Kelly v. State Farm Mut. Auto. Ins. Co.

Decision Date01 May 2007
Docket NumberNo. WD 66408.,WD 66408.
Citation218 S.W.3d 517
PartiesJoseph J. KELLY, et al., Respondents, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., et al., Appellants.
CourtMissouri Court of Appeals


Thomas E. Wack, Elizabeth C. Carver, co-counsel, St. Louis, for appellants.

George A. Hanson, Kansas City, for respondents.

Before JOSEPH M. ELLIS, Presiding Judge, HAROLD L. LOWENSTEIN, Judge and RONALD R. HOLLIGER, Judge.


State Farm Mutual Automobile Insurance Company, State Farm Life Insurance Company, State Farm Fire & Casualty Company, and State Farm General Insurance Company (collectively referred to hereinafter as "State Farm") appeal from a judgment totaling $19,760,000 entered against them in the Circuit Court of Jackson County in an action filed against them for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious interference with business expectancy, and punitive damages brought by Respondents Joseph Kelly, Tanya Glockner, Lee Saghirian, Michael Morgan, and Clifford Lykke (collectively referred to hereinafter as Plaintiffs).

Plaintiffs were all independent contractors who sold insurance products for State Farm on an exclusive basis. To that end, they all executed a State Farm Agent's Agreement ("the Agency Agreement"). Kelly executed his Agency Agreement in Missouri. Glockner and Saghirian executed theirs in Maryland. Morgan executed his agreement in Ohio, and Lykke executed his in Texas.

In December 1999, after discovering that Plaintiffs had made public statements critical of State Farm, State Farm sent letters to Glockner, Saghirian, Morgan, and Lykke informing them that State Farm was terminating their agency agreements effective in January 2000. State Farm subsequently sent Kelly a similar letter terminating his agency agreement effective February 15, 2000. Plaintiffs sought and obtained internal termination reviews pursuant to the terms of the Agency Agreement. After the respective review committees recommended that the terminations be upheld, State Farm's chief executive officer upheld the termination of Plaintiffs' Agency Agreements.

On February 14, 2002, Kelly filed suit in the Circuit Court of Jackson County, Missouri, alleging that State Farm wrongfully terminated his Agency Agreement. On February 2, 2004, the court allowed Glockner, Morgan, Saghirian, and Lykke to join as additional parties. After the petition was amended, it included claims that (1) State Farm wrongfully terminated Plaintiffs' Agency Agreements without good cause, (2) State Farm breached the covenant of good faith and fair dealing in terminating the Agency Agreements, (3) State Farm intentionally interfered with Plaintiffs existing and prospective business relationships with existing and prospective policyholders, and (4) that Plaintiffs were entitled to punitive damages. Following a fourteen-day trial, on August 5, 2005, the jury returned verdicts awarding a total of $8,730,000 in actual damages to Plaintiffs against State Farm on the breach of contract and tortious interference claims. The jury also awarded Plaintiffs a total of $11,030,000 in punitive damages against State Farm. The trial court entered judgments against State Farm in accordance with the jury's verdicts. The trial court subsequently denied State Farm's motion for judgment notwithstanding the verdict, for new trial, or for remittitur. State Farm brings six points on appeal from the trial court's judgment.

State Farm's first four points assert that the trial court erred in overruling its motions for directed verdict and motion for judgment notwithstanding the verdict on Plaintiffs' various claims. "The standard of review for a decision on a motion for a directed verdict or a judgment notwithstanding the verdict is the same." Blue v. Harrah's N. Kansas City, L.L.C., 170 S.W.3d 466, 472 (Mo.App. W.D.2005). Because a directed verdict or judgment notwithstanding the verdict should only be granted where the plaintiff fails to make a submissible case, our review is restricted to determining whether the plaintiff made a submissible case. Boggs ex rel. Boggs v. Lay, 164 S.W.3d 4, 14 (Mo.App. E.D.2005). "To make a submissible case, a plaintiff must present substantial evidence for every fact essential to liability. Substantial evidence is that which, if true, has probative force upon the issues, and from which the trier of fact can reasonably decide the case." Blue, 170 S.W.3d at 472 (internal quotation omitted). "In reviewing for a submissible case, this court must accept all evidence and reasonable inferences favorable to the verdict, disregarding contrary evidence." Moran v. Hubbartt, 178 S.W.3d 604, 609 (Mo.App. W.D.2005) (internal quotation omitted). This Court will not, however, supply missing evidence nor grant the plaintiff the benefit of any unreasonable, speculative, or forced inferences. Id. Furthermore, "if the denial of a directed verdict or judgment notwithstanding the verdict is based upon a conclusion of law, we review the trial court's decision de novo." Boggs, 164 S.W.3d at 15.

