Lucarell v. Nationwide Mut. Ins. Co. (Slip Opinion)
152 Ohio St. 3d 453
| Ohio | 2018Background
- Christine Lucarell joined Nationwide’s Agency Executive (AE) Program as an independent contractor in 2005, receiving a startup loan and various program supports; performance targets and loan-forgiveness terms were set in written agreements.
- Nationwide modified the program after many agents underperformed; Lucarell signed a Memorandum of Understanding (MOU) in 2007 and a Modified AE Program Agreement in 2008 that contained an express release and integration clause.
- Lucarell later failed to meet modified production requirements, received some cash infusions, defaulted on loan obligations, and resigned in 2009.
- She sued Nationwide for breach of contract, fraudulent misrepresentation, invasion of privacy, retaliation, and constructive discharge; the trial court directed a verdict for Nationwide on fraud but the jury awarded large compensatory and punitive damages on the other claims.
- The court of appeals affirmed some verdicts, reversed others, and reinstated the fraud claim for retrial while allowing punitive damages tied to contract breaches if fraud were proved. Nationwide appealed to the Ohio Supreme Court.
Issues
| Issue | Plaintiff's Argument (Lucarell) | Defendant's Argument (Nationwide) | Held |
|---|---|---|---|
| Are punitive damages available for breach of contract? | Punitive damages should be allowed where breach is accompanied by tortious conduct and jury found fraud/bad faith. | Ohio common law bars punitive damages for breach of contract. | Punitive damages are not recoverable for breach of contract; if conduct also constitutes a tort, punitive damages may be awarded only for the tort and are subject to R.C. 2315.21. |
| Is there an independent cause of action for breach of the implied duty of good faith and fair dealing? | Breach of the implied duty supports contract claims and punitive relief. | Enforcement of contract terms does not violate implied duty; no separate cause exists apart from contract breach. | No independent cause: implied duty is enforced only by showing breach of a specific contractual obligation; acting per express terms is not a breach. |
| Are releases avoidable by duress or prevention-of-performance? What is the burden of proof? | Releases were procured by economic duress or prevented performance (Nationwide’s conduct), so they should be voidable. | Releases are effective on execution and delivery; prevention-of-performance is not a defense to a release; duress must be proven. | A release is effective upon signing and bars covered claims unless procured by fraud, duress, or other wrongful conduct. Duress to avoid a release must be proved by clear and convincing evidence. The prevention-of-performance doctrine is not a defense to a release. |
| Did Lucarell prove fraudulent misrepresentation (reliance on pro forma and alleged altered loan documents)? | Nationwide misled her with pro forma projections ($200k/year) and altered loan paperwork; sales managers had incentive to recruit. | Pro formas are future projections (non-actionable); no evidence Nationwide knew agents were failing at recruitment; alleged misrepresentations to third parties can’t support fraud against Lucarell. | Fraud claim properly directed against Nationwide was reinstated at trial level was erroneous: predictions/pro formas are non-actionable for fraud; misrepresentations to third parties cannot support fraud by the plaintiff; trial court’s directed verdict on fraud is reinstated. |
Key Cases Cited
- Ketcham v. Miller, 104 Ohio St. 372, 136 N.E. 145 (Ohio 1922) (establishes that punitive damages are not recoverable in an action for breach of contract)
- Digital & Analog Design Corp. v. N. Supply Co., 44 Ohio St.3d 36, 540 N.E.2d 1358 (Ohio 1989) (reaffirming common-law rule barring punitive damages for contract breach)
- Sivit v. Village Green of Beachwood, L.P., 35 N.E.3d 508 (Ohio 2015) (punitive damages available only for tort component when conduct also constitutes a tort; statutory cap applies)
- Ed Schory & Sons, Inc. v. Soc. Natl. Bank, 75 Ohio St.3d 433, 662 N.E.2d 1074 (Ohio 1996) (explains implied duty of good faith and that enforcing express contract terms is not a breach of that duty)
- Groob v. KeyBank, 108 Ohio St.3d 348, 843 N.E.2d 1170 (Ohio 2006) (elements of actionable fraud and the requirement that misrepresentations concern present or past facts, not future predictions)