Dawson v. New York Life Ins. Co., 94 C 1423.

• Decision Date: 19 July 1996
• Docket Number: No. 94 C 1423.,94 C 1423.
• Citation: 932 F. Supp. 1509
• Parties: Ronald D. DAWSON, Plaintiff, v. NEW YORK LIFE INSURANCE COMPANY and NYLIFE Securities Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

932 F. Supp. 1509

Ronald D. DAWSON, Plaintiff, v. NEW YORK LIFE INSURANCE COMPANY and NYLIFE Securities Inc., Defendants.

No. 94 C 1423.

United States District Court, N.D. Illinois, Eastern Division.

July 19, 1996.

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Thomas P. Sullivan, Thomas Shane O'Neill, Jenner & Block, Chicago, IL, Sherwin H. Leff, Leff, Cohen & Rosenberg, Ltd., Chicago, IL, for plaintiff.

James Andrew Klenk, Dale M. Cohen, Sally L. Davis, Sonnenschein, Nath & Rosenthal, Chicago, IL, Edwin G. Schallert, Frances L. Kellner, Debevoise & Plimpton, New York City, for defendants.

MEMORANDUM OPINION AND ORDER

CASTILLO, District Judge.

On February 8, 1993, a state court jury in Corpus Christi, Texas found that New York Life Insurance Company ("New York Life") and one of its agents breached their duty of good faith and fair dealing, breached their fiduciary duty, and committed false, misleading or deceptive acts in connection with certain transactions involving a policy-holder and his wife. The jury also found that New York Life committed fraud in connection with these transactions. The jury awarded $65,000 in pecuniary losses, $1 million for mental anguish, and $15 million against New York Life as punitive damages. This was the first punitive damages award against New York Life in its 150-year history. Shortly thereafter, senior New York Life officers spoke at an annual New York Life Managers' Meeting, implicating local management at the Corpus Christi Office in the wrongdoing that gave rise to the Corpus Christi jury award. New York Life also produced a 30-minute videotape on corporate responsibility that was issued to every New York Life office for use in training agents. The videotape included excerpts from remarks made at the 1993 Managers' Meeting and specifically included the remarks implicating local management at the Corpus Christi Office.

The plaintiff in the present action, Ronald Dawson, was the General Manager of New York Life's Corpus Christi General Office from August 1985 to September 1989. Dawson brings this action against defendants New York Life and NYLIFE Securities, Inc. ("NYLSEC")¹ for defamation, intentional interference with prospective economic advantage, and intentional infliction of emotional distress based principally on the remarks made at the Managers' Meeting, the training videotape, and other allegedly defamatory statements. Dawson also asserts a breach of contract claim, alleging that New York Life breached an oral agreement relating to Dawson's compensation. Defendants' motion for summary judgment as to all of Dawson's claims is presently before the Court.

RELEVANT FACTS²

Dawson's Employment and Compensation Agreements with New York Life

Dawson was employed by New York Life for more than 18 years, beginning in June 1974 when he started as an agent. Pl.'s Add'l Facts ¶ 1. Throughout his career with New York Life, Dawson was promoted to positions of greater and greater responsibility based on his performance as an agent and manager. In 1981, after previously serving as an agent and Assistant Manager, he was promoted to General Manager. Id. ¶ 2. From August 1985 to approximately September 1, 1989, Dawson was employed as the General Manager of the company's Corpus Christi, Texas General Office. Dawson's transfer to Corpus Christi was initiated by three senior New York Life officers. New York Life chose Dawson to manage the Corpus Christi Office because the company wanted a strong recruiter of agents in that office and Dawson was so regarded. Id. When Dawson arrived in Corpus Christi, there were approximately 38 agents in the office; when he left Corpus Christi in 1989, there were 126 agents working out of that office. Id. ¶ 3. Dawson received numerous awards while General Manager of the Corpus Christi Office. His office was selected as a field project location in connection with the agency home office management school — which is considered an honor. Id. ¶ 4. In 1987, Dawson's immediate supervisor Ernestine Beauchamp, who was then Regional Vice President, referred to Dawson as "the number one general manager" in the Southwest region. Id. ¶ 6.

Effective September 1, 1989, Dawson was transferred to the Oak Brook, Illinois General Office where he worked as that office's General Manager. Defs.' Facts ¶ 5. Dawson continued to earn awards and honors while General Manager of the Oak Brook office. He traveled nationwide speaking on behalf of the company at training seminars and regional management schools. In 1990, Dawson was selected to speak at the company's national Managers' Meeting — which is considered an honor. Pl.'s Add'l Facts ¶ 9. For the year 1992, Dawson earned two major production awards for his performance as Oak Brook General Manager, which he was scheduled to receive at the company's 1993 National Managers' Meeting. Id. ¶ 10. On February 14, 1993, the same day that company officers decided to fire him, Dawson was speaking at a Regional Managers' Meeting in Chicago. Id. ¶ 11.

