PAUL D. BORMAN, District Judge.
This matter is before the Court on Defendant Nationwide Mutual Insurance Company's ("Nationwide") Motion for Summary Judgment. (Dkt. No. 60.) Plaintiffs filed a Response (Dkt. No. 66) and Nationwide filed a Reply (Dkt. No. 69.) The Court held a hearing on July 28, 2010. For the reasons that follow, the Court GRANTS Nationwide's motion on Counts I, II, IV and V of Plaintiffs' Complaint, requests the parties to submit supplemental briefing on Count III of Plaintiffs' Complaint and holds in abeyance its ruling on Nationwide's motion for summary judgment on Counts I-V of its Counterclaim.
Charles L. Bye, Jr. ("Plaintiff") worked for nine years as an insurance agent for Defendant Nationwide. In June, 1998, Plaintiff read an article describing a business opportunity with Nationwide and he contacted Nationwide about the position. (Def.'s Mot. Ex. 1, Deposition of Charles Bye Jr., June 18, 2009, 53.) Bye had previously worked as a sales manager for Pitney Bowes, a store manager for Zale Jewelers and had owned his own jewelry business, Hillcrest. (Id. 42-48, 50-52.) Thus, Plaintiff had experience supervising staffs, hiring and firing employees, and controlling expenses, budgeting and marketing. (Id. 48.)
On June 3, 1998, Nationwide offered Plaintiff the position of Financed Community Agent ("FCA") at a salary of $65,000 per year, contingent on Plaintiff passing a number of employment screens and completing certain training and licensing programs. (Def.'s Mot. Ex. 2.) On June 29, 1998, Plaintiff signed an FCA Agreement under which Nationwide placed Plaintiff in an agency location, paid his salary and bonuses and paid over $200,000 per year to cover his expenses, including office lease, furnishings, utilities and marketing expenses while Plaintiff continued to learn the business of selling insurance. (Def.'s Mot. Ex. 1, Bye Dep. 66, 69, 54-55; Def.'s Mot. Ex. 3.) In this agreement, Plaintiff agreed that Nationwide could increase its premiums without any prior notice to Plaintiff and could eliminate lines of business
After four years in the FCA program, Plaintiff became an Independent Contractor Agent ("ICA") with Nationwide and executed an Independent Contractor Agent's Agreement ("ICA Agreement") on May 2, 2002. (Def.'s Mot. Ex. 1, Bye Dep. 56, 83; Def.'s Mot. Ex. 4.) Like the FCA Agreement, the ICA Agreement contained a provision which authorized Nationwide to change prices, terms and to discontinue entirely writing or accepting policies or lines of insurance without notice to our consent of its agents and again Plaintiff indicated that he read and agreed to this provision at the time he signed the ICA. (Def.'s Mot. Ex. 1, Bye Dep. 84-85.)
A few months after becoming an ICA, Plaintiff, assisted by counsel, chose to begin to operate as a corporation and entered into a Corporate Agency Agreement ("CA Agreement") with Nationwide. (Id. at 87; Def.'s Mot. Ex. 5.) This agreement, like the FCA and the ICA, contained a provision which allowed Nationwide to make business decisions regarding premium pricing and underwriting decisions entirely independent of and without any notice to its agents and Plaintiff testified that he read and agreed to this language "for the third time." (Def.'s Mot. Ex. 1, Bye Dep. 103.) Plaintiff understood that the objective of the CA was that he have a profitable agency but also that Nationwide run a profitable business. (Id. at 91.)
Soon after becoming an ICA, Plaintiff began to expand and grow his business either by acquiring existing agencies or opening new satellite offices. Plaintiff set his sights on an existing Nationwide agency in Okemos, Michigan and was given a six-month "free look" period (as he was with all of his acquisitions) where he could work the book of business and decide whether he wanted to proceed with a formal acquisition. (Id. at 113-114, 119-120.) In December, 2002, Plaintiff took out a loan from Nationwide in the amount of $27,526.39 to purchase the Okemos agency.
In spite of the fact that two other agents in Okemos had "failed miserably" and "couldn't write enough business to survive," Plaintiff felt he could succeed because he was "not like those other guys" and had a "better work ethic." (Id. at 113.) Plaintiff felt that he could succeed where the other agents had failed "because some people just weren't cut out to do it," and so he proceeded with the loan and purchase of the Okemos agency. (Id.)
In late 2003 or early 2004, Plaintiff decided to further expand and decided to participate in Nationwide's Capital Access Program ("CAP Loan Program") to fund a new satellite office in DeWitt, Michigan and hire new staff. (Id. at 130-131.) Under the CAP Program, Plaintiff had an opportunity to secure a loan through Nationwide's financing arm and to have repayment of the loan waived if Plaintiff grew his agency by one-and-a-half times the "state DWP [direct written premium] growth objective," a goal that Plaintiff believed he could achieve in this instance because he was going to "double [his] number of producers." (Id. at 127-128, 148-149; 173.) The CAP Program, with the potential for loan forgiveness and interest on the loan at prime plus one, was an option for financing and was a benefit of being a Nationwide exclusive agent. (Pl. s's Resp. Ex. A-2, Deposition of Michael Whitehead, March 13, 2009, 65-66, 83.) An agent who chose not to participate in the CAP Loan program and who needed to finance to expand his or her business would have to seek financing from a traditional bank, at a higher interest rate, and with no potential for ultimate loan forgiveness. (Id.)
Nationwide provided the state growth target for the pro forma.
Plaintiff worked with Joe Sheffieck, a Nationwide business consultant, to complete a CAP Loan application and pro forma for the planned expansion. Nationwide business consultants can be called in to assist with preparation of a pro forma but there is no requirement that an agent utilize a Nationwide business consultant.
The pro forma was a collaborative effort between the agent and the business consultant. (Def.'s Mot. Ex. 1, Bye Dep. 126-141, 143; Def.'s Mot. Ex. 7, pp. 10-40.) The business consultant prepared the pro forma with input from the agent, asking the agent to provide expected expenses, anticipated sales and premium assumptions. (Pls.'s Resp. Ex. C-1, Deposition of Joseph Sheffieck in the matter of Boeve v. Nationwide, 08-12213, May 8, 2009, 10-11.)
