American Select Insurance Company et al v. Allegheny Insurance Services, Inc.
Filing
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MEMORANDUM ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS MOTION FOR PARTIAL SUMMARY JUDGMENT: Plaintiffs Motion for Partial Summary Judgment 160 is GRANTED IN PART and DENIED IN PART. Count V of AlleghenysCounterclaim [Doc. 49] is hereby DISMISSED, while Count I of Alleghenys Counterclaim and Count IV of Westfields Amended Complaint [Doc. 47] MAY PROCEED. Signed by Chief Judge John Preston Bailey on 10/15/12. (jss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
ELKINS
AMERICAN SELECT INSURANCE COMPANY, et al.,
Plaintiffs,
v.
Civil Action No. 2:11-CV-49
(BAILEY)
ALLEGHENY INSURANCE SERVICES, INC.,
and JAMES W. WALLACE,
Defendants.
MEMORANDUM ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
Pending before this Court is Plaintiffs’ American Select Insurance Company’s,
Westfield Insurance Company’s, Westfield National Insurance Company’s, and Ohio
Farmers Insurance Company’s (collectively, “Westfield”) Motion for Partial Summary
Judgment as to Count IV of the Amended Complaint and Counts I and V of the
Counterclaim [Doc. 160]. The Motion was filed August 20, 2012, and has since been fully
briefed and is ripe for decision. Having reviewed the record and the arguments of the
parties, this Court concludes that Westfield’s motion should be GRANTED as to Count V
of the Counterclaim and DENIED as to Count IV of the Amended Complaint and Count I
of the Counterclaim, for the reasons below.
PROCEDURAL BACKGROUND
I.
Count IV of Plaintiffs’ Amended Complaint
Westfield filed an Amended Complaint on November 7, 2011 [Doc. 47]. Count IV
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of the Amended Complaint alleged that Allegheny Insurance Services (“AIS”) principal
James Wallace (“Wallace”) breached an agreement to pay Westfield $20,000 in connection
with a $55,000 settlement of a bad faith law suit from 2007, Corder et al v. James W.
Wallace, Westfield Insurance Company and John Drennan, Civil Action No. C-196.
Wallace moved for partial summary judgment of Count IV on June 7, 2012 [Doc.
115] on the ground that the action was barred by the statute of frauds. That motion was
denied by this Court on July 31, 2012 [Doc. 148], which held that Westfield presented a
genuine issue of material fact regarding the existence of an oral contract and that the
agreement is not within the statute of frauds because it was capable of being performed
within one year.
Westfield then filed a Motion for Partial Summary Judgment [Doc. 160] and
Memorandum in Support of Motion for Partial Summary Judgment [Doc. 161] on the same
count, alleging that Wallace breached an agreement to pay Westfield $20,000 as a matter
of law. Westfield contends that letters sent between Westfield and Wallace’s attorney,
John Busch, as well as billing entries from the firm representing Wallace, are written proof
of the existence of a contract. Wallace’s failure to pay Westfield is proof of a breach of the
contract, leaving no issue of fact for a jury to decide.
Wallace’s Memorandum in Opposition of the Motion for Partial Summary Judgment
[Doc. 171] states that this Court lacks supplemental jurisdiction over the state law cause
of action. The Memorandum also alleges that there was no written agreement between the
parties and no understanding between the parties as to an express time limit for
performance by Wallace, issues which present a genuine issue of material fact and
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preclude summary judgment.
Westfield filed a Reply Memorandum in Support of Motion for Partial Summary
Judgment [Doc. 198], which states that Wallace’s claim that he cannot remember whether
he agreed to pay Westfield $20,000 is not sufficient in light of the correspondence between
Wallace’s attorneys and Westfield to create a material issue of fact as to the existence of
a contract.
II.
