S & W Agency, Inc. v. Foremost Ins. Co.
| Decision Date | 21 January 1998 |
| Docket Number | No. C 92-3071.,C 92-3071. |
| Citation | 51 F.Supp.2d 959 |
| Parties | S & W AGENCY, INC., d/b/a Farm and City Insurance Services, and Gaylord Wooge, Plaintiffs, v. FOREMOST INSURANCE COMPANY, Foremost County Mutual Insurance Company, American Federation Insurance Company, and George H. Shattuck, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Chris Sheldrup, Cedar Rapids, IA, Kevin Visser, Paul Gamez, for Plaintiffs.
Clifford Schoenberg, New York, NY, James Snyder, Stephen Holtman, David Hacker, Cedar Rapids, IA, for Defendant.
TABLE OF CONTENTS
BACKGROUND ...................................................................... 963
CONCLUSIONS OF LAW .............................................................. 965
I. Defendants' Motion for Judgment as a Matter of Law .......................... 965
A. Breach of Long Term Partnership Agreement ................................ 966
1. Existence of a Partnership ............................................ 966
2. Existence of a Long-Term "Partnership" Agreement ...................... 966
a. Parole Evidence .................................................... 967
b. Contract Interpretation ............................................ 968
c. Oral Agreement Superseded by 1992 Agency Agreement ................. 968
d. Lack of Mutuality, Consideration, and Definite Time Period ......... 968
e. Defendants Did Not Breach or Plaintiffs Breached First ............. 969
f. Statute of Frauds .................................................. 970
B. Breach of the Agreement for the Exclusive Marketing of Associations ...... 970
C. Breach of Agreement for the Exclusive Marketing of the WIT Endorsement.... 971
D. Intentional Interference with Contractual Relations ...................... 972
E. Fraudulent Misrepresentation ............................................. 974
1. Long-term Agreement ................................................... 974
2. Exclusive Marketing of the WIT and Other Endorsement s to Manufacturer
Associations .......................................................... 974
F. Fraudulent Nondisclosure ................................................. 975
G. Misappropriation of Trade Secrets ........................................ 977
1. Existence of a Trade Secret ........................................... 977
2. Misappropriation ...................................................... 979
H. Damages .................................................................. 980
II. Motion for New Trial ........................................................ 980
A. Plaintiffs' Exhibit 151 .................................................. 981
B. LeMoine's Testimony on Leja's RV Initiative Meeting Notes ................ 981
C. Verdict Against the Weight of the Evidence & Excessive Award ............. 983
This matter comes before the court pursuant to plaintiffs' motion to amend the judgment (docket number 101), defendants' December 14, 1995 motion for judgment as a matter of law or for new trial (docket number 102), plaintiffs' motions for attorney fees (docket numbers 103 and 133), defendants' motion to vacate award of costs (docket number 119), and defendants' motion for sanctions (docket number 153). On October 26, 1994, the parties consented to proceed before the undersigned United States Magistrate Judge for any and all proceedings in this case pursuant to 28 U.S.C. § 636(c) (docket number 46). This court heard oral arguments on all of the parties' post trial motions on April 29, 1996. Plaintiffs were represented by Chris Sheldrup, Kevin Visser, and Paul Gamez. Defendants were represented by Clifford Schoenberg, James Snyder, Stephen Holtman, and David Hacker.
This case arises out of the defendants' termination of its agreement with Gaylord Wooge and his Forrest City, Iowa, insurance agency. In the early 1980s Gaylord Wooge conceived an idea for a new insurance product for owners of recreational vehicles and a marketing program for this insurance product. Basically, the product which became known as a WIT or Wooge endorsement provided replacement cost insurance coverage for recreational vehicles. Apparently, due to the safety of recreational vehicle drivers and the otherwise uncommon occurrence of a recreational vehicle being "totaled" for insurance purposes, an insurer could offer replacement cost insurance for recreational vehicles at a very reasonable price.
