McGriff v. Minnesota Mut. Life Ins. Co.

• Citation: 127 F.3d 1410
• Decision Date: 18 November 1997
• Docket Number: No. 97-6007,97-6007
• Parties: 11 Fla. L. Weekly Fed. C 798 Joel McGRIFF, Plaintiff-Appellee, v. MINNESOTA MUTUAL LIFE INSURANCE COMPANY, THE, a corporation, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1410

127 F.3d 1410

11 Fla. L. Weekly Fed. C 798

Joel McGRIFF, Plaintiff-Appellee, v. MINNESOTA MUTUAL LIFE INSURANCE COMPANY, THE, a corporation,

Defendant-Appellant.

No. 97-6007.

United States Court of Appeals, Eleventh Circuit.

Nov. 18, 1997.

Ollie L. Blan, Spain & Gillon, L.L.C., Birmingham, AL, for Defendant-Appellant.

George L. Beck, Jr., Beck & Byrne, P.C., Montgomery, AL, for Plaintiff-Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before ANDERSON and COX, Circuit Judges, and ALARCN ^*, Senior Circuit Judge.

COX, Circuit Judge:

Minnesota Mutual Life Insurance Company ("MML") appeals from a judgment entered on a jury verdict in favor of plaintiff Joel McGriff awarding $250,000 in compensatory damages for fraudulent inducement and fraudulent suppression. We vacate and remand with instructions.

I. BACKGROUND

In the fall of 1987, MML recruited Joel McGriff as an MML agent. At the time, McGriff was employed by Principal Mutual Life Insurance Company, where he had been an active agent since 1983. While being recruited, McGriff received a recruiting booklet describing the uniqueness of the business opportunities at MML. The booklet stated in part that those entering into a "partnership" with MML would "end up owning a business and ... renewals after five years, with an equity value of $50,000 to $500,000." McGriff also visited MML's home office in St. Paul, where he met with Terry Sullivan, the Senior Vice President of the Individual Division of MML. McGriff testified that Sullivan represented employment with MML as a unique business opportunity in that McGriff would be able to build, develop, and increase the value of his own business. McGriff also testified that other senior employees told him that while working at MML, he would have the opportunity to build his own business with a specific equity value, much like a franchise. Based on these statements, McGriff understood the MML business opportunity to include, in addition to renewal income, compensation for McGriff's "block of business" if and when his agency with MML terminated.

On October 12, 1987, McGriff signed an agent's contract with MML, and from 1987 until 1994 sold insurance policies and annuities for MML. In May of 1994, the general agent in Birmingham, under whom McGriff had been working, left MML. Shortly after the general agent's resignation, MML wrote McGriff a letter terminating his Agent's Contract because of the general agent's departure. After receiving this letter, McGriff met and spoke with people at MML to discuss his future with the company. Subsequently, McGriff continued to operate as an MML agent, and the letter was apparently never put into effect. In September of 1994, McGriff expressed concern to MML about additional expenses he was incurring because of the absence of a general agent. MML and McGriff reached an agreement whereby McGriff would receive additional compensation if he could successfully place one million dollars of annuity business with MML by December 31, 1994. Dale Martin, who in 1994 was MML's Assistant Superintendent of Agencies for the Eastern Region, wrote McGriff a letter dated September 13 confirming the agreement. Additionally, the letter stated as follows:

In this case, a Service Office is a viable solution. However, at some point we have to determine if the production received and the quality of supervision is adequate enough to justify continuing the service office. In your case we feel there is enough potential business. You have proven in the past that you are a loyal, high impact agent. We would like to see you back on top. Obviously, the Service Office arrangement option is continually monitored.... Joel, I hope this arrangement is satisfactory to you. It is time to put the past behind us and build for the future.

After receiving the September 13 letter, McGriff leased new office space, hired an office manager and secretary, and purchased additional office equipment and furniture. Additionally, he began placing annuities with MML in an effort to meet the one million dollar goal.

Also on September 13, William Owens, the Director of Agencies for the Eastern Region of the Individual Division, sent an internal memorandum to Dave Goers, a MML vice president in the Agency Administration section. Owens expressed concern over the changing legal environment in Alabama and contemplated withdrawing MML's products and services from Alabama and severing relationships with unsupervised agents. In an internal memorandum from Goers to Sullivan dated October 4, 1994, Goers recommended terminating all agents in the Birmingham office except for one designated service representative. MML informed McGriff of the decision to terminate him in a letter dated December 2.

