Wells Fargo Insurance Services USA, Inc., Appellant,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2018).

STATE OF MINNESOTA
IN COURT OF APPEALS
A19-0175

Wells Fargo Insurance Services USA, Inc.,
Appellant,

vs.

Angelo Galioto, et al.,
Respondents.

Filed September 16, 2019
Reversed and remanded
Smith, John, Judge*

Hennepin County District Court
File No. 27-CV-17-17361

Amy L. Schwartz, Richard T. Thomson, Ballard Spahr, LLP, Minneapolis, Minnesota (for
appellant)

Joseph M. Sokolowski, Pamela Abbate -Dattilo, Bryan J. Morben, Fredrikson & Byron,
P.A., Minneapolis, Minnesota (for respondents)

Considered and decided by Connolly, Presiding Judge; Hooten, Judge; and Smith,
John, Judge.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.

2
U N P U B L I S H E D O P I N I O N
SMITH, JOHN, Judge
We reverse the district court’s grant of summary judgment in favor of respondent
Angelo Galioto, et al., because the restrictive covenant signed by Galioto was ancillary to
new employment and did not require independent consideration. We remand for further
proceedings on issues not decided by the district court.
FACTS
In March 1999, respondent Angelo Galioto began working as an insurance producer
for W.A. Lang Co . (W.A. Lang). When he was hired by W.A. Lang, Galioto signed an
employment agreement, which contained a restrictive covenant. The W.A. Lang restrictive
covenant provided:
In consideration of you r employment with the Company, you
agree that, if your employment should terminate for any
reason, you will not, at any time, during the period of two years
after such termination,
. . . .
(b) In any capacity, (whether as an employee, officer,
consultant, or otherwise) sell, solicit, accept, receive, service
or transact any Insurance Business which we have offered or
provided to any person or entity who was a Company
Customer at any time during the eighteen (18) month period
ending with the date of termi nation of your employment with
the Company.

In December 1999, W.A. Lang announced that it would be selling most of its assets
to Acordia of Minnesota, Inc. (Acordia). After announcing the sale, the CEO of W.A. Lang
assured the employees that their jobs would be safe; he told the insurance producers that

3
after W.A. Lang and Acordia made their final agreements, Acordia would extend offers of
employment to them under terms similar to those in W.A. Lang’s employment agreement.
On January 13, 2000, W.A. L ang entered into a purchase agreement to sell all or
substantially all of its assets to Acordia. The purchase agreement provided that , as of the
closing, Acordia “will make offers of immediate employment to all employees of [W.A.
Lang].” It additionally stated that W.A. Lang would:
sell, assign, transfer and convey , at the Closing . . . [a]ll
restrictive covenants and similar rights owned or possessed by
[W.A. Lang] including, without limitation, the right to enforce
the restrictive covenants in any . . . employment agreements
between [W.A. Lang] and its employees, to the extent
transferable or assignable which agreements or employment
contracts are not assigned by [W.A. Lang] to Acordia.

While the asset purchase closed on January 13, the purchase agreeme nt specifically
provided that the effective closing date was retroactive to January 1, 2000.
On the morning of January 14, Galioto received an email from W.A. Lang’s CEO
stating:
The closing with Acordia was successfully completed
last night as scheduled. Beginning today, we will be answering
the phones identifying ourselves as W.A. Lang/Acordia.
One issue that needs to be dealt with today is signing
employment agreements. Acordia has issued payroll checks
which are contingent upon your accepting the ir offer of
continued employment. Yesterday, a draft copy of the
agreement was distributed to those who were here in the
afternoon. No changes were required so we will be using the
draft as the final document. Upon receipt of your signed
agreement, [a repr esentative] has been authorized by Acordia
to provide you with your check.

4
At some point on January 14, Galioto received Acordia’s employment agreement. The
employment agreement contained a restrictive covenant that was very similar to the
restrictive covenant in W.A. Lang’s employment agreement. It provided:
In consideration of your employment with [Acordia], you
agree that, if your employment should terminate for any
reason, you will not, at any time, during the period of two (2)
years after such termination,
. . . .
(b) In any capacity, (whether as a n employee, officer,
consultant or otherwise) sell, solicit, accept, receive, service or
transact any Insurance Business which [Acordia] or W.A. Lang
Co. offered or provided to any person or entity who was a
Company Customer at any time during the eighteen (18) month
period ending with the date of termination of your employment
with the Company.

