American Select Insurance Company et al v. Allegheny Insurance Services, Inc.
Filing
91
MEMORANDUM OPINION AND ORDER: It is ORDERED that Westfield's 58 Motion to Dismiss Counterclaims is granted in part and denied in part. Accordingly, Counts II, III, IV (in part), V (in part) and VI (in part) of Allegheny's 49 Counterlca ims are dismissed, while Count I, IV (in part), V (in part) and VI (in part) may proceed. It is further ORDERED that Johnson's 60 Motion to Dismiss Third-Party Complaint is granted in part and denied in part. Accordingly, Counts I and III (in part) of Allegheny's 53 Third-Party Complaint are dismissed, while Count IV may proceed. Signed by Chief Judge John Preston Bailey on 4/2/12. (cnd)
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 WALLACE,
Defendants.
and
ALLEGHENY INSURANCE SERVICES, INC.,
Defendant/Third-Party Plaintiff,
v.
M. SCOTT JOHNSON and
JEREMY STANLEY,
Third-Party Defendants.
MEMORANDUM OPINION AND ORDER
Pending before this Court are plaintiffs American Select Insurance Company’s,
Westfield Insurance Company’s, Westfield National Insurance Company’s, and Ohio
Farmers Insurance Company’s (collectively, “Westfield”) Motion to Dismiss Counterclaims
[Doc. 58] and third-party defendant M. Scott Johnson’s Motion to Dismiss Third-Party
Complaint [Doc. 60], filed December 9, 2011, and December 15, 2011, respectively. These
motions have since been fully briefed and are ripe for decision. Having reviewed the record
and the arguments of the parties, this Court concludes that Westfield’s motion should be
1
GRANTED IN PART and DENIED IN PART and Johnson’s motion should be GRANTED
IN PART and DENIED IN PART.
BACKGROUND
I.
Factual History
The first-party action arises out of the termination of an agency agreement between
Westfield, an insurance group, and Allegheny Insurance Services, Inc. (“Allegheny”), an
insurance agency. On January 1, 2010, Westfield and Allegheny entered into the most
recent Westfield Insurance Agency Agreement (“Agency Agreement”) whereby Allegheny
agreed to provide various services to customers purchasing insurance policies issued by
Westfield. ([Doc. 3] at ¶ 9). In exchange, Westfield agreed to pay Allegheny a commission
on the premiums paid by policyholders. (Id. at ¶ 10). Westfield could terminate the
agreement without cause after providing “written notice mailed or delivered to [Allegheny]
. . . not less than one-hundred eighty (180) days in advance of the effective termination
date . . ..” (Id. at ¶¶ 11, 12).
During the months after executing the Agency Agreement, Westfield became
increasingly concerned about the ability of Allegheny to meet its obligations under the
agreement. (Id. at ¶ 13). By letter dated October 19, 2010, Westfield informed Allegheny
that their continued business relationship would depend upon Allegheny committing to
make several changes in the operation of its business. (Id. at ¶ 14). After Allegheny
refused, Westfield informed Allegheny of its intention to terminate the Agency Agreement
by letter dated November 23, 2010. (Id. at ¶ 15).
On December 1, 2010, Westfield and Allegheny began to discuss the terms of a
limited agency agreement, which would allow Allegheny to continue providing limited
2
services to certain existing Westfield policyholders until the termination date of January 1,
2012. (Id. at ¶¶ 17, 18). On December 10, 2010, Westfield provided Allegheny with formal
written notice that the Agency Agreement would be terminated as of January 1, 2012. (Id.
at ¶ 19). Along with the termination letter, Westfield provided Allegheny with a proposed
Limited Agency Agreement. (Id. at ¶ 21). Among other things, the proposed Limited
Agency Agreement: (1) terminated the Agency Agreement effective January 1, 2012; (2)
empowered Allegheny to issue endorsements on policies in force, provided that such
endorsements would not increase Westfield’s liability or extend the term of any policy; (3)
permitted Allegheny to retain commissions from premiums collected at the same rates
provide for in the Agency Agreement; and (4) required Allegheny to refund to Westfield
unearned commissions from any cancelled or otherwise terminated policies. ([Doc. 3-3]
at 2).
