Court Opinion

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Date Created: 2015-10-13 21:07:17.639353+00
Date Added: 2024-06-11T11:46:43.120207
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Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

4-1-2002

In Re: Prof Ins Mgt
Precedential or Non-Precedential:

Docket No. 00-5201

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Recommended Citation
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http://digitalcommons.law.villanova.edu/thirdcircuit_2002/232

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PRECEDENTIAL

        Filed April 1, 2002

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 00-5201

IN RE: PROFESSIONAL INSURANCE MANAGEMENT,
        Debtor

PROFESSIONAL INSURANCE MANAGEMENT

v.

THE OHIO CASUALTY GROUP
OF INSURANCE COMPANIES;
THE OHIO CASUALTY INSURANCE;
OHIO LIFE INSURANCE COMPANY;
OHIO SECURITY INSURANCE COMPANY
and OCASCO BUDGET;
WEST AMERICAN INSURANCE COMPANY;
AMERICAN FIRE AND CASUALTY COMPANY,
        Appellants

On Appeal from the United States District Court
For the District of New Jersey
(No. 99-cv-05919 and No. 00-cv-00640)
District Judge: Honorable Jerome B. Simandle

Argued: May 14, 2001

Before: SLOVITER, AMBRO, and GARTH, Circuit Ju dges

(Filed: April 1, 2002)

        Charles X. Gormally (Argued)
        Carl J. Soranno (Argued)
        Brach, Eichler, Rosenberg, Silver,
         Bernstein, Hammer & Gladstone
        101 Eisenhower Parkway
        Roseland, New Jersey 07068

        Attorneys for Appellants
        The Ohio Casualty Group of
        Insurance Companies, et al.

        Michael A. Zindler
        Teich, Groh, Frost & Zindler
        691 State Highway 33
        Trenton, New Jersey 08619

        Samuel Mandel (Argued)
        136 West Route 38
        Moorestown, New Jersey 08057
        Attorneys for Appellee
        Professional Insurance Management

OPINION OF THE COURT

AMBRO, Circuit Judge:

The primary issue presented by this appeal, stemming
from a tortured procedural mess, is whether an insurance
company must turn over to its terminated agent
$259,315.95 in accrued commissions and interest, plus
additional commissions that continue to be earned. The
answer hinges on the interpretation of New Jersey’s Agency
Termination Statute found at N.J. Stat. Ann. S 17:22-6.14a
(West 2000), a matter of first impression in this Court.1
_________________________________________________________________

1. Because we recognized that this issue was one of first impression in
New Jersey, a majority of the panel granted a motion to certify the issue
under New Jersey Court Rule 2:12A to the New Jersey Supreme Court.
The motion had been granted just prior to oral argument initially
scheduled for December 13, 2000. As a consequence, we filed a Petition
for Certification with the New Jersey Supreme Court on January 24,
2001. On February 21, 2001, the New Jersey Supreme Court denied our
Petition, thereby making necessary this opinion.

                                2

Specifically, the parties call upon us to resolve the question
of whether The Ohio Casualty Group of Insurance
Companies ("Ohio Casualty") terminated its agent,
Professional Insurance Management ("PIM"), essentially at
will or, instead, for gross and willful misconduct or failure
to pay over to Ohio Casualty moneys due after receipt of a
written demand therefor. See N.J. Stat. Ann.S 17:22-
6.14a(d), (e). The Bankruptcy Court ruled, and the District
Court affirmed, that the termination was at will. The
consequence of this ruling is that New Jersey’s Agency
Termination Statute requires Ohio Casualty to pay PIM
commissions on all policies for one year following
termination, and on automobile insurance policy renewals
so long as PIM services the accounts. See N.J. Stat. Ann.
S 17:22-6.14a(d), (l). Under a contrary ruling, PIM would
have no right to these commissions.

The remaining issues on appeal arise from the ruling that
the termination was at will, namely, (1) whether Ohio
Casualty can successfully interpose the equitable remedy of
recoupment against moneys PIM owed prior to its petition
under Chapter 11 of the Bankruptcy Code, and (2) whether
PIM is entitled to pre-judgment interest on the
commissions.

For the reasons that follow, we vacate the order of the
District Court requiring Ohio Casualty to turn over to PIM
commissions due and accruing, plus interest. We remand
to the Bankruptcy Court to apply to the facts of this case
the legal determination that the initial at-will termination
can become a termination for cause between the notice of
termination and the effective termination date. We also
vacate the orders denying the equitable remedy of
recoupment and awarding PIM pre-judgment interest,
pending the resolution of this question by the Bankruptcy
Court on remand.2
_________________________________________________________________

2. The claims of constructive trust and contempt of court addressed by
the District Court were not raised on appeal. Therefore, we render no
opinion on those issues and the orders with respect to each remain
unchanged.

                                3

I. Factual and Procedural Background

The facts of this case are set out at length in previous
opinions of this Court3 and the District Court,4 and the
letter opinions of the Bankruptcy Court dated July 12,
1999 and October 22, 1999. The following discussion
recounts the factual history bearing on the matters in this
appeal. Despite our shortened recounting of the facts, they
nonetheless remain complex.

PIM is a New Jersey-licensed insurance broker and agent.
In 1980, PIM entered into an agency agreement with Ohio
Casualty that permitted PIM to market Ohio Casualty’s
personal and commercial insurance policies. This
agreement permitted Ohio Casualty to cancel the contract
on 90 days notice and also reads in relevant part:

        The Company [Ohio Casualty], in the exercise of the
        right reserved to it above, may, at its option, retain all
        commissions which are payable or which may become
        payable under contracts of insurance represented by
        such expirations, or renewals thereof, and apply same
        against the amount of the Agent’s [PIM’s] indebtedness
        to the Company, or may sell, assign, transfer or
        otherwise dispose of such expirations to any other
        agent or broker. If, in either event, the Company does
        not realize sufficient return to satisfy Agent’s
        indebtedness to the Company in full, the Agent shall
        remain liable for the unpaid balance. Amounts realized
        by the Company in excess of such indebtedness, less
        expenses incurred by the Company in handling or
        other disposition of such expirations, shall be paid to
        the Agent.

        . . . This agreement may be suspended or canceled for
        non-payment of balances due. During suspension,
        commissions due and payable to the Agent for
        Automatic Renewal type policies will be applied against
        balances due, to the extent of the indebtedness.
_________________________________________________________________

3. See In re Professional Ins. Management, 130 F.3d 1122 (3d Cir. 1997).

4. See Professional Ins. Management v. The Ohio Cas. Group of Ins. Cos.,
246 B.R. 47 (D.N.J. 2000).
                                4

In re Professional Ins. Management, No. 94-1312, letter op.
at 10 (Bankr. D.N.J. July 12, 1999).

PIM located customers, ascertained their insurance
needs, and sold them Ohio Casualty policies. For personal
automobile insurance policies, Ohio Casualty collected
premiums directly from the policyholders and sent PIM its
sales commissions. For other types of insurance, namely
commercial lines, PIM collected the premiums, deducted its
commissions, and then forwarded the balance to Ohio
Casualty.