Acordia’s employment agreement also contained a retroactive provision which provided
that Galioto’s employment with Acordia commenced on January 1, 2000.
Through a series of corporate transactions from 2001 to 2010, Acordia Minnesota
became “rolled up” into Wells Fargo Insurance Services USA, Inc. Galioto continued to
work for Acordia, and ultimately its su ccessor, appellant Wells Fargo Insurance Services
USA, Inc. (WFIS) from January 2000 until his resignation on May 10, 2017.
Shortly after his resignation, Galioto began his employment with respondent Kansas
City Series of Lockton Companies (Lockton). WFIS alleges that Galioto is responsible for
24 accounts moving their business from WFIS to Lockton because he contacted them after
his resignation.
On November 16, 2017, WFIS served its summons and complaint upon Galioto and
Lockton, asserting claims of: (1) breach of contract by Galioto, (2) breach of duty of loyalty

5
by Galioto , (3) misappropriation of trade secrets by Galioto , and (4) and (5) tortious
interference with a contract by Lockton and Galioto. WFIS voluntarily dismissed the duty
of loyalty and misappropriation claims. WFIS filed a motion for partial summary judgment
on its claim of breach of contract. Galioto and Lockton filed a cross-motion for summary
judgment, seeking dismissal with prejudice of WFIS’s breach -of-contract claim and
tortious-interference claim.
On September 6, 2018, the district court held a hearing on the motions for summary
judgment. WFIS argued that the Acordia employment agreement was enforceable and
Galioto was liable to WFIS for violating the restrictive covenant. Galioto and Lockton
argued that the employment agreement lacked consideration and was overly broad, WFIS
lacked standing, and the restrictive covenant had expired. The district court determined
that the restrictive co venant within Acordia’s employment agreement was unenforceable
because it lacked consideration. Because it was unenforceable, the district court granted
summary judgment in favor of Galioto and Lockton on both claims and dismissed WFIS’s
complaint with pr ejudice. The district court did not consider the remaining arguments
made by Galioto and Lockton. WFIS appeals.
D E C I S I O N
On appeal from summary judgment, this court reviews de novo “whether there are
any genuine issues of material fact and whether the district court erred in its application of
the law to the facts.” Commerce Bank v. W. Bend Mut. Ins. Co ., 870 N.W.2d 770, 773
(Minn. 2015). We therefore review de novo the district court’s legal determinations
regarding consideration. See Brooksbank v. Anderson, 586 N.W.2d 789, 794 (Minn. App.

6
1998) (“Determining whether sufficient consideration exists for an agreement is a question
of law.”), review denied (Minn. Jan. 27, 1999).
I. The district court erred by determining that the restrictive covenant lacked
consideration.

The district court determined that the restrictive covenant in the Acordia agreement
was unenforceable because it was not supported by consideration. The district court found
that the restrictive covenant lacked consideration be cause: (1) it was presented to Galioto
after his employment with Acordia commenced, (2) Galioto’s first paycheck from Acordia
did not constitute independent consideration , and (3) the release from the restrictive
covenants in the W.A. Lang agreement did not constitute independent consideration. WFIS
argues that the district court erred in these determinations because the restrictive covenant
was ancillary to Galioto’s new employment with Acordia and the retroactivity provision
did not negate the new employment. We agree.
A. The restrictive co venant was ancillary to A cordia’s offer of new
employment.

“In order to be enforceable, non -compete agreements must be reasonable and
supported by consideration.” Softchoice, Inc. v. Schmidt , 763 N.W.2d 660, 667 (Minn.
App. 2009) (quotation omitted). Restrictive covenants that are ancillary to an employment
contract are supported by consideration. See Sanborn Mfg. Co. v. Currie, 500 N.W.2d 161,
164 (Minn. App. 1993) (noting that where a res trictive covenant is not ancillary to new
employment, it must be supported by independent consideration to be enforceable). “When
the employer fails to inform prospective employees of noncompetition agreements until
after they have accepted jobs, the employer takes undue advantage of the inequality