With respect to Plaintiff's pro forma, the information provided by Plaintiff indicated that his agency had experienced recent premium rate increases (indeed this was part of his justification for the staff increase) and the information provided by Mr. Sheffieck indicated that rates were going to continue to increase 22 percent over the next three years. (Def.'s Mot. Ex. 1, Bye Dep. 149-152.) Although Plaintiff read and understood this projected rate increase, he testified that he didn't "expect" it would really happen. (Id. at 151.) Premium rate prices were a factor affecting Plaintiff's ability to sell insurance.
In November, 2004, Plaintiff sought to expand his agency yet again by acquiring the Cambridge Insurance Agency which was an independent agency Plaintiff hoped to consolidate with his DeWitt satellite agency. (Def.'s Mot. Ex. 1, Bye Dep. 131-132.) In order to obtain funding to help with the Cambridge acquisition, Plaintiff prepared a business plan, indicating in the plan that Nationwide had "fairly competitive auto rates" in the relevant geographic area based upon a "competitive sampling" performed by Plaintiff. (Id. at 178-180; Def.'s Mot. Ex. 9.) Nationwide also helped Plaintiff prepare a business plan/pro forma which indicated on its cover page:
(Pls.'s Resp. Ex. I.). On December 2, 2004, Plaintiff executed a Credit Agreement and Promissory Note with Nationwide which was supported by a cash flow analysis of the Cambridge agency and an Asset Purchase agreement, the latter having been prepared by Plaintiff's independent counsel in connection with the Cambridge purchase. (Def.'s Mot. Ex. 10; Def.'s Mot. Ex. 1, Bye Dep. 188-190.) Nationwide was not involved in setting the price that Plaintiff agreed to pay for the Cambridge property. (Def.'s Mot. Ex. 1, Bye Dep. 190-192.) Following the Cambridge acquisition, Plaintiff was perhaps losing money but was "pretty close to break even." (Id. at 193-194.)
Sometime prior to his acquisition of the Cambridge agency, Plaintiff became aware that Nationwide's affiliate, Allied Insurance Company ("Allied"), was selling the Nationwide product in competition with Nationwide's exclusive agents, like Plaintiff. (Id. at 62-63.) In fact, Plaintiff complained to Nationwide because it was Plaintiff's perception that Allied was selling the same product as the Nationwide exclusive agents but at a lower price. (Id. at 63.) Plaintiff testified that Nationwide never attempted to conceal the fact that Allied was operating in Michigan and in fact indicated to Plaintiff that the Allied competition was "just the way it [was]." (Id.)
Plaintiff testified that at the end of 2006, having taken out three loans for expansions of his business, he still was operating at a loss. (Def.'s Mot. Ex. 1, Bye Dep. 212.) "Things had gotten progressively worse [since the end of 2004] because they had taken two or three more rate increases." (Id.) Plaintiff admitted that these rate increases had in fact been assumed by the pro formas and business plans. (Id.)
It was "early in 2007 when [Plaintiff] started getting concerned." (Id.) Plaintiff and his wife decided that she should open an insurance business and in November, 2006, she opened (Counter-Defendant) Bye Financial Group, LLC. (Id. at 213-214.) Plaintiff helped to set up the company and Plaintiff's wife, although she had worked at an insurance company as a Network Operations manager, was never involved with the insurance products side of the business and was not and is not licensed to sell insurance. (Id. at 213; Def.'s Mot. Ex. 13, Deposition of Kay Bye, June 18, 2009, 7, 9-10, 11.)
Plaintiff's wife testified that opening the LLC was her husband's idea but she thought it was a "great" idea and it gave her "an opportunity to help with [their] future together." (Def.'s Mot. Ex. 13, Kay Bye Dep. 10.) Plaintiff's wife indicated that she was a member of the LLC because "it would [have been] inappropriate based on [her] husband's employment with Nationwide to start another company on his own. So [she] became the principal for Bye Financial Group." (Id. at 10-11.) The LLC shared office space and office equipment with Plaintiff's Nationwide agency. (Def.'s Mot. Ex. 1, Bye Dep. 215-217.) Nationwide believed that Plaintiff began referring potential and existing Nationwide customers to the LLC and terminated Plaintiff's agency on May 22, 2007 for breach of his agreement to exclusively represent Nationwide. The termination became final on June 7, 2008 when the Agent Review Board denied Plaintiff's appeal. (Id. at 233-236.)
Plaintiff asserts that his experience in failing to achieve loan waiver was common among Nationwide agents and presents evidence which he argues indicates that only a small percentage of the CAP Loans nationwide achieved full waiver. (Pls.'s Resp. 13; Ex. M.) Ms. Smith testified that the CAP Loan program was designed to provide a benefit to the agent but that an agent also was free to either take a CAP Loan or to go to their personal bank for financing. (Pls.'s Resp. Ex. D-1, Smith Dep. 41.) Ms. Smith could recall approximately ten agents who had achieved loan waiver. (Id. at 16-17.) The business consultants were trained to help the agent take a look at economic conditions and the market and determine whether their cash flow would support their goals and desires for growth. (Pls.'s Resp. Ex. D-2, Smith Dep. 72-73.) In theory, if the agent worked together with the business consultant when putting together the pro forma, taking into consideration the historical data in their market, and if the agent implemented what he or she indicated in the pro forma they were going to do, they should have been able to achieve the goals of the pro forma. (Pls.'s Resp. Ex. D-1, Smith Dep. 13.)
However, according to Ms. Smith, the CAP Loan program hit Michigan at a time when the Michigan economy was going down which frustrated Nationwide's initiatives, like the CAP Loan program, which Nationwide was hoping would increase sales and spark growth in Michigan. (Pls.'s Resp. Ex. D-2 at 46.) Ms. Smith testified that the experience of the success of the CAP Loan program correlated directly with the negative growth in the insurance industry as a whole. (Id. at 42.) "The waivers followed that trend so the peak of full waivers hit in about the year 2002. And then, as the industry as a whole started to shrink, there was less for all agents to write and hence, the waivers decreased right along with the national trends." (Id.) Additionally, Ms. Smith testified that within Nationwide, there was some "misinformation" about the way the CAP Loan program was supposed to work and stated that several agents in Michigan expressed to her their regret for having undertaken the CAP Loan program because loan waiver was a goal they were never able to achieve. (Id. at 46.)
