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Malley-Duff & Associates Inc. v. Crown Life Insurance Co.

May 7, 1984

MALLEY-DUFF & ASSOCIATES, INC., A CORPORATION
v.
CROWN LIFE INSURANCE COMPANY, A CORPORATION, AGENCY HOLDING CORPORATION, AN ILLINOIS CORPORATION, AGENCY HOLDING CORPORATION, AN OHIO CORPORATION, CLARKE BURTON LLOYD, AN INDIVIDUAL, KERRY PATRICK CRAIG, AN INDIVIDUAL, AND ELLIE M. GOLDSTEIN, AN INDIVIDUAL KERRY PATRICK CRAIG, APPELLANT IN NOS. 83-5396 AND 83-5406; MALLEY-DUFF & ASSOCIATES, INC., A CORPORATION
v.
CROWN LIFE INSURANCE COMPANY, A CORPORATION, AGENCY HOLDING CORPORATION, AN ILLINOIS CORPORATION, AGENCY HOLDING CORPORATION, AN OHIO CORPORATION, CLARKE BURTON LLOYD, AN INDIVIDUAL, KERRY PATRICK CRAIG, AN INDIVIDUAL, AND ELLIE M. GOLDSTEIN, AN INDIVIDUAL CROWN LIFE INSURANCE COMPANY AND CLARKE BURTON LLOYD, APPELLANTS IN NO. 83-5397; MALLEY-DUFF & ASSOCIATES, INC., A CORPORATION, APPELLANT IN NO. 83-5427
v.
CROWN LIFE INSURANCE COMPANY, A CORPORATION, AGENCY HOLDING CORPORATION, AN ILLINOIS CORPORATION, AGENCY HOLDING CORPORATION, AN OHIO CORPORATION, CLARKE BURTON LLOYD, AN INDIVIDUAL, KERRY PATRICK CRAIG, AN INDIVIDUAL, AND ELLIE M. GOLDSTEIN, AN INDIVIDUAL.



Appeal from the United States District Court for the Western District of Pennsylvania -- Pittsburgh

Author: Aldisert

Before: ALDISERT and HIGGINBOTHAM, Circuit Judges, and LATCHUM, District Judge.*fn*

Opinion OF THE COURT

ALDISERT, Circuit Judge.

Two major questions are presented in these cross-appeals from a judgment entered on a jury verdict in favor of Malley-Duff & Associates, Inc. In the appeal at No. 83-5427, we must decide whether the trial court erred in directing an adverse verdict on Malley-Duff's antitrust claim that alleged a collective refusal to deal (boycott) in violation § 1 of the Sherman Antritrust Act, 1q5 U.S.C. § 1. In the appeals at Nos. 83-5396, 83-5397, and 83-5406, our primary task is to determine whether a new trial should be granted based on an inconsistency in the jury's verdict on state common law claims. Subsidiary issues involve several questions relating to admissibility and sufficiency of evidence and alleged errors in jury instructions.

Malley-Duff, a Pittsburgh-based general insurance agency, charged that Crown Life Insurance Company, a Canadian life insurance carrier; Clark Lloyd, its former vice president in charge of United States general agencies; Kerry Craig, a former Crown employee; and Agency Holding Corporation, a multi-state general agency representing Crown Life in the United States, all participated in a per se group boycott against it in violation of § 1 of the Sherman Act. It also alleged that the defendants were liable under Pennsylvania common law because they conspired to tortiously interfere with Malley-Duff's Pittsburgh general agency contract with Crown Life and tortiously interfered with the contract. At the close of plaintiff's case, the district court directed a verdict for the defendants on the Sherman Act claim. After the close of all evidence, the jury found the defendants liable under one of the common law conspiracy charges and assessed damages of $900,000.00. All parties have appealed. We conclude that there was sufficient evidence on the antitrust claim to preclude a directed verdict and that the verdict form answers on the remaining state law claims were inconsistent. We, therefore, reverse the judgment of the district court and remand for a new trial.

I.