In response, Allegheny sent a letter to Westfield dated January 26, 2011, demanding
that Westfield revise the Limited Agency Agreement to include terms which Westfield
claims are substantially different than discussed on December 1, 2010. ([Doc. 3] at ¶ 23).
Specifically, Allegheny asserted that Westfield had agreed to allow it to continue receiving
commissions until June 30, 2012, instead of January 1, 2012. ([Doc. 3-4] at 2). In addition,
Allegheny complained that the Limited Agency Agreement failed to include provisions: (1)
requiring Westfield to honor Allegheny’s ownership of expirations, (2) prohibiting Westfield
from appointing any new agents to service Allegheny’s territories until July 2013, and (3)
precluding Westfield from accepting any broker of record letters for Allegheny’s expirations
until July 2013. (Id.).
3
On February 9, 2011, Allegheny sent another letter to Westfield accusing the
insurance group of disclosing information to third parties regarding the expiration dates for
policies issued by Westfield and brokered by Allegheny. ([Doc. 3] at ¶ 25). Westfield
responded by letter dated February 28, 2011. (Id. at ¶ 27). In particular, Westfield
explained that it did not engage in the conduct alleged by Allegheny and again offered the
terms of the Limited Agency Agreement, which Westfield claimed comported with the
parties’ discussions on December 1, 2010. (Id. at ¶ 29).
During this time, Westfield learned that Allegheny had made misrepresentations to
Westfield policyholders in order to persuade those policyholders to purchase insurance
policies from other insurance providers. (Id. at ¶ 30). According to Westfield, Allegheny
falsely informed Westfield policyholders, including but not limited to Beckley Steel, Inc.
(“Beckley Steel”) and Virginia Steel & Fabrication, Inc. (“Virginia Steel”), that Westfield
would no longer be doing business in West Virginia. (Id. at ¶ 31).
On June 14, 2011, Westfield received a letter of representation from the law firm of
Colombo & Stuhr, P.L.L.C., which included a number of allegations and demands on behalf
of Allegheny. (Id. at ¶ 32). First, the letter alleged that Westfield had breached the Agency
Agreement by attempting to “poach existing clients/customers of [Allegheny] by improper
use of the expirations.” ([Doc. 3-7] at 3). In particular, the letter outlined two instances
where a Westfield agent allegedly made unsolicited contact with an Allegheny client and
Westfield insured in an attempt to obtain a broker of record letter. (Id. at 4). In so doing,
the Westfield agent allegedly used information gained from the underwriting department
at Westfield. (Id.). Based upon these allegations, the letter demanded that Westfield take
corrective action. (Id. at 5). Next, the letter demanded that Westfield revise the Limited
4
Agency Agreement to include terms similar to those outlined in Allegheny’s January 26,
2011, letter. (Id.).
Finally, the letter warned of an impending lawsuit should Westfield not agree to
Allegheny’s demands. (Id. at 6). Specifically, the lettered stated that “in 14 days, a lawsuit
will be filed against Westfield Insurance Company in the Circuit Court of Randolph County,
West Virginia, with individual counts that will include breach of contract for the failure of
Westfield to honor the terms of the Westfield Insurance Agency Agreement (‘WIAA’)
between [Allegheny] and Westfield, misappropriation of trade secrets, unjust enrichment,
disgorgement of profits, etc. Other individuals (including at least two Westfield agents
doing business in West Virginia) that have conspired with Westfield in this endeavor will
also be named as defendants in this action, on theories including tortious interference and
civil conspiracy.” (Id. at 1). According to the letter, the filing of the lawsuit would “result in
a substantial amount of very tedious discovery (including electronic discovery) . . ..” (Id.
at 6).
II.
Procedural History
A.
Westfield’s Claims against Allegheny
On June 24, 2011, Westfield filed suit in this Court against Allegheny, claiming
tortious interference with its business relations and requesting declaratory relief [Doc. 3].
