Karen Nemier, et al v. Nationwide Mutual Insurance Co

Filing

OPINION filed : the district court's judgment is AFFIRMED, decision not for publication pursuant to local rule 206. Raymond M. Kethledge (authoring) and Jane Branstetter Stranch, Circuit Judges; James S. Gwin, U.S. District Judge.

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 1

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 12a0055n.06
No. 10-2116
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
KAREN NEMIER; KAREN NEMIER INSURANCE
AGENCY, INC.,
Plaintiffs-Appellants,
v.
N A T IO N W ID E M U T U A L IN S U R A N C E
COMPANY, an Ohio Corporation,
Defendant-Appellee.

)
)
)
)
)
)
)
)
)
)
)
)
)

Jan 13, 2012
LEONARD GREEN, Clerk

ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF
MICHIGAN

Before: KETHLEDGE and STRANCH, Circuit Judges; GWIN, District Judge*
KETHLEDGE, Circuit Judge. Former Nationwide insurance agent Karen Nemier appeals
the district court’s decision to enter summary judgment for Nationwide on her fraud and breach-ofcontract claims. She argues that material factual disputes remain as to whether Nationwide
fraudulently induced her to take out loans to open a new insurance agency. We disagree and affirm.
I.
In 1998, Nationwide gave Nemier money to start her own insurance agency in Plymouth,
Michigan. Nemier sold Nationwide insurance through her agency, but ran the agency as an
independent contractor starting in 2002. In 2003, Nationwide announced its goal to become the third
*

The Honorable James S. Gwin, United States District Judge for the Northern District of
Ohio, sitting by designation.

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 2

No. 10-2116
Nemier v. Nationwide
largest insurer in the country. To that end, Nationwide planned to implement a new ratings system
in Michigan, called “Class Plan M.” Under Plan M, Nationwide would more precisely calibrate its
insurance rates according to the risk presented by each customer, supposedly making the rates more
competitive. Nationwide also encouraged agents like Nemier to open additional satellite offices.
To help open the new offices, Nationwide offered its agents “capital access loans” under which
Nationwide would waive repayment of the loan if the agent met certain growth targets.
Nemier told a Nationwide sales manager that she was interested in opening another satellite
in Hartland, Michigan. Nemier added that she was “extremely busy” and “didn’t know when [she]
could get a whole business plan done” for the new office. The manager responded that a Nationwide
business consultant “would take care of the majority” of the work.
Nationwide’s business consultant prepared the pro forma with little input from Nemier. He
projected revenue increases after Nemier opened the new office, predicting that the office would
have positive cash flow in three years. The consultant also prepared a demographic summary that
classified Hartland as a “target expansion market.”
Another Nationwide employee warned Nemier that there had been problems with the rollout
of Plan M in other states. But in June 2004 Nemier took out a $100,000 capital-access loan from
Nationwide Federal Credit Union to open a Hartland office. In doing so, she allegedly relied on the
consultant’s two studies and Nationwide’s promises that, considering her past success, she would
likely achieve certain growth targets necessary to avoid repaying the loan. Those growth targets
included a requirement that the sum of her “direct written premiums” exceed 150% of Nationwide’s
“state growth objectives” for those premiums within three years. The targets also required Nemier
-2-

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 3

No. 10-2116
Nemier v. Nationwide
to increase her direct written premiums by $1,005,955 within three years. Nemier opened her
Hartland office in July or August 2004.
In April 2005, Nemier borrowed another $10,000 from Nationwide Federal Credit Union to
pay for advertising. As before, she could avoid repayment if her direct written premiums exceeded
150% of Nationwide’s state-growth objective and if she produced an additional $100,000 in direct
written premiums, all by December 31, 2005.
Sometime in 2005, Nemier learned that Nationwide was selling insurance directly to
Michigan residents, creating competition for agents like her. In at least one instance, Nationwide
cancelled an insured’s policy with Nemier and rewrote the policy directly with Nationwide. Nemier
also learned that a Nationwide subsidiary called Allied was offering similar insurance to Michigan
residents, but at a lower price.
Nationwide’s Class M program was unsuccessful. Rather than making Nationwide’s rates
more competitive, its rates climbed and Nationwide lost policyholders. Nemier closed the Hartland
office in October 2006. Her profits dropped from $215,000 in 2006 to $92,157 in 2007. She missed
the growth targets in her loan agreements by 7%. See R. 58, Attach. 1 at 28. Nemier resigned from
Nationwide in 2008.
Nemier later sued Nationwide for fraud, breach of contract, and violation of Michigan’s
franchise-investment law. The district court granted summary judgment to Nationwide. Nemier
appeals as to the fraud and breach-of-contract claims.

