Lincoln Ben. Life Co. v. Edwards
| Decision Date | 24 March 1999 |
| Docket Number | No. 4:95CV3098.,4:95CV3098. |
| Citation | 45 F.Supp.2d 722 |
| Parties | LINCOLN BENEFIT LIFE COMPANY, a Nebraska Domestic Insurance Corporation, Plaintiff, v. Robert R. EDWARDS, Defendant. |
| Court | U.S. District Court — District of Nebraska |
Gary J. Nedved, Keating, O'Gara Law Firm, Lincoln, NE, Terry R. Wittler, Cline, Williams Law Firm, Lincoln, NE, for plaintiff.
Rexford H. Caruthers, Holloran Law Firm, St. Louis, MO, R. Murray Ogborn, Ogborn, Summerlin Law Firm, Lincoln, NE, for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case involves a series of agreements under which an insurance company and one of its former marketing directors both claim they are owed money. Following a bench trial on the merits of this case, I now issue my findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure 52(a).1
This action originated in the District Court of Lancaster County, Nebraska, as an action for declaratory judgment in which plaintiff Lincoln Benefit Life Company ("LBL") alleged that defendant Robert R. Edwards ("Edwards") owed LBL $452,558.29 pursuant to various agreements between LBL and Edwards. Under these agreements, Edwards, a marketing director for LBL, received overwriting commissions on insurance premiums collected by LBL on insurance policies that were sold by agents who were assigned to Edwards and for whom Edwards was to provide training, supervision, and administrative support. In exchange for such overwriting commissions, Edwards became responsible to LBL for indebtedness created by the agents assigned to him. LBL filed the above-described declaratory judgment action seeking payment from Edwards under agreements which reflected that indebtedness. Pursuant to 28 U.S.C. §§ 1332(a), 1441, and 1446, Edwards filed a notice of removal of this action from state court to federal court (filing 1).
The agreements between LBL and Edwards that are at the core of this dispute are the following:
• General Agent Agreement effective February 1, 1982
• Marketing Director Agreement effective February 1, 1982, and oral agreement reached on the same date regarding assignment of agents in the Dallas-Fort Worth area
• Master General Agent Agreement effective March 29, 1984
• Continuing Compensation Addendum to Marketing Director Agreement dated July 10, 1985
• Agreement Acknowledging Edwards' Indebtedness to LBL dated March 7, 1986
• Revision of Indebtedness Amount dated May 1, 1987
Edwards asserts five counterclaims against LBL based on these agreements:
• Count I — Preferential Commissions: LBL breached the Marketing Director Agreement dated February 1, 1982, by granting two other marketing directors secret and preferential commission increases without passing the same increases on to Edwards, as provided in the agreement.
• Count II — Assignment of Agents: LBL breached its oral agreement of February 1, 1982, to assign to Edwards all agents under contract to LBL and located in the Dallas-Fort Worth market area.
• Count III—Indebtedness Agreement: The March 7, 1986, agreement acknowledging Edwards' indebtedness to LBL created by one of Edwards' subagents should be rescinded.
• Count IV — Continuing Compensation Addendum (Breach of Contract): LBL breached the July 10, 1985, Continuing Compensation Addendum to the Marketing Director Agreement which provided a retirement package that LBL was obligated to pay when LBL terminated Edwards.2
• Count V — Continuing Compensation Addendum (Tort): LBL is liable in tort to Edwards for breach of the implied covenant of good faith and fair dealing arising from the Continuing Compensation Addendum.
LBL has asserted the statute of limitations as a defense to Counts I and II of Edwards' counterclaims. I previously conducted a bench trial on that issue and decided that such counterclaims were not barred by the statutes of limitation, Neb. Rev.Stat. §§ 25-205 & 25-206 (Michie 1995). Lincoln Benefit Life v. Edwards, 966 F.Supp. 911 (D.Neb.1997).3 I entered judgment accordingly pursuant to Fed. R.Civ.P. 54(b) (filing 80). The Eighth Circuit Court of Appeals affirmed this court's Fed.R.Civ.P. 54(b) judgment on the statute-of-limitations issue (filing 193), but later vacated its decision and dismissed LBL's appeal, deciding that this court's Rule 54(b) judgment was not an appealable final judgment or order (filing 195).
