Knowlton v. Shaw, 1:09–cv–00334–JAW.

• Decision Date: 24 August 2011
• Docket Number: No. 1:09–cv–00334–JAW.,1:09–cv–00334–JAW.
• Citation: 791 F.Supp.2d 220
• Parties: Alan KNOWLTON, Plaintiff,v.Judith SHAW, et al., Defendant.
• Court: U.S. District Court — District of Maine

791 F.Supp.2d 220

Alan KNOWLTON, Plaintiff,

v.Judith SHAW, et al., Defendant.

No. 1:09–cv–00334–JAW.

United States District Court, D. Maine.

June 13, 2011.Order Denying Reconsideration Aug. 24, 2011.

Eric M. Mehnert, Hawkes & Mehnert, Joseph Baldacci, Law Office of Joseph M. Baldacci, Bangor, ME, for Plaintiff.Martin Ridge, Beagle & Ridge, LLC, Edward R. Benjamin, Jr., Thompson & Bowie, LLP, Peter J. Detroy, III, Russell Pierce, Norman, Hanson & Detroy, Portland, ME, Brent A. Singer, Rudman & Winchell, Bangor, ME, Darrell Clay Tucker, II, Gary Lane Howard, Jason Allen Walters, Paul Peter Bolus, Bradley, Arant, Boult, Cummings, LLP, Birmingham, AL, for Defendants.

ORDER ON MOTION FOR SUMMARY JUDGMENT

JOHN A. WOODCOCK, JR., Chief Judge.

In an action by a former employee against his former employer and its representatives asserting causes of action under 42 U.S.C. § 1983, slander, intentional and fraudulent misrepresentation, breach of contract, breach of good faith and fair dealing, and promissory estoppel, and requesting punitive damages, the Defendants move for summary judgment. The Court concludes: 1) the § 1983 claims must be dismissed because, under Illinois law, the Plaintiff was an at-will employee and lacked a property interest in continued employment; 2) the slander claims must be dismissed because they are based on speculation and character evidence and because they fail to link the Defendants to the allegedly slanderous material; 3) the breach of contract, breach of good faith and fair dealing, and promissory estoppel claims must be dismissed because the employment contract made clear that the Plaintiff was an at-will employee and the employer's policies did not alter the contract; 4) the negligent and fraudulent misrepresentation claims survive to the extent they seek to recover for economic loss; and, 5) the punitive damages count survives.

I. STATEMENT OF FACTSA. General Overview

On July 2, 2009, Alan D. Knowlton filed suit in Superior Court, Penobscot County, state of Maine, against a number of state of Maine Defendants. ¹Notice of Removal (Docket # 1) Attach. 1 at 1. The case was removed to this Court on July 28, 2009. Notice of Removal. Mr. Knowlton later amended his complaint to include two additional state of Maine Defendants; Bankers Life and Casualty Co. (Bankers Life); James Valdez, Vice President and Associate General Counsel of Bankers Life; Michael Buckley, Vice President of Bankers Life; and Bruce Jordan, Regional Director of Bankers Life.²First. Am. Compl. at 1–2 (Docket # 11) ( Am. Compl.). The Amended Complaint claims multiple violations of 42 U.S.C. § 1983 including Deprivation of a Property Interest without Due Process of Law (Counts I through V) and Unconstitutional Impairment of Contractual Obligations (Counts VI through X); Conspiracy to Violate Civil Rights under 42 U.S.C. § 1985(2) (Count XI); Negligent Misrepresentation (Counts XII, XIII, XVI and XIX); Fraudulent and Intentional Misrepresentation (Counts XIV, XVII and XX); Slander (Counts XV and XVIII); Breach of Contract (Count XXI); Breach of Implied Covenant of Good Faith and Fair Dealing (Count XXII); and Promissory Estoppel/Detrimental Reliance (Count XXIII). Am. Compl.

1. Mr. Knowlton's Complaint

Bankers Life hired Alan D. Knowlton in New Hampshire as a sales agent in November 1980 and in May 1985, it transferred him to Bangor, Maine as the branch sales manager. Mr. Knowlton says he was successful in Bangor. The number of sales agents grew and the office became among the top fifty Bankers Life offices in the Country. Mr. Knowlton's immediate supervisor at Bankers Life was Leroy Kunselman, a Vice President. Mr. Kunselman told Mr. Knowlton it was Bankers Life's policy and practice to continue all branch sales managers in their positions unless they failed to perform or engaged in prohibited activity, an assertion Mr. Knowlton took as a promise. Accordingly, Mr. Knowlton worked hard with the expectation he would retire from Bankers Life upon his 56th birthday.

