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James Powell v. Wachovia Corporation and Wachovia Insurance Services

April 9, 2012


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3323-07.

Per curiam.


Argued March 14, 2012

Before Judges Graves, J. N. Harris, and Haas.

Following an adverse jury verdict, Defendants Wachovia Insurance Services, Inc. (Wachovia Insurance) and Wachovia Corporation (Wachovia) appeal from a judgment and numerous orders*fn1 entered in the Law Division that collectively hold them liable to plaintiff James Powell for approximately $3,600,000 for violating the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14. Because Powell's CEPA claim was unsustainable as a matter of law, and the dispute should never have been submitted to the jury, we reverse.*fn2


We glean the following facts from the record, including the testimony and documentary evidence that was adduced at trial. We do not recite the facts and circumstances relating to Powell's damages, the jury charge, the verdict form, or the applications for reallocated attorneys' fees and disbursements as they are not necessary to our disposition of the appeal.


Starting in 1993, Powell was employed by several insurance brokerages that were purchased by entities ultimately culminating in the ownership by Wachovia Insurance. Powell, an at-will employee, was fired on February 22, 2007, after earning approximately $210,000 the previous year.

Powell's job -- a benefits producer -- was to "prospect, market and place business employee benefits, group health insurance, group life, group dental, long term disability, short term disability, those types of employer benefits with different insurance companies." His clientele included "[s]mall to medium size employers in New Jersey." He testified that his employee benefit group in Wayne, New Jersey generated "a large amount of revenue for Wachovia" and that of the thirty-five offices in the United States, his office was "in the top five." Stewart McDowell, President of Wachovia Insurance, confirmed this productivity. He also indicated that Wachovia Insurance employed approximately 1800 individuals throughout its nationwide offices.

Before 2006, Powell was compensated according to a 1993 contract that "followed all the way through" to Wachovia Insurance. For every dollar of commissions that Powell generated, he would receive fifty percent and Wachovia Insurance would retain the other fifty percent. Powell claimed that his employer "had a big problem with the 50/50 commission split" and "they were always trying to push us off that 50/50" because "they wanted to keep a bigger piece of the pie."

According to Powell, in early 2006, Wachovia "tried to introduce a matrix" whereby benefits producers "would get paid based on [their] production and [their] retention, [and they] would land somewhere on a scale." Powell testified that under the proposed matrix, "if we had a good year," this would result in benefits producers receiving "around [thirty-five] percent on new [policies] and maybe [twenty-five] percent on renewal[s]." He continued, "if we had a bad year, we could be at [eighteen] percent on new [policies] and [ten] percent on renewal[s]."

McDowell testified that the new compensation plan was developed in 2004 or 2005 and was to be implemented in 2006. He sent an announcement to each of the approximately 200 employees who would be affected by the matrix to "make sure that every person heard directly and individually from [him] the main points and the spirit . . . of the new program so that there would be consistency and fairness . . . and equal communication throughout the organization."

Although he considered the new compensation plan fair, McDowell received "noise from virtually every location" when the plan was revealed because "no one likes their compensation to be changed and it can be threatening if not done properly." Other than Powell and four of his colleagues, no other affected employees retained an attorney to challenge the compensation plan. According to McDowell, Wachovia Insurance lost only one benefits producer as a result of the new program.

As noted, five benefits producers (representing approximately twenty percent of the production in the Wayne office), including Powell, retained attorney Joseph Rizzi, Esq., in an effort to "protect [their] higher commissions." On March 26, 2006, Rizzi sent a letter to Wachovia Insurance objecting to the implementation of the matrix.*fn3 In the letter, Rizzi stated that his clients "would have no alternative but to look to the [c]courts to enforce their contractual commission arrangements, an action that would without question reverberate throughout the company." On cross-examination, Powell agreed that the letter also indicated that he and the others were "at-will employees of Wachovia Insurance." Powell also acknowledged that the letter was "asking for better terms than the compensation plan that was going to apply to all of the other producers that worked at Wachovia Insurance Company." Accordingly, Rizzi indicated that his clients would "execute confidentiality agreements confirming that they have not discussed and will not discuss the terms of such a resolution with any other persons within or outside the company" if a satisfactory agreement were reached.

In response to Rizzi's letter, the parties engaged in negotiations. Concessions were made on both sides, and ultimately they agreed to a "60/40 split" for new business, which was "a twenty percent reduction in pay," and a "70/30 [split]" for renewals, which was a "[forty] percent . . . reduction in commission on renewal." On August 21, 2006, Powell and Wachovia Insurance entered into a formal Producer Compensation Agreement to memorialize their arrangement. Paragraph 13 provided that "the existence and terms of this Agreement are to be [sic] remain confidential. The Producer shall not disclose the terms of this [A]greement to any person except as is required by law or as is necessary for him to enforce his rights under this Agreement."


The following facts relate to Powell's termination of employment ...

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