LARRY v. NATIONWIDE MUTUAL INSURANCE COMPANY No. 5:08CV77-RLV.
MOOSE, LARRY A., Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, NATIONWIDE LIFE INSURANCE COMPANY, NATIONWIDE PROPERTY AND CASUALTY INSURANCE COMPANY, Defendants.
United States District Court, W.D. North Carolina, Statesville Division.
September 19, 2011.
MEMORANDUM and ORDER
RICHARD L. VOORHEES, District Judge.
I. PROCEDURAL BACKGROUND
This action was commenced in The General Court of Justice, Superior Court Division, for Iredell County, North Carolina on May 28, 2008, by way of a civil summons and complaint filed by Moose claiming Breach of Contract, Tortious Interference with a Contract, and Unfair and Deceptive Trade Practices pursuant to N.C.G.S. § 75-1.1. (Dkt. 1-1, 1-8). The Complaint was amended in State Court on June 17, 2008. (Dkt. 1-1. 9-14 / First Amended Complaint). Before further action could be had in State Court, Defendant removed this action to federal court pursuant to 28 U.S.C. §§ 1441 and 1446. (Dkt. 1, 1-2). This Court has original jurisdiction pursuant to 28 U.S.C. § 1332 on the basis of diversity of citizenship between the parties and because the amount in controversy exceeds the statutory minimum of $75,000.00, exclusive of interests and costs. (Dkt. 1, 2-4).
On September 3, 2009, Moose moved to amend/correct the amended complaint. (Dkt. 24). This motion was granted by U.S. Magistrate Judge David Keesler on November 10, 2009. (Dkt. 28). On November 11, 2009, Moose filed a second amended complaint incorporating the previous claims and adding claims for Fraud, Negligent Misrepresentation, and Constructive Fraud. (Dkt. 31 / Second Amended Complaint) (leave of court to amend complaint provided by the magistrate judge on November 10, 2009 / Dkt. 28). For convenience, additional citations to the Plaintiff's original Complaint and subsequent amended pleadings will refer simply to these pleadings collectively as Plaintiff's Complaint.
The facts for the purpose of this Memorandum and Order are as follows.
II. FACTUAL BACKGROUND
From approximately 1987 to December 31, 2006, Moose owned and operated an independent Nationwide Insurance Agency in Statesville, North Carolina. Moose operated the Larry A. Moose Nationwide Insurance Agency ("the Agency") pursuant to the terms of an exclusive independent agent's agreement ("Agent's Agreement") and the internal policies of Nationwide as a whole.
Nationwide's chain of command started with Moose as an independent agent, whose immediate supervisor was Mike Rollins ("Rollins"), a District Sales Manager. During the relevant time period, Rollins' supervisor was the Sales Director for Western North Carolina, Scott McPherson ("McPherson").
On direction from McPherson,
In June of 2006 Rollins referred Jason Winn ("Winn") to Moose as a potential replacement. (Dkt 42, 7). Moose and his staff met with Winn and generally discussed the take over process but did not discuss the side deal. (Dkt. 37-1, 20-21). In his deposition Moose recounts the evaluation he gave to Rollins following his meeting with Winn:
(Dkt. 42-4, 79). At that point, Rollins met with McPherson who was initially on board with Winn replacing Moose. But in a conversation approximately a week later, McPherson told Rollins that Winn had failed to meet the qualifications for the replacement agent position. Winn went on to become a district sales manager for Nationwide in the Boone, Lenoir, and Wilkesboro areas. (Dkt. 43-3, 22).
At some point in early August, Moose was instructed by Rollins that the screening process of potential new agents required that Moose submit a retirement letter.
Next, Rollins referred Bennie Sheally ("Sheally") to Moose as a potential replacement agent. (Dkt 42-3, 21). Sheally began the screening process, meeting with Moose and taking a business acumen test, which he passed. (Dkt. 39-1, 28). It is disputed whether Moose submitted a second retirement letter, but agreed that a retirement letter was on file for Sheally's screening process.
