Court: District Court, S.D. Ohio; February 6, 2018; Federal District Court
The Court is addressing the Motion for Summary Judgment filed by Defendants Nationwide Mutual Insurance Company and Nationwide Insurance Company of America. The motion has been fully briefed and is ready for a decision, resulting in partial approval and partial denial of the motion.
In the factual background, Plaintiff Debra McGrath began working for Nationwide agent Anthony Colosimo in 2005. Following Colosimo's cancer diagnosis and subsequent death in February 2006, McGrath managed his agency and was later tasked with servicing policies from another agency until they were reassigned to agents Scott Diemert and Richard Marnic in May 2006. McGrath showed interest in acquiring servicing rights for one of the policy books but was informed by Nationwide's Sales Manager, Jim Montelone, that she would be offered rights if either Diemert or Marnic declined, which did not occur.
In June 2006, McGrath was hired as an associate by Marnic. Montelone allegedly promised her servicing rights to the next available book, though without specifics about its location or size. In February 2007, McGrath discovered that servicing rights to a book from another agency had been sold to another agent, despite her expressing interest to Darryl Hohlbaugh, Montelone’s successor. Hohlbaugh assured her she would receive the next available book.
In spring 2007, Emmett Santillo, another Sales Manager, discussed McGrath's potential participation in Nationwide's Agency Capital Builder (ACB) Program, which trains individuals for agency ownership. During this meeting, McGrath reiterated her expectations based on previous promises, and Santillo stated she was not required to join the ACB Program due to her experience. In November 2007, McGrath learned of another available policy book; however, despite her ongoing communication with Hohlbaugh, the rights were sold to another agent.
McGrath was required to participate in the ACB Program to purchase servicing rights to a book of policies, as communicated by Santillo in late 2007 or early 2008. During her interview for the program with Santillo and Carol Miller, Miller expressed concerns about McGrath’s suitability due to the program's demanding nature and McGrath's age, which Nationwide denies. McGrath was accepted into the ACB Program in July 2008, and on July 25, 2008, she signed the Agency Capital Builder Agreement (ACB Agreement), which outlined production goals for a 24-month term. Key provisions included Section 4, granting Nationwide exclusive control over customer expirations; Section 16, allowing McGrath to service a developed book of business or an equivalent one upon meeting production goals; and Section 34, establishing that the ACB Agreement supersedes all prior understandings. McGrath was informally referred to as "Mother Hen" and "Yoda" by her colleagues due to her experience. She completed the ACB Program in 19 months, earning a $40,000 bonus, and acknowledged no adverse employment actions during the program. After completing the ACB Program, McGrath became eligible for Nationwide's Successor Programs, including the Agency Executive Program (AE Program), which she joined in June 2010 after being invited by Nationwide. On June 29, 2010, she entered into the Agency Executive Program Performance Agreement (AE Agreement).
McGrath was compelled to enter the AE Agreement to continue her career as a Nationwide agent due to the unavailability of policy books. Under the AE Agreement, she operated as an independent contractor, responsible for all business expenses and taxes, while maintaining autonomy in her operational methods. Nationwide retained exclusive rights to all policies and the authority to service customers at any time. The agreement included a Minimum Production Plan, which could be modified by Nationwide during its term. An integration clause confirmed that the AE Agreement superseded all prior agreements between McGrath and Nationwide.
Initially concerned about increased production requirements in the second year, McGrath was reassured by an agent, Santillo, that she would eventually be offered agency ownership. During her first year, McGrath discovered that other agents had been given opportunities to purchase servicing rights, prompting her to express her concerns to Hohlbaugh. She perceived Nationwide's failure to provide her with similar opportunities as a breach of promise.
On February 24, 2012, Hohlbaugh informed McGrath about an amendment related to tax liability, which he downplayed. When he visited her on March 1, 2012, to have her sign the AE Amendment, he pressured her to sign without allowing time for review, threatening termination if she did not comply. The AE Amendment included provisions altering the calculation of any early termination payment due to McGrath under potential future cancellations of the AE Agreement. Throughout the agreement's term, McGrath's production goals were adjusted, but they never surpassed the original requirements.
McGrath initially met her production requirements under the AE Agreement, aided by approximately $343,000 in premium credits from the ACB Program. However, beginning in July 2011, her production fell short, prompting her to enter a coaching plan on September 1, 2011, which warned that failure to improve could lead to formal performance action. By October 27, 2011, her continued underperformance resulted in signing an Administrative Action Plan, which warned that failure to meet minimum requirements could lead to cancellation of her Agent's Agreement. Ultimately, McGrath's inability to improve led to the termination of her AE Agreement on July 23, 2012. Following her termination, she was employed by Nationwide on an hourly basis to service her agency's policies until those rights were sold in December 2012.
