Old Republic Ins. Co. v. Lanier

• Decision Date: 26 May 2000
• Citation: 790 So.2d 922
• Parties: OLD REPUBLIC INSURANCE COMPANY and Old Republic Union Insurance Company v. Tom LANIER, individually and d/b/a J.T. Lanier Agency.
• Court: Alabama Supreme Court

790 So.2d 922

OLD REPUBLIC INSURANCE COMPANY and Old Republic Union Insurance Company v. Tom LANIER, individually and d/b/a J.T. Lanier Agency.

1971340.

Supreme Court of Alabama.

May 26, 2000.

Rehearing Denied March 2, 2001.

J. Fairley McDonald III of Maynard, Cooper & Gale, P.C., Montgomery, for appellants.

Charles A. Dauphin and Donald R. James, Jr., of Baxley, Dillard, Dauphin & McKnight, Birmingham, for appellee.

Rhonda Pitts Chambers of Rives & Peterson, Birmingham, for amicus curiae Alabama Defense Lawyers Ass'n.

PER CURIAM.

Old Republic Insurance Company and Old Republic Union Insurance Company (collectively "Old Republic") appeal from a judgment entered on a jury verdict in favor of Tom Lanier for $2,940,000 in compensatory damages, and $25 million in punitive damages. The dispositive issue on appeal is whether Lanier's action was barred by the doctrine of res judicata. We conclude that it was, and we therefore reverse and remand.

This litigation already has a considerable history. See Old Republic Ins. Co. v. Lanier, 644 So.2d 1258 (Ala.1994) ("Lanier I"); see also Lanier v. Old Republic Ins. Co., 936 F.Supp. 839 (M.D.Ala.1996) ("Lanier II"). The business relationships out of which the litigation arose are described in Lanier I and Lanier II, and will not be discussed here except as to those points pertinent to the new issues raised by this appeal.

At the core of these relationships are two substantively identical agreements between Lanier and Old Republic (collectively the "Agreement"), Lanier I, 644 So.2d at 1259, which were executed in 1987. Lanier II, 936 F.Supp. at 840. Pursuant to the Agreement, Lanier was to serve as an agent for Old Republic "in connection with an insurance program being developed to service the logging industry." Lanier I, 644 So.2d at 1259. More specifically, it "authorized Lanier to solicit and bind worker's compensation and employer's liability coverage, comprehensive general liability coverage, automobile coverage, and inland marine insurance in Alabama, Florida, and Georgia." Brief of Appellant, at xxi. The Agreement contained the following pertinent provisions:

"ARTICLE IX. ARBITRATION

"As a condition precedent to the institution of any action at law or in equity hereon, any dispute arising out of this Agreement shall be submitted to the decision of a board of arbitration composed of two arbitrators and an umpire meeting in the City of Chicago, Illinois, unless otherwise agreed.

". . . .

"ARTICLE X. TERMINATION OF AGREEMENT

"A. This Agreement shall be terminable at any time without cause by either party giving to the other party at least [90] days' prior notice of its intent to terminate.

"B. This Agreement shall terminate ten (10) days after the effective date of written notice given by either party to the other in the event of fraud, insolvency, or gross and willful misconduct on the part of such other party, unless cured within the ten day period. Such notice of termination shall state the grounds that the party giving notice relies upon in giving such notice of termination.

"C. This Agreement shall be terminable by [Old Republic] upon [Old Republic's] giving thirty (30) days' written notice to [Lanier] in the event of default if [Lanier] shall fail to correct such default within such period.

"D. In the event of a termination of this Agreement by [Old Republic] for cause under paragraphs B or C above, the ownership of all expirations on insurance written hereunder shall belong to [Old Republic]. Otherwise, the ownership of all insurance expirations shall belong to [Lanier], but only if [Lanier] has made all accountings, remitted all premiums due, and filed proof of such actions with [Old Republic].

"E. With any termination of this Agreement, [Lanier] shall cease to have any further authority hereunder, except that if this Agreement is terminated by prior written notice without cause, [Lanier] shall have the following limited authority as to the insurances written hereunder and which are still in force:

"1. To continue such insurances for their remaining unexpired terms, subject to [Old Republic's] approval or as may be required by law, for which [Old Republic] shall pay [Lanier] commissions in effect at the time of any such renewals;

"2. To issue and countersign endorsements, with respect to coverages under Schedule A, but only with prior written approval of [Old Republic];

"3. To collect, receive and receipt for premiums becoming due on such policies and endorsements.

"The foregoing limited authority shall automatically terminate upon the cancellation, expiration or other termination of the insurances written hereunder or upon [Lanier's] breach of any of the limitations on such authority.

