Havensure, L.L.C. v. Prudential Insurance Co. of America ( 2010 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 10a0040p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
-
HAVENSURE, L.L.C.,
-
Plaintiff-Appellant,
-
-
No. 09-3367
v.
,
>
-
-
PRUDENTIAL INSURANCE COMPANY OF
Defendant-Appellee. -
AMERICA,
-
N
Appeal from the United States District Court
for the Southern District of Ohio at Cincinnati.
No. 06-00721—Sandra S. Beckwith, District Judge.
Argued: January 12, 2010
Decided and Filed: February 12, 2010
Before: MARTIN, BOGGS, and WHITE, Circuit Judges.
_________________
COUNSEL
ARGUED: Robert R. Sparks, PARRY, DEERING, FUTSCHER & SPARKS, PSC,
Covington, Kentucky, for Appellant. Michael Nathan Ungar, ULMER & BERNE, LLP,
Cleveland, Ohio, for Appellee. ON BRIEF: Robert R. Sparks, PARRY, DEERING,
FUTSCHER & SPARKS, PSC, Covington, Kentucky, for Appellant. Michael Nathan
Ungar, Gregory James Phillips, Paula Gallito Shakelton, ULMER & BERNE, LLP,
Cleveland, Ohio, Jeffrey S. Jacobson, DEBEVOISE & PLIMPTON, New York, New York,
for Appellee.
_________________
OPINION
_________________
BOGGS, Circuit Judge. Havensure, L.L.C. (Havensure), an insurance broker, sued
Prudential Insurance Company of America (Prudential), an insurer, for tortious interference
with Havensure’s business relationship with York International Corp. (York). Havensure
claimed that Prudential offered York a better rate quote through Havensure’s competitor than
1
No. 09-3367 Havensure, L.L.C. v. Prudential Insurance Page 2
Company of America
through Havensure in order to prevent Havensure from winning York’s business. The
district court granted summary judgment in favor of Prudential. On appeal, Havensure
asserts that the district court erred in two ways: first, it wrongly concluded that Havensure
failed to raise a genuine issue of material fact with respect to the cause of its alleged injury;
second, the district court erroneously found that Prudential’s interference was privileged as
a matter of Ohio law. Upon de novo review, we agree with the district court that
Prudential’s interference was privileged as a matter of Ohio law, and thus we affirm the
district court’s judgment. Because privilege provides sufficient grounds to affirm the district
court’s judgment, we do not examine the issue of causation.
I
In early 2004, Havensure approached York with a proposal for obtaining group life
insurance and disability insurance through a “group purchasing organization.” At the time,
York’s broker of record was Universal Life Resources (ULR), and its group life insurance
carrier was Prudential.
After meeting with Havensure and Corporate United (a group purchasing
organization), York issued Havensure a Letter of Authorization that enabled Havensure to
obtain confidential information from Prudential regarding York’s group life insurance plan.
Upon reviewing this information, Havensure projected that it could save York $125,000 per
year on group life insurance and $93,500 per year on long-term disability insurance. Part
of this savings apparently arose from the elimination of $135,000 in hidden broker fees built
1
into York’s existing plan.
After reviewing Havensure’s projections, York authorized Havensure to send out
a Request for Proposals (RFP). On May 25, 2004, Havensure sent an RFP to various
insurance carriers, including Prudential.
Havensure’s RFP sparked discussion at Prudential. On June 3, Prudential
executive Lori High e-mailed several colleagues and expressed uncertainty as to how to
1
The parties dispute whether these fees were actually known to York. For the purpose of
summary judgment, we will assume that the fees were hidden.
No. 09-3367 Havensure, L.L.C. v. Prudential Insurance Page 3
Company of America
respond to Havensure’s RFP. In a written response to High’s e-mail, Prudential
executive Daniel Hettrich strongly supported the incumbent broker (i.e., ULR). He gave
three justifications for his position. First, he did not believe that incumbent carriers (like
Prudential) fared well when a client granted a Letter of Authorization to a new broker,
and he believed that Prudential would “most likely lose business when a [Letter of
Authorization] is received.” In light of Havensure’s receipt of a Letter of Authorization,
Hettrich believed that it was critical to support the incumbent broker throughout the
bidding process in order to preserve Prudential’s existing relationship with York.