In Count I, Westfield requests the following 10 declarations:
(1) Westfield did not breach any contract with [Allegheny] or otherwise fail to
honor the terms of the Agency Agreement;
(2) Westfield did not misappropriate any trade secrets of [Allegheny] in
connection with the Agency Agreement . . . or the termination [thereof];
(3) Westfield did not engage in any civil conspiracy with other entities or
5
individuals against [Allegheny];
(4) Westfield did not derive any unjust enrichment in connection with the
Agency Agreement with [Allegheny] or the termination [thereof];
(5) Westfield did not unlawfully interfere with any contracts, business
relationships, or prospective business relationships between [Allegheny] and
any other individual or entity at any time during its business relationship with
[Allegheny];
(6) Westfield did not engage in any other tortious or unlawful conduct and did
not act in bad faith at any time during its business relationship with
[Allegheny];
(7) Westfield lawfully terminated the Agency Agreement, and the effective
termination date for the Agency Agreement is January 1, 2012;
(8) The Limited Agency Agreement . . . is the controlling agreement as to the
terms of the limited agency relationship between [Allegheny] and Westfield
until the termination of the relationship on January 1, 2012;
(9) Westfield may appoint insurance agents other than [Allegheny] to sell
insurance policies issued by Westfield and to provide services to individuals
and business holding policies issued by Westfield in the territories currently
and previously serviced by [Allegheny]; [and]
(10) Westfield may lawfully send Informational Letter No. 39, as required by
the West Virginia Insurance Commission, to individuals, businesses, or other
entities affected by the termination of the relationship between Westfield and
[Allegheny], which termination is effective as of January 1, 2012[.]
(Id. at 7-9).
In Count II, Westfield alleges that Allegheny tortiously interfered with its business
relations by falsely informing Westfield policyholders, including but not limited to Beckley
Steel and Virginia Steel, that Westfield would no longer issue or renew insurance policies
in West Virginia. (Id. at ¶ 45). According to Westfield, these actions were intentionally and
willfully taken to convince those policyholders to purchase insurance issued by other
insurance providers so that Allegheny could receive commissions after the termination of
6
its agency relationship with Westfield. (Id. at ¶¶ 46-51). As relief, Westfield requests that
this Court “award compensatory and punitive damages in excess of $75,000, court costs,
attorneys fees, and such further relief as this Court deems necessary or appropriate under
the circumstances.” (Id. at 10).
After filing its Answer [Doc. 12] on July 18, 2011, Allegheny instituted a state court
action against the Westfield insurance group and Westfield agents M. Scott Johnson and
Jeremy Stanley in the Circuit Court of Randolph County, West Virginia, on August 1, 2011
[Doc. 30-2]. As warned in the June 14, 2011, letter, the state court complaint alleges that:
(1) Westfield breached the Agency Agreement by using Allegheny’s policy expirations to
solicit a broker of record letter from at least two Allegheny clients, (2) Westfield’s agents
tortiously interfered with Allegheny’s contractual right to exclusive use and ownership of
its policy expirations, and (3) Westfield breached its December 1, 2010, agreement with
Allegheny by failing to honor the terms promised to be included in the Limited Agency
Agreement. (Id. at 7-13). In addition, the state court complaint seeks an award of punitive
damages against all defendants, a permanent injunction enjoining all defendants from any
further conduct that violates Allegheny’s contractual rights to the exclusive use of its policy
expirations, and a temporary injunction prohibiting the defendants from issuing an
Informational Letter No. 39 to Westfield policyholders that are also clients of Allegheny until
resolution of the parties’ dispute concerning the Agency Agreement and the Limited Agency
Agreement. (Id. at 14-15).
On August 12, 2011, Allegheny moved to dismiss Westfield’s Complaint, arguing in
part that this Court should abstain from exercising its jurisdiction to grant the declaratory
relief requested in Count I in light of the state court action [Doc. 23]. Finding abstention
7
unwarranted, this Court denied Allegheny’s motion to dismiss on September 22, 2011 [Doc.
39].
On October 31, 2011, Westfield moved to amend its Complaint to assert additional
claims against Allegheny based upon facts discovered since the filing of its Complaint [Doc.
