Mary McClure and Gary Kemp v. American Family Mutual Insurance Company, American Standard Insurance Company of Wisconsin, American Family Life Insurance Company, David Krueger, Daniel Desalvo, Harvey Pierce, and Dale Mathwich

Citations: 223 F.3d 845; 16 I.E.R. Cas. (BNA) 1200; 2000 U.S. App. LEXIS 21069Docket: 99-3482

Court: Court of Appeals for the Eighth Circuit; August 21, 2000; Federal Appellate Court

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Mary McClure and Gary Kemp, former exclusive agents for American Family Mutual Insurance Company, filed a lawsuit against the company and its affiliated entities following their termination after advocating for insurance legislation contrary to the company’s interests. Their claims included breach of contract and defamation. The district court granted summary judgment in favor of the defendants on all claims except for McClure's breach of contract, which was subsequently tried before a jury, resulting in a defense verdict and judgments favoring the defendants. 

American Family, a group of affiliated Wisconsin corporations, operates under unified management and is licensed to sell a variety of insurance products in Minnesota. Its exclusive agents, like McClure and Kemp, were bound by contracts that superseded prior agreements, mandated the sale of all American Family products, and prohibited agents from selling competing insurance. Both McClure and Kemp had extensive client bases, with contracts providing that either party could terminate the agreement without cause with written notice. After two years, termination for cause required a six-month notice period following written notification of undesirable performance, though American Family retained the right to terminate without notice for violations of specific contractual obligations or for dishonest conduct. Agents were also required to maintain a good reputation and advance the company's interests.

Kemp and McClure were involved in the American Family Agents Association, which, although not formally recognized by American Family, engaged in legislative lobbying. Kemp served as president of the National Association, while McClure was a board member of the Minnesota Association and chaired the National Legislative Committee. In 1995, they lobbied for a "quota bill" in Minnesota that aimed to prevent insurance companies from imposing sales quotas on agents for life or health insurance to sell property and casualty insurance, which agents found more profitable. Initially, the bill targeted only independent agents, but an amendment sought to include exclusive agents, which American Family opposed, asserting that it interfered with contractual rights. Despite this, Kemp and McClure hired lobbyist Dominic Sposeto to advocate for the amendment, resulting in its passage in 1996. American Family's lobbyists were informed of this action, leading to discussions between key company officials, including Gary Krueger and Gary Hammer, who concluded that Kemp and McClure had breached their contracts by lobbying against the company's position. Consequently, termination letters were issued to both agents on January 11, 1996, citing conduct prejudicial to the company as the reason for immediate termination. Section 4.i of their contracts mandated agents to avoid competitive or prejudicial practices. Following their termination, American Family publicly communicated their departure to former customers and agents, highlighting the agents' actions as detrimental to the company and the insurance-buying public.

In January 1996, McClure and Kemp filed a complaint with the Minnesota Department of Commerce, alleging their terminations violated state statutes. In August 1996, American Family issued a press release addressing the complaint, claiming McClure and Kemp engaged in "disruptive and disloyal activity." An administrative law judge determined that their terminations were intended to intimidate other agents but found the only statutory violation was a failure to provide notice of the right to a hearing upon termination. Subsequently, McClure and Kemp filed a lawsuit in state court against American Family for defamation, wrongful termination, tortious interference with contract, intentional interference with prospective contractual relations, violations of the Minnesota Deceptive Trade Practices Act, misrepresentation, and breach of contract. American Family removed the case to federal court and sought summary judgment.

The district court granted summary judgment on all claims except for McClure's breach of contract claim, which proceeded to a jury trial. The court ruled that American Family's statements were not defamatory and protected by qualified privilege due to their context and absence of malice. Claims for wrongful termination in violation of public policy were dismissed because the plaintiffs were not protected under the relevant Minnesota statute at the time of termination. Claims for tortious interference with contract were dismissed due to lack of evidence for malice or bad faith, and claims for interference with prospective contractual relations were dismissed for failure to identify affected relationships. The court also dismissed claims under the Minnesota Deceptive Trade Practices Act, noting no disparagement of the plaintiffs' ability to provide insurance was shown.

