Bennett v. Farmers Ins. Co.

• Decision Date: 01 June 2001
• Citation: 332 Or. 138,26 P.3d 785
• Parties: Darrell A. BENNETT, Petitioner/Respondent on Review, 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/Petitioners on Review.
• Court: Oregon Supreme Court

26 P.3d 785

332 Or. 138

Darrell A. BENNETT, Petitioner/Respondent on Review, 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/Petitioners on Review.

(CC 9308-05432; CA A89477; SC S45229 (Control), S45240).

Supreme Court of Oregon.

Argued and Submitted October 13, 1999.

Decided June 1, 2001.

Marc Zwerling, Portland, argued the cause for petitioner/respondent on review. With him on the briefs were Gary J. Lekas, P.C., and Jacqueline L. Koch, Portland.

James N. Westwood, of Miller, Nash, Wiener, Hager & Carlsen, LLP, Portland, argued the cause for respondents/petitioners on review. With him on the briefs were William H. Walters (Miller, Nash) and Craig D. Bachman, of Lane Powell Spears Lubersky, Portland.

Phil Goldsmith, John Paul Graff, and Richard S. Yugler, Portland, filed a brief for amicus curiae Oregon Trial Lawyers Association.

Before CARSON, Chief Justice, and GILLETTE, DURHAM, and KULONGOSKI, Justices.²

KULONGOSKI, J.

Plaintiff brought this action against Farmers Insurance Companies (Farmers)³ and Farmers's management company, Farmers Group, Inc. (FGI) (collectively, "defendants"), after Farmers terminated plaintiff's district manager appointment agreement. Plaintiff alleged tort claims for breach of fiduciary duty and breach of the duty of good faith and fair dealing against Farmers and FGI, and a claim for breach of contract against Farmers.⁴ The jury found for plaintiff on each of those claims. After entering judgment in favor of plaintiff in accordance with the jury's verdict, the trial court entered judgment notwithstanding the verdict (JNOV) for defendants on all claims.⁵ Alternatively, the trial court granted defendants' motion for a new trial on all claims. The Court of Appeals reversed the JNOV on plaintiff's contract claim and remanded that claim for a new trial, but affirmed the trial court's JNOV on plaintiff's tort claims. Bennett v. Farmers Ins. Co., 150 Or.App. 63, 945 P.2d 595 (1997). Plaintiff and defendants⁶ petitioned for review, and we allowed both petitions.

On review, we are asked to resolve three issues: (1) whether the evidence was sufficient to support plaintiff's claim that his termination without good cause constituted a breach of contract (based on plaintiff's theory that the parties had modified the at-will provision of the contract, or that Farmers had waived that provision, or that Farmers was estopped from relying on it); (2) if the evidence supports the breach of contract claim, then whether this court must remand the case for a new trial; and (3) whether a "special relationship" existed between plaintiff and defendants such that defendants could be liable to plaintiff in tort for breach of the duty of good faith and fair dealing or for breach of fiduciary duty. For the reasons set out below, we affirm the decision of the Court of Appeals reversing the trial court's JNOV on the contract claim and affirming the trial court's JNOV on the tort claims. However, we reverse the decision of the Court of Appeals remanding the case for a new trial on the contract claim, and we remand with instructions to the trial court to reinstate the judgment in accordance with the jury verdict on that claim.

I. FACTS

On appeal after a judgment notwithstanding the verdict, we review the evidence in the light most favorable to the party who prevailed before the jury. Jacobs v. Tidewater Barge Lines, 277 Or. 809, 811, 562 P.2d 545 (1977). We therefore review the record in this case in the light most favorable to plaintiff.

Plaintiff had been an insurance agent for Farmers in Roseburg, Oregon. In 1981, defendants asked plaintiff to become a district manager for Farmers in the Portland area, and plaintiff agreed.⁷ Plaintiff signed a written "District Manager's Appointment Agreement" (agreement) with Farmers. Although FGI directed Farmers's operations and employed Farmers's management personnel, only Farmers contracted with plaintiff.

