Rudolph v. Allstate Ins. Co.
| Decision Date | 06 August 2020 |
| Docket Number | Case No. 2:18-cv-1743 |
| Parties | MATTHEW C. RUDOLPH, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
OPINION AND ORDER
This matter is before the Court upon Defendant Allstate Insurance Company's Motion for Partial Summary Judgment (ECF No. 36), Plaintiff Matthew C. Rudolph's Motion for Partial Summary Judgment (ECF No. 59), and Allstate's Cross Motion for Summary Judgment on Plaintiff's Motion for Partial Summary Judgment (ECF No. 61). All three motions are fully briefed and ripe for review. For the reasons stated herein, Allstate's Motion for Partial Summary Judgment is GRANTED, Plaintiff's Motion for Partial Summary Judgment is DENIED, and Allstate's Cross Motion for Summary Judgment is GRANTED.
This matter arises out of Allstate's decision to terminate the Allstate R3001S Exclusive Agency Agreement ("EA Agreement") it had with Mr. Rudolph and Allstate's subsequent decision not to approve Mr. Rudolph's proposed candidates as successors to the two agencies Mr. Rudolph operated at the time of his termination.
Mr. Rudolph began working for Allstate as a Licensed Sales Producer ("LSP") at his father's agency in 2009. (Rudolph Dep. at 32, ECF No. 36-2, Ex. B). In March 2013, Mr. Rudolph purchased his father's agency and then later sold it. (Id.). Before he sold that agency, Mr. Rudolph purchased a second Allstate agency in Bexley, OH. Mr. Rudolph sold his Bexley agency in 2015. (Id. at 35). Mr. Rudolph opened two additional agencies, "South High" and "Georgesville" in 2014 and 2016, respectively. Mr. Rudolph owned and operated both of these agencies when his EA Agreement was terminated on May 10, 2018. (Termination Letter, ECF No. 36-2, Ex. G).
Each time Mr. Rudolph opened an agency, the parties executed a separate and distinct EA Agreement. (See EA Agreements, ECF No. 47, Exs. 1, 2).1 Each EA Agreement fully incorporated the Allstate Supplement for the R30001 Agreement (the "Supplement"), the Exclusive Agency Independent Contractor Manual (the "Manual") and the Allstate Agency Standards. (EA Agreement at I.C). The EA Agreement gave Allstate the ability to terminate Mr. Rudolph, with or without cause, at any time. (Id. at XVII.B.2). Allstate was able to terminate Mr. Rudolph with cause, immediately upon providing written notice to him. (Id.). "For cause" termination was warranted by "breach of [the Agreement], fraud, forgery, misrepresentation, or conviction on crime." (Id.).
As an agency owner, Mr. Rudolph contracted with LSPs, who sell insurance policies at one of his agencies. The Manual dictates that agents, such as Mr. Rudolph, are (Independent Contractor Manual at PAGEID # 503, ECF No. 39, Ex. C). Agents were also required to ensure LSPs complied with "Company policies and procedures, including the Allstate Agency Standards, and all applicable laws and regulations relating to the conduct of business under the R3001 Agreement." (Id.).
In late 2017 or early 2018, Allstate conducted an internal audit and subsequently began an investigation into Mr. Rudolph's agencies. The investigation concluded that one of Mr. Rudolph's former LSPs, Kevin Palmer, had falsified prospective customers' information to secure business by obtaining better rates than would have been otherwise possible. (Summary of Evidence Report at PAGEID # 368, ECF No. 36-2, Ex. D). Mr. Rudolph was made aware of Palmer's practices of falsifying information in October or November of 2017. . When Mr. Rudolph confronted Palmer, Palmer asked for forgiveness and assured Mr. Rudolph "it would never happen again." (Id. at 14:2-12). Mr. Rudolph did not fire Palmer and instead decided he would monitor him more closely. (Id.). However, the idiosyncrasies regarding the availability of reports from Allstate and Mr. Rudolph's retrospective failure to understand the reports that were available to him allowed Palmer to continue his practice of falsifying information—albeit to a lesser degree—largely undetected by Mr. Rudolph. (Id. at 17:7-20:18). Allstate had no reason to believe Mr. Rudolph instructed Palmer to engage in such conduct or that Mr. Rudolph knew of Palmer's conduct prior to the fall of 2017. (Hawkes Dep. at 58, 62, ECF No. 36-2, Ex. F; Cantrell Dep. at 30, ECF No. 44).
