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Deleski Insurance Agency, Inc. v. Allstate Insurance Co.

United States District Court, Eighth Circuit

December 30, 2013


Christopher M. Daniels, and Joshua P. Brotemarkle, DANIELS & KIBORT, PLLC, for plaintiffs.

Joseph G. Schmitt, and Peter D. Gray, NILAN JOHNSON LEWIS PA, for defendants.


JOHN R. TUNHEIM, District Judge.

Plaintiff Deleski Insurance Agency, Inc. ("the Agency"), through its sole owner Jerry Deleski ("Deleski"), entered an agreement with Allstate Insurance Company ("Allstate") to serve as an Allstate insurance agent. Plaintiffs sued Allstate and Allstate employee David Hewitt in state court alleging several state law claims arising out of the termination of this agency relationship with Allstate. Defendants removed the matter to federal court. Plaintiffs now move to remand to state court, and Allstate and Hewitt each move to dismiss all of Plaintiffs' claims against them. Because Hewitt was fraudulently joined, the Court will deny Plaintiffs' motion to remand, grant Hewitt's motion to dismiss, and exercise subject matter jurisdiction over the remaining claims. The Court will deny in part and grant in part Allstate's motion to dismiss because Plaintiffs' breach of contract claim, Plaintiffs' breach of implied covenant of good faith and fair dealing claim, and a portion of the Agency's age discrimination claims are adequately pled.



Deleski resides in Minnesota. (Notice of Removal, Ex. B ("First Am. Compl.") ¶ 7, July 8, 2013, Docket No. 1.) The Agency is incorporated in Minnesota and is wholly owned by Deleski. ( Id. ¶ 8.) Allstate is incorporated and operates its corporate offices in Illinois. ( Id. ¶ 9.) Hewitt is a resident of Minnesota. ( Id. ¶ 10.)

Between 1973 and 2000, Deleski was employed as an insurance agent for Allstate. ( Id. ¶ 12.) In 1999, Allstate began the process of terminating its employer-employee relationships with its insurance agents in favor of creating independent contractor relationships with insurance agents who would own an economic interest in their respective books of insurance business. ( Id. ¶ 13.) In the summer of 2000, in the wake of Allstate's transition to independent-contractor agents, Deleski incorporated the Agency. ( Id. at ¶ 18.) Subsequently, Deleski, on behalf of the agency, entered an Allstate R3001C Exclusive Agency Agreement with Allstate. ( Id. ¶ 19.) Deleski was designated as the Agency's "Key Person" under the Agreement. ( Id. ¶ 20; Notice of Removal, Ex. C ("Agency Agreement") ¶ II.E.) Under the Agency Agreement, Plaintiffs were to be independent contractors for Allstate. (First Am. Compl. ¶¶ 22-25; Agency Agreement ¶ I.D.) The Agency Agreement also set out the methods by which the Agreement could be terminated. In relevant part, the Agreement states:

This Agreement may be terminated:

1. At any time by mutual agreement of the parties in writing;
2. By either party, with or without cause, upon providing ninety (90) days prior written notice to the other, or such greater number of days as is required by law. Once written notice of termination has been given by either party, Agency will, immediately upon request of the Company, cease to act or to represent itself in any way as an agent or representative of the Company, but it will receive compensation pursuant to Section XV. from the Company for the period up to and including the specified termination date; or
3. Alternatively, by the Company, with cause, immediately upon providing written notice to Agency. Cause may include, but is not limited to, breach of this Agreement, fraud, forgery, misrepresentation or conviction of a crime. The list of examples of cause just stated shall not be construed to exclude any other possible ground as cause for termination.

(Agency Agreement ¶ XVII.)

During the Agency's tenure as an independent contractor for Allstate, Allstate used an "Expected Results Program" to evaluate agency performance in several business results criteria areas. ( Id. ¶ 41.) On January 31, 2012, Deleski received a letter from Defendant Hewitt, a Territory Sales Leader for Allstate, stating that Allstate was terminating his Allstate R3001C Exclusive Agency Agreement, effective April 30, 2012. ( Id. ¶ 79, Ex. B.) The letter cited "reasons that include not achieving business objectives" as the basis for termination. ( Id. ¶ 80, Ex. B.)

In February 2012, Deleski received a phone call from Hewitt. ( Id. ¶ 96.) During this call, Deleski informed Hewitt that another Allstate agent ("the prospective buyer") was prepared to buy the Agency's economic interest in its book of business. ( Id. ¶ 97.) Hewitt told Deleski that he would discuss the sale with the prospective buyer. ( Id. ) Plaintiffs allege that the prospective buyer was well qualified to buy the Agency's book of business. ( Id. ¶ 98.)

Twenty minutes after Deleski's February 2012 phone conversation with Hewitt, the prospective buyer called Deleski to tell Deleski that he was no longer interested in buying the Agency's book of business. ( Id. ¶ 99.) Plaintiffs allege "[u]pon information and belief" that Hewitt interfered with the potential sale during this twenty-minute window of time. ( Id. ¶ 100.) Plaintiffs also allege that during the February 2012 phone conversation Hewitt informed Deleski that Allstate "prefers outside buyers" to existing Allstate agents for sales of books of business and stated that he would assist Deleski in finding an outside buyer. ( Id. ¶¶ 103-04.) But, Plaintiffs allege that Hewitt never contacted Deleski about any potential outside buyers. ( Id. ¶ 105.)

During the course of these events, Deleski developed the belief that he was being wrongfully terminated, in part because of his opinion that Allstate's reason for the termination equated to termination for failure to meet a quota for the sale of life insurance policies, which is prohibited under Minnesota law. ( Id. ¶¶ 81-84, 108.) In March 2012, Deleski complained to the Minnesota Department of Commerce about the circumstances surrounding Allstate's attempt to terminate the Agency Agreement. ( Id. ¶ 108.)

