Commerce National Insurance Services, Inc. v. Buchler

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
12-6-2004
Commerce Natl Ins v. Buchler
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-1028
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-1028
COMMERCE NATIONAL INSURANCE SERVICES, INC.,
Appellant
v.
MICHAEL BUCHLER; NEW CASTLE INSURANCE LTD;
MARIANNE PISTORIA
On Appeal from the United States District Court for the District of Delaware
(District Court No. 02-cv-00037)
District Judge: Honorable Sue L. Robinson, Chief Judge
Submitted Under Third Circuit LAR 34.1(a): November 19, 2004
Before: SCIRICA, Chief Judge, and
MCKEE and CHERTOFF, Circuit Judges.
(Filed December 6, 2004)
OPINION
CHERTOFF, Circuit Judge.
Michael Buchler and Marianne Pistoria left Commerce National Insurance
Services (CNIS) to join a competing insurance brokerage firm, New Castle Insurance,
Ltd., in early 2002. Buchler personally contacted many of his former CNIS clients to let
them know that he had moved to New Castle Insurance. New Castle Insurance also sent
postcards to many of Buchler’s former clients which announced Buchler’s and Pistoria’s
arrival at the firm. CNIS sued Buchler, Pistoria, and New Castle for tortious interference
with existing contracts and with prospective business relations and sued Buchler and
Pistoria for breach of the nonsolicitation and confidentiality provisions in their
employment contracts.1
CNIS filed this appeal from a December 10, 2003 Opinion and Order of the
District Court granting summary judgment in favor of Buchler, Pistoria, and New Castle
Insurance on the breach of contract and tortious interference claims in CNIS’s Complaint.
Each claim was based on an underlying allegation that Buchler and Pistoria had breached
the terms of the nonsolicitation and confidentiality agreements in their employment
contracts with CNIS. The District Court found that summary judgment was appropriate
because CNIS had not established that Buchler’s nonsolicitation agreement applied to his
voluntary departure from CNIS, had not presented any evidence that Buchler violated the
terms of his confidentiality agreement, and had not raised any factual issue regarding the
propriety of Pistoria’s actions. (App. 30-32.) The Court further found that the tortious
interference claims failed as against Buchler, Pistoria and New Castle because CNIS’s
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CNIS also brought a defamation claim against all three defendants and a conversion
claim against Buchler. The District Court granted summary judgment in favor of the
defendants on the defamation and conversion claims and CNIS has not appealed the
Court’s judgment as to these claims.
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existing business clients were free “to choose their insurance representative” and because
CNIS “failed to identify any prospective business relations that, but for defendants’
conduct, would have become clients.” (App. 33-34.)
This Court exercises plenary review over the District Court’s decision. See Fiscus
v. Wal-Mart Stores, Inc., 385 F.3d 378, 381 (3d Cir. 2004). We will affirm.
A.
The District Court first found that Buchler did not violate the terms of the non-
solicitation agreement in section G.3 of his employment agreement because the provision
applies only to involuntary termination situations. We agree.
Under Delaware law, the terms of a nonsolicitation agreement must be “read in a
way that allows all the language to be read together, reconciling conflicts in the language
without rendering any of it nugatory if possible.” CTF Hotel Holdings, Inc. v. M arriott
Int’l., Inc., 381 F.3d 131, 137 (3d Cir. 2004); Eugene A. Delle Donne and Son, L.P. v.
Applied Card Sys., Inc., 821 A.2d 885, 887 (Del. 2003). If the language of the agreement
is unambiguous, it must be given its plain meaning. If it is ambiguous, it must be
construed against the drafter in accordance with the “well-accepted contra proferentem
principle of construction.” Twin City Fire Ins. Co. v. Del. Racing Assoc., 840 A.2d 624,
630 (Del. 2003).
Here, the Buchler nonsolicitation agreement, read as a whole, is ambiguous.
Section G.3.A is expressly limited to involuntary termination situations, providing that the
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employee is prohibited from providing notice to his former accounts “[f]or a period of
365 days following termination of ‘Employee’s’ employment by ‘Employer.’” (App. 57)
(emphasis added). Section G.3.B does not include this “by employer” language, instead
providing that “[f]or a period of 36 months following termination of employment,
‘Employee’ shall neither call upon or solicit, either for ‘Employee’ or for any other person
or firm, any ‘Class A, Class B, or Class C Accounts’ . . .” (App. 57) (emphasis added).
