Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

BORBELY v. NATIONWIDE MUT. INS. CO.

September 18, 1981

James A. BORBELY, et al., Plaintiffs,
v.
NATIONWIDE MUTUAL INSURANCE CO., et al., Defendants



The opinion of the court was delivered by: THOMPSON

 Plaintiffs, 18 former agents *fn1" of four Nationwide insurance companies *fn2" [hereinafter "Nationwide" or "defendant"], brought suit against Nationwide to recover damages for the alleged wrongful termination of the Agent's Agreements under which plaintiffs represented defendant in New Jersey. In particular, plaintiffs charged Nationwide with terminating the contracts without cause, without reasonable notice, and in violation of the public policy of New Jersey and of the implied covenant of good faith and fair dealing. In addition, plaintiffs claimed defendant had tortiously interfered with their prospective economic advantage. In a counterclaim, Nationwide charged ten *fn3" of the plaintiffs with breach of contract, inasmuch as each of the ten had executed an Agreement and Release which allegedly barred them from bringing suit against Nationwide.

 The case was bifurcated, and the matter of liability was tried to a jury over 17 trial days from June 2 to June 30, 1981. On the latter date, the jury returned verdicts in favor of plaintiffs on five issues which had been submitted for its consideration.

 Nationwide now moves for judgment notwithstanding the verdict pursuant to Fed.R.Civ.P. 50(b), for a new trial on defendants' counterclaim under Fed.R.Civ.P. 59(a), and for the conditional grant of a new trial pursuant to Fed.R.Civ.P. 50(c). In the alternative, defendant seeks a new trial on all issues. The Court, having read and considered the briefs submitted, the authorities cited therein, the evidence at trial, and the oral arguments of counsel at a hearing on July 20, 1981, renders the following opinion.

 I. BACKGROUND FACTS

 Although the facts relevant to each of the individual issues raised by defendant on these motions will be set forth in detail at later points in this opinion, a recitation of certain preliminary, uncontroverted facts will provide some necessary context.

 In September 1952, Nationwide *fn4" was authorized to sell various types of insurance in the State of New Jersey, including automobile, casualty, and fire policies. This insurance was marketed through individuals who had executed agency contracts with Nationwide under which the individuals were to represent Nationwide exclusively. *fn5" Defendant's District Sales Managers were responsible for, among other things, recruiting, training, and supervising these agents. Each of the plaintiffs became a Nationwide agent sometime during the period from 1953 to 1972 by signing whichever Master or Standard Agent's Agreement was then in effect.

 All billing and collection of premiums on the policies written by the agents, as well as policy renewals, was done directly between Nationwide and the policyholders. The agents serviced the policies by, among other things, forwarding claims against policyholders to defendant, remitting premiums if paid directly to the agents, and giving advice to policyholders when requested.

 From time to time, the agreements between plaintiffs and Nationwide were revised, and the agents asked to execute the revised version. In 1969, Nationwide published a Compensation and Security Handbook [CASH Book], which was distributed to the then-existing agents sometime in the same year, concurrent with a revised Agent's Agreement.

 Over the years up to and including 1977, Nationwide developed a series of promotional programs directed at the agents. These included a variety of sales contests and the establishment of clubs representing different levels of achievement in sales production.

 In October 1975, Nationwide adopted a plan called the "New Jersey Marketing Strategy" under which, among other things, business, life and health insurance lines were emphasized, quotas were placed on automobile insurance, and a moratorium was imposed on agent recruitment. This plan had been developed as a result of the issuance in 1975 of a Review Team study concerning Nationwide's New Jersey operations. Further studies were conducted between 1975 and 1977, culminating in a decision to withdraw from New Jersey. None of the agents were informed of the results of these studies. Finally, on or about October 13, 1977, Nationwide announced its decision to withdraw from the New Jersey insurance market and informed the agents that their agencies would be terminated effective September 30, 1978. This notice was given orally by Nationwide representatives at an agents' meeting and by form letter given or mailed individually to each agent. *fn6" Also, on October 13, 1977 Nationwide informed its policyholders that it would not renew commercial fire and casualty policies.

 Until April 7, 1981, Nationwide maintained its license to sell insurance in New Jersey. *fn8" As a consequence of litigation in the state court, *fn9" brought by the Commissioner of Insurance, Nationwide was free to terminate its fire and casualty business in New Jersey except for the renewals required under N.J.S.A. 17:22-6.14a *fn10" and 39:6A-3. *fn11" Defendant continues to issue, outside of New Jersey, insurance to its national accounts which conduct activity here.

