427 P.3d 25
Kan.2018Background
- Three longtime area managers (Meador, Filley, DeWitte) claim an oral agreement with Financial Associates/its founder Stumpf that they would receive 1% of Blue Cross premiums (half of a 2% "override") indefinitely, including after termination, for policies they originated or supervised.
- The area managers worked for Financial Associates for over 20 years and received the 1% override regularly until Blue Cross purchased Financial Associates in 2011 and discontinued the override; two managers were later terminated when they refused revised employment terms.
- Area managers sued Financial Associates and Blue Cross for breach of contract and related claims; defendants moved for summary judgment arguing the oral agreement is barred by Kansas’s statute of frauds (K.S.A. 33-106) because it could not be performed within one year.
- The district court granted summary judgment to defendants, concluding the agreement could not be performed within one year and the full-performance exception did not apply because payment depended on third-party policyholder renewals.
- The Kansas Court of Appeals affirmed, adopting case law that refuses the full-performance exception when the nonperforming party’s obligation depends on independent third-party actions.
- The Supreme Court of Kansas reversed, holding that the common-law full-performance exception (as stated in Restatement §130) applies: full performance by one party alone removes the contract from the one-year provision of the statute of frauds, even if the nonperforming party’s obligation is contingent on third parties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the oral override agreement is barred by the statute of frauds because it cannot be performed within one year | The area managers argued they fully performed their side over 20+ years, invoking the full-performance exception to remove the agreement from the statute | Blue Cross/Financial Assocs. argued the agreement is within the statute because performance (payment) depended on third-party policyholder renewals; court should not apply the full-performance exception or should limit it when obligations depend on third parties | Court held that full performance by one party alone is sufficient to remove the contract from the statute of frauds; third-party contingencies on the nonperforming party do not defeat the exception |
Key Cases Cited
- A. T. & S. F. Rld. Co. v. English, 38 Kan. 110 (Kan. 1887) (early Kansas recognition that a contract executed by one party is not barred by the statute of frauds)
- Meador v. Manlove, 97 Kan. 706 (Kan. 1916) (applied full-performance exception to enforce oral will/agreement after one party fully performed)
- Augusta Bank & Trust v. Broomfield, 231 Kan. 52 (Kan. 1982) (Kansas adopting Restatement §130 policy and narrowly construing one-year provision)
- Ed DeWitte Ins. Agency v. Financial Assocs. Midwest, 53 Kan. App. 2d 238 (Kan. Ct. App. 2016) (court of appeals decision below adopting rule that full-performance exception fails when payment depends on independent third parties)
- Zupan v. Blumberg, 2 N.Y.2d 547 (N.Y. 1957) (New York authority holding service contracts dependent on third parties must be in writing; relied upon by some jurisdictions)
- Lighthart v. Lindstrom, 24 Ill. App. 3d 918 (Ill. App. Ct. 1975) (applied reasoning similar to Zupan to bar renewal-based commission claims)
- Glass v. Minnesota Protective Life Ins. Co., 314 N.W.2d 393 (Iowa 1982) (Iowa Supreme Court applied Restatement §130 and held third-party contingencies do not defeat full-performance exception)