Ellis v. Provident Life & Accident Ins. Co.

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: Pollack
• Citation: Ellis v. Provident Life & Accident Ins. Co., 3 F.Supp.2d 399 (S.D. N.Y. 1998)
• Decision Date: 20 April 1998
• Docket Number: No. 96 Civ. 2484(MP).,96 Civ. 2484(MP).
• Parties: James R. ELLIS, Plaintiff, v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY and Provident Life & Casualty Insurance Company, Defendants.

3 F.Supp.2d 399

James R. ELLIS, Plaintiff, v. PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY and Provident Life & Casualty Insurance Company, Defendants.

No. 96 Civ. 2484(MP).

United States District Court, S.D. New York.

April 20, 1998.

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Liddle & Robinson, L.L.P. (James A. Batson, of counsel), New York City, for plaintiff.

Paul, Hastings, Janofsky & Walker (Patrick W. Shea, of counsel), New York City, for defendants.

OPINION AND DECISION

POLLACK, Senior District Judge.

This action represents the second chapter in an ongoing dispute between plaintiff James R. Ellis ("Ellis") and his employers, Provident Life and Accident Co. and Provident Life & Casualty Insurance Co. (collectively "Provident"). Ellis was employed as a Branch Manager of Provident's New York Branch Office from 1972 until 1996, when he voluntarily retired. In Ellis v. Provident Life & Acc. Ins. Co., 926 F.Supp. 417 (S.D.N.Y.1996) ("Ellis 1"), this Court held that Provident's decision in 1991 to split off district offices from the New York Branch Office to create therefrom a separate branch office was a reasonable exercise of informed judgment and was not pretext for discrimination, and therefore, Ellis did not establish age discrimination in violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §§ 621-33a, and N.Y.Exec.Law § 296.

Ellis brings this second suit ("Ellis 2") arising out of Provident's decision, implemented in January 1994, to overhaul its incentive compensation system and cease paying Branch Managers commissions on renewal premiums. The Complaint initially presented seven claims, but Ellis has withdrawn and no longer asserts two state age discrimination claims.¹ The remaining claims hinge on Ellis' assertion that renewal commissions were vested and that Provident's 1994 overhaul of their incentive compensation plan breached an implied-in-fact contract which required payment of these vested renewal commissions on the New York Branch Office Territory block of in-force business as of December 31, 1993. In addition to the implied-in-fact contract claim, Ellis has asserted his right to payment for lost renewal commissions on theories of promissory estoppel, negligent misrepresentation, unjust enrichment, constructive trust, and improper withholding of wages.

Provident has moved for summary judgment with respect to each of Ellis' claims. Ellis has cross-moved for summary judgment with respect to his implied-in-fact contract claim.

For the reasons cited below, Provident's motion for summary judgment is granted and Ellis' cross-motion is denied.

BACKGROUND

The Employment Relationship

Plaintiff James R. Ellis, was employed as a Branch Manager for Provident's branch office located in New York City, from 1972 until he voluntarily retired at the end of 1996. During his entire employment, plaintiff had no written contract and was an employee "at will." Provident sells its individual insurance policies through independent brokers. Plaintiff's job as Branch Manager was to facilitate such sales by recruiting, assisting and servicing brokers.

Ellis received a base salary, plus incentive compensation if the revenues credited to his office on the branch's operating statement exceeded certain designated costs of operating his office. The revenues credited to the office included a percentage of premium earned by Provident for new and renewed policies produced by the Branch Manager. These credits were referred to by the parties as overwriting credits or allowances. Certain expenses, including the salary of the Branch Manager and certain of his employees, bonuses for consultants and rent and automobile expense, were then debited from the operating statement, and any positive balance was paid to the Branch Manager as incentive compensation.

A policy statement in writing was issued in December 1972 by the then head of the Accident Department, Brooks Chandler and that governed plaintiffs employment (hereafter the "Chandler Papers"). The Chandler Papers expressly provided that:

"Managers of Accident Department Branch Offices are salaried employees of the Company and as such are eligible for all benefits available to field salaried employees, including the pension plan, sick-leave plan, group insurance, and other benefit programs provided by the Company. As in the case of other employees, the Company may at its discretion determine the Manager's location and assignment of duties and responsibilities as well as reassign, transfer or promote him, or terminate his employment."

