Filed: Jun. 24, 2020
Latest Update: Jun. 24, 2020
Summary: Case: 19-13723 Date Filed: 06/24/2020 Page: 1 of 14 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ No. 19-13723 Non-Argument Calendar _ D.C. Docket No. 7:18-cv-00069-HL HESSMORGANHOUSE, LLC, Plaintiff-Appellant, versus THE KINGDOM GROUP OF COMPANIES, LLC, et al., Defendants-Appellees. _ Appeal from the United States District Court for the Middle District of Georgia _ (June 24, 2020) Before MARTIN, ROSENBAUM, and TJOFLAT, Circuit Judges. PER CURIAM: Case: 19-1
Summary: Case: 19-13723 Date Filed: 06/24/2020 Page: 1 of 14 [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ No. 19-13723 Non-Argument Calendar _ D.C. Docket No. 7:18-cv-00069-HL HESSMORGANHOUSE, LLC, Plaintiff-Appellant, versus THE KINGDOM GROUP OF COMPANIES, LLC, et al., Defendants-Appellees. _ Appeal from the United States District Court for the Middle District of Georgia _ (June 24, 2020) Before MARTIN, ROSENBAUM, and TJOFLAT, Circuit Judges. PER CURIAM: Case: 19-13..
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Case: 19-13723 Date Filed: 06/24/2020 Page: 1 of 14
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 19-13723
Non-Argument Calendar
________________________
D.C. Docket No. 7:18-cv-00069-HL
HESSMORGANHOUSE, LLC,
Plaintiff-Appellant,
versus
THE KINGDOM GROUP OF COMPANIES, LLC, et al.,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Middle District of Georgia
________________________
(June 24, 2020)
Before MARTIN, ROSENBAUM, and TJOFLAT, Circuit Judges.
PER CURIAM:
Case: 19-13723 Date Filed: 06/24/2020 Page: 2 of 14
The Kingdom Group hired HessMorganHouse, LLC (“HMH”) to provide
consulting services related to the development of a group-term life-insurance plan
(the “Plan”). The parties agreed that The Kingdom Group could defer payments
owed for certain Pre-Rollout Services “until such time as The Kingdom Group
receives compensation” from commission payments. “Notwithstanding” that
deferral agreement, the parties agreed that “no payment shall be made to HMH in
excess of 20% of any commission payment.” Unfortunately for both parties, only
three policies were sold before the insurer canceled the Plan for lack of
participation. The Kingdom Group received a total of $262.80 in commission
payments.
HMH sued for breach of contract, seeking $113,818 plus other damages for
the services performed during the Pre-Rollout phase. HMH argues that the
deferred-payment scheme functions as a condition on timing and does not relieve
The Kingdom Group of its obligation to pay HMH for “Pre-Rollout Services.”
The Kingdom Group, invoking the 20% clause, claims that it owes HMH only
$52.56 for these services, and that such amount was already accounted for in an
earlier payment. The District Court determined that the “[n]otwithstanding” clause
was a limitation, rather than a condition on timing, and granted summary judgment
to The Kingdom Group. We affirm.
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I.
The facts—as outlined in the parties’ joint stipulation below—are not in
dispute. HMH is a life insurance consulting company. The Kingdom Group 1
retained HMH to help it develop a group-term life-insurance plan for the National
Hispanic Christian Leadership Conference. The parties entered into a series of
letter agreements during this process.2 After the Prudential Insurance Company of
America was selected as the insurer for the Plan, HMH and The Kingdom Group
entered into a letter agreement dated December 24, 2013. Pursuant to that
agreement, the Kingdom Group retained HMH to provide Pre-Rollout Services and
Post-Rollout Services.
Pre-Rollout Services included reviewing and negotiating the terms of the
draft contract and the guarantee letter with Prudential and, if such was deemed
necessary, establishing a trust. The agreement specified that The Kingdom Group
1
The Appellees are The Kingdom Group of Companies, LLC, d/b/a The Kingdom
Group; Kingdom Insurance Group, LLC, d/b/a The Kingdom Group; and Nicholas J. Lewis,
Individually and d/b/a The Kingdom Group. We refer to Appellees collectively as “The
Kingdom Group.”
2
HMH and The Kingdom Group entered into letter agreements on June 27, 2013;
September 17, 2013; December 24, 2013; and January 7, 2014. The parties agree that HMH
performed and was fully paid for the services under the June 27, 2013 and September 17, 2013
agreements. The January 7, 2014 letter agreement amended the payment schedule contained in
the September 17, 2013 agreement. The only dispute on appeal pertains to the December 24,
2013 agreement.