45]. This Court granted leave on November 3, 2011 [Doc. 46], and Westfield filed its
Amended Complaint [Doc. 47] on November 7, 2011.
B.
Allegheny’s Counterclaims against Westfield
On November 18, 2011, Allegheny answered Westfield’s Amended Complaint and
asserted the following six counterclaims against Westfield: (1) breach of the Agency
Agreement based on Westfield’s alleged provision of Allegheny expirations to Johnson and
Stanley; (2) breach of contract based on Westfield’s failure to honor the purported terms
of an alleged oral agreement reached during phone conversion on December 1, 2010 (the
“Oral Limited Agency Agreement”); (3) breach of the Agency Agreement based on alleged
Westfield’s provision of Allegheny expirations to Westfield’s legal counsel; (4) a request for
declaratory relief based on Westfield’s alleged breaches of contract, (5) a request for
punitive damages alleging, willful, wanton, intentional, and deliberate acts by Westfield in
connection with its alleged breach of the Agency Agreement by disclosing Allegheny
expirations; and (6) a request for injunctive relief to require Westfield to act in accordance
with the Agency Agreement and the Oral Limited Agency Agreement [Doc. 49].
On December 9, 2011, Westfield filed the instant Motion to Dismiss Counterclaims
[Doc. 58], arguing that Allegheny has failed to state claims upon which relief can be
granted. First, Westfield contends that the statute of frauds bars any breach of contract
claim based upon the Oral Limited Agency Agreement. Second, Westfield asserts that
8
Allegheny has failed to state a claim for breach of the Agency Agreement because
Allegheny does not explicitly allege that the information Westfield provided Johnson and
Stanley was protected expiration information and because Westfield’s legal counsel are not
insurance agents or brokers, nor were they provided expiration information for marketing
purposes.
Finally, Westfield argues that Allegheny’s claims for punitive damages,
declaratory relief, and injunctive relief should be dismissed to the extent that they are
entirely predicated on Allegheny’s inadequately-stated breach of contract claims.
On December 21, 2011, Allegheny responded in opposition to Westfield’s motion
[Doc. 62]. First, Allegheny argues that the statute of frauds does not bar its claim for
breach of the Oral Limited Agency Agreement because the Agency Agreement provides
that upon the termination of the Agency Agreement, the terms of a limited agency
agreement shall apply. Second, Allegheny contends that it has adequately stated a breach
of the Agency Agreement because the context of its allegations shows that Allegheny
asserts Westfield provided Johnson and Stanley with protected expirations and because
disclosure of expirations to Westfield’s legal counsel for any reason is prohibited by the
Agency Agreement.
On January 3, 2012, Westfield replied in support of its motion, reasserting and
supplementing its previous arguments [Doc. 66]. For example, Westfield counters that the
Agency Agreement does not constitute a writing sufficient to remove the Oral Limited
Agency Agreement from the statute of frauds.
C.
Allegheny’s Third-Party Claims against Johnson and Stanley
On November 21, 2011, Allegheny moved for leave to file third-party claims against
Johnson and Stanley [Doc. 51] for tortious interference with contractual relations, punitive
9
damages, and injunctive relief. This Court granted leave on November 23, 2011 [Doc. 52],
and Allegheny filed its Third-Party Complaint [Doc. 53] on November 28, 2011. As relevant
here, Allegheny alleges that Johnson used Allegheny expirations provided by Westfield to
solicit Elkins Distributing Company, Inc., (“Elkins Distributing”) to change its Westfield
broker of record from Allegheny to West Virginia Insurance Agency. ([Doc. 53] at ¶ 15).
Though Elkins Distributing refused the solicitation and retained Allegheny as its broker of
record, Allegheny alleges that it was “forced to devote time and attention of the company
to reverse the potential loss of Elkins Distributing” and that it “sustained consequential
damages and incurred attorney’s fees, costs and expenses associated with . . . Johnson’s
conduct, and potentially other damages as well.” (Id. at ¶ 20).