On February 7, 2013, McGrath filed a complaint with the Pennsylvania Human Relations Commission (PHRC), alleging age and sex discrimination. The PHRC found her claims insufficient under the Pennsylvania Human Relations Act and issued a right to sue letter on April 9, 2013. McGrath subsequently filed a praecipe for a Writ of Summons on April 15, 2014, and a formal complaint on January 27, 2015, asserting nine counts, including breach of contract, fraud, age and sex discrimination, and emotional distress. Nationwide removed the case to U.S. District Court based on diversity jurisdiction and the case was later transferred to the Southern District of Ohio due to a forum selection clause in the AE Agreement.
On May 30, 2017, Nationwide moved for summary judgment on all counts of McGrath’s complaint. McGrath opposed the motion, referencing Lucarell v. Nationwide Mut. Ins. Co. as supportive of her contract claims. Nationwide subsequently noted that Lucarell had been overturned by the Ohio Supreme Court. The court considered all relevant filings in its decision regarding the motion for summary judgment.
Nationwide has filed for summary judgment under Rule 56 of the Federal Rules of Civil Procedure, asserting that there are no genuine disputes regarding material facts and that it is entitled to judgment as a matter of law. Summary judgment is justified when a jury could not reasonably return a verdict for the nonmoving party based on the evidence presented. The movant bears the initial burden of demonstrating the absence of a genuine issue of material fact by providing relevant pleadings, depositions, and affidavits. Once this burden is met, the nonmoving party must present specific facts that indicate a genuine issue for trial. The court evaluates evidence in favor of the nonmoving party but states that self-serving affidavits are insufficient alone to create a factual dispute.
In this case, Nationwide seeks summary judgment on all nine claims made by McGrath, beginning with allegations of breach of contract and breach of the implied duty of good faith and fair dealing. McGrath contends that Nationwide breached the ACB and AE Agreements by not allowing her to acquire the book of business she developed. Nationwide counters that the ACB Agreement does not contain any obligations for such actions and highlights McGrath’s deposition admission that she received servicing rights to the book of policies upon entering the AE Program. The court aligns with Nationwide's argument, finding no evidence of breach in the contractual obligations claimed by McGrath.
McGrath appears to have abandoned her claim for breach of the ACB agreement, as she does not address it in her opposition brief. A review of the ACB agreement and her testimony supports Nationwide's entitlement to summary judgment on this claim. Regarding the AE Agreement, McGrath alleges several breaches by Nationwide:
1. **Payments for Bonuses and Commissions**: McGrath claims Nationwide failed to make correct bonus and commission payments. However, she admitted in her deposition that she did not know the extent of any unpaid commissions and had not calculated what was owed, leading Nationwide to argue that this claim lacks evidentiary support.
2. **Production Plan and Goals**: McGrath asserts that Nationwide unilaterally changed her production requirements and measurement method. Nationwide counters that the AE Agreement allowed for such unilateral changes and that the revised requirements were actually lower, making it easier for her to meet goals. She acknowledged awareness of the rolling measurement basis before signing the AE Agreement, which also explicitly stated this calculation method.
3. **Credits for Policies from the ACB Program**: McGrath claims she was not fully credited or paid under the agreements for policies procured while in the ACB program. Nationwide argues that the AE Agreement does not mandate this and that McGrath received appropriate credit for premiums generated during that time.
In her opposition, McGrath does not identify any disputed facts but relies on a prior Ohio case, **Lucarell v. Nationwide Mut. Ins. Co.**, where a jury verdict favored another agent under similar circumstances. She argues that if those facts were sufficient for a jury verdict, her situation should similarly prevent summary judgment in Nationwide's favor.
McGrath's breach of contract claim faces two significant issues. First, she must pinpoint specific factual disputes that would prevent summary judgment, as outlined in Federal Rule of Civil Procedure 56(e). Merely drawing a general analogy to a different case with similar but non-identical facts is insufficient. Second, a prior appellate decision in Lucarell has been overturned by the Ohio Supreme Court, which found that the appellate court erred in failing to evaluate whether sufficient evidence supported the jury's verdicts, necessitating a reversal.
McGrath has not established a genuine issue of material fact regarding her breach of contract claims, and the case she relies on has been invalidated. As the undisputed facts indicate no breach of the Agent Employment Agreement (AE Agreement), Nationwide is entitled to summary judgment on Count I.
In Count II, alleging a breach of the implied duty of good faith and fair dealing, McGrath faces an additional hurdle: Ohio law does not support a standalone claim for this duty. While Ohio recognizes an implied duty of good faith and fair dealing, it cannot serve as an independent cause of action. Such a duty may only arise within the context of a breach of contract claim. McGrath's assertion that Nationwide breached this duty is intertwined with her Count I claims. However, no implied covenants can exist concerning matters explicitly addressed in the contract, particularly when an integration clause is present.