Count I of Defendants’ Counterclaim
AIS filed a Counterclaim on November 18, 2011 [Doc. 49]. Claims I and V of the
Counterclaim are at issue in this Motion. Counterclaim I concerns the Westfield Insurance
Agency Agreement (“Agreement”), which prohibited Westfield from disclosing AIS’s
expiration information to third parties for marketing or business purposes. AIS claims
Westfield provided information to two competing insurance agents, M. Scott Johnson
(“Johnson”) and Jeremy Stanley (“Stanley”) about Westfield insureds for which AIS was the
broker of record. AIS alleges that this information was used in an attempt to poach its
clients and customers and improperly prevent AIS from moving Westfield policyholders, in
breach of the Agreement.
Westfield contends in support of its motion for summary judgment that the
unsolicited sales calls made by Westfield employees to Stanley and Johnson did not
disclose expiration information but were part of legitimate competition. It states that any
information disclosed was either already known to the agents, or was publicly available.
Second, Westfield contends that even if expiration information was disclosed, AIS did not
incur any damages as a result because AIS did not lose any clients as a result of the
alleged conduct or incur any expenses. Westfield argues that the damages claimed by
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AIS, six hours of time and expenses to meet with Johnson and at least $300 in connection
with Stanley, are not attributable to Westfield conduct.
In response, AIS points to communications between Stanley and Westfield
discussing renewal dates for the Agent of Record information and an audit conducted by
Westfield, which it claims is evidence of disclosure of expiration information. It claims as
damages the time and expense incurred to meet with Stanley prior to Stanley agreeing to
return to AIS. AIS contends that the meeting with Stanley took place prior to Stanley
agreeing to return to AIS and documents stating otherwise are the result of “serial
misdating” [Doc. 171 at 25]. With respect to Johnson, AIS points to an e-mail between
Johnson and Westfield requesting help from Westfield for a “new business submission” to
an AIS client. The damages claimed in connection with Johnson, according to AIS, arise
from the time spent by AIS to retain its client, which it calculated to be 1.5 hours, billed at
$200 per hour.
Westfield replied to state that the only audit information disclosed was information
to which Stanley was already privy.
III.
Count V of Defendants’ Counterclaim
Counterclaim V seeks punitive damages, attorneys’ fees and costs against Westfield
for the willful, wanton, intentional, deliberate or conscious disregard in Westfield’s
misappropriations of AIS’s expirations.
Westfield claims that Count V of the Counterclaim fails as a matter of law because
punitive damages are unavailable for breach of contract claims. AIS counters that under
an exception to the general Ohio law, punitive damages are permitted where the breach
of contract is accompanied by a connected, but independent tort involving fraud, malice or
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oppression” [Doc. 161 at 27.] AIS claims that there is “more than sufficient evidence of a
genuine issue of material fact as to the existence of a connected, but independent tort, and
evidence of fraud, malice or oppression” [Doc. 161 at 28] but does not specify any evidence
to support the claim.
STANDARD OF REVIEW
The moving party is entitled to summary judgment where "the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to material fact and that the moving party is
entitled to judgment as a matter of law." FED. R. CIV. PRO. 56(c). See Charbonnages de
France v. Smith, 597 F. 2d 406, 414 (4th Cir. 1979). A genuine issue exists "if the
evidence is such that a reasonable jury could return a verdict for the nonmoving party."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In considering a motion for summary judgment, the court is required to draw all
reasonable inferences in favor of the nonmoving party and to view the facts in the light
most favorable to the nonmoving party. Id. at 255. The moving party has the burden to
show an absence of evidence to support the nonmoving party's case. Celotex Corp. v.
Catrett, 477 U.S. 317, 325 (1986). The party opposing summary judgment must then
demonstrate that a triable issue of fact exists; he may not rest upon mere allegations or
denials. Anderson, 477 U.S. at 248. A mere scintilla of evidence supporting the case is
insufficient. Id. at 252.
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DISCUSSION
I.
