Legacy Group of America, Inc. v. North American Co. for Life & Health Insurance

336 F. App'x 87
CourtCourt of Appeals for the Second Circuit
DecidedJuly 8, 2009
DocketNo. 08-2019-cv
StatusPublished

This text of 336 F. App'x 87 (Legacy Group of America, Inc. v. North American Co. for Life & Health Insurance) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Legacy Group of America, Inc. v. North American Co. for Life & Health Insurance, 336 F. App'x 87 (2d Cir. 2009).

Opinion

SUMMARY ORDER

Legacy Group of America, Inc. and Samuel M. Ziegel, President of Legacy Group of America, Inc. (Legacy Group of America, Inc. and Ziegel collectively, “Legacy”), appeal the orders of the United States District Court for the Eastern District of New York (Townes, J.), entered on October 6, 2006 and March 31, 2008, granting summary judgment and awarding attorney’s fees and expenses to North American Company for Life and Health Insurance (“North American”).

On October 22, 1993, Ziegel and North American executed an agreement (the “Agreement”), which gave Ziegel the authority to solicit applications for North American insurance policies and place applications with North American, under certain conditions.1 In exchange, North American agreed to compensate Ziegel with “commissions earned on premiums paid on policies issued by [North American] on applications” Ziegel obtained. Zie-gel agreed to “conduct his activities in a professional manner ... and [comply] with all present and future instructions issued by [North American].” North American retained the right to “refuse to process any application, or issue, or amend any policy.” Under the terms of the Agreement, Ziegel “agree[d] to pay [North [89]*89American’s] costs and legal expenses if [Ziegel] [was] not the prevailing party in any lawsuit between [Ziegel] and [North American].”

The Agreement could be terminated by either party without cause, providing the terminating party gave thirty-days notice. “If [Ziegel] breachfed] any provision of [the] Agreement which [North American] in [its] sole discretion determine^] to be material” the Agreement automatically terminated for cause. If the Agreement was terminated without cause, North American agreed to “continue to pay [Zie-gel] commissions payable under [the] Agreement ... for the remainder of the first through the tenth policy years.” If the Agreement was terminated for cause, “all further commissions and any other compensation under this ... Agreement shall be immediately and automatically forfeited to [North American].”

In a letter dated June 5, 1998 from North American Senior Vice President Timothy Traynor to Ziegel, North American terminated the Agreement, citing a decline in the amount of North American policies sold and a “poor relationship[ ] ... between [Legacy] ... and [North American’s] home office.” By this time, Legacy had placed approximately 4,000 policies with North American.

In a letter dated June 9, 1998 from Traynor to Ziegel, Traynor reiterated that North American “will be terminating [Legacy’s] contract, due to lack of production, effective thirty (30) days from the date of this letter.” Traynor wrote that North American would return all insurance applications sent by Legacy after that date. Traynor also asked that Legacy repay a loan, called a “Super Bonus advance,” North American made to Legacy in April 1998, which was due to be repaid by January 31, 1999. Traynor expressed concern that because North American was terminating the Agreement the loan would not be repaid “via a year-end Super Bonus payment.” Traynor “recommendfed], as an alternative, that [North American] begin debiting [Legacy’s] first year and renewal commissions at the rate of ... $2,500 per month,” which “would result in full repayment in approximately twelve months.” Traynor wrote that he “would like to hear from [Legacy] if this method of repaying the loan is or is not acceptable.” Traynor concluded that if Legacy attempted “accelerated replacement of the existing block from which the renewals are being generated,” North American would terminate the Agreement for cause and “accelerate[ ] recapture” of the loan. In other words, North American would terminate the Agreement for cause, causing Legacy to lose its residual commission payments, if Legacy attempted to accelerate the replacement of its insurance policies placed with North American that were up for renewal.

After North American terminated the Agreement without cause, North American assigned at least some of Legacy’s policies placed with North American to Graber Agency (“Graber”). As a result of North American’s assignment of Legacy’s policies, Graber obtained medical history and financial information of the policyholders. Graber also began soliciting the policyholders to cancel their original policies and sign new policies, what is known in the insurance industry as “twisting.” In this way, Graber could receive commissions from those new policies and Legacy would no longer receive commissions from the now-terminated original policies.

On August 18, 2003, Legacy brought suit against North American. See Legacy Group of Am., Inc. v. N. Am. Co. for Life and Health Ins., No. 03-CV-4033, 2008 WL 941638, at *1 (E.D.N.Y. Mar. 31, 2008) (hereinafter Legacy). In its initial com[90]*90plaint, Legacy claimed breach of contract, breach of the covenant of good faith and fair dealings, tortious interference with contractual relationship, and unjust enrichment. The complaint contained several references to North American’s “conversion” of Legacy’s insurance policies and clients, but Legacy’s counsel did not formally allege conversion.

On February 24, 2006, Legacy’s counsel wrote to the district court that “it is clear that [North American] has converted property of [Legacy] by assigning the book of business to the Graber Agency without compensating [Legacy]” and “would like to amend [Legacy’s] complaint to add ... a [conversion] cause of action.” This letter was recorded in the district court docket sheet as a “MOTION to Amend/Correct Complaint.” On February 28, 2006, North American’s counsel wrote to the district court opposing Legacy’s counsel’s request, stating “[a]dmittedly, the plaintiffs were in possession of all the facts necessary to include a claim for conversion in their complaint from the inception of this action.” On March 7, 2006, the district court denied the motion to amend with leave to refile because “[t]his motion cites no law and few facts upon which the Court could base its decision.”

On April 13, 2006, Legacy’s counsel submitted an amended complaint to the district court which included a conversion count. The count stated that after terminating the Agreement, North American “appointed The Graber Agency as the servicing agent” of Legacy’s policies and “notified each of [Legacy’s] customers who had policies of insurance with [North American] that [Legacy was] no longer the servicing agentf ] for their policies but that The Graber Agency had been appointed as their servicing agent.” Legacy stated that by doing this North American converted Legacy’s book of business or Legacy’s list of clients.

The district court treated the filing of the proposed amended complaint with the conversion count as another motion to amend the complaint and denied the motion, stating: “On 3/07/06, this Court denied Plaintiffs letter motion to amend the complaint. Because plaintiff was not granted permission to file an amended complaint, the amended complaint filed on 4/13/06 will not be considered by the Court.”

On September 27, 2006, the district court granted North American’s motion for summary judgment. North American then moved for attorney’s fees and expenses only against Ziegel. Legacy, 2008 WL 941638, at *1. The district court granted the motion, awarding North American $55,106.50 in fees and $6,808.85 in expenses for a total of $61,915.35. Legacy, 2008 WL 941638, at *1.

Legacy appeals.2

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Bluebook (online)
336 F. App'x 87, Counsel Stack Legal Research, https://law.counselstack.com/opinion/legacy-group-of-america-inc-v-north-american-co-for-life-health-ca2-2009.