Special Risk Insurance Services Inc v. GlaxoSmithKline LLC ( 2023 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 22-1891
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SPECIAL RISK INSURANCE SERVICES, INC.,
Appellant
v.
GLAXOSMITHKLINE, LLC, trading as GLAXOSMITHKLINE
___________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-19-cv-03002)
District Judge: Honorable Nitza I. Quiñones Alejandro
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Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
March 21, 2023
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Before: RESTREPO, PHIPPS, and ROTH, Circuit Judges.
(Opinion filed: May 25, 2023)
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OPINION*
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PHIPPS, Circuit Judge.
An insurance broker sued to recover commissions for policies that it brokered for
a pharmaceutical company with three insurance companies. The insurance companies
paid the commissions on the policies for several years, until the pharmaceutical company
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
terminated the broker as its designated broker of record. After that, although the
pharmaceutical company continued to use the policies, the insurance companies ceased
paying commissions. Now, in seeking post-termination commissions, the broker sues the
pharmaceutical company – not the insurance companies that previously paid the
commissions.
The District Court rejected the broker’s claims and entered summary judgment for
the pharmaceutical company. Through this timely appeal of that final order, see
28 U.S.C. § 1291, the broker argues that its claims for breach of contract and unjust
enrichment should have proceeded to trial. For the reasons below, on de novo review, we
will affirm the judgment of the District Court.
BACKGROUND
This dispute is between citizens of different states. Special Risk Insurance
Services, Inc., (‘Special Risk’) is an insurance broker incorporated in Pennsylvania with a
principal place of business in Blue Bell, Pennsylvania. GlaxoSmithKline, LLC, engaged
primarily in the pharmaceutical business, is a citizen of Delaware. It is a limited liability
company with a single member, a holding company that is incorporated in Delaware and
has a principal place of business in Delaware. See Johnson v. SmithKline Beecham
Corp., 724 F.3d 337, 360 (3d Cir. 2013) (holding that GlaxoSmithKline Holdings is a
citizen of Delaware); see also Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420
(3d Cir. 2010).
From 1991 through 2015, GlaxoSmithKline designated Special Risk as its group
insurance broker of record. In that role, Special Risk helped negotiate and purchase
group insurance policies for GlaxoSmithKline’s employees. Those included
GlaxoSmithKline’s group life insurance policies with Liberty Mutual Insurance
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Company and with ACE American Insurance Company as well as its disability insurance
policy with Metropolitan Life Insurance Company. For several years, these insurance
companies paid Special Risk annual commissions – ranging from $850,000 to $1.2
million in total each year – on GlaxoSmithKline’s policies. See 40 Pa. Cons. Stat.
§§ 310.1, 310.72–.73 (authorizing insurance entities to pay commissions to brokers).
In 2015, GlaxoSmithKline terminated Special Risk as its broker of record, but
continued to use the group insurance policies that Special Risk had previously brokered.
When GlaxoSmithKline terminated Special Risk, the three insurance companies stopped
paying commissions to Special Risk – even though GlaxoSmithKline continued to use the
policies.
To recover those commissions, Special Risk sued GlaxoSmithKline in the Court of
Common Pleas, Philadelphia County. Special Risk raised claims for breach of contract,
unjust enrichment, promissory estoppel, and tortious interference with contractual
relations.
In response, GlaxoSmithKline removed the action to the United States District
Court for the Eastern District of Pennsylvania, see 28 U.S.C. § 1441, due to diversity
jurisdiction, see 28 U.S.C. § 1332. After discovery, GlaxoSmithKline moved for
summary judgment. In applying Pennsylvania law, the District Court granted summary
judgment to GlaxoSmithKline on every claim. See Special Risk Ins. Servs., Inc. v.
GlaxoSmithKline, LLC, 2022 WL 1093129, at *4–7 (E.D. Pa. Apr. 12, 2022). In this
appeal, Special Risk disputes the rejection of its claims for breach of contract and unjust
enrichment.
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DISCUSSION
A. The District Court Did Not Err in Granting Summary Judgment
to GlaxoSmithKline on the Claim for Breach of Contract.
The District Court did not find evidence of either an express or an implied-in-fact
contract between Special Risk and GlaxoSmithKline for the payment of commissions.
See id. at *5 (explaining that there is “no evidence” that GlaxoSmithKline “agreed—
either orally, in writing, or by any inference” to compensate Special Risk for lost
commissions); see also Solis-Cohen v. Phoenix Mut. Life Ins. Co., 198 A.2d 554, 555–56
(Pa. 1964) (explaining that any right to commissions “is a matter of contract either
express or implied”); 3 Steven Plitt et al., Couch on Insurance § 46:76 (3d ed. 2022)
(“The insured . . . is not liable to compensate an agent or broker unless there is an express
or implied agreement to pay compensation.”). And on that basis, it rejected Special
Risk’s breach-of-contract claim. See Special Risk, 2022 WL 1093129, at *5.
