Beaudry v. Farmers Ins. Exch.

• Decision Date: 17 October 2016
• Docket Number: NO. 33,618,33,618
• Parties: Craig Beaudry, Plaintiff–Appellee, v. Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Mid–Century Insurance Company, Farmers New World Life Insurance Company, Farmers Insurance Company of Arizona, Lance Carroll, and Craig Allin, Defendants–Appellants, and Farmers Group, Inc., Tom Gutierrez, and Christopher Kerr, Defendants.
• Court: Court of Appeals of New Mexico

388 P.3d 662

Craig Beaudry, Plaintiff–Appellee,

v. Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Mid–Century Insurance Company, Farmers New World Life Insurance Company, Farmers Insurance Company of Arizona, Lance Carroll, and Craig Allin, Defendants–Appellants,andFarmers Group, Inc., Tom Gutierrez, and Christopher Kerr, Defendants.

NO. 33,618

Court of Appeals of New Mexico.

Filing Date: October 17, 2016

Certiorari Granted, December 19, 2016, No. S-1-SC-36181

Law Office of Jane B. Yohalem, Jane B. Yohalem, Santa Fe, NM, O'Friel and Levy, P.C., Pierre Levy, Aimee Bevan, Santa Fe, NM, Law Office of Barry Green, Barry Green, Santa Fe, NM, for Appellee.

Lewis Roca Rothgerber Christie LLP, Ross L. Crown, Albuquerque, NM, Lewis Roca Rothgerber Christie LLP, Steven J. Hulsman, Kristina N. Holmstrom, Phoenix, AZ, Skadden, Arps, Slate, Meagher & Flom LLP, Raoul D. Kennedy, James P. Schaefer, Palo Alto, CA, for Appellants.

Brownstein Hyatt Farber Schreck, LLP, Eric R. Burris, Nury H. Yoo, Albuquerque, NM, for Amicus Curiae Association of Commerce and Industry of New Mexico.

OPINION

SUTIN, Judge.

{1} Plaintiff Craig Beaudry received substantial compensatory and punitive damages jury verdicts on his claim of prima facie tort against various Farmers Insurance companies (the Companies)¹ and two Farmers employees, Lance Carroll and Craig Allin (altogether, Defendants). At trial, Plaintiff proved that, in terminating his insurance agent agreement (the Agreement), Defendants intended to harm and actually harmed Plaintiff with malice and without justification. Defendants' appeal asserts that the district court erred as a matter of law in submitting prima facie tort to the jury because termination of the Agreement was determined by the districtcourt to be lawful and authorized under the terms of the Agreement. Defendants also attack the punitive damages award as unconstitutional.

{2} The approaches of the parties diverge significantly. Defendants treat the factual detail of their proved malicious, intentionally harmful conduct in terminating the Agreement as irrelevant as a matter of law, whereas Plaintiff focuses heavily on that conduct as the underlying appropriate basis for application of prima facie tort. Defendants represent that, based on their global legal research, "[u]pholding the verdict [in this case] would make this Court the first appellate tribunal in America to hold that prima facie tort can be used on a contract termination expressly authorized by the contract itself." Plaintiff interprets New Mexico case law as permitting the application of prima facie tort in the circumstances under which Defendants' termination of the Agreement was expressly authorized by a for-cause termination provision in the Agreement.

{3} As this Opinion lays out, how this case was tried by the parties is a crucial and compelling consideration in how the author of this Opinion (referred to hereafter in the first person) decides Defendants' issues on appeal. I hold that, under the particular manner in which this case was tried, prima facie tort was properly sent to the jury, and the majority affirms the judgment and the orders denying Defendants' post-trial motions for judgment as a matter of law. The majority also holds that the jury's award of punitive damages was not unconstitutional and affirms the award.

BACKGROUND

A. Defendants' Presentation of Facts

{4} In conformity with their approach that purely legal issues are to be addressed and decided, Defendants limit their presentation of the facts to the few that relate to the Agreement and that bear upon the appellate issues, the majority of which I quote here from Defendants' brief in chief.

