Chandler v. Sentry Select Insurance Company et al

Filing 56

ORDER ADOPTING FINDINGS AND RECOMMENDATIONS - denying 33 Motion for Partial Summary Judgment; adopting Findings and Recommendations re 51 Findings and Recommendations. Signed by Judge Donald W. Molloy on 11/4/2011. (APP, ) Copy to Chandler this date.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION

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Pro Se Plaintiff,
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vs.
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SENTRY SELECT INSURANCE
COMPANY AND JOEL POENDEL,
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a claims adjuster for Sentry Ins., Company, )
a Wisconsin Corporation,
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Defendants.
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CHAD L. CHANDLER,

CV-II-46-DWM-JCL

ORDER

v. -.(

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Plaintiff Chad L. Chandler ("Chandler") began working as a service
consultant for Scarff Auto Center, Inc. ("Scarff') in 2007. A "pay plan," which
was signed by Chandler and his manager, Bill Stokesberry on May 16,2007, went
into effect on June 1,2007. The pay plan provided that Chandler would receive a
base salary of$I,OOO per month as well as a monthly commission equal to 2% of
"Service Sales"; in June 2008, Chandler's monthly commission increased to 3%.
In November 2008, December 2008 and March 2009, Scarff withheld a
portion of Chandler's monthly commission, citing adverse economic conditions.
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Over time, Scarff's financial status deteriorated and on October 15,2009, Scarff
infonned its employees in writing that their commission checks would no longer
be issued; Chandler resigned from his position on October 16,2009.
Chandler subsequently filed suit against Scarff, asserting a variety of civil
claims and seeking damages of $7,923.20 in unpaid wages and $251,232.00 in lost
wages and benefits. Scarff was defended under its Commercial Garage Insurance
Policy ("Policy") by Defendant Sentry Select Insurance Company ("Sentry"). In
May 2010, Chandler and Sentry entered into a settlement agreement that paid
Chandler $12,000 in exchange for Chandler releasing his claims against Scarff.
Chandler's lawsuit against Scarff was therefore dismissed with prejudice.
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Chandler filed this action against Sentry, as well as its claims adjuster Joel
Poendel, in December 20 I O. Chandler asserts claims of deceit, constructive fraud,
unjust enrichment, and violations ofMontana's Unfair Trade Practices Act. In
particular, Chandler alleges that Sentry misrepresented the tenns of the Policy
during settlement negotiations.
Chandler has moved for partial summary judgment and asked this Court to
hold, as a matter of law, that the Policy covered his underlying claims against
Scarff, and that Sentry misrepresented pertinent facts and insurance policy
provisions in violation of Montana Code Annotated § 33-18-201(1).
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United States Magistrate Judge Jeremiah C. Lynch issued Findings and
Recommendations in which he determined that Chandler's motion for partial
summary judgment should be denied. Chandler filed timely objections regarding
that denial; therefore he has preserved his right to a de novo review ofthe record
to the portions of the Findings and Recommendations to which Chandler objected.
This Court is mindful ofthe requirement that "a document filedpro se is to
be liberally construed." Erickson v. Pardus, 551 U.S. 89, 94 (2007). However,

''pro se litigants must follow the same rules ofprocedure that govern other
litigants." King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987). In the summary
judgment context, that means that all movants,pro

se or otherwise, must

demonstrate that "thereig no genuine dispute as to any material fact and [they are]
entitled to judgment as a matter oflaw." Fed. R. Civ. P. 56(a). While reviewing
the record, this Court must draw "all reasonable inferences in favor ofthe
nonmoving party, but [make] no credibility determinations or [weigh] any
evidence." Reeves v. Sanderson Plumbing Prods.. Inc., 530 U.S. 133, 135 (2000).
The Court stresses that, in determining whether Chandler's claims are
covered by the Policy, its analysis is guided by the terms ofthe Policy and not by
the language of the Montana Wrongful Discharge From Employment Act ("the
Act"). Even if Chandler had valid wrongful discharge claims against Scarff,

Sentry is only obligated to provide coverage for those claims that fall under the
umbrella ofthe Policy.
In his partial summary judgment motion, Chandler contended that his claim
was covered by three separate provisions of the Sentry Policy: I) his claim for lost
wages was covered by the Policy's Garage Operations coverage provision; 2) the
Policy's Employment Practices Endorsement provided coverage for his
constructive discharge claim; and 3) the Policy's Personal and Advertising Injury
Liability Coverage provision covered his "False Light" claim. Chandler also
argued that Sentry misrepresented the Policy during their settlement negotiations.
JudgeLynch denied each of Chandler's arguments for partial summary
judgment. Chat\dleronly object'! to Judge Lynch's [mdings regarding the Policy'e
Employment Practices Endorsement and Sentry's alleged misrepresentation of the
Policy during settlement negotiations. Dkt # 52 at 2-3. Those objections are
addressed in tum and this Court makes its own de novo determination.
Judge Lynch determined that the Policy's Employment Practices
Endorsement did not provide coverage for Chandler's constructive discharge
claim because the Policy specifically disclaimed coverage for claims relating to
wages owed under express contracts and, alternatively, because the Policy
specifically bars coverage for claims relating to intentional conduct. Chandler
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asserts that he never entered into an express contract with Scarff and that Judge
Lynch misinterpreted the Employment Practices Endorsement intentional conduct
exclusion as it relates to the Act.
Even assuming that the "pay plan" agreement signed by Chandler and by
Scarff manager Bill Stokesberry that specifically stated the compensation
Chandler was entitled to receive as an employee at Scarff was not an express
contract, l Chandler's claim is not covered by the Employment Practices
Endorsement because that section specifically excludes claims based on
intentional conduct. 0Ii October 15,2009, Doug Scarff, President of Scarff, wrote
to his employees that until further notice "there wiIl be no commission or bonus
checksissuedmonthly."Dkt # 36-1, atlO. That writing manifested Scarffs

