Wolcott v. Nationwide Mut. Ins. Co.

• Citation: 664 F. Supp. 1533
• Decision Date: 12 August 1987
• Docket Number: No. C-2-84-854.,C-2-84-854.
• Parties: David C. WOLCOTT, Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, et al., Defendants.
• Court: United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio

664 F. Supp. 1533

David C. WOLCOTT, Plaintiff, v. NATIONWIDE MUTUAL INSURANCE COMPANY, et al., Defendants.

No. C-2-84-854.

United States District Court, S.D. Ohio, E.D.

July 15, 1987.

On Motions to Alter and Amend Judgment August 12, 1987.

James W. Lewis, Brownfield, Bally & Goodman, Columbus, Ohio (Roderick R. McKelvie, Ashby, McKelvie & Geddes, Wilmington, Del., of counsel), for plaintiff.

Larry H. James, Crabbe, Brown, Jones, Potts & Schmidt, Columbus, Ohio, for defendants.

MEMORANDUM AND ORDER

GRAHAM, District Judge.

Plaintiff herein, David C. Wolcott, brings an action under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. to recover from defendants pension benefits allegedly owed to him and to obtain declaratory relief. Plaintiff has also asserted breach of contract claims based upon pendent and diversity jurisdiction. The controversy in the case centers around the terms of plaintiff's Agent's Agreement with Nationwide Insurance Companies, in particular those provisions dealing with the Agent's Security Compensation Plan, and whether the laws of ERISA govern the administration of that plan.

The parties are in basic agreement concerning the general history of the case. Plaintiff first became an agent of the defendant insurance companies in 1963. Except for a period of time between 1965 and 1967, when plaintiff was employed as a district manager for defendants, plaintiff remained a licensed agent of the defendants until April, 1982. The terms of the agency arrangement were governed by the Agent's Agreement entered into by plaintiff and defendants. This agreement was renewed and revised over the years of plaintiff's association with the defendant companies.

Under the terms of the agreement, plaintiff was a "captive agent" for the defendants, that is, he was authorized to sell only Nationwide Insurance policies unless he obtained the prior written consent of defendants to write a policy through another company. The agreement defined plaintiff's relationship with the company as that of an independent contractor, and he was paid a commission on his policy sales and renewals. Plaintiff operated his Nationwide agency under the name David C. Wolcott Agency from an office at 2601 Annand Drive, Wilmington, Delaware. Plaintiff's wife, Ruth Wolcott, and plaintiff's daughter, Theresa Hurka, were licensed through Nationwide and worked in plaintiff's office.

The Agent's Agreement also included the terms and conditions of the Agent's Security Compensation Plan. The plan contains two types of benefits, deferred compensation incentive credits and extended earnings. The plan terms include a forfeiture provision which states that the plan will not be liable to a beneficiary who engages in the solicitation or sale of insurance within a year after the termination of the Agent's Agreement and within a twenty-five mile radius of his business location at the time of cancellation.

Late in 1981, Ruth Wolcott and Theresa Hurka formed an insurance agency under the business names of Wolcott and Associates and Corporate Risk Specialists. This new agency solicited and wrote policies for insurance companies other than Nationwide. Corporate Risk Specialists shared office space with plaintiff's agency in the office condominium owned by plaintiff and his wife at 2601 Annand Drive, and the two agencies shared the same phone number. Ruth Wolcott and Theresa Hurka continued to perform some work for plaintiff's agency even after the formation of Corporate Risk Specialists. Ruth Wolcott also retained her subagent status with Nationwide.

In April of 1982, George and Kathryn Hart, clients of plaintiff's agency, were sent a letter by Corporate Risk Specialists, signed "Wolcott & Associates", advising them that their agency now represented additional major insurance companies. Enclosed with the letter, for their consideration, was a replacement policy placed with a company other than Nationwide. Finally, the letter thanked the Harts for their "past valued business" and the "loyalty and confidence you have displayed in dealing with our office over the years."

