Key Financial Planning Corp. v. ITT Life Ins. Corp.

• Decision Date: 28 August 1987
• Docket Number: No. 84-2800,84-2800
• Citation: 828 F.2d 635
• Parties: 1987-2 Trade Cases 67,685 KEY FINANCIAL PLANNING CORPORATION, a Colorado corporation, Reuben S. Sorensen and Anne-Marie Sorensen, Plaintiffs-Appellants, v. ITT LIFE INSURANCE CORPORATION, a Wisconsin corporation, Diversified Financial Planners, Inc., a Colorado corporation, Fred K. Nelken, David Fabian and Sandra L. Weidaman, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 635

828 F.2d 635

1987-2 Trade Cases 67,685

KEY FINANCIAL PLANNING CORPORATION, a Colorado corporation Reuben S. Sorensen and Anne-Marie Sorensen Plaintiffs-Appellants, v. ITT LIFE INSURANCE CORPORATION, a Wisconsin corporation Diversified Financial Planners, Inc., a Colorado corporation, Fred K. Nelken, David Fabian and Sandra L. Weidaman Defendants-Appellees.

No. 84-2800.

United States Court of Appeals, Tenth Circuit.

Aug. 28, 1987.

Phillip S. Figa (Hugh A. Burns with him, on briefs), Burns & Figa, P.C., Denver, Colo., for plaintiffs-appellants.

Teryl R. Gorrell of Moye, Giles, O'Keefe, Vermeire & Gorrell, Denver, Colo., and Richard E. Falcone, Colorado Springs, Colo., for defendants-appellees.

Before ANDERSON, BARRETT, and TACHA, Circuit Judges.

STEPHEN H. ANDERSON, Circuit Judge.

This is an antitrust case in which the plaintiff/appellant Key Financial Planning Corporation ("Key") ¹ alleges that the defendant insurance corporation and its subsidiary agents violated the Sherman Antitrust Act, 15 U.S.C. Secs. 1, 2. Essentially, the heart of the complaint is that the defendants, in violation of section one, conspired to restrain trade by depriving Key of its share of the ITT life insurance business in Aurora, Colorado. Key also alleges that the defendants, in violation of section two, attempted to monopolize the ITT life insurance market in Colorado. The district court granted summary judgment to the defendants on the federal antitrust claims and dismissed pendent state claims. Key appeals, arguing that its evidence was sufficient to survive the defendants' motion for summary judgment. After examining Key's arguments, we reject them and affirm the summary judgment.

BACKGROUND

The business relationships among Key and the defendants are multi-layered. Defendant/appellee ITT Life Insurance Corporation ("ITT") sells life insurance through contracted agents. As is common in the insurance industry, these agents are part of an organized sales hierarchy consisting of Field Marketing Directors ("FMDs") at the top, then general agents, and then field agents. FMDs sell insurance and also recruit, recommend, and oversee the tier of general agents. In return the FMDs receive an override commission on business written by the general agents. The general agents, in turn, have authority to recruit and recommend field agents and receive an override commission on business written by the field agents. When an insurance policy is issued by ITT, it advances for distribution among the agents 100% of the commission for the policy. The advance commissions are treated as loans and must be repaid to ITT if they are not ultimately earned, i.e. if a policy is prematurely cancelled. FMDs are liable for repayment of all advances that general agents and agents under them fail to repay. Similarly, general agents are liable for advances made to agents under them.

Defendants/appellees Diversified Financial Planners, Inc. ("Diversified"), located in Colorado Springs, Colorado, and Fred Nelken, its Vice-President, operated as an FMD for ITT with apparent authority, along with other FMDs, to recruit general agents throughout Colorado and a few adjacent states. In November 1980, Nelken contacted Key, a new company organized in September of 1980 and located in the Denver area at Aurora. Key already had agency contracts with several other insurance companies, and on November 11, Key became an ITT general agent as well.

Evidence shows that from its inception Key experienced financial difficulties, resulting, in part, from the loss of promised financing. Whether or not as a result of financial difficulties, the phones that were used to contact potential insurance customers were shut off for the last two weeks of December 1980. In early January, Key's President, Reuben Sorensen, entered into an agreement with Global Marketing, an enterprise that sold photograph packages door-to-door. Under the agreement Sorensen received an override on sales made by Global. Global allegedly disrupted the Key Office with its attempts to persuade Key agents to stop selling ITT insurance and sell photograph packages instead. Diversified's Defendants maintain that Nelken's recommendation of Key's termination as an ITT general agent was made "because of lack of production, because the general agent was attempting to get agents to sell products other than insurance, and because Key was not the quality of agent Diversified was looking for." Brief of ITT at 10. As of January 15, 1981, Key agents had taken four applications for ITT insurance policies. One of these was later cancelled and another was sold to a secretarial employee, Sandra Weidaman. ² The week following the termination recommendation, seven additional applications were taken. One of these was cancelled. Nine policies were ultimately issued by ITT from Key applications; five were subsequently cancelled, leaving four in force.

