Devnew v. Brown & Brown, Inc.

• Decision Date: 17 October 2005
• Docket Number: No. Civ.A.2:05CV00400.,Civ.A.2:05CV00400.
• Court: U.S. District Court — Eastern District of Virginia
• Parties: John S. DEVNEW, Plaintiff, v. BROWN & BROWN, INC., Defendants.

396 F.Supp.2d 665

John S. DEVNEW, Plaintiff, v. BROWN & BROWN, INC., Defendants.

No. Civ.A.2:05CV00400.

United States District Court, E.D. Virginia, Norfolk Division.

October 17, 2005.

Abram William VanderMeer, Jr., Pender & Coward PC, Virginia Beach, VA, for Plaintiff.

Lynn Forgrieve Jacob, Williams Mullen, Richmond, VA, Sara Lynne Berg, Williams Mullen, Virginia Beach, VA, for Defendant.

OPINION AND ORDER

DOUMAR, District Judge.

Plaintiff John S. Devnew filed a civil action against his former employer Brown & Brown, Inc. alleging that the termination of his employment breached his employment agreement and violated the public policy of the Commonwealth of Virginia. Defendant filed a motion to dismiss contending that Plaintiff failed to state any claims upon which relief may be granted. For the reasons that follow, Defendant's Motion to Dismiss is GRANTED and Plaintiff's claims are DISMISSED.

I. Factual and Procedural Background¹

Plaintiff John S. Devnew ("Devnew") is a licensed insurance agent in, and citizen of, the Commonwealth of Virginia. From July 1994 until on or around April 21, 2005, he was employed by Defendant Brown & Brown, Inc. ("B & B"). B & B is a Florida corporation that maintains its principal place of business in Daytona Beach. B & B provides insurance in multiple states, including Virginia, and is licensed to conduct business as an insurance agent in Virginia. B & B conducts its insurance business through a subsidiary in Norfolk, Virginia called the "Flagship Group." From on or about January 1, 2004 until his employment with B & B ceased in April 2005, Devnew served as Profit Center Manager of Flagship Group and Executive Vice President of B & B. Flagship Group is not a named party in this lawsuit.²

On December 27, 2000, Devnew, B & B, and Flagship Group entered into an Employment Agreement (the "Agreement"). The Agreement contains a termination provision categorizing Devnew as an at-will employee. The Addendum to the contract, entitled "Addendum # 1 to the Employment Agreement" set forth Devnew's compensation and contained a separate provision stating that "[i]f the Company terminates Employee's employment during the term of this Agreement other than for `Cause,' the Employee shall continue to receive the amount of $120,000, on an annualized basis, for the remainder of the term hereof." The term of the addendum was for two years from January 1, 2001 to December 31, 2002. Devnew continued in his employment with B & B after December 31, 2002 until he was terminated on April 21, 2005.

According to Devnew, B & B terminated him because "he had signed an insurance binder for an insurer with which [B & B] had no agency agreement and as to which he had no authority to make representations regarding coverage." Devnew claims, however, that his conduct with respect to this insurer accorded with company practice. He alleges that the proffered explanation was merely a pretext for firing him due to his attempts to shield himself, as well as B & B, from entering into an arrangement with an insurance premium financing company, namely Premium Assignment Corporation ("PAC"), that may have violated Virginia law. The alleged violation stemmed from B & B's relationship with PAC. Although PAC finances premiums in Virginia as well as other states, its Virginia business is subject to the provisions of Virginia Code §§ 38.2-4700 to 4712, which regulate companies that offer insurance premium financing in the Commonwealth. In January 2004, B & B allegedly entered into an agreement with PAC whereby B & B would receive "administrative reimbursement" from PAC based on the volume of insurance premium financing business it secured from B & B's referrals, some of which came from Virginia. According to Devnew, B & B agents were instructed "to refer clients to PAC for financing of their insurance premiums at financing rates imposed by PAC and not to negotiate on behalf of the clients for lower financing rates." Starting on January 1, 2004, the same time that Devnew became Profit Center Manager of Flagship Group and Executive Vice President of B & B, Devnew claims that B & B agents began referring clients to PAC in exchange for compensation under the guise of "administrative reimbursement."