* * * * * *

"This explanation of the current Company policy with respect to Branch Office Managers is not a contract and does not constitute a guarantee of continued employment. The Company may, at its option, revise any or all of the provisions and conditions set out herein."

Thus, when the plaintiff's New York City territory was split in 1991, and Westchester, Nassau and Suffolk counties, the New York suburban areas were split-off from the previously combined New York City Metropolitan and suburban areas, Ellis no longer was entitled to commissions on renewals of policies written for the suburban areas and he does not claim that he is; Ellis makes no claim herein against renewals which were made in the suburban areas of New York; he no longer was in charge of that territory. Commissions on renewals of those policies in force before the split fell in part to the new branch manager for the suburban New York areas and the balance reverted to Provident. The territorial split of the New York area involved was litigated in Ellis 1 and was upheld against the claim of Ellis that the split discriminated against plaintiff on the basis of his age. No age bias claim exists any longer in Ellis 2.

Acting consistently with the Chandler Papers, there have been, over the years a number of changes to Provident's compensation system, including that of January 1, 1994 on which plaintiff rests.

The 1994 Changes to the Incentive Compensation System

In January 1994, Provident implemented several changes in the incentive compensation system. Of note, base compensation was calculated exclusively on the percentage of new premium received in a policy's first year; renewal premiums on old policies no longer generated overwrites in calculating incentive compensation.

In Ellis 1, plaintiff gave the following testimony:

"Q: No. I asked you if the Chandler Papers made clear to you and you understood that the Chandler Papers said that the company reserved the right to change the compensation plan at whim.

A: Yes [4/15/96 Trial transcript of Ellis 1, at p. 201, lines 1-5.]

Q: In fact, the company on a number of occasions has changed the incentive compensation plan, including the number of overwrites which were allotted to branch managers, which you said occurred back in the 1970's?

A: I think it was in 1985, 1986.

Q: ... they did make a change ... that reduced the percentage?

A: Yes ... they have a right to change.

Q: They changed it in their discretion January 1, 1992?

A: Yes.

Q: And they changed it again at their discretion effective January 1, 1994?

A: Yes. [Trial Transcript of Ellis 1 at p. 202-03].

* * * * * *

Q: The Court: Did you find anything in the Chandler Papers that gave you an implied contract?

The Witness: Other than what is stated here and the layout of the commission schedules, no, but they did — and they also say, which I agree, they had the right to change it down the road. That they did have a right to do". 926 F.Supp. at 417.

The phantom implied-in-fact contract

To offset the clear understanding of Ellis from the foregoing, he claims to have obtained an "implied" contract as a result of the following verbal assurances and Provident's practice to buy-out territorial changes which he says furnished him where there was no elimination of part or all of a branch manager's territory with a "vested" contractual right to commissions on renewals of insurance originally written prior to the incentive compensation overhaul effective January 1, 1994.

The history, most favorably stated for the plaintiff's phantom contract was as follows:

Plaintiff states:

"The Chandler Papers had created a distinction between branch managers who were not under contract and general agents, who were under written contract with Provident." As plaintiff's brief hereon correctly states: "General agents had a `vested' interest [in writing] in renewal commissions generated by their business for ten years if their contracts were terminated. A general agent therefore had a `claim on the stream of commission payments and overwrites' that would accrue during the future ten years." [The amount was determined by a `vested commission evaluation' computer program, which calculated the present value of these future renewal commissions.]

Plaintiff's statement in his brief continues:

"By contrast, under the Chandler Papers, a Branch Manager's renewal commissions were paid only as long as he remained in charge of his territory. If the manager was terminated or transferred, or if the territory was split, the annual incentive compensation (net allowances) reverted to Provident."

Plaintiff's testimony in Ellis I was that:

"Q: `... the company reserved the right to change the compensation plan at whim?

A: Yes.

Q: You acknowledge, do you not, that the Chandler Papers spelled out in detail that you were an employee at will, and that you had no contract or rights or incentive pay under the system that the Chandler Papers promoted?

A: As long as it does not discriminate under federal laws, yes.

Q: And in 1994, the company completely eliminated the operating statement itself and any incentive paid based on the difference between overwrites and expense credits that were assigned to the operating statement.

The Court: That was permissible under the plan that privilege that the company had which you just acknowledged?

The Witness: Yes.

The...