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Zeller v. Farmers Group, Inc.

Court of Appeals of Ohio, Second District, Montgomery

August 16, 2019

JOHN ZELLER, et al. Plaintiffs-Appellants
v.
FARMERS GROUP, INC., et al. Defendants-Appellees

          Civil Appeal from Common Pleas Court Trial Court Case No. 2013-CV-5566

          GILBERT J. GRADISAR, Atty. Reg. No. 0021782 and JOHN M. GONZALES, Atty. Reg. No. 0038664, Attorneys for Plaintiffs-Appellants

          MELVIN D. WEINSTEIN, Atty. Reg. No. 0012174, and LORIANN E. FUHRER, Atty. Reg. No. 0068037, 65 E. State Street, Suite 1800, Columbus, Ohio 43215 Attorneys for Defendants-Appellees

          OPINION

          TUCKER, J.

         {¶ 1} Plaintiffs-appellants, Andrew Baker, David Boevington, Alisa Boles, Temma Crismond, Rochell Graeber, John Haldeman, Bradley Huey, Glenn Kamphaus, Gerald Marshall, Joseph Mullins, Jason Roberts and Allison Runnells, appeal from the trial court's entry of final judgment on May 9, 2018, in favor of Defendants-appellees, Farmers Group, Inc., Farmers Insurance Exchange, Farmers Insurance Group, Inc., Farmers New World Life Insurance Co., Fire Insurance Exchange, Mid-Century Insurance Co., Truck Insurance Exchange, and 21st Century Insurance. Raising six assignments of error, Appellants argue that the trial court erred by dismissing their claims for fraudulent inducement, breach of contract and violation of R.C. Chapter 1334; by entering judgment in favor of Appellees on their counterclaims against Appellants; and by striking Appellants' attempt to dismiss their claims without prejudice under Civ.R. 41(A).

         {¶ 2} We find that the trial court erred by dismissing the claims of Appellants for fraudulent inducement to the extent that the claims were based on the allegations in Paragraphs 77(b)-(d) of Appellants' amended complaint. Otherwise, we find that the trial court did not err by dismissing Appellants' claims for breach of contract, by dismissing Appellants' claims for Appellees' alleged violations of R.C. Chapter 1334, or by entering judgment in favor of Appellees on their counterclaims against Appellants. Additionally, we find, as we have previously, that the trial court did not err by striking Appellants' attempt to dismiss their claims under Civ.R. 41(A).

         I. Facts and Procedural History

         {¶ 3} Appellants allege that "[in] or before 2011," Appellees implemented a system in Ohio to promote the opening of agencies for the sale of Appellees' insurance products. See Amended Complaint ¶ 1-2 and 73, Nov. 19, 2014. Referring to the system as the "Agency Point Program," Appellants allege further that it was presented to them as a three-year curriculum in which "person[s] would [be] train[ed] and [receive] support, including a monthly subsidy, to open [their] own insurance agenc[ies]" as independent business owners. Id. at ¶ 73. Appellees "admit that [they] opened Agency Points in Ohio in or before 2011," but they otherwise deny the foregoing allegations. See Answer to Amended Complaint ¶ 1-2 and 73, Dec. 30, 2014; see also Appellees' Brief 1-6.

         {¶ 4} Appellants claim that they were among "approximately 400 [prospective] agents" whom Appellees "aggressively recruited, solicited and induced" to enroll in the program. Amended Complaint ¶ 3 and 74. As "part of the recruitment and solicitation," Appellants accuse Appellees of "knowingly ma[king] material representations [about the program] that were false." Id. at ¶ 75.

