93 F.3d 1088 (2nd Cir. 1996), 907, Srein v. Soft Drink Workers Union, Local 812

Docket Nº:907, Docket 95-7658.
Citation:93 F.3d 1088
Party Name:Ronald J. SREIN, Plaintiff-Appellee, v. SOFT DRINK WORKERS UNION, LOCAL 812, also known as Teamsters AFL-CIO Local 812, Soft Drink and Brewery Workers Union; Local 812 Group Insurance Account Trust Fund; Anthony Rumore, Thomas Rosano; Louis Didio; Louis Rumore; John Russo; Joseph Vitta; Anthony Vinci and Theodore Hutchinson, as Trustees of the Loca
Case Date:August 28, 1996
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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93 F.3d 1088 (2nd Cir. 1996)

Ronald J. SREIN, Plaintiff-Appellee,


SOFT DRINK WORKERS UNION, LOCAL 812, also known as Teamsters

AFL-CIO Local 812, Soft Drink and Brewery Workers Union;

Local 812 Group Insurance Account Trust Fund; Anthony

Rumore, Thomas Rosano; Louis Didio; Louis Rumore; John

Russo; Joseph Vitta; Anthony Vinci and Theodore

Hutchinson, as Trustees of the Local 812 Group Insurance

Plan Account Trust Fund, Defendants-Appellees,

Cigna Employee Benefits Services, Inc.; Connecticut General

Corporation and Cigna Holding Inc., Defendants-Appellants.

No. 907, Docket 95-7658.

United States Court of Appeals, Second Circuit

August 28, 1996

Argued Jan. 26, 1996.

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[Copyrighted Material Omitted]

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Thomas A. Martin, New York City (Beverly M. Barr, Michael P. Collins, Putney, Twombly, Hall & Hirson, New York City, of counsel), for Defendants-Appellants.

James L. Griffith, Wolf, Block, Schorr and Solis-Cohen, Philadelphia, PA, for Plaintiff-Appellee.

William J. Rodgers, Washington, DC (Thomas A. Thompson, Collier, Shannon, Rill & Scott, Washington, DC, of counsel), for Defendants-Appellees.

Before JACOBS, LEVAL, and PARKER, Circuit Judges.

JACOBS, Circuit Judge:

Defendants CIGNA Employee Benefits Services, Inc., Connecticut General Corp. and CIGNA Holding Inc. (collectively "CIGNA") entered into a contract to provide insurance and insurance services for the Local 812 Group Insurance Account Trust Fund (the "Trust Fund"). (The Trust Fund, an employee benefits program; Soft Drink Workers Union Local 812, the union whose members are participants in the Trust Fund; and eight trustees of the Trust Fund are collectively referred to herein as "Local 812" or "the Union.") Prior to the insurance contract, CIGNA had made an oral contract with plaintiff Robert J. Srein to pay him a brokerage commission (or finder's fee) of two percent on all premium payments that Local 812 would make under the contract, including millions of dollars of premium equivalency payments that funded Local 812's self-insured retention for the members' health insurance. CIGNA has taken the position throughout this litigation that the commissions due to Srein in respect of the self-insured retention could not be paid without Local 812's consent. A litigation in state court ensued when Local 812 refused to give such consent and instead asserted a claim to the funds in the account from which CIGNA intended to pay the commission. Following the commencement of that litigation, CIGNA and Local 812 entered into a settlement agreement pursuant to which CIGNA paid Local 812 the money that it claimed, and Local 812 undertook to indemnify CIGNA for the commissions CIGNA might be compelled to pay Srein (the "Settlement Agreement").

Srein commenced this diversity action in the United States District Court for the Southern District of New York, alleging that CIGNA breached its oral contract to pay the brokerage commission and that Local 812 induced the breach; CIGNA cross-claimed against Local 812 on the indemnity. Judge Brieant entered summary judgment against CIGNA on Srein's claim for commissions, and entered summary judgment in favor of Local 812 on CIGNA's indemnity claim, voiding the indemnity clause of the Settlement Agreement between CIGNA and Local 812.

We affirm for many of the same reasons adduced by the district court.


The Trust Fund is an employee welfare benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. §§ 1001-1461. The Trust Fund furnishes a variety of benefits to its members (including medical and disability insurance), some or all of which are funded by the employers pursuant to collective bargaining agreements. In 1988, following an arbitration in which it unsuccessfully sought higher employer contributions to its health plan, Local 812 encountered difficulty finding an insurer that would offer a satisfactory and affordable health benefits program. One of the bottling companies that employed members of Local 812--Canada Dry Bottling Company of New York--became aware of Local 812's insurance problems and approached

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Srein, an insurance consultant, to see if Srein could find a plan that would meet Local 812's needs. Srein had previously developed and marketed insurance benefits programs for Canada Dry as well as for other bottling companies that bargained collectively with Local 812.

