Bennett v. Farmers Ins. Co. of Oregon

• Decision Date: 17 September 1997
• Citation: 945 P.2d 595,150 Or.App. 63
• Parties: Darrell A. BENNETT, Appellant, v. FARMERS INSURANCE COMPANY OF OREGON, an Oregon corporation; Farmers Insurance Exchange; Truck Insurance Exchange; Fire Insurance Exchange; Mid-Century Insurance Company; Farmers New World Life Insurance Company; and Farmers Group, Inc., aka Farmers Underwriters Association, Respondents. 9308-05432; CA A89477. Court of Appeals of Oregon, In Banc
• Court: Oregon Court of Appeals

Page 595

945 P.2d 595

150 Or.App. 63

Darrell A. BENNETT, Appellant, v. FARMERS INSURANCE COMPANY OF OREGON, an Oregon corporation Farmers Insurance Exchange; Truck Insurance Exchange; Fire Insurance Exchange; Mid-Century Insurance Company; Farmers New World Life Insurance Company; and Farmers Group, Inc. aka Farmers Underwriters Association, Respondents.

9308-05432; CA A89477.

Court of Appeals of Oregon,

In Banc.

Argued and Submitted April 11, 1997.

Resubmitted In Banc Sept. 4, 1997.

Decided Sept. 17, 1997.

Marc Zwerling, Portland, argued the cause for appellant. With him on the briefs were Ridgway K. Foley, Jr., Gary J. Lekas and Foley & Duncan.

James N. Westwood, Portland, argued the cause for respondents. With him on the brief were Craig D. Bachman, Miller, Nash, Wiener, Hager & Carlsen and Lane Powell Spears Lubersky.

EDMONDS, Judge.

Plaintiff appeals after the trial court granted judgments notwithstanding the verdict (JNOV) and, alternatively, a motion for a new trial, ORCP 63 C, on breach of contract, breach of fiduciary duty, and breach of duty of good faith and fair dealing claims. ORCP 63 C. After a two-month jury trial, the jury returned verdicts in favor of plaintiff for $3.5 million for breach of contract against all contracting defendants, ¹ $750,000 compensatory damages for breach of fiduciary duty against Farmers Insurance Company of Oregon (FICO) and Farmers Group, Inc. (FGI), $750,000 compensatory damages for breach of good faith and fair dealing against FICO and FGI, and $35 million punitive damages against FICO and FGI. The trial court entered judgments in favor of plaintiff in accordance with the verdicts, and then subsequently entered JNOVs. Plaintiff seeks reinstatement of the judgments in his favor. We reverse the JNOV on the contract claim and remand for a new trial. Otherwise, we affirm.

Because this appeal comes to us on JNOVs, we do not reexamine the jury's findings, nor do we reweigh the evidence. Jacobs v. Tidewater Barge Lines, 277 Or. 809, 811, 562 P.2d 545 (1977). All evidence, and every reasonable inference from the evidence In 1981, FGI and FICO solicited plaintiff to terminate his insurance agency business and to enter into a new agreement under which he would recruit and train insurance agents to sell the contracting defendants' insurance policies. All defendants, except FGI, are insurance companies. FGI is the management company that acts on behalf of the defendant insurance companies and with whom plaintiff dealt throughout his relationship with defendants. Subsequently, the contracting insurance companies entered into a "district manager's agreement" (Agreement) with plaintiff in September 1981. FGI is not a party to the Agreement. Under the Agreement, plaintiff was characterized as an independent contractor. He maintained his own office, hired his own employees, paid his own business expenses and assumed all the risk of business losses and failure. The Agreement provided that "no control" would be exercised by the insurance companies over the time, place or manner in which plaintiff carried out the objectives of the Agreement and that the Agreement did not create an employer-employee relationship between plaintiff and the insurance companies. Plaintiff's office was located in the Portland metropolitan area, but he was entitled under the Agreement to recruit agents without any geographical restriction. Most importantly, the Agreement expressly provided that it could be terminated by defendants without cause.

must be viewed in the light most favorable to plaintiff. Wooton v. Viking Distributing Co., Inc., 136 Or.App. 56, 62, 899 P.2d 1219 (1995), rev. den. 322 Or. 613, 911 P.2d 1231 (1996). Our inquiry is to ascertain whether the record contains any evidence that supports the verdicts.