The third candidate Rollins proposed for replacing Moose was Todd Bowman ("Bowman"). (Dkt. 42-3, 23). Bowman was introduced to Moose in October 2006. Moose was again instructed by Rollins to submit a retirement letter so that the screening process for Bowman could take place. (Dkt. 42-2, 122). Bowman's candidacy proceeded farther along in the replacement process than the previous candidates. Bowman began the screening process by submitting a variety of documents and meeting with both Moose and Rollins. (Dkt. 42-4, Ex. #4, 127-28). Bowman successfully completed Nationwide's Mentee Program for prospective agents. (Bowman Aff. 2) Bowman was told that his candidacy was "on track" and that he was a "shoo-in" to take over the Agency. (Bowman Aff. 2)
Moose and Bowman eventually signed what the parties refer to as "a letter of intent" dated December 5, 2006. (Dkt. 39-7, Ex. H, 2). The letter "confirm[ed] the intent for Larry Moose to sell Todd Bowman the rights and items below" —
Dkt. 39-7, Ex. H, 2). The letter of intent further provided that Moose would work as a consultant for twenty hours a week for 36 months for an agreed upon monthly consulting fee and that arrangements would be made to split commission on all new business only. (Dkt. 39-7, Ex. H, 2).
Moose submitted another letter of resignation to McPherson on December 6, 2006, effective December 31, 2006. (Dkt. 39-8, 2). Moose was still operating under the belief, based on what Rollins had told him previously, that he could rescind his retirement letter at any point. (Dkt. 42-4, Ex. #4, 123) The next day, December 7, 2006, McPherson sent an email to Rollins which read:
(Dkt. 42-7, Ex. E, 25-27).
Moose became concerned with the forecast that Bowman's official approval would not take place by the end of the year and expressed this to Rollins. (Dkt. 42-4, 147). On December 22, 2006, Moose sent an official letter to McPherson, on instruction from Rollins, attempting to withdraw his retirement letter, saying that he "would like to reconsider retirement sometime after January 1, 2007."
As a result of Moose's putative retirement and Bowman's pending candidacy as Moose's replacement, the Agency, or former Larry A. Moose Nationwide Insurance Agency that Plaintiff Moose built during approximately twenty (20) years as an exclusive agent with Nationwide, became an "open agency." (Dkt. 37-2, 32-34). As an open agency, the Agency was operated by Nationwide's Checks and Balances, Inc.
At the same time, effective January 2007, Nationwide doubled its liquid asset requirement (from $25,000 to $50,000), applicable to all Nationwide agencies and all prospective Nationwide agents.
Since January of 2007, Moose has been working in the Agency and simultaneously accepting retirement benefits. (Dkt. 37-2, 32-34). Because Moose had entered into a non-compete with Nationwide at the outset of his career, he was contractually obligated not to sell insurance elsewhere. (Pl.'s Brf. In Opp'n. at 25).
Saundra Carney ("Carney"), a sibling of two successful Nationwide agents in the area, was awarded the exclusive agency contract to service Moose's former agency. (Rollins Dep. 89-90) Carney took over the agency with Nationwide's approval on July 1, 2007. (Rollins Dep. 90)
III. STANDARD OF REVIEW
Summary judgment is proper where "the facts and the law will reasonably support only one conclusion."
A genuine issue of material fact exists only if "the evidence is such that a reasonable jury could return a verdict for the non-moving party."
However, the party opposing summary judgment "may not rest upon the mere allegations or denials of [his or her] pleadings," FED. R. CIV. P. 56(e), and a "mere scintilla of evidence" is insufficient to overcome summary judgment.
Summary judgment is inappropriate because genuine issues of material fact exist regarding 1) formation of contract between Moose and Nationwide/Rollins; 2) the extent of Mike Rollins' actual (implied) and apparent authority; 3) representations made to Moose by Rollins regarding the replacement agent search process, proposed "side deal," and Moose's ability to rescind his retirement letter prior to approval of a replacement agent and/or prior to Moose's effective retirement date; and 4) whether Moose reasonably relied on Rollins' representations.
A. Breach of Contract
Moose contends that he entered into a valid and enforceable contract with Nationwide. According to Moose, in exchange for his early retirement, Rollins, on behalf of Nationwide, promised to help identify a replacement agent willing to enter into a side deal with Moose covering the desired $160,000.00 retirement incentive. The gist of Moose's breach of contract claim is that Nationwide breached this contract by failing to approve Bowman as a replacement agent while enforcing Moose's letter of retirement.