This Court Has Original Jurisdiction Over Count IV of Amended Complaint
Defendant asserts that this Court lacks supplemental jurisdiction over Count IV
because Count IV “was not so related to those claims of the Plaintiffs over which the Court
has original jurisdiction such that it forms part of the same case or controversy, as required
by 28 U.S.C. § 1367" [Doc. 171 at 3]. However, this Court does not need to seek
supplemental jurisdiction under 28 U.S.C. § 1367 because it has original jurisdiction over
Count IV based on diversity jurisdiction under 28 U.S.C. § 1332.
28 U.S.C. § 1332 grants original jurisdiction to district courts for all civil actions that
fulfill a diverse-citizenship requirement and an amount-in-controversy specification. The
amount-in-controversy specification gives district courts original jurisdiction where the
matter in controversy exceeds the sum or value of $75,000. 28 U.S.C. § 1332(a). The
Supreme Court “has long held that, in determining whether the amount-in-controversy
requirement has been satisfied, a single plaintiff may aggregate two or more claims against
a single defendant, even if the claims are unrelated.” Exxon Mobil Corp. v. Allapattah
Services, Inc., 545 U.S. 546, 585 (2005).
The Amended Complaint [Doc. 47] names Wallace as a defendant. There is
complete diversity between the parties and the amount in controversy claimed against
Wallace is more than $75,000, therefore this Court has jurisdiction over Count IV of the
Amended Complaint.
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II.
There is a Genuine Issue of Material Fact as to Settlement Amount Regarding
Count IV
Equivocal testimony by Wallace and his attorney and correspondence regarding the
settlement are insufficient to establish as a matter of law that Wallace agreed to pay
Westfield $20,000. There is ambiguous and conflicting evidence regarding the amount of
money Wallace agreed to pay to settle the matter of Corder et al v. James W. Wallace,
Westfield Insurance Company and John Drennan. The declarations of attorney Mark
Lane and Daniel Spencer (“Spencer”) state that Wallace agreed to contribute $20,000 to
the settlement, as do letters from Spencer to Mr. Wallace [Doc. 128, Exhibit B; Doc. 161,
Exhibit C; Doc. 47, Exhibit I]. Plaintiffs’ attorney in the Corder matter, Phillip S. Isner,
stated in his deposition testimony that it was his recollection that Wallace agreed to
contribute $5,000 toward the settlement of the Corder matter [Doc 171, Exhibit 3]. Neither
the letter from John Busch to Spencer nor the statements for services rendered specify a
dollar amount regarding Wallace’s contribution to the settlement amount [Doc. 47-8, Exhibit
I; Doc. 161, Exhibit E].
Defendant’s argument that, “[i]n the absence of a deadline for performance, there
has been no breach of contract” fails. “Where a contract fixes no definite time for
performance, the law usually implies that performance shall be within a reasonable time.”
Homeland Training Ctr., LLC v. Summit Point Auto. Research Ctr., 594 F.3d 285, 291
(4th Cir. 2010) (quoting First Nat'l Bank of Bluefield v. Clark, 191 W. Va. 623, 447 S.E.2d
558, 562 (1994)). While this does not preclude an action for breach of contract, what
constitutes a reasonable period of time is normally a question of fact to be determined by
a jury. Jochum v. Waste Mgmt. of W. Virginia, Inc., 224 W. Va. 44, 51, 680 S.E.2d 59,
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66 (2009).
Accordingly, the motion for summary judgment with respect to Claim IV of the
Amended Complaint is DENIED.
III.
The is a Genuine Issue of Material Fact as to Whether Westfield Breached the
Agency Agreement
The Agreement includes a provision that prohibits Westfield from disclosing AIS’s
expirations to third parties for marketing or business purposes [Agreement Part IV, § C].
The parties disagree on what information constitutes expiration information, whether
information disclosed by Westfield to AIS clients constitutes expiration information, and if
expiration information was disclosed whether the disclosure resulted in AIS incurring
damages.