"F. Termination by prior notice or otherwise shall not be construed as fully discharging either party's accounting and financial obligations hereunder, which shall be fully discharged as speedily as possible upon termination."

Additionally, in January 1991, Lanier contacted Rickie Wayne Chancy and Jeffrey R. Stoutamire, who owned Chancy-Stoutamire, Inc. ("C-S"), a "major [insurance] competitor" in Florida. Lanier proposed that C-S "com[e] in and writ[e] their business through [his] contract with Old Republic as a subagent." (Reporter's Transcript, at 829.) Consequently, in January 1991, Lanier and Chancy executed a "letter of intent," stating in pertinent part:

"It is the intent of J.T. Lanier & Associates and Chancy-Stoutamire, Inc. hereinafter referred to as agencies to join together in a marketing plan for the states of Florida and Georgia.

"It is further intended that these agencies place all qualified mechanized logging business in the current program as specified in an Agency Agreement between John T. Lanier dba J.T. Lanier & Associates and [Old Republic].

". . . .

"It is further intended that non-compete agreements and formal agency marketing plans will be signed by each of the parties prior to March 1, 1991."

(Emphasis added.)

Also in January 1991, Lanier sent to Charles D. Jordan,¹ a letter, which stated in pertinent part:

"I hereby authorize [Old Republic] to set up a company number for Chancy-Stoutamire, Inc.... The intent is for Chancy-Stoutamire, Inc. to submit all of their mechanized logging business that meets the underwriting requirements of the program for the State of Florida and the State of Georgia.

". . . .

"Chancy-Stoutamire's agency contract is to be an addendum to J.T. Lanier & Associates' and should be contracted as a sub-agent under our Agency Agreement.

"Chancy-Stoutamire will have the authority to solicit and bind coverages."

(Emphasis added.)

No noncompetition agreement between C-S and Lanier was ever executed. Moreover, Lanier and C-S had an "understanding" that the subagency could be cancelled arbitrarily by either party, at any time.

By mid-1992, Lanier's relationships with Old Republic and C-S had become strained. On June 1, C-S wrote a letter to Old Republic expressing an interest in terminating its subagency with Lanier and commencing a direct agency relationship with Old Republic. The letter stated in pertinent part:

"Our agency has represented Old Republic through J.T. Lanier & Associates for the past eighteen months. We feel that the job we have done was good for both Old Republic [and] J.T. Lanier ... as this is reflected in our agency loss runs.

"J.T. Lanier & Associates has previously placed a restriction on our agency which hindered growth and profitability. They are now wanting to further restrict our profitability and we feel it is in our best interest to seek another market. We have been very pleased with the job that... Old Republic [has] done our agency.

"Before talking to any other carriers, we would like to request a direct contract with Old Republic.... If this is possible, we would like to have all our business transferred as soon as possible. We would also request that no further data from our agency be sent to J.T. Lanier & Associates."

Old Republic forwarded this letter to Lanier.

On June 16, 1992, Lanier wrote to Old Republic, stating:

"I am continuing to correspond with [C-S] to reach a satisfactory sub-agency arrangement between them and myself.... I do not intend to relinquish my rights to the exclusive agency relationship for Georgia, Alabama, and Florida and I do not intend to allow [C-S] to represent Old Republic on a direct basis. Until then, we should operate under the present sub-agency relationship."

(Emphasis added.) Subsequent attempts to resolve the difficulties between C-S and Lanier were, however, unsuccessful. Moreover, in a letter dated June 25, 1992, Old Republic accepted the offer of C-S to establish a "direct [agency] contract" with Old Republic.

On July 27, 1992, Old Republic formally notified Lanier of its intent to terminate his agency on October 26, 1992, that is, after 90 days. Effectively, however, Old Republic terminated the agency immediately. More specifically, Old Republic immediately ceased both (1) writing new policies and (2) renewing existing policies generated by Lanier.

On November 12, 1992, Lanier filed the six-count complaint commencing this action against Old Republic, C-S, Charles Jordan, Rickie Wayne Chancy, and Jeffrey Stoutamire.² See Lanier I, 644 So.2d at 1259. Counts one to three contained claims against Old Republic and Jordan. Counts four to six contained claims against the C-S defendants. Specifically, count one contained a "misrepresentation" claim against Old Republic and Jordan. Id. Count one alleged that "[i]n negotiations leading to the execution of the Agency Agreement, Old Republic ... represented to ... Lanier that [his] agency would be the exclusive agency for logging business in the states of Alabama, Georgia and Florida." It further alleged that "Lanier discovered the representations were false in June 1992." Count two contained a breach-of-contract claim, alleging breach of the Agreement. More specifically, count two alleged:

"27. In July,

...