{5} "[Plaintiff] was an insurance agent who contracted to sell insurance policies on behalf of the Companies under [the] ... Agreement[.] ... Lance Carroll contracted with the Companies to be a District Manager for the territory that included [Plaintiff's] agency.... Craig Allin served as the Companies' State Director in New Mexico." "The Agreement specified that [Plaintiff] was an ‘independent contractor.’ The Agreement obligated [Plaintiff] to ‘submit to the Companies every request or application for insurance for the classes and lines underwritten by the Companies and eligible in accordance with their Rules and Manuals.’ It further provided that, ‘[a]ll business acceptable to the Companies and written by the Agent will be placed with the Companies,’ and that the Agent must ‘servic[e] all policyholders of the Companies in such a manner as to advance the interests of the policyholders, the Agent and the Companies.’ The Agreement was terminable upon three months[ ] written notice and terminable for specified reasons on thirty days[ ] written notice. One of the specified reasons was ‘[s]witching insurance from the Companies to another carrier.’ "

{6} "From 2000 through 2011, [Plaintiff] operated an insurance agency in Taos, [New Mexico,] selling policies to the Companies' policyholders pursuant to the Agreement. One of those policyholders was Moises Martinez. In September 2010, [Plaintiff]² placed one of Martinez's policies with a rival carrier, i.e., CNA. [Defendants] investigated and concluded that [Plaintiff's] agency had breached the Agreement. [Defendants] elected to terminate the Agreement in accordance with the Companies' policy of terminating agents who place eligible business outside the Companies." "By letter dated February 1, 2011, the Companies notified [Plaintiff] that the Agreement would be terminated effective March 5, 2011. The termination date was later changed to March 24, 2011. [Plaintiff], therefore, received [fifty-one] days[ ] notice of his termination—well in excess of the [thirty] days required for termination based on a breach of the Agreement." "[Plaintiff's] termination was considered by a Termination Review Board and ultimately upheld by the Companies."

B. Plaintiff's Presentation of Facts

{7} In stark contrast, in his answer brief, Plaintiff recites approximately twenty-one pages of facts covering, in detail, everything that went to the jury on his prima facie tort claim, including proof of malicious intent to harm him, actual and significant harm to him, improper, offensive, and unfair means employed by various Farmers' employees, absence of justification, and compensatory damages. According to Plaintiff, despite his stellar record as an agent, his contract was terminated after he complained to his supervisor, Carroll, and his supervisor's supervisors about a fellow agent who was "poaching" clients. Additionally, Plaintiff states that by terminating the Agreement, Carroll and Allin profited financially and in job security by terminating Plaintiff and distributing the policies previously held at Plaintiff's agency. Among many other details, Plaintiff outlines broken promises Defendants made to Plaintiff, including Defendants' assurance that his hard work would pay off and that only "deadbeat" agents were terminated. Plaintiff admits that his employee mistakenly and temporarily transferred a Farmers policy to another company, but explains that the error was quickly remedied. This error occurred at a time when the agency was stressed due to the absence of Plaintiff's wife, Dee, who handled operations at the agency, but who had lost both kidneys and was forced to relocate to Denver for intensive treatment. Despite his having corrected the mistake quickly, Plaintiff states that he was ambushed, that his termination was engineered, and that he was never given a full opportunity to explain the situation either before his termination or after. He describes feelings of shock, betrayal, and depression. It is a given, based on the jury verdict, that the facts Plaintiff presented showed the termination of Plaintiff's agency was based on unjustifiable motives, including actual and malicious intent to harm Plaintiff, greed, personal self-interest, and retribution. In their reply brief, Defendants characterize Plaintiff's factual presentation as "irrelevant" and as "a skewed version of the record in an attempt to garner sympathy and divert attention from the fatal legal defects in his prima facie tort claim."

{8} Based on the record, the majority treats the facts as provided in Plaintiff's answer brief as established and uncontrovertible. In considering the elements of prima facie tort, the jury obviously believed enough of Plaintiff's extensive factual detail to conclude that the elements were satisfied.

C. Procedural

{9} Plaintiff's operative complaint set out eight claims for relief sounding in contract and tort: "tortuous ^{[3 ]}interference with contract"; "tortuous interference with prospective contractual relations"; breach of contract; breach of the covenant of good faith and fair dealing; conspiracy; intentional infliction of emotional distress; prima facie tort; and violation of the New Mexico Insurance Code. Presumably, these claims were set out because Plaintiff believed that each of the eight claims stated a claim upon which relief could be granted. Plaintiff also sought punitive damages.

{10} During the course of litigation, Defendants filed numerous dispositive motions, including a motion for summary judgment on what Defendants characterized as Plaintiff's claim for wrongful termination of the Agreement. In this motion, Defendants sought a ruling that the termination of the Agreement was authorized under the terms of the Agreement, and thus, Plaintiff's claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and any other claim "premised in whole or [in] part on wrongful termination of the Agreement" should be dismissed. In response, Plaintiff argued that genuine issues of material fact existed as to whether "Defendants legitimately fired [Plaintiff] for breach of contract." Plaintiff's argument in opposition primarily focused on the question of whether he could be found to have breached the Agreement, and thus be subject...