Essentially, plaintiff's theory of the case is that defendants recruited him to become a district manager and that, after he had built a successful business, they terminated their relationship with him, thereby retaining the fruit of his investment in the business. From 1981 to 1993, plaintiff invested money in the business and worked to make it successful. Because district managers for the companies receive a percentage of all sales commissions generated by the insurance agents under their supervision, they enjoy the potential to earn annual incomes exceeding one million dollars. From 1982 to 1992, defendants' total gross profits from plaintiff's district exceeded $27 million. However, in 1993, FGI and FICO prepared an internal 150-page report proposing to terminate the Agreement. FGI's management approved the request, which directly led to defendants' termination of the Agreement. As a result, plaintiff brought this action. A central issue in this case is whether the parties' agreement, as it existed in 1993, permitted defendants to terminate without cause.

CONTRACT CLAIM--JNOV

We first address the JNOV on plaintiff's breach of contract claim against all defendants except FGI. Plaintiff alleges, in part, that those defendants violated the Agreement by terminating him without cause. Defendants answered that the Agreement expressly permitted them to terminate the Agreement without cause. Plaintiff replied with several theories: (1) that the "termination without cause" provision had been modified in 1985 to provide for termination only "for cause"; (2) that the companies had waived their contractual right to terminate the Agreement without cause; and (3) that the companies were estopped from terminating the Agreement without cause. The jury found the contracting defendants liable for breach of contract. Defendants then moved for a JNOV, which the trial court granted. The court also ruled that, as a matter of law, plaintiff's theories of modification, waiver and estoppel were not available based on the evidence that had been adduced. On appeal, plaintiff assigns those rulings as error.

There are three clauses in the Agreement that are pertinent to our analysis. The first is the termination clause that provides, in part:

"This Agreement shall terminate upon the death of [plaintiff], and may be cancelled without cause by either [plaintiff] or [defendants] on 30 days written notice."

The Agreement also contained a clause that provides, in part:

"The time to be expended by [plaintiff] is solely within his discretion, and the persons Finally, the Agreement provides that

to be solicited and the area within the district involved wherein solicitation shall be conducted is at the election of [plaintiff]. No control is to be exercised by [defendants] over the time when, the place where, or the manner in which [plaintiff] shall operate in carrying out the objectives of this Agreement."

"this Agreement supersedes and takes the place of any and all prior agreements, written or otherwise, between [plaintiff] and [defendants], or any of them, and no change, alteration or modification hereof may be made, except as is evidenced by an agreement in writing signed by [plaintiff] and an authorized representative of [defendants]."

When the provisions of the Agreement are read together, they require that any modifications to the Agreement must be in writing and signed by the parties. The trial court ruled that there was no evidence of any written modification of the Agreement. The evidence shows that on May 24, 1985, David Winter, defendants' regional sales manager, sent plaintiff a letter that established certain goals that defendants expected plaintiff to attain to avoid termination of the Agreement. Defendants told plaintiff that they would terminate the Agreement if he did not reach the specified goals. The letter also explained that defendants would be exercising more control over plaintiff's business. The letter was signed by Winter and requested that plaintiff also sign the letter and return it to defendants. Plaintiff signed the letter and returned it to defendants.

In particular, the letter provided:

[Plaintiff has] agreed that all of the goals that we discussed and established were attainable goals. * * *

" * * * * *

" * * * If any of the above goals are not attained by the end of August, we will be asking you for your resignation. All of these goals must be attained. You did indicate that these were reasonable goals and goals which could be attained.

" * * * * *

" * * * Failure to attain any one of these goals will again result in us requesting your resignation or terminating your appointment agreement.

" * * * * *

"In addition, we ask that you supply a weekly recruiting report to both Bill Meals and Ed Colvard every Monday. This report should include the number of first time interviews, second interviews and subsequent interviews which you have with prospective agents. Also include the names of the people you were talking with. In addition, indicate the number of first time contacts, from whatever source that you have. Also indicate the source from which the contact came. This will allow us to evaluate your progress on a weekly basis and recommend changes to your plans or to provide you assistance should problem areas pop up. We want to help you in any way we can.

" * * * * *

" * * * At this point, you will either make the goals that we established together and develop the habits necessary to be a successful district manager over the long haul, or we will have to replace you as a district manager.

"If you approach this in a positive manner and take advantage of the assistance that we can and will provide, you can attain the established goals. If you are unwilling or unable to put forth the effort necessary to attain these goals, you probably should not be a district manager. Your future is in your hands. We can help, but can't do the job for you. Your own abilities and efforts will be the determinant factor as to whether you remain as a district manager for the Farmers Insurance Group of Companies." (Emphasis supplied.)

Plaintiff argues that the letter constitutes a...