Eaton v. Principal Life Ins. Co.

• Decision Date: 31 March 2022
• Docket Number: 8:20-cv-0061-KKM-CPT
• Parties: ERIC D. EATON, Plaintiff, v. PRINCIPAL LIFE INSURANCE COMPANY and PRINCIPAL NATIONAL LIFE INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — Middle District of Florida

ERIC D. EATON, Plaintiff, v. PRINCIPAL LIFE INSURANCE COMPANY and PRINCIPAL NATIONAL LIFE INSURANCE COMPANY, Defendants.

No. 8:20-cv-0061-KKM-CPT

United States District Court, M.D. Florida, Tampa Division

March 31, 2022

ORDER

Kathryn Kimball Mizelle United States District Judge

Eric Eaton is a licensed securities broker. He worked as an agent for Principal Life Insurance Company and Principal National Life Insurance Company (collectively, Principal) beginning in 2001 until he terminated his agency contract with Principal in 2016. During that time, Eaton sold a specific kind of security for Principal, known as a Principal Variable Annuity (PVA). Eaton worked under the terms of two different agency contracts: his initial agency contract signed in 2001 and a new agency contract signed in 2009. In those contracts, Eaton agreed to a compensation package in exchange for his services. Commission schedules (updated annually) set out the terms of his compensation, which were incorporated by reference into Eaton's agency contracts. In October 2016 Eaton terminated the 2009 agency contract with Principal. Following that termination, Principal stopped paying Eaton "trail commissions" on the PVAs that he sold during his time as a Principal agent.

Eaton sued Principal in response. In his complaint, he alleges that Principal breached its contracts with him by failing to continue paying him trail commissions following his termination on the PVAs he sold between July 2001 and October 2016. He alleges one claim for breach of contract and one claim for declaratory judgment. Principal responds that Eaton is not entitled to any post-termination trail commissions under the plain language of the applicable contracts and commission schedules. The facts in this action are largely undisputed; both parties agree that this case turns on the interpretation of certain key provisions in two agency contracts and the incorporated commission schedules.

Eaton moves for partial summary judgment, arguing that the Court should conclude as a matter of law that he is entitled to trail commissions for PVAs that he sold under each of his agency contracts. (Doc. 46.) His briefing is unclear as to why, given this argument, he seeks only partial summary judgment, but the Court assumes his arguments go to liability only and that he believes the damages calculation would require further resolution. Principal opposes Eaton's motion, (Doc. 55), and moves for summary judgment, arguing it is entitled to judgment as a matter of law because the clear language of the contract terms bar the monetary and declaratory relief Eaton seeks, (Doc 50). Eaton opposes that motion. (Doc. 53.)

Under the plain terms of the governing contracts, the Court concludes that Eaton is not entitled to the post-termination trail commissions he seeks. Of primary importance is the commission schedules' unambiguous disclaimer that "[t]rail commissions are not paid after your contract with us terminates." (Doc. 49-11 at 27.) Because that text-as well as the text of the 2001 and 2009 Agency Contracts-is clear, that is the end of the matter. See Antonin Scalia &c Brian Garner, Reading Law: The Interpretation of Legal Texts § 2, at 56 (2012) (explaining the fundamental rule of interpretation that the words of the governing document "are of paramount concern, and what they convey, in their context, is what the text means."). The Court therefore grants summary judgment to Principal and denies it to Eaton.

I. BACKGROUND^[1]

A. Facts

Between 2001 and 2016, Eaton was an agent affiliated with Principal. (Doc. 1 %% 8, 17.) In July 2001, Eaton signed an exclusive agency contract with Principal (the 2001 Agency Contract), which required that Eaton sell only Principal products. (Doc. 49 at 2; Doc. 49-3 at 3.) From July 2001 through December 2009, Eaton and Principal operated under the 2001 Agency Contract. (Doc. 51 at 1.) In December 2009, Eaton and Principal entered into a second agreement (the 2009 Agency Contract), which replaced the initial agreement as the operative contract. (Id. at 2.)

Under both agency contracts, Eaton sold PVAs, which are securities. (Doc. 1 % 11.) To be legally eligible to sell them, service them, and receive commissions on them, an individual must be registered with a securities broker-dealer. (Doc. 49-2 at 5.)

Beginning in July 2001, Eaton registered with Princor Financial Services (Principal's affiliated broker-dealer) and executed a registered representative agreement with Princor. (Id. at 6-7; Doc. 49-6.) By operation of the agreement, Eaton became an "Associated Person" with Princor. That agreement between Eaton and Princor covered commissions paid on registered products, which expressly included PVAs. (Doc. 49 at 4- 5; Doc. 49-6 at 1.)