Moose contends that he and Rollins first discussed his financial goals and retirement plans in late 2005 or early 2006, at which time Moose made clear that he would not be able to retire until his house was paid for and his daughter's college education was taken care of. (Moose Dep. 63-72) According to Moose, absent an additional financial incentive to do so (i.e., a "side deal"), there was no reason for him to retire since he could stay on and continue to collect his renewals and new sales commissions. (Moose Dep. 82) According to Moose, he only responded positively to the inquiry about retirement when prompted by Rollins, "Well, I have candidates that I can send to you. And if we can make that happen for you, get those things taken care of, would you retire?" (Moose Dep. 63) (Moose Dep. 63)
Rollins denies ever representing to Moose that he'd find a replacement agent who would pay Moose "some lump sum" of money to cover the financial obligations Moose identified as obstacles to early retirement. (Rollins Dep. 110) Instead, Rollins claims he had in his mind that the replacement agent would permit Moose "to work through a transition," possibly on a part-time basis, and enable him to continue to earn some money. (Rollins Dep. 109) (Rollins Dep. 109-11, 117-18) Nationwide argues that Moose's breach of contract claim fails because 1) no such contract could exist since Rollins lacked the actual and apparent authority to contract on behalf of Nationwide; and 2) that even if Rollins possessed the requisite authority and a contract found to exist, the contract would be unenforceable as a matter of law due to either impossibility of performance or because its terms violate public policy. Taking the facts and inferences in the light most favorable to Moose, genuine issues of material fact exist as to whether Nationwide, through Rollins, entered into a valid and enforceable contract with Moose.
A valid contract may be formed by the agent of the principal where " the agent acts within the scope of his  authority;  when an unauthorized contract has been ratified; or  when the agent acts within the scope of his  apparent authority, unless the third person has notice that the agent is exceeding actual authority."
Under the doctrine of apparent authority, "the principal's liability is to be determined by what authority a person in the exercise of reasonable care was justified in believing the principal conferred upon his agent."
What Moose reasonably believed to be Rollins' actual or apparent authority is a matter for the jury. Here, Rollins was Moose's immediate supervisor, and the only Nationwide manager with whom Moose had significant contact. Moose trusted Rollins and believed Rollins to be a man of his word. (8/21/09 Moose Dep. 172) Indeed, as far as Moose was concerned, "Mike Rollins was the voice of Nationwide. . . ." (Dkt. 42-4, 174)
Nationwide contends that because Moose was aware of Nationwide's written and express policy against side deals, any argument by Moose in support of Rollins' actual or apparent authority fails. Nationwide's policy concerning succession planning addresses the financial arrangements involving transfer of business between Nationwide Agents as follows:
(Def.'s Exh. G/Nationwide Agency Succession Planning Policy). Similarly, Nationwide's Agency Administration Handbook provides in pertinent part:
(Def's Exh. F/Nationwide Agency Administration Handbook at 1) (emphasis provided).
Whether Moose exercised reasonable care is likewise for the jury. The extent of Moose's knowledge, if any, of the written policies is disputed. Moose testified that he was unfamiliar with Nationwide's Succession Planning Policy, which had only been in existence since 2003, and that Rollins never advised or otherwise informed him about the succession policy. (Moose Dep. 99) Moose testified that the existing procedure for screening a prospective Nationwide agent, including the candidate's provision of certain start-up fees, is "a new process, not part of what [Moose] was involved with early on in [his] career." (Moose Dep. 78)
Notwithstanding the more recent written policy, Moose had knowledge, dating back to 1995, of "side deals" taking place among agents and replacements within Nationwide. (Dkt. 42-4, 84-85 / Moose Dep. 72). Significantly, Moose's understanding was that the sales managers, like Rollins, were active participants in the "side deal" process. (Moose Dep. 135)
Todd Bowman's affidavit supports Moose's position. According to Bowman, Moose and Bowman had reached a "side deal" that was discussed in a meeting between Moose, Rollins, and Bowman. (Dkt. 42-2, 2). The deal provided that, if approved to take over the agency, Bowman would pay Moose $100,000.00 to be paid over the course of the first couple years of operating the agency.