On appeal, Special Risk does not dispute the District Court’s ruling that there was
no express contract for a commission. Instead, Special Risk argues that GlaxoSmithKline
– by designating Special Risk as its broker of record – impliedly promised continuing
commissions on any brokered contracts to Special Risk. But Special Risk does not make
a sufficient showing of such an implied promise. See Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986) (explaining that summary judgment properly issues where “the
nonmoving party has failed to make a sufficient showing on an essential element of her
case”); Gardiner v. V.I. Water & Power Auth., 145 F.3d 635, 645 (3d Cir. 1998)
(affirming grant of summary judgment on implied-in-fact contract claim for want of a
triable issue of material fact). The record does not indicate that GlaxoSmithKline ever
paid commissions to Special Risk – not even when Special Risk was its broker of record.
Nor is there any evidence of an industry custom or practice of implying such a promise.
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Without such facts, Special Risk argues that, as a matter of law, it has a vested
right to a brokerage commission upon the writing of a policy. Even if that is a correct
statement of Pennsylvania law (an issue not addressed here), it would concern only the
timing of when a commission becomes due. And for Special Risk to succeed on the law
alone, it needs a legal rule that an entity, by designating a broker as its insurance broker
of record, is liable for that broker’s commissions. Yet Special Risk offers nothing in that
respect. Cf. 40 Pa. Cons. Stat. §§ 310.1, 310.72–.73 (authorizing the insurer to pay
commissions to a broker); Solis-Cohen, 198 A.2d at 554–56 (holding that a real estate
broker could not recover commissions from a landlord, where the landlord’s tenant – but
not the landlord – had promised the commissions). Thus, the District Court did not err in
rejecting Special Risk’s claim for breach of an implied contract.
B. The District Court Did Not Err in Rejecting Special Risk’s Claim
for Unjust Enrichment.
To succeed on its alternative claim for unjust enrichment, Special Risk must
demonstrate that GlaxoSmithKline knowingly benefitted from the insurance companies’
non-payment of the commissions such that GlaxoSmithKline’s retention of such a benefit
would be not just unfair, but unconscionable. See Torchia v. Torchia, 499 A.2d 581, 582
(Pa. Super. Ct. 1985) (“To sustain a claim of unjust enrichment, a claimant must show
that the party against whom recovery is sought either ‘wrongfully secured or passively
received a benefit that it would be unconscionable for her to retain.’” (quoting Roman
Mosaic & Tile Co. v. Vollrath, 313 A.2d 305, 307 (Pa. Super. Ct. 1973))); see also
Meyer, Darragh, Buckler, Bebenek & Eck, P.L.L.C. v. Law Firm of Malone Middleman,
P.C., 179 A.3d 1093, 1102 (Pa. 2018) (articulating three elements for an unjust
enrichment claim); Sovereign Bank v. BJ’s Wholesale Club, Inc., 533 F.3d 162, 180 (3d
Cir. 2008) (same). Here, GlaxoSmithKline has knowingly benefitted through its
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retention of the group insurance policies brokered by Special Risk. But that is not
sufficiently unjust under these circumstances. See State Farm Mut. Auto. Ins. Co. v. Jim
Bowe & Sons, Inc., 539 A.2d 391, 393 (Pa. Super. Ct. 1988) (“[T]he most significant
requirement for recovery is that the enrichment is unjust.”); cf. Restatement (Third) of
Restitution and Unjust Enrichment § 1 cmt. d (2011) (“The third element . . . referring to
‘circumstances making it inequitable for the defendant to retain the benefit,’ incorporates
the whole of the question presented, making the rest of the formula superfluous.”).
Special Risk already received millions of dollars in commissions for several years in
return for brokering those policies. And it was the insurance carriers – not
GlaxoSmithKline as the purchaser of the group insurance policies – who paid the
commissions for those policies. Also, Special Risk, in negotiating with GlaxoSmithKline
to be its broker of record, could have insisted that GlaxoSmithKline be liable for its
commissions, but Special Risk did not do so. See Restatement (Third) of Restitution and
Unjust Enrichment § 2 cmt. d (explaining that no claim for unjust enrichment exists when
“the claimant neglects an opportunity to contract” for compensation for the benefit
conferred). Thus, the degree of unfairness here does not rise to the level required for an
unjust enrichment claim.
***
For the foregoing reasons, the judgment of the District Court will be affirmed.
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