Update: In a Jan. 26, 2011 decision, the U.S. Court of Appeals, 10th Circuit reversed the district court's decision on the punitive damages portion of the award. That award, initially $62.7 million, had been reduced to $3.6 million by the district court before being thrown out altogether by the 10th Circuit.
The $3.6 million in compensatory damages stands, and the 10th Circuit decision says American National "does not contest the jury's finding of liability." But the court says Farm Bureau "failed to present any evidence at trial of 'additional aggravating circumstances' that entitled it to punitive damages."
See the 10th Circuit decision reversing and vacating the district court's ruling on punitive damages and affirming the district court's order for compensatory damages here.
The original story on the 2008 district court's ruling follows:
Three American National Insurance companies have been ordered to pay compensatory and punitive damages to Farm Bureau companies totaling more than $66 million for unlawfully recruiting agents.
In an Aug. 8 decision in U.S. District Court for the District of Utah, Central Division, a jury awarded Farm Bureau Life Insurance Company and Farm Bureau Mutual Insurance Company $3.6 million in compensatory damages and $62.7 million in punitive damages to be paid by Galveston, Texas-based American National and other defendants.
The complaint, filed in 2003 by West Des Moines, Iowa-based Farm Bureau, charged that one of its district managers, Darrin Ivie, shared confidential, proprietary and trade secret information with an American National representative, Ken Gallacher. The complaint further stated that Mr. Ivie and American National engaged in efforts to unlawfully recruit Farm Bureau agents to American National from July 2002 to February 2003, while Mr. Ivie was employed as a Farm Bureau district manager.
"American National, with full knowledge of Ivie's position of trust with Farm Bureau as district manager, incentivized, encouraged, advised, counseled, assisted, induced, and/or directed Ivie in recruiting agents, in setting the state for the 'coup'…and otherwise in breaching his duty of loyalty to Farm Bureau," the complaint filed with the District Court asserted.
The complaint added, "Those plans included a common scheme with the agents in his district to set up their offices, computer lines, telephone lines, signage, phone listings and the like for the transition to American National, and to otherwise prepare for a smooth and easy transition, including embarking upon efforts leading to the conversion of Farm Bureau customers and clients to American National."
The complaint also charged American National with inviting Farm Bureau policyholders to informational meetings where American National representatives would disparage Farm Bureau. American National tried to secure former Farm Bureau agents to be at these meetings to support the claims, according to the complaint.
American National disputed the charges, and Mr. Ivie filed counterclaims alleging that Farm Bureau withheld money due to him under a Career Incentive Plan in place during his employment. He also claimed that Farm Bureau disparaged him to third parties after he left the company to work for American National.
A litigation summary provided by plaintiff lawyer Dennis James stated that the jury "returned a verdict that Darrin Ivie had breached his duty of loyalty and his fiduciary duty to Farm Bureau and that Ken Gallacher and American National had induced that breach. All defendants were also found liable for intentional interference with prospective economic relations of Farm Bureau and were found guilty of civil conspiracy."
The punitive damages awarded included $37.5 million against American National Insurance Company, $15 million against American National Property and Casualty Company, $7.5 million against American National General Insurance Company, $2.4 million against Mr. Gallacher, and $322,000 against Mr. Ivie.
In a statement, American National said it will ask for a retrial on all issues. The company said the verdict is "excessive and the punitive damage award bears no correlation to compensatory damages, is unconstitutional, and violates the Due Process Clause of the United States Constitution and decisions of the U.S. Supreme Court."
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