In Re: Prof Ins Mgt

Opinions of the United

2002 Decisions States Court of Appeals

for the Third Circuit

4-1-2002

In Re: Prof Ins Mgt

Precedential or Non-Precedential:

Docket No. 00-5201

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PRECEDENTIAL

Filed April 1, 2002

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 00-5201

IN RE: PROFESSIONAL INSURANCE MANAGEMENT,

Debtor

PROFESSIONAL INSURANCE MANAGEMENT

v.

THE OHIO CASUALTY GROUP

OF INSURANCE COMPANIES;

THE OHIO CASUALTY INSURANCE;

OHIO LIFE INSURANCE COMPANY;

OHIO SECURITY INSURANCE COMPANY

and OCASCO BUDGET;

WEST AMERICAN INSURANCE COMPANY;

AMERICAN FIRE AND CASUALTY COMPANY,

Appellants

On Appeal from the United States District Court

For the District of New Jersey

(No. 99-cv-05919 and No. 00-cv-00640)

District Judge: Honorable Jerome B. Simandle

Argued: May 14, 2001

Before: SLOVITER, AMBRO, and GARTH, Circuit Ju dges

(Filed: April 1, 2002)

Charles X. Gormally (Argued)

Carl J. Soranno (Argued)

Brach, Eichler, Rosenberg, Silver,

Bernstein, Hammer & Gladstone

101 Eisenhower Parkway

Roseland, New Jersey 07068

Attorneys for Appellants

The Ohio Casualty Group of

Insurance Companies, et al.

Michael A. Zindler

Teich, Groh, Frost & Zindler

691 State Highway 33

Trenton, New Jersey 08619

Samuel Mandel (Argued)

136 West Route 38

Moorestown, New Jersey 08057

Attorneys for Appellee

Professional Insurance Management

OPINION OF THE COURT

AMBRO, Circuit Judge:

The primary issue presented by this appeal, stemming

from a tortured procedural mess, is whether an insurance

company must turn over to its terminated agent

$259,315.95 in accrued commissions and interest, plus

additional commissions that continue to be earned. The

answer hinges on the interpretation of New Jersey’s Agency

Termination Statute found at N.J. Stat. Ann. S 17:22-6.14a

(West 2000), a matter of first impression in this Court.1

_________________________________________________________________

1. Because we recognized that this issue was one of first impression in

New Jersey, a majority of the panel granted a motion to certify the issue

under New Jersey Court Rule 2:12A to the New Jersey Supreme Court.

The motion had been granted just prior to oral argument initially

scheduled for December 13, 2000. As a consequence, we filed a Petition

for Certification with the New Jersey Supreme Court on January 24,

2001. On February 21, 2001, the New Jersey Supreme Court denied our

Petition, thereby making necessary this opinion.

2

Specifically, the parties call upon us to resolve the question

of whether The Ohio Casualty Group of Insurance

Companies ("Ohio Casualty") terminated its agent,

Professional Insurance Management ("PIM"), essentially at

will or, instead, for gross and willful misconduct or failure

to pay over to Ohio Casualty moneys due after receipt of a

written demand therefor. See N.J. Stat. Ann.S 17:22-

6.14a(d), (e). The Bankruptcy Court ruled, and the District

Court affirmed, that the termination was at will. The

consequence of this ruling is that New Jersey’s Agency

Termination Statute requires Ohio Casualty to pay PIM

commissions on all policies for one year following

termination, and on automobile insurance policy renewals

so long as PIM services the accounts. See N.J. Stat. Ann.

S 17:22-6.14a(d), (l). Under a contrary ruling, PIM would

have no right to these commissions.

The remaining issues on appeal arise from the ruling that

the termination was at will, namely, (1) whether Ohio

Casualty can successfully interpose the equitable remedy of

recoupment against moneys PIM owed prior to its petition

under Chapter 11 of the Bankruptcy Code, and (2) whether

PIM is entitled to pre-judgment interest on the

commissions.