Ms. Smith began to have concerns in September, 2004, that the agents were having trouble achieving waiver on their CAP Loans. (Pls.'s Resp. Ex. E-1, Smith Dep. 20 (taken in Nemier v. Nationwide).) Ms. Smith was of the opinion that the pro formas should not utilize target state growth, which for the approximate years 2004-2009 had been twice the actual state growth, but should utilize actual state
Pursuant to Federal Rule of Civil Procedure 56, a party against whom a claim, counterclaim, or cross-claim is asserted may "at any time, move with or without supporting affidavits, for a summary judgment in the party's favor as to all or any part thereof." Fed.R.Civ.P. 56(b). Summary judgment is appropriate where the moving party demonstrates that there is no genuine issue of material fact as to the existence of an essential element of the nonmoving party's case on which the non-moving party would bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Of course, [the moving party] always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. 2548; See also Gutierrez v. Lynch, 826 F.2d 1534, 1536 (6th Cir.1987).
A fact is "material" for purposes of a motion for summary judgment where proof of that fact "would have [the] effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties." Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984) (quoting Black's Law Dictionary 881 (6th ed. 1979)) (citations omitted). A dispute over a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Conversely, where a reasonable jury could not find for the nonmoving party, there is no genuine issue of material fact for trial. Feliciano v. City of Cleveland, 988 F.2d 649, 654 (6th Cir. 1993). In making this evaluation, the court must examine the evidence and draw all reasonable inferences in favor of the non-moving party. Bender v. Southland Corp., 749 F.2d 1205, 1210-11 (6th Cir. 1984).
If this burden is met by the moving party, the non-moving party's failure to make a showing that is "sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," will mandate the entry of summary judgment. Celotex, 477 U.S. at 322-23,
Plaintiff claims that the two variables which affected his ability to achieve loan waiver were the growth of direct written premium and state target growth rates, that these variables were completely under Nationwide's control and that Nationwide intentionally manipulated these numbers and failed to disclose their true nature to Plaintiff, all in a fraudulent effort to induce Plaintiff into the loans and then to leverage his failure to Nationwide's benefit. (Pls.'s Resp. 10.) The Court concludes that, viewing all facts in the light most favorable to the Plaintiff, Plaintiff has failed to produce evidence in support of this claim which creates a genuine issue of material fact sufficient to survive summary judgment on his claim of fraud in the inducement.
The elements which must be proven to establish actionable fraud or misrepresentation in Michigan are well established:
Hi-Way Motor Co. v. Int'l Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813 (1976) (internal quotation marks and citations omitted).
Plaintiff argues that Nationwide's premium price increases made it impossible for him to achieve the projected growth in direct premium stated in his pro formas and therefore made it impossible for him to meet the state growth targets for loan waiver. Plaintiff asserts that despite Nationwide's increasing premium price, and the impossibility that this presented for Plaintiff to achieve his loan waiver requirements, Nationwide continued to push him to grow and expand and to take out more loans to do so.
Plaintiff admits that he read and understood, on three different occasions over an extended period of time, the following contractual provision which at all times governed the parties' relationship:
(Def.'s Mot. Ex. 1, Bye Dep. 103; Def.'s Mot. Ex. 3, Charles Bye's Agents Agreement dated June 29, 1998, p. 5; Def.'s Mot. Ex. 4, Charles Bye's Independent Contractor Agreement executed May 2, 2002, Ex. 4, p. 8; Def.'s Mot. Ex. 5, Charles Bye's Corporate Agency Agreement, dated October 23, 2002 p. 10.)
In his Second Amended Complaint ("Compl."), Plaintiff alleges generally that Nationwide made representations to him regarding what he could expect from the business opportunity of managing a Nationwide agency and represented to him that it had a business model that would be profitable and provide Plaintiff with a livelihood. (Compl. ¶¶ 8, 11.) Specifically, Plaintiff alleged (a) that Nationwide represented that the business plan and pro formas for his Nationwide agency would be mutually devised by the parties, (b) that the business consultant would be independent and (c) that the plan they devised would result in a successful business model. (Compl. ¶¶ 11, 16.) Plaintiff also alleged that Nationwide represented to him (d) that he could increase his success and profitability if he expanded his business by undertaking mergers and acquisitions. (Compl. ¶ 39.)
Taking each of these alleged misrepresentations in turn, the Court must find an actionable representation, that was false and known to be false when made, that Nationwide intended that it be relied on and that Plaintiff reasonably did rely on it. As to each alleged misrepresentation, which must be established with a reasonable degree of certainty, the failure of any one of these elements defeats Plaintiff's claim.
This statement, even if made, was true and Plaintiff admitted as much in his
It is undisputed that when Plaintiff applied for the CAP Loan for the Cambridge agency acquisition, he independently prepared a business plan. (Id. at 178-179.) Similarly, for the Holt acquisition, Plaintiff devised the forecasted numbers himself and prepared the supporting spreadsheets. (Id. at 201-202.) Finally, in his responsive brief, Plaintiff conceded that the pro formas were a collaborative effort. (Pls.'s Resp. 10.)
Any claim of fraudulent misrepresentation based upon this representation must fail where Plaintiff admits that the loan applications, business plans and pro formas were prepared in conjunction with Nationwide and therefore were "mutually devised."
Plaintiff states that "he thought Mr. Sheffieck [his business consultant] was his own consultant, looking out for Plaintiff's best interests. The business consultant was represented to be an independent person whose purpose was to assist the agent with business decision-making (viability)." (Pls.'s Resp. 7.) But the testimony cited in support of this "belief" fails to indicate any representation by Nationwide to Plaintiff that the business consultant was Plaintiff's own consultant, looking out for his best interests. In support of this allegation, Plaintiff cites his own deposition testimony where he admitted that he never hired his own consultant to look over his pro formas and indicated his belief that Mr. Sheffieck was his own consultant, looking out for Plaintiff's best interests. (Def.'s Mot. Ex. 1, Bye Dep. 49.)