All went well until 2000, when the state of Maine began a “Market Conduct” investigation into Bankers Life's sales practices in Maine, focusing particularly on the South Portland branch office. When Deputy Superintendent of Insurance Judith Shaw expanded the investigation to the Bankers Life Bangor branch office, the only sales practice mistake she found was the office had mistakenly distributed literature describing Bankers Life as having an A.M. Best “A” rating when in fact it had a “B+” rating. Bankers Life hired an attorney to represent Mr. Knowlton on the complaint that he had distributed inaccurate literature, and on March 28, 2005, Mr. Knowlton and the state of Maine entered into a Consent Agreement in which Mr. Knowlton agreed to pay a fine of $750 in return for the state's agreement to take no further action against him. Mr. Knowlton thought his problems with the state of Maine were over.

He was wrong. At the same time the state was negotiating with Mr. Knowlton regarding violations in the Bangor branch office, it was also negotiating with Bankers Life to resolve the systemic violations that had taken place in the South Portland branch office. The state was concerned that the South Portland office had inappropriately focused its sales on elderly Mainers. The state proposed to Bankers Life that it conduct an audit of both its South Portland and Bangor offices. Concerned that the audit would reveal the serious depth of the South Portland transgressions, Bankers Life proposed an alternative to the state: it would fire the South Portland and Bangor branch managers. Despite the state's March 28, 2005 Consent Agreement with Mr. Knowlton, the state and Bankers Life entered into a Consent Agreement on April 11, 2005 in which Bankers Life agreed to remove Mr. Knowlton from his position as the branch sales manager in the Bangor office.

Bankers Life lived up to its Consent Agreement with the state of Maine. On April 14, 2005, three of Mr. Knowlton's Bankers Life superiors, James Valdez, Michael Buckley, and Bruce Jordan, told him the state of Maine had concluded that South Portland and Bangor offices could not handle the offices' improper sales practices problems and, despite the fact Bankers Life did not want to remove him, the state had insisted on his removal as the branch sales manager for the Bangor office. All three men assured Mr. Knowlton that Bankers Life had fought with the Maine Bureau of Insurance to preserve his job but that the state had insisted upon his removal. This, according to Mr. Knowlton, was a lie. They all knew full well that it had been Bankers Life, not the state of Maine, which had proposed Mr. Knowlton's termination.

From then on, the Bankers Life supervisors continued to deceive Mr. Knowlton. Reassuring him they knew he was not at fault, they told him he could work for Bankers Life in a new position in the commonwealth of Massachusetts as branch manager for the North Shore sales office; however, they said he would have to start out as a unit sales manager: in effect, a salesman. They promised the salesman position would be temporary, and as soon as the North Shore branch was up and running, Mr. Knowlton would become its branch sales manager.

Personal lines insurance sales begin with personal relationships. By transferring Mr. Knowlton from Bangor, where he had spent the last two decades, to north of Boston, where he knew no one, Bankers Life set up Mr. Knowlton for failure. This is exactly what happened. Mr. Knowlton could not succeed as an insurance salesman in Massachusetts and repeatedly requested that he be allowed to assume the promised position of North Shore branch manager. The supervisors at Bankers Life, however, lied to him again and told him that the Consent Agreement with the state of Maine prohibited him from becoming a branch manager anywhere.

Bankers Life then engaged in a series of actions to force him to resign. It promised him a salary and then unilaterally cut him off, reinstated it upon his complaint, but then cut it off again. Ultimately Bankers Life was successful in its campaign to force Mr. Knowlton out of the company. After he left, Bankers Life lied about Mr. Knowlton, disparaging his honesty and competence and falsely asserting that he had been forced out of the Bangor branch manager position by the state of Maine.

2. The Bankers Life View

Bankers Life tells a different story. Contrary to Mr. Knowlton's claim of superior performance as the Bangor branch office manager, Bankers Life says that from January 1, 2002 to April 11, 2005, the state of Maine Bureau of Insurance received 70 formal complaints alleging violations of the Maine Insurance Code by agents appointed by Bankers Life, including agents recruited, trained and supervised by Mr. Knowlton in the Bangor branch office. Bankers Life points to the Bureau of Insurance's conclusion that “neither the South Portland nor Bangor branch can be operated in full compliance with Maine law and this Consent Agreement as those branches are currently operated” and that it was incumbent upon Bankers Life to “take serious measures to create a new culture dedicated to the development and maintenance of a strong compliance philosophy.” The Bankers Life Defs.' Statement of Material Facts in Support of Their Mot. for Summ. J. ¶ 17 (Docket # 60) (DSMF).

Bankers Life also disputes Mr. Knowlton's contention that it proposed his removal to avoid an audit. Instead, Bankers Life says the state of Maine insisted upon his removal and rejected Bankers Life's suggestion that he be retained and retrained. In effect, Bankers Life says it capitulated to the state's demand that it relieve Mr. Knowlton of the managerial duties in Bangor.

Despite its reluctant acquiescence to the state's non-negotiable demands, Bankers Life insists that it sought to treat Mr. Knowlton fairly. It placed him on a paid leave of absence and made him a variety of job offers. After he...