CNIS asserts that the absence of the “by employer” language in G.3.B requires its
application to all termination situations, whether voluntary or involuntary. The court,
though, must read the agreement as a whole, including the immediately subsequent “Post-
termination Purchase of Accounts” paragraph, which further defines the positions of the
parties in a section G.3.B situation and is expressly limited to involuntary termination
situations. The paragraph provides, in pertinent part:
“Employee” agrees that if, during the 36 month period following
termination of employment by “Employer”, an account which “Employee”
is other wise not permitted to solicit pursuant to the provisions of
Agreement G. of this . . . Cont[r]act, nevertheless places business through
“Employee” either directly or with an entity with which “Employee” is
affiliated or employed, “Employer” as fair compensation for such account
an amount equal to the following:
“Class A accounts”:
.50 times annualized gross commissions for 36 months after writing account.
“Class B accounts”:
.50 times annualized gross commissions for 36 months after writing account.
“Class C accounts”:
.50 times annualized gross commissions for 36 months after writing account.
(App. 57-58) (emphasis added).
The District Court read these two paragraphs together, and used the “termination
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of employment by Employer” language in the “Post-termination Purchase of Accounts”
paragraph to construe the “termination of employment” language in the immediately
preceding section G.3.B. This reading is reasonable, as it provides double protection to
the employer who fires an employee, first, by limiting the number of times where it will
lose Class A, B, and C accounts by preventing the employee from soliciting them, and
second, by providing for monetary relief should the accounts follow nonetheless. Had the
employer also wished to protect itself in voluntary termination situations, it can be
assumed that it would have provided for the same dual protection in G.3.B and the “Post-
termination Purchase of Accounts” paragraph. It did not, as it explicitly limited the post-
termination purchase protection to involuntary termination situations.
Therefore, because the agreement can reasonably be read to apply solely to
involuntary termination situations, and because the Court must construe the clause against
CNIS as drafter, this Court will affirm.
B.
Michael Buchler was also bound by a confidentiality agreement, under which he
agreed that he would not use confidential information obtained at CNIS “for any purpose
other than in the course of this employment and for the exclusive benefit of [CNIS].”
(App. 55-56.) CNIS asserts that Buchler breached this agreement because, after he left
CNIS, he sent a letter to the Delaware Transit Corporation which stated, in pertinent part:
As stated at our meeting, I feel New Castle Insurance, Ltd is extremely
capable of servicing your group’s Life, vision, short-term disability and
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long-term disability programs. I being personally familiar with the unique
plan design needs to the Delaware Transit plan will certainly be beneficial
when marketing the plan in an effort to maintain the most competitive rates.
(App. 793) (emphasis added).
Even if the information referred to in this letter was confidential information,
something that Buchler disputes, CNIS cannot sustain a breach of contract claim based on
its use because there is no evidence that CNIS sustained damages as a result of the letter
or Buchler’s contact with Delaware Transit. Delaware law “requires a showing of
compensable injury” for a breach of a confidentiality agreement claim. Kronenberg v.
Katz, 2004 WL 1152282 at *29 (Del. Ch. 2004) (citing Great Lakes Chem. Corp. v.
Pharmacia Corp., 788 A.2d 544, 549 (Del. Ch. 2001)). Here, it is undisputed that
Delaware Transit did not follow Buchler to New Castle Insurance, but remained a CNIS
customer. We affirm the District Court’s grant of summary judgment on this claim.
C.
The District Court next concluded that there was no evidence to support the claims
that Marianne Pistoria breached the non-solicitation and confidentiality provisions in her
employment agreement. This Court will affirm.
It is undisputed that Pistoria’s non-solicitation agreement applies to both
involuntary and voluntary termination situations. (App. 402-04.) There is no evidence,
though, that Pistoria breached the provision. Pistoria testified that she did nothing to
contact any CNIS customer or to aid New Castle Insurance in soliciting clients, (App.
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622-23), and Robert Hackett, Jr., senior vice-president of CNIS and manager for the
Delaware Division, admitted that he knew of no “specific proof” that she had, (App. 469-
71, 600-01). CNIS argues that it is still reasonable to infer that Pistoria solicited clients in
violation of her agreement because she worked at New Castle Insurance with Buchler
who admitted to soliciting clients. To survive summary judgment, though, a party must
present more than just “bare assertions, conclusory allegations or suspicions” to show the
existence of a genuine issue. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
With no record evidence indicating that Pistoria solicited clients, this Court will affirm
the decision of the District Court as to the non-solicitation agreement claim.
CNIS also bases its confidentiality agreement claim against Pistoria on an
inference, asserting that “[c]ertainly, a jury could reasonably infer that Pistoria used . . .
confidential CNIS information in servicing the accounts which followed Buchler and her
to New Castle.” (Appellant Reply Br. at 10.) Again, CNIS has presented no record
evidence to support their suspicion. Summary judgment, therefore, was appropriate, see
Celotex, 477 U.S. at 325, and this Court will affirm.
