Chamberlain v. Securian Fin. Grp., Inc.

• Decision Date: 19 February 2016
• Docket Number: DOCKET NO. 3:14–cv–00453–MOC–DCK,3:14–cv–00453
• Court: U.S. District Court — Western District of North Carolina
• Parties: Scott Chamberlain, Plaintiff, v. Securian Financial Group, Inc. and Minnesota Life Insurance Company, Defendants.

180 F.Supp.3d 381

Scott Chamberlain, Plaintiff,

v.Securian Financial Group, Inc. and Minnesota Life Insurance Company, Defendants.

DOCKET NO. 3:14–cv–00453–MOC–DCK

3:14–cv–00453

United States District Court, W.D. North Carolina, Charlotte Division.

Signed February 19, 2016

Julie Hanna Fosbinder, Fosbinder Law Office, Charlotte, NC, for Plaintiff.

Patti West Ramseur, Corinne Berry Jones, Smith Moore Leatherwood LLP, Greensboro, NC, Heather C. White, Smith Moore LLP, Charlotte, NC, for Defendants.

ORDER

Max O. Cogburn, Jr.

, United States District Judge

THIS MATTER is before the court on Defendants' Motion for Summary Judgment (# 21). After being fully briefed, the court heard oral arguments on the motion on January 25, 2016. Having considered the motion, briefs, arguments of counsel, and evidentiary record, the court enters the following findings, conclusions, and Order.

FINDINGS AND CONCLUSIONS

I. INTRODUCTION AND FACTUAL BACKGROUND

The facts of this case are as follows. Defendant Minnesota Life Insurance Company (“Minnesota Life”) sells, via a network of independent agents, life insurance products. (Affidavit of Paul Dwyer, ¶ 3 (hereinafter, “Dwyer Affid.”)). Defendant Securian Financial Group (“SFG”) is the parent corporation of Minnesota Life. (Id. ¶ 2). It is also the parent corporation of nonparty Securian Financial Services (“SFS”).¹ (Id. ¶ 2). SFS sells, via a network of independent general agents and registered agents, registered securities products, including variable life insurance products. (Id. ¶ 4). Independent agents and registered agents must be affiliated with a “general agent” that oversees their work. See, e.g., (Deposition of Scott Chamberlain, pp. 66, 73-76 (hereinafter “Chamberlain Dep.”) (# # 23, 40); Dep. Ex. 43² (showing Dennis Howe as Chamberlain's general agent)). Agents, registered agents, and general agents are paid based solely on commission. (Chamberlain Dep pp. 66, 73–76; Dep. Ex. 43, 44, 45).

In 1994, Plaintiff Chamberlain signed an Agent's Contract with the Minnesota Mutual Life Insurance Company (“MMLIC”) (now named Minnesota Life Insurance Company (Defendant)). (Dep. Ex. 43; Chamberlain Dep. pp. 50–54). The Agent's Contract appointed Plaintiff to sell MMLIC life insurance products. (Id. ) The appointment was non-exclusive, meaning that Plaintiff did not have exclusive rights on any specific territory, but had to compete with other agents for business. (Id. at p. 2). The Agent's Contract included the following specific language:

During your agency service, you understand and agree that you are an independent contractor, not an employee . Nothing in this contract is intended, nor is it to be construed, to create an employee-employer relationship between you and [General Agent] or between you and us. You are free to use your own judgment: as to the persons from whom you will seek applications; the time which you do it; the place where you do it; and the means by which you do it.

(Id. p. 2 ) (emphasis added). The Agent's Contract further specifically limited Chamberlain's authority on behalf of MMLIC to three tasks: 1) taking applications; 2) delivering policies; and 3) taking initial premiums. Id. The Agent's Contract also required Chamberlain to obtain his own license and maintain his own surety bond and errors and omissions insurance. (Id. at pp. 2–3). He was required to comply with MMLIC rules and regulations (designed to comply with Financial Industry Regulatory Authority “FINRA” regulations), submit advertising for approval, and satisfy minimum production goals. (Id. at p. 3). At the time Chamberlain signed the Agent's Contract, he was affiliated with a general agency named the Greater Carolina Group (“GCG”). (Chamberlain Dep. p. 28, 41–42, 51–52). He identified himself as a financial advisor with GCG. (Id. at pp. 28–29, 39, 99). Dennis Howe, the principal of GCG, became Chamberlain's supervising agent.

The Agent's Contract could be terminated by any party at any time, with or without cause. (Dep.Ex. 43, p. 6). To terminate without cause, 15 days written notice was required. (Id. ). After MMLIC changed its name to Minnesota Life on October 1, 1998, Minnesota Life sent annual contract updates to the Agent's Contract. (Dwyer Affid. ¶ 5; Chamberlain Dep. p. 68). In 1994, Chamberlain also signed an Agent Sales Agreement with MMLIC Sales Corporation to become a registered representative to sell securities. (Dep.Ex. 45). MMLIC later changed its name to Ascend Financial Services, Inc., and then to Securian Financial Services (Deposition of Loyall Wilson, p. 40 (hereinafter “Wilson Dep.”); Dwyer Affid. ¶ 6). In 1997, Chamberlain signed an Agent Sales Agreement with Ascend Financial Services, Inc. to become a registered representative to sell securities. (Dep. Ex. 44; Chamberlain Dep. pp. 56–58). The Ascend Agent Sales Agreement provided that the agreement could be terminated by either party at any time, with or without cause. (Dep.Ex. 44, p. 4). To terminate without cause, the terminating party was required to give 15 days written notice to the other party. (Id. ).

