropriate.

This is so for two alternative reasons.

First, the parties’ course of conduct and expectations establish that revenue

should be calculated based on cash received during 2016, not obligations accrued

during 2016. The term “2016 revenue” is ambiguous because it is reasonably

susceptible to two or more meanings, such that parol evidence is appropriate to assist

15 Defendants filed a motion to exclude opinions by Plaintiff’s expert Gary Bowers under Rule

702, which the Court held in abeyance until after trial. See Doc. 145. Bowers is unquestionably

qualified to opine on Generally Accepted Accounting Principles as well as the captive insurance

industry. Bowers has been a CPA since 1981 and earned a Masters in Taxation from Georgia State

University. He spent more than a decade as the managing partner of the tax group at Johnson

Lambert, one of the leading specialty CPA firms for the insurance industry, and was actively

involved with the firm’s captive work for seventeen years. Defendants motion is denied, and

Bowers’s testimony will be considered.

in its interpretation. See State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 308–

09 (Ala. 1999); McClendon v. Eubanks, 30 So. 2d 261, 268 (Ala. 1947). Evidence

at trial unequivocally establishes that the parties intended revenue to be calculated

based on cash received. Jade Risk used the cash basis method of accounting. Jarvis

executed a version of the employment agreement that contained an extra subsection,

3.1(b)(vii), titled “Calculation of Revenue During Initial Term,” which expressly

provided that cash basis be used to determine revenue. And Taylor and Chandler

testified that they thought this section was included in the version they signed.

Second, were the contract unambiguous, the Court would conclude that the

cash basis method is the correct way to calculate 2016 revenue. Under Alabama law,

the words of an agreement are to be given their ordinary meaning, and the intention

of the parties is to be derived from the provisions of the contract. Smith v. Citicorp

Person-to-Person Financial Centers, Inc., 477 So.2d 308, 310 (Ala. 1985). Revenue,

as defined by any dictionary, is the total cash produced by a company’s sales or other

activities. “2016 revenue” would naturally mean the total cash realized during that

calendar year. Only under a specialized definition could one conclude that a

company’s “2016 revenue” includes money that is not realized in 2016.

Plaintiff’s expert declined to provide a cash basis calculation for the Court.

Accordingly, the best evidence on point comes from Defendants’ expert, who

calculated revenue for 2016 under the cash basis method at $772,286.88. When this

figure is subtracted from $1,010,000, it results in a revenue shortfall of $237,713.12.

When this figure is subtracted from $750,000, the result is $512,286.88. Therefore,

the Court finds that Defendants owe Jarvis $512,286.88 plus all applicable interest.

C. Declaratory Judgment About the Promissory Note (Counts VII and VIII)

– The requested relief has already been provided.

If the Court is unwilling to find that Defendants breached the promissory note,

Jarvis asks in Count VII that the Court find they anticipatorily breached it. If the

Court finds neither that they breached nor anticipatorily breached, Jarvis asks in

Count VIII that the Court award him the money owed under the promissory note less

the Defendants’ calculated revenue shortfall. These counts are dismissed as moot in

light of the Court’s ruling on Count VI.

D. Civil Conspiracy (Count X) – Defendants did not have the coordination

or ability to conspire.

Jarvis alleges that all Defendants wrongfully conspired together to commit

each of the wrongful acts alleged. See Doc. 82 at ¶102. “The elements of civil

conspiracy in Alabama are: (1) concerted action by two or more persons (2) to

achieve an unlawful purpose or a lawful purpose by unlawful means.” Ex parte

Alamo Title Co., 128 So. 3d 700, 713 (Ala. 2013). Although the Court finds that

Defendants breached the employment agreement and promissory note, the trial made

clear that there was no conspiracy to do so. Even had there been, this right of action

is not cognizable under the intracorporate conspiracy doctrine.

Defendants never conspired to wrongfully harm Jarvis. Jarvis claims that all

three individual defendants wrongfully conspired to terminate him without cause

and refuse to pay him compensation, either in salary or as part of the promissory

note. His theory is that they formed this conspiracy to rid themselves of the bad deal

that they had signed. Instead, the Court finds that Defendants fired Jarvis because

they did not want to work with him as an employee. They did not trust him, and they

had trouble managing him. Having observed the key players at trial, it is obvious to

the Court that Defendants—or any other group of conservative accountants—would

have difficulty employing someone like Jarvis. Defendants may have caused their

company to breach the terms of the contract when they fired Jarvis, but they did not

commit a tort, and they did not do so with bad intentions.

Even if Jarvis had proved that Defendants wrongfully conspired to harm him,

any allegation of conspiracy in this case would be foreclosed by the intracorporate

conspiracy doctrine. This doctrine has been fully embraced by the Eleventh Circuit:

[under the doctrine] acts of corporate agents are attributed to the

corporation itself, thereby negating the multiplicity of actors necessary

for the formation of a conspiracy. Simply put, under the doctrine, a

corporation cannot conspire with its employees, and its employees,

when acting in the scope of their employment, cannot conspire among

themselves.

McAndrew v. Lockheed Martin Corp., 206 F.3d 1031, 1036 (11th Cir. 2000) (en

banc). The Alabama Supreme Court has adopted the intracorporate conspiracy

doctrine. See M & F Bank v. First Am. Title Ins. Co., 144 So. 3d 222, 234 (Ala.

2013) (citing McAndrew). The action of Taylor, Chandler, and Johnson in firing

Jarvis was well within the scope of their employment duties as the three leaders of

TaylorChandler and Arsenal. Accordingly, Plaintiff’s civil conspiracy count will be

dismissed.

CONCLUSION

There was a lot of testimony during the trial about the captive management

industry and best practices in creating and maintaining such insurance companies.

The Court appreciated that testimony—it was very interesting—but it was not

especially relevant. This case is ultimately about written agreements that

memorialized an arms-length deal between sophisticated parties. The Court

concludes that Jarvis substantially performed the contracts he signed with

Defendants, and they were never excused from their payment obligations under the

employment agreement and promissory note.

A separate order will be entered consistent with this memorandum opinion on

the various pending motions. Three issues remain to be resolved: Defendant’s

spoliation sanctions, Jarvis’s costs and attorneys’ fees, and prejudgment interest.

After these issues are addressed, the Court will enter a final judgment as a separate

document that (1) awards Jarvis $175,000 in deferred salary from TaylorChandler,

$160,000 in captive origination bonus payments from TaylorChandler, $512,286.88

in promissory note payments from individual Defendants Taylor, Chandler, and

Johnson, and appropriate prejudgment interest; (2) requires Jarvis to render unto

TaylorChandler the MacBook Pro laptop or its value in 2017; (3) awards spoliation

sanctions to all Defendants in the amount of attorneys’ fees and expenses expended

to develop and litigate the spoliation issue; and (4) awards Jarvis his attorneys’ fees

and expenses in litigating this action.

DONE and ORDERED this 19th day of August 2020.

/s/ Andrew L. Brasher

ANDREW L. BRASHER

UNITED STATES CIRCUIT JUDGE

(sitting by designation)