Fiamma Partners LLC v. Morningstar et al

Filing 126

Memorandum Opinion and Order Morningstar is entitled to summary judgment on all Fiamma's claims for breach of contract, fraud, fraudulent inducement, negligence, gross negligence, negligent misrepresentation, breach of fiduciary duty, knowin g breach of fiduciary duty, statutory theft, defamation, conspiracy, and tortious indifference. Thus, the Court GRANTS 97 Morningstar's Motion for Summary Judgment, OVERRULES as moot Defendant's Objections to Summary Judgment Evidence, DENIES Plaintiff's 94 Motion to Compel Defendants' Depositions and 103 to Extend Discovery Period, and DENIES as moot 96 Defendants' Motion to Bar and Exclude Any Opinion Testimony From Plaintiff's Designated Experts and Plaintiff's Motion to Extend Time for Expert Deadlines and Discovery. (Ordered by Judge Ed Kinkeade on 2/7/2018) (ndt)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
FIAMMA PARTNERS, LLC,
Plaintiff,
v.
DAVID G. MORNINGSTAR,
CAROLINE D. MORNINGSTAR,
HILARY B. RADOLEC,
EMPLOYER ASSURANCE
SOLUTIONS, LLC, and
MORNINGSTAR BENEFITS
SOLUTIONS, LLC,
Defendants.

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Civil Action No. 3:16-CV-1402-K

MEMORANDUM OPINION AND ORDER
Before the Court are: (1) Defendants’ Motion for Summary Judgment (Doc.
No. 98); (2) Defendants’ Motion to Bar and Exclude Any Opinion Testimony From
Plaintiff’s Designated Experts (Doc. No. 96); (3) Plaintiff’s Motion to Compel
Defendants’ Depositions and to Extend Discovery Period (Doc. No. 94); and
(4) Plaintiff’s Motion to Extend Time for Expert Deadlines and Discovery (Doc. No.
103). The Court has carefully considered the motions, the responses, the replies, the
evidence submitted, and the applicable law. Because the Court finds the Texas
Insurance Code prohibits Plaintiff Fiamma Partners, LLC from recovering insurance
commissions, the Court GRANTS Defendants’ Motion for Summary Judgment,
DENIES Plaintiff’s Motion to Compel Defendants’ Depositions and to Extend
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Discovery Period, and DENIES as moot the Defendants’ Motion to Bar and Exclude
Any Opinion Testimony From Plaintiff’s Designated Experts and Plaintiff’s Motion
to Extend Time for Expert Deadlines and Discovery. Defendants objected to an
affidavit Plaintiff offered as summary judgment evidence. Because the affidavit
addressed legal grounds the Court did not need to reach in this memorandum and
opinion, the Court OVERRULES as moot Defendants’ objections to the affidavit.
I.

Background
Plaintiff Fiamma Partners, LLC (“Fiamma”) is a limited liability company

solely owned by non-party Frank Zaccanelli, Jr. (“Zaccanelli, Jr.”). Fiamma had a
business relationship with Defendants David G. Morningstar, Caroline D.
Morningstar,

Hilary B. Radolec, Employer Assurance Solutions,

LLC,

and

Morningstar Benefits Solutions, LLC (collectively “Morningstar”). David Morningstar
is a licensed insurance agent who sold insurance policies for American Family Life
Assurance Company, Inc. (“Aflac”). Fiamma provided Morningstar clients and, in
exchange, Morningstar provided those clients with supplemental health insurance.
Fiamma alleged this business relationship was a general partnership based on an oral
agreement and the parties had equal management of the partnership. Under this oral
agreement, Fiamma also alleged Morningstar agreed to split its commission with
Fiamma to receive 12 points on initial sales and 3 points on residuals. Non-parties
Frank Zaccanelli III (“Zaccanelli III”), the son of Zaccanelli, Jr., and Andrew
Neporent (“Neporent”) worked for Fiamma and often communicated with
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Morningstar. At some point during the business relationship, Zaccanelli III and
Neporent became licensed insurance agents. However, as of the time of the summary
judgment motion, neither Fiamma nor Zaccanelli, Jr. had a license to sell insurance.
In late 2015, Fiamma and Morningstar discussed renegotiating their business
relationship. Fiamma wanted to receive 50% of Morningstar’s commissions and for
the insurance carriers to pay Fiamma’s share directly to it. Fiamma alleged
Morningstar agreed to these and other terms in a telephone conversation in October
2015. The parties did not reduce this alleged agreement to writing. In early May
2016, Morningstar and Fiamma still could not agree on what fee Morningstar owed
Fiamma. On May 20, 2016, Fiamma filed this lawsuit alleging state law claims
against Morningstar for failure to pay Fiamma commissions under the terms of the
alleged agreement, for providing Fiamma fraudulent information about Aflac’s
financial health, and for falsifying commission documents among other allegations.
Fiamma later amended its complaint to include a claim for defamation.
II.