For the reasons that follow, we vacate the order of the

District Court requiring Ohio Casualty to turn over to PIM

commissions due and accruing, plus interest. We remand

to the Bankruptcy Court to apply to the facts of this case

the legal determination that the initial at-will termination

can become a termination for cause between the notice of

termination and the effective termination date. We also

vacate the orders denying the equitable remedy of

recoupment and awarding PIM pre-judgment interest,

pending the resolution of this question by the Bankruptcy

Court on remand.2

_________________________________________________________________

2. The claims of constructive trust and contempt of court addressed by

the District Court were not raised on appeal. Therefore, we render no

opinion on those issues and the orders with respect to each remain

unchanged.

3

I. Factual and Procedural Background

The facts of this case are set out at length in previous

opinions of this Court3 and the District Court,4 and the

letter opinions of the Bankruptcy Court dated July 12,

1999 and October 22, 1999. The following discussion

recounts the factual history bearing on the matters in this

appeal. Despite our shortened recounting of the facts, they

nonetheless remain complex.

PIM is a New Jersey-licensed insurance broker and agent.

In 1980, PIM entered into an agency agreement with Ohio

Casualty that permitted PIM to market Ohio Casualty’s

personal and commercial insurance policies. This

agreement permitted Ohio Casualty to cancel the contract

on 90 days notice and also reads in relevant part:

The Company [Ohio Casualty], in the exercise of the

right reserved to it above, may, at its option, retain all

commissions which are payable or which may become

payable under contracts of insurance represented by

such expirations, or renewals thereof, and apply same

against the amount of the Agent’s [PIM’s] indebtedness

to the Company, or may sell, assign, transfer or

otherwise dispose of such expirations to any other

agent or broker. If, in either event, the Company does

not realize sufficient return to satisfy Agent’s

indebtedness to the Company in full, the Agent shall

remain liable for the unpaid balance. Amounts realized

by the Company in excess of such indebtedness, less

expenses incurred by the Company in handling or

other disposition of such expirations, shall be paid to

the Agent.

. . . This agreement may be suspended or canceled for

non-payment of balances due. During suspension,

commissions due and payable to the Agent for

Automatic Renewal type policies will be applied against

balances due, to the extent of the indebtedness.

_________________________________________________________________

3. See In re Professional Ins. Management, 130 F.3d 1122 (3d Cir. 1997).

4. See Professional Ins. Management v. The Ohio Cas. Group of Ins. Cos.,

246 B.R. 47 (D.N.J. 2000).

4

In re Professional Ins. Management, No. 94-1312, letter op.

at 10 (Bankr. D.N.J. July 12, 1999).

PIM located customers, ascertained their insurance

needs, and sold them Ohio Casualty policies. For personal

automobile insurance policies, Ohio Casualty collected

premiums directly from the policyholders and sent PIM its

sales commissions. For other types of insurance, namely

commercial lines, PIM collected the premiums, deducted its

commissions, and then forwarded the balance to Ohio

Casualty.

Each month, a reconciliation process occurred whereby

Ohio Casualty provided PIM an account statement detailing

each insurance account, the type of insurance, the gross

premium, the commission rate, and details of the amounts

currently due, past due and due in the future. PIM would

customarily receive Ohio Casualty’s monthly statement at

the beginning of each month. PIM would then compare its

own records to the statement, and would reconcile the

items contained in the currently due column. If PIM

disagreed with an entry, it would line off the entry and

provide an explanation and documentation in support. Ohio

Casualty would then carry forward the item into the past

due column where it would remain until Ohio Casualty

researched the item and the parties resolved the issue.

PIM’s reconciliation and payments were due by the 15th of

the month. If an item that Ohio Casualty determined was

due was not paid after a "please remit" notice, an Ohio

Casualty account technician would issue an "open item

letter" demanding payment and, at times, threatening

suspension unless payment was received by a certain

deadline. The relevant point is that in the reconciliation

process the parties mixed the policy types and took credits

against all policies in one monthly transaction, as per the

agency agreement. In addition, in the case of agent

indebtedness, the agency agreement specifically called for

the application of commissions due against balances due

regardless of the policy type.

In order to make its product more attractive in a highly

competitive market, Ohio Casualty formed its own premium

finance company, Ocasco. Ocasco offered to finance large

premiums, particularly those in the commercial market, at

5

no interest for premiums over $10,000 and at a nominal

interest rate for premiums under $10,000. The vast

majority of premiums on commercial policies sold by PIM,

96%-98% of its premiums in 1992 and 1993, were

financed. In those cases, an agreement was prepared by the

agent -- PIM, signed by the insured, and sent to Ocasco.

