Ameriplan Corporation v. Anderson, Anthony

• Court: Court of Appeals of Texas
• Decided: May 20, 2013
• Docket: 05-11-00628-CV
• Status: Published

Opinion

REVERSE and REMAND; and Opinion Filed May 20, 2013.

S In The Court of Appeals Fifth District of Texas at Dallas

No. 05-11-00628-CV

AMERIPLAN CORPORATION, Appellant V. ANTHONY ANDERSON, Appellee

On Appeal from the 191st Judicial District Court Dallas County, Texas Trial Court Cause No. 07-14089-J

MEMORANDUM OPINION

Before Justices FitzGerald, Lang-Miers, and Murphy Opinion by Justice Lang-Miers

Appellee Anthony Anderson worked as an independent contractor for appellant

AmeriPlan Corporation for nine years. After Ameriplan terminated his employment Anderson

sued AmeriPlan for claims relating to his compensation. A jury found in favor of Anderson and

the trial court rendered judgment against AmeriPlan. AmeriPlan raises three issues on appeal

arguing that the evidence is legally insufficient to support the jury’s findings and that the award

of attorneys’ fees was erroneous. We reverse and remand.

BACKGROUND

AmeriPlan’s Business Model

The material facts in this case are undisputed. AmeriPlan’s customers pay a monthly

membership fee in order to access a network of healthcare professionals who have agreed to provide medical services to AmeriPlan’s customers at a set discount. AmeriPlan’s business

model is based on multilevel direct marketing. It hires independent contractors, also known as

“independent business owners” or “IBOs,” to recruit its customers, healthcare professionals, and

other IBOs. AmeriPlan compensates its IBOs through commissions and bonuses. IBOs earn

commissions for each new member that the IBO personally recruits. IBOs who reach the level

of sales director may also become a provider representative and earn a one-time commission by

recruiting new healthcare professionals to AmeriPlan’s network. In addition, once they reach

certain levels, IBOs can earn certain bonuses, also known as “overrides” or “builders bonuses,”

based on the revenues AmeriPlan receives from the sales efforts of IBOs who were recruited

directly or indirectly by the IBO, also known as the IBO’s “downline.” 1

Anderson’s Introduction to AmeriPlan

Anderson first learned about AmeriPlan in 1996 through a newspaper advertisement. He

met with an IBO who showed him a marketing flip chart that described the position of regional

sales director (RSD) as the “Cornerstone of our Compensation Plan.” The flip chart described

AmeriPlan’s compensation system and stated that RSDs receive a “[l]ifetime vested contract”

that was “willable and sellable,” which Anderson understood to mean that AmeriPlan would

continue to pay bonuses to Anderson or his heirs as long as AmeriPlan continued to receive

revenues from Anderson’s downline. Anderson also attended a sales presentation during which

the same marketing materials were shown.

1 For example, quoting from Anderson’s appellee’s brief, [W]hen an IBO achieves the position of National Sales Director, the IBO will earn 15% of the revenues produced by the first generation of Regional Sales Directors (“R[S]Ds”) in his sales force (i.e., the R[S]Ds whom he personally recruited to AmeriPlan), 10% of the revenues produced by the second generation of R[S]Ds in his sales force (i.e., R[S]Ds whom his first generation of R[S]Ds recruited to AmeriPlan), 5% of the revenues produced by the third generation of R[S]Ds in his sales force (i.e., R[S]Ds recruited by the R[S]Ds whom his first generation of R[S]Ds recruited to AmeriPlan), 3% from the fourth generation, and 1% from the fifth.

–2– Anderson’s Sales Contract and Tenure with AmeriPlan

Anderson signed a broker application and agreement and became an AmeriPlan IBO in

August 1996. A few weeks later, after recruiting the necessary number of new members and

IBOs to reach the level of RSD, Anderson signed AmeriPlan’s sales director contract (the sales

contract). The sales contract stated that Anderson would receive commissions and bonuses

“during the continuation of this Agreement.”