7
between the parties,” thus independent consideration is necessary. Id. (quotation omitted).
The district court determined, and Galioto contends , that the restrictive covenant was
presented to Galioto after he was employed by Acordia and thus needed independent
consideration. WFIS argues that the restrictive covenant in the Acord ia agreement was
ancillary to new employment. In order to evaluate whether the restrictive covenant was
supported by consideration, we must first determine whether Acordia’s employment
agreement was an offer of new or continued employment.
Neither party d isputes the facts. On January 13, 2000 , W.A. Lang and Acordia
signed a purchase agreement, which provided that W.A. Lang would “sell, assign, transfer,
and convey, at the Closing, absolutely to [Acordia] . . . its entire business and certain of its
properties and assets.” Although the parties entered into this agreement on January 13, the
document provided that the transaction “is made and entered into as of the 1st of January,
2000.” At 7:59 a.m. on the morning of Friday, January 14, 2000, Galioto received an email
from the CEO of W.A. Lang, which provided:
The closing with Acordia was successfully completed
last night as scheduled. . . .
One issue that needs to be dealt with today is signing
employment agreements. Acordia has issued payroll checks
which are contingent upon your accepting their offer of
continued employment. . . . Upon receipt of your signed
agreement, [a representative] has been authorized by Acordia
to provide you with your check.”

Later that same day, Galioto received a copy of the employment agreement referenced in
the email. The agreement contained a restrictive covenant. The agreement also contained
a retroactive provision which provided that Galioto’s employment with Acordia

8
commenced on January 1, 2000. Galioto worked the entire day on January 14 without
signing the agreement. Following the Martin Luther King Jr. holiday, Galioto signed and
returned the agreement on Tuesday, January 18. After executing the agreement, Galioto
received his paycheck for the preceding two weeks.
WFIS argues that Galioto was offered new employment with Acordia on January
14, and therefore the restrictive covenant was ancillary to his new employment and did not
require independent consideration. Galioto contends that the clear and unambiguous terms
of the employment agreement provided that Galioto became an employee of Acordia on
January 1. Thus, because the employment agreement was not provided to him and
executed prior to January 1, the agreement was not ancillary to new employment and
required independent consideration.
The district court found that Galioto’s employment with Acordia commenced on
January 1 based on the language in the employment agreement and because Acordia “took
affirmative actions consistent with the position that G alioto’s effecti ve start date was
January 1.” The affirmative actions the district court cited to included: (1) Acordia paid
Galioto his earnings as of January 1 , (2) Acordia made Galioto eligible to participate in
benefit programs as of January 1, (3) Acordia benefited from Galioto’s work as of January
1, and (4) the CEO of W.A. Lang presented the employment agreement as an of fer of
continued employment. Galioto relies on the district court’s reasoning, and also argues
that there was no material change i n his employment —such as an increase in
compensation—which bolsters the position that the agreement was not an offer of new

9
employment but continued employment , requiring independent consideration for the
restrictive covenant.
WFIS argues that the dist rict court erred in determining that the retroactivity
provision suggests that Galioto commenced employment with Acordia on January 1. WFIS
contends that “the fundamental problem with the district court’s analysis is that it uses the
signed employment agreement to prove that Galioto was employed by Acordia on January
1 and thus received nothing of value when the employment agreement was offered on
January 14.”
In its argument, WFIS relies on our decision in Softchoice. In that case, an employee
interviewed for a promotion within the company on January 7. Softchoice, 763 N.W.2d at
664. Later that same day, the employee was informed via email that he received the
promotion and would soon receive a “formal offer.” Id. On January 16, Softchoice sent
the employee a formal offer letter that also contained a non -solicitation agreement. Id. at
665. The offer letter retroactively set the promotion’s effective date for January 2. Id. The
employee signed the letter, continued working for Softchoice, but quit approximately one
year later and violated the non-solicitation agreement. Id. Softchoice sought an injunction
against the employee, and the employee argued that his promotion could not serve as
consideration for the non-solicitation agreement because the promotion occurred on
January 7, and he received the agreement after this date. Id. at 667-68. We rejected the
employee’s argument and held that “a promotion serves as consideration for a non-compete
agreement at t he time when the terms of the promotion have been defined and the
promotion has been formally offered and accepted in writing.” Id. at 668. “It was only