Aside from evidence concerning the proposed Moose/Bowman transaction, Moose proffers an affidavit from Troy McMahon ("McMahon"), former independent Nationwide agent who owned and operated a Nationwide agency in Matthews, North Carolina prior to retirement.
(McMahon Aff. 1) McMahon further states that "[t]o the best of [his] recollection, [he] was never required by Nationwide to submit [his] resignation until [his replacement] had been approved to take over [the] agency." (
There is also evidence that during the same time period another Nationwide agent, Robert Tarlton ("Tarlton"), with Rollins' assistance and expertise, reached a side deal worth $100,000.00 with the agent that replaced him upon retirement. (Tarlton Dep. 26, 47) Tarlton operated a Nationwide agency in Taylorsville, North Carolina, approximately 20 miles away from Statesville, North Carolina. According to Tarlton, every candidate Rollins sent to him knew of the proposed side deal or financial incentive to retire before meeting with him. (Tarlton Dep. 35) When asked about any prohibition regarding side deals between the owner/operator and replacement agent, Rollins testified that "[t]here was no written policy."
Finally, whether Nationwide took the past of least resistance and acquiesced is for the jury. While the parties agree that Nationwide's "official word" was that side deals were not permitted, a jury could reasonably find that "side deals" were entered into with tacit approval or acquiesence by Rollins or other members of Nationwide's upper management.
(Kirk Dep. 42) Kirk concedes that he never took any affirmative steps to prevent an outgoing agent from contracting with a prospective replacement agent but denied that Nationwide would condition acceptance of an agent's retirement upon replacement with a specific prospective agent (Kirk Dep. 41-44)
Taking these facts in the light most favorable to Moose, a reasonable jury could come to the conclusion,
Nationwide next argues that even if Rollins possessed the authority to contract on its behalf, the terms of the alleged agreement would be unenforceable as a matter of law. More specifically, Nationwide argues that the side deal between Rollins and Moose was a de facto agreement to sell Moose's book of business. Nationwide argues that, pursuant to the Policy Ownership section within its Agency Administration Handbook, the book of business was owned by Nationwide and was not Moose's to sell. Nationwide's position regarding Policy Ownership is as follows:
(Def.'s Exh. F/Agency Administration Handbook at 1). According to Nationwide's express policy, agents such as Moose have no ownership interest in the book of business. (Rollins Dep. 101) Rather, Nationwide posits that outgoing agents with the requisite years of service are entitled to "extended earnings" and any deferred compensation accrued during employment.
On its face, the letter of intent describing the side deal makes no mention of the book of business. (Dkt. 39, #7 Ex. H) ("Buying the right to use the name of Larry A. Moose Insurance Agency, INC and the office equipment . . . and miscellaneous items."). In addition, Rollins testified that a contract between Moose and Bowman for the right to use the same office space, the use of the existing agency name, and the sale of office equipment would be entirely proper and consistent with Nationwide policies. (Rollins Dep. 100-01)
Nationwide argues as well that the purported contract terms advanced by Moose would be unenforceable because the manner in which the side deal would be funded would have resulted in misrepresentations, and the potential commission of fraud, upon Nationwide. Moose contends that the details of funding the side deal were left to Rollins and the replacement agent. In fact, the whole idea of padding the pro forma was first suggested by Rollins. Although Moose admittedly contemplated the possibility of an unorthodox funding arrangement that would inure to his benefit, Nationwide fails to reconcile its claim with Bowman's affidavit. Bowman describes a legitimate manner of payment in which the funding to pay Moose is drawn from the income Bowman would receive in the first years of operating the agency. (Dkt. 42-2,3). At minimum, the representations made by Moose and Bowman create a genuine issue of material fact.
For all of these reasons, summary judgment is not proper on Moose's breach of contract claim. Similarly, because Plaintiff's other causes of action are at least partially dependent upon the breach of contract claim (and the facts ultimately to be determined by a jury), summary judgment disposition cannot be had on the remaining claims.