Between 1996 and 2005 Anderson rose to the highest IBO position in the company—

national sales director—and also became a provider representative. In November 2005, after

receiving a complaint letter from a provider, AmeriPlan terminated the sales contract and

stopped paying commissions and bonuses to Anderson. Although the issue of whether Anderson

was terminated for cause was contested during trial, in this appeal the parties agree that

Anderson was not terminated for cause.

This Lawsuit

Anderson filed suit against AmeriPlan asserting causes of action for breach of the sales

contract, breach of oral contract, fraud, and negligent misrepresentation. The crux of Anderson’s

complaint is that he was promised “lifetime residual income,” as described in AmeriPlan’s

marketing materials. After an eight-day jury trial the jury returned a verdict in Anderson’s favor

on all of Anderson’s claims and found that Anderson was entitled to $75,000 in past damages,

$75,000 in future damages, $372,400 in attorneys’ fees through the time of trial, $20,000 in

conditional appellate attorneys’ fees, and $5 million in exemplary damages. Anderson elected to

recover for breach of the sales contract. Based on the jury’s verdict, the trial court signed an

amended final judgment awarding Anderson $150,000 in actual damages, $372,000 in attorneys’

fees through trial, up to $20,000 in conditional appellate attorneys’ fees, prejudgment interest,

and postjudgment interest.

–3– ISSUES ON APPEAL

In its first issue AmeriPlan argues that the trial court erred when it rendered judgment in

favor of Anderson on his breach-of-contract claim because the evidence is legally insufficient to

support the jury’s finding that AmeriPlan breached the sales contract. More specifically,

AmeriPlan argues that the sales contract is unambiguous and requires AmeriPlan to pay

commissions and bonuses only during the continuation of the contract.

When examining a legal sufficiency challenge we review the evidence in the light most

favorable to the challenged finding. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005).

An appellant challenging the legal sufficiency of the evidence supporting an adverse finding on

an issue for which it did not have the burden of proof must show that no evidence supports the

jury’s adverse finding. Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 215 (Tex.

2011). A no-evidence challenge must and may only be sustained on appeal if the record shows

one of the following: (1) a complete absence of evidence of a vital fact, (2) the court is barred by

the rules of law or of evidence from giving weight to the only evidence offered to prove a vital

fact, (3) the evidence offered to prove a vital fact is no more than a mere scintilla, or (4) the

evidence conclusively establishes the opposite of a vital fact. Serv. Corp. Int’l v. Guerra, 348

S.W.3d 221, 228 (Tex. 2011).

To succeed on his claim for breach of the sales contract Anderson was required to prove

the following elements: (1) the existence of a valid contract, (2) Anderson’s performance or

tendered performance, (3) AmeriPlan’s breach of the sales contract, and (4) Anderson sustained

damages as a result of the breach. See Helping Hands Home Care, Inc. v. Home Health of

Tarrant Cnty., Inc., 393 S.W.3d 492, 507 (Tex. App.—Dallas 2013, pet. filed). It is undisputed

that the sales contract was a valid contract and that Anderson performed under it. The disputed

issue in this case is whether a breach occurred.

–4– When construing a written contract, our primary concern is to ascertain the true intentions

of the parties as expressed in the instrument. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d

223, 229 (Tex. 2003). We consider the entire writing and attempt to harmonize and give effect

to all the provisions of the contract by analyzing the provisions with reference to the whole

agreement. Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (per

curiam); J.M. Davidson, 128 S.W.3d at 229.

Section II of the sales contract states that AmeriPlan will pay Anderson bonuses based on

a certain formula, and that the bonuses will be paid monthly “in addition to the commission

compensation specified in Section IX and under the same terms and conditions of Section IX.”

Section IX of the sales contract states that AmeriPlan will pay commissions to Anderson while

the sales contract is in effect:

AmeriPlan agrees to pay during the continuation of this Agreement full compensation in the amount of thirty (30%) percent from all membership fees and/or broker fees received by AmeriPlan procured by the Sales Director, servants, and/or employees that the Sales Director may employ.