Kemp's breach of contract claim was dismissed due to the timing of his contract, while McClure's claim was not dismissed due to factual disputes regarding her conduct. During McClure's trial, the jury questioned the clarity of contractual terms, and McClure sought a jury instruction on contractual ambiguity, which was denied. After the jury ruled in favor of American Family, McClure's motion for a new trial based on the denied instruction was also denied, leading to this appeal. McClure and Kemp contend the district court erred in granting summary judgment on several claims but did not appeal the dismissal of their tortious interference claims.

Appellants claim that American Family's statements were defamatory, containing false statements of fact made with actual malice, and therefore not privileged. They argue these statements disparaged their ability to provide insurance, making them actionable under the Minnesota Deceptive Trade Practices Act (MDTPA). Additionally, they contend that the court incorrectly dismissed their claims for interference with prospective contractual relations due to insufficient identification of harmed relations. Kemp argues the district court misapplied a termination provision in his contract, while McClure seeks a new trial based on the court's failure to provide an additional jury instruction. In response, American Family maintains that the district court correctly granted summary judgment, asserting its statements were opinions protected by qualified privilege, and that they were not false nor related to the appellants' business. American Family argues the appellants failed to demonstrate specific customers lost due to its statements and that there was no violation of public policy in terminating them. They also assert Kemp had adequate notice regarding his contract claim dismissal and that the jury instruction McClure sought would have unfairly introduced new factors into her case. The review of summary judgment follows a de novo standard, confirming if any material fact issues exist and if the moving party is entitled to judgment as a matter of law. Minnesota law governs tort claims, while Wisconsin law applies to contract claims. The determination of whether American Family's statements are false—essential for defamation—hinges on specific criteria: the statement's specificity, verifiability, and the context in which it was made, following the guidelines set forth in Janklow v. Newsweek, Inc.

None of American Family's communications contained provably false statements of fact regarding the appellants' actions, which included accusations of "disloyal and disruptive activity" and claims that they acted against the public’s best interests. These statements were deemed to lack precision and verifiability necessary to support a defamation claim. A commentator is not liable for defamation if multiple interpretations of their statements exist, as no definitive showing of falsity can be made under such circumstances.

American Family also asserted a qualified privilege for its statements, which requires that they be made in good faith, on a proper occasion, for a proper motive, and based on reasonable cause. The court determined that these conditions were met, as the statements were communicated to relevant audiences, including agents and customers. This privilege can be revoked if actual malice is demonstrated, defined as intent to harm without cause. Malice can be inferred from either extrinsic evidence or the nature of the statements themselves. However, the court found that the statements were not sufficiently extreme to indicate a genuine issue of material fact regarding actual malice.

Additionally, the appellants claimed a violation of the Minnesota Deceptive Trade Practices Act (MDTPA), which prohibits misleading representations about goods or services. The burden of proof lies with the plaintiff to demonstrate the falsity of the claims. Since none of American Family's communications contained provably false statements, the MDTPA claim was accordingly dismissed.

The communications in question do not pertain to the appellants' business, services, or goods, thus falling outside the Minnesota Deceptive Trade Practices Act (MDTPA). The plaintiffs claim tortious interference with prospective contractual relations, requiring proof that the defendant intentionally committed a wrongful act that disrupted a potential relationship. The primary evidence cited by the appellants is a January 1996 notice from American Family to former clients, which stated they could reject policies from other companies. This notice did not defame the appellants. Furthermore, American Family’s public statements about the appellants being disloyal were legitimate expressions of the company's stance. The appellants failed to demonstrate that any potential contractual relationships were lost due to these communications, as a mere general loss of unspecified customers does not meet the criteria for intentional interference under Minnesota law.