Plaintiff also cites the testimony of Ms. Smith, who stated that "the consultants were supposed to be independent, third-party consultants." (Pls.'s Resp. Ex. D, Smith Dep. 27.) This is not evidence of a representation to Plaintiff that his consultant would be looking out for his best interests. Finally, Plaintiff cites the testimony of Ms. Smith in the Nemier case that she was concerned that the consultants not be controlled by the sales department because it might impact their independence. (Pls.'s Resp. Ex. E, Smith Dep. 10.) Not only is this testimony from an unrelated case, and not placed in any context, but Ms. Smith goes on to testify that while this was her concern, in fact the consultants never were controlled by the sales team. (Id.) This testimony simply cannot be construed as a promise to Plaintiff that his business consultant would be
Any claim of fraudulent misrepresentation based upon this representation must fail where Plaintiff has produced no evidence that such a representation was ever made to him.
"The agents were told that they would have an expectation of loan waiver if they were successful.... [Plaintiff] believed that his business consultant arranged the numbers to put his agency is an advantageous position for loan forgiveness." (Pls.'s Resp. 7.) This is the heart of Plaintiff's claim. He claims that through the CAP Loan program, Nationwide promised him that the growth projections contained in his pro formas and business plans were realistic and that loan waiver therefore would be achievable.
First, it is clear that Plaintiff was not compelled to participate in the CAP Loan program and could have chosen to go his personal bank to secure financing. (Pls.'s Resp. Ex. D-1, Smith Dep. 41.) Plaintiff did choose to participate, however, and claims that he was told that he could expect loan waiver if he was successful in achieving the performance criteria set forth in the business plan and pro forma. In support of this alleged representation, Plaintiff cites, in addition to his own belief that this was the case, the testimony of Ms. Smith which was as follows:
Pls.'s Resp. Ex. D, Smith Dep. 41-42. Clearly, none of this testimony relates to a promise to Plaintiff either that the goals in his pro forma specifically were achievable or that he would necessarily achieve loan waiver. Ms. Smith was not Plaintiff's business consultant and is not testifying about any specific representations that were made to Plaintiff.
Moreover, even assuming that someone did tell Plaintiff that his 5-year projected pro forma goals were achievable and would result in loan forgiveness, this would not be an actionable representation because it is a prediction about the future, not a statement about the past or even the present. It has long been established in Michigan that "an action for fraudulent concealment must be predicated upon a
Cook v. Little Caesar Enter., Inc., 972 F.Supp. 400, 410 (E.D.Mich.1997). A statement that, at the time it is made, cannot be said "from its nature" to be true or false cannot be the basis for a claim in fraud. In Little Caesar, the court found that defendant's real estate manager's statements regarding whether certain independent franchises were in competition with in-store franchises were not actionable to the extent that they related to future competition. However, the court concluded that such statements that related to competition between independent and in-store franchises in the then-existing market were actionable. Id. at 549, 551.
In addition to his own testimony and the testimony of Ms. Smith, Plaintiff in the instant case, in support of his claim that Nationwide promised him loan forgiveness, cites a statement from the Cambridge Business Plan: "It is our strong mutual desire that by following this plan, it will help you profitably grow your agency." (Pls.'s Resp. at 9.) Plaintiff does not quote the next two sentences which state: "However, it is important for you to recognize that the implementation of this plan is entirely optional and solely your responsibility. Nationwide cannot and does not guarantee the plan as outlined will result in achieving the desired objective." (Pls.'s Resp. Ex. I.) Plaintiff does not allege, or provide evidence of, any representations relating to a current, existing or past fact. Not only did the "promise" relate to future conduct, but it also contained a glaring disclaimer.
Plaintiff correctly observes, however, that Michigan courts have recognized exceptions to this general rule. Michigan courts recognize fraudulent inducement to enter into a contract when "a party materially misrepresents future conduct under circumstances in which the assertions may reasonably be expected to be relied upon and are relied upon." Samuel D. Begola v. Wild Bros., 210 Mich.App. 636, 639, 534 N.W.2d 217 (1995).
Plaintiff has not presented any evidence that at the time Plaintiff signed his performance agreements for his CAP Loans, Nationwide intended not to forgive Plaintiff's loan if he achieved the goals set forth in the performance agreements. Ms. Smith testified that Nationwide had great plans for its loan forgiveness program, that it was anticipating growth and increased sales in the state but that the CAP Loan program hit Michigan at a time when the Michigan economy was going down and that the success of the CAP Loan program correlated with the growth (or decline) in the insurance industry as a whole. (Pl.s Resp. Ex. D-2 at 42, 46.) Despite Plaintiff's counsel's efforts at the deposition to elicit a different response, Ms. Smith never testified that any Nationwide employee misrepresented the CAP Loan program, only that they were "misinformed." Plaintiff at the summary judgment stage is required to produce "evidence of evidentiary quality" demonstrating the existence of a genuine issue of material fact. Plaintiff has not come forward with any evidence of a bad faith intent on the part of Nationwide, at the time of Plaintiff's CAP Loan agreements were executed, not to forgive Plaintiff's loan if Plaintiff met his waiver requirements. In fact, several agents did achieve waiver and their loans were forgiven. (Pls.'s Resp. Ex. F, Deposition of Karen Marszalec, June 12, 2009, 25-26.)
Viewing the facts in the light most favorable to the Plaintiff, however, Plaintiff appears to make a somewhat different argument. Plaintiff doesn't actually claim that Nationwide intended to break its promise of loan forgiveness if the agent met its performance goals. Plaintiff isn't claiming that he reached his performance goals and Nationwide failed to forgive his loans—a broken promise as to future conduct. Rather, Plaintiff appears to argue that Nationwide knew that the goals set forth in the performance agreements were unachievable and that therefore Nationwide knew that it would never be called
Even assuming that Plaintiff has created a genuine issue of fact on this issue, and that Nationwide did misrepresent to Plaintiff that he could hit his performance targets and achieve loan forgiveness, Plaintiff's fraud claim is ultimately foreclosed by the fact that any reliance by Plaintiff on such representations made by Nationwide was unreasonable. For Plaintiff to succeed on his fraud claim he must prove that he reasonably relied on any alleged misrepresentation. Zaremba Equip. Inc. v. Harco Nat'l Ins. Co., 280 Mich.App. 16, 39, 761 N.W.2d 151 (2008) ("This Court has frequently reiterated that, to sustain a fraud claim, the party claiming fraud must reasonably rely on the material misrepresentation.") Of particular significance in this case, it is well accepted that "[c]hanges in markets and economic conditions occur frequently, and one cannot reasonably expect an office, plant, or store that becomes not viable economically and not in the strategic interests of its owners to remain open." Rooyakker & Sitz, P.L.L.C. v. Plante & Moran, P.L.L. C., 276 Mich.App. 146, 162, 742 N.W.2d 409 (2007) (rejecting plaintiff's claim that defendants did everything to undermine the success of plaintiff's office while at the same time representing to plaintiff that the office would remain open). Plaintiff has presented no evidence that Nationwide hid anything from him regarding the growth targets set forth in his performance agreements and Plaintiff was in as good a position as Nationwide to evaluate their reasonableness. Therefore any reliance on an alleged promise by Nationwide that those goals were achievable was unreasonable.