At trial, Malley-Duff presented a theory that LLoyd while in charge of United States general agencies for Crown Life, masterminded a scheme to create the Agency Holding Corporation in conjunction with Craig to take over a number of Crown Life territories, and that, inter alia, they intended to freeze Malley-Duff out of the Crown Life insurance business in Pittsburgh and replace it with an agency controlled by their interests. To evaluate the various contentions, it is necessary to set forth in some detail the evidence presented at trial. To the extent that the antitrust claim was terminated by a directed verdict, we invoke the familiar rule that we "consider the record as a whole and in the light most favorable to the non-moving party, drawing all reasonable inferences to support its contentions. " Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879, 883 (3d Cir.) (quoting Edward J. Sweeney & Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 115 (3d Cir. 1980), cert. denied, 451 U.S. 911 (1981)), cert. denied, 454 U.S. 893 (1981).

Malley-Duff presented direct and circumstantial evidence substantially as follows. In terms of insurance in force, Crown Life, located in Toronto, ranks in the top two percent of all life insurance companies operating in North America. At the time of the relevant events, Crown Life marketed its products in the United States through independent general agents, with agency contracts providing for commissions generally exceeding those offered by other life insurance companies.

The Malley-Duff agency was the oldest of seven Crown Life general agencies in Pennsylvania and represented Crown Life continuously and exclusively until its termination for a period of 23 years. The agency contract contained a 30-day termination clause. Malley-Duff did not have an exclusive franchise for Pittsburgh, Pennsylvania, but competed with the Jules Ehrman Agency, a brokerage and personal producing general agency, for the sale of Crown Life products in the area. Malley-Duff sold insurance through independent agents who, in turn, dealth with consumers. The Ehrman Agency engaged in both personal production and brokerage sales. Nothwithstanding this competition, Malley-Duff produced over $58,400.00 in business for Crown Life in the Pittsburgh area from 1967 to 1977.

Employed by Crown Life Insurance Company for over 30 years, Lloyd rose to the position for Senior Agency Vice-President for the United States. From at least 1976 until 1981, Crown Life vested Lloyd with complete and unfettered power to appoint and terminate general agents and to approve loans and financing for them.

Kerry Craig began with Crown in 1969 when he was only 21-years-old. For three years, he operated Xerox machines, but then was transferred to Lloyd's Agency Department where he served two years as a messenger until 1974. About a year later, Lloyd promoted the former Xerox operator and messenger to be a Supervisor of Agencies where he remained for two years until he left Crown Life to serve as the head of Agency Holding Corporation, which was formed in 1977 pursuant to Lloyd's instructions. Agency Holding became Crown Life's general agent in Chicago. Plaintiff contended that Lloyd and Craig controlled Agency Holding and used it to own and control general agencies in various parts of the United States, including Pittsburgh.

The creation of Agency Holding followed an interesting scenario. In October, 1976, Crown Life's general agent in Chicago died. Lloyd, responsible for finding a replacement, revealed a plan to a friend, Dennis Cunningham, whose aid he attempted to enlist. Lloyd divulged that he was forming a "mega general agency holding corporation." App. at 1505a-06a. Beginning in Chicago, Cleveland, Pittsburgh and Toledo, this mega general agency holding corporation was designed to control Crown Life general agencies throughout the eastern United States. Plaintiff contended that the plan called for Craig and Robert Ogelevee to join Lloyd in the operation, and Lloyd extended an invitation to Cummingham who declined to join.

Lloyd engaged Bruce Pennamped, an attorney in Indianapolis, Indiana, to incorporate Agency Holding Corporation in Illinois. Plaintiff contended that Pennamped was a nominee for Lloyd and Craig and that he was a front for Agency Holding until Craig, a Canadian national, received immigration permission to be employed in the United States. An indemnity agreement dated February 28, 1977, between the attorney and Crown sets forth Pennamped's duties more fully. Lloyd hired him to "assist in the organization, management, operation and financing of certain of [Crown Life's] general agencies located, or to be located, in Chicago, Illinois; Cleveland, Ohio; and, Pittsburgh [sic], Pennsylvania. . . ." App. at 2616a; Supp. App. at 635a-36a.Pursuant to Lloyd's instructions, Pennamped made arrangements in January 1977 for Agency Holding to be qualified to do business in Ohio and Pennsylvania.