The agreement described the district manager's duties and compensation, and provided:

"This Agreement * * * may be canceled without cause by either the District Manager or [Farmers] on 30 days [sic] written notice."

The agreement also provided:

"Nothing contained [in the agreement] is intended or shall be construed to create the relationship of employer and employee. * * * No control is to be exercised by [Farmers] over the time when, the place where, or the manner in which the District Manager shall operate in carrying out the objectives of this Agreement provided only that they conform to normal good business practice * * *."

Finally, the agreement stated that the parties could make "no change, alteration or modification" of the agreement, "except as * * * evidenced by an agreement in writing signed by the District Manager and an authorized representative of [Farmers]."

Defendants regularly evaluated district managers' performance. Some of the factors affecting those evaluations were the number of new agents that the district manager had recruited and the number and types of policies that agents within the district had sold.

In 1985, Winter, plaintiff's regional sales manager,⁸ and other FGI managers criticized plaintiff's performance as a district sales manager. That criticism centered around what Winter referred to as plaintiff's "poor performance in agency development." According to Winter, plaintiff had failed to recruit and train a sufficient number of new agents. Winter informed plaintiff that he was expected to meet specific recruitment goals by the end of August 1985 and additional goals by the end of that year. In a letter describing those goals, Winter wrote:

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

Winter also requested that plaintiff submit a detailed description of how he intended to meet his goals. Winter went on to list the additional expectations, including that plaintiff would provide a "weekly recruiting report" and that plaintiff would contact his prospective recruits every two weeks. The parties referred to that agreement as plaintiff's "performance plan." Winter closed the letter about the performance plan by saying:

"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 we 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 * * *."

At Winter's request, plaintiff signed, dated, and returned the letter. According to plaintiff, after that performance plan was developed, defendants began to exercise increasing control over the manner in which he conducted his business.

Plaintiff nearly reached the goals that had been set for him in the 1985 performance plan. Farmers acknowledged plaintiff's success by giving him various awards. However, in 1992, a new group of regional managers placed plaintiff on another performance plan with new goals. That performance plan also was accompanied by exhortatory letters from defendants' managers, including statements such as, "you are responsible for your own destiny" and "as always, your ultimate destiny lies in your own hands." One year later, Farmers terminated its agreement with plaintiff, citing plaintiff's failure to meet stated goals and his management decisions on several specified occasions.

In August 1993, plaintiff filed the present action against defendants. Plaintiff alleged that defendants had encouraged him to give up his insurance agency to become a district manager and that, after he had built a successful business, defendants had established unreasonable performance goals and used other deceitful strategies to force him out of business and to reap the profits of the business that he had created.

Plaintiff introduced evidence at trial in support of those allegations. Colvard, the regional agency manager who worked under Winter and who attended the meetings to evaluate plaintiff, testified that plaintiff's 1985 performance plan was part of defendants' strategy to force plaintiff to resign. Colvard explained that his own success was evaluated based on the number of district managers that he could replace. According to Colvard, defendants benefitted from replacing district managers because the commission paid to new agents typically was lower than that paid to seasoned ones, and defendants would profit from the difference. Colvard further testified that he had been told that Farmers had to have good cause to terminate a district manager. Accordingly, to support plaintiff's termination, Colvard had had to document a "severe performance deficiency." Colvard also admitted that he had set out to obtain plaintiff's resignation or to document his performance deficiency by setting unreachable performance quotas.

Additional testimony from Meals, the manager under Colvard who worked directly with district managers, corroborated Colvard's testimony. Meals testified that he directly was responsible for executing defendants' plan to push plaintiff into resignation or to document plaintiff's performance failure. Meals testified that he had set out to demonstrate that plaintiff had failed to perform and that he had asked for plaintiff's resignation at least eight times in 1985. Meals also...