B. Tortious Interference 24
Moose contends that the series of rejected prospective replacement agents (Winn, Sheally, Bowman) was motivated by Nationwide's desire to force Moose into retirement. In other words, Moose's tortious interference claim is based on the alleged malicious and arbitrary deterring of replacement agents from entering into contracts with Moose by Nationwide. Moose contends that, but for Nationwide's interference, one or more of the potential replacement agents would have entered into a contract with him. According to Moose, he was deprived the benefit of a side deal and was unable to reap the benefits flowing out of the Agency while Nationwide sustained a windfall.
As an initial matter, the Court rejects Nationwide's contention that Moose did not plead tortious interference with prospective economic advantage. Although the Second Claim for Relief is labeled "Tortious Interference With A Contract," the language within the body of the Complaint clearly speaks to plural prospective contracts. (Compl. ¶¶25, 26) ("deterring potential agents from entering into a contract . . . which they would have entered into . . ." and interference that "dissuaded potential agents. . . .") Moreover, courts have recognized that different specific theories of tortious interference may be encompassed within the "tortious interference" or "tortious interference with business relations" category.
In order to prevail on a tortious interference with prospective economic advantage claim, there must be proof that "defendants acted without justification in inducing a third party to refrain from entering a contract with them which would have ensued but for the interference."
"[I]nterference with contract is justified if it is motivated by a legitimate business purpose."
Nationwide argues that it did not induce Bowman to not perform under the alleged contract. However, Nationwide didn't need to induce Bowman because it thwarted his performance with its determination that Bowman was ineligible to take over the Agency. Nationwide also contends that its disqualification of Bowman as a replacement agent was justified because Bowman could not meet Nationwide's liquid asset requirement of $50,000.00. (Dkt. 36, 16-17). Because genuine issues of material fact are attendant to these claims, Moose's tortious interference claim survives summary judgment.
C. Fraud, Negligent Misrepresentation, Constructive Fraud
The same can be said for Moose's other tort claims. In order to successfully prosecute his action for fraud, Moose must show evidence of: "1) [a] false representation or concealment of a material fact [by Nationwide]; 2) reasonably calculated to deceive; 3) made with intent to deceive; 4) which does in fact deceive; 5) resulting in damage to the injured party."
On the other hand, negligent misrepresentation requires a litigant to show that he "justifiably reli[ed] to his detriment on information prepared without reasonable care by one who owed the relying party a duty of care."
Constructive fraud is shown by evidence of: 1) a relationship of trust and confidence; and 2) use of the relationship to the detriment of the plaintiff and benefit of the defendant. See
In contrast to a claim of fraud, constructive fraud does not require proof of an intent to deceive by the defendant.
As to the fraud, negligent misrepresentation, and constructive fraud claims, Nationwide contends that each of these respective claims are founded on Moose's allegation that Nationwide, through Rollins, induced him to submit, and guaranteed him the ability to rescind, his December 6, 2006 retirement letter. Nationwide argues that Moose personally concedes the falsity of this claim. (Dkt. 36, 19-21). Nationwide proffers the following excerpt from Moose's deposition:
(Dkt. 38-1, #1 Ex. B, 17-19). Additionally, Nationwide contends that even if Rollins represented to Moose that he could rescind his retirement at anytime, Moose knew that Rollins did not have the authority to make such a promise.
(Dkt. 38-1, #1 Ex. B, 10-11).
The representations made by Rollins, if any, as well as the nature and purpose of each, present questions of fact for the jury. Rollins' statement to Moose, allowing rescission of the first retirement letter, was not accompanied by any qualifiers limiting rescission of the retirement letter only to Winn's candidacy. At the outset of the replacement agent search, Moose expressed reservations in submitting the letter prior to having a replacement agent and side deal finalized. According to Moose's testimony, he was assured by Rollins that he had the ability to rescind his retirement letter. Later, during the pendency of Bowman's candidacy, Rollins did not expressly say to Moose that his retirement letter was rescindable from the present to infinity. However, Rollins did not expressly say to Moose that his retirement letter for Bowman's candidacy would be operating under different guidelines than previously agreed upon either. With no conversation between Moose and Rollins regarding Moose's ability to rescind his December 6, 2007 retirement letter, a jury could reasonably conclude that the subsequent retirement letter would be subject to the same conditions promised earlier.