-3-

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 4

No. 10-2116
Nemier v. Nationwide
II.
In Nemier’s view, a genuine issue of material fact exists because a reasonable jury could
conclude, by clear and convincing evidence, that Nationwide committed fraud under any one of three
theories.
1.
Nemier’s first theory of fraud is that Nationwide fraudulently induced her to borrow money
to open the Hartland office by promising to lower its rates in Hartland to encourage growth. See
generally Elliott v. Therrien, No. 288235, 2010 WL 293071, at *5 (Mich. Ct. App. Jan. 26, 2010).
To support this allegation, Nemier points to a single sentence in the 2004 demographic study, saying
that Hartland was a “target expansion market.” She also points to testimony by Nationwide
employee Renelle Smith that Nationwide’s agents believed that Plan M would generally result in
more “competitive” rates. But these statements are not promises to lower Nationwide’s rates in
Hartland. Moreover, Nationwide’s alleged promise to lower rates could only have been fraudulent
if Nationwide intended to break that promise from the outset. See Diamond Computer Sys., Inc. v.
SBC Commc’n, Inc., 424 F. Supp. 2d 970, 981 (E.D. Mich. 2006). Nemier has no evidence of any
such intent. Her false-promise theory therefore fails.
2.
Nemier’s second theory of fraud is that Nationwide induced her to take out the capital-access
loans by making two projections relating to her business that were so optimistic as to be dishonest.
She alleges that Nationwide told her that Plan M would be an engine for growth. She also asserts
that Nationwide told her that her business was very likely to grow enough to meet her loan-waiver
-4-

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 5

No. 10-2116
Nemier v. Nationwide
targets after opening the Hartland office.
Financial projections can be fraudulent if the projections are based on misrepresentations
about past or present facts. See Mesh v. Citrin, 300 N.W. 870, 534 (Mich. 1941). For example, the
Mesh court held that a jury could conclude that a gas station seller’s projection that his station would
earn $50 a week was fraudulent because the station was in poor condition at the time of sale. Id. at
534, 537. But Nemier’s allegations fall outside that rule.
Nemier points to two pieces of evidence that purportedly show that Nationwide made overly
optimistic projections that Plan M would drive growth. She cites Nationwide’s generalized
statements that Class M would succeed, including an email saying the company is “excited and
optimistic” about Plan M. But such statements are puffery, not fraud. See Webb v. First of Mich.
Corp., 491 N.W.2d 851, 853 (Mich. Ct. App. 1992). Nemier also cites a Nationwide employee’s
deposition testimony, after the fact, that it would have been “inaccurate” for Nationwide to tell
agents that Plan M would make them more competitive without supporting documentation. See R.
60, Attach. 4 at 6. But that employee was only saying that changes in rates do not always result in
growth, not that Nationwide knew that Plan M was likely to fail based on data available when
Nationwide was projecting success. Id. Even more to the point, Nemier admits that a Nationwide
employee actually warned her about Plan M’s possible problems when she was deciding whether to
open the new office. That admission fatally undermines her assertion that Nationwide misled her
about Plan M’s prospects for success.
Concerning Nationwide’s predictions that Nemier’s business would grow enough to meet
the loan-waiver targets, Nemier relies on three pieces of evidence to show fraud. First, she notes that
-5-

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 6

No. 10-2116
Nemier v. Nationwide
Nationwide’s pro forma for the Hartland office projected that her business would see positive cash
flow within three years, yet a Nationwide employee later testified in a deposition that it “takes five
to seven years for a satellite or any storefront to be cash flow positive.” See R. 60, Attach. 3 at 9.
But the employee was not talking about Nemier specifically, who undisputedly was an unusually
successful agent. Moreover, Nemier admits that Nationwide warned Nemier that she “could not
compete in the standard market in [Hartland] and that her win rate would be very low.”
Second, Nemier contends that Renelle Smith, who reviewed problems with the capitalaccess-loan program, said that Smith “knew” (Nemier’s word) in 2004 that “a loan waiver was not
likely to happen” and that Nationwide was spreading “misinformation” about the program to agents.
But Smith merely said that she had a “hunch” about the loan-waivers in general, not about Nemier’s
loans in particular. And Nemier takes Smith’s statement about “misinformation” out of context:
Smith did not say that Nationwide was deliberately misleading agents about the program; instead,
she said that the Nationwide employees who pushed the loans did not fully understand them. See
R. 60, Attach. 3 at 13. Moreover, the “misinformation” that Smith mentioned was about the
“interpretation” of the loan program, not the prospects for growth. Id. Smith’s testimony therefore
would not support a finding of fraud.
Third, Nemier contends that Nationwide should have known that she would fail to meet the
growth targets in her loan agreements because internal records showed that the frequency of loanwaivers was rapidly declining between 2002 and 2004. But that decline does not tell the whole
story: Between 2002 and 2003, the number of full loan waivers doubled. And there were still more
loan waivers in 2004 than in 2002. Moreover, waiver was not unrealistic in Nemier’s case: She
-6-

