2004 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-29-2004

A. H. Meyers Co v. CNA Ins Co

Precedential or Non-Precedential: Non-Precedential

Docket No. 03-2592

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Recommended Citation

"A. H. Meyers Co v. CNA Ins Co" (2004). 2004 Decisions. Paper 1061.

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NOT PRECEDENTIAL

IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________________________

No. 03-2592

______________________________

A. H. MEYERS & COMPANY,

 Appellant

 v.

CNA INSURANCE COMPANY; AMERICAN

CASUALTY COMPANY OF READING, PENNSYLVANIA;

CONTINENTAL CASUALTY COMPANY; TRANSCONTINENTAL

INSURANCE COMPANY; VALLEY FORGE INSURANCE COMPANY, j/s/a

____________________________________

On Appeal From the United States District Court

For the District of New Jersey

(D.C. No. 97-cv-06107)

District Judge: Honorable Joseph H. Rodriguez

_________________________________________

Argued January 12, 2004

Before: ALITO, CHERTOFF and BECKER, Circuit Judges.

(Filed January 29, 2004)

STEVEN E. ANGSTREICH, ESQUIRE (Argued)

THOMAS S. HARTY, ESQUIRE

PAUL N. BONAVITA, ESQUIRE

Levy, Angstreich, Finney, Baldante, Rubenstein

& Coren, P.C.

1616 Walnut Street

Fifth Floor

Philadelphia, Pennsylvania 19103

Attorneys for Appellant
2

MITCHELL A. LIVINGSTON, ESQUIRE (Argued)

SUSAN STRYKER, ESQUIRE

CHRISTOPHER E. TORKELSON, ESQUIRE

Sterns & Weinroth

50 West State Street

P.O. Box 1298

Trenton, New Jersey 08607-1298

Attorneys for Appellees

__________________________

OPINION OF THE COURT

_____________________________

BECKER, Circuit Judge.

This is an appeal by plaintiff A.H. Meyers & Company (“Meyers”), an insurance

agency which had entered into an agency agreement that allowed it to write policies

underwritten by defendant CNA Insurance Company (“CNA”) and its affiliated

companies (also defendants), from an order of the District Court dismissing the case. 

Meyers appeals several rulings by the District Court that, taken together, left it without

any colorable theory of damages. We will affirm in all respects, though on somewhat

different grounds.

I.

The case was terminated under unusual circumstances, which raise a threshold

question of our appellate jurisdiction. The District Court excluded an expert report

proffered by plaintiff computing its damages, in the absence of which plaintiff was

unwilling to go to trial because it could not recover anything. Plaintiff therefore

requested dismissal so that it could appeal. Plaintiff made clear at oral argument before
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us that if it does not prevail on appeal there is nothing that it wishes to proceed on in the

District Court. Plaintiff further represented that if it prevails here, the only claims that it

will pursue in the District Court are those covered by the contested expert report. Under

these circumstances, we are satisfied that the order of the District Court dismissing the

case is a final order and that we have appellate jurisdiction.

II.

A.

Meyers is an independent agent. It writes insurance policies underwritten by

various companies, but CNA accounted for about half of Meyers’s business. Meyers was

writing various forms of personal insurance (automobile, home, and universal security)

and also commercial insurance on behalf of CNA at all relevant times. CNA had at least

two types of standard-form agreements with its agents: a “standard preferred agency

agreement” and a more-lucrative “high performance agency agreement” (an “HPA

agreement”). Starting in 1983, CNA and Meyers entered into an HPA agreement; this

was renewed at five-year intervals (i.e., in 1988 and 1993). 

An important term of the HPA agreement was the “110% guarantee.” This clause

reads, in relevant part:

We guarantee to provide an available market to you for a period of

five years from the effective date of this Agreement for those classes of

business contained in the various commission schedules attached to this

Agreement, subject to the maximum limits of liability and restrictions

contained in this High Performance Agency Binding Authority Schedule

attached to this Agreement, our existing underwriting rules, regulations, and

programs, all of the other terms and conditions of this Agreement, and the
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terms and conditions of your Annual Market Plan and the premium volume

growth plans contained therein.

For each applicable line of business, the available market guarantee

for each year’s market plan volume (new written premium) shall not be less

than 110% of the prior year’s amount of actual net written premium paid to

us and contained in your Producer Experience Report for such year.

