Wolcott v. Nationwide Mut. Ins. Co., s. 87-3846

• Decision Date: 24 August 1989
• Docket Number: 87-3870,Nos. 87-3846,s. 87-3846
• Citation: 884 F.2d 245
• Parties: David C. WOLCOTT, Plaintiff-Appellee, Cross-Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Nationwide Mutual Fire Insurance Company, Nationwide Life Insurance Company, Nationwide General Insurance Company, and Nationwide Property & Casualty Company, Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 245

884 F.2d 245

David C. WOLCOTT, Plaintiff-Appellee, Cross-Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Nationwide Mutual Fire Insurance Company, Nationwide Life Insurance Company Nationwide General Insurance Company, and Nationwide Property & Casualty Company, Defendants-Appellants, Cross-Appellees.

Nos. 87-3846, 87-3870.

United States Court of Appeals Sixth Circuit.

Argued Aug. 25, 1988.

Decided Aug. 24, 1989.

Larry H. James (argued), Crabbe, Brown, Jones, Potts & Schmidt, Columbus, Ohio, for defendants-appellants, cross-appellees.

James W. Lewis, Lewis & Spencer, and C. William Brownfield (argued), Brownfield Law Offices, Columbus, Ohio, for plaintiff-appellee, cross-appellant.

John D. Luken, Nationwide Ins., Cincinnati, Ohio, Richard D. Panza, Mark P. Altieri, Richard A. Naegele, Wickens, Herzer & Panza, P.A., Lorain, Ohio, and Anne M. Richard and B. Lee Willis, Hazel, Thomas, Fiske, Beckhorn & Hanes, P.C., Alexandria, Va., for amicus curiae.

Before JONES and GUY, Circuit Judges, and HILLMAN, Chief District Judge. ^*

NATHANIEL R. JONES, Circuit Judge.

Defendants-appellants, Nationwide Mutual Insurance Company, et al. (Nationwide), appeal from the judgment of the district court granting plaintiff-appellee, David Wolcott's (Wolcott), motion for summary judgment. Because we hold that Wolcott is not Nationwide's "employee" within the meaning of Title I of the Employee Retirement Income Act of 1974, 29 U.S.C. Sec. 1001, et seq. (ERISA), we reverse the judgment of the district court.

I.

From 1962 until April 1982, Wolcott was a commissioned insurance agent for Nationwide in Easton, Maryland. Wolcott operated his Nationwide agency under the name David C. Wolcott Agency (Wolcott Agency). During that period, Wolcott represented Nationwide exclusively, i.e. he was authorized to write policies only for Nationwide unless he received the express prior approval of Nationwide to write a policy through another carrier. Except for a two year period in the 1960's, Wolcott was compensated through commission.

The relationship between Wolcott and Nationwide was governed by a written contract (Agent's Agreement or Agreement) which was renewed and revised over the years. The Agent's Agreement included the terms and conditions of the Agents Security Compensation Plan (ASCP) which Nationwide created in 1969. The ASCP consisted of two programs known as the "Deferred Compensation Incentive Plan" and the "Extended Earnings Plan." Under the Deferred Compensation Plan, Nationwide maintained a retirement account for Wolcott and annually credited to that account, beginning after his fifth year of service, a sum based on their original and renewal service fee earnings for insurance policies. Under the Extended Earnings Plan, Nationwide agreed to pay Wolcott upon his retirement, termination, death, or disability, a sum equal to earnings from renewal fees over the prior twelve months.

The Agent's Agreement provided that in order for the agent to be entitled to payment of the ASCP, the cancellation of the Agent's Agreement must be "qualified." ¹ In particular, the Agent's Agreement stated that Nationwide's obligation to pay benefits under the ASCP would terminate if a former agent engaged in competition with Nationwide within one year of the cancellation of the Agent's Agreement with Nationwide and within a twenty-five mile radius of the former business location of the agent. Nationwide's obligation would also cease if the former agent, at any time after the cancellation of the Agent's Agreement with Nationwide, induced a Nationwide policyholder to cancel a contract with Nationwide. The Agent's Agreement between Nationwide and Wolcott further provided that either party had the right to cancel the contract at any time after written notice.

The parties dispute the facts leading up to the cancellation of the Agent's Agreement. However, it is undisputed that in 1981 Wolcott's wife and daughter formed a company under the business names Wolcott and Associates and Corporate Risk Specialists ("Corporate Risk Specialists"), which was located at the same address and phone number as the Wolcott Agency. Wolcott's wife and daughter remained employed at the Wolcott Agency. Corporate Risk Specialists solicited and wrote policies for insurance companies other than Nationwide.