On December 15, 2011, Johnson filed the instant Motion to Dismiss Third-Party
Complaint [Doc. 60], arguing that Allegheny has failed to state a claim against him upon
which relief can be granted. First, Johnson contends that his communication with Elkins
Distributing constituted legitimate competition. Second, Johnson asserts that Allegheny
was not harmed because Elkins Distributing retained Allegheny as its broker of record and
thus that Allegheny has no recoverable damages.
On December 23, 2011, Allegheny responded in opposition to Johnson’s motion
[Doc. 64]. First, Allegheny argues that legitimate competition is an affirmative defense that
should not be considered at the motion to dismiss stage. Second, Allegheny argues that
Johnson’s communication with Elkins Distributing caused it actionable harm in two ways,
namely: (1) Elkins Distributing contacted Allegheny about Johnson’s activity, which forced
Allegheny to devote time and resources to protect its property rights in the expiration
related to Elkins Distributing and (2) Johnson’s conduct required Allegheny to seek an
10
injunction in this action to enjoin any further interference.
On December 28, 2011, Johnson replied in support of its motion, reasserting and
supplementing its previous arguments [Doc. 65]. For example, Johnson argues that
Allegheny’s alleged damages are too speculative to support a claim for intentional
interference with a contract.
DISCUSSION
I.
Applicable Standard
A 12(b)(6) motion must be treated as a motion for summary judgment under Federal
Rule of Civil Procedure 56(c) where “matters outside the pleadings are presented to and
not excluded by the court.” Fed. R. Civ. P. 12(d). In this regard, the Fourth Circuit has held
that a court ruling on a motion to dismiss may consider any documents integral to and
relied on in the complaint – regardless of whether those documents are actually attached
to the Complaint. See Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212,
234 (4th Cir. 2004). In reaching its decision below, this Court has accordingly considered
the Agency Agreement, which is integral to and relied on in Allegheny’s counterclaims and
third-party claims without converting the motion into one for summary judgment.
In assessing a Rule 12(b)(6) motion for failure to state a claim, the court must accept
the factual allegations contained in the complaint as true. Advanced Health-Care Servs.,
Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990). A complaint must be
dismissed if it does not allege “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1974 (2007) (emphasis added).
“A complaint need only give ‘a short and plain statement of the claim showing that
the pleader is entitled to relief.’” In re Mills, 287 Fed.Appx. 273, 280 (4th Cir. 2008)
11
(quoting Fed. R. Civ. P. 8(a)(2)). “Specific facts are not necessary; the statement need
only give the defendant fair notice of what the ... claim is and the grounds upon which it
rests.” Id. (internal quotations and citations omitted).
“[T]he pleading standard Rule 8
announces does not require detailed factual allegations, but it demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation. A pleading that offers labels
and conclusions or a formulaic recitation of the elements of a cause of action will not do.
Nor does a complaint suffice if it tenders naked assertions devoid of further factual
enhancements.” Ashcroft v. Iqbal, 556 U.S. 662, 883-884 (2009).
II.
Analysis
A.
Westfield’s Motion to Dismiss
Westfield moves to dismiss Allegheny’s counterclaims for failure to state a claim
upon which relief can be granted. Westfield provides support for dismissal of each count,
while Allegheny contends that each count should proceed. Below, the Court will consider
each count beginning with Allegheny’s claims for breach of contract.
1.
Oral Limited Agency Agreement
The statute of frauds in West Virginia provides, in pertinent part, that:
No action shall be brought . . . [u]pon any agreement that is not to be
performed within a year, [u]nless the promise, contract, agreement,
representation, assurance, or ratification, or some memorandum or note
thereof, be in writing and signed by the party to be charged or his agent.
W.Va. Code § 55-1-1.
Allegheny alleges that on December 1, 2010, Westfield agreed upon an Oral Limited
Agency Agreement containing the following terms:
12
a.
Allegheny . . . would continue to receive commissions on Westfield
policies covering Allegheny . . . clients pursuant to the . . . Agency
Agreement up through and including June 30, 2012;
b.
The effective date of termination of the . . . Agency Agreement would
be June 30, 2012;
c.