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shall pay HMH an hourly rate of $300 for “Pre-Rollout Services,” subject to the
following payment schedule:
• The lesser of total HMH invoices or $15,000 upon receipt by The
Kingdom Group of the initial commission payment from Prudential.
• The lesser of any remaining unpaid HMH invoices or $20,000 upon
receipt by The Kingdom Group of the second commission payment from
Prudential.
• The lesser of any remaining unpaid HMH invoices or $30,000 upon
receipt by The Kingdom Group of a third commission payment from
Prudential.
• Up to $30,000 on the same basis as set forth above upon receipt by the
Kingdom Group of each subsequent commission payment from
Prudential until such time as all outstanding HMH invoices have been
paid in full.
The next provision in the agreement states that “Notwithstanding the
foregoing, no payment shall be made to HMH in excess of 20% of any commission
payment, taking into account amounts payable to HMH that have been deferred
and remain outstanding from all letter agreements, including this one.”
In addition, the parties agreed that The Kingdom Group would retain HMH
for ongoing Post-Rollout Services, such as auditing retention charges and
reviewing premium rates, “in consideration of our agreement to defer
compensation for Pre-Rollout Services until such time as The Kingdom Group
receives compensation from the product.” Post-Rollout Services were to be billed
at a quarterly rate of $20,000. Those fees were to be aggregated with fees for Pre-
Rollout services, and “payable upon receipt by the Kingdom Group of subsequent
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commission payments from Prudential, but collectively subject to the 20%
limitation applicable to Pre-Rollout Services.”
HMH performed Pre-Rollout Services and sent The Kingdom Group ten
letters summarizing the hours worked each month. According to the letters,
HMH’s hourly charges for Pre-Rollout Services totaled $118,818. The Plan was
launched in late 2015. Three insurance policies were sold under the Plan and The
Kingdom Group earned $262.80 in commissions from the sales. On January 26,
2017, Prudential terminated the Plan for lack of participation.
After the insurer terminated the Plan, HMH sought to recover amounts owed
for services performed during the Pre-Rollout phase. HMH filed a complaint in
the Middle District of Georgia alleging that The Kingdom Group refused to pay
HMH for the value of services provided and demanding damages in the amount of
$113,818 (representing the amount billed for hourly services less a $5,000
payment), interest, and attorneys’ fees. The parties stipulated to certain facts and
cross-moved for summary judgment. The District Court granted summary
judgment in favor of The Kingdom Group, holding that there was no breach of
contract as the “[n]otwithstanding” clause unambiguously limits any payment to
HMH to 20% of the commission payment received by The Kingdom Group. The
District Court dismissed HMH’s remaining claims for breach of the covenant of
good faith and fair dealing, quantum meruit, account, and attorneys’ fees as a
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matter of law. HMH appeals the District Court’s grant of summary judgment on
the breach of contract claim.
II.
HMH argues that the payment deferral scheme established a condition
subsequent, and that Prudential’s cancellation negates The Kingdom Group’s right
to defer payments on the Pre-Rollout invoices. HMH also asserts that the deferred
invoice amounts are due “within a reasonable amount of time” and points to L.
Gregg Ivey, Inc., v. Land, 252 S.E.2d 88 (Ga. Ct. App. 1979) and Powell Co. v.
McGarey Group, LLC,
508 F. Supp. 2d 1202 (N.D. Ga. 2007) to support its
argument. On the other hand, The Kingdom Group argues that the
“[n]otwithstanding” clause makes the collection of sufficient commission a
condition precedent to payment and that its failure to occur excuses The Kingdom
Group’s obligation to pay HMH. We uphold summary judgment in favor of The
Kingdom Group as we determine that the “[n]otwithstanding” clause is an
independent covenant limiting the terms of performance due.
A.
Georgia law defines a condition subsequent as “a term of the contract within
the intent of the parties that the happening or non-occurrence of an event after the
contract becomes binding upon the parties, which, by pre-agreement of the parties,
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causes the contract to terminate without further duties and obligations on any
party.” Sheridan v. Crown Capital Corp., 554 S.E.2d 296, 300 (Ga. Ct. App.
2001). We need not decide whether the parties pre-agreed that failure of the Plan
would terminate the contract as the only alleged breach is failure to pay for
services that have already been performed.3
Therefore, we must determine whether the collection of commissions
created a condition precedent for payment or whether the deferral scheme simply
specified a time for payment and the effect, if any, that the “[n]otwithstanding”
clause has on The Kingdom Group’s obligations to pay HMH.
B.
1.
“Georgia courts have long recognized a material distinction between a
condition precedent and a mere accommodation between the parties over the
timing of payment.” Callaway v. Garner, 755 S.E.2d 526, 532 (Ga. Ct. App.