It is undisputed that AmeriPlan terminated the sales contract in November 2005 and stopped

paying commissions and bonuses to Anderson after the termination.

Anderson does not contend that the sales contract is ambiguous or that it required

AmeriPlan to pay bonuses to Anderson after the termination of the sales contract. Instead,

Anderson argues that the jury was entitled to consider AmeriPlan’s promise of “lifetime vested

benefits” (i.e., the continuation of bonus payments as long as AmeriPlan continued to receive

revenues from Anderson’s downline) contained in AmeriPlan’s marketing materials in deciding

whether AmeriPlan breached the sales contract. In response, AmeriPlan argues that the parol

evidence rule barred the jury from considering the statements made in AmeriPlan’s marketing

materials in deciding whether AmeriPlan breached the sales contract.

–5– The applicability of the parol evidence rule is a question of law that we review de novo.

Jarvis v. K & E Re One, LLC, 390 S.W.3d 631, 638 (Tex. App.—Dallas 2012, no pet.). The

parol evidence rule is not a rule of evidence, but a rule of substantive contract law. Id. “An

unambiguous contract will be enforced as written, and parol evidence will not be received for the

purpose of creating an ambiguity or to give the contract a meaning different from that which its

language imports.” David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008) (per

curiam). However, “parol evidence can be used to demonstrate a prior or contemporaneous

agreement that is both collateral to and consistent with a binding agreement, and that does not

vary or contradict the agreement's express or implied terms or obligations.” Id. at 451.

Anderson argues that AmeriPlan’s promise of “lifetime vested benefits” was a collateral

consistent agreement that does not violate the parol evidence rule because it does not vary or

contradict the sales contract. More specifically, Anderson argues that the sales contract does not

state or imply “that an IBO will lose his right to receive [bonuses], or any other vested benefits”

if AmeriPlan terminated the sales contract. To support this argument Anderson contends that

section IX of the sales contract only applies to commissions and does not apply to bonuses. We

disagree.

We must construe the sales contract as a whole. Frost Nat’l Bank, 165 S.W.3d at 312.

Section II states that bonuses will be paid “under the same terms and conditions of Section IX.”

The effect of this provision in section II is that the payment terms and conditions of section IX

apply to bonuses, and under section IX bonuses are to be paid only until the sales contract is

terminated. Evidence of AmeriPlan’s alleged promise to pay bonuses after the termination of the

sales contract would therefore alter section IX of the sales contract. As a result, AmeriPlan’s

alleged promise of lifetime vested benefits is not a collateral consistent agreement and evidence

of that alleged promise is barred by the parol evidence rule. See, e.g., Haden, 266 S.W.3d at 451

–6– (concluding extraneous evidence would alter terms of written agreement “and is therefore not

admissible under the collateral and consistent exception to the parol evidence rule”).

In the alternative, Anderson argues that “[u]nder the fraud exception to the parol evidence

rule, the jury was entitled to conclude that [AmeriPlan’s] promise of lifetime vested benefits was

part of, and reflected the true intent of, the [sales contract].” We disagree. Under certain

circumstances, a defendant may avoid a contract based on an affirmative defense of fraudulent

inducement. See, e.g., Italian Cowboy Partners v. Prudential Ins. Co. of Am., 341 S.W.3d 323,

331 (Tex. 2011) (“A contract is subject to avoidance on the ground of fraudulent inducement.”);

Bernal v. Garrison, 818 S.W.2d 79, 84 (Tex. App.—Corpus Christi 1991, writ denied) (“In order

to avoid a contract for fraud, it is necessary to show that the fraudulent representation was relied

upon to the extent that it became a material factor in inducing the making of the contract and

without which it would not have been made.”). But in this case Anderson is not the defendant,

and he is not seeking to avoid the sales contract. Instead, Anderson is the plaintiff and is seeking

to uphold one material part of the sales contract (the formula for payment of bonuses), while

altering another material part of the sales contract (the term). Extraneous evidence cannot be

used to alter the terms of an unambiguous contract. See, e.g., Haden, 266 S.W.3d at 450. We

conclude that evidence of AmeriPlan’s alleged promise of lifetime vested benefits was not

admissible under the fraud exception to the parol evidence rule to prove that AmeriPlan breached

the sales contract.

