Cigna Fire Underwriters Co. v. MacDonald & Johnson, Inc., s. 95-1061

Citation86 F.3d 1260
Decision Date06 November 1995
Docket NumberNos. 95-1061,95-1145,95-1570 and 95-1648,s. 95-1061
PartiesCIGNA FIRE UNDERWRITERS COMPANY, et al., Plaintiffs, Appellees, Cross-Appellants, v. MacDONALD & JOHNSON, INC., Defendant, Appellant, Cross-Appellee. . Heard
CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)

John B. Stewart, with whom Edward V. Leja and Moriarty, Donoghue & Leja, P.C., Springfield, MA, were on brief, for CIGNA Fire Insurance, et al.

F. Michael Joseph, with whom Joseph, St. Clair & Cava, Springfield, MA, was on brief, for MacDonald & Johnson, Inc.

Before SELYA, Circuit Judge, BOWNES, Senior Circuit Judge, and BOUDIN, Circuit Judge.

BOWNES, Senior Circuit Judge.

Before us are appeals by both parties after two jury trials. CIGNA Fire Insurance Company ("CIGNA") is a large insurance conglomerate. MacDonald & Johnson, Inc., ("M & J") is an independent insurance agent that sold, inter alia, CIGNA insurance. CIGNA sued M & J for breach of contract alleging failure to remit insurance premiums due it by M & J. M & J brought a counterclaim against CIGNA alleging: breach of contract; intentional interference with contractual relations; intentional interference with economic gain; and violation of Mass. Gen. L. ch. 93A, § 11, and 93A generally.

After a four-day trial, the jury returned special verdicts:

Judgment for the defendant on plaintiffs' claim of breach of contract.

Judgment for the defendant against the plaintiffs on its counterclaim alleging breach of contract with damages awarded in the amount of $780,000.00.

Judgment for the defendant against the plaintiffs on its counterclaim alleging interference with contractual relations with damages awarded in the amount of $500,000.00.

Adding interest, the total award to M & J came to $1,544,106.73.

The district court found for CIGNA on M & J's claimed violations of Mass. Gen. L. ch. 93A.

After a hearing, the district court set aside the jury verdict and ordered a new trial.

After another four-day trial the second jury found in favor of M & J and awarded it damages in the amount of $250,000.00. Judgment for M & J, including interest, came to $321,333.28. Early in the second trial, the district judge, based on a stipulation by the parties, ruled that M & J had breached its contract with CIGNA and that the amount due CIGNA was $169,798.14. Adding interest to this resulted in a judgment for CIGNA in the sum of $219,888.60. The judge denied both parties' post-trial motions.

Before starting our exposition of the evidence and analysis of the issues, we state the standard of review that controls our assessment of the district court's decision to set aside the jury verdicts and order a new trial in the first case and decline to do so the second time around. Fed.R.Civ.P. 59(a) provides in pertinent part:

(a) Grounds. A new trial may be granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States;

The Court has described the scope of the rule as follows:

The motion for a new trial may invoke the discretion of the court in so far as it is bottomed on the claim that the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair to the party moving; and may raise questions of law arising out of alleged substantial errors in Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251, 61 S.Ct. 189, 194, 85 L.Ed. 147 (1940).

admission or rejection of evidence or instructions to the jury.

First Circuit precedent is clear.

A district court may set aside a jury's verdict and order a new trial only if the verdict is so clearly against the weight of the evidence as to amount to a manifest miscarriage of justice. See, e.g., Lama v. Borras, 16 F.3d 473, 477 (1st Cir.1994). A trial judge's refusal to disturb a jury verdict is reversed only for abuse of discretion.

Federico v. Order of Saint Benedict in Rhode Island, 64 F.3d 1, 5 (1st Cir.1995). See also Fleet Nat'l Bank v. Anchor Media Television, Inc., 45 F.3d 546, 552 (1st Cir.1995).

There can be no doubt that the district court here understood the constraints applicable to setting aside a verdict and ordering a new trial. The new trial ruling states, inter alia:

A jury verdict may not be set aside as a matter of law under Fed.R.Civ.P. 50(b) except on a "determination that the evidence could lead a reasonable person to only one conclusion." Acevedo-Diaz v. Aponte, 1 F.3d 62, 66 (1st Cir.1993) (quoting Hiraldo-Cancel v. Aponte, 925 F.2d 10, 12 n. 2 (1st Cir.1991)).