Legal Standard
Summary judgment is appropriate when the pleadings, affidavits, and other

summary judgment evidence show that no genuine issue of material fact exists, and
the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c);
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A dispute of a material fact is
“genuine” if the evidence is such that a reasonable jury could return a verdict in favor
of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All
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evidence and reasonable inferences must be viewed in the light most favorable to the
nonmovant, and all disputed facts resolved in favor of the nonmovant. See United
States v. Diebold, Inc., 369 U.S. 654, 655 (1962); Boudreaux v. Swift Transp. Co., 402
F.3d 536, 540 (5th Cir. 2005).
The moving party bears the burden of identifying those portions of the record
it believes demonstrates the absence of a genuine issue of material fact. Celotex, 477
U.S. at 322–25. Once a movant makes a properly supported motion, the burden
shifts to the nonmovant to show the existence of a genuine fact issue for trial; but,
the nonmovant may not rest upon allegations in the pleadings to make such a
showing. Id. at 321–25; Anderson, 477 U.S. at 255–57. Conclusory allegations,
unsubstantiated assertions, or a mere scintilla of evidence cannot defeat a motion for
summary judgment. See Anderson, 477 U.S. at 249–52; Boudreaux, 402 F.3d at 540. If
the nonmovant fails to make a sufficient showing to prove the existence of an
essential element to the case and on which the nonmovant will bear the burden of
proving at trial, summary judgment must be granted. Celotex, 477 U.S. at 322.
III.

Analysis
A. Fiamma’s Claims Fail Because They Seek to Recover Insurance
Commissions in Violation of Texas Insurance Code § 4005.053.

In this suit, Fiamma seeks to recover a portion of Morningstar’s insurance
commissions that Fiamma is allegedly owed based on either contract theory or tort.
Fiamma alleges an oral partnership or oral agreement existed which required
Morningstar to pay a portion of its commission to Fiamma in exchange for it referring
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clients to Morningstar. Texas law explicitly prohibits an individual or corporation
who does not have a license to sell insurance from receiving even a portion of an
insurance commission. Because Fiamma is not licensed as an insurance agency, it
cannot recover commissions from Morningstar, regardless of any agreement or
partnership.
Section 4005.053 of the Texas Insurance Code prohibits a company from
receiving portions of an insurance commission when the company is not a licensed
insurance agency. Section 4005.053 (c) states:
An agent may not pay, permit or give or offer to pay, permit, or give,
directly or indirectly, to any person who does not hold a license as an
agent: (1) a rebate of premiums payable, a commission, employment, a
contract for service, or any other valuable consideration or inducement
that is not specified in the insurance policy or contract for or on account
of the solicitation or negotiation of an insurance contract; or (2) a fee or
other valuable consideration for referring a customer who seeks to
purchase an insurance product or seeks an opinion on or advice
regarding an insurance product, based on that customer’s purchase of
insurance.
TEX. INS. CODE § 4005.053(c) (West Supp. 2017); see Ahmed v. Shimi Ventures, L.P.,
99 S.W.3d 682, 684 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (The court
quotes Tex. Ins. Code. Ann. Art. 21.01–2, § 2A(b) which has been recodified, without
making material changes to the law, under Tex. Ins. Code § 4005.053.). For the
purposes of this section, a “person” includes corporations, limited liability companies,
and partnerships. TEX. INS. CODE § 4001.003(8), § 4001.004 (West 2009); see
Ahmed, 99 S.W.3d at 693–94. A court order cannot require a party to violate this
code by paying, directly or indirectly, an unlicensed individual an insurance
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commission. Id. at 694. Likewise, a contract cannot require an insurance agent to pay
or share his commission with an unlicensed individual or company, so such contract
violates the code and is unenforceable. Benefits Admin. Corp. v. Rearick, 705 S.W.2d
234, 235–36 (Tex. App.—Texarkana 1986, no writ).
Zaccanelli, Jr. admitted Fiamma, a limited liability company, was not licensed
to sell insurance. For that reason, any agreement between the parties that required
Morningstar to pay Fiamma shares of commissions for insurance policies would be
unenforceable, because it would violate the insurance code. See id. This Court cannot
order Morningstar to pay Fiamma a share of insurance commissions because such
payment would violate the insurance code. See Ahmed, 99 S.W.3d at 684.
Fiamma argues this case does not fall under the insurance code’s prohibition
on sharing insurance commissions with unlicensed individuals, but instead this case is
similar to two other cases in which courts found commission sharing did not violate
the statute. Fiamma cites the Court to Solomon v. Greenblatt, 812 S.W.2d 7 (Tex.
App.—Dallas 1991, no pet.) and Ferch v. Baschnagel, No. 03-04-00605-CV, 2009 WL
349149 (Tex. App.—Austin Feb. 13, 2009, no pet.). The Court is not persuaded by
Fiamma’s argument. Both cases are clearly distinguishable from Fiamma and
Morningstar’s business relationship. In Solomon v. Greenblatt, the defendant insurance
agent received advice on running and managing a business from the plaintiff, an
individual without an insurance license, in exchange for a percentage of his insurance
commission. 812 S.W.2d at 11–12. Because the unlicensed individual had no contact
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with clients and gave only general business advice, not insurance related advice, the
court found the fee arrangement did not violate the statute. Id. at 14. In Ferch v.
Baschnagel, two men entered a partnership, one with a license to sell life and health
insurance and the other with a license to sell property and casualty insurance. 2009
WL 349149, at *4. The court held their partnership agreement was enforceable
because the insurance code did not state the individual has to be licensed to sell a
particular type of insurance to share insurance commissions. Id.
In this case, Fiamma alleges Morningstar agreed to pay Fiamma a portion of
the insurance commissions in exchange for Fiamma referring potential insurance
clients to Morningstar. Unlike in Solomon, Fiamma did more than generally advise
Morningstar on business matters and it had direct contact with clients regarding
insurance matters. And unlike the relationship in Ferch, Fiamma held no insurance
license at all. The Court is not persuaded by Fiamma’s argument.
This case is exactly the scenario Section 4005.053(c) intended to prohibit—the
sharing of an insurance agent’s commissions with unlicensed individuals. See TEX. INS.
CODE § 4005.053(c); see also Benefits Admin. Corp., 705 S.W.2d at 235–36. Any
alleged contract or partnership between Morningstar and Fiamma that required
commission-sharing would be illegal and unenforceable. Fiamma’s contract and
partnership claims are barred as a matter of law and no genuine issue of material fact
exists; thus, Morningstar is entitled to summary judgment on them. Id.