On February 11, 1977, Lloyd and Craig met with Chicago insurance executive Ralph Wood and offered Wood a position with Agency Holding. Lloyd explained that Agency Holding would be the new Chicago general agent and that it would control ten or twelve territories throughout the east, including Cleveland and Pittsburgh. Four or five vice-presidents were to be appointed and were to split 20 percent of the Agency Holding stock. Lloyd refused to divulge the identity of the 80 percent shareholder, and Mr. Wood declined the offer.

In March 1977, Crown Life, through Lloyd, appointed Agency Holding as its Chicago general agent. Pennamped continued to be the nominal head of Agency Holding although he seldom visited Chicago.

In early 1977, Lloyd terminated Crown Life's general agent in Cleveland, and awarded a new general agency for Cleveland to the newly formed Agency Holding Corporation for Cleveland, Ohio. Oglevee was the president of Agency Holding-Ohio, but Craig, still employed by Crown Life, was the majority stockholder, although there was evidence that he contributed no capital for his majority interest. Ed Horning was employed as manager and Lloyd promised him (but never delivered) 40 percent of the stock, while 20 percent was to be held by "silent partners." Supp. App. at 709a-10a. Plaintiff produced testimony that neither Craig nor Oglevee ever made a real business decision affecting any agency without first consulting Lloyd.

On July 12, 1977, the Immigration and Naturalization Service granted Craig permission to work in this country. Three days later, Craig resigned from Crown Life effective September 1, 1977 and became the company's general agent in Chicago and Cleveland. He was just three years away from his position as messenger and Xerox operator at Crown Life.

Lloyd and Craig traveled to Pittsburgh in August 1977 and met with the principals of Malley-Duff. At that meeting, Lloyd professed dissatisfaction with Malley-Duff's production, which had exceeded $5,000,000 in 1976. He delivered an ultimatum: Malley-Duff would be terminated unless it met a production quota; moreover, Crown Life was either going to establish a new general agent for Pittsburgh or to expand the Ehrman Agency.

The quota Lloyd imposed upon plaintiff in August 1977 required Malley-Duff to produce $7,5000,000 of business by December 31, 1977, the year then in progress. Less than four months remained in the appropriate business year when plaintiff learned that it had to produce 50 perceant more of its business than it did the entire preceding year.

Evidence disclosed that Malley-Duff had never had a quota before, that Crown Life had never imposed a yearly quota upon any agency over nine months into the year to which it applied, and that Crown Life had never terminated a general agent producing more than $5,000,000 in business. Crown Life's internal documents disclose that 78 percent of Crown Life's United States general agencies did not produce $7,500,000 in 1977. Malley-Duff's 1977 production had placed it in the top third of all of Crown Life's 1977 general agents in the United States. Moreover, Malley-Duff was told that it had to produce $10 million in 1978, $15 million in 1979, and $20 million in 1980, an increase of 300 percent in four years.

Lloyd admitted that he did not expect Malley-Duff to meet the quota. App. at 1661a. In August 1977, Oglevee told another general agent that he and Craig would take over Malley-Duff when it was terminated. He and Craig also agreed that their Pittsburgh venture would be more profitable if Malley-Duff were eliminated. Lloyd, Craig and Ogelvee met with Mr. Ehrman in December 1977 to negotiate the acquisition of the Ehrman Agency.

Although Malley-Duff's 1977 production exceeded that of 1976, it fell short of the quota. On January 11, 1978, Crown Life mailed plaintiff a formal 30-day termination notice and, on February 13, 1978, Malley-Duff's business was transferred to the Ehrman Agency. Craig and Oglevee signed the formal purchase agreement for the Ehrman Agency and named the new agency Ehrman, Rantini, Oglevee & Craig (EROC), although Erham and Ratini were not owners. Craig and Oglevee and, according to plaintiff, also Lloyd, then had Crown Life's sole remaining franchise in Pittsburgh.

Direct evidence as to the true ownership of Agency Holding was not forthcoming at the trial, although there were permissible inferences that could have been drawn by the jury. At the time Craig was appointed general agent for Chicago, he admitted to one of Crown Life's officers that he owned only "part" of the holding company. He later admitted to another that he owned 20 percent of Agency Holding and refused to identify the majority owner. Crown Life investigated the matter but was not able to determine the real owner of ...


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