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Allstate Insurance Company v. Papanek

United States District Court, S.D. Ohio, Western Division, Dayton

July 23, 2018

MELISSA PAPANEK, et al., Defendants.



         This civil consent case, arising under the Court's diversity jurisdiction, see 28 U.S.C. § 1332, concerns, inter alia, breach of contract claims following the termination of an exclusive agent agreement between Allstate Insurance Company (“Allstate”) and its former exclusive agent Melissa Papanek (“Melissa”). Phoenix Insurance and Financial Group, LLC (“Phoenix”), an independent insurance agency founded by Melissa following her termination from Allstate, is also a Defendant in the case. Melissa's father, Michael Papanek (“Mike”), who was Melissa's employee both while she remained an Allstate exclusive agent and after she founded Phoenix, is also a Defendant.

         Now before the Court are the following: (1) Mike's motion for summary judgment (doc. 124), which was subsequently supplemented by him (doc. 168); (2) the motion for summary judgment filed by Melissa and Phoenix (doc. 185); and (3) Allstate's motion for summary judgment (doc. 195) with regard to counterclaims asserted by Melissa and Phoenix.[2] The parties filed appropriate memoranda in opposition, as well as reply memoranda.[3] The Court has carefully considered all of the foregoing, as well as evidence presented in support of summary judgment, and the parties' motions are now ripe for decision.


         A motion for summary judgment should be granted if the evidence submitted to the Court demonstrates that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). “Summary judgment is only appropriate ‘if 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 a judgment as a matter of law.'” Keweenaw Bay Indian Comm. v. Rising, 477 F.3d 881, 886 (6th Cir. 2007) (quoting Fed.R.Civ.P. 56(c)). “Weighing of the evidence or making credibility determinations are prohibited at summary judgment -- rather, all facts must be viewed in the light most favorable to the non- moving party.” Id.

         Once “a motion for summary judgment is properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading[.]” Viergutz v. Lucent Techs., Inc., 375 Fed.Appx. 482, 485 (6th Cir. 2010) (citation omitted). Instead, the party opposing summary judgment has a shifting burden and “must -- by affidavits or as otherwise provided in this rule -- set out specific facts showing a genuine issue for trial.” Id. (citation omitted). Failure “to properly address another party's assertion of fact as required by Rule 56(c)” could result in the Court “consider[ing] the fact undisputed for purposes of the motion.” Fed.R.Civ.P. 56(e)(2).

         Finally, “there is no duty imposed upon the trial court to ‘search the entire record to establish that it is bereft of a genuine issue of material fact.'” Buarino v. Brookfield Twp. Trs., 980 F.2d 399, 404 (6th Cir. 1992) (citations omitted). Instead, “[i]t is the attorneys, not the judges, who have interviewed the witnesses and handled the physical exhibits; it is the attorneys, not the judges, who have been present at the depositions; and it is the attorneys, not the judges, who have a professional and financial stake in case outcome.” Id. at 406. In other words, “the free-ranging search for supporting facts is a task for which attorneys in the case are equipped and for which courts generally are not.” Id.


         Many of the facts at issue in this case are disputed. In support of their summary judgment motions, the parties cite to deposition testimony, sworn statements, and numerous exhibits attached to their respective memoranda in an effort to set forth the relevant factual background. The Court has carefully considered all of the proper Rule 56 evidence submitted by the parties on summary judgment, see Fed. R. Civ. P. 56(c)(1)(A), and unless otherwise stated herein, the following are the undisputed facts of the case.

         Contractual Relationship Between the Parties

         In 1972, Mike opened an Allstate exclusive agency, which came to be called the Papanek Agency, at 4048 Colonel Glenn Highway in Beavercreek, Greene County. Doc. 161 at PageID 4001. In 2008, Melissa purchased Mike's economic interest in the Papanek Agency. Doc. 158 at PageID 3358-59. As part of the transfer of the Papanek Agency, Melissa entered into an exclusive agency agreement (“EA Agreement”) with Allstate on August 13, 2008. Doc. 185-1 at PageID 5065-74. The EA Agreement authorized Melissa to sell Allstate insurance products and prohibited her from “either directly or indirectly, solicit[ing], sell[ing], or servic[ing] insurance of any kind for any other company, agent, or broker, or refer a prospect to another company, agent, or broker, without the prior written approval of [Allstate].” Doc. 195-2 at PageID 5696.