With respect to Stanley, AIS argues that Westfield violated the Agreement by
providing expiration information regarding American Refractory Company’s (“ARC”)
renewal date for its commercial insurance policy. Although Stanley has represented ARC
for worker’s compensation purposes since 2008 and represented ARC’s commercial
insurance in 2008, AIS contends there is no evidence Stanley knew with certainty that the
commercial insurance expiration date had remained the same since that time. This creates
a genuine issue of material fact.
With respect to information provided to Johnson, there is an issue of material fact
as to whether Westfield supported and encouraged Johnson’s solicitation of Elkins
Distributing Company. AIS claims it was a violation of the Agreement for Westfield to
disclose to Johnson that Elkins Distributing Company was insured by Westfield through
AIS. Westfield claims that an agency’s representation of a particular client is not expiration
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information and even if considered expiration information, Johnson was aware of the
information prior to contact with Westfield.
A genuine issue of material fact also exists regarding the damages recoverable in
this action. At the summary judgment stage, “the judge's function is not himself to weigh
the evidence and determine the truth of the matter but to determine whether there is a
genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
Taking the evidence in a light most favorable to the non-moving party, a jury could find that
AIS incurred damages in the form of time and money spent to retain clients even though
they did not lose any business as a result of Westfield’s conduct.
Accordingly, summary judgment on Count I of the Counterclaim is DENIED.
IV.
Punitive Damages Not Available Under Ohio Law
The Agreement’s provisions are interpreted and construed under the laws of the
State of Ohio under the Agreement’s choice of law provisions [Doc. 161-8 at § XII(H)].
Under Ohio law, punitive damages are generally not available for a breach of contract
claim. DeCastro v. Wellston City School Dist. Bd. of Ed., 94 Ohio St.3d 197, 201
(2002). An exception to the rule exists where “the breach of contract is accompanied by a
connected, but independent tort involving fraud, malice or oppression.” Goldfarb v. Robb
Report, Inc., 101 Ohio App. 3d 134, 140 (1995).
In order to recover punitive damages pursuant to this exception, a claimant must
prove (1) breach of contract, (2) that a connected tort was committed independently of that
breach, and (3) that the tortious conduct was fraudulent, malicious, or oppressive in nature.
Id. at 141.
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“Breach of contract is not converted to a tort by adding words characterizing it which
also characterize otherwise tortious conduct for which punitive damages are available.”
Klusty v. Taco Bell Corp., 909 F. Supp. 516, 521 (S.D. Ohio 1995). The tort of bad faith
is not a tortious breach of contract, for "no matter how willful or malicious the breach, it is
not [a] tort to breach a contract." Motorists Mutual Ins. Co. v. Said, 63 Ohio St. 3d 690,
694 (1992) (overruled on other grounds). “The mere pleading of malice . . . is insufficient
to defeat a motion for summary judgment.” Stemen v. Shibley 11 Ohio App. 3d 263
(1982); see also Battista v. Lebanon Trotting Association, 538 F.2d 111, 117 (6th Cir.
1976) (“[M]ere averment of malice in a pleading does not change an action in contract to
one in tort.”).
Defendant claims no independent tort but only malice in connection with the breach
of contract. For these reasons, this Court finds that the cause of action in Counterclaim I
was founded in contract. Thus, exemplary or punitive damages are not available as part
of the remedy for any breach of contract. Accordingly, the motion for summary judgment
with respect to Count V of the Counterclaim is granted.
IV. Conclusion
For the reasons stated above, Plaintiffs’ Motion for Partial Summary Judgment [Doc.
160] is hereby GRANTED IN PART and DENIED IN PART. Count V of Allegheny’s
Counterclaim [Doc. 49] is hereby DISMISSED, while Count I of Allegheny’s Counterclaim
and Count IV of Westfield’s Amended Complaint [Doc. 47] MAY PROCEED.
It is so ORDERED.
The Clerk is directed to transmit true copies of this Order to all counsel of record in
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this matter.
DATED: October 15, 2012.
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