         {¶ 5} To participate, each of the appellants executed a pair of contracts-the "Agent Appointment Agreement" (the "AAA") and the "Horizontal Marketing Agent Relationship Agreement" (the "HMARA"), though the parties make no express reference to the HMARA in the pleadings.[1] See id. at ¶ 1-101; Answer to Amended Complaint ¶ 1-14 and Exhibits 2, 4-8 and 15; see also Defendants' Motion to Dismiss, Exhibits 5, 12, 14, 22 and 24, Nov. 13, 2013. According to Appellants, the program was thereafter unilaterally terminated by Appellees in October 2012. Amended Complaint ¶ 78. Appellees deny this allegation, averring that they "reorganized] [their] Ohio agency force" and simply reassigned agents who formerly "work[ed] through * * * Agency Point office[s]." See Answer to Amended Complaint ¶ 78.

         {¶ 6} Thirty-four agents filed a complaint on September 16, 2013, identifying Appellees, two individual defendants, and 100 John Does as the defendants.[2] The agents presented causes of action for fraudulent inducement, breach of contract, tortious interference with business, unjust enrichment, civil conspiracy, and violations of R.C. Chapter 1334.[3]

         {¶ 7} Appellees and the two individual defendants moved for dismissal of the complaint under Civ.R. 12(B)(6) on November 13, 2013. Before the trial court issued a decision on this motion, however, the agents moved for leave to file an amended complaint, and in advance of the trial court's ruling, the parties submitted a joint entry on April 9, 2014, stipulating that the pending motion to dismiss would apply to the amended complaint, if the trial court granted leave. On May 7, 2014, the trial court sustained the agents' motion for leave, and the agents thereafter filed their amended complaint on November 19, 2014. The amended complaint joined 27 additional agents as plaintiffs; the causes of action were substantively unchanged.[4]

         {¶ 8} On December 2, 2014, the trial court sustained Appellees' motion to dismiss in part and overruled the motion in part. Sustaining the motion in part, the court dismissed the claims of all of the agents for civil conspiracy; the claims of all of the agents for tortious interference with business; the claims of all of the agents for breach of contract against two of the appellees and the two individual defendants; and "the unjust enrichment claims of the 34 original [p]laintiffs" against six of the appellees. Decision, Order and Entry on Defendants' First Motion to Dismiss 10, 13, 15-16, 18-20 and 23, Dec. 2, 2014. Otherwise, the court overruled the motion. Id.

         {¶ 9} The agents then attempted to dismiss the balance of their claims, filing a notice of voluntary dismissal under Civ.R. 41(A) on December 22, 2014. Appellees moved to strike the notice in reliance on precedent represented by the Ohio Supreme Court's opinion in Pattison v. W.W. Grainger, Inc., 120 Ohio St.3d 142, 2008-Ohio-5276, 897 N.E.2d 126. In its opinion, the Court held: "[W]hen a plaintiff has asserted [several] claims against one defendant, and some of those claims have been ruled upon but not converted into a final order through Civ.R. 54(B), the plaintiff may not create a final order by voluntarily dismissing [the remaining claims] pursuant to Civ.R. 41(A)." Pattison at ¶ 1.

         {¶ 10} On December 30, 2014, Appellees filed their answer to the amended complaint, with which they included four counterclaims. Of these, the first is relevant to the instant appeal-a claim for breach of contract against 27 of the agents for failure to repay their monthly subsidies as required by the terms of an addendum to the AAA.

         {¶ 11} With Appellees' motion to strike pending, the agents filed a notice of appeal to this court on January 20, 2015, challenging the trial court's decision of December 2, 2014, on Appellees' motion to dismiss.[5] The trial court sustained Appellees' motion to strike in its decision of February 6, 2015, and on March 11, 2015, Appellees filed a second motion to dismiss, seeking dismissal of the agents' claims for "fraudulent] [inducement] and unjust enrichment" to the "extent [those claims were] not previously dismissed." Defendants' Second Motion to Dismiss 1, Mar. 11, 2015.

         {¶ 12} In Montgomery App. No. 26559, we dismissed the agents' appeal for want of a final, appealable order on April 7, 2015. Two days later, Appellees moved for summary judgment on the agents' claims under R.C. Chapter 1334. On May 6, 2015, the trial court held Appellees' second motion to dismiss in abeyance, and in a decision entered on May 21, 2015, it sustained Appellees' motion for summary judgment. The court sustained Appellees' second motion to dismiss on November 30, 2015.