Second, Hettrich noted that he did not understand Havensure’s business model, and
found that it failed to produce the results (mutually benefitting the client, the broker, and
Prudential) that Prudential preferred. Finally, he asserted that Prudential needed “to
stand with the broker/consultant that brought us to the dance.”
Despite Prudential’s apparent reluctance to deal with Havensure, on June 28,
2004, Prudential produced a quote for Havensure. This bid was identical to the current
York plan, except that it removed the $135,000 in hidden fees and added Havensure’s
4% commission rate.
At the close of the bidding process, Havensure presented its results to York. The
lowest bidder was not Prudential; rather, CIGNA submitted a bid that was $90,020 less
per year than the lowest quote provided by Prudential. York did not provide an
immediate response to these results. Instead, York’s Manager of Worldwide Benefits,
Wendy Nafziger, shared both Prudential and CIGNA’s bids with ULR, “with the
intention that ULR would pursue negotiations with Prudential based on that
information.”
On September 7, 2004, ULR sent an e-mail to Prudential executives indicating
that both ULR’s and Prudential’s positions were in jeopardy because of CIGNA’s rate
quote. Prudential responded by matching CIGNA’s bid, but it made this lower bid
available only through ULR. Prudential executive Frank Corsi explained Prudential’s
decision to match CIGNA’s bid:
No. 09-3367 Havensure, L.L.C. v. Prudential Insurance Page 4
Company of America
This case is running a 42% loss ratio2 and in the end the only reason I
landed on making this concession was to support [ULR] and to be honest,
try to prevent Havensure from winning this account.
After receiving Prudential’s reduced bid through ULR, York decided to remain
with Prudential and ULR. York informed Havensure and Corporate United that it had
decided not to accept any of the bids obtained by Havensure.
On October 26, 2006, Havensure filed the present action against Prudential in the
United States District Court for the Southern District of Ohio. In its second amended
complaint, Havensure alleged that Prudential violated the Sherman Antitrust Act,
tortiously interfered with Havensure’s business relationship with York, committed civil
conspiracy, and had been unjustly enriched. The district court dismissed Prudential’s
antitrust and unjust enrichment theories for failure to state a claim, and Havensure has
not appealed that ruling. After discovery, the district court granted summary judgment
in favor of Prudential on Havensure’s remaining tortious interference and conspiracy
claims. The court held that Havensure had failed to provide evidence indicating that
Prudential’s interference actually caused York to sever its relationship with Havensure
and also held that Prudential’s interference was privileged as a matter of Ohio law. As
no predicate tort remained to support Havensure’s civil conspiracy claim, the district
court also granted summary judgment against Havensure on that claim. Havensure
timely appealed.
II
On appeal, Havensure challenges the grounds upon which the district court
granted summary judgment. This court reviews a district court’s order granting
summary judgment de novo. Cincom Sys., Inc. v. Novelis Corp., 581 F.3d 431, 435 (6th
Cir. 2009). Summary judgment is appropriate where “the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine issue as to
2
In the parlance of the insurance industry, a 42% loss ratio indicates that an account is highly
profitable.
No. 09-3367 Havensure, L.L.C. v. Prudential Insurance Page 5
Company of America
any material fact and that the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(c)(2). The party moving for summary judgment bears the initial burden
of identifying those parts of the record which demonstrate the absence of any genuine
issue of material fact. White v. Baxter Healthcare Corp., 533 F.3d 381, 389-90 (6th Cir.
2008) (citing Celotex Corp. v. Cartrett, 477 U.S. 317, 323 (1986)). Once the moving
party has satisfied its burden, the nonmoving party may not rest upon its mere allegations
or denials of the opposing party’s pleadings, but rather it must set forth specific facts
showing that there is a genuine issue for trial. Moldowan v. City of Warren, 578 F.3d
351, 374 (6th Cir. 2009). A genuine issue of material fact exists if there is sufficient
evidence favoring the nonmoving party for a jury to return a verdict for that party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether a
genuine issue of material fact exists, this court draws all inferences in the light most
favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986).