Additionally, appellants claimed a violation of a Minnesota statute that prohibits insurance companies from terminating employees solely for contacting government agencies. At the time of McClure and Kemp's terminations, the statute applied only to contacts with executive agencies, and the administrative law judge determined that American Family did not violate the statute. The subsequent amendment that included legislative contacts could not be applied retroactively, a point the appellants did not contest. They contended, however, that the amended statute reflected a public policy against retaliating employees for legislative petitioning and sought a common law remedy for actions taken prior to the amendment. The court ruled that circumstances warranting such a remedy were absent, as the existing statute provided adequate remedies for its purpose, and it is not the court's role to redefine the legislative boundaries established by the Minnesota legislature.

Regarding the employment contracts of McClure and Kemp, both contained similar provisions allowing termination without notice within two years of their effective dates. Kemp's contract became effective just ten days before his termination, while McClure's took effect three years earlier. This distinction led the district court to treat the appellants differently in summary judgment. Kemp argued that the district court's ruling was based on a theory not presented by American Family and that he could provide evidence supporting his interpretation of the contract.

A court can grant summary judgment sua sponte if the nonmoving party was adequately notified and had the opportunity to present their evidence. American Family contended it did not breach contracts permitting at-will termination with notice. However, McClure and Kemp argued their contracts were not at-will and referenced a clause requiring written notice of undesirable performance after two years, which applied since their contracts had been effective for over that period. Kemp's termination on January 11, 1996, was deemed valid under the terms of his contract, which allowed for termination on that date. Although Kemp claimed he was entitled to a six-month notice due to promises made by the company, the Wisconsin parol evidence rule prevented the introduction of prior agreements to alter the written contract's terms, which included a merger clause designating it as the complete agreement. Thus, the district court upheld summary judgment in favor of American Family regarding Kemp’s claim. Conversely, McClure's claim was not granted summary judgment and proceeded to trial, where the central issue was whether her termination without six months' notice constituted a breach. American Family defended the termination by asserting McClure's actions were disloyal and prejudicial, while McClure maintained that these terms were ambiguous and clarified by extrinsic evidence, asserting her actions did not warrant such a termination.

McClure did not invoke the rule that ambiguities in contracts should be interpreted against the drafter, nor did she request an instruction to that effect until the jury deliberations had begun. The trial judge is obliged to provide further instructions when necessary, but is not required to do so on issues not previously raised by the parties. Allowing such a request during deliberations could unfairly alter trial strategy and deny the opposing party a chance to respond. McClure's failure to seek this instruction before the case was submitted meant that introducing it during deliberations would be prejudicial, as it would not allow for prior evidence or argument against it. The court concluded that it did not err in granting summary judgment or in its jury instructions regarding McClure's contract claim, affirming the district court's judgments. Additionally, Circuit Judge Heaney concurred, noting the appellants abandoned their claim under Minnesota Statute 72A.20, subd. 20, and expressed concern about the administrative law judge's ruling regarding the statute's applicability to the Legislature, which he found contrary to the Minnesota Constitution.

Appellants did not appeal the administrative law judge's decision and indicated in both the district court and the current proceedings that they were abandoning their previous claim, focusing instead on the argument that the statute reflects state public policy. The author concurs with the majority on the public policy issue, which has been clarified by a recent amendment to the Minnesota statute, ensuring that insurance companies cannot terminate an agent's contract for contacting the Legislature regarding their economic future. The contracts of the appellants included clauses stating they superseded prior agreements and required written modification for any changes. A question of fact may arise regarding whether the defendant had reasonable grounds for statements made about the plaintiffs, as established in relevant case law. The Minnesota Court of Appeals previously recognized a public policy exception to at-will employment, which has been supported by subsequent court decisions, broadening the scope to include wrongful wage discrimination alongside wrongful discharge.