Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-03571/USCOURTS-ca8-06-03571-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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1

The Honorable Scott O. Wright, United States District Judge for the Western

District of Missouri.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-3571

___________

Janet Clifton, *

*

Appellant, *

* Appeal from the United States

v. * District Court for the 

* Western District of Missouri. 

American Family Mutual Insurance *

Company; American Family Life *

Insurance Company; American *

Standard Insurance Company of *

Wisconsin, *

 *

Appellees. * 

___________

Submitted: May 18, 2007

Filed: November 13, 2007

___________

Before MURPHY, HANSEN, and COLLOTON, Circuit Judges.

___________

COLLOTON, Circuit Judge.

Janet Clifton sued American Family Mutual Insurance Company and several

of its affiliates (collectively, “American Family”) for breach of contract. The district

court1

 granted summary judgment in favor of the defendants, and we affirm. 

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I.

In early 1993, Clifton entered into an agent agreement with American Family.

This contract permitted Clifton, as an independent contractor, to operate an insurance

agency in Raymore, Missouri. The agreement required Clifton to deliver policies and

collect revenue for American Family, and allowed American Family to audit the

agency’s books from time to time. Clifton also agreed to maintain records and

“refrain from any practices competitive with or prejudicial to [American Family].”

The contract provided that all records of policies and transactions would be American

Family’s property.

It is undisputed that for the first two years that the agreement was in force,

either party could terminate the relationship at will. After this two-year period,

section 6(h)(2) of the contract required American Family to give “notice in writing of

any undesirable performance which could cause termination of this agreement if not

corrected.” American Family agreed that once it had given this notice, it would not

“terminate this agreement for those reasons for a period of six months after that

written notice.” The company reserved the right to terminate the agreement without

notice for actions “prejudicial to the company,” or “any other dishonest, disloyal or

unlawful conduct.” 

Beginning in 2001, American Family began receiving an unusually high

number of customer complaints about Clifton’s agency. On October 8, 2002, Doug

Willis, the district sales manager for Clifton’s area, and Gladys Keith, the state sales

director, met with Clifton to discuss the problem of poor customer service at Clifton’s

agency. At this meeting, Willis issued Clifton and her agency a notice of undesirable

performance, in order to satisfy the agent agreement’s requirement of giving notice

before terminating the agreement. The notice cited numerous complaints from

Clifton’s clients. It directed Clifton that she must promptly respond to the needs of

her policyholders, and specified that she must return telephone calls or other requests

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for assistance in a professional and timely manner. The notice placed Clifton’s

agency “on a six-month program, starting October 15, 2002 through April 15, 2003,”

and warned Clifton that “[y]our agency[’s] future lies in your hands.”

After this notice, between January 1, 2003, and March 2, 2005, American

Family received fifty-one more complaints regarding Clifton’s agency. On January

20, 2005, Clifton had her annual “agency conference” with Zachery Edwards, who

had replaced Willis as the district sales manager supervising Clifton’s agency. At this

conference, Edwards told Clifton that the agency was not meeting its goal of retaining

customers, and that too many of Clifton’s customers were complaining about the

quality of her agency’s service. Edwards warned Clifton that one more complaint

would cause Edwards to issue a notice of undesirable performance. That complaint

arrived during the meeting, so Edwards discussed with his assistant the possibility of

issuing a notice. At this point, Edwards’s assistant informed him that Clifton already

had received a notice of undesirable performance more than two years earlier.

Edwards did not send another letter.

On March 1, 2005, American Family received a complaint from a customer that

cash payments made to Clifton’s agency were not being credited to his account. The

following day, another customer complained that her insurance was out of force

because of a billing problem, but that she could not reach anyone at Clifton’s agency.

At this point, Edwards’s assistant tried to set up a meeting between Clifton and the

customer. Lori O’Malley, Clifton’s daughter and an assistant at the agency, stated that

she and Clifton would arrive at the office by 2:30 p.m. Feeling that he should

investigate the complaint immediately, Edwards decided that he and his assistant

would visit Clifton’s agency to review her payment records. When the two arrived,

the only employee at the agency was Harold Clifton, Janet’s husband. A disgruntled

customer was waiting to see Janet Clifton, who was not present. 

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Edwards asked to review the agency’s receipt books. At some point, Harold

spoke on the telephone with O’Malley, and told her that Edwards and his assistant had

come to the office to investigate the complaints. O’Malley then called a police officer

she knew and asked for his help with a “situation” at the office. The officer arrived,

along with three other officers, at about the same time that Clifton and O’Malley

arrived. At this point, O’Malley told Edwards that he would need to schedule an

appointment to review the receipt book. O’Malley maintained that she would need

“hours and hours to find” the relevant records, so Edwards would have to return after

O’Malley had sufficient time to uncover them. After being asked to leave, Edwards

and his assistant departed the office.

In the aftermath of this incident, Edwards suggested terminating the agent

agreement, and his supervisors agreed. On March 7, 2005, Edwards delivered to

Clifton a letter terminating the agent agreement. The letter cited three bases for this

decision. First, the letter described the March 2 incident and stated that Clifton’s

“failure to allow [Edwards] to review the needed records is prejudicial to the interests

of American Family.” Second, the letter stated that Clifton’s agency had “mishandled

customer premium funds,” and had failed to submit “premium monies” to American

Family in a timely manner. Third, the letter recounted that American Family had

“logged numerous service complaints” from Clifton’s clients in recent months,

including Clifton’s failure to return telephone calls in a timely manner, and her failure

to process requested policy changes in a timely manner. The termination letter said

that Clifton’s “failure to provide timely and quality customer service” was prejudicial

to the company.