Just what the “110% guarantee” means is subject to some dispute (as the District

Court acknowledged). It certainly means that something is to be larger each year than it

was in the preceding year. The dispute turns on whether that “something” is the total

premium volume (including renewals) or is the volume of new sales. (The latter would be

better for Meyers because in 1992 it was experiencing 30%+ growth in total premium

volume.) At all events, the District Court found this to be a disputed issue of contract

interpretation, and declined to grant summary judgment on it. That issue, however, is not

before us.

The language quoted above makes reference to an “Annual Market Plan,” (an

“AMP”) which is the other key document defining the volume of policies that an agency

under an HPA agreement could sell. The AMPs were signed by Meyers and CNA. They

are in large part just columns of figures establishing how much (in number and total

premium value) insurance Meyers could write on behalf of CNA in each of a number of

categories. What is significant is that, for the years in question here, certain personal line

categories—principally automobile and universal security—were listed at “zero,”

meaning that there could be no growth in the number of policies written in those

categories. Moreover, each AMP has a clause immediately above the signature block that
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reads:

To the extent any of the provisions of this Annual Market Plan change,

modify or supersede any other terms of the Agency Agreement, the

provisions contained in this plan shall control as respects business written

under this Plan.

We understand “the Agency Agreement” to refer to the HPA agreement that

Meyers and CNA had renewed in 1993. Although no date of signing is indicated on

either the HPA or any of the AMPs, both the HPA agreement renewal and the 1993 AMP

are dated “effective” January 1, 1993, and subsequent AMPs are dated “effective”

January 1, 1994 and 1995. Meyers for its part contends that it entered the AMPs under

economic duress from CNA, averring that CNA offered the AMPs to Meyers without

negotiation, and on a take-it-or-leave-it basis. 

B.

The backdrop to these AMPs was the ongoing crisis in New Jersey’s automobile

insurance market. In the 1980s, premiums had risen so high that the State stepped in with

several successive plans for insuring the vast number of effectively uninsurable motorists

in the state. Insurance companies doing business in the state were, under some of these

arrangements, required to underwrite automobile insurance, an exposure they desperately

wanted to minimize. The dealings between CNA and Meyers that led to this suit were

sharply affected, if not triggered, by these events: CNA wanted to limit Meyers’s

premium volume in order to limit its exposure to the New Jersey automobile insurance

market. 
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Meyers remonstrates that the strictures of the AMPs were not commercially

reasonable. It explains that it cannot occupy a sales force that is the bread and butter of

an insurance agency if it is unable to write a new policy unless one of its existing policies

has been cancelled or not renewed. We sympathize with Meyers, but view the state of

affairs as one imposed on the market (and the carriers) by the New Jersey insurance laws

and regulations.

C.

Meyers filed this suit in New Jersey Superior Court in 1997, and CNA removed it

to the United States District Court for the District of New Jersey. The complaint

advanced six theories of recovery: (1) breach of contract; (2) breach of covenant of good

faith; (3) misrepresentation; (4) violation of the New Jersey Consumer Fraud Act (CFA);

(5) intentional interference with existing business relationships; and (6) intentional

interference with reasonable expectation of economic benefit.

The District Court granted summary judgment to CNA on the CFA claim, holding

that the CFA does not apply to this transaction. Meyers appeals this determination. The

District Court refused to grant partial summary judgment to either party on the

interpretation of the “110% guarantee,” holding instead that its interpretation would be a

jury issue. However, it went on to consider whether Meyers had, at all events, waived

that guarantee by entering into the AMPs, which provided for essentially no growth. 

After citing a number of cases for the proposition that it is difficult, under New Jersey

law, to find waiver as a matter of law (i.e., it is a question of intent, usually for the finder
 1 1

We agree with the District Court that the claim of duress is without merit, and will

2 affirm on that issue. Any business pressures to which Meyers perhaps succumbed in

3 entering the AMPs are a far cry from the wrongful compulsion required under New Jersey

4 law for a finding of economic duress. See Continental Bank v. Barclay Riding Academy,

5 Inc., 459 A.2d 1163, 1174-79 (N.J. 1983).

7

of fact to decide), the District Court nonetheless held that Meyers had waived the “110%

guarantee,” whatever it really meant, by entering into the zero-growth AMPs in 1993,

1994, and 1995. In coming to this determination, the District Court also rejected as a

matter of law Meyers’s claim that it entered into the AMPs under duress.1

The case came to a head with some skirmishes about reports prepared by Meyers’s

expert witnesses. In brief, it appears that those expert reports ignored the District Court’s

holding on zero growth, and computed damages based on one interpretation or another of

the “110% guarantee.” The District Court struck Meyers’s final expert report, and, as

noted above, Meyers sought a dismissal with prejudice so that it might appeal,

recognizing that it was not worth taking the case to trial without a viable damages theory. 

