The Ohio Supreme Court has slashed much of what of was left of a $42.8 million judgment against Nationwide from a lawsuit filed by a former Nationwide agent in northeast Ohio.
The agent claimed the company forced her to resign and then took much of her business.
The court ruled Thursday that punitive damages cannot be awarded in disputes involving a breach of contract. The ruling further cuts the award that Christine Lucarell received in 2012 from a jury in Mahoning County.
Of the $42.8 million award, $36 million were punitive damages against Nationwide. The trial judge subsequently reduced the award to $14.5 million and much of that award was upheld by the 7th District Court of Appeals in Youngstown.
Thursday's ruling reduces the damages against Nationwide to potentially $2 million to $3 million, according to Lucarell's former attorney, Caryn Groedell.
Nationwide says only one claim is final, and that's over Lucarell's claim of an invasion of privacy that led to damages of about $300,000. The claim over the breach of contract will now go back to the appeals court and potentially even back to the trial court.
Lucarell was among about 400 people Nationwide recruited in 2005 as part of a three-year agency executive program. Her agency flourished at first, but Nationwide started setting tougher production standards and then told her she wasn't on track to meet her goals.
Eventually, Nationwide began to withhold disbursements from the loan it had given her to start the agency, cut her commissions and then finally terminated her agency in 2009, Lucarell claimed. Additionally, she said Nationwide took the hundreds of new policyholders and the $1.8 million business she created and moved it to a Nationwide call center, keeping commissions that would have gone to her.
"Nationwide is pleased with the court's decision, which vindicates Nationwide. The decision soundly rejects the charge that Nationwide engaged in fraud. As we have maintained throughout this case, our objective is and has always been to help position our agents for success, not failure," the company said in a statement.
"This important decision by the Ohio Supreme Court supports that Nationwide acted in good faith in seeking to enforce the terms of its contracts and further favorably clarifies the law surrounding contractual relations in Ohio for both Nationwide and the business community."
The insurer also said the ruling corrected legal errors made by lower court courts that led to what it called an improper jury verdict. Also, it said the ruling upholds that Nationwide's exclusive agents are independent contractors, not employees.
Nationwide claimed in court documents that Lucarell had lied when she testified during the trial and couldn't account for more than half of the $800,000 in loans, grants and commissions she received.
The court, according to the decision written by Justice Terrence O'Donnell, has held since 1922 that punitive damages can't be recovered in a breach of contract case. Some Ohio appeals courts had suggested that there are exceptions to those rulings, he wrote.
"Ohio common law provides that punitive damages may not be awarded for breach of contract, no matter how willful the breach," O'Donnell wrote.
Justice William O'Neill agreed with that part of the ruling that punitive damages can't be recovered from a breach of contract, but he dissented from the rest of the ruling without writing an opinion.
"We're reviewing the decision and, at this time, have no further comment," said Scott Fromson, one of Lucarell's current attorneys.
Grodell said there are a few claims still pending with the case for the appeals court to resolve.
The ruling is frustrating, but not surprising, she said.
"It's a very pro-business environment," she said. "I'm not surprised. I hoped for something more favorable, but can't say I'm surprised. Just look at the makeup of the court."
mawilliams@dispatch.com
@BizMarkWilliams