2014) (collecting cases), aff'd in part, rev’d on other grounds,
776 S.E.2d 829 (Ga.
Ct. App. 2015).4 “While the distinction may be subtle, it is crucial; if the parties’
3
HMH did not sue The Kingdom Group for breaching its obligation to retain HMH to
provide Post-Rollout Services. HMH’s complaint alleges only that The Kingdom Group failed
to pay HMH for services rendered during the Pre-Rollout phase.
4
A contingency can be described as a condition precedent to the existence of a valid
contract or as a condition precedent to performance under an existing contract. Yi v. Li, 721
S.E.2d 144, 148 (Ga. Ct. App. 2011). The parties do not argue that the receipt of commissions
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understanding was merely to specify a time of payment based on the happening of
a particular event, if the event ‘does not happen,’ the payor is still obligated to pay
and must do so ‘within a reasonable time.’” Id. at 533 (quoting MacLeod v.
Belvedale, Inc.,
154 S.E.2d 756, 759 (Ga. Ct. App. 1967)). In MacLeod, for
example, the Georgia Court of Appeals determined that language in a loan
document that $9,500 was to be repaid “upon the closing of a construction loan”
specified a time of payment, not a condition of
payment. 154 S.E.2d at 759.
“When the existence of a debt is conditional on the happening of some event,
payment cannot be enforced until the event happens; but when payment of an
existing liability is postponed until the happening of an event which does not
happen, payment must be made within a reasonable time.”
Id. Because the
promise to repay the loan created an absolute liability, payment was due within a
reasonable time.
Id.
L. Gregg Ivey provides another example of a timing provision. There, a
promissory note contained language that the note was payable at the time that
thirty of the thirty-two lots in a subdivision had been
sold. 252 S.E.2d at 89. The
parties disputed whether a foreclosure sale on the underlying property made this an
impossible condition and thus extinguished the debt.
Id. The Georgia Court of
was necessary to the formation of the contract, nor do they dispute that a binding contract exists.
Thus, we use the term in the latter sense.
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Appeals determined that the conditional language related to the timing of the
repayment. Id. at 89–90. The promise to repay, however, was still an absolute
liability.
Id. at 90 (citing
MacLeod, 154 S.E.2d at 759). Therefore, the
impossibility of the sale did not extinguish the debt and a jury could decide a
reasonable time for repayment.
Id.
Likewise, in Powell Co., the Northern District of Georgia determined that
contract language stating that the Powell Company shall receive $5,000 per month,
“payable on the first day of each month or upon receipt of the monthly retainer due
[owners], whichever shall last occur” created an absolute
liability. 508 F. Supp. 2d
at 1202. The provision established a “timing for payment, rather than a condition
precedent.”
Id.
HMH is correct that the “upon receipt” of commission payment language in
the schedule refers to the timing for payment and is not a condition for payment.
But the schedule is not the only relevant provision. Prudential’s cancellation of the
Plan does not absolve The Kingdom Group of its liability to pay HMH for the
services performed; however, the “[n]otwithstanding” clause does limit the amount
owed.
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2.
The policy provides that “[n]otwithstanding” the preceding payment
schedule, “no payment shall be made to HMH in excess of 20% of any commission
payment, taking into account amounts payable to HMH that have been deferred
and remain outstanding from all letter agreements, including this one.”
“Notwithstanding” means “without prevention or obstruction from” or “in
spite of.” Webster’s Third New International Dictionary (1976); see also Black’s
Law Dictionary (2019). Such qualifying language means that the parties’ agreed-
to deferral schedule does not alter the terms of the limitation. See Brazeal v.
Newpoint Media Grp., LLC, 769 S.E.2d 763, 769 (2015) (“Inclusion of the phrase
‘notwithstanding Section 1’ . . . simply means that the right of the parties to decline
to renew Brazeal’s employment . . . does not alter the right of NewPoint to
‘terminate’ Brazeal ‘with or without Cause’ during the course of that term.”);
Record Town, Inc. v. Sugarloaf Mills Ltd. P’ship of Ga.,
687 S.E.2d 640, 643 (Ga.
Ct. App. 2009) (“[T]he ‘notwithstanding’ provision in the amendment means that
these requirements from the original lease do not alter the terms of the second
amendment.”). The limitation is clear and without conditions.
Unlike the payment deferral schedule, the “[n]otwithstanding” clause does
not use timing language, such as “upon receipt.” It provides that “no payment”—
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whether made according to the payment schedule or “within a reasonable time”—
shall exceed 20% of any commission payment. This limitation applies to all
amounts payable, including those that have been deferred and remain outstanding
from other agreements. The agreement itself calls this clause a limitation, when it
makes the aggregation of amounts outstanding for Post-Rollout Services,
“collectively subject to the 20% limitation applicable to Pre-Rollout Services.”