         After selling his economic interest to Melissa, Mike continued selling insurance for the Papanek Agency as a Licensed Service Provider (“LSP”), [4] and executed an LSP Agreement with the Papanek Agency on October 26, 2008. Doc. 130 at PageID 2639; doc. 130-2 at PageID 2700-01. Allstate was a third-party beneficiary of the LSP Agreement, an agreement in which Mike agreed to “not, either directly or indirectly, solicit, sell or service insurance of any kind for any other company, agent, or broker, or refer a prospect to another company, agent, or broker without the prior written consent of [Allstate].” Id.

         Both Melissa's EA Agreement and Mike's LSP Agreement provided for the protection of Allstate's confidential information. Melissa's EA Agreement provided that confidential information, such as “the names, addresses, and ages of [Allstate] policyholders[, ]” were “wholly owned” by Allstate. Doc. 195-2 at PageID 5697, 5699. Melissa, however, was permitted “use” of such confidential information, but “only for the purposes of carrying out the provisions of [the contract], ” i.e., “soliciting, selling, and servicing insurance and other [Allstate] Business[.]” Id. Substantially similar provisions were set forth in Mike's LSP Agreement. See doc. 130-2 at PageID 2700.

         Termination of the Relationship Between the Parties

         In March of 2013, Mike suffered a stroke; he did not work during his recovery. Doc. 182 at PageID 4746. According to Allstate records, the Papanek Agency terminated Mike's LSP Agreement on March 4, 2013 after he suffered the stroke. Doc. 160 at PageID 3995. However, by November 2013, Mike's health had substantially improved, and he returned to his job as an LSP at the Papanek Agency. Doc. 182 at PageID 4746. The parties point to no evidence, however, that Mike executed a subsequent LSP Agreement upon his return in November 2013.

         Melissa's EA Agreement was terminable by either her or Allstate, “with or without cause, upon providing ninety (90) days prior written notice to the other” party. Id. at PageID 5703. On September 2, 2014, Allstate exercised its right under the EA Agreement and, both in person and in writing, notified Melissa that it was terminating the EA Agreement effective December 1, 2014. Doc. 195-3 at PageID 5707-08; doc. 195-4 at PageID 5710. According to Allstate, it exercised its right to terminate Melissa's EA Agreement because she admitted to improperly issuing auto and homeowners policies without the customers' knowledge; intentionally refusing to remove vehicles from customers' auto policies; and delaying cancellation of certain policies until after December 2013 in order to receive year-end bonuses. Doc. 195-4 at PageID 5710.

         Rights and Duties Upon Termination

         Under the EA Agreement, Melissa was permitted to “transfer [her] entire economic interest in the business written under [the EA Agreement] . . . by selling the economic interest in the business to an approved buyer.” Id. at PageID 5702. Upon notifying Melissa of termination, Allstate reminded her of her ability to sell her economic interest so long as the sale occurred by the termination date of December 1, 2014. Doc. 198-5 at PageID 6359. Under the EA Agreement, however, Allstate “retain[ed] the right in its exclusive judgment to approve or disapprove such a transfer.” Id. Notably, “[a]pproval of a proposed transfer” was “conditioned upon[, ]” inter alia, “the execution of a then current agency agreement by the proposed transferee.” Id. Melissa was unable to sell her economic interest and, according to her, Allstate impeded her efforts in that regard despite interested purchasers. See doc. 198 at PageID 6317-18.

         Pursuant to the EA Independent Contractor Manual, which was made part of the EA Agreement between the parties, in the event Melissa was unable to sell her economic interest, she could “elect to receive [a] termination payment, subject to the terms and conditions of the [EA] Agreement[.]” Doc. 158-1 at PageID 2538 (SEALED). Pursuant to the Supplement to the EA Agreement, which was also incorporated as part of the contract between the parties, termination payments “are subject to compliance with the terms of the confidentiality and non-competition provisions of the [EA Agreement], which survive termination of the agreement.” Doc. 158-1 at PageID 3553 (SEALED). Ultimately, Melissa accepted the termination payments; a dispute exists as to whether such choice was voluntary or whether such choice was forced upon her by Allstate. Doc. 195-23 at PageID 5991; doc. 195-24 at PageID 5993.

         In addition to the foregoing, upon termination of the EA Agreement, Melissa Papanek was required to, inter alia, “immediately return all property belonging to [Allstate], or dispose of it in such manner as the Company specifie[d]” and “immediately cease” using all telephone numbers used to conduct business under the EA Agreement. Doc. 195-2 at PageID 5703. Further, for “one year following termination” of the contract, Melissa Papanek was also prohibited from “solicit[ing] the purchase of products or services in competition with those sold by [Allstate]” to certain people, companies, or organizations who were Allstate customers at the time of termination. Doc. 195-2 at PageID 5704. Specifically, Melissa Papanek could not solicit Allstate customers that: (1) she or anyone working on her behalf sold Allstate products to; or (2) whose identity was discovered because of access to Allstate confidential information. Id. Finally, upon termination of the agreement, Melissa Papanek agreed not to solicit the purchase of products in competition with Allstate products within a mile of the office in which she sold Allstate products during the contract period. Id. at PageID 5704. Mike's LSP Agreement had similar prohibitions. Doc. 130-2 at PageID 2700-01.