Westfield would not appoint any new agents to service the territories
of Allegheny . . . until July 2013;
d.
Westfield would not accept any broker of record letters for the
expirations of Allegheny . . . through June 30, 2012; and
e.
Westfield would not send the notices to Allegheny . . . clients that are
based on Informational Letter No. 39 as required by the West Virginia
Insurance Commission, until the effective date of the termination date
of June 30, 2012.
([Doc. 49] at ¶ 6).
Allegheny does not, and cannot, dispute that none of the above terms can be
performed within a year and thus that the statute of frauds is applicable. Instead, Allegheny
argues that the Agency Agreement constitutes a sufficient writing because it provides that
“[i]n the event the Agency Agreement is terminated, the terms of [Westfield’s] Limited
Agency Agreement shall apply.” (Agency Agreement at Part I, Section I). This Court
disagrees.
Nearly 130 years ago, the Supreme Court of Appeals of West Virginia first
pronounced that “[e]very agreement required by the statute of frauds to be in writing must
be certain in itself or capable of being made so by reference to something else, whereby
the terms can be ascertained with reasonable certainty.” Syl. Pt. 2, White v. Core, 20
W.Va. 272 (1882). In 1997, the Supreme Court of Appeals explained that “[b]y ‘certain in
13
itself’ we mean that within its four corners the writing must contain or refer to the basic
terms of the agreement . . ..” Fry Racing Enterprises, Inc. v. Chapman, 201 W.Va. 391,
497 S.E.2d 541 (1997).
Here, the Agency Agreement’s single fleeting reference to a limited agency
agreement clearly falls woefully short of describing an agreement that is “certain in itself,”
failing to describe even one term of the limited agency agreement. Thus, because the
statute of frauds is undisputably applicable and Allegheny has failed to allege the existence
of a writing sufficient to satisfy the statute of frauds, Allegheny’s breach of contract claim
based upon the Oral Limited Agency Agreement (Count II) is hereby DISMISSED.
Accordingly, Allegheny’s requests for declaratory relief (Count IV) and injunctive relief
(Count VI) that are wholly dependent upon the viability of that claim are also hereby
DISMISSED.
2.
Agency Agreement
Part III, Section D of the Agency Agreement provides that “[Westfield] shall protect
the security of [Allegheny’s] information in the same manner it protects its own confidential
and proprietary information.”
Part IV, Section A states, as relevant here that “[Allegheny’s] records and use and
control of expirations shall remain [Allegheny’s] absolute property and be left in
[Allegheny’s] undisputed possession . . ..”
Part IV, Section C provides in whole that “[a]s long as use and control of such
expirations are vested in [Allegheny], [Westfield] shall not use its records of those
expirations, or any information about the customer which [Westfield] acquires in the normal
course of business dealings between [Westfield] and [Allegheny] under this Agreement, in
14
any marketing method for the sale, service or renewal of any ownership, use and control,
nor shall [Westfield] communicate such expiration information or work product to any other
agent or broker except as otherwise provided for in this Agreement.”
The Agency Agreement does not define “expiration information.” On the issue of
expiration information, Allegheny alleges: “The term ‘expirations’ refers to a list of policies
issued and the expiration dates of the policies. It includes vital information regarding the
elements of the insurance contracts in force, such as records containing the date of the
insurance policy, the name of the insured, the date of its expiration, the amount of
insurance, premiums, property covered and the terms of insurance. The expirations enable
an agent to contact the insured before the existing contract of insurance expires. The
expirations provide the agent with information necessary to secure another policy and
present to the client a solution for the insured’s insurance needs.” ([Doc. 49] at ¶ 10).
i.
Johnson and Stanley
Allegheny alleges that Westfield breached the above-outlined provisions of the
Agency Agreement “by providing information” to Johnson and Stanley about Westfield
insureds for which Allegheny is the broker of record. ([Doc. 49] at ¶¶ 17-21). Allegheny
also alleges that “[t]o the extent that . . . Westfield . . . breached the . . . Agency Agreement
by improperly disclosing information about [Allegheny] expirations to . . . Johnson . . .