 II. JUDGMENT NOTWITHSTANDING THE VERDICT

 Since Nationwide moved for a directed verdict, both after plaintiffs' case and after the close of all the evidence, and now moves for judgment notwithstanding the verdict on grounds previously advanced on both of those occasions, it may properly seek relief under Fed.R.Civ.P. 50(b). Universal Computer Systems, Inc. v. Medical Services Association of Pa., 474 F. Supp. 472, 475 (M.D.Pa.1979), modified on other grounds, 628 F.2d 820 (3rd Cir. 1980). The standards governing a motion for directed verdict under subdivision (a) of Rule 50 and a motion for judgment notwithstanding the verdict under subdivision (b) of the rule are identical. Fireman's Fund Insurance Co. v. Videfreeze Corp., 540 F.2d 1171, 1177 n.5 (3rd Cir. 1976), cert. denied 429 U.S. 1053, 97 S. Ct. 767, 50 L. Ed. 2d 770 (1977). "The standards to be applied [do, however,] vary according to whether the movant has the burden of proof." Id. at 1177.

 Where, as here, the movant did not bear that burden at trial, the test is whether, viewing the evidence in the strongest light favorable to the non-moving party and giving him the advantage of every fair and reasonable inference drawn therefrom, the non-moving party has adduced sufficient evidence to create a jury issue. Id. at 1177-78. Put another way, the question turns on "whether as a matter of law the record is critically deficient of that minimum quantum of evidence from which a jury might afford relief." Universal Computer Systems, Inc. v. Medical Services Association of Pa., supra at 475. On this review neither the credibility of the evidence nor the weight of it may be considered. Fireman's Fund Insurance Co. v. Videfreeze Corp., supra at 1178.

 Having established the standard by which defendant's application must be adjudged, I turn now to consider the separate issues which Nationwide raises.

 A. BREACH OF CONTRACT.

 The first issue submitted to the jury involved the alleged breach of contract, specifically breach of the agreement's cancellation provision. At the time Nationwide terminated the agency agreements, the clause governing such action provided as follows:

 
9. Cancellation. This Agreement shall continue from its effective date until the end of the current year and shall be automatically renewed thereafter from year to year unless sooner cancelled. This Agreement shall automatically cancel upon the date your license to act as an agent for the Companies is revoked or cancelled, or upon your death, or normal retirement at age sixty-five (65). Further, due to the personal nature of our relationship you or the Companies have the right to cancel this Agreement at any time after written notice has been delivered to the other or mailed to the other's last known address. It is understood that the Agent shall have access to the Agents Administration Review Board, and its procedures, as it may exist from time to time.

 Plaintiffs' Exhibit 1(i).

 Nationwide has consistently urged that, because the clause is unambiguous, construction of the provision is a matter for the court rather than the jury, and further, that the only possible construction is that the contract was terminable at will by either party, with or without cause. In addition, Nationwide claims that existence of the implied condition that defendant would continue to do business in this state and would continue to have business to give plaintiffs is also a matter of law for the court to decide. Finally, defendant takes the position that, inasmuch as no evidence was adduced upon which reasonable persons could differ, the issues of the existence of "cause" to terminate the Agent's Agreement and of the adequacy of notice are not subject to jury determination.

 Plaintiffs contend the quoted passage is ambiguous and, when viewed in light of extrinsic evidence, is susceptible of an interpretation that cause, namely agent misconduct, is required before an agent may be properly terminated, which construction would be the function of the jury.

 "Ordinarily the construction of a written agreement is a matter for the court, but where its meaning is uncertain or ambiguous and depends upon parol evidence admitted in aid of interpretation, the meaning of the doubtful provisions should be left to the jury." Michaels v. Brookchester, Inc., 26 N.J. 379, 387, 140 A.2d 199 (1958) (citations omitted). *fn12" Thus it falls to the court, in the first instance, to decide whether the provision under scrutiny is or is not ambiguous. See Gray v. Joseph J. Brunetti Construction Co., 266 F.2d 809 (3rd Cir.), cert. denied, 361 U.S. 826, 80 S. Ct. 74, 4 L. Ed. 2d 69 (1959). In making this determination, the court should consider the circumstances surrounding the making of the agreement, since "debatability of meaning is not always discernible at the first reading of a contract by a new mind [; m]ore often it becomes manifest upon exposure of the specific disputed interpretations in the light of the attendant circumstances." Garden State Plaza Corp. v. S.S. Kresge Co., 78 N.J.Super. 485, 496, 189 A.2d 448 (App. Div.), cert. denied, 40 N.J. 226, 191 A.2d 63 (1963). Accord, Sherman v. Mutual Benefit Life Insurance Co., 633 F.2d 782 (9th Cir. 1980).

 The 1953 Farm Bureau agreement provided, in relevant part:

 
4. It is mutually agreed and understood:
 
(a) That this agreement shall take effect upon the date hereof and shall continue until the end of the current license year and shall be automatically renewed thereafter from year to year unless sooner terminated.
 
This agreement shall automatically terminate upon the date the Agent's license to act as Agent for the Companies is revoked or cancelled or upon the date of death of the Agent, or this agreement may be terminated, with or without cause, by either party by giving written notice to the other and shall be deemed terminated as of the date specified in such notice. Upon termination, the Agent shall be entitled to receive only such compensation as shall be due the Agent as provided for in said schedules and in accordance with all of the conditions relating thereto.

