NU Online News Service, June 20, 12:07 p.m.EDT

Insurance broker Aon may not be doing much California dreamingafter a U.S. District Court struck down its assertion that severalformer employees violated their restrictive covenant agreementsafter leaving the company.

Last week, U.S. District Judge Dale S. Fischer, sitting in U.S.District Court Central District of California, ruled that formerAon employees Peter Arkley, Ken Caldwell and Michael Parizino didnot violate non-compete agreement, handing the insurance brokeranother defeat in its poaching allegations against Newport Beach,Calif.-based Alliant Insurance Services, where the three employeesnow work.

“These important rulings reject Aon’s attempt to use illegalemployee covenants to restrict Alliant’s brokers from working withtheir clients,” says Jeffrey S. Klein, chairman of the employmentlitigation practice at Weil, Gotshal & Manges LLP and leadcounsel for Alliant in the dispute. “From the beginning of thisdispute, Aon has sought to stifle fair competition in themarketplace. Alliant will continue to vigorously defend its rightto compete.”

Judge Fischer ruled that, under California law, the employeesdid not violate their covenants that are based on Illinois lawconcerning non-compete over clients. The judge found thatCalifornia law gives a higher bar of protection to employees andbusinesses than Illinois’ law that seeks to foster“predictability.”

“Under California law, the interests of the employee inhis own mobility and betterment are deemed paramount to thecompetitive business interest of the employers,” Judge Fischer saysin his opinion.

Since the employees live and work in California, and did so atthe time they were with Aon before moving to Alliant, theCalifornia law takes precedent over Illinois, the judge ruled.

On that same day, June 13, Judge Fischer did give Aon a win onat least one count, ruling that the London-based insurance brokerdid have cause to seek attorney fees for an allegation that Aon’ssuit attempted to deny the defendants the ability to file itscase.

For its part, Aon issued a statement saying, “The injunctionprohibiting Alliant from soliciting Aon’s employees or specifiedclients remains in place, and the New York court has found itlikely that Alliant engaged in misconduct. We look forward tocontinuing to pursue our claims for damages from Alliant.”

In February, a U.S. District Court Judge in New York ruled that former employees working with Alliant did notviolate their non-solicitation agreements.

But the same judge previously ruled that Aon is likely toprevail in its claims over breach of contract, breach of fiduciaryduty, conspiracy, breach of the duty of loyalty, intentionalinterference with contractual relations and tortuous interferencewith prospective economic advantage.

There are a number of outstanding issues that the courts havenot resolved and court filings indicate the parties are prepared togo to trial over stock awards and other compensation the defendantshave been denied.

A June 18 court filing indicates the parties are seeking amediator.

Arkley was terminated from Aon on June 6, 2011, and he beganworking for Alliant in Los Angeles on the 13^th.

Subsequently, 50 employees left Aon, which the broker says costit $15 million in revenue.