McGriff testified that he read the Agency Contract before signing it and that he understood MML's right, under the contract, to terminate him at any time without cause. McGriff also testified that the Agent's Contract set forth the compensation that McGriff, as an MML agent, was entitled to receive upon termination of the contract, but that the Agent's Contract did not include any provisions stating that MML would buy his block of business or compensate him for the value of his business upon termination of the agency relationship. The Agency Contract stated that neither a Production Bonus nor a Quality Bonus nor Service Fees would be paid after the agency relationship terminated.

II. PROCEDURAL HISTORY

McGriff sued MML in the Circuit Court for Houston County, Alabama, for outrage, libel, breach of contract and fraud. MML removed the case to the United States District Court for the Middle District of Alabama; the case was then transferred to the United States District Court for the Northern District of Alabama. The district court granted MML's motion for summary judgment as to the outrage, libel, and breach of contract claims, rendering the fraud claims the sole claims remaining for trial. At trial, the district court denied MML's motions for judgment as a matter of law, and the jury returned a verdict for $250,000 in compensatory damages. Following the jury's verdict, MML moved for a judgment notwithstanding the verdict or, alternatively, for a new trial. The district court denied this motion as well.

On appeal, MML contends that the district court erred in (1) denying its motion for summary judgment as to the fraud claims; (2) denying its motions for judgment as a matter of law at the close of the plaintiff's evidence and at the close of all the evidence; (3) denying its motion for judgment notwithstanding the verdict; and (4) denying its motion for a new trial based upon errors occurring during the trial.

III. DISCUSSION

In his fraudulent inducement claim, McGriff alleges that MML fraudulently induced him to leave his former employment and to sign the Agency Contract with MML by leading him to believe that by entering into an agency relationship with MML, he would be building his own business with an equity value. In his fraudulent suppression claim, McGriff alleges that in the fall of 1994, MML fraudulently suppressed the fact that MML was contemplating McGriff's termination while at the same time encouraging him to remain as an agent with MML and to place more business with MML.

A. FRAUDULENT INDUCEMENT

The first issue we address is whether the trial court erred in denying MML's motion for judgment as a matter of law on McGriff's claim of fraudulent inducement. A party is entitled to judgment as a matter of law if "there is no legally sufficient evidentiary basis" for a reasonable jury to find for the opposing party. Fed.R.Civ.P. 50(a)(1). A scintilla of evidence in support of a verdict is insufficient to withstand a motion for judgment as a matter of law; there must be substantial evidence to support the verdict. Walker v. NationsBank of Florida, N.A., 53 F.3d 1548, 1555 (11th Cir.1995). We review de novo the district court's decision to deny MML's motion for judgment as a matter of law. See, e.g., Daniel v. City of Tampa, 38 F.3d 546, 549 (11th Cir.1994). In evaluating the motion for judgment as a matter of law, we must consider "all of the evidence and reasonable inferences arising therefrom in the light most favorable to the nonmoving party." Richardson v. Leeds Police Dep't., 71 F.3d 801, 805 (11th Cir.1995).

Under Alabama law, to prevail on a fraudulent inducement claim, McGriff must prove: (1) MML had a duty to speak the truth; (2) MML made a false representation of material fact; (3) McGriff justifiably relied upon the false representation; and (4) as a proximate result, McGriff suffered loss, harm, or damage. See Kidder v. AmSouth Bank, N.A., 639 So.2d 1361, 1362 (Ala.1994); Alfa Mut. Ins. Co. v. Northington, 561 So.2d 1041, 1045 (Ala.1990). Additionally, an action for promissory fraud, in which the alleged fraud concerns a future promise as opposed to a present fact, does not lie unless McGriff proves that at the time MML made the alleged misrepresentations, it intended not to do the acts promised and intended to deceive McGriff. See Sealing Equip. Prod. Co. v. Velarde, 644 So.2d 904, 908 (Ala.1994).

We begin our analysis by noting that there has been considerable debate in the Alabama courts as to the proper application of the "reliance" element in fraud cases. Initially, Alabama courts applied a "reasonable reliance" standard to both consumer and commercial transactions, holding that "if a ... plaintiff, acting as a reasonably prudent person exercising ordinary care, would have discovered the 'true facts' before acting on the alleged misrepresentation, then, as a matter of law, the plaintiff could not have relied on the misrepresentation." Johnson v. State Farm Ins. Co., 587 So.2d 974, 977 (Ala.1991) (citing Torres v. State Farm Fire & Casualty Co., 438 So.2d 757 (Ala.1983), overruled by Hickox v. Stover, 551 So.2d 259 (Ala.1989)). Courts applying this standard...