McGrath's agreements with Nationwide clearly defined her obligations related to earning commissions through new policies, not through servicing existing ones. Therefore, no implied covenants exist for Nationwide to breach in this context. Moreover, a party does not breach this implied duty by enforcing the contract as written or acting according to its explicit terms unless a specific contractual obligation is unmet. Thus, McGrath's claims lack merit as there has been no breach of specific obligations in the contract.
McGrath's claim for breach of the implied duty of good faith and fair dealing fails due to her inability to identify a specific contract term that Nationwide breached. Her fraud claims (Counts III and IV) are based on alleged misrepresentations by Nationwide regarding her ability to purchase servicing rights to existing policies and her fraudulent inducement to enter the ACB and AE Agreements, as well as the AE Amendment. Nationwide contends that McGrath's fraud claims are barred by Pennsylvania's two-year statute of limitations for fraud, which McGrath does not dispute applies to her claims. Regardless of whether Pennsylvania or Ohio law is applied, the claims are governed by Pennsylvania's two-year limitation due to Ohio's borrowing statute, which prohibits maintaining a claim if the statute of limitations in the state where the cause of action accrued has expired. Factors for determining where a fraud claim accrues include the locations of reliance, representation, and business operations. All alleged misrepresentations occurred in Pennsylvania, making this the relevant jurisdiction.
Nationwide argues that McGrath's fraud claims are time-barred because the misrepresentations she cites occurred more than two years before she initiated her lawsuit. Key dates include a June 2006 statement regarding future policy rights that was contradicted in February 2007, a spring 2007 promise regarding the ACB Program that was later retracted, and a mid-2010 assurance about servicing rights that did not materialize by mid-2011. These events indicate that the alleged fraud was discovered more than two years prior to filing the action.
McGrath's claims of misrepresentation against Nationwide are challenged based on the statute of limitations. Nationwide contends that McGrath should have recognized the falseness of the representations by July 2011 but did not initiate her lawsuit until April 14, 2014. McGrath counters by citing a May 2012 assurance from Nationwide's sales manager, Mr. Hohlbaugh, which falls within the acceptable two-year period prior to her lawsuit. However, Nationwide argues that this new claim is a self-serving addition that contradicts McGrath's earlier statements, including her sworn interrogatory responses where she only named three individuals as making promises to her.
The court finds no material contradiction in McGrath's testimony, as she did mention Hohlbaugh in her complaint and deposition. Despite this, Nationwide argues that McGrath cannot demonstrate detrimental reliance on Hohlbaugh's May 2012 promise since her actions, which she alleges were based on promises, occurred by June 2010. Consequently, McGrath's claims of fraud and fraudulent inducement face significant issues either due to the statute of limitations or lack of reliance. The court concludes that Nationwide is entitled to summary judgment on McGrath's fraud claims, except for her claim regarding the AE Amendment executed in March 2012, which will be considered next.
McGrath claims that Hohlbaugh made several false statements that fraudulently induced her to sign the AE Amendment on March 1, 2012. Specifically, she alleges that Hohlbaugh misrepresented that the AE Amendment was related to a tax liability, was "not a big deal," required immediate execution to avoid cancellation of the AE Agreement, and that failure to sign that day would result in cancellation. Nationwide argues that McGrath cannot sustain a fraudulent inducement claim since she did not read the AE Amendment before signing it. McGrath explained her failure to read was due to time constraints for a meeting and Hohlbaugh's insistence on immediate signing. While Ohio law limits recovery for fraudulent inducement if a party fails to read an agreement, this limitation applies only to misrepresentations about the agreement's contents. McGrath contends that even if she had read the AE Amendment, it would not have clarified Hohlbaugh's urgent claims regarding the need for immediate signing. Nationwide asserts that threats of cancellation do not constitute fraudulent inducement, referencing a previous case where a similar argument was made. However, the prior case did not address fraudulent inducement specifically. For her claim to succeed, McGrath must demonstrate a false representation related to the transaction, knowledge of its falsity, intent to induce reliance, justifiable reliance, and resulting injury. McGrath asserts that Hohlbaugh's false statement about the need for immediate signing induced her reliance, leading to injury from the alteration of her early cancellation payment calculations.
Nationwide's Motion does not prevent McGrath from proving her allegations of fraudulent inducement at trial, nor does it establish that such allegations cannot legally constitute fraudulent inducement. Therefore, Nationwide is not entitled to summary judgment on McGrath's claims concerning the AE Amendment.