In April 1981, Corporate Risk Specialists sent George and Kathryn Hart a letter which advised them that their agency was then representing additional major insurance companies. Although the Harts were Nationwide policyholders, Corporate Risk Specialists enclosed with the letter a replacement insurance policy from a carrier other than Nationwide. The letter signed by Wolcott and Associates thanked the Harts for their past business and the loyalty they had displayed over the years. Apparently the letter came to Nationwide's attention when the Harts inquired about their Nationwide policy. On April 29, 1982, Wolcott was notified about the letter by his Nationwide regional sales manager. When asked about the circumstances regarding the letter to the Harts, Wolcott denied any responsibility for the actions of his wife and daughter. Nationwide then cancelled Wolcott's Agent's Agreement, and Wolcott sought review of this decision by an internal administrative review board. In May 1982, Wolcott formally joined Corporate Risk Specialists and thereafter wrote and solicited policies for carriers other than Nationwide. Subsequently, Nationwide affirmed the unqualified cancellation of Wolcott's Agent's Agreement, and Wolcott received notification of this decision in June 1982. Wolcott thereafter inquired about his benefits under the ASCP and was notified by Nationwide that he was ineligible because of his violation of the forfeiture clause.

On April 27, 1984, Wolcott filed this instant action under 29 U.S.C. Sec. 1132(a), which provides that a participant, as a beneficiary of an employee retirement income security plan, may bring a civil action to enforce provisions of the Act and recover benefits due him. Wolcott sought in particular to enforce the Act's nonforfeitability requirements and to recover benefits claimed to be due him under the ASCP.

Wolcott moved for summary judgment, and Nationwide filed a cross-motion for summary judgment claiming that Wolcott voluntarily forfeited any right he may have had to the claimed benefits. The district court held that Wolcott is an "employee" under ERISA, and that the Deferred Compensation Plan is a "pension benefit plan" which is not exempted from ERISA nonforfeitability requirements. The district court determined, however, that the Extended Earnings Plan is not a pension benefit plan under ERISA and therefore is not governed by the nonforfeiture provisions. Finally, the district court held that Wolcott does not have the right to enforce payment of benefits under the Deferred Compensation Plan until he reaches the age of 65 and, therefore, that his wife would have no survivorship rights in any benefits under the Deferred Compensation Plan should Wolcott die prior to reaching the age of 65.

Following the parties' receipt of the district court's judgment of July 15, 1987, both parties filed timely motions to alter and amend pursuant to Federal Rule of Civil Procedure 59(e). On August 12, 1987, the district court rendered a second memorandum and order. The district court denied Nationwide's motion and granted Wolcott's motion, in part, by clarifying his rights under ERISA with regard to the Deferred Compensation Plan in the event of his death or disability.

II.

We first address Wolcott's contention that the district court erred by granting summary judgment in favor of Nationwide because there exists a genuine issue of material fact concerning Nationwide's claim that he breached the Agent's Agreement. A district court should grant summary judgment only if the "pleadings, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). This court applies the same test as used by the district court in reviewing a motion for summary judgment. Gutierrez v. Lynch, 826 F.2d 1534, 1536 (6th Cir.1987).

In support of his contention that there is a genuine issue of material fact regarding the alleged breach of the Agent's Agreement, Wolcott argues that the district court erroneously found that he had violated his Agent's Agreement as a result of the actions of his "subagents," Ruth Wolcott and Theresa Hurka. Wolcott contends that his wife and daughter were never authorized agents for Nationwide and, in fact, only worked as paid employees for the Wolcott Agency. While conceding that he was responsible for the activities of his subagents at the Wolcott Agency, Wolcott claims that he was not responsible for their activities at Corporate Risk Specialists.

Wolcott further argues that he was not associated with Corporate Risk Specialists prior to his "unqualified" termination, and asserts that this proposition is supported by the testimony of both his wife and daughter. Moreover, Wolcott contends that he never referred any current or prospective Nationwide clients to Corporate Risk Specialists or any other agency prior to April 29, 1982, and at no time during his almost twenty year association with Nationwide did he sell insurance coverage for any other carrier without Nationwide's express prior approval.

Wolcott concludes that Nationwide breached the Agent's Agreement by virtue of its "unqualified" termination, and the consequent forfeiture of the ASCP benefits. Thus, Wolcott asserts that because of Nationwide's breach, he was justified in his subsequent competitive activities which fell within the provision of paragraphs 11(f)(1) and (3).

Confining our discussion to...