Nelken learned of Key's relationship with Global in mid-January when he noticed a newspaper ad listing Key's telephone number and soliciting applications for employment to sell photos. After conversations with Sorensen and several employees of Key, including defendants Fabian and Weidaman, regarding the Global relationship, Nelken informed Sorensen in January 1981 that he was recommending Key's termination as an ITT general agent. ITT subsequently terminated Key, giving 30-days' notice as required by the agency contract.

At some point, Nelken and Key agents, including co-defendant Fabian, discussed the possibility of employment transfers to Diversified. In order for the transfers to take place, Key's Sorensen executed releases, and in February 1981, Diversified opened an Aurora office. The agents who transferred from Key began selling ITT insurance for Diversified out of this office. Co-defendant Weidaman also transferred to the Diversified office. Diversified's Aurora office was closed three months later in May, 1981, apparently due to a lack of production.

The defendants maintain that transfer discussions between Nelken and Key employees occurred only after the agents learned that Key's agency contract with ITT was to be terminated. They also insist that the discussions were initiated by the Key agents. The plaintiffs, however, characterize the chain of events--conversations with Key employees, the contract termination, and subsequent transfer of Key personnel--as evidence of a conspiracy to drive Key out of business and capitalize on Key's development of the Aurora market.

I.

In reviewing a summary judgment, " 'the inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion.' " Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 1356-57, 89 L.Ed.2d 538 (1986) (ellipses original) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962)). Nonetheless, mere conclusory allegations do not establish an issue of fact under Fed.R.Civ.P. 56. Bright v. Moss Ambulance Serv., Inc., 824 F.2d 819, 824 n. 6 (10th Cir.1987); Instructional Sys. Dev. Corp. v. Aetna Casualty & Sur. Co., 817 F.2d 639, 644 (10th Cir.1987). Rather, "allegations of restraint of trade must be supported by significant probative evidence in order to overcome a motion for summary judgment." Instructional Sys. Dev. Corp., 817 F.2d at 644 (citing First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 289-90, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968)). In an antitrust action based on section one of the Sherman Act, as here, ambiguous evidence, standing alone, is not enough to survive a defendant's motion for summary judgment. "[A]ntitrust law limits the range of permissible inferences from ambiguous evidence in a Sec. 1 case.... To survive a motion for summary judgment ... [a plaintiff] must present evidence 'that This circuit recently restated the Matsushita standard as a two-part evidentiary test:

                tends to exclude the possibility' that the alleged conspirators acted independently."   Matsushita, 106 S.Ct. at 1357 (quoting Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 1471, 79 L.Ed.2d 775 (1984))
                

(1) is the plaintiff's evidence of conspiracy ambiguous, i.e., is it as consistent with the defendants' permissible independent interests as with an illegal conspiracy; and, if so, (2) is there any evidence that tends to exclude the possibility that the defendants were pursuing these independent interests.

Gibson v. Greater Park City Co., 818 F.2d 722, 724 (10th Cir.1987). In other words, if the evidence is as consistent with permissible independent business interests as with an illegal conspiracy, then the plaintiff fails to create a fact issue on the existence of a section one conspiracy unless the ambiguity is negated by evidence tending to exclude the possibility that the defendants were pursuing independent interests. We turn first to the question of ambiguity, then to whether any evidence tends to negate the possibility of legitimate business interests.

A. Is The Evidence of Conspiracy Ambiguous?

Key alleges that "[d]efendant Nelken combined and conspired with Defendants ITT, Diversified, Fabian and Weidaman to terminate the agency contract between Plaintiff Key and Defendant ITT." Complaint, R.Vol. I at 3, p 11. In particular, it claims that Nelken conspired to take ITT business away from Key and open a Diversified office in the Denver area while avoiding the substantial costs and effort normally involved in establishing a new office. It maintains that the following facts and events support that claim: (1) Nelken was an authorized agent of ITT with independent authority to appoint and terminate general agents subject to automatic and perfunctory approval of ITT, (2) Nelken had plans to locate new offices in seventeen metropolitan areas including Denver, and ITT was aware of these plans more than a month before Key's termination; (3)...