Srein thereupon approached David Johnson, a senior account executive at CIGNA with whom Srein had had previous dealings on a commission basis. Following Srein's initiative, Johnson sent a letter to Local 812 in May 1988 seeking information that would permit CIGNA to provide quotations on health benefits. CIGNA contends that the following passage in that letter demonstrates Local 812's awareness that Srein was acting as broker for Local 812 in the ensuing transaction:

This letter also authorizes you to send this data to Mr. R.J. Srein.... This can be the original information, or copies, as Mr. Srein will be "driving" the program development.

Srein and CIGNA agreed that, if Local 812 accepted the proposed plan, Srein would receive a two-percent commission on all premium payments by Local 812 under the plan. Johnson testified in his deposition that he always dealt with outside brokers such as Srein in the sale of group insurance for such risks as medical care and disability. Johnson also testified that the "total rate" quoted to prospective policyholders for such plans included an allocation for CIGNA's administrative costs and profit as well as the brokerage commission.

Although Johnson's May 1988 letter to Local 812 said that Srein would be " 'driving' the program development" (whatever that means), Srein deliberately kept in the background during CIGNA's negotiations with the union, because Srein was strongly identified with management. Thus, when the CIGNA plan was presented to the Trustees of Local 812 on March 16, 1989, Srein did not attend. As CIGNA puts it in its brief:

Mr. Srein did not attend the [March 16] meeting at his own specific request. Apparently, Mr. Srein had previously represented management groups in the soft drink industry and felt Local 812 would not react positively to his presence at this meeting.

In deposition, Johnson admitted that, when he prepared a standard-form "Application for Group Insurance" for Local 812, he did not identify Srein as the "soliciting agent," as he normally would have done. Moreover, Johnson did not disclose to Local 812 during negotiations that the rate quoted for the CIGNA plan included a commission for Srein. In a letter to Local 812 dated February 23, 1989, Johnson wrote that the amount attributable to "fixed expenses" would "cover our handling of the claims, printing your booklets, ID cards, providing you with utilization reports, alphabetical listings, etc.," but he omitted to mention that these "fixed expenses" also included Srein's commission.

By the end of March 1989, Local 812 accepted CIGNA's proposed insurance program, and the parties entered into an insurance agreement effective April 1, 1989. In a letter to Johnson dated May 12, 1989, Local 812's consultant, Martin E. Segal Company, requested a breakdown of "principal retention components," such as "state premium taxes, commissions, interest credits on cash flow and reserves, administration and expenses." Johnson responded in a letter dated September 22, 1989, nearly six months into the policy term. Near the end of the letter, Johnson wrote:

I did want to confirm in our conversation that Ron Srein is the broker of record on this case as he is the one who brought me into it. Ron is also the broker of record on Pepsi Cola of New York, Canada Dry, Seven-Up, and RC Acquisition. Ron was very instrumental with us in writing this piece of business due to his relationship with CIGNA over the last decade. It was his evaluation of plan design and claims that enabled us to make a competitive offering to the executive committee.

The September 29, 1989 letter does not mention (in so many words) a commission for Srein. In a letter to Srein dated December 14, 1989, Johnson indicated that Local 812's only response to the information about Srein's involvement was asking "whether [Local 812] would have to pay additional monies to cover your compensation and I told

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[Local 812] that it was included in the fixed expense [it] is paying to me."

The program adopted by Local 812 in March 1989 consisted of policies for group medical, dental, life and accidental death and dismemberment insurance. The premiums disputed in this litigation were incurred in connection with the medical and dental plans.

The overall design of the medical and dental plans was that Local 812 would be self-insured up to a retention (limit) of $125,000 per claim, and that CIGNA would furnish claims-handling services for all claims, plus insurance coverage to the extent that any single claim exceeds the retention. The plan was funded by two kinds of payments from Local 812--"premium equivalency" payments and "residual" payments--as explained below.

A. "Premium equivalency" payments funded the payment of claims that were within Local 812's self-insured retention. Local 812 made monthly premium equivalency payments into its own "imprest" account to be drawn down by payments to CIGNA as CIGNA paid claims within the self-insured retention. It appears that all funds that Local 812 was required to transmit from this account were duly transmitted to CIGNA, and that any sums remaining in the imprest account were duly retained by Local 812. The premium equivalency payments added up to $11,572,835. 1 The two-percent commission owing to Srein on these...

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