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unequivocal and deliberate intention to no longer fully compensate its employees
and that writing serves as the foundation for Chandler's claim.
Chandler also correctly alleges that the "act" that led to his resignation must
have been committed by Scarff, and not one of Scarff's employees. Dkt # 51, at
IS. Chandler, however, asserts that the only "act" that led to his resignation was

'Chandler's reliance on Cromwell to bolster his argument that the "pay plan" was not an
express contract is misplaced. The analysis in Cromwell was driven by the unique facts in that
case; it does not stand for the proposition that an express employment contract cannot be formed
in the absence ofa specified term of employment. Cromwell v. Victor Sch. Dist. No.7. 140 P.3d
487,490-491 (Mont. 2006).

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Scarff employee Bill Stokesberry's refusal to fire him, not Scarff's refusal to pay
his monthly commissions.
Chandler's argument is unpersuasive. Chandler has acknowledged that his
"constructive discharge claim was brought about by a series of acts." Dkt # 52, at
5. Furthermore, if Doug Scarffhad not written the letter informing Chandler that
he would no longer be receiving his monthly commission checks, Chandler would
have no reason to ask Stokesberry to fire him. Scarff's intentional refusal to pay
Chandler's monthly commission checks is the foundation for Chandler's claim.
Becausecit is clear from the record that the acts giving rise to Chandler's
constructive discharge claim were intentional, the Policy's Employment Practices.·
EndorSement's intentional·act exclusionl;>ars co¥erage; , ,,' ,
Chandler alternatively contends that ifthe intentional act exclusion bars
coverage, the Policy's coverage is illusory because it is "contrary to an express
provision of law." That argument presumes that because Sentry's Policy disclaims
liability for some, but not all, wrongful termination claims that could arise under
the Wrongful Discharge from Employment Act, it is contrary to the Act and
therefore unlawful. Dkt # 52, at 20.
Chandler cites to Montana Petroleum Tank Release Compensation Board v.
Crumleys. InC., 341 Mont. 33 (2008). In that case, an insurance contract failed to
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provide notice of a 120-hour provision expressly required by Montana Code
Annotated § 33-15-337(2). [d. at 46. Conversely, Chandler is unable to cite to a
statute or to case law that expressly requires an insurance company to provide
coverage for all wrongful termination claims that could conceivably arise under
the Act.
Chandler mistakenly believes that the "Conformity with Montana Statutes"
provision of the policy requires the Policy to incorporate the Act. Dkt # 52, at 19.
However, Chandlers statement of undisputed facts acknowledges that the complete
text ofthat provision states: "The provisions ofthis policy or coverage part .
conform to the minimum requirements ofMontana law.~Dkt, # 35, at 16 (emphasis
added).. Chandler points to no"minimum requirement" that requires the Policy to
incorporate the Wrongful Discharge from Employment Act Sentry and Scarff
were free to enter into a contract that provided as much or as little wrongful
termination coverage as they desired, Scarff did not contract with Sentry for a
Policy that covered all wrongful termination claims under the Act, but that fact
does not render its coverage illUSOry. Judge Lynch properly denied Chandler's
partial summary judgment motion on this issue.
Chandler's only other argument is that Judge Lynch erroneously determined
that Sentry did not misrepresent the liability limits ofthe Policy to Chandler
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during settlement negotiations. During settlement negotiations, Sentry's claims
adjuster Joel Poendel informed Chandler that Chandler's claim had "defense value
only." According to Chandler, Poendel repeatedly stated that "the more he spent
on defense the less Sentry had to spend on settlement." Dkt # 52, at 24. Chandler
argues that, under the Policy, Sentry had a duty to defend Scarff and negotiate
with him until the limits of the Policy ($500,000) were exhausted. Id
Chandler's summary judgment argument fails here because he cannot show
that "there is no genuine dispute as to any material fact and [he is] entitled to
judgment as a matter of law." There are two asserted interpretations of Poendel' s
statement that ~'the more he spent on defense the less Sentry had to· spend o n ,

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settlement.'?; €handler's interpretation is advanced,above;Sentry's interpretation' .;'. "He ... ,
is that the word "had" merely refers to the amount Sentry was willing to spend to
successfully defend the case, and not the ultimate amount Sentry potentially could
be required to pay under the Policy. A reasonable juror could adopt either
interpretation. Because the Court must draw "all reasonable inferences in favor of
the nonmoving party," the Court accepts Sentry's interpretation; Chandler's
summary judgment argument therefore fails.
Chandler raised a new objection to Judge Lynch's Findings and
Recommendations regarding his "false light" claim when he filed his "Reply to
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Objections" on November 1, 2011. Dkt # 55, at 1. Judge Lynch filed his Findings
and Recommendations on September 22, 20 II. Dkt # 51, at I. Chandler failed to
file this objection within fourteen days as required by 28 U.S.C. § 636(b)( 1). My
review ofJudge Lynch's analysis as to this claim revealed no clear error.
Although I appreciate the difficult work Chad L. Chandler has conducted as
a pro se litigant, upon de novo review I agree with Judge Lynch's Findings and
recommendations in full. He correctly determined that Chandler did not meet the
applicable burden for any ofhis summary judgment arguments.
Accordingly, IT IS HEREBY ORDERED that I AIX>PT Judge Lynch's

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Findings and Recommendations (DKT # 51,) in full.·

IT ISFURTHER·ORDEREDthat Chandler's motion for summaryjudgment
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