Goforth v. Avemco Life Insurance Co. of Silver Spring, Md.

• Decision Date: 31 October 1966
• Docket Number: No. 10094,10095.,10094
• Citation: 368 F.2d 25
• Parties: James A. GOFORTH, Sr., Appellant, v. AVEMCO LIFE INSURANCE COMPANY OF SILVER SPRING, MARYLAND, Appellee. AMERICAN CROSS PLAN, INC., Appellant, v. AVEMCO LIFE INSURANCE COMPANY OF SILVER SPRING, MARYLAND, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

368 F.2d 25 (1966)

James A. GOFORTH, Sr., Appellant, v. AVEMCO LIFE INSURANCE COMPANY OF SILVER SPRING, MARYLAND, Appellee.

AMERICAN CROSS PLAN, INC., Appellant, v. AVEMCO LIFE INSURANCE COMPANY OF SILVER SPRING, MARYLAND, Appellee.

Nos. 10094, 10095.

United States Court of Appeals Fourth Circuit.

Argued December 10, 1965.

Decided October 31, 1966.

Clyde C. Randolph, Jr., and Harold R. Wilson, Winston-Salem, N. C., for appellants.

Bynum M. Hunter, Greensboro, N. C. (James R. Turner, and Smith, Moore, Smith, Schell & Hunter, Greensboro, N. C., on brief), for appellee.

Before SOBELOFF and BOREMAN, Circuit Judges, and MAXWELL, District Judge.

BOREMAN, Circuit Judge:

American Cross Plan, Inc., and James A. Goforth, Sr., a former president and general manager of that corporation, brought actions for libel against Avemco Life Insurance Company ofilver Spring, Maryland (hereinafter "Avemco"). The two actions, presenting issues common to both, were consolidated for trial. Following the plaintiffs' presentation of evidence the court directed a verdict against them on the ground that the communications complained of were qualifiedly privileged and that the evidence was insufficient to establish malice and thereby defeat the privilege. Both plaintiffs have appealed. We agree with the result reached by the court below and affirm the judgments.

Jurisdiction is based upon diversity of citizenship. American Cross Plan is chartered under the laws of North Carolina and Goforth is a citizen of the same state. Avemco is a Maryland corporation. The law of North Carolina governs the disposition of the cases.¹

The communications involved are contained in a series of letters, introduced into evidence by appellants as Exhibits A through H, which were written by Avemco in the early fall of 1963. At that time, Goforth was serving as American Cross Plan's chief executive officer, a position which he had filled for several months.² The letters in question effected or pertained to Avemco's cancellation of American Cross Plan's authority to act as its agent or subagent in the sale of its insurance policies.³

The business relationship between American Cross Plan and Avemco, which had existed for only a few months prior to its termination, evolved in roundabout fashion. Before its inception, American Cross Plan had been the agent or subagent of Accident Indemnity Insurance Company. This earlier arrangement resulted from an agreement which American Cross Plan had entered into on April 24, 1962, with American Cross Agency, a sole proprietorship owned by one George N. Lefler, who was a general agent of Accident Indemnity Insurance Company. The sale of Accident Indemnity Insurance Company's policies constituted the only business of American Cross Plan.

American Cross Plan's affiliation with Avemco was brought about by the latter's merger with Accident Indemnity Insurance Company. Avemco, the surviving corporation, assumed all of Accident Indemnity Insurance Company's assets and liabilities. The only indication in the record of the date of the merger is supplied by the oral statement at the trial by Avemco's counsel that the merger occurred in July of 1963.

At the time of the merger, Avemco was not licensed to do business in North Carolina. In September of 1963, officials of Avemco conferred with the North Carolina Department of Insurance concerning the merger and obtention of the needed license. Avemco maintains that all of the allegedly libelous statements contained in the letters subsequently written by it were either mere reiterations of, or statements based upon, information which was conveyed to it at these September discussions by the StaÅte's administrative arm for the regulation of the insurance business. The appellants introduced no evidence which would tend to negate this assertion. In fact, certain portions of their argument are based upon the assumption that Avemco was only parroting charges which the Insurance Department had made to it.⁴ Defendant asserts also that the Insurance Department indicated at these meetings that Avemco would not be licensed in North Carolina and that the licenses then held in the name of Accident Indemnity Insurance Company might be revoked unless it cancelled the agency relationship which existed between it and American Cross Plan.