This letter came to the attention of the defendants and on April 29, 1982, the defendants notified plaintiff that they were immediately cancelling his Agent's Agreement. Plaintiff sought review of this decision with the Nationwide Agents Administrative Review Board, but the termination was affirmed. In May of 1982, plaintiff became associated with Corporate Risk Specialists at the site of his former Nationwide office, and wrote and solicited policies with other insurance companies from that time onward. Plaintiff inquired about his benefits under the Agent's Security Compensation Plan, and was advised by letter that his cancellation was "unqualified", that is, he was ineligible for benefits, because of his violation of the forfeiture clause.

On April 27, 1984, plaintiff filed the instant complaint. Both plaintiff and defendants have filed motions for summary judgment. Summary judgment procedures are governed by Rule 56, Fed.R.Civ.P. which provides:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact.

The evidence must be viewed in the light most favorable to the party opposing summary judgment. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Summary judgment will not lie if the dispute about a material fact is genuine. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, ___, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986). However, summary judgment is appropriate if the opposing party fails to make a showing sufficient to establish the existence of an element essential to that party's case. Celotex Corp. v. Catrett, 477 U.S. 317, ___, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).

Plaintiff seeks to recover benefits by way of 29 U.S.C. § 1132(a), which provides that a participant or beneficiary of a pension plan may bring a civil action to recover benefits due him under the plan or to clarify his rights to future benefits under the terms of the plan. Plaintiff contends that the forfeiture provision in the Agent's Security Compensation Plan is invalid under ERISA. Plaintiff relies upon 29 U.S.C. § 1053(a) which provides that "an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age".

The first issue to be resolved is whether plaintiff is an "employee" within the terms of ERISA. The definition of "employee" found in 29 U.S.C. § 1002(2)(B)(6) states simply that "The term `employee' means any individual employed by an employer." This definition provides little insight into the problem. Therefore, courts have turned to other sources in determining whether an individual is an employee under ERISA.

The courts in Short v. Central States, Southeast and Southwest Areas Pension Fund, 729 F.2d 567 (8th Cir.1984) and Wardle v. Central States, Southeast and Southwest Areas Pension Fund, 627 F.2d 820 (7th Cir.1980) looked to traditional common law tests for determining whether an individual was an employee or an independent contractor in the pension plan context.

Additional guidance is provided by decisions of the United States Supreme Court interpreting the term "employee" as used in other regulatory legislation. Those decisions hold that the term "employee" is to be construed in light of the purpose of the statute, that is, the mischief to be corrected and the end to be attained. See e.g. United States v. Silk, 331 U.S. 704, 713, 67 S.Ct. 1463, 1468, 91 L.Ed. 1757 (1947); NLRB v. Hearst Publications, 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 (1944). Basically, the total situation must be considered in making this determination, and any one factor is not controlling. United States v. Silk, supra, 331 U.S. at 719, 67 S.Ct. at 1471.

Factors in making this determination include, but are not limited to: 1) the nature and degree of control retained by the employer; 2) the degree of supervision retained by the employer over the details of the work; 3) the extent to which services are an integral part of the employer's business or a distinct business; 4) the duration of the relationship; 5) who supplies the place or instrumentalities of work; 6) the method of payment; 7) the "employee's" opportunity for loss or profit; 8) the amount of initiative, skill, judgment or foresight required of the "employee" for the success of the enterprise; 9) the right to discharge; 10) whether the "employee" is engaged in a business apart from the business of the employer; 11) whether an "employee" can hire and control his own employees; and 12) whether the employer withholds taxes or pays social security for the "employee".

The court in Darden v. Nationwide Mutual Insurance Co., 796 F.2d 701 (4th Cir. 1986) formulated additional tests specifically directed toward the analysis of whether an individual is an employee for purposes of ERISA. These standards are as follows: 1) the "employee" must anticipate retirement benefits, or in other words, the employer must have taken some action that created a reasonable expectation on the "employee's" part that benefits would be paid in the future; 2) the "employee" must have relied on these expectations by remaining a substantial period of time with the employer and by foregoing other significant means of providing for his or her retirement; and 3) the "employee" must lack sufficient economic bargaining power to obtain contractual rights to nonforfeitable benefits. Id. at 706-707.

The circumstances relevant to the present case, as set forth in the Agent's Agreement and the affidavits and depositions on file, are basically undisputed and reveal no genuine issue of material fact. The Agent's Agreement states that plaintiff was an independent contractor. Plaintiff was required to...