Each month, a reconciliation process occurred whereby
Ohio Casualty provided PIM an account statement detailing
each insurance account, the type of insurance, the gross
premium, the commission rate, and details of the amounts
currently due, past due and due in the future. PIM would
customarily receive Ohio Casualty’s monthly statement at
the beginning of each month. PIM would then compare its
own records to the statement, and would reconcile the
items contained in the currently due column. If PIM
disagreed with an entry, it would line off the entry and
provide an explanation and documentation in support. Ohio
Casualty would then carry forward the item into the past
due column where it would remain until Ohio Casualty
researched the item and the parties resolved the issue.
PIM’s reconciliation and payments were due by the 15th of
the month. If an item that Ohio Casualty determined was
due was not paid after a "please remit" notice, an Ohio
Casualty account technician would issue an "open item
letter" demanding payment and, at times, threatening
suspension unless payment was received by a certain
deadline. The relevant point is that in the reconciliation
process the parties mixed the policy types and took credits
against all policies in one monthly transaction, as per the
agency agreement. In addition, in the case of agent
indebtedness, the agency agreement specifically called for
the application of commissions due against balances due
regardless of the policy type.

In order to make its product more attractive in a highly
competitive market, Ohio Casualty formed its own premium
finance company, Ocasco. Ocasco offered to finance large
premiums, particularly those in the commercial market, at

                                5

no interest for premiums over $10,000 and at a nominal
interest rate for premiums under $10,000. The vast
majority of premiums on commercial policies sold by PIM,
96%-98% of its premiums in 1992 and 1993, were
financed. In those cases, an agreement was prepared by the
agent -- PIM, signed by the insured, and sent to Ocasco.
Ocasco would process the agreement and send a voucher
back to PIM. PIM then forwarded the voucher in lieu of
cash to Ohio Casualty when it made its monthly payments.
Because PIM could not deduct its commissions from the
vouchers directly, it was using the small percentage of cash
receipts to pay its commissions. The volume of premiums
PIM financed through Ocasco and the length of voucher
processing time created accounting difficulties for PIM. As
a result, PIM would credit vouchers prematurely and use
vouchers-in-hand to credit premiums in the pipeline. The
latter practice was permitted by an agreement between
Ocasco and PIM.

Ohio Casualty complained of PIM’s accounting
procedures as early as 1989. PIM typically had 25% or
more of its amount due in the past due column, and PIM’s
accounting practices with respect to past due balances and
credits were the subject of at least nine letters from Ohio
Casualty. After much discussion between the parties,
Ocasco agreed to send its vouchers directly to Ohio
Casualty. Despite this improvement and PIM’s clarifications
of its past due balances, accounting problems continued
into 1993. PIM was twice threatened with suspension that
year.

Finally, on November 15, 1993, Ohio Casualty sent the
following letter of termination to PIM:

        We have had a lot of conversations about continued
        existing problems with your agency regarding clearing
        accounting differences in a timely fashion resulting in
        a continued high "over 90 days" debt and continued
        problems with your agency reimbursing Ocasco Budget
        promptly on accounts that have been canceled. On
        many, the Accounting Department had to reimburse
        Ocasco and now since we have requested your agency
        not to use Ocasco on new accounts, we are beginning

                                  6

        to get similar problems and requests from other
        premium finance companies.

        Along   with the above problems you are heading for the
        third   consecutive unprofitable year (twelve months
        86.9%   thru October 30, 1993) and a six year Loss
        Ratio   of 62.6%.

        At this time it is necessary that I advise you that we
        are terminating your Agency Agreement effective March
        1, 1994 and that you will no longer have the authority
        to write new business or bind coverage effective
        November 19, 1993. We will honor all prior binding
        commitments, subject to our underwriting rules, made
        prior to that date.

In re Professional Ins. Management, No. 94-1312, letter op.
at 32 (Bankr. D.N.J. July 12, 1999). This initial termination
letter was followed by an "official form letter" dated
November 19, 1993 establishing the procedures for
termination and renewals. Attached to this form letter were
copies of the agency termination notice and offer letters
that Ohio Casualty intended to send to PIM’s insureds. Id.
at 33. The forms submitted to the New Jersey Department
of Insurance noted that the reasons for PIM’s termination
were poor loss ratio, continued accounting differences, and
continued payment problems with premium finance
companies and canceled accounts. Id. at 34. The
termination was effective on March 1, 1994. Thereafter, PIM
was to continue to receive commissions on commercial
renewals for one year following termination and on
automobile policy renewals so long as PIM serviced the
accounts, in accordance with the notice of termination and
the New Jersey Agency Termination Statute.5
_________________________________________________________________

5. The New Jersey Agency Termination Statute, codified at N.J. Stat.
Ann. S 17:22-6.14a, governs the rights of a terminated agent. The
relevant subsections (d), (e) and (l) provide:

        d. Termination of any such contract for any reason other than one
        excluded herein shall become effective after not less than 90 days’
        notice in writing given by the company to the agent and the
        Commissioner of Banking and Insurance. No new business or
        changes in liability on renewal or in force business, except as

                                7

At the time Ohio Casualty sent the notice of termination,
it claimed that PIM owed over $200,000. In November and
_________________________________________________________________

        provided in subsection l. of this section, shall be written by the
        agent for the company after notice of termination without prior
        written approval of the company. However, during the term of the
        agency contract, including the said 90-day period, the company
        shall not refuse to renew such business from the agent as would be
        in accordance with said company’s current underwriting standards.
        The company shall, during a period of 12 months from the effective
        date of such termination, provided the former agent has not been
        replaced as the broker of record by the insured, and upon request
        in writing of the terminated agent, renew all contracts of insurance
        for such agent for said company as may be in accordance with said
        company’s then current underwriting standards and pay to the
        terminated agent a commission in accordance with the agency
        contract in effect at the time notice of termination was issued. Said
        commission can be paid only to the holder of a valid New Jersey
        insurance producer’s license. In the event any risk shall not meet
        the then current underwriting standards of said company, that
        company may decline its renewal, provided that the company shall
        give the terminated agent and the insured not less than 60 days’
        notice of its intention not to renew said contract of insurance.

        e. The agency termination provisions of this act shall not apply to
        those contracts:

        (1) in which the agent is paid on a salary basis without commission
        or where he agrees to represent exclusively one company or to the
        termination of an agent’s contract for insolvency, abandonment,
        gross and willful misconduct, or failure to pay over to the company
        moneys due to the company after his receipt of a written demand
        therefor, or after revocation of the agent’s license by the
        Commissioner of Banking and Insurance; and in any such case the
        company shall, upon request of the insured, provided he meets the
        then current underwriting standards of the company, renew any
        contract of insurance formerly processed by the terminated agent,
        through an active agent, or directly pursuant to such rules and
        regulations as may be promulgated by the Commissioner of Banking
        and Insurance; . . .