Plaintiff's reliance on any alleged representation that his performance goals could be reached and loan forgiveness achieved was objectively unreasonable because he knew all of the facts necessary to predict the fatal outcome. He knew that Nationwide
Plaintiff correctly asserts that Michigan courts have "long recognized that the relationship between the parties is crucial in determining whether fraud has occurred." In re Allied Supermarkets, Inc., 951 F.2d 718, 725 (6th Cir.1992) (citing Hayes Constr. Co. v. Silverthorn, 343 Mich. 421, 426-427, 72 N.W.2d 190 (1955)). "One party may have special knowledge and the other none and without the means of getting it. In this case the latter cannot fairly and reasonably exercise his own judgment. The parties, therefore, do not stand on equal terms and the buyer has a right to rely upon the representations of excellence." Hayes, supra at 426-427, 72 N.W.2d 190. Plaintiff relies on Allied to support his claim that his case fits within the exception described in Hayes. Allied is easily distinguished. Plaintiffs in Allied were Iraqi immigrants whom the court found were without the means to discover the alleged misrepresentation. The court also found that defendant actively discouraged plaintiffs from making the calculations necessary to discover defendant's fraud:
951 F.2d at 725. Plaintiff in the instant case, an insurance agent for several years before taking his first CAP Loan, and a sophisticated businessman in other endeavors prior to that, cannot claim to be similarly situated. Nor has he produced evidence that Nationwide actively discouraged him from independently examining the reasonableness of his loan waiver goals.
Finally, as to each of the alleged misrepresentations, Plaintiff has failed to adduce evidence that Nationwide, even assuming it made all of the alleged statements, did so with the intent to deceive him. The closest Plaintiff comes to succeeding on this claim is his mischaracterization of Ms. Smith's testimony that the business consultants
While Plaintiff refers repeatedly to Nationwide's "scheme," Plaintiff proffers no evidence that this alleged scheme was anything other than an honestly-arrived at bad business decision. Plaintiff testified that "the biggest problem that I had with Nationwide was that, you know, Nationwide doesn't understand that price is what sells insurance. I mean that's why Geico is the fastest growing company out there right now because price is what drives insurance . . . . and that's where Nationwide is way off base because they would say well, you guys just need to work on your selling skills. There's no working on selling skills over $400 in difference every six months, and that was not uncommon for it to be that much different. They priced us so far out of the market that we couldn't sell any product, and we couldn't hold on to what we had." (Def.'s Mot. Ex. 1, Bye Dep. 41.) Plaintiff himself admits that Nationwide "didn't get it" and made a bad business decision by increasing their premium rates. What Plaintiff has not established is that Nationwide knew that the model was bad and forced it on Plaintiff, hoping he would fail, all for Nationwide's own benefit. Plaintiff claims that Nationwide had a hidden scheme to push agents out of Michigan and cut back to "five or six super agencies." (Def.'s Mot. Ex. 1, Bye Dep. 12.) Even if this happened, it surely wasn't hidden from Plaintiff who testified that he wanted to be one of those super agencies himself! (Id. at 20, 24.)
Plaintiff has not offered one iota of evidence that Nationwide "leverage[d] the agent's own investment of time and money in the business" to expand market share. (Pls.'s Resp. 5.) Plaintiff provides no evidence that Nationwide believed such a "scheme"—having failing agencies all over the State of Michigan—would be a good business decision. Plaintiff offers no evidence to support the allegation that Nationwide set its agents up to fail. There is no question that the numbers in the pro forma were projections and assumptions and that Plaintiff agreed that the results forecasted appeared, at the time they were made, to be achievable. (Def.'s Mot. Ex. 1, Bye Dep. 143, 149, 154; Pls.'s Resp. Ex. C, Sheffieck Dep. 22-24.) While Plaintiff claims that the state growth targets placed in the pro formas by Nationwide were unrealistic, and that the premium rate increases forced on the agents made these targets unattainable, Plaintiff does not claim that these figures were ever hidden from him. While Nationwide may have set its goals too high for Michigan, and failed to achieve its hoped-for growth in this market, Plaintiff has not produced evidence that this was done with the specific intent to defraud Plaintiff.
Plaintiff alleges that Nationwide "constantly pushed its agents to grow," and told Plaintiff that if he grew his agency as outlined in this pro formas, he would be successful and would achieve loan waiver. (Pls.'s Resp. 4.) This is but a variation on the alleged representation that if Plaintiff
(Def.'s Mot. Ex. 1, Bye Dep. 195-196.) Plaintiff perceived that "growth was king" but does not identify one statement of a Nationwide employee who forced Plaintiff to take out a CAP Loan for growth. Plaintiff admits that these decisions whether to expand were always in the end his own, and he was always given a six-month "free look" so that he could evaluate the book of business before making a final commitment. He never opted to back away. He repeatedly invested in locations where previous agents had failed because he thought he was "different than those other guys." Plaintiff believes that Nationwide "should have come to us and said you guys need to start bringing in all your overhead, lower your expenses because we're going to have a rough couple of years, but no, they never said that. Instead, they kept pushing us to open up satellites, hire producers, and spend money. And in essence, they leveraged people." (Id. at 74-75.) But Plaintiff, an experienced Nationwide agent with years of experience, provides the Court with no basis to conclude that Nationwide had any obligation to make Plaintiff's business decisions for him. Plaintiff acknowledges that any decision that he made to grow had to make sense for his business and that he believed that he could make it work.