         {¶ 13} On December 8, 2015, Appellees filed a third motion to dismiss, directed to the agents' claims for breach of contract. The trial court overruled the motion in part with respect to the agents' "breach of contract allegations related to [Appellees]' alleged failure to make available education and sales training programs and failure to pay commissions in accordance with established commission schedules and rules." Decision, Order and Entry on Defendants' Third Motion to Dismiss 14, Feb. 23, 2016. In "all other respects," the court sustained the motion. Id.

         {¶ 14} On October 31, 2016, Appellees moved for summary judgment on their counterclaim against 27 of the agents for failure to repay subsidies. The trial court sustained the motion in part and overruled the motion in part in a decision entered on February 7, 2017.

         {¶ 15} On October 10, 2017, Appellees moved for summary judgment on the remainder of the agents' claims for breach of contract, as well as their counterclaim against 27 of the agents, to the extent that the counterclaim had not been resolved by the trial court in response to Appellees' previous motion. The agents filed a reciprocal motion for summary judgment on Appellees' counterclaim on the same date. On December 17, 2017, the trial court overruled the agents' motion, and on March 12, 2018, the court sustained Appellees' motion in part and overruled the motion in part.

         {¶ 16} In April 2018, the case proceeded to a trial by jury on the claim of Appellant, Glenn Kamphaus, for breach of contract with respect to Appellees' alleged failure to pay commissions, and on Appellees' counterclaim against Kamphaus for failure to repay his subsidies. The trial court directed a verdict in favor of Appellees on Kamphaus's claim against them, and the jury entered a verdict in favor of Kamphaus on Appellees' counterclaim against him.

         {¶ 17} On May 9, 2018, the trial court entered its final judgment, incorporating the foregoing verdicts. The court further entered judgment in favor of Appellees on their counterclaim for failure to repay subsidies as it related to 11 of the agents. Appellants timely filed their notice of appeal to this court on May 30, 2018.

         II. Analysis

         {¶ 18} We address Appellants' first and second assignments of error together because both of the assignments relate to the trial court's dismissal of Appellants' cause of action for fraudulent inducement. For their first assignment of error, Appellants contend that:

         THE APPELLANTS' COMPLAINT STATED VIABLE AND SPECIFIC CLAIMS FOR FRAUDULENT INDUCEMENT[, ] AND THE TRIAL COURTS DISMISSAL OF THOSE CLAIMS WAS ERROR.

         And for their second assignment of error, Appellants contend that:

         THE APPELLANTS' FRAUD ALLEGATIONS WERE SUFFICIENTLY SPECIFIC UNDER CIV.R. 9(B), PARTICULARLY GIVEN THE NUMBER OF PLAINTIFFS AND THE MULTIPLE LEVELS OF CORPORATE DEFENDANTS.

         {¶ 19} Appellants argue that the trial court erred by dismissing their claims against Appellees for fraudulent inducement. In its decisions of December 2, 2014, and November 30, 2015, the court dismissed the claims pursuant to Civ.R. 12(B)(6) because it determined that Appellants could not prove their allegations of fraud without relying on evidence excluded by the parol evidence rule, and because it determined that the allegations were insufficient for purposes of Civ.R. 9(B). Appellants maintain, to the contrary, that the parol evidence rule was inapplicable to their claims, and that their allegations of fraud were sufficiently particular. Appellant's Brief 2-15.

         {¶ 20} A motion to dismiss pursuant to Civ.R. 12(B)(6) "is [a] procedural [motion that] tests the sufficiency of [a] complaint" as a matter of law. See State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548, 605 N.E.2d 378 (1992). When a court considers a motion to dismiss, it "must presume that all factual allegations of the complaint are true and make all reasonable inferences in favor of the non-moving party." (Citations omitted.) Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 192, 532 N.E.2d 753 (1988). Given the purpose of a motion to dismiss, the moving party "may not rely on allegations or evidence outside the complaint." Hanson at 548.