Despite doubts about the legality of the termination, Deleski continued to follow Allstate's instructions for closing the Agency. ( Id. ¶¶ 108-16.) Deleski packed up the Agency's client files, removed all "Allstate" signs from the Agency's office, terminated the office lease and the majority of the Agency's employees, and sent letters to clients informing them that Allstate was terminating the Agency's contract. ( Id. ¶¶ 112-16.)

On Friday, April 27, 2012, at the direction of Allstate, movers arrived at the Agency and removed all of Plaintiffs' client files. ( Id. ¶ 118.) That afternoon, Deleski received a phone call and letter from Hewitt informing Deleski that Allstate was rescinding its January 31, 2012 Notice of Termination of the Agency Agreement upon direction from Allstate's legal department and directing Deleski to continue to operate the Agency commencing May 1, 2012. ( Id. ¶¶ 120, 122, Ex. C.) Later that afternoon, Deleski received a second letter via email from Hewitt stating:

As we discussed and as was communicated to you in writing today, Allstate rescinded the Notice of Termination of your R3001 Exclusive Agency Agreement that you received on January 31, 2012 such that your Agreement would not be terminated effective April 30, 2012 pursuant to that notice. You have indicated, however, that you are prepared to and desire to still proceed with the termination of your R3001 Agreement effective April 30, 2012. Allstate will process the termination of your agreement in accordance with this request.

( Id. ¶ 122, Ex. D.) Contrary to this second letter, Deleski had not indicated to Hewitt that he wanted to proceed with the Agency Agreement termination. Deleski responded to Hewitt's email indicating as such. ( Id. ¶ 126.)

On Monday April 30, 2012, an Allstate employee arrived at Deleski's office and completed the closing of the Agency by forwarding the Agency's phones to Allstate and placing a sign on the door stating that the Allstate location was closed. ( Id. ¶¶ 127-29.) That afternoon, Deleski received a phone call from Paul Hanson at the Minnesota Department of Commerce asking how things were going with Allstate, and Deleski informed Hanson that an Allstate employee had just closed his office. ( Id. ¶ 130.) Hanson responded that he understood that Allstate was not going to close the Agency's office. ( Id. ¶ 130.) At 5:30 that evening, Deleski received a voicemail message from Hewitt stating that the termination of the Agency Agreement "had once again been rescinded" and that Deleski needed to go back to work the following day. ( Id. ¶ 131.) At that point, however, Plaintiffs had no office, employees, phones, or files and their customers had all been informed that Allstate was terminating their contract. ( Id. ¶¶ 132-33.)

On May 7, 2012, Deleski received a letter dated May 4, 2012 from Hewitt stating: "As you know, Allstate has rescinded the termination notice you received in January. Your R3001 Agreement was not terminated effective April 30, 2012 and so your R3001 Agreement is still in effect. Therefore, our expectation is that you will continue to operate your agency per the Agreement." ( Id. ¶ 134, Ex. F (emphasis in original).) Deleski did not receive any communications from Allstate or Hewitt after receiving the May 4, 2012 letter. ( Id. ¶ 139.)

Plaintiffs allege that shortly after Allstate claimed to rescind the termination of the Agency Agreement, "Allstate distributed Plaintiffs' book of business to two, much younger agents of Allstate." ( Id. ) Plaintiffs allege that the new agents did not have to pay Allstate for the book of business and that "Allstate financially benefitted at the expense of Plaintiffs by, inter alia, eliminating the Deleski Agency and distributing its book of business to the younger agents." ( Id. ¶ 140.) Plaintiffs also allege that "Hewitt personally profited from the distribution of the Deleski Agency's book of business to the two younger agents in that, inter alia, he earned a bonus for bringing in new agents to Defendant Allstate." ( Id. ¶ 141.) Further, Plaintiffs allege that Allstate wrongfully informed customers attempting to contact Deleski that Deleski "had retired, '" that he was "terminated' (and insinuating that he was terminated for doing something wrong), " that he "was not producing and was just collecting his renewals, '" and that he "was content to just sit back and service his accounts.'" ( Id. ¶ 142.) Furthermore, Plaintiffs allege that someone acting on behalf of Allstate created an internet listing for "Allstate Insurance Company - Jerry Deleski'" with a phone number of one of the younger agents to which Allstate distributed Plaintiffs' book of business. ( Id. ¶ 144.)


On April 29, 2013, Plaintiffs filed a charge of discrimination with the Minnesota Department of Human Rights setting forth a claim of age discrimination against Allstate. ( Id. ¶ 158.) Subsequently, Plaintiffs sued Allstate and Hewitt in state court. (Notice of Removal ¶ 1.) Plaintiffs' First Amended Complaint includes claims against Allstate for age discrimination in violation of Minn. Stat. §§ 363A.08 and 181.81, breach of contract, breach of the implied covenant of good faith and fair dealing, trade libel, and deceptive trade practices in violation of Minn. Stat. § 325D.44. Additionally, Plaintiffs bring a claim for tortious interference with a prospective economic advantage against Hewitt and an action for equitable accounting against both Defendants. (First Am. Compl. at ¶¶ 147-217). After being served with the First Amended Complaint, Defendants filed a notice of removal with the Court alleging that subject matter jurisdiction based on diversity of citizenship is proper because Hewitt was fraudulently joined. (Notice of Removal ¶ 16.)



Plaintiffs move to remand this matter to state court arguing that the Court lacks subject matter jurisdiction because there is not complete diversity between all plaintiffs and all defendants, as Plaintiffs and Defendant Hewitt are all residents of Minnesota. Because Hewitt was fraudulently joined, the Court ...

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