Both Eaton's agency agreements (the 2001 Agency Contract and the 2009 Agency Contract) and his agreement with Princor incorporated separate commission schedules, which governed Eaton's compensation structure. (Doc. 49-3 at 2; Doc. 49-12 at 3.) These commission schedules covered a wide variety of products, including life insurance policies, disability income policies, and annuities. (See, e.g., Doc. 49-7 at 3, 16, 20.) And within the annuities category, the commission schedule covered multiple annuity products- including the PVAs at issue in this dispute. (Id. at 20-24.) Regarding the PVAs, the commission schedules provided a range of commission options and clarified that only "Registered Representatives" could sell the PVAs. (Id. at 21.)

E. Flexible Variable Annuity' Qualified and IMon-Qualified issued lo Principal Life Insurance Company (may only be sold by Registered Representatives).

Premium Up to 52, 000, 000 Premium Qwh $2, 000, 000" and lssu« Age to 75

and Issue Age to 7S All Premium Amounts for Issue Ages 7B-A5

Year? 2 Thru 7 Years B and Later Years Z Thru 7 Years B and Later

First Year Annual Trail Annual Trail First Year Annual Trail Annual Trail

Commission Commission"* Commission"" Commission Commission*" Commission"**

Option A 3.5 0 20 2.5 0 .20

Option B 3.0 .10 .30 20 .10 .30

Option C 2.0 30 .SO 1.0 .30 .50

(Id.) Each option provided a "First Year Commission" (new premium commissions) on the sale of a PVA followed by an "Annual Trail Commission." (Id.) Eaton selected an option that entitled him to payment of "trail commissions" on the PVAs that he sold beginning the eighth year the individual PVA contracts remained in force and every year thereafter.

(Doc. 51 at 2-3.)

During his time as a Principal agent, Eaton sold PVAs on Principal's behalf and subsequently acted as a servicing agent for those PVAs according to his agreement with Principal and Princor. (Doc. 49-4 at 2-3; Doc. 49-2 at 18.) The arrangement worked this way: Principal paid commissions for the sale and servicing of the PVAs that Eaton sold to Princor, and Princor then compensated Eaton directly. (Doc 49-4 at 2-3.)

New commission schedules were issued annually. (Id. at 3; see, e.g., Doc. 49-7; Doc. 49-8; Doc. 49-9; Doc. 49-10; Doc. 49-11.) In 2009, Principal issued a revised Commission Schedule for Career Agency Contracts. (Doc. 49-8.) In the 2009 Commission Schedule and all subsequent commission schedules, Principal included the following language:

Servicing agent means the agent appointed by us and accepted by the contract owner as the servicing agent. If the contract owner requests a change in the servicing agent or if we decide that change would be in the best interests of the contract owner, trail commissions will be paid to the new servicing agent. Trail commissions are not paid after your contract with us terminates.

(Doc. 49-8 at 19 (emphasis added); Doc. 49-9 at 21; Doc. 49-10 at 26; Doc. 49-11 at 27.)

Eaton's 2001 Agency Contract defined "commission" to mean "first year commission, renewal commission, service fee, and bonuses identified in the commission schedule." (Doc. 49-3 at 1.) The contract also included a section titled, "COMMISSIONS WHILE UNDER CONTRACT," which provided: "We will pay you commissions on policies sold according to the commission schedule and your financing plan, if any." (Id. at 2.) It included another a section titled "COMMISSIONS AFTER TERMINATION," which provided that certain commissions will be paid following contract termination (for reasons other than death). (Id. at 2.) Specifically, that section mentions the payment of "[f]irst [y]ear commissions not yet paid on deterred first year premiums" and "[f]ull renewal commissions" on certain policies. (Id.) This section did not mention trail commissions.

Eaton's 2009 Agency Contract provided that prior contracts, including the 2001 Agency Contract, were "terminated." (Doc 49-12 at 4.) It further stated that the "Agent's rights to receive Commissions and service fees earned on any business issued under a previous career agen[cy] contract will continue to be paid in accordance with the applicable commission schedule(s)." (Id.) As stated above, the commission schedule in effect at the time the 2009 Agency Contract became effective (and each subsequent commission schedule) stated that "[t]rail commissions" for PVAs "are not paid after your contract with us terminates." (Doc. 49-8 at 19.) The 2009 Agency Contract also included a section titled "COMMISSIONS AFTER TERMINATION," which provided that if the contract was terminated (for reasons other than death or fraud), Eaton would "receive Commissions as provided in the Commission schedule in effect at the time this Contract terminates." (Doc. 49-12 at 3.) The very next provision in that section addresses the post-termination situation where an agent "continuously held a career agen[cy] contract. . . previous to this Contract." (Id. at 4.) In that situation, the 2009 Agency Contract provided that ...