Farmers Ins. Exch. v. Goldan, DA 15–0529.

• Court: United States State Supreme Court of Montana
• Citation: 378 P.3d 1163,2016 MT 196,384 Mont. 301
• Docket Number: No. DA 15–0529.,DA 15–0529.
• Parties: FARMERS INSURANCE EXCHANGE, Truck Insurance Exchange, Fire Insurance Exchange, Mid–Century Insurance Company, and Farmers New World Life Insurance Company, Plaintiffs, Counterdefendants and Appellants, v. David S. GOLDAN, Defendant, Counterclaimant and Appellee.
• Decision Date: 16 August 2016

384 Mont. 301
378 P.3d 1163
2016 MT 196

FARMERS INSURANCE EXCHANGE, Truck Insurance Exchange, Fire Insurance Exchange, Mid–Century Insurance Company, and Farmers New World Life Insurance Company, Plaintiffs, Counterdefendants and Appellants
v.
David S. GOLDAN, Defendant, Counterclaimant and Appellee.

No. DA 15–0529.

Supreme Court of Montana.

Submitted on Briefs May 11, 2016.
Decided Aug. 16, 2016.

378 P.3d 1164

For Appellant: Mark D. Parker, Casey Heitz, Parker, Heitz & Cosgrove, PLLC, Billings, Montana.

For Appellee: John G. Taussig, III, Attorney at Law, Boulder, Colorado,

378 P.3d 1165

Sherine D. Fernando, Kasting, Kauffman & Mersen, P.C., Bozeman, Montana.

Justice PATRICIA COTTER delivered the Opinion of the Court.

384 Mont. 302

¶ 1 Appellants¹ appeal the order of the Eighteenth Judicial District Court, Gallatin County, entering judgment on a jury verdict in favor of David Goldan in a breach of contract action. We restate the issues on appeal as follows:

1. Whether the District Court erred by denying Farmers' motion for judgment as a matter of law because Goldan failed to meet his burden of proving damages for loss of net profits;

2. Whether the District Court erred in denying Farmers' motion for sanctions based on Goldan's alleged discovery violations;

3. Whether the District Court erred in concluding that damages should not be limited to the three month notice period allowed in the contract for terminations without cause.

¶ 2 We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 3 In August 1988, Goldan began working as an independent contractor insurance agent for Farmers. At that time, Farmers and Goldan entered into a standardized Agency Appointment Agreement (Agreement), which defined the parties' various rights and obligations.

384 Mont. 303

¶ 4 Under the Agreement, Farmers was obligated to pay Goldan new business and service commissions on each policy he sold and serviced in accordance with Farmers' commission schedules. In return, Goldan was obligated to provide the facilities necessary to service policyholders and to service policyholders so as to advance their interests and those of Goldan and Farmers. The Agreement could be terminated in three ways: (1) on three months written notice for any reason; (2) on thirty days written notice if any provisions of the Agreement were breached; or (3) immediately for specified causes, including switching insureds to another carrier. If the Agreement was terminated, Farmers was obligated to pay “contract value” to Goldan.

¶ 5 Over his 21 years with Farmers, Goldan became a successful agent. In the five years immediately preceding his termination, he averaged over $150,000 per year in commission income. Goldan was considered a “career” agent by Farmers, and he planned to continue with Farmers for the rest of his career. For its part, Farmers agreed it almost never terminated an experienced agent without a reason.

¶ 6 Goldan's wife, Linda, assisted him with his business and she eventually became a Farmers' customer service representative. In the early 2000s, Linda started the Bozeman Independent Insurance Agency (Independent Agency) to sell insurance policies that Farmers did not offer. Goldan and the Independent Agency shared office space and other resources. Farmers' district manager approved the arrangement and Farmers' audited the operation to make sure Goldan was complying with the Agreement. Goldan and Linda eventually formed Goldan Agency, Inc., for tax purposes on the advice of their accountant. Goldan Agency did not sell insurance; rather, Goldan and Linda would deposit their respective commissions into a jointly owned account held by Goldan Agency and Goldan Agency would pay the various expenses of both Goldan and the Independent Agency.