 Plaintiffs' Exhibit 1(j).

 From 1954 until 1969, the termination clause stated:

 
4. It is mutually agreed and understood:
 
(a) That this Agreement shall take effect upon the date hereof and shall continue until the end of the current license year and shall be automatically renewed thereafter from year to year unless sooner terminated.
 
This Agreement shall automatically terminate upon the date the Agent's license to act as an Agent for the Companies is revoked or cancelled or upon the death of the Agent, or this Agreement may be terminated by either party by giving written notice to the other and shall be deemed terminated as of the date specified in such notice. Upon termination, the Agent shall be entitled to receive only such compensation as shall be then due the Agent as provided for in this Agreement including the said Schedules and in accordance with all of the conditions relating thereto.

 Plaintiffs' Exhibit 1(a).

 In 1969 the provision was again revised, and from July 1st of that year until 1976, the clause stated:

 
9. Termination. This Agreement shall continue from its effective date until the end of the current year and shall be automatically renewed thereafter from year to year unless sooner terminated.
 
This Agreement shall automatically terminate upon the date your license to act as an Agent for the Companies is revoked or cancelled, or upon your death, or normal retirement at age sixty-five (65). Further, due to the personal nature of our relationship you or the Companies have the right to terminate this Agreement at any time after written notice has been delivered to the other or mailed to the other's last known address.

 Plaintiffs' Exhibit 1(h).

 Finally, effective January 1, 1977, the operative Agent's Agreement was revised, and the cancellation clause quoted at the beginning of this section came into effect.

 Plaintiffs also rely on certain documentary evidence, in particular the CASH Book, the Challenger newspapers, and the minutes of Agents' Advisory Council meetings.

 The CASH Book contained the following passage regarding termination:

 
The Company can be expected to exercise its right to cancel the agreement under the following conditions:
 
-- Breach of contract, criminal acts, dishonesty or fraud by the agent.
 
-- Agent actions that are clearly contrary to the best interests of the customer and the Company, which include failure of the agent to:
 
-- promptly submit money or applications,
 
-- furnish complete and accurate information on applications,
 
-- adhere to underwriting and administrative rules, or,
 
-- deliver acceptable service to customers.

 Plaintiffs' Exhibit 1(c).

 The MERO Regional Advisory Board minutes of March 24-26, 1975, records a statement by defendant's Regional Personnel Manager, Mr. Fietkiewicz, to the effect that an agent should not have to fear for his security and that the information in the CASH Book was "contract." Plaintiffs' Exhibit 56. In a similar vein, the minutes of a February 12, 1976, meeting of the New Jersey Sales Region Agent Advisory Council contain statements by Alex Gonzales, New Jersey Regional Sales Manager, concerning no instance of arbitrary termination during his many years with Nationwide and the need for good faith on the part of both companies and agents. Plaintiffs' Exhibit 57.

 The copies of the Challenger newspapers admitted into evidence contained articles dealing with agents' children and spouses joining and, in some instances, taking over, the agents' businesses. Plaintiffs' Exhibits 40 through and including 55. These articles, plaintiffs contend, support the personal assurances they received about passing on their businesses at retirement.

 Defendant's evidence as to attendant circumstances *fn14" consisted of five basic elements: additional CASH Book language; testimony about moratoria on automobile policies and effects of the New Jersey marketing strategy; successive contract signings; testimony as to the companies' understanding of the termination clause; and testimony elicited from plaintiffs regarding agent concern over their termination rights. This proof purports to demonstrate the parties' true understanding of their termination rights.

 With reference to the CASH Book, defendant cites the Court to paragraphs immediately preceding and following the above-quoted passage, which paragraphs place that excerpt in proper context. This additional language provides:

 
It is recognized, however, that there are circumstances under which either you or the Companies may initiate action for cancellation of your contract. If the Companies initiate the action, it is the general policy to notify you that cancellation is being considered and that your Agreement may be cancelled at a specific date after such notification.
 
Company initiated cancellation of an independent contractor agent's agreement will require prior approval of the Vice-President-Regional Manager or Vice-President-Business Accounts. To further insure consistency and uniform treatment, such cancellations will also be reviewed in the Office of Marketing on an on-going basis.
 
The Independent Contractor Agent's Agreement gives either party -- the Company as well as the agent -- the right to cancel the agreement at any time, for any reason, with or without cause.
 
* * *
 
Company initiated cancellation of an Independent Contractor agent agreement for reasons other than the above are expected to be rare.

 Plaintiffs' Exhibit 2(c).

 With regard to moratoria on automobile policies, plaintiffs testified on cross-examination that during the 1970's Nationwide from time to time imposed limits on the number of new policies, or "green business," they could write, as well as on the number of second-car additions to existing policies because of that line's unprofitability. Similarly, plaintiffs testified that in 1975, when Nationwide's New Jersey Marketing Strategy plan was put into effect, they were given a choice of three options:

 
1. To remain as a personal lines agent,
 
2. To become exclusively a commercial ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.