The “[n]otwithstanding” clause unambiguously places a limitation on the amounts
payable to HMH.
HMH argues that the limitation is inapplicable because Prudential cancelled
the Plan, thus making the collection of sufficient commissions and the provision of
Post-Rollout Services impossible. As explained above, the impossibility of an
event that was specified to be the source of funds for repayment does not ordinarily
excuse the underlying debt. See MacLeod, 154 S.E.2d at 759; L. Gregg
Ivey, 252
S.E.2d at 89; see also Scott v. Hussmann Refrigeration, Inc.,
357 S.E.2d 860, 861
(Ga. Ct. App. 1987). A party’s inability to obtain money, “whether due to his
poverty, a financial panic, or failure of a third party on whom he relies for
furnishing the money, will not ordinarily excuse nonperformance, in the absence of
a contract provision in that regard.” Bright v. Stubbs Properties, Inc.,
210 S.E.2d
379, 380 (Ga. Ct. App. 1974).
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But here, there is a contract provision that relates to The Kingdom Group’s
performance. No payment shall exceed 20% of any commission payment. This
independent covenant limits the performance due. In interpreting these as “words
of covenant” rather than “words of condition,” 5 the remedy is an action for
damages. Fulton Cty. v. Collum Properties, Inc., 388 S.E.2d 916, 919 (1989). No
action for damages lies here; however, as the parties agree that The Kingdom
Group earned $262.80 in commissions from the sales and that 20% of this amount
was already paid to HMH.
Thus, while the failure of the Plan and the subsequent lack of commissions
does not excuse The Kingdom Group from paying HMH for its Pre-Rollout
Services, the amount due under the contract is limited by the very terms the two
parties agreed to. The “[n]otwithstanding” clause does not excuse performance by
The Kingdom Group—it is a limitation on the performance. Payment is still due.
5
The Kingdom Group points to St. Paul Fire & Marine Insurance Co. v. Georgia
Interstate Electric Co., 370 S.E.2d 829, 830 (Ga. Ct. App. 1988), for its characterization that the
“[n]otwithstanding” clause makes the collection of sufficient commissions a condition precedent
to payment. In St. Paul Fire & Marine Insurance, the Georgia Court of Appeals held that
language that “provided that no payment shall be due Subcontractor . . . until Contractor has
received payment from the Owner for said changed or extra work performed by Subcontractor”
created a condition precedent for payment. There, the word “provided” indicated the parties
expressly intended to make payment from a third party a condition precedent. Id.; see also
Collum
Properties, 388 S.E.2d at 918 (“Words such as ‘on condition that,’ ‘if,’ and ‘provided,’
are words of condition, and in the absence of indication to the contrary, the employment of such
words in a contract creates conditions precedent.”). Here, the limitation is not conditional. The
notwithstanding clause does not create a condition for payment—it limits an obligation that
already exists.
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The amount is just limited by the terms of the contract. “That it may be unwise or
disadvantageous or place a hardship” on HMH “furnishes no reason for not
enforcing the contract as made.” Bright, 210 S.E.2d at 380.
3.
Separately, HMH argues that our interpretation of the “[n]otwithstanding”
clause runs afoul of the Georgia prohibition on commission payments to persons
not licensed to sell insurance products. See O.C.G.A § 33-23-4 (“No person other
than a duly licensed adjuster, agent, limited subagent, or counselor shall pay or
accept any commission or other valuable consideration except as provided in
subsections (b) and (c) of this Code section.”). It is undisputed that HMH is not
licensed to sell insurance.
Georgia case law regarding what constitutes an illegal commission under
O.C.G.A § 33-23-4 is sparse. In Seals v. Hygrade Distribution & Delivery System,
Inc., 549 S.E.2d 412, 415 (Ga. Ct. App. 2001), the Georgia Court of Appeals
determined that when Hygrade—who was not a licensed agent—charged a flat
administrative fee to act as an intermediary between Seals and an insurance broker,
it did not violate O.C.G.A § 33-23-4 because Hygrade “did not charge [Seals] a
percentage of [Seal’s] gross commissions to administer the insurance program.”
Here, HMH did not charge The Kingdom Group for its services based on a
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percentage of the commissions received by The Kingdom Group. It charged $300
per hour for Pre-Rollout Services and the parties agreed to a $20,000 quarterly fee
for Post-Rollout Services. Separately, the parties agreed to a limitation on the
amount that HMH would be able to recover—no payment would exceed 20% of
any received commission payment. We conclude that this arrangement does not
violate the Georgia statute against sharing commissions because the receipt of
commission payments is not a condition precedent to the payment of outstanding
balances.
AFFIRMED.
14
