Borbely v. Nationwide Mut. Ins. Co.

• Decision Date: 18 September 1981
• Docket Number: Civ. No. 78-1872.
• Citation: 547 F. Supp. 959
• Parties: James A. BORBELY, et al., Plaintiffs, v. NATIONWIDE MUTUAL INSURANCE CO., et al., Defendants.
• Court: U.S. District Court — District of New Jersey

547 F. Supp. 959

James A. BORBELY, et al., Plaintiffs, v. NATIONWIDE MUTUAL INSURANCE CO., et al., Defendants.

Civ. No. 78-1872.

United States District Court, D. New Jersey.

September 18, 1981.

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Morris Brown, Steven J. Tripp, Wilentz, Goldman & Spitzer, Woodbridge, N. J., for plaintiffs.

Eugene M. Haring, Ronald J. Hedges, McCarter & English, Newark, N. J., for defendants.

OPINION

ANNE E. THOMPSON, District Judge.

Plaintiffs, 18 former agents¹ of four Nationwide insurance companies² hereinafter "Nationwide" or "defendant", brought suit against Nationwide to recover damages for the alleged wrongful termination of the Agent's Agreements under which plaintiffs represented defendant in New Jersey. In particular, plaintiffs charged Nationwide with terminating the contracts without cause, without reasonable notice, and in violation of the public policy of New Jersey and of the implied covenant of good faith and fair dealing. In addition, plaintiffs claimed defendant had tortiously interfered with their prospective economic advantage. In a counterclaim, Nationwide charged ten³ of the plaintiffs with breach of contract, inasmuch as each of the ten had executed an Agreement and Release which allegedly barred them from bringing suit against Nationwide.

The case was bifurcated, and the matter of liability was tried to a jury over 17 trial days from June 2 to June 30, 1981. On the latter date, the jury returned verdicts in favor of plaintiffs on five issues which had been submitted for its consideration.

Nationwide now moves for judgment notwithstanding the verdict pursuant to Fed.R. Civ.P. 50(b), for a new trial on defendants' counterclaim under Fed.R.Civ.P. 59(a), and for the conditional grant of a new trial pursuant to Fed.R.Civ.P. 50(c). In the alternative, defendant seeks a new trial on all issues. The Court, having read and considered the briefs submitted, the authorities cited therein, the evidence at trial, and the oral arguments of counsel at a hearing on July 20, 1981, renders the following opinion.

I. BACKGROUND FACTS

Although the facts relevant to each of the individual issues raised by defendant on these motions will be set forth in detail at later points in this opinion, a recitation of certain preliminary, uncontroverted facts will provide some necessary context.

In September 1952, Nationwide⁴ was authorized to sell various types of insurance in the State of New Jersey, including automobile, casualty, and fire policies. This insurance was marketed through individuals who had executed agency contracts with Nationwide under which the individuals were to represent Nationwide exclusively.⁵ Defendant's District Sales Managers were responsible for, among other things, recruiting, training, and supervising these agents. Each of the plaintiffs became a Nationwide agent sometime during the period from 1953 to 1972 by signing whichever Master or Standard Agent's Agreement was then in effect.

All billing and collection of premiums on the policies written by the agents, as well as policy renewals, was done directly between Nationwide and the policyholders. The agents serviced the policies by, among other things, forwarding claims against policyholders to defendant, remitting premiums if paid directly to the agents, and giving advice to policyholders when requested.

From time to time, the agreements between plaintiffs and Nationwide were revised, and the agents asked to execute the revised version. In 1969, Nationwide published a Compensation and Security Handbook CASH Book, which was distributed to the then-existing agents sometime in the same year, concurrent with a revised Agent's Agreement.

Over the years up to and including 1977, Nationwide developed a series of promotional programs directed at the agents. These included a variety of sales contests and the establishment of clubs representing different levels of achievement in sales production.

In October 1975, Nationwide adopted a plan called the "New Jersey Marketing Strategy" under which, among other things, business, life and health insurance lines were emphasized, quotas were placed on automobile insurance, and a moratorium was imposed on agent recruitment. This plan had been developed as a result of the issuance in 1975 of a Review Team study concerning Nationwide's New Jersey operations. Further studies were conducted between 1975 and 1977, culminating in a decision to withdraw from New Jersey. None of the agents were informed of the results of these studies. Finally, on or about October 13, 1977, Nationwide announced its decision to withdraw from the New Jersey insurance market and informed the agents that their agencies would be terminated effective September 30, 1978. This notice was given orally by Nationwide representatives at an agents' meeting and by form letter given or mailed individually to each agent.⁶ Also, on October 13, 1977 Nationwide informed its policyholders that it would not renew commercial fire and casualty policies.