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Fiamma’s tort based claims also fail. Fiamma cannot circumvent the Texas
Insurance Code’s prohibition on sharing commissions with unlicensed individuals by
seeking the same commissions as damages in tort claims. The only damages Fiamma
alleges in its claims for fraud, fraudulent inducement, negligence, gross negligence,
negligent misrepresentation, breach of fiduciary duty, knowing breach of fiduciary
duty, and statutory theft are lost commissions. A court cannot violate the insurance
code by ordering a party to pay insurance policy commissions to an unlicensed
individual, even indirectly. Ahmed, 99 S.W.3d at 694. Texas law prohibits Fiamma
from recovering damages of lost commissions for its claims of fraud, fraudulent
inducement, negligence, gross negligence, negligent misrepresentation, breach of
fiduciary duty, knowing breach of fiduciary duty, and statutory theft. Because
Fiamma failed to allege a genuine issue of material fact, Morningstar is entitled to
summary judgment on these claims also. See id.
B. Because the Morningstar Letter Is Privileged, Fiamma Failed to
Establish a Defamation Claim Against Morningstar.
Fiamma brought a state law defamation claim against Morningstar based on a
letter David Morningstar sent to a non-party, Cerberus Capital Management
(“Cerberus”). Shortly before Fiamma filed this lawsuit, Fiamma threatened
Morningstar with legal action if Morningstar did not agree to the increased fee
Fiamma wanted in exchange for referring potential insurance clients. Fiamma stated
Morningstar may hear from Cerberus’s legal department. It is unclear how Cerberus is
connected to Fiamma, but Cerberus’s Chief Operating Officer and General Counsel is
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Neporent’s father. After Fiamma filed this lawsuit, David Morningstar sent a letter
(“Morningstar Letter”) to Cerberus for the stated purpose of resolving the lawsuit.
Fiamma later amended its complaint to include a claim for defamation.
Morningstar argues the Morningstar Letter did not contain any defamatory
statements about Fiamma, any statements made referenced only specific Fiamma
employees, and the letter is privileged as settlement negotiations. Fiamma responds
by arguing it is specifically mentioned in the letter, the defamatory statements
regarding its employees were intended to defame Fiamma, and the letter is not
privileged.
Texas law prohibits a party from using an oral or written communication
stated during the course of a judicial proceeding as the basis of a defamation claim
because such statements are absolutely privileged. Jenevein v. Friedman, 114 S.W.3d
743, 745 (Tex. App.—Dallas 2003, no pet.); see also Allstate Ins. Co. v. Plambeck, Civ.
Action No. 3:08-CV-0388-M-BD, 2012 WL 2130982, *5 (N.D. Tex. Jan. 4, 2012)
(Kaplan, MJ.), adopted by 2012 WL 2130912 (June 12, 2012) (Lynn, J.) (“This
privilege extends to statements made by parties…and attaches to all aspects of the
legal proceeding.”). Statements made in settlement letters are sufficiently connected
with a pending or potential suit to come within the privilege. Bennett v. Comput. Assoc.
Intern., Inc., 932 S.W.2d 197, 201 (Tex. App.—Amarillo 1996, writ denied).
In the Morningstar Letter, David Morningstar stated his purpose in writing the
letter to Cerberus was to try to resolve this lawsuit Fiamma filed against Morningstar.
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Based on prior statements and emails from Fiamma employees, Morningstar believed
Cerberus initiated or instructed Fiamma to initiate the lawsuit. The letter discusses
the facts and issues surrounding the lawsuit and seeks to resolve the issues without
the need for litigation. The Court finds the letter is absolutely privileged as a possible
settlement letter and cannot form the basis of Fiamma’s defamation claim. See id; see
Jenevein, 114 S.W.3d at 745. Fiamma failed to carry its summary judgment burden,
and Morningstar is entitled to summary judgment on this claim.
C. Because Fiamma Did Not Establish an Underlying Tortious or
Unlawful Act, Fiamma’s Claims for Tortious Interference and
Conspiracy Fail as a Matter of Law.
Fiamma brought claims against Morningstar for conspiracy and tortious
interference with a business relationship and a potential business relationship. It is
well-established that claims for conspiracy and tortious interference are not
actionable without an underlying tortious or unlawful act. Am. Tobacco Co. v. Grinnell,
951 S.W.2d 420, 438 (Tex. 1997); McGowan & Co. v. Bogan, 93 F. Supp.3d 624, 655
(S.D. Tex. 2015).
When a court grants summary judgment on all of a plaintiff’s other claims
related to the alleged conspiracy, the court also properly grants summary judgment
on the conspiracy claim. Am. Tobacco Co., 951 S.W.2d at 438. To prevail on a claim
for tortious interference, the plaintiff must prove the defendants (1) undertook
unlawful actions without justification or excuse; (2) with the intent to harm; (3)
actual damages resulted; and (4) the actions were motivated by malice. McGowan, 93
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F. Supp.3d at 655. The Court has already found Morningstar is entitled to summary
judgment on all the underlying unlawful acts Fiamma alleged Morningstar conspired
to commit. Because Fiamma failed to establish any related underlying claims, Fiamma
cannot prove its tortious interference claim. Morningstar is entitled to summary
judgment on these claims.
IV.