Before addressing the various points on appeal, we note that the parties have conceded, both at trial and now on appeal, that the substantive law of Missouri applies to Kelly's claims, Maryland substantive law applies to Glockner-Schultz and Saghirian's claims, Ohio substantive law applies to Morgan's claims, and Texas substantive law applies to Lykke's claims. Accordingly, as appropriate, we will address the substantive law of each of those jurisdictions in our discussion of State Farm's points on appeal.

In its first point, State Farm claims that the trial court erred in failing to grant judgment notwithstanding the verdict on Plaintiffs' breach of contract claims because the unambiguous language of the Agency Agreement allowed for termination of the agreement at will. With regard to the termination of the agreement, the agency agreements provide:

A. This Agreement will terminate upon your death. You or State Farm have the right to terminate this Agreement by written notice delivered to the other or mailed to the other's last known address. The date of termination shall be the date specified in the notice, but in the event no date is specified, the date of termination shall be the date of delivery if the notice is delivered, or the date of the postmark, if the notice is mailed. Either party can accelerate the date of termination specified by the other by giving written notice of termination in accordance with this paragraph.
B. In the event we terminate this Agreement, you are entitled upon request to a review in accordance with the termination review procedures approved by the Board of Directors of the Companies, as amended from time to time.
C. After termination of this Agreement you agree not to act or represent yourself in any way as an agent or representative of the Companies.
D. Within ten days after the termination of this Agreement, all property belonging to the Companies shall be returned or made available for return to the Companies or their authorized representative.
E. For a period of one year following termination of this Agreement, you will not either personally or through any other person, agency, or organization, (1) induce or advise any State Farm policyholder credited to your account at the date of termination to lapse, surrender, or cancel any State Farm insurance coverage or (2) solicit any such policyholder to purchase any insurance coverage competitive with the insurance coverages sold by the Companies. . . .

(emphasis added). Thus, the agreement grants either the agent or State Farm the right to terminate the agreement by providing written notice to the other.

Plaintiffs claim that this language merely reflects the mechanism for terminating the agreement and that the agreement is ambiguous as to whether a party must have good cause for terminating the agreement. The trial court agreed, finding the termination language to be ambiguous in that respect. After making that finding, the trial court considered parol evidence and interpreted the Agency Agreement to require State Farm to have good cause to terminate the agreement.

"The question of whether a contract is ambiguous and the interpretation of the contract itself are issues of law that are reviewed de novo on appeal."1 Executive Bd. of Mo. Baptist Convention v. Carnahan, 170 S.W.3d 437, 447 (Mo.App. W.D. 2005). Thus, we must consider, de novo, whether the Agency Agreements are ambiguous under the substantive law of the various states involved.

In interpreting a contract, "the plain, ordinary, and usual meaning of a contract's words are used, and the whole document is considered." Jackson County v. McClain Enters., Inc., 190 S.W.3d 633, 640 (Mo.App. W.D.2006). "`A contract is ambiguous only if its terms are susceptible of more than one meaning so that reasonable men may fairly and honestly differ in their construction of the terms.'" Id. (quoting Helterbrand v. Five Star Mobile Home Sales, Inc., 48 S.W.3d 649, 658 (Mo.App. W.D.2001)). "To determine whether a contract is ambiguous, we consider the whole document and give the words used their natural and ordinary meaning." Helterbrand, 48 S.W.3d at 658. "The ambiguity must appear from the four corners of the contract — extrinsic evidence cannot be used to create an ambiguity." Erwin v. City of Palmyra, 119 S.W.3d 582, 585 (Mo.App. E.D.2003). "The trial court cannot consider inadmissible parol evidence in interpreting a contract even if the evidence was admitted without objection." Helterbrand, 48 S.W.3d at 658. These rules of contract construction are applicable in all of the jurisdictions relevant to this case. See Sy-Lene of Wash., Inc. v. Starwood Urban Retail II, L.L.C., 376...

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