The opinion of the court was delivered by: Pollak, J.
Plaintiffs Brian M. Hayes ("Hayes") and Brian M. Hayes II ("Hayes II") were insurance salesmen who, while working for Brian M. Hayes & Associates (the "Agency"), sold and serviced insurance policies on behalf of the defendants, Ohio National Financial Services, Inc. ("Ohio National") and its wholly owned subsidiary, the O.N. Equity Sales Company ("ONESCO"). Since the end of the business relationship between plaintiffs and defendants, the parties have disputed their respective rights to access and use the customer information of policies that were sold and/or serviced by plaintiffs.
After the parties resolved any issues of preliminary injunctive relief by entering into a partial settlement agreement (see Docket No. 25, filed September 12, 2008), they sought a final determination from this court, sitting in diversity, as to the rights of the parties. Accordingly, the litigants appeared before this court for a hearing, at which the parties had the opportunity to put on witnesses and enter evidence into the record.*fn1 A final determination by this court of these issues, taking into account the evidence presented, requires this court to "find the facts specially and state separately its conclusions of law thereon." See Fed. R. Civ. P. 52(a). Thus, in this opinion I first find facts, and then state my conclusions of law.
On or about April 16, 1992, Ohio National and Hayes entered into a General Agent Contract (the "Old Contract"), and on or about February 17, 1995, Hayes and ONESCO entered into a Registered Representative Agreement (the "Rep. Agreement"). Pl. Proposed Findingsat ¶¶ 7-8 (Docket No. 46, filed May 26, 2009). On or about January 1, 1998, Hayes and Ohio National entered into a new General Agent Contract (the "G.A. Contract"), which superceded the Old Contract. Id. at ¶ 9. Hayes assigned the G.A. Contract to the Agency. Id. at ¶ 17. Hayes II, meanwhile, signed a Career Agent Agreement (the "C.A. Contract") with Ohio National in 2005.
Pursuant to the G.A. Contract, Hayes represented Ohio National as an agent, selling and servicing its insurance policies and recruiting other agents and brokers to represent Ohio National. Id. at ¶ 10-11. Ohio National also provided additional policyholders -- culled from its terminated, resigning, and/or retiring agents -- to Hayes for servicing; these reassigned policyholders were known as "orphans." See Def. Proposed Findings ¶ 8 (Docket No. 49, filed June 1, 2009). Hayes was compensated for servicing approximately 2,500 of these policies, and although he was not their original salesman, he was also able to sell new policies to his orphan clients. Id. at ¶¶ 9-10, 34-37. Although Hayes was not an exclusive agent of Ohio National, Hayes "placed 99.9 percent of [his] contracts with Ohio National." Tr. of March 26, 2009 Hearing at p. 25 (Docket No. 43, filed April 14, 2009).
Ohio National is a mutual insurance company, meaning that the company is owned by its policyholders. Id. at ¶¶ 113-115 . The Ohio National policies of insurance were non-cancellable life and disability insurance policies, as well as annuities. Id. at ¶¶ 109, 111.
At the center of this litigation is Section 4.03 of the G.A. Contract (which is the same, verbatim, as Section 8.05 of the C.A. Contract), entitled "Effect of Termination." It provides:
Upon termination of this Contract, the General Agent's authority and duties shall cease. The General Agent shall then make a final report and shall turn over to the Company all monies, receipts, notes, reports, policyowner records, books, stationery, blanks, forms, computer disks and software of any kind and any other property of the Company which the General Agent then or thereafter possesses or controls.
Def. Exh. C (the G.A. Contract); Def. Exh. F. (the C.A. Contract).*fn2 While Section 4.03 of the G.A. Contract relates to policyowner information, nowhere do any of the contracts reference the term "expirations." See Def. Proposed Findings ¶ 44.
The contracts mention no instance in which the policyowner information, such as that discussed in Section 4.03 of the G.A. Contract or Section 8.05 of the C.A. Contract, vests in the agent, i.e., Hayes or Hayes II. Hayes, however, testified to the court that he was told, by a representative of defendants, that "it's twenty percent a year vesting, that at the end of five years [the agent] own[s] the business. . . the policyholders and the business." See Tr. of March 26, 2009 Hearing at 107 (Docket No. 43, filed April 14, 2009). Hayes clarified, however, that in his alleged conversations with defendants' representative, he never inquired what effect termination might have on the alleged vesting plan, or on possession of particular policyholder information. Id. at 108. Hayes did contend that the vesting plan he testified to was "in the marketing material" that defendants provided to prospective agents, id.,but he did not provide the court with any such materials. Accordingly, I find that whatever vesting plan Hayes may have discussed with defendants' representative, it did not apply to the ownership of policyholder information.*fn3
The G.A. Contract outlines the duties of the agent. Under Section 1.02 of that contract, Hayes had "no authority to make, modify or discharge any contract of insurance." Def. Exh. C. Under Section 1.06, his "authority to collect premiums" was limited to the "initial" premium and he had "no authority . . . to collect premiums for which . . . billing forms are sent from the Company to the premium payor." Despite Hayes' testimony that the Agency had "had people pay premiums to the agency" at times, Docket No. 43 at 108, I find, based on the affidavit of Molly Akin, Ohio National's Senior Agency Auditor, that the general practice of Ohio National "agents like Hayes" was for premium notices to be "sent directly to the insured and typically remitted by the insured directly to Ohio National." See Akin Affidavit ¶ 7 (Def. Exh. JJ).
To assist plaintiffs with discharging their duties and to help them comply with regulatory insurance laws, defendants provided plaintiffs with access to an online database called "ON-Net." Plaintiffs entered into a user agreement (by clicking "accept" to clickthrough one of the registration screens on the computer) when they registered for ON-Net. Based on testimony in court, I find that Hayes accepted the terms and conditions of the ON-Net user agreement. See Def. Proposed Findings ¶¶ 49, 56-57
The user agreement stated that access to ON-Net would be terminated "immediately" upon termination of the G.A. Contract, and it granted Ohio National the right to terminate the user agreement at "any time." See Def. Exh. I. Regarding property rights, the user agreement provides:
Policyholder information maintained by Ohio National and made available through ON-Net is proprietary information of Ohio National. Unauthorized disclosure of proprietary information to any other person is prohibited.
Id. Only Ohio National, and not Hayes, was authorized to, and did, input information into ON-Net. See Def. Proposed Findings ¶¶ 62-63.
Section 4.02 of the G.A. Contract provides that either party may terminate the contract at will and without cause. Ohio National notified Hayes on July 25, 2008 that Ohio National was terminating the agency relationship.
Section 8.01(d) of the C.A. Contract provides that the C.A. Contract will be terminated "on the last day of July in any Calendar Year if, by July 1 of the Calendar Year, the Agent fails to meet the Semi-Annual Requirements described in Schedule C200." Def. Exh. F. In a letter dated July 29, 2008, Ohio National notified Hayes II that he was being terminated in accordance with Section 8.01(d) of the C.A. Contract. See Def. Exh. AE. Plaintiffs presented no evidence to suggest that Hayes II had, in fact, met his requirements.
Lastly, I find that defendants presented ample evidence showing that Hayes replaced his clients' insurance policies without giving notice of replacement, even though he was aware that Pennsylvania law required a notice of replacement and even after defendants had requested that he cease this ...