        *   *   *

        l. A company which terminates its contractual relationship with an
        agent subject to the provisions of subsection d. of this section shall,
        at the time of the agent’s termination, with respect to insurance

                                8

December of 1993, Ohio Casualty continued to send PIM
monthly statements and reconciliations and PIM continued
to make payments. Correspondence between Ohio Casualty
and PIM confirmed Ohio Casualty’s intent to renew
commercial policies through PIM for one year. In January of
1994, however, PIM filed suit against Ohio Casualty and
shortly thereafter the statements and accounting practices
between them broke down completely. Id. at 34. Also in
January of 1994, PIM began to take improper credits
against moneys owed to Ohio Casualty, a fact not subject
to dispute on appeal. The essence of the impropriety was
_________________________________________________________________

        covering an automobile as defined in subsection a. of section 2 of
        P.L.1972, c. 70 (C.39:6A-2), notify each named insured whose policy
        is serviced by the terminated agent in writing of the following: (1)
        that the agent’s contractual relationship with the company is being
        terminated and the effective date of that termination; and (2) that
        the named insured may (a) continue to renew and obtain service
        through the terminated agent; or (b) renew the policy and obtain
        service through another agent of the company.

         Notwithstanding any provision of this section to the contrary, no
        insurance company which has terminated its contractual
        relationship with an agent subject to subsection d. of this section
        shall, upon the expiration of any automobile insurance policy
        renewed pursuant to subsection d. of this section which is required
        to be renewed pursuant to section 3 of P.L.1972, c. 70 (C.39:6A-3),
        refuse to renew, accept additional or replacement vehicles, refuse to
        provide changes in the limits of liability or refuse to service a
        policyholder in any other manner which is in accordance with the
        company’s current underwriting standards, upon the written
        request of the agent or as otherwise provided in this section,
        provided the agent maintains a valid New Jersey insurance
        producer’s license and has not been replaced as the broker of record
        by the insured. However, nothing in this section shall be deemed to
        prevent nonrenewal of an automobile insurance policy pursuant to
        the provisions of section 26 of P.L.1988, c. 119 (C.17:29C-7.1).

         The company shall pay a terminated agent who continues to
        service policies pursuant to the provisions of this subsection a
        commission in an amount not less than that provided for under the
        agency contract in effect at the time the notice of termination was
        issued.

N.J. Stat. Ann. S 17:22-6.14a(d), (e) and (l) (West 2000).

                                9

that PIM applied credit for commissions it earned on
personal automobile policy lines against the commercial
premiums it collected on behalf of Ohio Casualty, claiming
that Ohio Casualty had wrongly withheld these same
personal automobile policy lines commissions beginning in
October of 1993.

In a letter dated May 26, 1994, nearly three months after
PIM was effectively terminated, Ohio Casualty demanded
that PIM surrender to it the agency records, declared that
PIM was indebted to it for $294,284.29, and demanded
payment. Also in May, PIM attempted to sell its book of
business ("Book of Business") to Anderson Jackson Metts
("AJM"). In anticipation of the sale, PIM brokered certain
contracts to AJM. After Ohio Casualty successfully obtained
injunctive relief to have the proceeds of the sale, if any,
placed in escrow, the sale fell through.

On August 5, 1994, PIM filed for bankruptcy protection
under Chapter 11 of the United States Bankruptcy Code,
11 U.S.C. S101, et seq.6 PIM’s indebtedness to Ohio
Casualty as of the time of the petition was later fixed at
$252,642.40.7 On August 15, 1994, Ohio Casualty sent
letters to PIM’s customers informing them of the
termination of the agency relationship and of their options.
Pursuant to a Bankruptcy Court order under which the
status quo was maintained, Ohio Casualty took over PIM’s
Book of Business in September of 1994, and employed AJM
as the servicing agent. This order was appealed to the
District Court. On June 30, 1995, the District Court
affirmed the Bankruptcy Court’s ruling that Ohio Casualty
_________________________________________________________________

6. Under subsection (e) of the Agency Termination Statute, the
termination of an agent for insolvency precludes the agent’s collection of
commissions pursuant to subsection (d). In this case (and without
considering the effect of the S 365(e)(1)(A) of the Bankruptcy Code
banning, inter alia, the termination of a contract solely because of
insolvency), because PIM filed for bankruptcy five months after the
effective date of termination, its insolvency could not have been a reason
for its termination and subsection (e) does not apply on this basis.

7. The fixing of Ohio Casualty’s pre-petition claim was resolved on
September 10, 1996, after lengthy hearings on PIM’s motion to expunge
Ohio Casualty’s claim. In re Professional Ins. Management, No. 94-1312,
letter op. at 35 n.53 (Bankr. D.N.J. July 12, 1999).

                                10

owned the Book of Business, but reversed and remanded as
to whether it could be sold or transferred.

On March 7, 1996, the Bankruptcy Court reversed itself
and held that Ohio Casualty had an unperfected security
interest in PIM’s Book of Business, and directed the Book
of Business to be returned to PIM effective April 1, 1996.
On April 19, 1996, the Bankruptcy Court (1) ordered Ohio
Casualty to rescind notices of non-renewal to 65 of 69 auto
policy holders under New Jersey’s 2 for-1 requirement;8 (2)
tolled the 12-month statutory period giving PIM a right to
renewals on commercial policies from April 1, 1996 to June
30, 1996 (subtracting several months for PIM’s delay in
seeking relief from an earlier ruling); and (3) granted PIM
the right to collect on commissions post April 1, 1996.9

On July 8, 1996, the District Court (Rodriguez, D.J.)
affirmed the April 19, 1996 decision as to the tolling period
and to Ohio Casualty having an unperfected security
interest in the Book of Business, but reversed the 2-for-1
decision and the rescission of the cancellation letters, and
found Ohio Casualty had no perfected security interest in
post-petition commissions owed to PIM. In re Professional
Ins. Management, No. 96-2499, slip op. at 16, 25-26, 30
(D.N.J., July 8, 1996). The District Court further remanded
to the Bankruptcy Court the issue of whether PIM’s
termination was covered under subsection (d) or (e) of the
Agency Termination Statute. Id. at 15. This Court upheld
the District Court’s reversal with respect to the 2-for-1
ruling and the holding that the Bankruptcy Court could not
_________________________________________________________________

8. New Jersey’s 2-for-1 insurance regulation, which provides that for
every New Jersey auto policy canceled the carrier must write two new
policies, does not directly bear on this appeal. The issues arising during
the period post-termination and prior to April 1, 1996, and the claim
that Ohio Casualty terminated PIM in retaliation for PIM’s refusal to
violate the New Jersey Fair Automobile Insurance Reform Act of 1990,
N.J. Stat. Ann. S 17:33B-1 (West 2000) (the"FAIR Act"), are before the
Bankruptcy Court in a different proceeding.

9. Ohio Casualty contends on appeal that the proceeds of this sale and
commissions earned on commercial policies pre-April 1, 1996 arise from
the identical commercial expirations that PIM failed to remit premiums
on pre-petition, and therefore recoupment should be ordered. Ohio
Casualty’s Motion to Expand the Record at 6.