I. ISSUES COMMON TO BOTH TRIALS

The evidence adduced at both trials was essentially the same. CIGNA has raised two issues on appeal which are common to both trials:

(1) Whether the district court erred in refusing to grant its motions for judgment as a matter of law on M & J's breach of contract claim at the conclusion of both trials.

(2) Whether the district court erred in ruling that M & J's claims "were not barred or diminished" for its failure to exhaust its administrative remedies provided under Mass. Gen. L. ch. 175, § 163.

Submission of M & J's Breach of Contract Claim to the Jury

The question, of course, is whether there was sufficient evidence for M & J's breach of contract claim to be decided by the juries. The relevant evidence which was substantially the same for both trials is summarized as follows. Frank Lombard, president and owner of M & J, testified that M & J encountered serious financial problems when the Bank of New England collapsed causing M & J's line of credit to terminate on May 30, 1991. Lombard testified that it was usual for M & J, and other insurance agencies, to use bank loans to meet its premium obligations to insurance companies for premiums owed by the insureds. In other words, the agency would carry its clients by borrowing money from a bank, pay the premiums due the company and wait for payments from the clients. The collapse of the Bank of New England stripped M & J of any cash reserves. Lombard testified that other insurance companies with whom M & J did business agreed to accept monthly installment premium payments or extended the due date for the payment of premiums.

Another factor that impacted on M & J's financial condition was the loss of its biggest insurance account, F.L. Roberts Co. ("Roberts"). Premiums on this account amounted to between $800,000.00 and $1,000,000.00 a year. Roberts was a large wholesaler and retailer of petroleum products and operator of service stations and car washes in southern New England.

The evidence discloses the following sequence of events. Lombard was an insurance consultant for Roberts, not an agent, from 1979 through 1986. In late 1986, Roberts did not have a carrier for 1987. Lombard suggested that Roberts try to obtain insurance coverage for a three-year period with the premiums being determined on the basis of the carrier's expenses and Roberts' losses. Under such a program the insured, who paid a deposit premium initially, might be owed refunds by the carrier at the end of the insurance year or vice versa. The amount due either the carrier or Roberts would be determined each year. In January of 1987, such a program was entered into An inter-office CIGNA memo states its position:

between Roberts and CIGNA for three years with M & J acting as agent. The amount of premiums due would be determined in September 1988, 1989, and 1990. In July or August of 1990 Lombard calculated that CIGNA owed Roberts $200,000.00 under the program. He contacted CIGNA on September 30, 1990, and was told that it would look into it. Lombard called the CIGNA department in charge of the program and was reprimanded for doing so. A new program was set to go into effect in January of 1991. The down payment required by CIGNA from Roberts was $250,000.00. Roberts informed Lombard that it would not pay the $250,000.00 unless it was credited with the $200,000.00 refund. Laurie Scanlan, who worked in the special risk division of CIGNA, acknowledged that CIGNA owed Roberts money under the program, but would not pay it because she asserted that Roberts also owed a surcharge of $56,000.00. Lombard told Scanlan the surcharge was not part of the insurance program. She told him to collect it. He refused.

Per our discussion, the following strategy will be utilized in solving the F.L. Roberts FVC surcharge dispute.

Number one, Insured Meeting. Set up a meeting with F.L. Roberts and invite the agent.

Number two, Program Intent. Discuss the need for the surcharge in vague terms. Provide the proposal for the '89 and '90 years to document the stated surcharge, in parentheses, '87 and '88: FVC not mentioned. Close parentheses.

Number 3, CIGNA's Needs. If we cannot collect the surcharge, we cannot be a market for such coverages.

Number 4, Payment Intentions. After discuss needs for surcharge, determine if F.L. Roberts is willing to pay the FVC surcharge.

Number five, Refusal to Pay. Legally, we cannot enforce the payment of the FVC surcharge. Therefore, back-off if they refuse to pay. But we should then seriously consider non-renewal.

Hopefully, we can satisfy our insured and collect the surcharge at the same time. Good luck.

M & J expected a proposal from CIGNA for the 1992 Roberts insurance program. Scanlan was supposed to work up the figures. Lombard received a letter from Scanlan on December 16, stating that CIGNA would not negotiate renewal terms unless CIGNA was paid the 1991 premiums due. The letter further stated that CIGNA would issue cancellation notices the next day, but if Roberts paid CIGNA within ten days, the notices would be rescinded. Roberts' insurance was cancelled as per the letter. Lombard immediately faxed to CIGNA a statement by CIGNA showing a credit due Roberts of $28,903.58 as of December 20, 1991. After the fax, CIGNA...

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