Leonard v. Louisiana Health Service & Indemnity Co.

505 So. 2d 173, 1987 La. App. LEXIS 9415
CourtLouisiana Court of Appeal
DecidedMarch 16, 1987
DocketNo. CA-3382
StatusPublished
Cited by1 cases

This text of 505 So. 2d 173 (Leonard v. Louisiana Health Service & Indemnity Co.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Leonard v. Louisiana Health Service & Indemnity Co., 505 So. 2d 173, 1987 La. App. LEXIS 9415 (La. Ct. App. 1987).

Opinion

PRESTON H. HUFFT, Judge Pro Tern.

The plaintiffs, Urban Leonard, Joseph Descant and Douglas Ordes, sued the defendant, Louisiana Health Service and Indemnity Co. (sometimes referred to as “Blue Cross”), for recovery of certain renewal commissions which Blue Cross failed to pay after the plaintiffs terminated their association with the company. The trial court dismissed plaintiffs’ suit due to the finding that “the plaintiffs failed to sustain the burden of proving that the renewal commissions were due to them after the termination of their association with Blue Cross.” The plaintiffs have appealed from the decision.

The issue before us is whether the record supports the existence of any agreement whereby plaintiffs might enforce their claims. For the reasons given below, we modify in part and reverse in part the trial court’s decision, and remand for purposes of determining the amounts of recovery to which plaintiffs are entitled in accordance with this opinion.

Blue Cross, through a nongroup sales manager named Melvin Hoerner, engaged the exclusive services of Urban Leonard in February, 1974, and of Joseph Descant in March, 1976, to sell Blue Cross insurance policies. Thomas J. Smith, another non-group sales manager for Blue Cross, engaged for the company the exclusive services of Douglas Ordes in October, 1976, for the same purpose. The compensation [174]*174payable for such services consisted of: (i) a nominal amount of cash sometimes referred to as the “enrollment fee”; (ii) a commission of 5% of the policy premium; and (iii) a renewal commission of 5% of the renewal premium(s) paid during the initial two years of a policy’s existence. The renewal commission represented a significant portion of the compensation that the plaintiffs might earn. Payment of the renewal commission, naturally, required that the policy be in effect and renewed during the two year deferral period. Payment of the sales commission in this manner approximated the amount normally paid by an insurance company as a single commission upon issuance of a policy. The payment plan deferred payment of the normal commission and made collection of the whole amount contingent upon renewal. The record indicates that Blue Cross did not allow the plaintiffs’ sales efforts to include making sure that an issued policy would be renewed; Blue Cross apparently directed all of plaintiffs’ efforts to making new sales of policies. For 1980 and thereafter, Blue Cross has paid the entirety of the sales commission upon issuance of the policy rather than over a two year deferral period.

Blue Cross has characterized its relationship with the plaintiffs as one with independent contractors which position plaintiffs have not controverted. Blue Cross defended the instant suit by insisting that company policy during the affected period always conditioned payment of the renewal commissions to an independent contractor upon his fulfilling two other requirements: (1) that he meet or exceed a certain sales quota of new business within a specified period of time, and (2) that he remain associated with Blue Cross throughout the entirety of such quota period. In July, 1979, officers of Blue Cross circulated a certain memorandum captioned “Change in Policy,” effective as of January 1, 1979 (sometimes referred to below as the “Subject Memorandum”), which Blue Cross required its independent contractors to execute; failure to execute resulted in termination of association with Blue Cross. Leonard’s association with Blue Cross terminated in June, 1979, before circulation of the Subject Memorandum which, naturally, he did not sign. Descant and Ordes did sign the Subject Memorandum but they terminated their respective associations with Blue Cross within several months thereafter: Descant in October, 1979, and Ordes in February, 1980.

Thomas J. Smith testified that, when Ordes had been engaged, Smith was unaware of any company policy which conditioned payment of the renewal commissions upon the sales representative either meeting or exceeding a certain quota of new sales or maintaining an association with Blue Cross throughout the entirety of the quota period. Smith further testified that he did not engage Ordes for Blue Cross subject to such requirements placed upon payment of the renewal commissions.

Melvin Hoerner testified that he was aware of such requirements when he engaged Leonard and Descant for Blue Cross but he could not state whether he informed them of such requirements when he engaged their services. The record reflects that the circulation of the Subject Memorandum had been the first written communication by the company or acknowledgment of understanding by certain of the plaintiffs that payment of renewal commissions would be subject to the quota and continuing relationship requirements.

Our review of the trial court’s decision in conjunction with the record leads us to conclude necessarily that the decision rendered rests upon a failure to determine the relationship between Blue Cross and plaintiffs while implicitly accepting what appears to be contradictory positions taken by Blue Cross: the plaintiffs were independent contractors compensable as employees. The trial court’s decision does not consider the nature of the “association” Blue Cross had with the plaintiffs, which characterization is critical in determining the proper disposition of this case. We find that plaintiffs were independent contractors of Blue Cross.

We must next determine whether the compensation described by Blue Cross, par-[175]*175tieularly with respect to the requirements placed upon the renewal commissions, is consistent with plaintiffs’ status as independent contractors. The Blue Cross explanation of compensation is that the independent contractor not only agreed to defer payment of a significant portion of a normal sales commission over a two year period but also agreed that such amount would be payable in the form of an employee’s bonus conditioned upon meeting or exceeding a sales quota in each respective quota period falling within the two year deferral period and maintaining association with Blue Cross throughout the entirety of.a quota period. The bonus payment plan is at odds with the independent contractor status of the plaintiffs asserted by Blue Cross. In essence, Blue Cross has attempted to exact damages from an independent contractor (who fails to make a quota in sales subsequent to those to which the renewal commissions relate or who terminates association with Blue Cross) by forfeiture of what would otherwise be a normally earned and received commission.

The case at bar has not presented this Court with the first opportunity to consider and to dispose of similar claims. Indeed, in Dowty, et al. v. Blue Cross of La. d/b/a Louisiana Health Service & Indemnity Co., 410 So.2d 332 (La.App. 4th Cir., 1982), writ denied, 412 So.2d 1113 (La., 1982), other plaintiffs, having independent contractor status but casually referred to as employees in the opinion, had brought suit for recovery of renewal commissions from the same defendant under similar but not the same set of facts. In said case, we reviewed the trial court’s finding of facts:

“(1) [P]rior to the memo [Subject Memorandum] there was no specified agreement for payment of commissions after employment.
“(2) [Defendant’s memo attempted ‘to change’ the procedure for renewal commissions, i.e. the reverse of the new procedure was in effect prior to the change (i.e. payments would have been due even if the employee was terminated).

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Bluebook (online)
505 So. 2d 173, 1987 La. App. LEXIS 9415, Counsel Stack Legal Research, https://law.counselstack.com/opinion/leonard-v-louisiana-health-service-indemnity-co-lactapp-1987.