Bowman's affidavit is consistent with Moose's recollection and supports Moose's understanding that his retirement letter was of a tentative nature, subject to the approval of Bowman's takeover of the Agency. Bowman avers that on two different occasions Rollins told Bowman
Whether Moose was induced to retire early to his detriment and Nationwide's benefit is also for the jury. Moose testified that he was never told that Nationwide had the power to accept or reject his offer of retirement. (Dkt. 42-4, Ex. C, 103-105). Moose testified that he recognized that superiors existed that Rollins answered to, but Moose also testified that he "knew that Scott was Mike's boss and could overrule him. But Mike assured me that that would not vary, that there would be no problem."(Dkt. 38-1, #1 Ex. B, 18). Although Moose does state in his deposition that he knew the decision of accepting or rejecting the rescission of his retirement was up to McPherson, Moose immediately goes on to say that he was not sure of the process from that point forward. Taken in the light most favorable to the Plaintiff, the evidentiary record presents genuine issues of material fact best suited for the trier-of-fact.
This Court denies summary judgment as to Moose's fraud, negligent misrepresentation, and constructive fraud claims, because genuine issues of material fact exist as to whether Moose was induced into retirement per Nationwide's negligent or fraudulent representations.
D. Unfair and Deceptive Trade Practices
"[A] successful claim under N.C.G.S. § 75-1.1 requires proof of three elements: (1) an unfair or deceptive act or practice; (2) in or affecting commerce; (3) which proximately caused actual injury to the claimant."
Nationwide argues that if the UDTP claim is permitted, the claim fails on two of the three elements required for a successful UDTP claim: (1) the alleged actions were not in or affecting commerce; and (2) even if Nationwide's action are considered to be in or affecting commerce, Nationwide did not commit an unfair or deceptive act or practice. (Dkt. 36, 21-22). At this stage of the litigation, the undersigned rejects both of Nationwide's contentions.
The "in or affecting commerce" criteria for purposes of a claim pursuant to §75-1.1 is easily met. All that is required is that plaintiff show some business activity and impact on the marketplace.
Moreover, the nature of the allegations here, if proven, could support an unfair or deceptive act or practice claim. Although a mere breach of contract, even if intentional, is insufficient to support an UDTP claim, "if the breach is surrounded by substantial aggravating circumstances, it may sustain an action for UDTP."
Likewise, "[p]roof of fraud  necessarily constitute[s] a violation of the prohibition against unfair and deceptive acts."
E. Contract-Centered Dispute
Because of the "contractual center" of the dispute, Nationwide contends that Moose's tort claims and UDTPA claim should be dismissed. Nationwide's argument cites to
Nationwide also argues that Moose is estopped, under the doctrine of quasi-estoppel, from making the claim that he was forced into retirement, because Moose has been voluntarily receiving and accepting retirement benefits since January 1, 2007. (Dkt. 36, 24). Nationwide contends that all of Moose's claims are based on his forced retirement, and because Moose is estopped from making the claim he was forced into retirement, all of his claims should be dismissed.
North Carolina recognizes the doctrine of "estoppel by the acceptance of benefits," also referred to as "quasi-estoppel."
North Carolina's doctrine of quasi-estoppel requires that, for a party to prevail under the doctrine, they must show that the party being estopped 1) had the right to accept or reject a transaction or instrument; 2) has subsequently accepted and retained benefits flowing from the accepted transaction or instrument; and 3) now attempts to avoid the obligations that came with the accepted transaction or instrument. Nationwide makes much of the fact that Moose has accepted benefits under retirement, but fails to make a clear showing that Moose had the right to accept or reject retirement in the first place. Nationwide is correct; this issue of forced retirement is the crux of Moose's claims. This Court finds that genuine issues of material fact exist. Moose had the choice of submitting a retirement letter or not, and chose to do so, under Rollins' direction, with the belief that he could rescind this letter at any time. When Moose attempted to rescind, Nationwide refused to accept. Moose claims that he accepted monthly retirement benefits after January 1, 2007, because his resignation had been rejected and there were no other options for viable income that would allow him to pay his bills. (Dkt. 42-4, 160-161). At the very least, these facts taken in the light most favorable to Moose,
This Court denies summary judgment because a genuine issue of material fact exists regarding whether Moose had the right to accept or reject retirement.
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