                                11

order Ohio Casualty to pay commissions to PIM until the (d)
or (e) determination was made. In re Professional Ins.
Management, 130 F.3d 1122 (3d Cir. 1997).

In July of 1998, the Bankruptcy Court held seven days of
hearings on the (d) versus (e) issue. In the midst of these
hearings, Ohio Casualty issued a Notice of Discontinuance
informing PIM that effective September 1, 1998, Ohio
Casualty would stop accepting renewals and service
requests from PIM for automobile policies under subsection
(l) and would not pay PIM commissions. The Bankruptcy
Court enjoined this Notice of Discontinuance.

Throughout the hearings, the Bankruptcy Court limited
its inquiry into the record to the period prior to November
15, 1993 -- the notice of termination date. The Bankruptcy
Court found that, as of the month-end prior to the
termination notice, only $24,774 of the $217,000 listed as
due to Ohio Casualty prior to reconciliation was actually in
the past due column, and of that amount only $1,930 was
marked due and payable.10 Such a small amount of arrears,
the Bankruptcy Court ruled, did not substantiate Ohio
Casualty’s claim that PIM was terminated for gross and
willful misconduct or for failure to pay over premiums due
under subsection (e) of the Agency Termination Statute. In
re Professional Ins. Management, No. 94-1312, letter op. at
59-60 (Bankr. D.N.J. July 12, 1999). The Bankruptcy Court
concluded that PIM’s termination therefore fell under
subsection (d) of the Agency Termination Statute,
essentially the "at will" provision. This meant that PIM was
entitled to renewal commissions for one year on all policies,
subject to the tolling period instituted by the Bankruptcy
Court, and for renewal commissions on automobile policies
under subsection (l) of the statute for as long as PIM
serviced those accounts.

In a Supplemental Decision on September 15, 1999, the
Bankruptcy Court rejected Ohio Casualty’s claims of
recoupment and constructive trust, and on October 14,
1999, the Bankruptcy Court ordered that all commissions
_________________________________________________________________

10. Support for the Bankruptcy Court’s accounting for the reduction in
the amount PIM owed Ohio Casualty at the time of the notice of
termination is detailed in its July 12, 1999 letter opinion.

                                12

after April 1, 1996 be turned over to PIM. Ohio Casualty
appealed and requested a stay. After Ohio Casualty failed to
turn over the commissions, the Bankruptcy Court found
Ohio Casualty in contempt in a letter opinion dated
November 17, 1999. The Bankruptcy Court issued its final
decision in the matter before us on January 5, 2000 in a
letter opinion wherein it ruled that Ohio Casualty owes PIM
commissions plus pre-judgment interest from April 1, 1996
forward, in the amount of $259,315.95.

The District Court affirmed the Bankruptcy Court’s
determination that PIM’s termination fell under subsection
(d) of the Agency Termination Statute and ruled that the
Bankruptcy Court’s failure to consider evidence of PIM’s
conduct between the time of notice and the time of
termination was error, though harmless in the context of
the District Court’s analysis. Professional Ins. Management
v. The Ohio Cas. Group of Ins. Cos., 246 B.R. 47, 65 (D.N.J.
2000). It affirmed the denial of recoupment and
constructive trust and the award of prejudgment interest.
Id. at 67, 69, 71. However, the District Court reversed the
finding that Ohio Casualty was in contempt for failure to
turn over commissions to PIM on the ground that Ohio
Casualty filed a timely appeal after the automatic ten-day
stay. Id. at 73. This appeal followed.

II. Jurisdiction

As a threshold matter, we must be satisfied that we have
appellate jurisdiction. Metro Transp. Co. v. North Star
Reinsurance Co., 912 F.2d 672, 676 (3d Cir. 1990). At oral
argument, we posed the question of the statutory basis for
exercising jurisdiction in this case. To resolve this question,
we sought supplemental briefing from the parties.
Specifically, we asked whether we could exercise
jurisdiction over an appeal based on the traditional
jurisdiction provisions in 28 U.S.C. SS 1291-1292, the
bankruptcy jurisdiction provision in 28 U.S.C. S 158(d), or
whether we should otherwise exercise jurisdiction in light of
the factors set forth in In re Blatstein, 192 F.3d 88, 94 (3d
Cir. 1999). After reviewing the submissions of the parties,
we conclude that jurisdiction is proper in this case under
28 U.S.C. S 158(d) and shall entertain the appeal.

                                13

In the context of an appeal from the District Court
reviewing a Bankruptcy Court decision, our own
jurisdiction is prescribed by S 158(d). Consequently, our
review is limited to final orders and judgments of the
bankruptcy courts and district courts: "The courts of
appeals shall have jurisdiction of appeals from all final
decisions, judgments, orders, and decrees entered under
subsections (a)11 and (b)12 of this section." 28 U.S.C.
S 158(d). Although district courts may grant leave to appeal
from interlocutory orders, no such power is granted to
courts of appeals. In re White Beauty View, Inc. , 841 F.2d
524, 525 (3d Cir. 1988).

"The finality of the [orders] must be resolved with respect
to the decisions of both the bankruptcy judge and the
district court." Id. at 526 (citing In re Meyertech Corp., 831
F.2d 410, 413-14 (3d Cir. 1987)). Ordinarily in civil
litigation only those orders that dispose of all issues as to
all parties to the case are considered final. In re Meyertech
Corp., 831 F.2d at 414. However, considerations unique to
bankruptcy appeals have led us consistently in those cases
to construe finality in a more pragmatic, functional sense
than with the typical appeal. In re Amatex Corp., 755 F.2d
1034, 1039 (3d Cir. 1985). With this understanding,

        [w]e interpret finality pragmatically in bankruptcy
        cases because these proceedings often are protracted
        and involve numerous parties with different claims. To
_________________________________________________________________

11. Subsection (a) of section 158 grants the District Court jurisdiction to
hear appeals

        (1) from final judgments, orders, and decrees;
        (2) from interlocutory orders and decrees issued under section
        1121(d) of title 11 increasing or reducing the time periods referred
        to in section 1121 of such title; and

        (3) with leave of the court, from other interlocutory orders and
        decrees;

        of bankruptcy judges entered in cases and proceedings referred to
        the bankruptcy judges under section 157 of this title.

28 U.S.C. S 158(a).

12. This jurisdictional subsection is not implicated by this appeal.

                                14

        delay resolution of discrete claims until after final
        approval of a reorganization plan, for example, would
        waste time and resources, particularly if the appeal
        resulted in reversal of a bankruptcy court order
        necessitating re-appraisal of the entire plan.

In re White Beauty View, 841 F.2d at 526.

This relaxed sense of "practical finality" is not without
limitation. It must be balanced against our traditional
antipathy toward piecemeal appeals.13 In re Meyertech
Corp., 831 F.2d at 414. For example, although an order of
the bankruptcy court expunging a creditor’s claim is final,
Walsh Trucking Co., Inc. v. Insurance Co. of North America,
838 F.2d 698, 701 (3d Cir. 1988), an order of the
bankruptcy court finding the debtor’s attorneys subject to
sanctions (but not determining the amount or form of the
penalty) is not final, In re Jeannette Corp., 832 F.2d 43 (3d
Cir. 1987). Similarly, in In re Brown, 803 F.2d 120 (3d Cir.
1986), we ruled that a district court order remanding to the
bankruptcy court for a determination of damages was not
a final order.