10
after [the employee] signed the offer letter containing the terms of his new position and the
non-solicitation agreement that he received any ‘real advantages’ from Softchoice.” Id. at
669. Thus , the agreement was supported by consideration —specifically the employee’s
promotion.
Galioto and the district court distinguish Softchoice from this case bec ause the
employee was offered increased pay and benefits contingent upon signing the non -
solicitation agreement, whereas here, Galioto was not offered any increase in pay or
promotion. However, as WFIS points out, Galioto never would have received the ben efit
of something he was not entitled to —employment with Acordia —had he not signed the
employment agreement containing the restrictive covenant. Galioto only received the “real
advantages” from Acordia upon signing the employment agreement. Any retroacti vity
does not factor into the analysis, as Galioto only gain ed any benefits from employment
with Acordia, such as being retroactively employed or retroactively receiving benefits,
after signing the agreement.
Galioto additionally argues that the employ ment agreement constituted continued
employment because he received the email on the morning of January 14 notifying him of
an employment relationship with Acordia, but he did not receive the employment
agreement containing the restrictive covenant until later that afternoon, after he had worked
a few hours . Cf. Midwest Sports Mktg ., Inc. v. Hillerich & Brandsby of Can ., Ltd., 552
N.W.2d 254, 265-66 (Minn. App. 1996) (holding that noncompetition agreement failed for
lack of consideration after company pres ented employee with agreement two weeks after
beginning work), review denied (Minn. Sept. 20, 1996). But the January 14 email clearly

11
stated that Galioto must sign the employment agreement to accept Acordia’s offer of
employment. And Galioto received tha t employment agreement later that same day. We
are not convinced that this situation is analogous to cases where an employee worked for a
company for weeks before receiving a noncompetition agreement. Cf. Davies & Davies
Agency, Inc. v. Davies , 298 N.W.2 d 127, 132 -33 (Minn. 1980) (determining that
noncompetition agreement lacked consideration when employee was not presented with
agreement until 11 days after his first day and there was no independent consideration).
In sum, Acordia made an offer of new employment on January 14 and the restrictive
covenant was ancillary to that offer , regardless of any retroactivity provision. Therefore,
the district court erred by determining that the restrictive covenant lacked consideration.
Because the restrictive covenant was ancillary to new employment, we do not address the
parties’ arguments regarding independent consideration.
II. This court must remand for further proceedings.

WFIS argues that this court should enter summary judgment in its favor and against
Galioto. However, because the district court found that the Acordia employment
agreement containing the restrictive covenant lacked consideration and was unenforceable,
it did not address Galioto’s and Lockton’s alternative argument s for summary judgment.
Those remaining arguments include: (1) that the restrictive covenants are overbroad,
unreasonable, and unenforceable; (2) that USI Insurance Services National, Inc. (which
brings this lawsuit in the name of WFIS) lacks standing, fo llowing numerous mergers,
acquisitions, and name changes, to enforce the two -decades-old agreement; and (3) that

12
under the plain language of the Acordia employment agreement, the restrictive covenants
have long since expired.
WFIS argues that these three arguments involve only legal issues and can be decided
by this court rather than the district court. Although the three other arguments Galioto
made for summary judgment involve legal arguments, the arguments require significant
analysis of the record an d fact finding, particularly in determining the reasonableness of
the restrictive covenant. See Satellite Indus., Inc. v. Keeling, 396 N.W.2d 635, 640 (Minn.
App. 1986) (“Ascertaining whether a non -competition agreement is reasonable in scope
calls for a balance of the equities between the employee and his former employer.”), review
denied (Minn. Jan. 21, 1987) ; see also Klick v. Crosstown State Bank of Ham Lake , Inc.,
372 N.W.2d 85, 87 -88 (Minn. App. 1985) (“ [I]t is not within the scope of our review to
make the essentially factual finding of whether the covenant was reasonable.”).
We therefore reverse and remand to the district court for further proceedings on
Galioto’s and WFIS’s remaining arguments. We additionally remand to the district court
WFIS’s claim against Lockton for tortious interference, as the district court dismissed this
claim based solely on its determination that the restrictive covenant lacked consideration.
Reversed and remanded.