D.
This Court will also affirm the District Court’s finding that CNIS did not sustain a
claim for tortious interference with existing business relations. Under Delaware law, if
“there is no sustainable claim of breach, there can be no viable claim for tortious
interference” with existing business relations because the cause of action requires proof
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that the defendant intentionally took an action which caused the existing client to breach
its existing contract with the plaintiff. See Aspen Advisors v. United Artists Theatre Co.,
843 A.2d 697, 713 (Del. Ch. 2004) (citing Goldman v. Pogo.com Inc., 2002 WL
1358760, at *8 (Del. Ch. June 14, 2002); Irwin & Leighton, Inc. v. W.M. Anderson Co.,
532 A.2d 983, 992 (Del. Ch. 1987)). Here, it is undisputed that Buchler, Pistoria, and
New Castle Insurance did not cause any CNIS client to breach its contract with CNIS
because all CNIS accounts were at-will, meaning that they were free to leave at any time
and select another insurance representative. (See App. 57-58.) Therefore, CNIS cannot
state a claim for tortious interference with existing business relations, and we will affirm.
E.
We will also affirm the District Court’s grant of summary judgment in favor of
Buchler, Pistoria and New Castle Insurance on the tortious interference with prospective
contractual relations claim. To establish such a claim under Delaware law, a plaintiff
must show: (1) the existence of a valid business relationship or expectancy; (2)
knowledge of the relationship or expectancy on the part of the interferer; (3) intentional,
wrongful interference which induces or causes a breach or termination of the relationship
or expectancy; and (4) resulting damages. Gill v. Del. Park, LLC, 294 F. Supp. 2d 638,
645 (D. Del. 2003) (citing Lucent Info. Mgmt., Inc. v. Lucent Tech., Inc., 5 F. Supp. 2d
238, 243 (D. Del. 1998)) (emphasis added). Here, CNIS has presented evidence that
Buchler, Pistoria, and New Castle Insurance knew, or should have known, that CNIS had
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a valid expectancy in the continued business of its existing clients. CNIS, though, has not
presented proof that Buchler, Pistoria, or New Castle Insurance wrongfully interfered
with that expectancy.
A competitor does not “wrongfully interfere” with its competitor’s at-will
customers by simply competing for their business. Restatement (Second) Torts § 768
(cited in Lipson v. Anesthesia Servs., P.A., 790 A.2d 1261, 1287 & n.80 (Del. Super.
2001)). Instead, the competitor is only liable if the plaintiff shows that the competitor
used “wrongful means” to compete. “Wrongful means” are tactics which are sufficiently
“predatory” that they form an independent basis for liability on the part of the defendant.
See CGB Occupational Therapy, Inc. v. RHA Health Servs., Inc., 357 F.3d 375, 388 (3d
Cir. 2004) (interpreting Restatement (Second) Torts § 768(1) and Pa. law). Such
“independently actionable conduct” includes a defendant’s breach of fiduciary duty,
“physical violence, fraud, civil suits [or] criminal prosecutions.” CGB, 357 F.3d at 389(quoting Restatement (Second) Torts § 768, cmt. e). Provided the conduct is “sufficiently
wrongful to be actionable by someone,” it provides the basis for a tortious interference
claim even if the party claiming tortious interference lacks standing to assert the claim.
CGB, 357 F.3d at 389.
Here, CNIS asserts that Buchler, Pistoria, and New Castle Insurance used
wrongful means because they solicited clients in violation of the Buchler and Pistoria
nonsolicitation and confidentiality provisions. The claim fails insofar as Buchler and
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Pistoria are concerned because there is no evidence that they breached the provisions, as
explained supra, sections A-C. The claim against New Castle Insurance is based on its
advertisement of Buchler’s and Pistoria’s arrival at the firm. While such action, if taken
by Pistoria may have violated her nonsolicitation agreement, CNIS has not pointed to any
“independently actionable” basis for liability against New Castle for the action. It has not
shown that New Castle was bound by the contractual provision that it did not sign, that
New Castle acted at Pistoria’s direction or aided and abetted Pistoria in taking an action
she was not otherwise permitted to take, or that New Castle had a fiduciary duty that
extended to CNIS. New Castle, without help from Pistoria, merely reported Pistoria’s
arrival at the firm. Without further proof, summary judgment in favor of New Castle
Insurance was appropriate on this claim as there is no evidence from which a reasonable
factfinder could conclude that New Castle Insurance intentionally used “wrongful
means.”
For these reasons, this Court will affirm the District Court’s decision in its entirety.
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