In this case, the District Court was satisfied that
jurisdiction was proper either as an appeal of a final order
of the Bankruptcy Court under 28 U.S.C. S 158(a) or as an
appeal of an interlocutory order granting an injunction
_________________________________________________________________

13. Even within the context of S 1291, balancing "the inconvenience and
costs of piecemeal review on the one hand and the danger of denying
justice by delay on the other" is appropriate. Cox Broadcasting Corp. v.
Cohn, 420 U.S. 469, 479 n.7 (1975). As the Supreme Court noted in Cox
Broadcasting:

        [O]ur cases long have recognized that whether a ruling is "final"
        within the meaning of S 1291 is frequently so close a question that
        decision of that issue either way can be supported with equally
        forceful arguments, and that it is impossible to devise a formula to
        resolve all marginal cases coming within what might well be called
        the "twi-light zone" of finality. Because of this difficulty this Court
        has held that the requirement of finality is to be given a "practical
        rather than a technical construction." Cohen v. Beneficial Industrial
        Loan Corp., 337 U.S. 541, 546 (1949).

Id.

                                15

under 28 U.S.C. S 1292(a)(1).14 Professional Ins.
_________________________________________________________________

14. The Bankruptcy Court order of July 30, 1999, pertaining to the
applicability of subsection (e) of the Agency Termination Statute,
provides in relevant part:

Ordered as follows:

        1. That Ohio’s cross-motion for an order declaring that N.J.S.A.
        17:22-6.14a(e) restricts Debtor’s entitlement to renewal commissions
        is denied;

        2. That the provisions of N.J.S.A. 17:22-6.14a(d) apply regarding
        the termination of Debtor’s agency relationship with Ohio;

        3. That any other issues remaining for resolution shall proceed in
        accordance with this Court’s Opinion filed July 12, 1999 . . . .

The Bankruptcy Court order of October 14, 1999, pertaining to the
turnover of commissions and clarified in the letter opinion of October 22,
1999, reads in relevant part:

        ORDERED that the Debtor is entitled to receive commissions due on
        its Ohio book of business from April 1, 1996 and continuing
        through and after the date of this Order; and it is further

        ORDERED that Ohio be and is hereby directed to turnover to the
        Debtor within seven (7) days from the date of the entry of this Order,
        the sum of Two Hundred Sixteen Thousand Five Hundred Sixty-nine
        and 79/100 ($216,569.79) Dollars in direct bill commissions that
        have accrued since April 1, 1996 through July 26, 1999, as well as
        all direct bill commissions after July 26, 1999 to the date of this
        Order . . . and it is further . . .

        ORDERED that Ohio be and is hereby directed to pay to the Debtor
        all direct bill commissions that accrue to the Debtor as a terminated
        agent under New Jersey law after the date of this Order, . . . and it
        is further . . .

        ORDERED that the Debtor’s claim for commissions due for the
        period August 1994 through April 1996 be and are hereby preserved
        and reserved pending a determination of Ohio’s administration claim
        by this Court; and it is further

        ORDERED that Ohio’s application for a constructive trust to be
        imposed on the above commissions for its benefit be and is hereby
        denied; and it is further

        ORDERED that Ohio’s application for this Court to exercise its
        equitable powers to grant Ohio a right of recoupment from these
        commissions in order to satisfy the Debtor’s pre-petition debt to
        Ohio be and is hereby denied . . . .
                                16

Management, 246 B.R. at 59-60. With respect toS 158(a),
the District Court noted that

        the Bankruptcy Court specifically declined to
        characterize the nature of the October 14, 1999 Order,
        "except to note that [it] was a final resolution of the
        debtors’ motion for turnover of commissions from April
        1, 1996, which motion was made in Adversary
        Proceeding No. 94-1312, and to recognize that
        additional issues remain to be heard in that proceeding
        . . . ."

Id. at 57 (citing In re Professional Ins. Management, No. 94-
1312, letter op. at 3 (Bankr. D.N.J. Oct. 22, 1999)). The
Bankruptcy Court also denied Ohio Casualty’s request for
a stay of the October 14, 1999 Order pending resolution of
the remaining issues in the adversary proceeding because
none of the issues remaining in the case "relate to debtor’s
entitlement to commissions since April 1, 1996." In re
Professional Ins. Management, No. 94-1312, letter op. at 3
(Bankr. D.N.J. Oct. 22, 1999).

Invoking the doctrine of "practical finality," the District
Court agreed that the issues decided by the Bankruptcy
Court were discrete and that "no effect or impact of those
decisions would change as a result of the Bankruptcy
Court’s future ultimate decision as to whether PIM is
entitled to damages for wrongful termination." Professional
Ins. Management, 246 B.R. at 59. Therefore, the District
Court ruled that the Bankruptcy Court orders of July 30,
1999 and October 14, 1999 were final orders subject to its
review.

We agree with this conclusion. We note that Congress
had previously provided that orders in bankruptcy cases
finally disposing of discrete disputes within the larger case
may be immediately appealed, and that "a bankruptcy
court order ending a separate adversary proceeding is
appealable as a final order even though that order does not
conclude the entire bankruptcy case." In re Moody, 817
F.2d 365, 367-68 (5th Cir. 1987) (citing In re Saco Local
Development Corp., 711 F.2d 441, 445-46 (1st Cir.1983)).
The Bankruptcy Court’s orders finally determined whether
Ohio was obligated to pay PIM commissions following the

                                17

termination of its agency agreement and the amount of that
obligation. PIM disagrees, contending that the order is
interlocutory and that additional, related issues remain to
be heard before the Bankruptcy Court. It is true that the
Bankruptcy Court is still considering the resolution of
significant issues between these two parties, specifically (1)
an adversary proceeding alleging Ohio Casualty’s wrongful
termination of PIM under the FAIR Act, and (2) the
allegation that Ohio failed adequately to service the Book of
Business pre-April 1, 1996, resulting in commissions owed
to PIM during this period. However, we agree with the
District Court that this appeal is entirely distinct and that
the issues noted above are unaffected by our resolution of
this appeal.15

Moreover, the two orders, considered together, effect a
turnover of commissions, which is widely regarded as a
final order for purposes of appeal.

