Thrivent Financial for Lutherans sues former agents, Largest fraternal benefit society in US, Thrivent’s Christian common bond, “Core Christian values”, “you will know them by their fruits”

From the Free Library.

“Fraternal face-off: Thrivent Financial for Lutherans, the largest fraternal benefit society in the United States, doesn’t turn the other cheek when it comes to former agents allegedly violating noncompete agreements.”

“In the first-half of 2003, Thrivent Financial for Lutherans took legal action against 14 former agents for allegedly violating noncompete agreements, and sent about 140 letters to other former agents reminding them of their contract obligations.

The company, which was formed when Lutheran Brotherhood of Minneapolis and Aid Association for Lutherans merged in 2002, is the largest fraternal benefit society in the United States. Thrivent Financial serves the Lutheran community through charity programs, and sells life insurance, annuities, mutual funds and other products to its nearly 3 million members–about a third of the 9.5 million Lutheran adults in the United States. All of Thrivent Financial’s agents are Lutherans, and while some products also can be sold to non-Lutherans, the Lutheran community is the main marketing target and represent the vast majority of the company’s members.

Those former agents being targeted with letters and legal actions left the company after the merger. But it is not a sign that the company is in turmoil, said Paul Kelash, a spokesman for the company.

“This goes on with other companies. No one is going to raise their hand and say, ‘yeah, we take action against agents,’ but it happens throughout the industry,” Kelash said. In fact, both predecessor companies have taken similar actions against former agents from time to time, he said.

Noncompete clauses are commonly included in insurance agents’ contracts, said Jeffrey L. Braff, an attorney with the Philadelphia-based law firm of Cozen O’Connor.

“Typically there are restrictive covenants either on an employment agreement or some sort of contract, or they would be part of the condition of employment,” Braff said. “They’re intended to prevent a former employee from soliciting the customers that they used to serve.”

Braff said lawsuits against former agents, financial advisers or brokers are very common. “Companies put a lot of investment into training these folks and putting them in a position where they can be successful in the Merrill Lynches and Thrivents of the world. They want to protect that investment. As the result of making that investment, consumers get attracted, and it’s too easy for a person to say ‘I can get a better deal taking my client base across the street.’ That’s what these companies are trying to avoid.”

Braff said the cases can be difficult to prove. “The courts don’t like to enforce these types of restrictions to begin with. There is a bias against them. Those that are enforced, are enforced narrowly. It becomes a public policy issue. If you enforce these restrictions, you are punishing the customer because the customer has built a relationship with these agents.”

A Common Practice

John Ella, an attorney with the law firm Mansfield, Tanick & Cohen, is experienced in dealing with noncompete litigation, and represented one of the former Thrivent agents. While Ella said he couldn’t speak specifically about the Thrivent cases, he said that in general, these types of actions are becoming more common.

“We see it in all industries, and frankly, it’s starting to grow wider and deeper. There are more industries where you didn’t see it before, and it’s going down to lower-level employees where you didn’t see it before,” Ella said. Sales people are often targeted, no matter what they sell. In a new twist, even hair stylists and massage therapists are being asked to sign noncompete agreements, he said.

The ability to enforce the contract depends on the state and the language used. “California has a law that generally forbids noncompete agreements. Minnesota is right in the middle of the country, and right in the middle of the law. It is enforceable if you do it right, but it’s disfavored, according to case law. If there’s a reason to kick it out of court, generally, the judge will,” Ella said.

Noncompete agreements can have different requirements, ranging from promising not to sell similar products in a geographic area for a period of time to promising not to interfere with the relationship between a company and its clients, Ella said. Some stipulate that sales people aren’t allowed to contact their former clients if they leave the company, while others say they just shouldn’t solicit business from their former clients for a set period of time. ”

Read more: