Newton Ins. Agency v. Caledonian Ins. Group, Inc.

52 P.3d 30
CourtCourt of Appeals of Washington
DecidedSeptember 23, 2002
Docket48753-1-I
StatusPublished
Cited by2 cases

This text of 52 P.3d 30 (Newton Ins. Agency v. Caledonian Ins. Group, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Newton Ins. Agency v. Caledonian Ins. Group, Inc., 52 P.3d 30 (Wash. Ct. App. 2002).

Opinion

52 P.3d 30 (2002)

NEWTON INSURANCE AGENCY, & BROKERAGE, INC., a Washington corporation, Respondent,
v.
CALEDONIAN INSURANCE GROUP, INC., a Washington corporation, Appellant.

No. 48753-1-I.

Court of Appeals of Washington, Division 1.

August 12, 2002.
As Amended September 23, 2002.

*31 Phillip D. Noble, Helsell Fetterman Martin Todd & Hokanson, Seattle, WA, for respondent.

Charles Edward Watts, Oseran Hahn Spring & Watts, Bellevue, WA, for appellant.

ELLINGTON, J.

In this action for tortious interference and civil conspiracy, no questions of fact exist about Caledonian Insurance Group's liability to Newton Insurance Agency, or about the amount of damages. The trial court therefore properly granted summary judgment in favor of Newton, and we affirm.

*32 FACTS

In 1994, Newton Insurance Agency and Brokerage, Inc. purchased an insurance business from Terry Lynch, including all Lynch's accounts and customer base. The parties' agreement contained a noncompetition clause prohibiting Lynch from later competing for those accounts. Lynch agreed not to:

A. Request or advise any of the clients who have been transferred by [Lynch] to [Newton] to withdraw or cancel insurance with [Newton]; [or]

B. Solicit, sell, serve, divert, or receive insurance agency, brokerage, actuarial, or employee—benefit reporting business to or from any such client.[1]

Newton also hired Lynch as an insurance agent. The employment agreement contained an additional noncompetition clause covering all later-acquired accounts. The agreement provided that the accounts generated by Lynch would be owned by Newton, and that Newton's offer to hire Lynch was expressly conditioned upon his agreement not to:

(a) Solicit, sell, serve, divert, [or] accept the customers, trade or business, or interfere with policy contracts of the [Newton] Agency or any client having any coverage with the [Newton] Agency existing as of the date of notice of [Lynch's] termination, [or] any prospective account being actively solicited by the Agency at that time;

. . . .

(c) Be an employee, employer, consultant, officer, director, partner, trustee, or shareholder of more than 1% of the outstanding stock of any person or entity that doe any of the activities just listed.[2]

After learning that Lynch was selling insurance and keeping the commissions for himself, Newton fired Lynch on December 20, 1999. Three days later, Lynch was hired as vice-president and insurance producer for Caledonian Insurance Group. Caledonian president Anthony Cowan acknowledged that he and Lynch discussed Lynch's noncompetition agreements. He also testified that Caledonian hired Lynch expecting to obtain business from Newton's customers:

Q: During the course of your discussions with Mr. Lynch between December 20 and December 23, there were some discussions about obtaining a book of business from Newton Agency; is that correct?

A: Correct.

Q: And your offer to [hire] Mr. Lynch was contingent upon obtaining the book of business from the Newton Agency; isn't that correct?

A: Based on the enforceability of the covenant, and the fact that a number of these accounts had been with Terry Lynch prior to joining the Newton Agency, it was expected that some business [was] to follow.

Q: And it was on that basis you were willing to give Mr. Lynch an offer of employment?

A: Correct.[3]

It is undisputed that with the knowledge of Caledonian, Lynch contacted, obtained business from, and sold insurance to Newton customers:

Q: Subsequent to Mr. Lynch's becoming an employee of Caledonian, he contacted Newton clients; are you aware of that?

A: Yes.

Q: And are you aware that a number of those clients transferred their business to Caledonian—

A: Yes.
Q: —after Mr. Lynch contacted them?
A: Yes.

Q: And when Mr. Lynch contacted the Newton agency clients, he was doing so as an employee of Caledonian; is that right?

*33 A: Correct.[4]

Newton filed suit to enforce the noncompetition agreements and obtained an order to show cause why a preliminary injunction should not be entered. Lynch was served with the order on December 23, the day he started working at Caledonian. He told Cowan about the order the same day. Contending his obligation under the noncompetition agreements had been discharged by his personal bankruptcy in 1996, Lynch removed the proceedings to bankruptcy court. Between the day Lynch received the order to show cause and the bankruptcy hearing on January 10, 2000, Lynch continued to contact Newton customers, and had them sign "Broker of Record" letters transferring their business from Newton to Caledonian. The bankruptcy court held that Lynch's noncompetition obligations were not discharged by his personal bankruptcy, and entered a preliminary injunction. Lynch nevertheless continued to contact Newton customers and transfer their business to Caledonian.

The bankruptcy court remanded to state court for further proceedings. Newton asserted claims for breach of the noncompetition agreements and tortious interference with business expectations. Lynch requested arbitration as provided by the agreements. The arbitrator determined that Lynch had wrongfully breached his noncompetition agreements, had tortiously interfered with Newton's business relationships, and had breached his fiduciary duties to Newton. The arbitrator entered an award granting Newton a permanent injunction, damages, and attorney fees. The damages were based on expert testimony establishing that the accepted method for evaluating a lost book of insurance business was to use a multiple of annual commissions. The arbitrator awarded $281,913.82 in damages, representing two times the lost annual commissions from 27 accounts.[5]

Newton filed a separate action against Caledonian, alleging tortious interference and civil conspiracy. The trial court granted Newton's motion for summary judgment as to both liability and damages. Caledonian appeals.

DISCUSSION

Standard of Review

Summary judgment is appropriate when the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue about any material fact and, assuming facts most favorable to the non-moving party, establish that the moving party is entitled to judgment as a matter of law.[6] In opposing summary judgment, a party may not rely merely upon allegations or self-serving statements, but must set forth specific facts showing that genuine issues of material fact exist.[7]

Interference With a Business Expectancy

To prove tortious interference with a business expectancy, a plaintiff must show (1) the existence of a valid contractual relationship or business expectancy; (2) that the defendant had knowledge of that expectancy; (3) an intentional interference inducing or causing a breach or termination of the relationship or expectancy; (4) that the defendant interfered for an improper purpose or used improper means; and (5) resulting damage.[8]

A valid business expectancy includes any prospective contractual or business relationship that would be of pecuniary value.[9] Newton had a valid business expectancy in all of its customers, including those *34

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52 P.3d 30, Counsel Stack Legal Research, https://law.counselstack.com/opinion/newton-ins-agency-v-caledonian-ins-group-inc-washctapp-2002.