Whatever may be fact with respect to the truth of these assertions,⁵ Avemco did, in any event, write a letter to Goforth on September 30, 1963, stating:

"It has just been brought to our attention by the North Carolina Department of Insurance that you have been selling stock in a corporate entity in which you are involved, namely, `The American Cross Plan, Inc.\', and further, that said stock is not registered with the proper auorities as required by North Carolina law.

"It is further alleged that in offering either this stock or these debentures, or whatever you are selling, you have been using the financial statements of our company to substantiate the financial strength of your organization and, further, as an inducement to prospective buyers, it is also alleged that you have been offering insurance to be issued by our company at a discount to those individuals.

"Based on this information, we have no other alternative but to terminate effective this date your authority to represent our company as an agent or otherwise."^5a

The publication to a third person which is a required element of actionable defamation was accomplished by Avemco with respect to this letter, appellants' Exhibit A, by sending copies thereof to the Department of Insurance and to George N. Lefler. The first two charges recited in this letter — the claim that Goforth was selling unregistered stock and offering insurance policies at discount rates — are repeated in several of the other letters which are claimed to be libelous.⁶ It is unnecessary to reproduce in full the contents of each of those letters. We conclude that two of them, which we set forth in a footnote,⁷ are devoid of any defamatory matter. Pertinent portions of the remaining letters are summarized or quoted from in the next succeeding paragraphs.

Appellants' Exhibit B is Avemco's letter of September 30, 1963, to the Deputy Commissioner of the Department of Insurance requesting that appellants' license to represent it be cancelled. This letter cited Avemco's receipt of information with respect to the first two charges contained in Exhibit A as its reason for the request.

On October 1, 1963, S. J. Solomon, President of Avemco, wrote a letter (appellants' Exhibit C) to Edwin S. Lanier, the North Carolina Commissioner of Insurance, in which he stated:

"On my return to Silver Springs after the meeting with you, I immediately discussed with Mr. Worthington the matter called to my attention about the sale of stock by the American Cross Plan, Inc. I also discussed with him that that agency was offering insurance of Accident Indemnity Insurance Company at a discount to subscribers of stock in that company, inducing in some cases subscribers of stock to withdraw monies from Savings and Loan institutions. I appreciate very much your ready acceptance of my statement that under no circumstances would we tolerate either of these actions. Mr. Worthington agreed fully with the viewpoint expressed to you.

"After a full investigation by Mr. Worthington, we have today cancelled the license of Mr. J. A. Goforth to represent Accident Indemnity Insurance Company operating as The American Cross Plan, Inc., in Winston-Salem, North Carolina. * * *."

AppellanÅts' Exhibit D was Avemco's letter to Lefler dated September 30, 1963. That letter provided in part as follows:

"Pursuant to our telephone conversation of this date concerning the aforementioned American Cross Plan, I would like to repeat, once again, my statement to the effect that I am most upset by what I understand has been happening and would like all such activity stopped immediately.

"I am referring, specifically, to the fact that `The American Cross Agency (sic) Plan, Inc.\', a sub-agency of yours, is alleged to be selling some form of stock or securities which is not registered with the proper authorities in the State of North Carolina and, further, as an inducement to make such sales, they are offering to discount insurance premiums for policies sold through our company to stockholders in their organization. For that matter, I am not interested in having any agency selling stock or investments of any kind and this whether such stock or other is registered or not. * * *

"In accordance with our understanding, the company does not wish any commissions whatsver paid by you to any unlicensed persons and we would ask you to guide yourself in accordance.

"For the matter of our files, I would ask you to be kind enough to forward us, as soon as possible, a copy of the letter you write to `The American Cross Plan, Inc.\', terminating their contract with your office."

On October 8, 1963, Lefler, the general agent of Avemco, wrote Goforth cancelling his agency's contract with American Cross Plan. This letter (Exhibit G) did not repeat any of the charges contained in Exhibit A, but stated that:

"The above action termination of the contract is taken due to the fact that American Cross Plan, Inc., has violated the following paragraphs of its contract:

"`(2) The "Agency" shall submit no accident, health, accident and health or hospitalization applications to other companies or agencies except that first rejected by the "Company."

"`(10) The "Agency" shall endeavor to promote the interest of the "Company" as contemplated by this agreement and shall so conduct itself as not to affect adversely the business, good standing or reputation of itself or of the "Company."

"`(11) The "Agency" agrees that it will not nor will it permit any misrepresentation, misleading statement or incomplete comparisons oral or written to be made by its agents or employees, by any circulars, advertising matter or

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