Clifton requested an administrative review of her termination by Jeff Burke,

American Family’s vice president for marketing. Burke observed that Clifton had

received a six-month notice of undesirable performance, as required by the agent

agreement, in October 2002, but that American Family “continued to receive customer

service complaints and encountered the premium submittal discrepancy.” He also

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explained that since Clifton’s termination, American Family had received “additional

complaints regarding customers’ inability to reach her and her failure to follow-up on

customer concerns during her tenure as an American Family agent.” Burke

recommended that the termination “stand as requested by field management.” 

II.

Clifton commenced this suit for breach of contract, alleging that the American

Family had terminated the agent agreement without the notice and six-month

probationary period required by the agreement. The district court granted summary

judgment for American Family, holding that the termination provisions of the

agreement did not require cause for termination. Alternatively, the court concluded

that the agreement was terminable at will after the passage of the six-month

probationary period. The district court also noted that Clifton’s refusal to cooperate

with American Family’s investigation “could reasonably be characterized as disloyal”

or “prejudicial” under the terms of the agent agreement. On appeal, Clifton maintains

that the agent agreement required another six-month probationary period before

American Family could terminate the agreement, and that she did not engage in

disloyal or prejudicial conduct. We review the district court’s grant of summary

judgment de novo, taking the facts in the light most favorable to Clifton.

Under Missouri law, which applies here, courts look only to the contract

language when interpreting the agreement, unless the language is ambiguous. Royal

Banks of Missouri v. Fridkin, 819 S.W.2d 359, 361 (Mo. 1991). In this case, we see

no ambiguity concerning whether American Family was permitted to terminate the

agency in March 2005 based on Clifton’s undesirable performance. Accepting for

purposes of analysis that the notice requirement of section 6(h)(2) of the agent

agreement applies to all undesirable performance by an agent with a tenure of more

than two years, cf. Adams v. Am. Family Mut. Ins. Co., No. 98-15711, 1999 WL

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386913, at *3 (9th Cir. 1999) (unpublished), we agree with the district court that

American Family provided the requisite notice.

The agreement requires American Family to give notice of “any undesirable

performance which could cause termination of this agreement if not corrected.” The

agreement provides that once notice was given, American Family could not “terminate

this agreement for those reasons for a period of six months after that written notice.”

American Family issued Clifton a notice of undesirable performance in October 2002,

and this notice placed Clifton “on a six-month program” ending in April 2003.

Clifton observes that American Family did not terminate the agreement at the

conclusion of this period, and she contends that it could not terminate the agreement

two years later without issuing another notice. In her view, “any termination resulting

from a six-month notice must be effectuated within a reasonable time after the end of

the [six-month] program,” and there is at least a genuine issue of fact as to whether the

timing here was “reasonable.”

We see no basis in the agreement to impose this requirement of additional

notice. The contract states only that American Family agreed not to terminate the

agreement based on the undesirable performance of which it gave notice – i.e.,

numerous service complaints and failure to provide timely and professional service

– “for a period of six months after that written notice.” Once notice was given, and

American Family complied with the requirement to withhold action for six months,

the agreement does not forbid American Family to terminate the agreement for the

reasons described in the notice at any time after the conclusion of the six-month

period. At most, the agreement gave agents with tenure of two years the additional

protection of one-time notice that American Family considered particular performance

undesirable, followed by a six-month safe harbor after receipt of that notice. But the

agreement did not guarantee Clifton that if the undesirable performance persisted or

recurred, then she would be given another window of six months to correct the

problem before American Family ended the relationship. Having been notified once

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that American Family considered numerous service complaints regarding failure to

provide timely service to be undesirable and unacceptable performance, Clifton was

entitled to no additional notice before American Family terminated the agreement on

that basis.

We also see no genuine issue of fact concerning the existence of “undesirable

performance” for which American Family could terminate Clifton’s agreement. The

initial notice of undesirable performance cited “numerous service complaints” from

Clifton’s customers and directed Clifton to respond promptly to the “service needs”

of her clients. When the company decided to end its association with Clifton,

Edwards relied on “numerous service complaints” and Clifton’s “failure to provide

timely and quality customer service.” In upholding the decision, Burke again cited

“customer service complaints” and Clifton’s “failure to follow-up on customer

concerns.” Whether or not each and every customer complaint was well founded,

there is no genuine dispute that the problem with a high volume of service complaints

persisted at Clifton’s agency, and American Family understandably considered that

circumstance to be undesirable and unacceptable, in and of itself. While the Edwards

letter also said that Clifton’s performance was “prejudicial” to the company, Burke’s

subsequent letter specifically cited Clifton’s “undesirable performance” and the

previous notice to her in October 2002. We need not decide, therefore, whether the

contractual provision concerning practices “prejudicial to the Company” supplies a

separate basis that would justify terminating Clifton’s agreement without any notice

whatever.

* * *

For these reasons, the judgment of the district court is affirmed.

______________________________

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