Objections to Summary Judgment Evidence

Morningstar objected to the Liane McDonnell affidavit that Fiamma included
as summary judgment evidence in its response to Morningstar’s motion for summary
judgment. This affidavit solely addressed the alleged fraud. The Court has concluded
Morningstar is entitled to summary judgment based on the insurance code
specifically prohibiting the underlying agreement that forms the basis for Fiamma’s
claims. The Court need not consider the Liane McDonnell affidavit and
OVERRULES as moot Morningstar’s objections to this summary judgment
evidence.
V.

Conclusion
Morningstar is entitled to summary judgment on all Fiamma’s claims for

breach of contract, fraud, fraudulent inducement, negligence, gross negligence,
negligent misrepresentation, breach of fiduciary duty, knowing breach of fiduciary
duty, statutory theft, defamation, conspiracy, and tortious indifference. Thus, the
Court GRANTS Morningstar’s Motion for Summary Judgment, OVERRULES as
moot Defendant’s Objections to Summary Judgment Evidence, DENIES Plaintiff’s
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Motion to Compel Defendants’ Depositions and to Extend Discovery Period, and
DENIES as moot Defendants’ Motion to Bar and Exclude Any Opinion Testimony
From Plaintiff’s Designated Experts and Plaintiff’s Motion to Extend Time for Expert
Deadlines and Discovery.
SO ORDERED.
Signed February 6th, 2018.
______________________________________

ED KINKEADE
UNITED STATES DISTRICT JUDGE

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