Sample Case Summary: Mendenhall v. Bankers Life and Casualty Company

Sample Case Summary: Mendenhall v. Bankers Life and Casualty Company and CNO Financial Group

CASE: Mendenhall v. Bankers Life and Casualty Company and CNO Financial Group.

Civil Action No. 11-cv-01203-WJM-KMT (2014)

PROCEDURE: Mendenhall (Plaintiff) sued Bankers Life and Casualty Company, and CNO Financial Group (Defendants) for breach of contract regarding failure to compensate, after Bankers Life terminated his employment as a result of Mendenhall being involved in fraud, and violation of the company’s policies. Mendenhall wanted the court to hear out his claim for relief and argued that defendants violated the Agent Contract, Unit Sales Manager Contract, and Deferred Compensation Plan. The defendants filed “Motion for Summary Judgment”, on the basis that no compensation is payable in case of termination “for cause”, including contract violations, “including but not limited to fraud”. The motion was filed after Mendenhall was “found guilty of twenty-five charges of theft and securities fraud”.

FACTS: Michael Mendenhall, the plaintiff, was an employee of Bankers Life since July 1983 to October 2010, when his employment was terminated. The organization, Bankers Life, sells insurance covers such as life insurance, and Medicare supplement insurance among others. At the time of his termination, Mendenhall was working as a Unit Sales Manager at one of the Colorado branches. When the plaintiff got this employment, they entered into a contractual agreement, the Agent Contract, that indicated the employer may terminate the contract immediately “for cause.”  For cause, in this agreement, refers to a situation in which the employee violates the contract, including engaging in fraud, failure to secure necessary licenses, and failure to remit funds. The contract also indicated that the agent could not receive any compensation or benefits if the employment was terminated “for cause.” In 2006, the contract was updated to include “non-compliance with company’s established policies and procedure”, and a clause that required the agent’s lawful conduct, including promoting the interest of the company, and protecting the business goodwill or reputation. All the other clauses agreed upon during the commencement of the employment were retained. Mendenhall’s other legal agreements with the defendants included the Unit Sales Manager Contract, and the Deferred Compensation Plan, which provided that no compensation was payable in case ‘for cause’ termination, and termination for gross misconduct or criminal conduct. Additionally, the Agent Compliance Guidelines outlined non-compliance behavior including “agent asking a client or potential client for loans.”

The defendant, Bankers Life Group, found out that the employee was involved in acquiring personal loans from the company’s policy holders, without any authorization whatsoever. Upon investigation, the company found out that employee had convinced elderly policyholders to invest with him in exchange of promissory notes. The company argued that the employee had acquired up to $1.4 million for Mendenhall’s personal real estate investments.

ISSUE: Whether there was sufficient evidence to validate that the termination of plaintiff’s employment as “for cause”, and that the plaintiff should not receive compensation according to the contractual agreement.

DECISION: Yes, affirmed

HOLDING: The court held that there was enough evidence to substantiate the defendant’s action to terminate the employment “for cause”, and due to non-compliance of company’s policies, resulting in forfeiture of Deferred Benefit account. Hence, the plaintiff was not entitled to further compensation or commissions from the Defendants

RATIONALE: Based on the case of Western Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992), the court established that any party that intends to claim breach of employment contract must prove the following provisions: “the existence of the contract, performance or non-performance by the plaintiff, non-performance of contract by the defendant, and the resulting damages to the plaintiff. In this case, both parties affirmed to the existence of the employment contract, and the abiding terms. The court’s main role was to confirm the validity of claims, as relevant to the contractual performance of both parties, and related criminal proceedings against the plaintiff. MacLeod argues that the breach of obligation for parties bound by contract depends on the characteristics of the good or service exchanged (599). Selling insurance policies without authorization and manipulating clients to invest with a specific employee is acting in bad faith, and affecting the reputation capital (MacLeod 617). It also an act of violation of the employee goodwill, as the court found out that the plaintiff was responsible for breach of employment contract, and that the termination of employment without any benefit was validated.




Work Cited

MacLeod, Bentley W. “Reputations, Relationships, and Contract Enforcement.” Journal of Economic Literature 45.3 (2007): 595-628.