        Following the lead of every circuit court that has
        considered the question directly or indirectly, we hold
_________________________________________________________________

15. Ohio Casualty submitted the recent decision of the New Jersey
Supreme Court, R. J. Gaydos Ins. Agency, Inc. v. Nat’l Consumer Ins. Co.,
773 A.2d 1132 (N.J. 2001), pursuant to Federal Rule of Appellate
Procedure 28(j), as possibly negating our authority to decide this matter
on appeal. In Gaydos, the New Jersey Supreme Court held that the FAIR
Act "does not create a private right of action for an agent to pursue a
claim that it was wrongly terminated as a result of an insurer’s alleged
FAIRA violations." Id. at 1147. Instead, the FAIR Act vests enforcement
powers exclusively with the Commissioner of Insurance. Id. The Court
noted that the New Jersey Legislature did not adopt the FAIR Act to
benefit insurance agents and insulate them from potential termination.
Id. However, the Court held that the agent could assert a common-law
contract claim for breach of the implied covenant of good faith and fair
dealing stemming from the carrier’s termination of the agency
agreement, citing to N.J.S.A. 17:22-6.14a(d) -- the same statute at issue
in this appeal. Id. at 1148. Because we conclude that the FAIR Act claim
currently before the Bankruptcy Court will not be affected by our
disposition of this case and because the Agency Termination Statute,
enacted to protect the rights of terminated insurance agents, provides a
common-law cause of action, the Courts below did not abuse their
discretion in failing to defer to the Commissioner of Insurance. This
matter was properly before the Bankruptcy and District Courts, and as
an appeal of a final order is properly before us.

                                18

        that a bankruptcy court’s turnover order, in a separate
        adversary proceeding, compelling a defendant to turn
        over property in his possession to the trustee in
        bankruptcy, is a final order and hence appealable as of
        right.

In re Moody, 817 F.2d at 366. See also In re Cash Currency
Exchange, Inc., 762 F.2d 542, 546 (7th Cir. 1985); In re
Flying W. Airways, Inc., 442 F.2d 320, 321 n.1 (3d Cir.
1971); Sproul v. Levin, 88 F.2d 866, 869 (8th Cir. 1937); cf.
George A. Fuller Co. of P.R., Inc. v. Matta, 370 F.2d 679, 680
(1st Cir. 1967); O’Keefe v. Landow, 289 F.2d 465, 466 n.1
(2d Cir. 1961). We conclude that the effect of the
Bankruptcy Court’s determination that subsection (d) of the
Agency Termination Statute was triggered by Ohio’s
termination of PIM, in conjunction with the turnover order,
completely disposed before that Court of the issues under
appeal. Therefore the Bankruptcy Court orders were final,
appealable orders to the District Court under 28 U.S.C.
S 158(a).16

Having concluded that the Bankruptcy Court orders were
_________________________________________________________________

16. In addition, we agree that the District Court, sitting as an appellate
court, was authorized to hear the appeal from the Bankruptcy Court as
an appealable injunctive order under 28 U.S.C. S 1292(a), which
provides:

        (a) Except as provided in subsections (c) and (d) of this section, the
        courts of appeals shall have jurisdiction of appeals from:

        (1) Interlocutory orders of the district courts of the United States,
        the United States District Court for the District of the Canal Zone,
        the District Court of Guam, and the District Court of the Virgin
        Islands, or of the judges thereof, granting, continuing, modifying,
        refusing or dissolving injunctions, or refusing to dissolve or
        modify injunctions, except where a direct review may be had in
        the Supreme Court . . . .

28 U.S.C. S 1292(a)(1). Both the District Court and the Bankruptcy Court
characterized the Bankruptcy Court orders as providing injunctive relief.
"The injunctive character of these orders is . . . evident from the [larger,
continuing order to pay commissions and] the duty imposed upon Ohio
Casualty with respect to the ongoing accrual of PIM’s commissions,
namely, to pay them over as they are earned, now and in the future."
Professional Ins. Management, 246 B.R. at 59.

                                19

final, we now briefly discuss the finality of the District
Court order of February 29, 2000. That order:

        (1) affirmed the Bankruptcy Court order with respect
        to subsection (d) of the Agency Termination Statute;

        (2) affirmed the turnover of accrued commissions and
        interest and continuing commissions;

        (3) vacated the order holding Ohio Casualty in
        contempt for failure to pay over commissions;

        (4) directed the Clerk of Court to withdraw
        $259,215.95 from the registry of Court and make
        payment to PIM’s counsel; and

        (5) ordered Ohio Casualty to calculate the additional
        interest and commissions due to date.

Professional Ins. Management, No. 99-5919, order (D.N.J.
Feb. 29, 2000). Just as the Bankruptcy Court proceeding
below fully adjudicated a specific adversary proceeding
between the parties, the challenged order of the District
Court does the same.17 Therefore, jurisdiction over this final
order is proper in our Court pursuant to 28 U.S.C.S 158(d).

III. New Jersey’s Agency Termination Statute
Having jurisdiction over this appeal, we now turn to the
merits of the District Court’s decision regarding New
Jersey’s Agency Termination Statute. "Because the District
Court sat as an appellate court, reviewing an order of the
Bankruptcy Court, our review of the District Court’s
determinations is plenary." In re Rashid, 210 F.3d 201, 205
(3d Cir. 2000). "In reviewing the bankruptcy court’s
determinations, we exercise the same standard of review as
the district court." Fellheimer, Eichen & Braverman, P.C. v.
Charter Technologies, Inc., 57 F.3d 1215, 1223 (3d Cir.
_________________________________________________________________

17. Notably, the District Court did not remand to the Bankruptcy Court
for additional findings or legal determinations. Thus, the merits of the
discrete adversary case before the District Court were finally adjudicated.
As a result, we do not need to elaborate on the four factors set forth in
In re Blatstein, 192 F.3d 88, 94 (3d Cir. 1999), which provides additional
guidance on our jurisdiction where the District Court remands to the
Bankruptcy Court in whole or in part.

                                  20

1995). Therefore,   we review the Bankruptcy Court’s legal
determinations de   novo, its factual findings for clear error,
and its exercises   of discretion for abuse thereof. In re Engel,
124 F.3d 567, 571   (3d Cir. 1997).

After reviewing the voluminous record before us, we
conclude that both the Bankruptcy Court and the District
Court correctly interpreted the provisions of the Agency
Termination Statute to be predicated on the termination of
an agency relationship. We agree with the District Court
that an "at will" termination (under N.J. Stat. Ann. S 17.22-
6.14a(d)) could morph into a "for cause" termination (under
N.J. Stat. Ann. S 17.22-6.14a(e)) prior to the effective date
of termination and that the Bankruptcy Court erred when
it set the notice date as the relevant point of inquiry into
whether the statute’s "at will" or "for cause" provisions
apply. However, we do not subscribe to the District Court’s
conclusion that the Bankruptcy Court’s error was
nonetheless harmless. Because neither the District Court
nor the Bankruptcy Court considered the relevant conduct
(PIM’s failure to pay over premiums due between the date
of notice and the effective date of termination) and whether
Ohio Casualty recognized this conduct as a reason for
termination (irrespective of whether it was aware of
subsection (e)), the error was prejudicial and the case is
remanded to the Bankruptcy Court.

