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Jay Cochran FBFS, Inc. v. Fauth

Supreme Court of Montana

April 23, 2019

JAY COCHRAN FBFS, INC., a Montana corporation, Plaintiff and Appellee,
v.
KURT JAMES FAUTH and SY SALES, LLC, a Montana limited liability company d/b/a FAUTH AGENCY, Defendants and Appellants.

          Submitted on Briefs: February 20, 2019

          APPEAL FROM: DISTRICT COURT OF THE THIRTEENTH JUDICIAL DISTRICT, IN AND FOR THE COUNTY OF YELLOWSTONE, CAUSE NO. DV-17-0075 HONORABLE GREGORY R. TODD, PRESIDING JUDGE.

          For Appellants Ben Sather, Sather Law, PLLC, Billings, Montana

          For Appellee Stephen C. Mackey, Towe, Ball, Mackey, Sommerfeld & Turner, PLLP, Billings, Montana

          OPINION

          Ingrid Gustafson Justice.

         ¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court's quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.

         ¶2 Defendants Kurt James Fauth and SY Sales, LLC, d/b/a Fauth Agency (Fauth) appeal from the Thirteenth Judicial District Court's: May 3, 2017 order denying Fauth's motion for summary judgment; January 17, 2018 order denying Fauth's motion for summary judgment and combined motions in limine; May 1, 2018 findings of fact, conclusions of law, and judgment; June 29, 2018 order amending; and July 17, 2018 final judgment. We affirm in part, and reverse and remand in part for further proceedings consistent with this opinion.

         ¶3 The crux of the parties' dispute centers around the meaning of the language used in a November 3, 2008 appointment agreement (Agreement) between Fauth and Farm Bureau Mutual Insurance Company and/or Farm Bureau Life Insurance Company (Farm Bureau).

         ¶4 Cochran is a financial services provider administering the sale of property, life, casualty, and other insurance products underwritten and insured by Farm Bureau. In 2008, Cochran hired Fauth as an employee. Fauth later became an independent contractor. No written employment or independent contractor agreement ever existed between Fauth and Cochran. The Agreement between Fauth and Farm Bureau enabled Fauth to sell Farm Bureau insurance products and is the only written agreement between Fauth and Farm Bureau.

         ¶5 The Agreement contained a confidentiality clause prohibiting Fauth from appropriating any confidential information, including customer data, for his own use at any time. The Agreement further contained a non-solicitation clause prohibiting Fauth from selling or soliciting replacements or exchanges of insurance products:

with respect to any policyholder of [Farm Bureau], their subsidiaries or affiliates, or with any company with whom [Farm Bureau has] a marketing agreement, within any counties in which Appointee sold or serviced any products pursuant to this [Agreement] . . . enforceable for a period of eighteen months following the termination of this [Agreement].

         Beneath a section of the Agreement titled "FOR HOME OFFICE USE ONLY" was a listing of three distinct Farm Bureau subsidiary companies and three distinct checkable boxes. On the executed Agreement, the only box checked was the box next to the heading for Farm Bureau Life Insurance Company. The box next to the heading for Farm Bureau Mutual Insurance Company was not checked.

         ¶6 On September 19, 2016, Fauth left Cochran to start his own insurance agency. Prior to doing so, Fauth removed confidential information from Cochran's business. In early October 2016, legal counsel for Farm Bureau, Randall G. Nelson, requested by letter (Nelson letter) that Fauth return the confidential information. On October 27, 2016, Fauth returned the confidential information to Cochran. Fauth then requested that Farm Bureau clarify whether Fauth could sell insurance products to Farm Bureau insurance policy holders. In response, Fauth received a November 4, 2016 letter (Swinton letter) from Farm Bureau Financial Services attorney, Paul Swinton, stating that the Agreement only limited Fauth from selling life insurance to existing Farm Bureau life insurance policy holders. After leaving Cochran, Fauth did not sell life insurance to Farm Bureau life insurance policy holders. Swinton therefore opined that Fauth had not violated the Agreement.

         ¶7 On January 12, 2017, Cochran filed a complaint against Fauth alleging: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) conversion of customer information; (4) misappropriation of trade secrets and confidential information; (5) interference with contractual relationships or prospective contractual relationships; (6) unjust enrichment; and (7) fraud. Specifically, Cochran sought to enforce the Agreement as a third-party beneficiary, asserting the Agreement precluded Fauth from selling life insurance and casualty and property insurance to Farm Bureau life insurance and casualty and property insurance policy holders. Fauth filed a brief and motion for summary judgment asserting Cochran was not a party to the Agreement and ...


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