¶ 7 In December 2009, Farmers terminated the Agreement immediately, alleging that Goldan was switching policies from Farmers to the Independent Agency's insurance carriers. Pursuant to the Agreement, Farmers paid Goldan the first installment of contract value it owed him. Prior to paying the second installment of contract value in June 2010, Farmers sued Goldan alleging that Goldan breached his contractual duties and fiduciary responsibilities under the Agreement

378 P.3d 1166

by soliciting and servicing the insurance business of policyholders within a year of his termination. Farmers sought damages and declaratory relief for the partial contract value it paid Goldan. Goldan counterclaimed for breach of contract, alleging that Farmers terminated him without cause and seeking the remainder of

384 Mont. 304

the contract value and other damages for sums he “reasonably anticipated receiving as an agent for” Farmers.

¶ 8 During pretrial litigation, Farmers moved to compel Goldan's response to requests for production of financial information. After briefing by the parties and a hearing, the District Court ordered Goldan to produce financial records of Goldan Agency along with his and Linda's personal tax returns, which he did. In addition, Farmers filed a number of motions in limine regarding the calculation of damages. Farmers moved to bar admission of any evidence relating to gross commissions, arguing that the measure of damages required evidence of Goldan's expenses in order to calculate net lost profits, and seeking to limit Goldan's proof to those damages suffered during the three month notice period specified in the Agreement for terminations without cause. The District Court denied both motions reasoning that evidence of gross commissions is relevant to calculating damages, the question of Goldan's expenses could be subject to cross-examination, and that limiting damages to the three month notice provision as a matter of law would be improper because calculating the amount of damages is a question of fact for the jury to determine.

¶ 9 A three-day trial was held in April 2015. At the close of evidence, Farmers moved for judgment as a matter of law and to strike Goldan's damage claims because he had not presented evidence of his expenses. The District Court noted that Farmers chose not to ask Goldan or Linda questions regarding expenses during trial and denied the motion reasoning that “the jury will be able to evaluate” the expenses argument. The jury ruled in favor of Goldan on all issues. It determined that Goldan had not breached the Agreement before or after Farmers' terminated him. It determined further that Farmers had breached the Agreement by terminating Goldan and awarded him $759,740.45—which amounted to five years of the yearly average commissions Goldan had earned over the three years preceding his termination.

¶ 10 Farmers moved post-trial for judgment as a matter of law on the same questions on which it had sought judgment preverdict and in its motions in limine. In the alternative, Farmers sought dispositive sanctions as to Goldan's damages projections because he had not produced documents showing his expenses. The District Court denied the motion on the ground that Farmers had presented “no new legal theories in support of the Motion, but simply request the Court to reverse its prior rulings based on arguments already made.” The District Court entered judgment in Goldan's favor, which included the $759,740.45 jury award with post-judgment interest and $69,422.41 for

384 Mont. 305

the remaining contract value Farmers owed Goldan, plus $32,248.14 in prejudgment interest. Farmers paid the judgment's contract value portion in partial satisfaction of the judgment and appeals from the jury's damage award and judgment.

STANDARDS OF REVIEW

¶ 11 Whether judgment as a matter of law should be granted or denied is a question of law that we review de novo. Johnson v. Costco Wholesale, 2007 MT 43, ¶ 18, 336 Mont. 105, 152 P.3d 727. Judgment as a matter of law may be granted only when there is a complete absence of any evidence which would justify submitting an issue to a jury. All such evidence and any legitimate inferences that might be drawn from the evidence must be considered in the light most favorable to the nonmoving party. Johnson, ¶ 13. Courts should exercise the greatest self-restraint in interfering with the constitutionally mandated processes of a jury decision; therefore, judgment as a matter of law is not proper if reasonable persons could differ regarding conclusions that could be drawn from the evidence. Johnson, ¶ 13.

¶ 12 We review a district court's ruling on a request for discovery sanctions for an abuse of discretion.

378 P.3d 1167

Peterman v. Herbalife Int'l, Inc., 2010 MT 142, ¶ 14, 356 Mont. 542, 234 P.3d 898. A district court abuses its discretion when it acts arbitrarily, without the employment of conscientious judgment, or exceeds the bounds of reason resulting in...