The Code of Virginia prohibits insurance premium financing companies from providing valuable consideration to insurance agents as an inducement for steering clients to their service. The applicable provision, in pertinent part, reads as follows:

No part of any charges shall be paid to any insurance agent by an insurance premium financing company, nor shall any insurance premium company pay, allow or give, or offer to pay, allow or give, directly or indirectly to any insurance agent, any valuable consideration as an inducement to finance the premium of any insurance policy. No insurance agent shall accept any valuable consideration as an inducement to finance the premium of any insurance policy.

Va.Code Ann. § 38.2-4705(C) (2005). Around December 2004, Devnew allegedly became suspicious that B & B's arrangement with PAC may have violated this provision of Virginia law and inquired about it with his supervisors. Devnew alleges that he wrote letters and made phone calls to supervisors raising his concerns. Around April 4, 2005, Devnew alleges that he spoke with B & B's Regional President, who allegedly warned Devnew to cease raising concerns or B & B's Chief Executive Officer, Chief Financial Officer, and General Counsel would get involved. According to Devnew's complaint, he was terminated less than three weeks later.

A. Procedural Background

Devnew filed a Motion for Judgment in the Circuit Court for the City of Norfolk on or around June 6, 2005. On July 1, 2005, B & B removed the case to this Court because the matter fell within the diversity jurisdiction of the federal courts. See 28 U.S.C. §§ 1332, 1441, 1446 (2000). B & B also filed a Motion to Dismiss for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and, in the event that Motion failed, a Motion to Strike Jury Demand on the ground that Devnew waived his right to a jury trial in the Employment Agreement.

B. Causes of Action

Plaintiff's Motion for Judgment alleges three causes of action, two sounding in contract law and one sounding in tort. Devnew claims that his termination amounts to a breach of contract on two scores. First, although the Employment Agreement contains an at-will provision, Devnew maintains that his termination violated the "Cause" provision contained in Addendum # 1, which appears to have expired on December 21, 2002. He claims it survived during the entire term of his employment with B & B. Second, Devnew alleges that B & B breached an implied contract or covenant of good faith and fair dealing when it discharged him.

Devnew also claims that his termination constituted a tort of wrongful discharge. He maintains that B & B contravened Virginia public policy, as expressed in § 38.2-4705 of the Virginia Code, because he was discharged for the steps he took to expose the illegality of the "administrative reimbursement" arrangement between B & B and PAC.

Finally, Devnew further alleges that all of B & B's actions were malicious and in willful and wanton disregard of Devnew's rights under the Agreement and Virginia law, entitling him to punitive damages. He seeks compensatory damages of $7,500,000 and punitive damages of $350,000.

II. MOTION TO DISMISS

A. Legal Standard

1. Rule 12(b)(6) Motion

The Defendant's motion to dismiss claims that the Plaintiff fails to state a cause of action in either tort or contract. Rule 12(b)(6) of the Federal Rules of Civil Procedure permits federal courts to dismiss an action for "failure to state a claim upon which relief can be granted." "At this stage of the litigation, we must accept [the plaintiff's] allegations as true. A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); accord Slade v. Hampton Rds. Reg'l Jail, 407 F.3d 243, 248 (4th Cir.2005).

Because the purpose of a Rule 12(b)(6) motion is to test the legal, but not the factual sufficiency of a complaint, a court's consideration is limited to the pleadings alone, drawing all reasonable inferences in favor of the plaintiff. Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir.1999). However, "[a] copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes." Fed.R.Civ.P. 10(c). This exception is targeted at cases involving a dispute over the terms of, meaning of, or obligations imposed by a written instrument, such as a contract. See Stahl v. U.S. Dep't of Agric., 327 F.3d 697, 700 (8th Cir.2003); Rosenblum v. Travelbyus.com Ltd., 299 F.3d 657, 661 (7th Cir.2002); cf. Phillips v. LCI Intern., Inc., 190 F.3d 609, 618 (4th Cir.1999) (holding that a district court did not err by considering a document outside the pleadings that "was integral to and explicitly relied on in the complaint"). Consequently, a court may consider any materials attached to the complaint on which the plaintiff's claim relies, a contract in particular.

2. Applicable Law

In non-federal question cases before a federal court, such as this one, the court must apply the substantive law of the state in which the claim arose. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); accord United States v. Little, 52 F.3d 495, 498 (4th Cir.1995) ("In adjudicating non-federal questions, a federal court must apply the law of the state."). In this case, it is undisputed that Virginia law applies, as the claims pled in the Motion for Judgment involve an employment relationship initiated, carried out, and terminated in Virginia. See Derthick v. Bassett-Walker I...