In two of the other two cases involving similar but factually distinct fraud claims against Nationwide filed in this District, motions to dismiss were denied because the courts could not conclude, based solely on the pleadings, that none of the exceptions to the future promise rule applied. See Boeve v. Nationwide Mutual Ins. Co., No. 08-CV-12213, 2008 WL 3915011 at * 4 (E.D.Mich. Aug. 20, 2008) (concluding that the court could not determine as a matter of law whether Nationwide's misrepresentations in pro formas and business plans constitute actionable bad faith projections of profitability); Bucciarelli v. Nationwide Mutual Ins. Co., 662 F.Supp.2d 809, 816 (E.D.Mich.2009) (concluding that there was "simply not enough information before
Unlike the courts in Boeve and Bucciarelli, this Court has the benefit of a fully developed summary judgment record that establishes that this Plaintiff did participate in the preparation of his pro formas and business plans and that he did not stand in a position of inequality relative to Nationwide, such that any statements in the pro formas can be deemed to be actionable misrepresentations. Even drawing all inferences in Plaintiff's favor, Plaintiff simply has not adduced enough evidence demonstrating facts that could lead a reasonable jury to conclude that Nationwide fraudulently induced this Plaintiff into continuing to invest in and grow and expand his Nationwide agency.
Plaintiff claims that Nationwide competes with its own agents by selling insurance under its Allied banner at rates that are lower than the rates it allows its captive agents to charge and that this contributed to his failure to achieve loan waiver. Plaintiff claims that Nationwide failed to disclose that "it has the ability and does in fact manipulate the prices so as to affect the percentage of insurance written by captive agents as compared to independent Allied agents." (Compl. ¶¶ 34, 35.) "Plaintiffs allege that Nationwide had a duty to tell Mr. Bye that it was competing against them and selling the same products for a cheaper price through another division of Nationwide." (Pls.'s Resp. 15.) Plaintiff relies on M & D, Inc. v. W.B. McConkey, 231 Mich.App. 22, 585 N.W.2d 33 (1998) for the proposition that silence accompanied by deceptive conduct or suppression of material facts can give rise to concealment that is actionable as fraud. (Pls.'s Resp. 15.) In order to be actionable, silent fraud requires Plaintiff to demonstrate (1) that he expressed concern over or otherwise inquired into a matter and was given an incomplete reply or "misdirection" on which Plaintiff relied or (2) that Nationwide made a representation but acquired subsequent information which rendered a previous representation untrue. Id. at 38.
Plaintiff's allegations as to the Allied issue do not even state a claim of silent fraud because Plaintiff did inquire and Nationwide gave Plaintiff a full and truthful reply—yes, Allied does compete with you and you just need to live with it:
(Def.'s Mot. Ex. 1, Bye Dep. 62-64.) Plaintiff did inquire, and he did receive a full and truthful response and he doesn't claim otherwise. He just didn't like the response. This does not state a claim of silent fraud.
Moreover, Plaintiff has not produced any evidence to support the claim that the Allied product was in fact always, or even generally, priced lower than the comparable Nationwide product or that Nationwide intentionally manipulated those prices. In support of his assertion that "Nationwide competed with its own agents, making up lost volume by selling Allied for less" (Pls.'s Resp. 6), Plaintiff refers to his own deposition testimony and then blatantly mischaracterizes the testimony of other witnesses. Plaintiff cites the testimony of Mr. Whitehead, who stated that he couldn't say what the Allied price was compared to the Nationwide price because he just didn't know. (Pls.'s Resp. Ex. A-1, Whitehead Dep. 41.) Plaintiff also cites to the testimony of Mr. Sheffieck who was responding to a hypothetical and gave no testimony whatsoever as to what Nationwide actually did with the price of its insurance relative to the Allied product. Plaintiff's silent fraud allegation is based on pure conjecture without any evidentiary support and fails even to state a claim of silent fraud, let alone create a genuine issue of material fact that would survive summary judgment.
Plaintiff claims that Nationwide violated the Michigan Franchise Investment Law ("MFIL"), MCL 445.1501 et seq., by employing devices, schemes and artifices to defraud in its sale or offer of a franchise. (Compl. ¶ 57.) Under MCL 445.1502(3), a "franchise" is defined as "a contract or agreement, either express or implied, whether oral or written, between 2 or more persons to which all of the following apply: (a) A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor; (b) A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; (c) The franchisee is required to pay, directly or indirectly, a franchise fee." All three elements must be present in order for a relationship to be governed by the MFIL.
Nationwide claims (1) that the relationship between an insurer and its agent is
In support of its argument that Plaintiff is not permitted to "sell" insurance, Nationwide relies on Harts v. Farmers Ins. Exch., 461 Mich. 1, 8-9, 597 N.W.2d 47 (1999) where the court held that insurance agents are merely "order takers" and are not obligated to advise prospective purchasers regarding the adequacy of coverage, a role intended to be fulfilled by insurance counselors. Id. at 9, 597 N.W.2d 47. Nationwide argues that because an agent is merely an order taker, they cannot bind the insurance company and therefore cannot engage in the business of "offering or selling" insurance, a prerequisite for application of the MFIL. (Def.'s Mot. 18.) Nationwide refers the Court to the Illinois case of Vitkauskas v. State Farm Mut. Auto. Ins. Co., 157 Ill.App.3d 317, 109 Ill.Dec. 373, 509 N.E.2d 1385, 1391 (1987) where the Illinois court interpreted an identical statutory provision as inapplicable to an insurance agent because the agent could only solicit applications for insurance but could not sell the product and could not bind the principal. Id., at 109 Ill.Dec. 373, 509 N.E.2d at 1391. However, as the court observed in analyzing this same argument in Bucciarelli, supra, the Illinois court's reasoning ignores the language of the statute that refers to the "offering" of insurance as well as the "selling" of insurance, noting that the former would be entirely redundant if it were taken to be synonymous with selling. Bucciarelli, supra at 818. The court in Bucciarelli concluded that the term "offering" as used in the MFIL must be construed more broadly than "selling" and does encompass the solicitation of orders for insurance coverage. However, this Court need not decide whether "taking orders" would be considered the equivalent of "offering" insurance, or whether the MFIL is generally applicable to the relationship between an insurance company and its agents, because it finds that Plaintiff has not alleged facts that establish that he paid a "franchise fee" as that term is understood in the cases interpreting the MFIL.
