Aon Risk Services, Inc. v. Meadors

• Decision Date: 07 November 2007
• Docket Number: No. CA 06-1231.,CA 06-1231.
• Citation: 267 S.W.3d 603,100 Ark. App. 272
• Parties: AON RISK SERVICES, INC., of Arkansas, Appellant, v. John MEADORS, Appellee.
• Court: Arkansas Court of Appeals

267 S.W.3d 603

100 Ark. App. 272

AON RISK SERVICES, INC., of Arkansas, Appellant, v. John MEADORS, Appellee.

No. CA 06-1231.

Court of Appeals of Arkansas.

November 7, 2007.

Tony L. Wilcox and Brandon W. Lacy; Orr, Scholtens, Willhite & Averitt, PLC, by: Chris A. Averitt, Jonesboro, AR; and Sidley Austin, LLP, by: Robert N. Hochman and Jason M. Bohm, Chicago, IL, for appellant.

Eubanks, Baker & Schulze, by: J.G. "Gerry" Schulze, Little Rock; Welch & Kitchens, by: Morgan E. Welch, North Little Rock; and Cloar Law Firm, by: Ralph Cloar, Little Rock, AR, for appellee.

LARRY D. VAUGHT, Judge.

A Pulaski County jury awarded appellee John Meadors $2,509,127.60 on several breach-of-contract claims against his employer, appellant Aon Risk Services, Inc., of Arkansas ("ARS Arkansas"). In post-trial proceedings, the circuit judge reduced the award to $1,281,930.90. The judge also gave Meadors $150,000 in attorney fees, to be increased to $320,482.72 in the event of an appeal, and declined Meadors's request for prejudgment interest. ARS Arkansas appeals, arguing that the jury's verdict was not supported by substantial evidence and that the trial judge erred in subjecting it to an enhanced attorney-fee award should it decide to appeal. On cross-appeal, Meadors asks us to reinstate the jury's original damage award, grant him prejudgment interest, and reverse several summary judgments that were entered prior to trial. We affirm in part and reverse and remand in part on both direct and cross-appeal.

Background Facts

Meadors is a veteran of the insurance-brokerage industry. On May 1, 1997, he executed a five-year employment contract with ARS Arkansas, a Little Rock insurance brokerage firm whose parent company is Aon Corporation. ARS Arkansas's managing director, Mark Brockington, described Meadors's job as that of a producer, meaning that he was responsible for attracting business and making sales. The contract provided that Meadors would be compensated by a base salary plus an annual bonus calculated on a percentage of new, first-year commissions earned and collected by ARS Arkansas.

For twenty-five to thirty years prior to 1997, Meadors cultivated a business relationship with Dillard's department stores in hopes of brokering insurance benefits for Dillard's employees. His patience was rewarded in the fall of 1999, while he was employed at ARS Arkansas. In August and September of that year, he put Dillard's in touch with Combined Insurance Companies, another subsidiary of Aon Corporation. Combined offered a package called Workplace Solutions in which Dillard's employees could purchase life, disability, and other types of insurance policies through workplace enrollment. Dillard's and Combined ultimately executed a five-year agreement on March 24, 2000, giving Combined access to Dillard's employees for that length of time.

Before the agreement was signed, however, Meadors obtained a copy of what is referred to as the "Interdependency Memo." This document, dated February 9, 2000, was sent by Aon to all Aon Risk Services Managing Directors, including Mark Brockington at ARS Arkansas. Its intent was to promote "interdependency" among Aon entities, that is, to encourage ARS brokerage offices to place insurance business with Aon-affiliated companies. The Memo recited the following:

[A] financial rewards system has now been put in place with almost all Aon companies. ARS Management has agreed with the various Aon companies listed on the following page that it will receive from these companies bonus pool monies representing the listed percentage of interdependence revenues generated on new fees and commissions.

(Emphasis in original.) The following page was headlined "Interdependency Compensation Agreements for 2000," and it listed, among others, Combined Insurance Companies. Combined agreed to pay "30% of annualized premium on all life products over 15 year term plus 15% 1st year for all other products to pool." The Memo then explained how the bonus pool would operate:

Such funds will be paid out in entirety to ARS staffers in the form of annual bonus pool payments under the following conditions:

1. The Aon Company will credit these monies to the ARS office(s) practice group(s) as appropriate to their involvement in the procurement of revenue.

2. The credit is made as the income is booked and, if not booked on the accrual method, for 12 full months of income booking.