In summary, the evidence Anderson relied upon to prove that AmeriPlan breached the

sales contract was extraneous evidence of AmeriPlan’s alleged promise of lifetime vested

benefits. This evidence, however, is barred by the parol evidence rule. Because the jury was

precluded from giving weight to the only evidence offered to prove a vital fact, the evidence is

legally insufficient to support Anderson’s claim for breach of written contract. Serv. Corp. Int’l,

–7– 348 S.W.3d at 228 (evidence is legally insufficient if court is barred by rules of law or of

evidence from giving weight to only evidence offered to prove vital fact). We resolve

AmeriPlan’s first issue in its favor and reverse the trial court’s judgment in favor of Anderson on

his claim for breach of written contract. As a result, we do not need to address AmeriPlan’s third

issue, in which it argues, in the alternative, that if we affirm the judgment on the claim for breach

of written contract we should vacate the award of attorneys’ fees for multiple reasons.

In its second issue AmeriPlan argues that the evidence is legally insufficient to support

Anderson’s alternative claims for breach of oral contract, fraud, and negligent misrepresentation.

During oral argument, however, AmeriPlan’s counsel explained that AmeriPlan had fully

challenged on appeal only the claim for breach of written contract because that was the only

claim addressed in the judgment, and that it had not fully challenged all possible grounds of a

hypothetical new judgment in favor of Anderson on one of his possible alternative grounds for

recovery. Citing DiGiuseppe v. Lawler, 269 S.W.3d 588, 603 (Tex. 2008), in which the Texas

Supreme Court held that the plaintiff “should be allowed to present his alternative ground for

recovery to the trial court for a determination in the first instance as to whether he should recover

under that alternative theory,” AmeriPlan’s counsel asked this Court to remand this case to the

trial court for entry of a new judgment in the event that we concluded that the evidence was

legally insufficient to support Anderson’s claim for breach of written contract. Based on

DiGiuseppe and AmeriPlan’s request, and because we have concluded that the evidence was

legally insufficient to support the only claim addressed in the trial court’s judgment—Anderson’s

claim for breach of written contract—we will not address Anderson’s alternative claims and

instead will remand this case to the trial court for entry of a new judgment. See, e.g., Strebel v.

Wimberly, 371 S.W.3d 267, 269 (Tex. App.—Houston [1st Dist.] 2012, pet. filed) (“We reverse

the trial court’s judgment on [plaintiff’s] breach of fiduciary duty claims because we conclude

–8– that the parties contractually disclaimed the fiduciary duties related to profit distributions to

[plaintiff]. We remand to the trial court for consideration of the jury’s alternative liability and

damages findings on [plaintiff’s] minority oppression claims and for reconsideration of its

attorneys’ fees award in light of our opinion.”).

CONCLUSION

We sustain AmeriPlan’s first issue, reverse the trial court’s judgment, and remand this

case to the trial court for further proceedings consistent with this opinion.

/Elizabeth Lang-Miers/ ELIZABETH LANG-MIERS JUSTICE

110628F.P05

–9– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

AMERIPLAN CORPORATION, Appellant On Appeal from the 191st Judicial District Court, Dallas County, Texas No. 05-11-00628-CV V. Trial Court Cause No. 07-14089-J. Opinion delivered by Justice Lang-Miers. ANTHONY ANDERSON, Appellee Justices FitzGerald and Murphy participating.

In accordance with this Court’s opinion of this date, the judgment of the trial court is REVERSED and this cause is REMANDED to the trial court for further proceedings consistent with this opinion. It is ORDERED that appellant AMERIPLAN CORPORATION recover its costs of this appeal from appellee ANTHONY ANDERSON.

Judgment entered this 20th day of May, 2013.

–10–