In addition to informing them of the terminations, the notice to agents provided in part for payment of certain benefits,⁷ waiver of the agreement's non-competition clause after cancellation, and enforcement of the exclusivity provision until termination. The notice also gave instructions concerning the companies' plan for curtailing and ultimately ceasing their insurance sales operation in New Jersey, as it affected the various lines.

Until April 7, 1981, Nationwide maintained its license to sell insurance in New Jersey.⁸ As a consequence of litigation in the state court,⁹ brought by the Commissioner of Insurance, Nationwide was free to terminate its fire and casualty business in New Jersey except for the renewals required under N.J.S.A. 17:22-6.14a¹⁰ and 39:6A-3.¹¹ Defendant continues to issue, outside of New Jersey, insurance to its national accounts which conduct activity here.

II. JUDGMENT NOTWITHSTANDING THE VERDICT

Since Nationwide moved for a directed verdict, both after plaintiffs' case and after the close of all the evidence, and now moves for judgment notwithstanding the verdict on grounds previously advanced on both of those occasions, it may properly seek relief under Fed.R.Civ.P. 50(b). Universal Computer Systems, Inc. v. Medical Services Association of Pa., 474 F.Supp. 472, 475 (M.D.Pa.1979), modified on other grounds, 628 F.2d 820 (3rd Cir. 1980). The standards governing a motion for directed verdict under subdivision (a) of Rule 50 and a motion for judgment notwithstanding the verdict under subdivision (b) of the rule are identical. Fireman's Fund Insurance Co. v. Videfreeze Corp., 540 F.2d 1171, 1177 n.5 (3rd Cir. 1976), cert. denied 429 U.S. 1053, 97 S.Ct. 767, 50 L.Ed.2d 770 (1977). "The standards to be applied do, however, vary according to whether the movant has the burden of proof." Id. at 1177.

Where, as here, the movant did not bear that burden at trial, the test is whether, viewing the evidence in the strongest light favorable to the non-moving party and giving him the advantage of every fair and reasonable inference drawn therefrom, the non-moving party has adduced sufficient evidence to create a jury issue. Id. at 1177-78. Put another way, the question turns on "whether as a matter of law the record is critically deficient of that minimum quantum of evidence from which a jury might afford relief." Universal Computer Systems, Inc. v. Medical Services Association of Pa., supra at 475. On this review neither the credibility of the evidence nor the weight of it may be considered. Fireman's Fund Insurance Co. v. Videfreeze Corp., supra at 1178.

Having established the standard by which defendant's application must be adjudged, I turn now to consider the separate issues which Nationwide raises.

A. BREACH OF CONTRACT.

The first issue submitted to the jury involved the alleged breach of contract, specifically breach of the agreement's cancellation provision. At the time Nationwide terminated the agency agreements, the clause governing such action provided as follows:

9. Cancellation. This Agreement shall continue from its effective date until the end of the current year and shall be automatically renewed thereafter from year to year unless sooner cancelled. This Agreement shall automatically cancel upon the date your license to act as an agent for the Companies is revoked or cancelled, or upon your death, or normal retirement at age sixty-five (65). Further, due to the personal nature of our relationship you or the Companies have the right to cancel this Agreement at any time after written notice has been delivered to the other or mailed to the other's last known address. It is understood that the Agent shall have access to the Agents Administration Review Board, and its procedures, as it may exist from time to time.

Plaintiffs' Exhibit 1(i).

Nationwide has consistently urged that, because the clause is unambiguous, construction of the provision is a matter for the court rather than the jury, and further, that the only possible construction is that the contract was terminable at will by either party, with or without cause. In addition, Nationwide claims that existence of the implied condition that defendant would continue to do business in this state and would continue to have business to give plaintiffs is also a matter of law for the court to decide. Finally, defendant takes the position that, inasmuch as no evidence was adduced upon which reasonable persons could differ, the issues of the existence of "cause" to terminate the Agent's Agreement and of the adequacy of notice are not subject to jury determination.

Plaintiffs contend the quoted passage is ambiguous and, when viewed in light of extrinsic evidence, is susceptible of an interpretation that cause, namely agent misconduct, is required before an agent may be properly terminated, which construction would be the function of the jury.

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