         Papanek Conduct Immediately Following the Notice of Termination

         Upon receiving the 90-day notice of termination from Allstate on September 2, 2014, Melissa's reaction was to “get Allstate” and she discussed with employees of the Papanek Agency her desire to solicit Allstate customers away to her independent agency. See doc. 158 at PageID 3379. Almost two months later, in late October 2014, Melissa spent ten to twelve hours a day, for four straight days, printing confidential information for hundreds of Allstate customers with the specific intent of using such confidential material to solicit them for her new insurance agency. Doc. 196-1 at PageID 6109-11. In fact, Melissa admits she printed the voluminous amount of confidential information intending “to take back the book” from Allstate. Id. at 6111. Melissa acknowledges that printing the confidential information was “a bad decision” and testified in her deposition that, upon realizing her actions were wrong, she shredded the documents. Id. at 6110.

         It is also undisputed that Papanek hung a sign on the door of the Papanek Agency after receiving the 90-day notice of termination from Allstate. See doc. 158 at PageID 3401. The sign on the door read:

The Papanek Agency
Thanks You for your business
Mike & Melissa are opening an Independent Insurance Agency at their previous North Dixie location, 3801 North Dixie, in January.
If you have any questions you can reach Mike & Melissa at 937-781-6717
Thank you for your business.

Doc. 195-25 at PageID 5995. Without dispute, the phone number on the sign was Melissa Papanek's cell phone number. Doc. 158 at PageID 3401.

         In addition to these undisputed facts, Allstate points to other, albeit disputed facts, that Melissa was accumulating Allstate customer information and even contacting Allstate customers to inform them of potentially cheaper rates beginning on December 1, 2014, i.e., following her termination as an Allstate agent. See doc. 195-1 at PageID 5655-56.

         According to Allstate, after learning of Melissa's activities showing -- or at least suggesting -- her intent to solicit Allstate customers following her termination as an Allstate agent in violation of the EA Agreement, Allstate representatives Ted Stefanov and Cathy Fouty arrived at the Papanek Agency on October 31, 2014, read the termination letter previously issued on September 2, 2014, and “shut [the Agency] down.” Doc. 198-2. Notably, under the EA Agreement, Allstate possessed to contractual right, after giving Melissa Papanek 90-days written notice of termination, to require her to “cease to act or represent [her]self in any way as an agent or representative of [Allstate][.]” Doc. 195-2 at PageID 5703.


         Following termination of the EA Agreement on December 1, 2014, Allstate began making termination payments to Melissa in January 2015. Doc. 185-9 at PageID 5098. Melissa opened Phoenix in January 2015 at a former Papanek Agency location on North Dixie Drive in Dayton, Ohio. Doc. 185 at PageID 5049. Allstate contends that Melissa solicited Allstate customers after opening Phoenix. See doc. 185-6 at PageID 5086-88. On May 15, 2015, Allstate sent Melissa's attorney a cease-and-desist letter. See id. In November 2015, Allstate began withholding installments of Melissa's termination payments because of the issues involved in this case. See doc. 185-8 at PageID 5096. Of the $692, 261.10 of termination payments supposedly due and owing to Melissa, she has not been paid $374, 974.79. Doc. 185-8 at PageID 5096; doc. 185-9 at PageID 5098.


         Allstate filed this action against Defendants on July 6, 2015, i.e., before it ceased making termination payments to Melissa. Doc. 1. The operative pleadings before the Court at this time are Allstate's first amended complaint (doc. 22) and the first amended answer and counterclaim by Melissa and Phoenix (doc. 34).

         In the first amended complaint, Allstate names three Defendants, namely Melissa, Mike, and Phoenix. Doc. 22 at PageID 253. Allstate specifically asserts the following claims: (1) breach of contract (against Melissa); (2) breach of contract (against Mike); (3) misappropriation of trade secrets (against all three Defendants); (4) tortious interference with contractual relationships (against Phoenix); (5) tortious interference with business relationships (against all three Defendants); and (6) unfair competition (against all three Defendants). Doc. 22. Melissa asserts the following counterclaims against Allstate: (1) breach of contract; (2) tortious interference with contractual and business relationships; (3) violations of Ohio's Deceptive Trade Practices Act (“ODTPA”), Ohio Rev. Code § ...

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