         {¶ 21} Dismissal under Civ.R. 12(B)(6) is warranted only if the plaintiff can prove no set of facts in support of the claim or claims asserted in the complaint that would entitle the plaintiff to the relief requested. See Ohio Bur. of Workers' Comp. v. McKinley, 130 Ohio St.3d 156, 2011-Ohio-4432, 956 N.E.2d 814, ¶ 12, citing O'Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St.2d 242, 245, 327 N.E.2d 753 (1975), and LeRoy v. Allen, Yurasek & Merklin, 114 Ohio St.3d 323, 2007-Ohio-3608, 872 N.E.2d 254, ¶ 14; see also Sacksteder v. Senney, 2d Dist. Montgomery No. 24993, 2012-Ohio-4452, ¶ 35-46. Appellate "review of a trial court's decision [on a motion] to dismiss * * * pursuant to Civ.R. 12(B)(6) is de novo." (Citation omitted.) McKinley at ¶ 12.

         A. The Parol Evidence Rule

         {¶ 22} Appellants' first assignment of error concerns the trial court's application of the parol evidence rule, a principle "of substantive law" that, "when applicable, defines the limits of a contract." Charles A. Burton, Inc. v. Durkee, 158 Ohio St. 313, 109 N.E.2d 265 (1952), paragraph one of the syllabus. According to the rule, absent "claims of fraud, mistake, or some other invalidating cause, [a] written agreement may * * * not be varied, contradicted, or supplemented by or on account of evidence of prior or contemporaneous oral agreements, or by [subsidiary] written agreements that the terms of the principal contract do not expressly authorize." Evilsizor v. Becraft & Sons Gen. Contrs., Ltd., 156 Ohio App.3d 474, 2004-Ohio-1306, 806 N.E.2d 614, ¶ 12 (2d Dist.), citing Galmish v. Cicchini, 90 Ohio St.3d 22, 27-28, 734 N.E.2d 782 (2000). The rule, regardless, "does not prohibit a party from introducing parol or extrinsic evidence for the purpose of proving fraudulent inducement." Simon Property Group, LP. v. Kill, 3d Dist. Allen No. 1-09-30, 2010-Ohio-1492, ¶ 15, citing Galmish at 28. Yet, in a further convolution, the "rule may not be avoided 'by [means of] a fraudulent inducement claim [premised on the allegation] that the inducement to [execute a written contract] was a promise, the terms of which are directly contradicted by the signed writing.'" Galmish at 29, quoting Marion Prod. Credit Assn. v. Cochran, 40 Ohio St.3d 265, 533 N.E.2d 325 (1988), paragraph three of the syllabus. Thus, an oral agreement, or a subsidiary written agreement, "cannot be enforced in preference to a signed writing which pertains to exactly the same subject matter [but states] different terms." Id.

         {¶ 23} Here, pursuant to the AAA, Appellants "accept[ed] appointment[s] as * * * [agents] for [Appellees]" in particular districts. [6]See, e.g., Answer to Amended Complaint, Ex. 2. The AAA obligated Appellees to: (1) "pay new business and service commissions or any other commission to [agents] in accordance with commission schedules and rules"; (2) "arrange for Group Life and Comprehensive Medical Insurance plans and pay a portion of the premium[s] [for agents] elect[ing] to apply for coverage * * *"; (3) "provide approved * * * manuals, forms and policyholder records necessary to carry out the provisions of [the agreement]"; (4) "provide advertising assistance"; and (5) "make * * * education and sales training programs" available to agents. Id. Appellants, in return, were obligated to: (1) "sell insurance exclusively for [Appellees]"; (2) "provide the facilities necessary to furnish insurance services to [Appellees'] policyholders"; (3) "permit [Appellees'] authorized representatives * * * to review and examine [agencies'] records [to] verify compliance" with the agreement; (4) "provide a fidelity bond"; (5) "meet at all times performance standards"; (6) "conduct ...


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