Appeals Judges Uphold Marsh & McLennan Noncompete Clause Ruling

April 6, 2005 ( - A federal appeals court has upheld a lower court's ruling that non-compete agreements from insurance giant Marsh & McLennan Companies was unenforceable under Georgia law.

The US 11 th Circuit Court of Appeals ruled that US District Court Judge B. Avant Edenfield correctly threw out the agreements, which barred the executive from working for former Marsh clients who came to him on their own.

Lawyers familiar with noncompete agreements said the 11th Circuit decision was significant because it extends the reach of Edenfield’s decision around the country, according to a Fulton County Daily Report news story. That is significant because Georgia law is one of the toughest on employers who make employees sign noncompete agreements by judging such agreements to strict scrutiny, according to the lawyers in the Daily Report story. If an illegal section is found, courts can throw out the entire agreement instead of just the problem area, under Georgia law.

The latest case was brought by James Meathe, who was managing director for the Midwest region for Marsh USA Inc. until January 2003. According to court documents, Meathe made $725,000 in salary and bonuses in 2003, plus between $2 million and $10 million in Marsh stock.

The executive left Marsh and joined Savannah, Georgia.-based Palmer & Cay – a direct competitor of Marsh – as Palmer & Cay president.

The parties ended up suing each other with Meathe and Palmer & Cay alleging that the non-compete pacts were illegal because the agreement covering Meathe was actually a stock purchase agreement and not one covering employment. Marsh alleged that Meathe violated the agreements by raiding Marsh for employees and clients and disclosing confidential business information.

The case is Palmer & Cay v. Marsh & McLennan Companies, No. 16248 (11th Cir. April 1, 2005). The opinion is here .