Under MCL 445.1503(1), a "franchise fee" is defined as "a fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business under a franchise agreement, including but not limited to payments for goods and services." Was Plaintiff required to or did he agree to pay a fee or charge to Nationwide for the "right to enter into a business under a franchise agreement?" Plaintiff articulates the following theory in support of his argument that he paid a franchise fee: "Plaintiffs contend that Defendant churns agents. When the agent fails, which, according to Plaintiffs' theory, he or she is going to do, Nationwide takes the enhanced book of business, sells it for more than it credits the defaulted former agent and then makes more money off the same
In Count IV, Plaintiff claims that "Nationwide has breached its contractual duty by attempting to obstruct Charles L. Bye, Jr. and his agency from competing. Nationwide continues to breach the Agency Agreement by filing its Counter-Claim against him and his agency on the basis of its non-compete clause." (Compl. ¶¶ 82, 83.) Nationwide argues that this claim makes no legal sense. Plaintiff failed to respond to this argument either in its brief or at oral argument and has offered no legal support or analysis of this claim of "duty." The Court agrees that this "Count" appears to be an argument offered in defense to Nationwide's counterclaim alleging that Plaintiff violated a contractual non-compete provision, and does not state a legally cognizable claim. Count IV, therefore, is dismissed.
Nationwide argues that Plaintiff cannot state a claim for unjust enrichment where there is a contract governing the same subject. "Unjust enrichment requires a plaintiff to prove (1) the receipt of a benefit by the defendant from the plaintiff and (2) an inequity resulting to the
Plaintiff appears to claim in Count III that under the terms of the ICA, Plaintiff was not an "exclusive" representative and therefore his termination was a breach of that agreement because it was based upon a reason not identified in MCL § 500.1209(2). (Compl. ¶¶ 60-68.) The parties touched on this issue only fleetingly in their briefs and not at all during oral argument, yet the issue remains before the Court. The Court is unable to conclude, based on the scant evidence and legal argument presented by the parties, whether issues of fact remain as to whether MCL § 500.1209 applies to Plaintiff's agreement or whether Plaintiff was an "exclusive" agent for Nationwide as that term is understood for purposes of the application of the exception contained in MCL 500.1209(4). The parties will be given an opportunity to provide the Court with supplemental briefing on these two narrow issues.
Plaintiff argues that alternatively, Nationwide has breached not the ICA but the CA by terminating Plaintiff's agreement. (Compl. ¶¶ 69-71.) In its earlier opinion denying Nationwide's motion to dismiss, this Court noted that there were "issues of fact regarding what contract was in effect at the time of Defendant's alleged misrepresentation." (Opinion and Order Denying Motion to Dismiss, Dkt. No. 13, 10.) The Court concludes that the record and legal argument presented on this issue remains insufficient to permit the Court to determine which contract was in effect at the time of Plaintiff's termination and whether a genuine issue of material fact exists as to whether Nationwide's termination of Plaintiff violated that agreement. The parties will be given an opportunity to provide the Court with supplemental briefing on these two additional narrow issues.
Because the Court concludes that the parties have presented insufficient evidence to enable the Court to rule on the issues presented in Count III of Plaintiffs' Complaint, it will hold in abeyance its ruling on Nationwide's motion for summary judgment on Counts I-V of its Counterclaim pending resolution of Nationwide's motion for summary judgment on Count III of Plaintiffs' Complaint.
The Court GRANTS Nationwide's motion for summary judgment on Counts I, II, IV and V of Plaintiff's Complaint, and
On August 19, 2010, Plaintiffs filed a Motion for Reconsideration and Rehearing (Dkt. No. 75) of this Court's August 5, 2010 Opinion and Order (Dkt. No. 73.) For the reasons that follow, the Court DENIES Plaintiffs' motion for reconsideration.
On August 5, 2010 this Court entered its Opinion and Order granting in part Defendant Nationwide Mutual Insurance Company's ("Nationwide") motion for summary judgment. (Dkt. No. 73.) In that Opinion, this Court concluded that Plaintiff had failed to produce evidence in support of his claims of fraudulent inducement and silent fraud which created a genuine issue of material fact sufficient to survive Nationwide's motion for summary judgment.
Plaintiff has filed the instant motion for reconsideration, arguing that the Court improperly weighed the evidence and made credibility determinations in reaching its conclusion that Plaintiff failed to establish his fraud-based claims. (Mot.Recon.3.) Plaintiff argues that the Court's failure to conclude that there exist material questions of fact on Plaintiff's claim that he was defrauded by Nationwide has deprived Plaintiff of his right to a jury trial. (Id.) Plaintiff asks the Court to reexamine its Opinion and to conclude that "the arguments of Plaintiff satisfy the requirements of fraud" and allow Plaintiff to argue his claims to a jury. (Id. at 18.)
Motions for reconsideration are governed by E.D. Mich. LR 7.1(h) (3), which states in pertinent part:
E.D. Mich. L.R. 7.1(h)(3). "A `palpable defect' is a defect which is obvious, clear, unmistakable, manifest, or plain." Ososki v. St. Paul Surplus Lines Ins. Co., 162 F.Supp.2d 714, 718 (E.D.Mich.2001).
In his motion for reconsideration, rather than discussing the standard of review for the instant motion, Plaintiff discusses the standard of review for the underlying motion for summary judgment. Thus, Plaintiff
In spite of Plaintiff's failure to discuss a "palpable defect," the Court has analyzed Plaintiff's generalized objections and concludes that there has been no showing of a palpable defect and denies Plaintiff's motion to reconsider.
