In a shocking final decision last week, the Alabama Supreme Court upheld by a 4-3 vote a $2.4 million punitive damage verdict against Farmers Insurance Company.
With a majority of appellate court seats on the ballot in 2018 and several members not returning or running for re-election, the philosophical direction of the court could change. It is important that the business community stay involved in the races to ensure that the direction changes for the better.
This decision clearly marks a dramatic, negative direction in the court's philosophy on three issues key to a fair civil justice system:
1. the primacy of written contract terms over alleged oral representations;
2. the authority of the at-will employment doctrine; and,
3. the enforcement of "merger" clauses in agreements that expressly state that all
promises and negotiations are merged and integrated into the final written
Voting for the decision were Justices Jim Main, Glenn Murdock, Tom Parker, and Kelli Wise.
Voting against were Acting Chief Justice Lyn Stuart and Justices Mike Bolin and Greg Shaw. Chief Justice Roy Moore remains suspended.
In earlier voting, Justice Tommy Bryan voted with the majority and against the position of the business community, but recused in the final decision for an undisclosed reason.
Only four members of the court joined in the plurality opinion. While it is not considered binding precedent, it remains a dangerous, persuasive decision which often impacts future decisions by trial courts presented with similar facts. Moreover, bad law often begins with a plurality opinion as it gains credence with additional court members and later becomes a majority, binding opinion.
The case involved a dispute between Farmers Insurance and one of its agents in which the agent alleged that he was told he could become a Farmers agent but maintain his office in his father's independent insurance agency. Farmers requires its agents to maintain separate, exclusive offices.
ACJRC and virtually every business association in the state filed "friend of the court" briefs to no avail encouraging the court to reverse its earlier decision upholding the award.
As first reported by ACJRC last February, the case erodes an important 1997 decision changing the state's fraud law and was credited with playing a key role in ending "Tort Hell" in Alabama.
The 1997 "Foremost" case determined that a plaintiff could not reasonably rely on oral representations when presented with written contract terms that clearly contradicted the alleged misrepresentations that formed the basis of the fraud claim. The case created the opportunity for defendants to have certain fraud cases thrown out early in the judicial process. This, as much as any development, restored balance to Alabama's civil justice system.
Prior to Foremost, the Supreme Court routinely permitted fraud claims to be submitted to sympathetic juries based on alleged oral representations that were flatly contradicted by written documents presented to the plaintiff. This became one of the main drivers of explosive punitive damage awards, as well as massive suit filings in certain plaintiff-friendly Alabama counties.
The decision potentially also overrode the long-standing "at will" employment doctrine in Alabama since it alleged that the employee was "fraudulently induced" to leave his former job to join Farmers.
And, it dismissed the "merger" clause in the agent's employment agreement that expressly said that all promises and negotiations were superseded by the written provisions of his agent agreement.
Via the Alabama Civil Justice Reform Committee, Post Office Box 240757, Montgomery, AL 36124