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 7

No. 10-2116
Nemier v. Nationwide
admits that she met 93% of her goals. Thus, this data does not show that Nationwide lied in its
predictions that Nemier would meet her growth targets. Nemier has failed to support her allegation
that Nationwide fraudulently induced her to take out loans by offering overly optimistic projections
of growth.
3.
Nemier’s third theory of fraud is that Nationwide committed “silent fraud” by failing to
disclose (i) the data about declining waiver rates and (ii) Nationwide’s plans to compete with its
agents directly and through Allied. See generally U.S. Fidelity and Guaranty Co. v. Black, 313
N.W.2d 77, 87–88 (Mich. 1981). She notes that Michigan law requires a party to disclose its own
“special knowledge” when another party is “without the means of getting it” and the parties
“therefore[] do not stand on equal terms.” Hayes Constr. Co. v. Silverthorn, 72 N.W.2d 190, 193
(Mich. 1955). But the “special knowledge” must be knowledge on which the ignorant party “would
naturally rely.” See In re Allied Supermarkets, Inc., 951 F.2d 718, 725 (6th Cir. 1991). As explained
above, the data about declining waiver rates does not tell the whole story. Moreover, Nemier says
little about the scope of the competition from Allied and Nationwide; and that makes it impossible
to gauge whether that competition constituted a change in Nationwide’s business plan upon which
Nemier would have “naturally relied” when deciding whether to open the Hartland store. More
importantly, the “special knowledge” rule typically does not apply where, as here, the parties are both
sophisticated, knowledgeable business people or where there is no evidence one party actively sought
to conceal information. Compare Hayes Constr. Co., 72 N.W.2d at 193 with In re Allied
Supermarkets, 951 F.2d at 725. Finally, Nemier knew that Nationwide could make business decisions
-7-

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 8

No. 10-2116
Nemier v. Nationwide
adverse to her interests, without warning, because she signed a contract authorizing Nationwide to
do precisely that. See R. 53, Attach. 4 (“It is understood and agreed that . . . each Company retains
the right to change, alter or amend terms under which it will insure risks, and [can] change, alter or
amend such rules, regulations, prices, and terms, including the right to limit, restrict, or discontinue
entirely the acceptance or writing of any policies, coverages, lines or kinds of insurance, at any time
it deems it advisable to do so, and without notice to or consent of the Agent”).
Nemier points to no other “legal or equitable duty” on Nationwide’s part to disclose its
internal statistics and plans to compete with its agents. Black, 313 N.W.2d at 88. Thus the district
court was correct to reject Nemier’s silent-fraud theory.
4.
Nemier also seeks to revive one of her breach-of-contract theories. (She mentions another
theory only in passing, so she has waived it.) She alleges that Nationwide promised to use money it
owed her upon her retirement to pay off her loans immediately rather than in allotments. She
complains that the failure to pay off her loans at once increases her interest payments. But the
“contract” she relies upon is an agreement between Nemier and Nationwide Federal Credit
Union—which is not a party to this case. Nemier acknowledges that the credit union is a subsidiary
of Nationwide Mutual Insurance and points to no exception to the usual rule in Ohio (whose law
governs the agreement) that parent corporations are not liable for the obligations of their subsidiaries.
Cf. Belvedere Condo. Unit Owners’ Ass’n v. R.E. Roark Cos., Inc., 617 N.E.2d 1075, 1086 (Ohio
1993) (stating Ohio rule for piercing the corporate veil); Pottschmidt v. Klosterman, 865 N.E.2d 111,
120–21 (Ohio Ct. App. Dec. 29, 2006) (“We initially acknowledge . . . that a simple breach of
-8-

Case: 10-2116

Document: 006111183306

Filed: 01/13/2012

Page: 9

No. 10-2116
Nemier v. Nationwide
contract is not sufficient to pierce the corporate veil”). Moreover, Nemier does not dispute that the
“contract” is actually a promissory note to the credit union—as it is labeled—and that she, as the
promisor, therefore has no power to enforce it. See O.R.C. § 1303.31.
*

*

The district court’s judgment is affirmed.

-9-

*