Tom Winfree filed a complaint against Educators Credit Union (hereinafter ECU) and its then wholly-owned Credit Union Services Organization of Middle Tennessee, Inc. (hereinafter CUSO), for lost insurance commissions resulting from defendants’ alleged breach of contract, unfair competition and tortious interference with Plaintiff’s other contracts.

The facts are undisputed:

Plaintiff, Tom Winfree, entered into a “Memorandum of Understanding” with ECU in which he agreed to act as an unpaid marketing representative for ECU in consideration for the opportunity to sell cancer insurance from Life Investors, Inc. to ECU members.

Plaintiff would be entitled to retain a commission from the sale of those insurance policies with payment for the insurance premiums being deducted from the members’ wages.

The parties later amended the Memorandum to indicate that ECU could terminate the arrangement with the Plaintiff by giving thirty days written notice to Plaintiff.

Thereafter, ECU formed a CUSO for the purpose of selling cancer insurance directly to its members and phasing out the Plaintiff’s sale of the insurance to ECU members. ECU sent proper notice to the Plaintiff indicating that their relationship with him would terminate in thirty days.

After the CUSO was formed, and prior to expiration of the thirty day notice, ECU sent a letter to its members announcing formation of the CUSO and termination of payroll deduction for insurance sold by Plaintiff.

In this letter, ECU advised its members that those who wished to continue paying premiums directly from payroll would be required to sign a conversion form allowing their coverage to be transferred to another insurance company which would return the commissions directly to ECU.

Plaintiff claimed that ECU breached its contract with Plaintiff when it solicited the members to convert to the new ECU carrier during the thirty day period in which ECU notified Plaintiff that their arrangement was being terminated.

Plaintiff further claimed that he should be compensated for lost commission compensation from the year of the termination and continuing for several years thereafter.

The Court of Appeals of Tennessee found that there was a breach of contract when ECU acted to solicit Plaintiff’s commission income during the thirty day notice termination period, although the Plaintiff would only be entitled to recover lost commissions that actually resulted during the thirty day notice period, and not thereafter.

Hence, the Court of Appeals significantly limited ECU’s liability on the breach of contract claim; this court additionally denied and dismissed Plaintiff’s claims for unfair competition and tortious interference with business contracts, finding ECU’s actions constituted “a classic example of the free enterprise system at work.”  Tom Winfree vs. Educators Credit Union [of Tennessee] and Credit Union Services Organization of Middle Tennessee, Inc.

Author: Charles R. Harroun, Attorney at Law