Lucarell v. Nationwide Mut. Ins. Co.

• Citation: 2018 Ohio 15,97 N.E.3d 458,152 Ohio St.3d 453
• Decision Date: 04 January 2018
• Docket Number: No. 2016–0585,2016–0585
• Parties: LUCARELL, Appellee, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant.
• Court: United States State Supreme Court of Ohio

152 Ohio St.3d 453

97 N.E.3d 458

2018 Ohio 15

LUCARELL, Appellee,

v.NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant.

No. 2016–0585

Supreme Court of Ohio.

Submitted April 05, 2017

Decided January 04, 2018

Randy J. Hart, A. Scott Fromson, Solon, and Patricia A. Morris, Canfield, for appellee.

Baker & Hostetler, L.L.P., Thomas D. Warren, and G. Karl Fanter, Cleveland; Jones Day, New York, and Yvette McGee Brown ; and Bricker & Eckler, L.L.P., and Quintin Lindsmith, Columbus, for appellant.

Vorys, Sater, Seymour and Pease, L.L.P., Thomas E. Szykowny, Columbus, and Rebecca E. Wilson, urging reversal for amici curiae Ohio Insurance Institute, Ohio Chamber of Commerce, Ohio Alliance for Civil Justice, Ohio Manufacturers' Association, and National Association of Mutual Insurance Companies.

O'Donnell, J.{¶ 1} Nationwide Mutual Insurance Company appeals from a judgment of the Seventh District Court of Appeals, which affirmed jury verdicts in favor of Christine Lucarell on her claims for breach of contract and invasion of privacy but reversed a directed verdict entered by the trial court in favor of Nationwide on her claim for fraud.

{¶ 2} Lucarell sued Nationwide for breach of contract, fraudulent misrepresentation, invasion of privacy, retaliation, and constructive discharge, asserting it had fraudulently and in bad faith induced her to open a new insurance agency when it intended to terminate her after she generated a profitable book of business. The case proceeded to trial, and at the close of her case-in-chief, the court directed a verdict in favor of Nationwide on the fraud claim. The jury returned verdicts in favor of Lucarell in excess of $42 million in compensatory and punitive damages, finding that Nationwide had breached its contracts with her, invaded her privacy, retaliated against her, and constructively discharged her. The trial court, applying statutory caps on damages, entered judgment against Nationwide for more than $14 million in compensatory and punitive damages. Both parties appealed.

{¶ 3} The appellate court affirmed the breach of contract judgment, affirmed the invasion of privacy judgment in part, reversed the retaliation and constructive discharge judgments, and reinstated and remanded the fraud claim for a new trial. It also held that punitive damages could be awarded for breach of contract if Lucarell proved her fraud claim and that the jury could have found that Nationwide prevented her from performing obligations of releases she signed, allowing her to avoid them. It rejected Nationwide's assignments of error challenging the sufficiency of the evidence supporting the jury's verdicts on the breach of contract claims and the trial court's instruction on the standard of proof for duress.

{¶ 4} Nationwide appealed to this court, asserting that Ohio law does not permit punitive damages to be awarded for any breach of contract, that App.R. 12 required the appellate court to review the assignment of error challenging the sufficiency of the evidence of breach of contract, that Lucarell had the burden to present clear and convincing evidence of duress to avoid the releases she signed, that the prevention of performance doctrine is not a defense to a release, and that she failed to prove her claim for fraud.

{¶ 5} Upon review, we reaffirm that in Ohio, punitive damages may not be awarded for a breach of contract. We also clarify that a party to a contract does not breach the implied duty of good faith and fair dealing by seeking to enforce the agreement as written or by acting in accordance with its express terms, nor can there be a breach of the implied duty unless a specific obligation imposed by the contract is not met.

{¶ 6} In addition, a release of liability is an absolute bar to a later action on any claim encompassed within it absent a showing of fraud, duress, or other wrongful conduct in procuring it, and a party claiming duress is required to prove duress by clear and convincing evidence. We further recognize that the prevention of performance doctrine—which states that a party who prevents another from performing a contractual obligation may not rely on that failure of performance to assert a claim for breach of contract—is not a defense to a release of liability and therefore cannot be asserted as a defense to a release. Lastly, a claimant cannot rely on predictions or projections that relate to future performance or that are made to third parties to establish a fraud claim.