Quoting from the authority Plaintiff cites in support of his argument that he was deprived of his right to a jury trial, the Court notes: "Assuming that [Plaintiff] had a right to jury trial on the question, it was not denied here. Summary judgment is not unconstitutional; where there are no disputed issues of material fact for a jury to decide, no jury is necessary. . . . summary judgment is appropriate only where, viewing the facts in the light most favorable to the nonmovant, there are no genuine issues of material fact and judgment for the movant is appropriate as a matter of law. Fed.R.Civ.P. 56(c)." King v. Fidelity Nat'l Bank of Baton Rouge, 712 F.2d 188, 192 (5th Cir. 1983).
Narrowing this case down to its core issue, notwithstanding all of the "factual" determinations that Plaintiff claims the Court has made, Plaintiff has produced no evidence that Nationwide made a promise or guarantee relating to Plaintiff's ability to achieve loan waiver that the law recognizes as the type of representation on which Plaintiff could reasonably have relied. Plaintiff furthermore has produced no evidence that Nationwide intended to deceive Plaintiff. The Court did not make credibility or factual determinations on these issues. The Court made sufficiency of the evidence findings, as it is required to do on summary judgment, and concluded that, taking the facts in the light most favorable to the Plaintiff, no reasonable juror could conclude that Nationwide made an actionable misrepresentation to Plaintiff or that Nationwide intended to deceive Plaintiff.
Plaintiff claims that he was fraudulently induced to enter into the various CAP loans based upon an alleged "promise" made by Nationwide that he would be able to achieve loan waiver and have his loans forgiven. This argument was addressed in the Court's Opinion and the Court will not restate its reasoning here except to note again that, as a matter of law, a promise as to the anticipated and hoped-for success of Plaintiff's agency, even assuming it were made, is not actionable on a theory of fraudulent inducement. (Id. at 22-25.) Any such "promise" would be a mere prediction or statement of opinion as to future "success" and would not be actionable on a theory of fraudulent misrepresentation or fraudulent inducement. See Hi-Way Motor Co. v. Int'l Harvester Co.; 398 Mich. 330, 337-338, 247 N.W.2d 813 (1976); Diamond Computer Systems, Inc. v. SBC
Furthermore, again as addressed at length in the Court's Opinion, Plaintiff has produced no evidence from which a reasonable juror could conclude that Plaintiff's reliance on any such alleged "promise" was reasonable. Plaintiff argues that he held on to the belief that he would achieve loan waiver, and thus continued to grow his agency, despite the fact that on multiple occasions he signed and understood documents that specifically gave Nationwide the ability to potentially frustrate that goal by raising premium prices without notice to or the consent of the agent. Plaintiff admitted that he was aware that his premium rates were predicted to increase, but he "didn't really expect" it to happen. (Opinion and Order, Dkt. No. 7, 26-27.) Plaintiff also claims that he held this belief notwithstanding his acknowledgment of the following disclaimer on his business plan: "Nationwide cannot and does not guarantee the plan as outlined will result in achieving the desired objective." (Id. at 22.) Plaintiff was aware that several of the agencies he decided to acquire had failed before him, but believed that he "was different" from those other agents and could succeed where they failed. (Id. at 4.) Plaintiff admits that he was never forced by Nationwide to make a new acquisition, that he always knew any decision to grow had to be in his best financial interests and never disputed that he always had a six-month "free-look" period, during which time he was free to back out of the loan completely. (Id. at 9-10.)
Additionally, the Court did not make credibility determinations as to Plaintiff's business experience, it merely related Plaintiff's own testimony as to his business background which speaks for itself as to Plaintiff's "sophistication." The Court merely noted that this admitted experience adequately distinguishes this Plaintiff from the Iraqi immigrants in In re Allied Supermarkets, Inc., 951 F.2d 718 (6th Cir. 1992), the case relied on by Plaintiff in support of his argument that there was some legally significant inequality between Plaintiff and Nationwide. Plaintiff quite simply did not offer evidence from which a reasonable juror could conclude, even assuming Nationwide made a legally actionable promise that Plaintiff would achieve loan forgiveness (which the Court concluded as a matter of law that it did not), that it was reasonable for Plaintiff to rely on such a promise in view of his admitted knowledge of evidence to the contrary.
Finally, on the issue of intent, Plaintiff argues in his motion for reconsideration that the Court "softened the impact" of Ranelle Smith's testimony. (Mot.Recon.7.) The Court merely attempted to correct Plaintiff's mischaracterization of Ms. Smith's testimony by reciting her testimony verbatim and concluding that no reasonable juror could find, based on that testimony, that Nationwide made a misrepresentation to Plaintiff that he could achieve loan waiver. First, Ms. Smith never stated that Nationwide made misrepresentations. She testified that the agents felt they had been misinformed. Viewed in the light most favorable to Plaintiff, Ms. Smith's testimony states that some agents expressed to her their feeling that they had been given misinformation that induced them to sign up for the CAP loan program. This testimony says nothing about a representative of Nationwide making a statement to Plaintiff promising him that he could achieve loan forgiveness. Moreover, this triple hearsay testimony is not "evidence of evidentiary" quality, which Plaintiff was obligated to provide to
Nemier v. Nationwide Mutual Ins. Co., No. 09-cv-10634, Transcript of Hearing, Dkt. No. 70, 45-46 (E.D.Mich. July 28, 2010). A reasonable juror could not conclude, based on this testimony, even assuming some agents were given misinformation, that Nationwide intended to deceive Plaintiff.
Finally, Plaintiff argues in his motion for reconsideration that the Court did not adequately address the issue of competition from Allied. (Mot.Recon.Dkt. No. 75, 10.) Regardless of whether Plaintiff's deposition testimony, standing alone, would be sufficient to create a genuine issue of fact as to whether there was a price differential between Allied and Nationwide (and the Court concludes that it is not), the Court concluded that Plaintiff failed to state a claim of silent fraud because he admitted that he complained to Nationwide in 2003 or 2004 about competition from Allied and that he was told to "live with it." Thus, Plaintiff cannot establish that he inquired and was given an incomplete reply or misdirected. He was told the truth and he does not dispute this.
Although this Court was not aware of the decision in Nemier when it issued its Opinion in this case, Judge Tarnow's ruling in that case parallels each of the conclusions reached by this Court in dismissing Plaintiff's claims in the instant case. Judge Tarnow held:
For the foregoing reasons, and because Plaintiff has failed to establish a palpable
IT IS SO ORDERED.