Reviewing the district court’s judgment under this standard, we hold that the
district court did not err when it granted summary judgment on Havensure’s tortious
interference claim. Under Ohio law, a claim for tortious interference with a business
relationship arises when a person, without privilege to do so, induces or otherwise
purposely causes a third person not to enter into or continue a business relation with
another. A & B-Abell Elevator Co. v. Columbus/Cent. Ohio Bldg. & Constr. Trades
Council, 651 N.E.2d 1283, 1294 (Ohio 1995). As this definition suggests, interference
with a business relationship is not tortious if the interference is privileged.3 See Reali,
Giampetro & Scott v. Soc’y Nat’l Bank, 729 N.E.2d 1259, 1267 (Ohio App. 1999). The
Ohio Supreme Court has adopted the approach of the Restatement (Second) of Torts in
determining whether an interference is privileged. See Fred Siegel Co. v. Arter
& Hadden, 707 N.E.2d 853, 860 (Ohio 1999). Under that approach, a court must
consider seven factors:
3
Ohio courts appear to use the terms “privileged,” “justified,” and “proper” interchangeably. See,
e.g., Wauseon Plaza L.P. v. Wauseon Hardware Co., 807 N.E.2d 953, 963 (Ohio App. 2004); Doyle v.
Fairfield Mach. Co., 697 N.E.2d 667, 683 (Ohio App. 1997).
No. 09-3367 Havensure, L.L.C. v. Prudential Insurance Page 6
Company of America
(a) the nature of the actor’s conduct, (b) the actor’s motive, (c) the
interests of the other with which the actor’s conduct interferes, (d) the
interests sought to be advanced by the actor, (e) the social interests in
protecting the freedom of action of the actor and the contractual interests
of the other, (f) the proximity or remoteness of the actor’s conduct to the
interference, and (g) the relations between the parties.
Ibid. (citing Restatement (Second) of Torts § 767). Ohio courts place the burden on the
plaintiff to show that the defendant’s conduct was not privileged. See Doyle v. Fairfield
Mach. Co., 697 N.E.2d 667, 683 (Ohio App. 1997) (citing Kenty v. Transamerica
Premium Ins. Co., 650 N.E.2d 863 (Ohio 1995)); see also Super Sulky, Inc. v. U.S.
Trotting Ass’n, 174 F.3d 733, 742 (6th Cir. 1999) (citing Kenty, 650 N.E.2d at 866).
Applying Ohio’s seven-factor test to the present case, we conclude that the
district court was correct that there is no genuine issue of material fact as to whether
Prudential’s actions in seeking to retain York’s business through ULR rather than
Havensure were privileged. Looking first to the nature of Prudential’s conduct in
supplying ULR with a lower quote, Prudential did nothing that was independently
criminal, tortious, or even wrongful. Generally speaking, absent antitrust concerns,
“there exists no duty to deal.” Byars v. Bluff City News Co., 609 F.2d 843, 854 (6th Cir.
1979). The district court concluded that Prudential’s alleged conduct did not amount to
an antitrust violation, and Havensure has not challenged that ruling. Further, Havensure
has identified no federal or state law that prohibited Prudential from offering a lower rate
quote through ULR than it did through Havensure.
Havensure does suggest that Prudential used fraud or misrepresentation to
accomplish its interference, based upon an e-mail composed by Prudential Senior Vice
President Michael Witwer. Appellant’s Brief at 25. Havensure asserts that this e-mail
misrepresented the nature of the bid that Prudential submitted to Havensure. Ibid. Yet
Witwer addressed his e-mail only to ULR employees, and there is no evidence that York
employees ever received the e-mail or learned of its contents. In fact, York’s Manager
of Worldwide Benefits specifically disclaimed any recollection of the e-mail. There is
No. 09-3367 Havensure, L.L.C. v. Prudential Insurance Page 7
Company of America
thus no evidence that Prudential used fraud or misrepresentation to dissuade York from
dealing with insurers through Havensure.