Regarding unjust enrichment (Count V), McGrath claims that Nationwide unjustly profited from her work without compensation after assuming control of her business. Nationwide contends that McGrath cannot pursue an unjust enrichment claim because the parties' relationship was governed by an express contract covering the same subject matter. The Court agrees, noting that while a plaintiff may plead both breach of contract and unjust enrichment claims alternatively, recovery on both is not permitted in the absence of fraud, illegality, or bad faith. Here, ownership of the servicing rights remained with Nationwide according to the ACB and AE Agreements, and the validity of the AE Amendment does not change those terms. Consequently, McGrath's unjust enrichment claim fails as a matter of law, and Nationwide is entitled to summary judgment on Count V.
In Count VI, McGrath alleges age and sex discrimination under the Pennsylvania Human Relations Act (PHRA), claiming she was denied the opportunity to purchase servicing rights based on her protected characteristics. However, for such claims to be valid, a plaintiff must file an administrative complaint with the Pennsylvania Human Relations Commission (PHRC) within 180 days of the alleged discrimination. Nationwide argues that McGrath's complaint is time-barred since the last alleged discriminatory act occurred on July 23, 2012, and her complaint was filed 199 days later, on February 7, 2013. Pennsylvania courts have strictly enforced this 180-day requirement, stating that untimely complaints cannot be considered to have utilized the administrative processes required by the PHRA.
In Garner v. SEPTA and related cases, McGrath filed a complaint with the Pennsylvania Human Relations Commission (PHRC) more than 180 days post-termination of her AE Agreement. Although she claims her PHRC complaint was timely due to Nationwide's final termination of her employment on December 31, 2012, she failed to allege any discrimination related to that termination. Her discrimination claims are based solely on Nationwide's refusal to let her purchase an agency and her termination as an insurance agent, both occurring by July 23, 2012. Consequently, McGrath did not properly follow the PHRA's necessary administrative procedures, leading to Nationwide's entitlement to summary judgment on her PHRA-related Count VI.
Regarding Count VII, which challenges her termination as violating the PHRA and Pennsylvania's public policy against age and sex discrimination, the court found these claims time-barred. Additionally, Pennsylvania law establishes that a statutory remedy, such as the PHRA, precludes common law wrongful discharge claims based on the same grounds. Therefore, McGrath cannot pursue a common law claim for wrongful discharge since a statutory remedy exists. As such, Nationwide is entitled to summary judgment on Count VII as well.
For Count VIII, concerning negligent infliction of emotional distress, Nationwide argues that McGrath has not met the basic elements required for this claim, as Ohio courts restrict recovery to cases where the claimant was a bystander to an incident or feared for their own physical safety.
A claim for negligent infliction of emotional distress requires an element of physical danger, which McGrath's Complaint lacks. She did not contest the inadequacy of her allegations or address this claim in her opposition brief, leading to Nationwide's entitlement to summary judgment on Count VIII. For a claim of intentional infliction of emotional distress, the plaintiff must demonstrate that the defendant's conduct is extreme and outrageous. The court is tasked with determining whether Nationwide's actions meet this threshold. Both the Ohio Supreme Court and the Sixth Circuit follow Section 46 of the Second Restatement of Torts, which states that a defendant is not liable if their actions merely assert legal rights, even if they cause emotional distress. The court found that McGrath's allegations reflect a typical business relationship rather than conduct that exceeds acceptable bounds, resulting in Nationwide's entitlement to summary judgment on Count IX. Nationwide's Motion for Summary Judgment is granted in part and denied in part, with the exception of McGrath's claim for fraudulent inducement related to an amendment executed on March 1, 2012. The court recommends mediation to resolve the remaining claim.
The Clerk is instructed to remove Document 79 from the Court's pending motions list. Both parties reference only Ohio case law concerning McGrath's contract claims, supported by a choice of law provision in the AE Agreement that specifies Ohio law governs the Agreement. Consequently, the Court will apply Ohio law to McGrath's claims for breach of contract and breach of the duty of good faith and fair dealing. In Pennsylvania, a plaintiff initiates an action through a praecipe for writ of summons or a complaint, as per Pa.R.C.P. No. 1007. Neither party argues definitively regarding the applicable substantive law for McGrath's tort claims. Under diversity jurisdiction, the Court must adhere to the choice of law rules of its sitting state. Although this case originated in federal court in Pennsylvania, it is subject to an exception for transfers under a contractual forum selection clause. Consequently, applying Ohio's conflict of law principles, if both jurisdictions apply the same law or reach the same outcome, a choice of law determination becomes unnecessary, allowing the forum state's laws to apply. No significant differences between Ohio and Pennsylvania law regarding McGrath's tort claims have been identified by either party or the Court, leading to the conclusion that Ohio law will govern these claims.