Stanley, [Allegheny] has sustained damages from the consequences of each breach and
risks the loss of the prospective business of other clients of Allegheny . . . that are presently
Westfield insureds.” (Id. at ¶ 22).
Westfield argues that Allegheny has failed to state a breach of contract claim
because Allegheny does not specifically and unequivocally allege that the information
15
Westfield allegedly provided Johnson and Stanley was the expiration information protected
by the Agency Agreement.
Allegheny responds that the context of its allegations
establishes that the “information” referenced was “expiration information.”
Viewing Allegheny’s allegations in their most favorable light, this Court agrees with
Allegheny that it has sufficiently alleged that Westfield’s disclosure of Allegheny’s expiration
information to Johnson and Stanley breached the Agency Agreement. Thus, Allegheny’s
breach of contract claim relating to Johnson and Stanley (Count I) MAY PROCEED.
Accordingly, Allegheny’s requests for declaratory relief (Count IV), punitive damages
(Count V), and injunctive relief (Count VI) that are predicated upon that claim also MAY
PROCEED.
ii.
Westfield’s Legal Counsel
Allegheny alleges that Westfield also breached the above-outlined provisions of the
Agency Agreement by disclosing expiration information to its legal counsel who then
telephoned Allegheny clients and former Westfield policyholders to inquire about any prior
communications had between those clients and Allegheny about Westfield. ([Doc. 49] at
¶¶ 32-36).
Westfield argues that Allegheny has failed to state a breach of contract claim
because Allegheny has failed to allege that such disclosure was made so that Westfield’s
counsel could contact former Westfield policyholders for marketing purposes, as described
in Part IV, Section C of the Agency Agreement. In response, Allegheny refines its theory
to assert that “any disclosure by Westfield to its counsel of a ‘list’ or the identity of any
individual of Allegheny clients that were former Westfield policyholders is a violation of the
terms of the . . . Agency Agreement,” including those outlined above. ([Doc. 62] at 9)
16
(emphasis in original).
Even viewing Allegheny’s allegations in their most favorable light, this Court agrees
with Westfield that Allegheny has failed to state a claim for breach of the Agency
Agreement. Specifically, this Court agrees that Westfield’s alleged disclosure of expiration
information to its legal counsel does not violate the Agency Agreement in the absence of
allegations that its counsel are insurance agents or brokers or that the expirations were
used “in any marketing method for the sale, service or renewal of any form of insurance
coverage or other product . . . ,” as required by Part IV, Section C of the Agency
Agreement. Thus, Allegheny’s breach of contract claim relating to Westfield’s legal counsel
(Count III) is hereby DISMISSED. Accordingly, Allegheny’s requests for declaratory relief
(Count IV), punitive damages (Count V), and injunctive relief (Count VI) that are wholly
dependent upon the viability of that claim are also hereby DISMISSED.
B.
Johnson’s Motion to Dismiss
Johnson moves to dismiss Allegheny’s third-party claims against him for failure to
state a claim upon which relief can be granted. Johnson provides support for dismissal of
each count, while Allegheny contends that each count should proceed. Below, the Court
will consider each count beginning with Allegheny’s claim for intentional tortious
interference with contractual relations.
1.
Intentional Tortious Interference with Contractual Relations
“To establish prima facie proof of tortious interference, a plaintiff must show: (1)
existence of a contractual or business relationship or expectancy; (2) an intentional act of
interference by a party outside that relationship or expectancy; (3) proof that the
interference caused the harm sustained; and (4) damages.”
17
Syl. Pt. 2, Torbett v.
Wheeling Dollar Savings & Trust Co., 173 W.Va. 210, 314 S.E.2d 166 (1983).
Johnson argues that Allegheny has failed to adequately plead the elements of harm
and recoverable damages because Allegheny concedes that Elkins Distributing retained
Allegheny as its broker of record despite Johnson’s solicitation. Allegheny claims that it
was harmed by Johnson’s solicitation in two ways: (1) Elkins Distributing contacted
Allegheny about Johnson’s activity, which forced Allegheny to devote time and resources
to protect its property rights in the expiration related to Elkins Distributing and (2) Johnson’s
conduct has required Allegheny to seek an injunction to enjoin any further interference. For
the reasons that follow, this Court finds neither of these alleged harms sufficient to support
Allegheny’s tortious interference claim as a matter of law.
