The opinion of the court was delivered by: HURD
This action was originally commenced in New York State Supreme Court - Oneida County. On March 29, 1994, it was removed to this court on the basis of diversity pursuant to 28 U.S.C. § 1332.
In her complaint, the plaintiff Shelly A. Johnson ("Johnson" or "plaintiff")
alleges three causes of action. In the First Cause of Action, the plaintiff alleges that on or about January 19, 1992, one Michael P. Donnelly ("Donnelly"), "agent either in fact or apparent, of the defendants" induced her to invest $ 70,000 in a Nationwide
tax free fund, and then misappropriated the money. In her Second Cause of Action, she alleges that the defendants were negligent in the employment of Donnelly. In the Third Cause of Action, the plaintiff alleges that she is entitled to the benefits of an assignment given by Donnelly to the defendant Nationwide Insurance Company.
The defendants have denied the material allegations in the complaint. In addition, they have raised affirmative defenses, including the termination of Donnelly as an agent effective September 20, 1991, plaintiff's notification of the termination, and that he was not an agent in January 1992, when he induced the plaintiff to invest.
Plaintiff seeks damages in the sum of $ 70,000 in her complaint. However, it is admitted that she was reimbursed by Donnelly in the sum of $ 15,000, and therefore her actual loss is $ 55,000 plus interest.
The defendants have moved for summary judgment pursuant to Fed. R. Civ. P. 56. The plaintiff has filed a response and a cross-motion for summary judgment. The defendants filed in opposition to the cross-motion. Oral argument was held on June 13, 1996, in Utica, New York. The court reserved decision.
II. Summary Judgment Standard
Summary judgment must be granted when the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact, and that the moving party is entitled to summary judgment as a matter of law. Fed. R. Civ. P. 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Lang v. Retirement Living Pub. Co., 949 F.2d 576, 580 (2d Cir. 1991). The moving party carries the initial burden of demonstrating an absence of a genuine issue of material fact. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir. 1990). Facts, inferences therefrom, and ambiguities must be viewed in a light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir. 1983).
When the moving party has met the burden, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., 475 U.S. at 586. At that point, the nonmoving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56; Liberty Lobby, Inc., 477 U.S. at 250; Matsushita Elec. Indus. Co., 475 U.S. at 587. To withstand a summary judgment motion, sufficient evidence must exist upon which a reasonable jury could return a verdict for the nonmovant. Liberty Lobby, Inc., 477 U.S. at 248-49; Matsushita Elec. Indus. Co., 475 U.S. at 587.
Donnelly was an employee of Nationwide from January 1976 through September 1991. Donnelly held many positions with Nationwide including sales agent, district manager, management training counselor at corporate headquarters in Columbus, Ohio, and financial plans advisor in Hartford, Connecticut.
In 1987, after several years of attempting to climb the management ladder, Donnelly decided to return to a position as a sales agent. During the next four years as an agent, Donnelly was twice given the "President's Award" for top company sales, an honor which Nationwide advertised in Time magazine. Donnelly's agency was also advertised on television, radio, and in newspapers in the Hartford area where his agency was located.
Plaintiff had known Donnelly for approximately sixteen years. He was her brother-in-law, having been married to her sister, Mary A. Johnson. During all of that time, plaintiff was aware that he was a successful Nationwide agent.
In September 1991, Nationwide terminated Donnelly for improprieties relating to the handling of customer premium dollars. A form letter was allegedly sent to each of Donnelly's customers notifying them that Donnelly was no longer a Nationwide agent and giving them the name of an agent to call for future assistance. None of the actual letters or copies of any of the letters are in Nationwide's possession. Margaret Kelly ("Mrs. Kelly"), a Nationwide customer who is also plaintiff's mother and Donnelly's mother-in-law, never received one of these letters. Mrs. Kelly opened an account with Nationwide through Donnelly in 1988. Donnelly made unauthorized withdrawals and closed the account without Mrs. Kelly's permission in 1990, about one year prior to his termination. Therefore, it seems that only Donnelly's then existing customers were notified of his termination. No attempt to notify the general public was ever made.
Johnson received a personal injury settlement about November 1991. While at her house for Thanksgiving dinner, Donnelly talked with her about investing some of that settlement. He provided Johnson with a prospectus and an application for a tax-free Nationwide mutual fund, documents which were still in his possession from his time as a Nationwide agent. Donnelly also informed Johnson that he was a broker and could still sell for Nationwide. In January 1992, plaintiff provided Donnelly with $ 70,000 to be invested in the tax-free fund. Donnelly sent plaintiff an official receipt, together with a note on Nationwide letterhead acknowledging her investment. (Ex. 2, 3 attached to cross-motion Ex. B.) These documents, like the prospectus, were materials which Donnelly had inappropriately retained ...