Walsh v. Zurich American Insurance Comp, 853 F.3d 1

Background

James Walsh was a Zurich regional sales manager who negotiated an August 2008 ADC (Alternative Distribution Channel) incentive plan that the jury found to be a binding agreement covering 2009 incentives.
The August 2008 Plan became effective Jan 1, 2009, with incentive payments scheduled to begin in April 2009; the Plan contained multiple provisos giving management discretion to cancel or "limit INCENTIVE in unique situations."
In December 2008 Walsh closed a very large APCO deal that — under the August 2008 Plan's formula — would have produced roughly $870,000 in 2009 ADC incentive; Zurich instead imposed a February 2009 Plan reducing his APCO incentive substantially.
In 2010 Zurich refused to pay $101,000 of ADC incentive for a GAIC transaction, treating it as a unique/financial transaction outside Walsh’s ADC responsibility and amending the February 2009 Plan to exclude it.
Walsh sued for breach of contract and willful violation of New Hampshire wage law; a jury found breach and willfulness on both APCO and GAIC claims and awarded doubled damages and attorneys’ fees. The district court denied JMOL motions; Zurich appealed.
The First Circuit: (1) affirmed that the August 2008 Plan could be an enforceable contract (jury question); (2) held the district court erred by telling the jury Zurich had no discretion to alter APCO incentives and failing to submit the implied covenant/good-faith issue; (3) affirmed the GAIC verdict and willfulness finding; (4) vacated the APCO-related award and remanded for determination whether Zurich’s exercise of discretion complied with implied good faith. Attorneys’ fees were vacated for reconsideration.

Issues

Issue	Walsh's Argument	Zurich's Argument	Held
Was the August 2008 Plan an enforceable contract?	Parties agreed to terms in Aug 2008; plan was final despite lack of formal entry into HR system.	Plan lacked formal sign-off and system entry, so no binding contract.	Jury verdict that plan was enforceable upheld — sufficiency of evidence supported the finding.
Could Zurich retroactively change APCO incentive under the Plan's discretion language?	If Plan was binding, APCO incentive vested on deal close and could not be retroactively reduced.	Plan reserved discretion to limit incentives; any exercise of discretion is subject to implied good-faith limits.	District court erred to rule as matter of law that discretion was unavailable; jury must decide (or new trial must consider) whether Zurich acted reasonably and in good faith when it adopted the Feb 2009 Plan. APCO award vacated and remanded.
Was the GAIC transaction covered by the February 2009 Plan (entitling Walsh to $101,000)?	Internal communications and accounting entries show GAIC posted as ADC premium and payroll queried payment under 2009 plan.	GAIC was an unusual financial/reinsurance transfer not contemplated as ADC business; amendment merely clarified plan scope.	Jury finding that GAIC qualified under the 2009 plan sustained; judgment on GAIC award affirmed.
Was Zurich’s nonpayment "willful and without good cause" under N.H. wage statute (double damages)?	Zurich knowingly withheld payment despite ability to pay; communications show awareness of obligation.	Zurich had a bona fide dispute about entitlement and acted on a reasonable interpretation of plan/discretion.	GAIC willfulness affirmed; APCO willfulness vacated along with breach because good-faith question on discretion remains for remand.

Key Cases Cited

Centronics Corp. v. Genicom Corp., 562 A.2d 187 (N.H. 1989) (contracts reserving unilateral discretion are subject to an implied duty to exercise that discretion in good faith)
New England Homes, Inc. v. R.J. Guarnaccia Irrevocable Trust, 846 A.2d 502 (N.H. 2004) (commission-earned rule: commissions vest when order is accepted unless agreement specifies otherwise)
Chisholm v. Ultima Nashua Indus. Corp., 834 A.2d 221 (N.H. 2003) (willfulness under wage statute requires voluntary nonpayment with knowledge of obligation)
Birch Broadcasting, Inc. v. Capitol Broadcasting Corp., 13 A.3d 224 (N.H. 2010) (contract interpretation: give language its reasonable meaning in context)
Durgin v. Pillsbury Lake Water Dist., 903 A.2d 1003 (N.H. 2006) (whether an agreement was formed can be a question of fact)
Ives v. Manchester Subaru, Inc., 498 A.2d 297 (N.H. 1985) (definition of "willfully and without good cause" under wage statutes)
T G Plastics Trading Co. v. Toray Plastics (Am.), Inc., 775 F.3d 31 (1st Cir. 2014) (standard of review for JMOL — view evidence in light most favorable to nonmovant)