Another unique feature of Gaylord Wooge's idea related to the marketing of this product. Each of the primary recreational vehicle manufacturers in America sponsor associations which meet at rallies across the country. Wooge's idea was to first convince the association that it should endorse an exclusive marketer of replacement cost insurance to its membership. Wooge would then travel to the rallies, set up a booth, and market the insurance directly to recreational vehicle owners.
Through Wooge's efforts and knowledge concerning recreational vehicle owners, the WIT endorsement became a huge success for Foremost and Wooge as it was marketed through Winnebago's recreational vehicle association. Thus, while Wooge had signed the same insurance agency agreement with Foremost as had other independent agencies, there was no question but that the WIT endorsement created a special relationship between the plaintiffs and the defendants. Because of the plaintiffs' investment of time and money developing the market for the WIT endorsement, the defendants agreed that its relationship with Wooge's agency was more akin to a partnership. In fact, the company used the terms "long-term" and "partnership" to describe this relationship although obviously the term "partnership" was not used to describe the legal entity under which the two parties did business.
Further, the plaintiffs alleged and the jury found that the plaintiff was to be the exclusive marketer of the WIT endorsement to manufacturer associations. In fact, Gaylord Wooge became upset when he found out that representatives of Foremost had approached the Holiday Rambler recreational vehicle association two weeks prior to his attempt to duplicate the Winnebago Association agreement with Holiday Rambler. There was testimony at trial that Foremost recognized this as a violation of Wooge's exclusive right to market to manufacturer associations.
Throughout 1990 and 1991 representatives of Foremost continued to make the same representations to Wooge about being partners for the long term and Wooge's exclusive right to market the endorsement he developed. Internally, however, the company became concerned about the high commissions that were being paid to Wooge and the fact that he owned rights to the customers' renewal business. At the same time they were telling Wooge about their long-term partnership, Wooge was expending sums of money to develop this business for Foremost and Foremost was planning the cancellation of plaintiffs' agency agreement if Wooge did not accede to a new business arrangement with dramatically lower commissions. In 1992 Wooge's agency was in fact terminated by Foremost and he brought this civil action.
This matter was tried before a jury between November 1, 1995 to November 14, 1995. The jury returned a verdict in favor of the plaintiffs on the following claims: (1) breach of contract by Foremost, (2) intentional interference with plaintiffs' contracts with manufacturer association groups by Foremost and by George Shattuck, (3) fraudulent misrepresentation by Foremost and by George Shattuck,1 (4) fraudulent nondisclosure by Foremost, and (5) misappropriation of trade secrets2 by Foremost and by George Shattuck. The jury awarded the plaintiffs six hundred eighty-eight thousand dollars ($688,000.00) in compensatory damages, eight million dollars ($8,000,000.00) in punitive damages against Foremost, and twelve thousand dollars ($12,000.00) in punitive damages against George Shattuck.
Defendants raise eleven arguments in support of their post trial motions. Defendants argue that Foremost neither breached a contract nor fraudulently misrepresented any facts: (1) that plaintiffs were Farmland's long-term partners, (2) that plaintiffs would have the exclusive right to market associations having contact with plaintiffs, and (3) that plaintiffs would be the exclusive marketer of the "WIT" replacement cost endorsement. In addition, defendants assert that Farmland is entitled to judgment as a matter of law (JML) on plaintiffs' fraudulent nondisclosure claim, trade secrets claim, and intentional interference with contracts with associations. Defendants also argue that neither the compensatory damage award nor the punitive damage award can stand if the court grants their motion on any of the above grounds. Finally, Defendants argue that, should the court deny their motions for JML, they are entitled to a new trial for the various reasons set forth in their brief. Plaintiffs resisted the motions on all grounds.
Fed.R.Civ.P. 50 provides for alternative post-trial motions for JML or new trial. It states the following in relevant part:
(a) Judgment as a Matter of Law.
(1) If during a trial by jury a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the court may determine the issue against that party and may grant a motion for judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue.
(2) Motions for judgment as a matter of law may be made at any time before submission of ...
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