Transamerica Premier Life Insurance Company v. Selman & Company, LLC

          MEMORANDUM OPINION

          Ellen Lipton Hollander United States District Judge.

         In this breach of contract dispute, plaintiffs Transamerica Premier Life Insurance Company and Transamerica Financial Life Insurance Company (collectively, “Transamerica”) have filed suit against defendant Selman & Company, LLC (“Selman”). ECF 1 (“Complaint”). Transamerica asserts the following causes of action: breach of contract (Count I); anticipatory breach of contract (Count II); and unjust enrichment (Count III). It also seeks compensatory damages, special damages, and injunctive relief. Id. at 23. Subject matter jurisdiction is founded on diversity of citizenship. Id. ¶ 16.

         Selman has moved to dismiss under Fed.R.Civ.P. 12(b)(6), for failure to state a claim. ECF 11. It is supported by a memorandum of law (ECF 11-1) (collectively, the “Motion”), and several exhibits. ECF 11-2 to ECF 11-8. Transamerica opposes the Motion. ECF 17 (the “Opposition”). Selman has replied. ECF 18 (“Reply”).

         The Motion is fully briefed and no hearing is necessary to resolve it. See Local Rule 105.6. For the reasons that follow, I shall deny the Motion.

         I. Factual Summary

         Transamerica is a national insurance company that underwrites an assortment of insurance products. ECF 1, ¶ 1. It offered several insurance products through Selman, a broker and third- party administrator of insurance products. Id. ¶ 2. Of relevance here, Transamerica underwrote TRICARE Supplement policies which were offered through Selman.

         TRICARE is the Department of Defense's health care insurance program for over nine million active duty and retired military members and their families. Id. ¶ 30. A TRICARE Supplement is a voluntary benefit insurance plan that covers out-of-pocket costs, such as co-payments or excess charges, not covered by TRICARE. Id. ¶ 31. Selman marketed and administered those plans. Id.

         Three sets of contracts govern the relevant terms of the business relationship of the parties: (1) the 2002 Administrative Service and Marketing Agreement (“ASMA”); (2) two agreements Selman acquired from another administrator in 2014; and (3) a 2016 Amendment to the 2002 Administrative Service and Marketing Agreement.

         A. The Administrative Service and Marketing Agreement

         Transamerica and Selman entered into the ASMA (ECF 11-2), effective August 1, 2002. See ECF 1, ¶ 23.^[1] The ASMA defines “the parties' rights and obligations concerning Selman's management, administration, and marketing of a series of insurance policies underwritten by Transamerica.” Id. ¶ 24. Specifically, the ASMA governs Selman's administration of the Transamerica insurance policies identified in “Exhibit A, ” which is appended to the ASMA. Id. ¶¶ 24-25. These policies include Medicare Supplement products, term life products, and retiree medical products, among others. Id. ¶ 25. When the parties executed the ASMA in 2002, Exhibit A did not include TRICARE Supplement policies and therefore the ASMA did not govern them. See Id. ¶ 69.^[2]

         In its recitals, the ASMA includes an incorporation clause providing that the ASMA “supersedes and replaces all previous agreements, written and oral, and amendments by and between [Selman] and [Transamerica] with respect to the accounts listed in Exhibit A attached hereto.” ECF 11-2 at 2. Significantly, the ASMA does not contain an exclusivity clause. ECF 1, ¶ 27; see also ECF 11-2. Rather, it provides: “Nothing in this Agreement shall be construed to prevent or restrict the ability of [Selman], the policyholder or sponsor to terminate any particular [Transamerica] insurance policy.” ECF 11-2 at 8. Further, it provides that, in “the event of such termination, ” Transamerica shall cooperate with [Selman] in the transfer of coverage . . . to another insurance company if requested by [Selman.]” Id. The ASMA also provides that the “insured records shall become the sole property of [Selman] upon termination of this Agreement.” Id. at 9.

         B. The Two Acquired Agreements

         Transamerica entered two agreements with the Association & Society Insurance Corporation (“ASIC”), which took effect on October 1, 2010: The Administrative Services Agreement (ECF 11-5, the “ASA”) and the Marketing Services and Marketing Developmental Allowance Agreement. ECF 11-6 (the “Marketing Agreement”). In March 2014, ASIC assigned its rights and obligations under both agreements to Selman, with Transamerica's consent. Id. ¶¶ 34, 44; see ECF 11-4.

         1. The Administrative Services Agreement

         Pursuant to the ASA, Selman administers some Transamerica health plans, including TRICARE Supplements. Id. ¶ 35. Selman agreed to “process applications of prospective insureds, issue certificates and policy documents, mail premium notices and collect premium payments, retain all records (including account documents, insurance applications, advertising materials, etc.), and serve as claims administrator.” Id. ¶ 36. In exchange, Selman was entitled to 27% of premiums collected on the TRICARE Supplement policies as well as other specified health plans. Id. ¶ 40.

         Transamerica alleges that it provided Selman with significant confidential and proprietary information to help Selman successfully meet its contractual obligations. Id. ¶ 37. Specifically, Transmerica provided “customer leads, distribution channels, insured records, policy numbers, pricing structure, risk analysis, premium information, program performance reports, and other nonpublic information pertaining to Transmerica's TRICARE Supplement insurance policies and Transamerica's business operations[.]” Id. ¶ 37.