During the course of Allstate's investigation, Palmer admitted to his conduct and acknowledged that he knew that he acted contrary to Allstate's internal policies. (Id. at 8:21-10:17). Ultimately, Allstate's Investigative Services recommended that Allstate terminate Mr. Rudolph's EA Agreements. (Summary of Evidence Report at PAGEID # 368). On May 10, 2018, Allstate notified Mr. Rudolph in writing that his EA Agreements were being immediately terminated for cause. (Termination Letter, ECF No. 36-2, Ex. G). The Termination Letter informed Mr. Rudolph that, pursuant to the terms of the EA Agreement, he could elect to find a buyer for each of his agencies or he could elect to receive a termination payment ("TPP") pursuantto the terms set forth in the Supplement. (Id.). If Mr. Rudolph elected to find a buyer, the EA Agreement provides that Allstate maintains "the right in its exclusive judgment not to approve the transfer of interest." (EA Agreement at I.B). According to the Termination Letter, if Mr. Rudolph did not present a buyer or if the buyer he presented was not approved, Allstate would process the termination payment in accordance with the Supplement. (Id.). In fact, Mr. Rudolph presented Allstate with four potential buyers, but Allstate denied all four. Allstate also never paid Mr. Rudolph a TPP, arguing that neither of his agencies met the vesting requirements spelled out in the EA Agreement or its incorporated documents.
After terminating Mr. Rudolph, Allstate notified The Ohio Department of Insurance, License Division ("ODI") and the Financial Industry Regulatory Authority ("FINRA") about Mr. Rudolph's termination for cause and that he was no longer authorized to represent Allstate. Most relevant here, Allstate's letter to ODI stated that Rudolph had been fired for cause "due to falsification of documents[.]" (ODI Letter, ECF No. 36-2, Ex. H). Allstate's statement on its Form U5 filing to FINRA was more detailed, with the reason for termination being identified as: "failing to monitor insurance agency staff who were inaccurately completing Auto and Renters' insurance policies." (FINRA Filing at 2, ECF No. 36-2, Ex. I).
Mr. Rudolph initiated this action on November 13, 2018, in the Court of Common Pleas in Franklin County, Ohio, by filing a ten-count Complaint. (See ECF No. 1-1). Allstate subsequently removed the case to this Court on December 19, 2018. (Notice of Removal, ECF No. 1). On December 11, 2019, Mr. Rudolph voluntarily dismissed six (6) of his claims. (Not. of Dismissal, ECF No. 35). On March 24, 2020, Allstate moved for partial summary judgment on Mr. Rudolph's claims for breach of contract (Count II), defamation (Count IV), and breach of the impliedcovenant of good faith and fair dealing (Count IX).2 After briefing had concluded on Allstate's Motion for Partial Summary Judgment, the Court extended the deadline for filing dispositive motions and Mr. Rudolph moved for Partial Summary Judgment "on the issue of whether Allstate breached the terms of the contract by failing to pay Rudolph a termination payment ("TPP") pursuant to the contract." (Pl.'s Mot. at 1, ECF No. 59).3 On April 24, 2020, Allstate filed its response and Cross Motion for Summary Judgment, focusing solely on Mr. Rudolph's new theory of recovery for breach of contract. The parties concluded briefing on all issues presently before the Court on June 5, 2020.
Summary judgment is appropriate "if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The Court may therefore grant a motion for summary judgment if the nonmoving party, who has the burden of proof at trial, fails to make a showing sufficient to establish the existence of an element that is essential to the party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
The "party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions" of the record which demonstrate "the absence of a genuine issue of material fact." Id. at 323. The burden then shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed. R. Civ. P. 56(e)). "The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn inhis favor." Id. at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248; see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) () ( reliance upon mere allegations, conjecture, or implausible inferences to be insufficient to survive summary judgment). Consequently, the central issue is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Hamad v. Woodcrest Cond. Ass'n, 328 F.3d 224, 234-35 (6th Cir. 2003) (quoting Anderson, 477 U.S. at 251-52).
Having disposed of Mr....
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