{¶ 7} After careful review, we have concluded that the court of appeals erred as a matter of law in holding that punitive damages are available for a breach of contract, in failing to review the sufficiency of the evidence of breach of contract and the jury instruction on duress, in considering the prevention of performance doctrine as a defense to a release of liability, and in reinstating the fraud claim.

{¶ 8} Accordingly, we reverse the judgment of the court of appeals and remand the matter to the appellate court for further proceedings consistent with this opinion.

Facts and Procedural History

{¶ 9} Nationwide designed an Agency Executive Program ("AE Program") to recruit new insurance agents by offering planning, training, and startup financing from Nationwide Federal Credit Union to build profitable, self-sustaining agencies over a three-year period. The new agents were independent contractors who agreed to exclusively sell and service Nationwide products.

{¶ 10} Nationwide determined that to be profitable, a new agency would need to generate $1.2 million in direct written premiums from new and renewed policies each year. If the program agent reached that sales goal in three years, that agent became a career agent, and if additional production goals were met, Nationwide would forgive part or all of any loans made to start the agency.

{¶ 11} Nationwide brought the AE Program to Ohio in 2004 and recruited Lucarell the next year. Based on a pro forma and business plan presented to her by Bill Helfer, a Nationwide sales manager, she anticipated revenues of $200,000 a year. Working with Nationwide, she developed her own business plan and pro forma, but she did not see the final version before authorizing Helfer to sign it on her behalf. Those documents represented that Lucarell had an active role in developing the business plan and pro forma and Nationwide disclaimed any guarantee of success.

{¶ 12} In November 2005, Lucarell signed an Independent Contractor Agent's Agreement, which specified that she was not a Nationwide employee and was responsible for her agency's expenses. She also signed the AE Program Performance Agreement, which included the schedule for disbursement of her $290,000 loan from Nationwide Federal Credit Union, the terms to qualify for a waiver of repayment of that loan, and the minimum production requirements to complete the AE Program. The exhibit containing the minimum production requirements is not part of the record in this case, however, and according to Lucarell, it was never part of her contract.

{¶ 13} Lucarell used the loan to start her agency in January 2006, renting, renovating, and furnishing office space, hiring two employees, and throwing a grand-opening party. She initially exceeded her minimum production requirements and won awards for her performance but began to have difficulty writing new policies and maintaining her cash flow.

{¶ 14} Other agents in the AE Program were also not meeting the minimum production requirements and were undercapitalized, so Nationwide began to modify the terms of the program. It offered agents the choice to (1) remain in the program, (2) leave with loans forgiven and Nationwide's agreement to pay off agency obligations such as leases, or (3) participate in a modified version of the AE Program. Nationwide also provided funds for agents to consult with accountants to prepare revised business plans in order to determine whether continuing in the program made financial sense.

{¶ 15} On February 7, 2007, Lucarell met with her sales manager, Helfer, and signed a Memorandum of Understanding ("MOU"), in which Nationwide offered her $15,000 in cash to prepare a new business plan and promised to reimburse $35,000 in business expenses as consideration for her to "completely release and forever discharge any and all claims which Agent may have against Nationwide * * * whether known or unknown, which were or could have been asserted against Nationwide from the beginning of time until the date of this MOU." Lucarell testified that when she signed the MOU, she had "no choice. * * * They would have terminated me and my agency, and my loan would become due in full."

{¶ 16} Lucarell submitted a new business plan prepared by a local certified public accountant, but Nationwide rejected it. Another Nationwide agent agreed to assist her in drafting a new business plan, which was supposed to be mutually acceptable, but according to Lucarell, Nationwide dictated it to her.

{¶ 17} Lucarell fell below her yearly minimum production requirements in August 2007 and continued to fall short throughout 2008. Nonetheless, between February 2007 and September 2008, Nationwide provided Lucarell additional cash infusions totaling $214,922, which she did not have to repay. She was also hoping to receive the books of business of two agents, Michael Ivan and Dennis White, who were considering retirement.

{¶ 18} On September 19, 2008, Lucarell entered into a Modified AE Program Agreement with Nationwide. In that contract, she acknowledged that Nationwide had given her the opportunity to exit the AE Program with Nationwide paying off her loan. She also "represent[ed] and warrant[ed] to Nationwide that [she] has made the decision to continue in the AE Program while under no economic duress," and she agreed that she "has entered this Modification voluntarily and of [her] own accord, without reliance on any inducement, promise, or representations by any other party, except those which are expressly set forth in...