Havensure also suggests that Prudential used “illegal means” because it included
hidden broker compensation in the plan that it originally provided to York. Appellant’s
Reply Brief at 13. Yet, even if such conduct was illegal, it has no bearing upon the
present inquiry. Havensure does not explain, nor is it apparent, how Prudential’s
inclusion of hidden compensation to ULR in the original York plan interfered with
Havensure’s potential contract with York. If anything, the inflated price of the original
York plan increased Havensure’s chance of winning York’s business. In fact, Havensure
identifies the removal of the hidden compensation as hurting its relationship with York.
Id. at 14. Nor does Havensure assert that Prudential’s removal of the hidden
compensation was a means to protect the allegedly unlawful compensation scheme. In
short, although the allegedly hidden broker compensation might have been illegal,4 its
inclusion in the original York-Prudential benefit plan was not the means used to thwart
Havensure’s efforts, and removing the compensation was not illegal.
Finally, Havensure alleges that Prudential violated its own internal policies and
that this violation suffices to render Prudential’s conduct wrongful. Appellant’s Brief
at 23-24. This argument has no legal basis. Although violations of “recognized ethical
codes” or “established customs or practices” may be significant in evaluating the nature
of an actor’s conduct, see Restatement (Second) of Torts § 767 cmt c.; see also Fred
Siegel Co., 707 N.E.2d at 860 (citing the Restatement), Havensure has identified no
authority suggesting that a violation of internal policies has comparable significance.
Turning from Prudential’s conduct to its motive, the record establishes that
Prudential’s desire to prevent Havensure from becoming York’s broker was coincident
4
We stress the qualified nature of this statement, as Havensure has provided no authority
indicating that the alleged hidden compensation was illegal under Ohio law. Havensure has cited to a
complaint against ULR filed in New York state court by the New York Attorney General, as well as to an
“Assurance of Discontinuance” that Prudential submitted to the New York Attorney General. Yet the New
York Attorney General’s efforts to enforce New York law have no bearing upon Ohio law. If Havensure
believes that Ohio should prohibit Prudential’s behavior, it remains free to urge the Ohio Attorney General
or the Ohio legislature to take action against such behavior.
No. 09-3367 Havensure, L.L.C. v. Prudential Insurance Page 8
Company of America
with Prudential’s desire to keep York’s business. Uncontradicted evidence (Daniel
Hettrich’s e-mail) indicates that Prudential believed that it would lose York’s account
if Havensure became York’s broker. Consistent with this, Frank Corsi’s e-mail stressed
the profitability of the York account (stating that it ran a 42% loss ratio) before
explaining that Prudential matched CIGNA’s bid to prevent Havensure from winning the
account. In fact, Havensure itself concedes that “Prudential understood its options to be
(a) potentially lose York’s business, or (b) interfere with Havensure’s business
opportunity . . . .” Appellant’s Brief at 24. No rational jury could conclude that a desire
to retain a profitable account was an improper motive.
Granted, evidence in the record also indicates that Prudential preferred to do
business with ULR rather than Havensure, both because Havensure’s business model did
not produce mutual gain and because ULR “brought [Prudential] to the dance.” Yet
neither Prudential’s desire to avoid a broker who produced less profitable outcomes for
Prudential nor Prudential’s concern with preserving its existing business relationships
constitute improper motives. Rather, they were both valid business considerations. See
Hoyt, Inc. v. Gordon & Assocs., Inc., 662 N.E.2d 1088, 1095 (Ohio App. 1995) (finding
that Consolidated Biscuit’s refusal to buy fig paste from a manufacturer unless the
manufacturer switched brokers was privileged because the preferred broker “was better
able to meet the needs of . . . Consolidated Biscuit,” so “Consolidated Biscuit had a
clear stake and economic interest in influencing [the manufacturer] to broker its fig paste
through [the preferred broker].”).
Given that all available evidence indicates that Prudential acted in a permissible
fashion with proper business motives, no rational jury could conclude, on the basis of
those factors, that Prudential’s actions were not privileged. Further, Havensure has not
suggested that the remaining factors, on their own, render Prudential’s interference
improper. Accordingly, Havensure has failed to show a genuine issue of material fact
with respect to whether Prudential’s interference was privileged, and the district court
properly granted summary judgment in favor of Prudential on that basis.
No. 09-3367 Havensure, L.L.C. v. Prudential Insurance Page 9
Company of America
III
For the foregoing reasons, the judgment of the district court is AFFIRMED.