On appeal, then, Meyers challenges both the CFA ruling and the waiver ruling on which

the District Court barred its expert’s liability computation.

II.

A.

We consider the CFA claim first. The New Jersey CFA provides that the

following is an unlawful business practice:

The act, use or employment by any person of any unconscionable

commercial practice, deception, fraud, false pretense, false promise,
8

misrepresentation, or the knowing[ ] concealment, suppression, or omission

of any material fact with intent that others rely upon such concealment,

suppression or omission, in connection with the sale or advertisement of any

merchandise or real estate . . . .

N.J. Stat. Ann. § 56:8-2 (emphasis added). This is the provision that the District Court

quoted (with the same emphasis) in dismissing Meyers’s CFA claim. The District Court’s

analysis is thorough and correct. Our precedent in J & R Ice Cream Corp. v. California

Smoothie Licensing Corp., 31 F.3d 1259 (3d Cir. 1994), is indistinguishable from this

case, and no intervening decision from the New Jersey Supreme Court has cast doubt on

the correctness of that case.

In J & R Ice Cream, this Court considered the applicability of the CFA to a

franchise agreement, and concluded that it did not apply. The facts were a fairly typical

franchising arrangement: The licensing company (the defendant) made a number of

promises to the franchisee (the plaintiff) about gross sales and so on. The franchisee

purchased the franchise (for a smoothie shop) and sales were not as good as promised, so

the franchisee sued. The franchise agreement provided that New Jersey law would apply,

and the case was tried to a jury in federal court. On appeal, this Court held that although

the CFA was intended to be applied expansively, it did not apply to a franchising

transaction between a franchise licensing company and a franchisee. We reached that

conclusion by holding that the term “merchandise” (which is defined by the CFA to

include “any objects, wares, goods, commodities, services or anything offered, directly or

indirectly to the public for sale,” N.J. Stat. Ann. § 56:8-1(c), does not encompass the sale
9

of franchises. J & R Ice Cream, 31 F.3d at 1270-74.

Even without repeating the extensive analysis in J & R Ice Cream, it should be

clear that there is no meaningful way to distinguish a franchise arrangement from an

agency arrangement. As we explained in J & R Ice Cream:

[franchises] are not covered by the Consumer Fraud Act because they are

businesses, not consumer goods or services. They never are purchased for

consumption. Instead they are purchased for the present value of the cash

flows they are expected to produce in the future and . . . bear no

resemblance to the commodities and services listed in the statutory

definition of “merchandise” or the rules promulgated by the Division of

Consumer Affairs.

31 F.3d at 1274 (footnotes omitted). The same can surely be said of insurance agency

relationships. Thus we affirm the District Court’s dismissal of Meyers’s CFA claim.

B.

Meyers’s second objection concerns the District Court’s striking of its expert’s

report, a result that flowed from that Court’s holding on waiver. We find the waiver

analysis unhelpful. We view the matter as one of contract interpretation. Looking closely

at the language of the HPA agreement and the AMPs, it becomes clear that neither is a

complete contract; rather, they make reference to each other: The HPA agreement

contemplates that it will be “subject to” the AMPs, and the AMPs themselves indicate

that they may “change, modify or supersede . . . terms” of the HPA agreement. Thus we

must view the contract between Meyers and CNA as a two-part contract, with the HPA

agreement sketching the rough outline of their long-term relationship, and the AMPs

serving to fill in detailed terms of their short-term relationship.
10

Looked at from this point of view, we see the case as a matter of unambiguous

contract interpretation: Meyers’s expert reports did not conform to the allocations

established in the AMPs, and we conclude that the District Court properly barred those

reports. That is because the zero growth entry in the AMP plainly means what is

said—zero. Plaintiff also remonstrates that the District Court’s earlier conclusions about

this being a jury issue—i.e., remitting to a jury the question whether the 110% guarantee

referred to growth in total volume or to growth in new sales volume—are inconsistent

with the Court’s ultimate conclusion. That may be so, but the conclusion reached by the

District Court pretermitted this jury issue and, moreover, was the right result. 

To recapitulate, the AMPs knowingly executed by Meyers clearly limited it to zero

growth in the years in question. Consequently, the expert report, which calculates

Meyers’s damages on the basis of a growth scenario, drawn from the HPA agreement

without reference to the AMP, was properly excluded from evidence. Accordingly, the

order of the District Court dismissing the plaintiff’s action will be affirmed.
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TO THE CLERK:

Kindly file the foregoing opinion.

 /s/ Edward R. Becker 

Circuit Judge
12