A. Interpretation of the Statute

That New Jersey considers the insurance industry to be
strongly affected by the public interest is demonstrated
through its comprehensive regulation of the industry. In
enacting the "No Fault Law," for example, it was the New
Jersey Legislature’s intent to provide insureds"the
advantage of guaranteed renewals of indefinite duration
with a particular company." Sheeran v. Nationwide Mutual
Insurance Co., Inc., 404 A.2d 625, 629 (N.J. 1979). With
respect to New Jersey’s Agency Termination Law, the
Legislature was "primarily concerned with the rights of
insurance agents. . . . The protection which it affords to the
insured public, although important, is only secondary." Id.
at 630. The Legislature enacted the statute to "regulate the
termination of agency agreements between insurance
companies and their independent agents." Cohen v. Home

                                21

Ins. Co., 230 N.J. Super. 72, 75 (App. Div. 1989). The
legislative history and case law also reflect a concern "that
New Jersey policyholders should not be deprived of the
benefit of continued effective policy service by motivated
agents." In re Terminated Aetna Agents, 248 N.J. Super.
255, 260 (App. Div. 1990), certif. denied, 126 N.J. 319
(1991). This case illustrates a point of conflict over the
protection of the interests of agents and the public at the
expense of the insurance carrier.

PIM’s entitlement to renewal commissions, following the
termination of its agency relationship with Ohio, is
governed by New Jersey’s Agency Termination Statute. As
already noted, if Ohio terminated PIM because of gross and
willful misconduct or failure to pay premiums due after
written notice, New Jersey law would preclude PIM from
receiving post-termination commissions or renewals. On the
other hand, if Ohio terminated PIM at will, New Jersey law
provides PIM with the right to renewal commissions on the
commercial policies for one year, and automatic renewal
commissions on personal automobile policies indefinitely.

Both the District Court and the Bankruptcy Court
interpreted the exception to S 17:22-6.14a(d) created in (e)
to apply specifically to terminations, as opposed to
situations where an agent fails to remit premiums at some
point after the termination of the agency relationship. What
Ohio Casualty initially disputes is the Courts’ construction
of subsection (e) to include the phrase "or failure to pay
over to the company moneys due to the company after his
receipt of a written demand therefor, . . ." as a termination
condition rather than an independent reason disqualifying
the agent from receipt of commissions.

To aid in this interpretation, we turn first to general rules
of statutory construction established by the United States
Supreme Court. As a general rule, "the meaning of a statute
must . . . be sought in the language in which the act is
framed, and if that is plain . . . , the sole function of the
courts is to enforce it according to its terms." Caminetti v.
United States, 242 U.S. 470, 485 (1917); see, e.g., Vreeland
v. Byrne, 370 A.2d 825 (N.J. 1977). In applying this rule,
courts have generally agreed that where a legislature has
"made a choice of language which fairly brings a given

                                22
situation within a statute, it is unimportant that the
particular application may not have been contemplated by
the legislators." Sears, Roebuck & Co. v. United States, 504
F.2d 1400, 1402 (Cust. Ct. Pat App. 1974); see, e.g., Barr
v. United States, 324 U.S. 83, 90 (1945); Vreeland, 370
A.2d at 832 (finding no room for judicial interpretation).
The New Jersey Supreme Court upheld these principles of
statutory construction in the insurance regulation context
when it rejected a defendant’s argument to rewrite the clear
wording of New Jersey’s No-Fault Act to exempt that
defendant from its proscriptions. Sheeran, 404 A.2d at 628.

The District Court applied these general rules of statutory
construction and agreed with the Bankruptcy Court’s
interpretation of the statute, noting that "[t]he plain and
unambiguous language of subsection (e) . . . clearly
establishes that subsection (e) applies if the termination is
a result of gross and willful misconduct or failure to pay
over funds; the causal relationship is a necessary predicate
to subsection (e)’s applicability." Professional Ins.
Management, 246 B.R. at 63 (italics in original). Upon
review of the text, this reading is correct.

Ohio Casualty asserts that strict application of
subsection (e) produces the inequitable result of preserving
(indeed requiring) PIM’s right to receive commissions even
where it failed to remit premiums after the date of
termination. The District Court, sympathetic to the
inequities posed by Ohio Casualty’s situation, agreed that
the ruling in Department of Insurance v. Universal
Brokerage Corp., 303 N.J. Super 405 (App. Div. 1997),
supports the policy that a "terminated agent cannot profit
from failure to remit premiums after demand therefor even
when it occurs after the termination date." Professional Ins.
Management, 246 B.R. at 63. Nonetheless, the Court
explained that while "[t]his policy statement may well have
an effect on the Bankruptcy Court’s equitable
determinations . . .[,] Universal Brokerage did not interpret
subsection (e)" nor could it alter the effect of the statute’s
plain language. Id. at 63-64. The District Court firmly
declared that "this Court is not free to rewrite the statute
to preclude that result where the unambiguous language of
subsection (e) does not." Id. at 64. The purpose and policy

                                23

behind this statute -- to preserve the rights of terminated
agents and to maintain the benefit of continued service by
motivated agents -- support this interpretation. We
therefore conclude that the Bankruptcy Court and the
District Court correctly read subsection (e) necessarily to
apply to the termination of agents as opposed to an agent’s
conduct independent of termination.

B. Application of the Statute

On appeal, Ohio Casualty claims that PIM’s improper
credits and failure to turn over commercial premiums from
January, 1994 forward was a continuation of the improper
accounting practices and indebtedness for which Ohio
Casualty initially terminated PIM. PIM’s conduct, therefore,
arguably constitutes gross and willful misconduct and the
failure to pay over premiums due, thus qualifying as a
termination under subsection (e) of the Agency Termination
Statute. Moreover, Ohio Casualty advises us that the
Agency Termination Statute does not direct how a carrier is
to terminate an agent; the agency contract does. According
to Ohio Casualty, "the sole purpose of the Statute is to
guide the renewals of policies of agents after termination."
Ohio Casualty’s Br. at 36.

Whether Ohio Casualty’s allegations legitimately
constituted a reason for termination under subsection (e)
was the inquiry that the Bankruptcy Court undertook. In
reaching its holding that PIM’s termination was effectively
at will (i.e., under subsection (d)), the Bankruptcy Court
limited its review of the record to the period prior to the
date of the notice of termination. In re Professional Ins.
Management, No. 94-1312, letter op. at 65 (Bankr. D.N.J.
July 12, 1999). "It cannot be disputed that the agency
relationship between the debtor and Ohio was terminated
by letter dated November 15, 1993. Any indebtedness that
arose following the termination will not be considered as a
basis for the activation of subsection (e)." It did so because
PIM was effectively prevented from writing new business
pursuant to the terms of the notice of termination, and
because by that time Ohio Casualty’s reasons for
termination were already fully formed. Professional Ins.
Management, 246 B.R. at 64.

                                24

The District Court ruled that this limited review was
erroneous.18 Although noting that the Bankruptcy Court’s
"decision to ignore evidence from after November 15, 1993
was based on an incorrect assumption that an agent could
not be terminated under both subsection (d) and
subsection (e)," the District Court nevertheless found this
error harmless. Professional Ins. Management, 246 B.R. at
64-65. In its harmless error analysis, the District Court
relied on evidence in the record that Ohio Casualty gave
PIM 90-days notice, paid PIM commissions in apparent
accordance with subsection (d), and never gave a
subsequent notice to PIM (or anyone) that it was terminated
for failure to remit premiums. The District Court concluded
that there was simply no evidence that Ohio Casualty
affirmatively changed the character of the termination
between November 15, 1993 and March 1, 1994. Id. at 65.