         To protect confidential information, each party agreed to a confidentiality clause, providing that the parties would “not use nor sell, duplicate, dispose of, disseminate, publish, reproduce, disclose (either orally or in writing) or otherwise make available in any manner whatsoever . . . any Confidential Information belonging to the other party, unless prior written permission to do so from an authorized officer of the other party is first obtained.” ECF 11-5 at 12, ¶ 7.01(d) (“Confidentiality Clause”); ECF 1, ¶ 38. Further, each party acknowledged that a breach of the Confidentiality Clause would “cause immediate and irreparable harm to the other party” and entitle the other party to seek injunctive relief. ECF 11-5 at 13, ¶ 7.01(i); see also ECF 1, ¶ 39.

         2. The Marketing Agreement

         Under the Marketing Agreement, Selman is obligated to market and sell health plans, including TRICARE Supplement plans. Id. ¶¶ 45-46. Pursuant to the Marketing Agreement, Selman is obligated to “solicit consumers for enrollment in the TRICARE Supplement plans, distribute promotional materials relating to the insurance plans underwritten by Transamerica, and engage in all efforts to market and grow Transamerica's TRICARE Supplement business.” Id. ¶ 46. In exchange, Selman is entitled to 2% of the premiums collected from all of Transamerica's TRICARE Supplement policies. Id. ¶¶ 54-56.

         Plaintiff asserts that the parties negotiated an Exclusivity Clause (ECF 11-6 at 4) as a material term of the Marketing Agreement. Id. ¶ 51. It provides, ECF 11-6 at 4 (my alterations):

         14. The following exclusivity provisions shall apply while this Agreement is in force:

(a) [Selman] has the exclusive right to market the Tricare employer payroll deduction and cafeteria plan (“Payroll Plan”) business on behalf of [Transamerica's] business unit known as Transamerica Affinity Services, Inc. (“Transamerica”), provided [Selman] maintains a minimum annualized premium in force of twenty million dollars ($20, 000, 000.00) of Tricare Payroll Plan business with [Transamerica]. Transamerica agrees not to aid any other business unit or other corporate affiliate that is competing with [Selman] for any Tricare Payroll Plan business. This exclusive right is granted only by Transamerica Affinity Services, Inc., and does not apply to any other business unit, division, or affiliated entity of [Transamerica];

(b) [Transamerica] shall have the exclusive right to underwrite and provide coverage for [Selman's] Tricare Payroll Plan business and [Selman] shall not engage directly or indirectly with any other insurance carrier or other entity to provide [Selman's] Tricare Payroll Plan product;

(c) Transamerica shall not, without the prior written consent of [Selman], engage directly or indirectly with any other entity or person for that entity or person to provide [Selman's] Tricare Payroll Plan product for or through Transamerica;

(d) As long as the minimum annual premium requirement as stated in paragraph 14(a) remains met, by mutual written agreement that specifically includes consent by [Selman] to the same, the Parties may agree upon terms and conditions that permit a third party to administer [Selman's] Tricare Payroll Plan business for Transamerica's client groups. Such agreement may include provision for compensation of [Selman] for consenting to the same for any coordination or participation by [Selman] in the services or transition thereby contemplated.

         According to Transamerica, “the Tricare employer payroll deduction and cafeteria plan” refers to TRICARE Supplement plans for employers. ECF 1, ¶ 48. Transamerica and Selman provide other TRICARE Supplement plans to associations. Id. Therefore, the Exclusivity Clause applies only to TRICARE Supplement plans for employers and permits Selman to “market [Selman's] other insurance products for other carriers.” Id. ¶ 57.

         The Marketing Agreement includes a termination clause. Id. ¶ 58. It provides: “Either party may give written notice to the other terminating this Agreement, without cause, effective one hundred and eighty (180) days after the date of such notice. Unless otherwise terminated this Agreement shall remain in effect.” ECF 11-6 at 5. According to Transamerica, the parties intended the 180-day period to allow them to plan for alternative arrangements. Id. ¶ 60. Notice would allow Selman to identify another carrier to underwrite its products and allow Transamerica to find another entity to administer and market its TRICARE Supplement plans. Transamerica alleges that the 180-day period was also intended to ensure that the non-terminating party receives its share of the premiums collected during the notice period. Id. ¶ 64.

         C. Amendment No. 5 to the ASMA

         In 2016, an internal third-party audit of Transamerica allegedly revealed that Transamerica was paying Selman compensation rates that were not reflected in the ASMA. Id. ¶ 79. As a result, Transamerica “prepared a revised compensation schedule that included, among other things, the TRICARE accounts that Selman purchased from ASIC for which Selman was receiving commissions.” Id. ¶ 80. As a result, the parties entered into Amendment No. 5 to the ASMA, effective May 1, 2016. Id. ¶ 81; ECF 11-8 (“Amendment”) at 2. The Amendment deleted ASMA's Exhibit A in its entirety and replaced it with a new version. ECF 11-8, ¶ 1. However, it also provided that “[a]ll other terms of the [ASMA] shall continue to remain in full force and effect. Id. ¶ 2. Further, it specified: “Except as specifically amended hereby, the [ASMA] shall remain unmodified and in full force and effect and is hereby reaffirmed.” Id. ¶ 3.

         Plaintiff alleges that the Amendment was intended only “to update the compensation schedule attached as Exhibit A to the ASMA to document all of the rates being paid to Selman.” Id. ¶ 82. Plaintiff also alleges that the parties did not intend to affect the ASA or the Marketing Agreement or to “modify the ...