Ocasco would process the agreement and send a voucher

back to PIM. PIM then forwarded the voucher in lieu of

cash to Ohio Casualty when it made its monthly payments.

Because PIM could not deduct its commissions from the

vouchers directly, it was using the small percentage of cash

receipts to pay its commissions. The volume of premiums

PIM financed through Ocasco and the length of voucher

processing time created accounting difficulties for PIM. As

a result, PIM would credit vouchers prematurely and use

vouchers-in-hand to credit premiums in the pipeline. The

latter practice was permitted by an agreement between

Ocasco and PIM.

Ohio Casualty complained of PIM’s accounting

procedures as early as 1989. PIM typically had 25% or

more of its amount due in the past due column, and PIM’s

accounting practices with respect to past due balances and

credits were the subject of at least nine letters from Ohio

Casualty. After much discussion between the parties,

Ocasco agreed to send its vouchers directly to Ohio

Casualty. Despite this improvement and PIM’s clarifications

of its past due balances, accounting problems continued

into 1993. PIM was twice threatened with suspension that

year.

Finally, on November 15, 1993, Ohio Casualty sent the

following letter of termination to PIM:

We have had a lot of conversations about continued

existing problems with your agency regarding clearing

accounting differences in a timely fashion resulting in

a continued high "over 90 days" debt and continued

problems with your agency reimbursing Ocasco Budget

promptly on accounts that have been canceled. On

many, the Accounting Department had to reimburse

Ocasco and now since we have requested your agency

not to use Ocasco on new accounts, we are beginning

6

to get similar problems and requests from other

premium finance companies.

Along with the above problems you are heading for the

third consecutive unprofitable year (twelve months

86.9% thru October 30, 1993) and a six year Loss

Ratio of 62.6%.

At this time it is necessary that I advise you that we

are terminating your Agency Agreement effective March

1, 1994 and that you will no longer have the authority

to write new business or bind coverage effective

November 19, 1993. We will honor all prior binding

commitments, subject to our underwriting rules, made

prior to that date.

In re Professional Ins. Management, No. 94-1312, letter op.

at 32 (Bankr. D.N.J. July 12, 1999). This initial termination

letter was followed by an "official form letter" dated

November 19, 1993 establishing the procedures for

termination and renewals. Attached to this form letter were

copies of the agency termination notice and offer letters

that Ohio Casualty intended to send to PIM’s insureds. Id.

at 33. The forms submitted to the New Jersey Department

of Insurance noted that the reasons for PIM’s termination

were poor loss ratio, continued accounting differences, and

continued payment problems with premium finance

companies and canceled accounts. Id. at 34. The

termination was effective on March 1, 1994. Thereafter, PIM

was to continue to receive commissions on commercial

renewals for one year following termination and on

automobile policy renewals so long as PIM serviced the

accounts, in accordance with the notice of termination and

the New Jersey Agency Termination Statute.5

_________________________________________________________________

5. The New Jersey Agency Termination Statute, codified at N.J. Stat.

Ann. S 17:22-6.14a, governs the rights of a terminated agent. The

relevant subsections (d), (e) and (l) provide:

d. Termination of any such contract for any reason other than one

excluded herein shall become effective after not less than 90 days’

notice in writing given by the company to the agent and the

Commissioner of Banking and Insurance. No new business or

changes in liability on renewal or in force business, except as

7

At the time Ohio Casualty sent the notice of termination,

it claimed that PIM owed over $200,000. In November and

_________________________________________________________________

provided in subsection l. of this section, shall be written by the

agent for the company after notice of termination without prior

written approval of the company. However, during the term of the

agency contract, including the said 90-day period, the company

shall not refuse to renew such business from the agent as would be

in accordance with said company’s current underwriting standards.

