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Community Insurance Services, Ltd. v. United Life Insurance Co.

September 13, 2007

COMMUNITY INSURANCE SERVICES, LTD., PLAINTIFF,
v.
UNITED LIFE INSURANCE COMPANY, FIRST FINANCIAL CORPORATION, JACQUE S. PENTELL, DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert District Judge

MEMORANDUM AND ORDER

This matter comes before the Court on Defendants First Financial Corporation's and Jacque S. Pentell's Motion for Summary Judgment (Doc. 62). Plaintiff Community Insurance Services, Inc. has responded (Doc. 68) and Defendants have replied (Doc. 69). Defendants have also filed a Motion for a Hearing on the Motion for Summary Judgment (Doc. 65). For the following reasons, the Court DENIES in part and GRANTS in part the Motion for Summary Judgment (Doc. 62). The Court DENIES the Motion for a Hearing (Doc. 65).

BACKGROUND

I. Summary Judgment Standard

Summary judgment is proper where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels Int'l-Ind., Inc., 211 F.3d 392, 396 (7th Cir. 2000). The Court construes all facts in the light most favorable to the nonmoving party and draws all justifiable inferences in the nonmoving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S.242, 255 (1986); Spath, 211 F.3d at 396.

The moving party has the burden of establishing that there is no genuine issue of material fact. Celotex Corp., 477 U.S. at 323. If it meets this burden, the nonmoving party must set forth facts that demonstrate the existence of a genuine issue of material fact. Fed.R.Civ.P. 56(e); Celotex, 477 U.S. at 322-26; Johnson v. City of Fort Wayne, 91 F.3d 922, 931 (7th Cir. 1996). The nonmoving party must do more than cast "some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); Michas v. Health Cost Controls of Ill., Inc., 209 F.3d 687, 692 (7th Cir. 2000). Rather, the nonmoving party must demonstrate to the Court that the evidence is such that a reasonable jury could return a verdict in his favor. Anderson, 477 U.S. at 248; Insolia v. Phillip Morris, Inc., 216 F.3d 596 (7th Cir. 2000). Mere assertions of a factual dispute unsupported by probative evidence will not prevent summary judgment. Anderson, 477 U.S. at 248-250.

II. Facts

Construing the evidence in the light most favorable to Community Insurance Services, and drawing all reasonable inferences in its favor, the evidence establishes the following facts. Solon "Bud" Pentell (Bud) and Jacque Pentell (Jacque) were married in 1977. Jacque and Bud, along with two other individuals, Richard and Gretta Davis, began Community Insurance Services (CIS) as a partnership in June 1995. On June 1, 1995, CIS entered into a Premier General Agency Agreement (PGA) with United Life Insurance Company (United Life). Under the PGA, United Life granted CIS the right to market and offer for sale United Life's insurance and annuity products in exchange for CIS's receipt of commissions from these sales. In late 1997 or early 1998, CIS incorporated. Later in 1998, Bud and Jacque bought the shares held by Richard and Gretta Davis, and became the only two shareholders of CIS, each holding one-half of CIS's stock.

Several years after entering into the agency agreement with United Life, Bud, on behalf of CIS, developed a plan to sell United Life products in Illinois and Missouri banks. As part of this business plan, CIS planned to hire bank employees at local banks to sell United Life products as "dual agents" under the PGA. Prior to the implementation of this plan, CIS and United Life orally agreed on a marketing plan, which would keep United Life from entering into separate agreements with CIS's potential customers. Essentially, United Life agreed not to contact banks and other financial institutions that CIS had previously contacted without CIS's consent. From 1997 to 2000, the parties operated according to this agreement.

In mid-1998, CIS entered into an agreement with Community Bank & Trust ("CB&T"). Under this agreement, CIS established a branch office at CB&T's Olney, Illinois facility to sell United Life annuities and other products. CB&T hired Jacque as a part-time employee to train the "dual agents" in the sale of United Life products. Over the years, CIS hired and trained at least 20 CB&T employees as agents under the PGA. Through its agents at CB&T, CIS generated gross commissions and bonuses exceeding $1.2 million from 1997 to 2001.

In late 2001 Bud and Jacque divorced. Under the terms of the divorce decree, Jacque assigned her entire interest in CIS to Bud. Soon after this, First Financial Corporation (First Financial) acquired CB&T, and renamed it First Community Bank ("First Community").*fn1 Bud notified United Life of First Financial's acquisition of CB&T and requested that United Life not grant First Financial or its subsidiaries a direct agency agreement without CIS's consent pursuant to United Life's prior agreement and consistent with the course of dealing between them during the previous four years. United Life's vice president, Ronald Brandt, assured Bud that United Life would maintain the status quo.

On June 17, 2002, First Community notified CIS of its intent to terminate its branch office agreement and to transfer all of its insurance and annuity services to Forrest Scherer Insurance, Inc., a wholly-owned affiliate of First Financial ("Forrest Scherer"). First Community also demanded that CIS return "all files and trail commissions on annuity policies" sold by CIS at its Olney, Illinois branch office (previously CB&T). Meanwhile, Jacque, still a "down line" agent of CIS, became a full-time employee of First Community and Forrest Scherer; continuing to sell United Life products for First Community in much the same way as she had under the prior agreement.

In August 2002, First Community's President, Larry Burbank (Burbank), contacted United Life and instructed United Life to send all future annuity correspondence for First Community customers to Forrest Scherer. Burbank told United Life to direct any questions regarding the transfer contact to himself or Jacque. Whereupon, United Life entered into a PGA with Forrest Scherer, and released confidential information concerning CIS's annuity customer accounts to Forrest Scherer, without CIS's consent. United Life also transferred CIS's "down line" agents under CIS's branch agreement with CB&T to Forrest Scherer without CIS's consent.

In late 2002, in a direct mailing signed by Burbank and Jacque, First Community contacted CIS's annuity customers, soliciting them to change their agency from CIS to Forrest Scherer. In its mass mailing, First Community included a change of agency form it had obtained from United Life. First Community characterized this form as an "acknowledgment," informing the annuity customers that Forrest Scherer was their agent, when in fact Forrest Scherer could not become their agent unless they signed the form. First Community also told these customers that their current agent, an ...


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