We agree with the District Court that the Bankruptcy
Court’s failure to extend its inquiry to PIM’s conduct post-
November 15, 1993 is error. However, we cannot support
the District Court’s conclusion that the Bankruptcy Court’s
error in this matter was harmless under Rule 61 of the
Federal Rules of Civil Procedure.19 See In re Barclay
_________________________________________________________________

18. The District Court distinguished the Bankruptcy Court’s equating the
notice of termination to a "practical termination" due to the inability of
the agent to write any new business.

        By the very terms of subsection (d) . . . , though the agent is
        practically "terminated" as of the date upon which the Notice is sent
        because it cannot write new business, the termination itself does
        not become effective in less than ninety days (and Ohio Casualty
        gave slightly more than ninety days notice by listing March 1, 1994
        as the effective date). In many instances, there are practical
        differences beyond the statutory ones as well: even though agents
        cannot write new business in the ninety day period, they may
        attempt to move the entire book of business to another insurance
        company during that time.

Professional Ins. Management, 246 B.R. at 65 n.11.

19. Rule 61 states that

        [n]o error in either the admission or the exclusion of evidence and
        no error or defect in any ruling or order or in anything done or
        omitted by the court or by any of the parties is ground for granting

                                25

Industries, Inc., 736 F.2d 75 (3d Cir. 1984) (overturning
District Court’s harmless error ruling in the context of a
Bankruptcy Court’s failure to consider factors relevant to
the legal determination at issue). The Bankruptcy Court’s
limited time-frame precludes the application of the correct
legal determination made by the District Court, namely that
the reasons for terminating an agent can change between
the time of notice and the effective date of termination.
Consequently, the relevant factual inquiry was not made:
whether PIM’s conduct post-notice legitimately qualifies as
a reason for termination under subsection (e) and whether
Ohio Casualty recognized this conduct (not necessarily
subsection (e) itself), sometime prior to March 1, 1994, as
one of the reasons for terminating PIM. Such an omission
appears to us as inequitable.

Contrary to the ruling of the District Court, we conclude
that the fact that Ohio Casualty gave PIM 90-days notice
and continued its commissions for a period of one year
does not automatically place the termination under
subsection (d). First, Ohio Casualty was obligated to do so
according to its agency contract with PIM. Ohio Casualty
continued to renew and pay commissions in accordance
with the contract and subsection (d) because, at the time,
PIM had not yet taken the improper credits. In addition,
Ohio Casualty’s employees admitted at trial that they were
not aware of subsection (e) when the initial termination
notice was sent. Professional Ins. Management , 246 B.R. at
64. The question, however, is not whether Ohio Casualty
complied with the Agency Termination Statute when it
terminated PIM, but whether the reason Ohio Casualty
terminated PIM was one of the reasons listed in subsection
(e). Ohio Casualty’s knowledge of subsection (e) is irrelevant
to answer this question.
_________________________________________________________________
        a new trial or for setting aside a verdict or for vacating, modifying,
        or otherwise disturbing a judgment or order, unless refusal to take
        such action appears to the court inconsistent with substantial
        justice.

Fed. R. Civ. P. 61.

                                26

Furthermore, that Ohio Casualty did not send a
subsequent notice of termination to PIM citing the improper
credits taken after January, 1994 does not disqualify Ohio
Casualty from the protection that subsection (e) affords. In
fact, subsection (e) does not contain a notice requirement.
The only requirement triggering subsection (e) is that the
agent be terminated for one of the reasons listed. We
cannot reconcile the District Court’s recognition of this fact20
with its subsequent conclusion that because Ohio Casualty
never notified anyone that PIM was being terminated for
one of the reasons listed in subsection (e), it therefore by
default terminated PIM at will. After Ohio Casualty sent
PIM its initial termination notice alleging improper
accounting procedures resulting in substantial
indebtedness (which, if proved, would satisfy subsection
(e)), Ohio Casualty was not thereafter required to re-notify
PIM that its increased indebtedness stemming from
additional improprieties was yet another reason for the
termination. The District Court’s expressed concern (when
it declared that "an insurance company cannot just decide
that an agent’s termination is now under subsection (e)
without telling anybody; there must be some evidence that
the insurance company told someone--perhaps the
insureds themselves--that renewals would no longer come
through the terminated agent," Professional Ins.
Management, 246 B.R. at 65) is not implicated by the facts
of this case. Ohio Casualty’s continued correspondence
with PIM post-termination declaring that premiums were
due and payable and documenting the improper credits
_________________________________________________________________

20. The District Court pointed out this feature of subsection (e):

        Nothing in subsection (e), . . . indicates that a formal Notice of
        Termination must be sent; an insurance company can terminate an
        agent immediately upon discovering the agent’s gross or willful
        misconduct or failure to pay over moneys due after receipt of a
        written demand therefor, without being subject to the agency
        termination provisions of subsection (d). Because no separate Notice
        is needed for a subsection (e) termination, and because the
        subsection (d) termination cannot, by law, be effective for ninety
        days after the Notice is sent, it is possible that a subsection (d)
        termination can transform into a subsection (e) termination before
        the effective date of the subsection (d) termination passes.

Professional Ins. Management, 246 B.R. at 64-65.

                                27
effectively put PIM on notice of the reasons for its
termination and satisfied any implied notice requirement.21

Because a termination under subsection (d) of the statute
can be converted into a subsection (e) termination based on
conduct of the agent between the time of notice of
termination and the effective date of the termination, and
this can occur without formal notice by Ohio Casualty to
PIM that a termination under (e) has occurred, the
Bankruptcy Court needs to apply this legal determination
to the evidence of PIM’s improper credits and failure to
remit premiums after November 15, 1993, in ascertaining if
that conduct is sufficient under subsection (e) to effect
PIM’s termination as Ohio Casualty’s agent and whether
Ohio Casualty recognized this conduct, sometime prior to
March 1, 1994, as one of the reasons for terminating PIM.22

IV. Conclusion

Accordingly, we vacate the order of the District Court and
remand to that Court so that in turn the case may be
remanded to the Bankruptcy Court for further proceedings
consistent with this opinion.

A True Copy:
Teste:

        Clerk of the United States Court of Appeals
        for the Third Circuit
_________________________________________________________________

21. In light of the circumstances of this case, which involved the
potential morphing of a subsection (d) termination into a subsection (e)
termination, we need not decide what notice, if any, must be given in
other cases arising under subsection (e) when there is an insufficient
basis to find an effective notice.

22. Our disposition of this case makes it premature for us to resolve the
question of the availability of the equitable remedies of recoupment and
of prejudgment interest, as they would be appropriate only if the
Bankruptcy Court rules on remand that the agency relationship remains
governed by subsection (d). We express no opinion as to the merits of
these determinations, but leave that decision for the Bankruptcy Court
in the first instance.

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