The company shall, during a period of 12 months from the effective

date of such termination, provided the former agent has not been

replaced as the broker of record by the insured, and upon request

in writing of the terminated agent, renew all contracts of insurance

for such agent for said company as may be in accordance with said

company’s then current underwriting standards and pay to the

terminated agent a commission in accordance with the agency

contract in effect at the time notice of termination was issued. Said

commission can be paid only to the holder of a valid New Jersey

insurance producer’s license. In the event any risk shall not meet

the then current underwriting standards of said company, that

company may decline its renewal, provided that the company shall

give the terminated agent and the insured not less than 60 days’

notice of its intention not to renew said contract of insurance.

e. The agency termination provisions of this act shall not apply to

those contracts:

(1) in which the agent is paid on a salary basis without commission

or where he agrees to represent exclusively one company or to the

termination of an agent’s contract for insolvency, abandonment,

gross and willful misconduct, or failure to pay over to the company

moneys due to the company after his receipt of a written demand

therefor, or after revocation of the agent’s license by the

Commissioner of Banking and Insurance; and in any such case the

company shall, upon request of the insured, provided he meets the

then current underwriting standards of the company, renew any

contract of insurance formerly processed by the terminated agent,

through an active agent, or directly pursuant to such rules and

regulations as may be promulgated by the Commissioner of Banking

and Insurance; . . .

* * *

l. A company which terminates its contractual relationship with an

agent subject to the provisions of subsection d. of this section shall,

at the time of the agent’s termination, with respect to insurance

8

December of 1993, Ohio Casualty continued to send PIM

monthly statements and reconciliations and PIM continued

to make payments. Correspondence between Ohio Casualty

and PIM confirmed Ohio Casualty’s intent to renew

commercial policies through PIM for one year. In January of

1994, however, PIM filed suit against Ohio Casualty and

shortly thereafter the statements and accounting practices

between them broke down completely. Id. at 34. Also in

January of 1994, PIM began to take improper credits

against moneys owed to Ohio Casualty, a fact not subject

to dispute on appeal. The essence of the impropriety was

_________________________________________________________________

covering an automobile as defined in subsection a. of section 2 of

P.L.1972, c. 70 (C.39:6A-2), notify each named insured whose policy

is serviced by the terminated agent in writing of the following: (1)

that the agent’s contractual relationship with the company is being

terminated and the effective date of that termination; and (2) that

the named insured may (a) continue to renew and obtain service

through the terminated agent; or (b) renew the policy and obtain

service through another agent of the company.

Notwithstanding any provision of this section to the contrary, no

insurance company which has terminated its contractual

relationship with an agent subject to subsection d. of this section

shall, upon the expiration of any automobile insurance policy

renewed pursuant to subsection d. of this section which is required

to be renewed pursuant to section 3 of P.L.1972, c. 70 (C.39:6A-3),

refuse to renew, accept additional or replacement vehicles, refuse to

provide changes in the limits of liability or refuse to service a

policyholder in any other manner which is in accordance with the

company’s current underwriting standards, upon the written

request of the agent or as otherwise provided in this section,

provided the agent maintains a valid New Jersey insurance

producer’s license and has not been replaced as the broker of record

by the insured. However, nothing in this section shall be deemed to

prevent nonrenewal of an automobile insurance policy pursuant to

the provisions of section 26 of P.L.1988, c. 119 (C.17:29C-7.1).

The company shall pay a terminated agent who continues to

service policies pursuant to the provisions of this subsection a

commission in an amount not less than that provided for under the

agency contract in effect at the time the notice of termination was

issued.

N.J. Stat. Ann. S 17:22-6.14a(d), (e) and (l) (West 2000).

9

that PIM applied credit for commissions it earned on

personal automobile policy lines against the commercial

premiums it collected on behalf of Ohio Casualty, claiming

that Ohio Casualty had wrongly withheld these same

personal automobile policy lines commissions beginning in

October of 1993.

In a letter dated May 26, 1994, nearly three months after

PIM was effectively terminated, Ohio Casualty demanded

that PIM surrender to it the agency records, declared that

PIM was indebted to it for $294,284.29, and demanded

payment. Also in May, PIM attempted to sell its book of

business ("Book of Business") to Anderson Jackson Metts

("AJM"). In anticipation of the sale, PIM brokered certain

contracts to AJM. After Ohio Casualty successfully obtained

injunctive relief to have the proceeds of the sale, if any,

placed in escrow, the sale fell through.