3. No formulaic bonus will be accrued to any individual ARS employee.

4. Each office/practice group will accumulate its "bonus pool" through year end at which time each Managing Director will allocate 100% of the fund balance in the pool to those employees who have been the most responsible for the professional production and/or marketing, servicing and/or maintenance of the client accounts generating the bonus pool funds and who have done so in a manner consistent with Aon's stated policies of professional excellence, cooperative behavior, and ethical conduct.

5. Shared introduction with an office/practice or between and office/practice generates a single payment only. Which may be split as agreed by the MDs [Managing Directors].

6. Each Managing Director's recommendation as to the allocation of the bonus funds in the pool is subject to sign off by the President or CEO of ARS Americas for audit purposes, but the Managing Director's recommendation will not be altered without assumed "extreme prejudice." In any case, the entire pool in each office or practice will be paid.

On a quarterly basis we will share the bonus pool figures with ARS professional staff so that employees are aware of the magnitude of the rewards accruing to them from serving client needs via interdependence efforts.

(Emphasis in original.) Additionally, the Memo declared that "local/practice group management is now authorized to make the proper call `on the ground' as to just how to allocate bonus monies." Managing Directors were asked to "carefully discuss this enhanced compensation structure with all professional staff" and to "share this message as soon as possible."

According to Meadors, when he saw the Memo sometime in February 2000, he was enthused about the program and "absolutely" believed that it would entitle him to compensation over and above his basic employment contract compensation. However, after the Dillard's/Combined agreement was signed in March 2000, Combined placed no monies in the bonus pool based on Dillard's premiums. Mark Brockington explained that, in order for Combined to acquire the Dillard's account, it had to buy out another broker or insurance company for $1.6 million. Thus, Combined told him, it could not pay normal commissions. Following negotiations that lasted well beyond the signing of the Dillard's agreement, Combined and ARS Arkansas agreed to a $240,000 commission, of which Meadors received fifteen percent, or $36,000, as called for in his basic employment contract.

In 2005, Meadors sued ARS Arkansas, Combined, and several other Aon companies, alleging that the Interdependency Memo was a unilateral contract, which was breached when he did not receive bonus-pool monies generated by the Dillard's agreement.¹ Combined and the other Aon entities were dismissed by summary judgment, as were Meadors's claims for unjust enrichment, fraud, and breach of contract as a third-party beneficiary. However, the case against ARS Arkansas went to trial. There, Meadors testified that, had the appropriate monies been placed in the bonus pool, he would have received $2,406,522.60 on the Dillard's transaction. The jury awarded him that amount, plus additional damages based on other claims. In post-trial proceedings, the trial judge reduced the Dillard's award by almost fifty percent. This appeal followed.

We begin our discussion of the issues with ARS Arkansas's direct appeal from the jury's verdict pertaining to the Dillard's transaction and Meadors's cross-appeal from the trial judge's reduction of the damages on that same transaction.

I. Formation of Contract

ARS Arkansas argues that the Interdependency Memo did not form a contract because: 1) it was not sufficiently definite to constitute an offer; 2) if it was an offer, Meadors did not accept it; 3) if a contract was created, it was not an agreement between ARS Arkansas and Meadors. ARS presents these arguments in the context of the trial court's denial of its motion for a directed verdict. Our standard of review is therefore whether the jury's verdict was supported by substantial evidence. Stewart Title Guar. Co. v. Am. Abstract & Title Co., 363 Ark. 530, 215 S.W.3d 596 (2005). Substantial evidence is that which goes beyond suspicion or conjecture and is sufficient to compel a conclusion one way or the other. Id. In determining whether there is substantial evidence, we view the evidence and all reasonable inferences arising therefrom in the light most favorable to the party on whose behalf judgment was entered. Id.

Meadors's theory at trial was that the Interdependency Memo formed a unilateral contract. There are several instances where unilateral contracts commonly appear, such as where a reward is offered, e.g., Ark. Bankers' Ass'n v. Ligon, 174 Ark. 234, 295 S.W. 4 (1927), where a contest is announced, e.g., Mears v. Nationwide Mut. Ins. Co., 91 F.3d 1118 (8th Cir.1996), or where changes are made and disseminated in an employee manual. See Crain Indus., Inc. v. Cass, 305 Ark. 566, 810 S.W.2d 910 (1991). In those situations, the offeree does not accept the offer by express agreement but by his performance. For example, in the case of a reward, the offeree accepts by performing the particular task, such as the capture of a fugitive, for which the reward is offered. Even though he has not directly communicated his acceptance, a contract is formed as the result of his performance. See Ligon, supra. See also JOSEPH M. PERILLO, CORBIN ON CONTRACTS, § 1.23 (Rev. Ed.1993); 17 C.J.S. Contracts § 9 (1999)...