This Court is unconvinced that a plaintiff can state a tortious interference claim
based upon an unsuccessful solicitation, i.e., when the solicited party to the contract elects
to continue performance in the face of solicitation. This conclusion finds support in
Restatement (Second) of Torts, upon which the Supreme Court of Appeals of West Virginia
relied heavily to articulate the contours of a tortious interference cause of action in Torbett.
314 S.E. 2d at 171-173. Restatement (Second) of Torts § 766 explains that:
One who intentionally and improperly interferes with the performance of a
contract (except a contract to marry) between another and a third person by
inducing or otherwise causing the third person not to perform the contract, is
subject to liability to the other for the pecuniary loss to the other from the
failure of the third person to perform the contract.
(Emphasis added).
The emphasized language makes clear that the only harm an
intentional interference claim is intended to redress is the solicited party’s failure to perform
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its contractual obligations and that the only damages recoverable are those resulting from
that failure to perform. In addition, Allegheny has failed to point to a case, and this Court’s
independent research has been unable to find a single one, in which the Supreme Court
of Appeals recognized a tortious interference claim where the interference did not cause
a failure to perform the contract at issue.
This Court is similarly unpersuaded that Allegheny can recover its attorney’s fees
and costs for seeking an injunction in this action enjoining Johnson from further contact with
Westfield insureds for which Allegheny is the broker of record. Though the Restatement
provides that consequential damages are recoverable in a tortious interference cause of
action, see § 774A(1)(b), that type of damages is nevertheless limited to damages incurred
as a consequence of the solicited party’s failure to perform. As for attorney’s fees and
costs specifically, those types of damages are recoverable only if incurred to pursue a
separate breach of contract claim against the successfully solicited and breaching party.
See § 774A, cmt. c (citing Dassance v. Nienhuis, 57 Mich. App. 422, 225 N.W.2d 789
(1975)).
Accordingly, because Allegheny has failed to adequately allege the elements of
harm and recoverable damages, its tortious interference claim against Johnson (Count I)
is hereby DISMISSED.
2.
Punitive Damages
In light of this Court’s dismissal of Allegheny’s tortious interference claim against
Johnson, Allegheny’s claim for punitive damages against Johnson must also fail.
Accordingly, Allegheny’s claim for punitive damages (Count III) is hereby DISMISSED to
the extent that it seeks punitive damages against Johnson.
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3.
Injunctive Relief
Finally, Allegheny seeks an injunction enjoining Johnson from using expirations
protected by the Agency Agreement to contact any additional Westfield insureds for which
Allegheny is the broker of record. To the extent that this Court has allowed Allegheny’s
breach of contract claim to proceed based upon Westfield’s alleged provision of Allegheny
expirations to Johnson, this Court finds it appropriate to allow Allegheny’s request for
injunction relief against Johnson (Count IV) to PROCEED.
CONCLUSION
For the foregoing reasons, this Court concludes that plaintiff Westfield’s Motion to
Dismiss Counterclaims [Doc. 58] should be, and hereby is, GRANTED IN PART and
DENIED IN PART. Accordingly, Count II, Count III, Count IV (in part), Count V (in part),
and Count VI (in part) of Allegheny’s Counterclaims [Doc. 49] are hereby DISMISSED,
while Count I, Count IV (in part), Count V (in part), and Count VI (in part) MAY PROCEED.
In addition, this Court concludes that third-party defendant Johnson’s Motion to Dismiss
Third-Party Complaint [Doc. 60] should be, and hereby is GRANTED IN PART and
DENIED IN PART. Accordingly, Count I and Count III (in part) of Allegheny’s Third-Party
Complaint [Doc. 53] are hereby DISMISSED, while Count IV MAY PROCEED.
It is so ORDERED.
The Clerk is hereby directed to transmit copies of this Order to counsel of record
herein.
DATED: April 2, 2012.
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