On May 1, 2001, Ascend Financial Services changed its name to Securian Financial Services, Inc. (“SFS”). (Wilson Dep., p. 40; Dwyer Aff. ¶ 6). Thereafter, annual contract updates came from SFS. (Dwyer Aff. ¶ 6; see also Dep. Ex. 62; Chamberlain Dep. pp. 62–65; Deposition of Dennis Howe, p. 59 (hereinafter “Howe Dep.”)). Therefore, at the time of his termination in October 2012, Chamberlain was an Agent with a contract to sell Minnesota Life products and was a Registered Representative with a contract to sell SFS products. (See Dep. Ex. 11).

By both parties' accounts, Plaintiff was a strong salesman and often received rewards for his work, including “Chairman's Club Reward Trips.” See (Howe Dep. at p. 20–21); (Chamberlain Aff. (# 33–1) at ¶ 19). In March 2012, Chamberlain and his then-wife attended a Chairman's Club cruise in the Caribbean. (Chamberlain Dep. at p. 110). On the cruise, Chamberlain's behavior triggered several complaints from cruise ship staff. (Roach Dep. at p. 47; Dep. Ex. 37 (excerpted), 38, Chamberlain Dep. at pp. 110–13). Defendant states that Chamberlain's behavior included running in the halls in a life jacket instead of attending the mandatory safety drill, being rude to staff, over-ordering room service, and being disruptive at dinner. (Roach Dep. pp. 47–48, 60, 115–116; Dep. Ex. 37, 38). Chamberlain denied that he engaged in disruptive or inappropriate behavior. (Roach Dep. at p. 48). One evening on the cruise, the ship's security team responded to a 911 call from Chamberlain's cabin. (Chamberlain Dep. at p. 115; Roach Dep. at p. 92; Dep. Ex. 37). The accounts of what triggered the call differ. Chamberlain's wife reported to the ship crew that she was assaulted by Chamberlain. (Roach Dep. at pp. 86–87, 93–95; Dep. Ex. 37). Chamberlain claims his wife was intoxicated and assaulted him and that he acted in self-defense. (Chamberlain Aff. (# 33–1) at ¶ 58; Chamberlain Dep. at pp. 114–116.) He denies being drunk at the time. Id. at ¶ 62. Ultimately, the captain of the ship ordered that Chamberlain be removed from the ship. (Chamberlain Dep. at pp. 116, 120; Roach Dep. at pp. 100, 102; Dep. Ex. 37).

Plaintiff has previously been treated for alcoholism. See (Chamberlain Dep. at p. 20–21; Chamberlain Aff. at ¶ 53–54). Defendant states that after the cruise incident, individuals at Minnesota Life and SFS engaged in internal discussions regarding the reports of Chamberlain's behavior on the cruise and that they decided that he posed a reputational risk to the company. (Wilson Dep. at pp. 53–55; 62; Fox Dep. at pp. 81–82, 107–108, 110, 154–56; Dep. Ex. 29). The company then decided that it was willing to maintain Chamberlain as an agent, but only if Chamberlain would agree to certain conditions. (Wilson Dep. at pp. 58–60; Fox Dep. at pp. 119, 147, 157). In the several months after the cruise ship incident, Minnesota Life and SFS discussed those conditions with Dennis Howe, the general agent at GCG. (Fox Dep. at pp. 103, 168, 170; Howe Dep. at pp. 78–79; Dep. Ex. 48). Ultimately, a meeting was held between Chamberlain, Howe, and representatives from Minnesota Life and SFS. (Chamberlain Dep. at p. 128; Wilson Dep. at pp. 55–56; Fox Dep. at pp. 86, 121–22; Howe Dep. at p. 73). After the meeting, Minnesota Life and SFS sent Chamberlain and Howe letters outlining the conditions under which Chamberlain could continue selling their products. See (Chamberlain Dep. at pp. 135–36; Dep. Ex. 9; 10(# 23) at p. 86–87). The letter stated,

We met recently to discuss our concerns regarding your conduct and how it may threaten our reputation. In light of this information, as an alternative to immediate termination, Minnesota Life Insurance Company (“ML”) and Securian Financial Services, Inc. (“SFS”) are willing to consider continuing the relationship with you based on the following conditions ...

Id. Plaintiff objected to several of the conditions, particularly (1) the requirement to prove attendance at AA; (2) the monthly administrative fee; (3) the reservation of rights to change or add conditions; and (4) the release of all claims, both present and future. (Chamberlain Dep. at pp. 138–145; Fox Dep. at p. 123). Ultimately, Chamberlain refused to agree to the conditions and did not sign the letter. (Chamberlain Dep. at p. 145; Fox Dep. at p. 126).

On October 16, 2012, Minnesota Life and SFS provided written notice to Chamberlain that his contracts with Minnesota Life and SFS were being terminated, effective at the end of the 15–day period following the letter. (Chamberlain Dep. at p. 147; Dep. Ex. 30). After Chamberlain's termination, Dennis Howe terminated GCG's contracts with Minnesota Life and SFS, taking all of his agents with him. (Howe Dep. at pp. 49–51). Chamberlain concedes he had the opportunity to work with GCG. (Chamberlain Dep. at p. 150). Chamberlain, Howe, and the other GCG agents signed with another broker/dealer,...