Dawson's tenure at the Oak Brook office was not without blemish, however. In March of 1992, the Senior Vice President in charge of the Agency Department, Lyle Paul, criticized Dawson, and reduced his compensation by approximately $27,000, for his conduct in connection with a federal criminal investigation of one of Dawson's top-performing agents. Specifically, Dawson had attended a meeting at the U.S. Attorney's office in Chicago without informing either his superiors or New York Life's Office of the General Counsel. See Paul Aff. ¶ 8.

As a General Manager, Dawson had a written employment agreement with New York Life which provided that Dawson's employment could be terminated with or without cause upon written notice. Defs.' Facts ¶¶ 6, 7. Before March of each year that Dawson was General Manager of the Oak Brook Office, New York Life notified Dawson in writing of his base compensation for the period from March 1 through February 28 of the following year. Dawson understood the writing to be a binding commitment. Id. ¶ 107. New York Life always honored the written commitments specifying Dawson's base compensation, except for the one occasion in 1992 on which his salary was reduced. Id. ¶ 108. Dawson continued to work after receiving the written descriptions of his base compensation. Id. ¶ 109.

Dawson was terminated in February 1993.³ Prior to his termination, Dawson had been a registered representative of NYLSEC; when New York Life terminated him, NYLSEC terminated Dawson's registration. On February 25, 1993, NYLSEC sent a Form U-5 ("Uniform Termination Notice For Securities Industry Registration") to the National Association of Securities Dealers ("NASD") concerning Dawson's termination. As is explained in greater detail below, New York Life subsequently amended Dawson's Form U-5 on three occasions.

After he was fired by New York Life, Dawson (or someone working on his behalf) discussed employment with more than 12 top-rated insurance companies. Pl.'s Add'l Facts ¶ 123. NASD member firms are required to access a prospective employee's NASD file before hiring. New York Life knew when it filed the Form U-5s relating to Dawson that other NASD members would access Dawson's U-5 information before hiring him. Id. ¶ 126. Two companies, Minnesota Mutual and John Hancock, made inquiries to New York Life about Dawson. Id. ¶ 124. Also, New York Life knew of a prospective business arrangement Dawson had with Pruco Securities in July 1994. Id. ¶ 125. Dawson has not been able to broker securities for Pruco. Id.

THE HERNANDEZ EVIDENCE AND VERDICT

Dawson's termination stemmed from the evidence presented at the Corpus Christi trial that resulted in the multi-million dollar punitive damages award against New York Life. In March of 1989, Ramiro Hernandez collected $331,000 in settlement of a personal injury suit. Later that month, he and his wife Lamar gave Oscar Herrera, who was then a New York Life agent in the Corpus Christi Office, $100,000 to purchase a $100,000 life insurance policy and an annuity. Herrera altered Mrs. Hernandez' life insurance application by adding a zero to increase it to $1 million, using $27,910 to pay the first premium and investing the balance of $72,090 in an annuity. To obtain underwriting approval for the $1 million policy, Hernandez forged a note from Mr. and Mrs. Hernandez stating falsely that they had obtained a $2 million settlement. Herrera subsequently falsified paperwork and endorsements to withdraw $27,910 from the Hernandez annuity to pay the second premium on the $1 million policy, and to withdraw additional funds from the annuity. In October 1990, Ramiro Hernandez died and Mrs. Hernandez asked Herrera for a withdrawal from her annuity to pay for her husband's funeral and for living expenses. Rather than tell her that the annuity had been depleted, Herrera forged paperwork to withdraw money from another customer's annuity. In March 1991, Mrs. Hernandez discovered that she had a $1 million insurance policy rather than a $100,000 policy when she received a premium notice for the larger policy. Shortly thereafter, Mrs. Hernandez brought suit against Herrera and New York Life in Texas state court, resulting, on February 8, 1993, in a judgment of $65,000 in pecuniary damages, $1 million for emotional distress, and $15 million in punitive damages against New York Life. The jury found that New York Life committed "false, misleading or deceptive acts or practices in the business of insurance" and that New York Life had acted knowingly and had committed its misconduct "with heedless and reckless disregard of the rights of others." The jury was instructed that "New York Life" referred to "all" of New York Life's agents and employees "except Oscar Herrera." As to its finding of reckless disregard, the jury was also instructed that it could "consider only the conduct, if any, that it had found that is attributable to persons acting in a managerial or...