LBL then moved (filing 196) to vacate this court's Findings of Fact and Conclusions of Law and Rule 54(b) judgment addressing the statute-of-limitations issue. I granted the motion in part and vacated the Rule 54(b) judgment, but I denied the motion as to the court's Findings of Fact and Conclusions of Law. Therefore, the court's previous Findings of Fact and Conclusions of Law on the statute-of-limitations issue remain intact and serve as the basis for a portion of the Findings of Fact below.
1. Plaintiff Lincoln Benefit Life Company ("LBL") is a Nebraska domestic insurance corporation with its home office in Lincoln, Nebraska. Defendant Robert R. Edwards ("Edwards") is a resident of Dallas, Texas. (Filing 63, at 3.)
2. Prior to 1982, LBL employed salaried regional vice presidents who were responsible for recruiting general agents through whom LBL marketed and sold its life insurance policies and annuity contracts. In 1982, LBL adopted a new marketing program and decided to replace these salaried regional vice presidents with independent, non-salaried, marketing directors who worked off commission and who had the resources to market and sell LBL's products through the appointment of general agents for LBL. (Stat. Lims. Tr. 195:20-197:8.4) In an effort to "sell" this opportunity, LBL invited eight prospective marketing directors to Lincoln in 1982. (Stat.Lims. Tr. 197:25-198:23.) Edwards was one of these original eight marketing directors.
3. Effective February 1, 1982, LBL and Edwards entered into a Marketing Director Agreement pursuant to which Edwards agreed to market insurance products and to recruit, train, supervise, motivate, retain, and provide administrative support for agents assigned to him in exchange for overwriting commissions and bonuses. (Filing 63, at 3; Ex. 54-101, at 2.) This agreement gave Edwards the authority to develop and supervise the company's business in conformity with the rules and regulations of the company and assigned Edwards the responsibility to recruit and recommend persons for appointment by the company as agents and train and supervise such agents in accordance with the standards of the company. (Ex. 54-101, at 2.) Pursuant to the language of the Marketing Director Agreement, Edwards was an independent contractor, and not an employee or servant. (Ex. 54-101, at 2.) The agreement bound Edwards to exclusively represent the interest of the company and to not enter into any insurance sales agreements with other insurers or individuals, nor engage in any competing activities on behalf of other insurers or individuals unless authorized to do so in writing by the company. (Ex. 54-101, at 2.)
4. The Marketing Director Agreement, under the printed heading entitled "Compensation," contained the following language:
The rate of overwriting commission payable as compensation to the marketing director may be amended at any time by written notice to the marketing director. Any amendment to such rate shall become effective on the date specified in the notice. An amendment, when made, shall apply only to insurance policies or annuity contracts accepted by the company on or after the effective date thereof. No amendment shall be made unless a similar amendment is made to all other marketing directors' Agreements between the company and other marketing directors.
The compensation to be paid to the marketing director under this Agreement constitutes the total amounts payable to the marketing director, and shall be solely for services as an independent contractor acting on behalf of the company in the development and maintenance of a quality system for the marketing and sale of insurance policies or annuity contracts through General Agents.
The agent's statements rendered by the company concerning commissions paid and/or payable, advances and indebtedness shall be conclusive unless within thirty (30) days following receipt of the statement the marketing director notifies the company of a dispute regarding any transactions reported since the last preceding report.
(Filing 63, at 3; Ex. 54-101, at 2-3 ().)
5. The section of the agreement entitled "Indebtedness" provided as follows:
The marketing director shall be responsible to the company for the acts and collections of his General Agents and for the indebtedness of his General Agents to the company. The company shall have a retaining first lien against any compensation payable hereunder for any indebtedness of the marketing director or his General Agents to the company, and the company may charge and set off any such amounts due from the compensation payable hereunder. Prior to charging the indebtedness of a General Agent to the marketing director the company shall make reasonable efforts to collect the indebtedness from the General Agent including the application of deferred first-year commission. The indebtedness of the marketing director or his General Agents may be declared due and payable whether or not any renewal commissions are payable.
(Ex. 54-101, at 3 (capitalization altered).) The Marketing Director Agreement did not provide for accrual of interest on the indebtedness of marketing directors. (Tr. 930:16-23, Test. of Theodore L. Kessner.)
6. As a part of this Marketing Director Agreement, Edwards and LBL entered into a "Submitted Annualized Commission/Loan Agreement" under which Edwards, as a marketing director, was...
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