On August 5, 1994, PIM filed for bankruptcy protection

under Chapter 11 of the United States Bankruptcy Code,

11 U.S.C. S101, et seq.6 PIM’s indebtedness to Ohio

Casualty as of the time of the petition was later fixed at

$252,642.40.7 On August 15, 1994, Ohio Casualty sent

letters to PIM’s customers informing them of the

termination of the agency relationship and of their options.

Pursuant to a Bankruptcy Court order under which the

status quo was maintained, Ohio Casualty took over PIM’s

Book of Business in September of 1994, and employed AJM

as the servicing agent. This order was appealed to the

District Court. On June 30, 1995, the District Court

affirmed the Bankruptcy Court’s ruling that Ohio Casualty

_________________________________________________________________

6. Under subsection (e) of the Agency Termination Statute, the

termination of an agent for insolvency precludes the agent’s collection of

commissions pursuant to subsection (d). In this case (and without

considering the effect of the S 365(e)(1)(A) of the Bankruptcy Code

banning, inter alia, the termination of a contract solely because of

insolvency), because PIM filed for bankruptcy five months after the

effective date of termination, its insolvency could not have been a reason

for its termination and subsection (e) does not apply on this basis.

7. The fixing of Ohio Casualty’s pre-petition claim was resolved on

September 10, 1996, after lengthy hearings on PIM’s motion to expunge

Ohio Casualty’s claim. In re Professional Ins. Management, No. 94-1312,

letter op. at 35 n.53 (Bankr. D.N.J. July 12, 1999).

10

owned the Book of Business, but reversed and remanded as

to whether it could be sold or transferred.

On March 7, 1996, the Bankruptcy Court reversed itself

and held that Ohio Casualty had an unperfected security

interest in PIM’s Book of Business, and directed the Book

of Business to be returned to PIM effective April 1, 1996.

On April 19, 1996, the Bankruptcy Court (1) ordered Ohio

Casualty to rescind notices of non-renewal to 65 of 69 auto

policy holders under New Jersey’s 2 for-1 requirement;8 (2)

tolled the 12-month statutory period giving PIM a right to

renewals on commercial policies from April 1, 1996 to June

30, 1996 (subtracting several months for PIM’s delay in

seeking relief from an earlier ruling); and (3) granted PIM

the right to collect on commissions post April 1, 1996.9

On July 8, 1996, the District Court (Rodriguez, D.J.)

affirmed the April 19, 1996 decision as to the tolling period

and to Ohio Casualty having an unperfected security

interest in the Book of Business, but reversed the 2-for-1

decision and the rescission of the cancellation letters, and

found Ohio Casualty had no perfected security interest in

post-petition commissions owed to PIM. In re Professional

Ins. Management, No. 96-2499, slip op. at 16, 25-26, 30

(D.N.J., July 8, 1996). The District Court further remanded

to the Bankruptcy Court the issue of whether PIM’s

termination was covered under subsection (d) or (e) of the

Agency Termination Statute. Id. at 15. This Court upheld

the District Court’s reversal with respect to the 2-for-1

ruling and the holding that the Bankruptcy Court could not

_________________________________________________________________

8. New Jersey’s 2-for-1 insurance regulation, which provides that for

every New Jersey auto policy canceled the carrier must write two new

policies, does not directly bear on this appeal. The issues arising during

the period post-termination and prior to April 1, 1996, and the claim

that Ohio Casualty terminated PIM in retaliation for PIM’s refusal to

violate the New Jersey Fair Automobile Insurance Reform Act of 1990,

N.J. Stat. Ann. S 17:33B-1 (West 2000) (the"FAIR Act"), are before the

Bankruptcy Court in a different proceeding.

9. Ohio Casualty contends on appeal that the proceeds of this sale and

commissions earned on commercial policies pre-April 1, 1996 arise from

the identical commercial expirations that PIM failed to remit premiums

on pre-petition, and therefore recoupment should be ordered. Ohio

Casualty’s Motion to Expand the Record at 6.

11

order Ohio Casualty to pay commissions to PIM until the (d)

or (e) determination was made. In re Professional Ins.

Management, 130 F.3d 1122 (3d Cir. 1997).

In July of 1998, the Bankruptcy Court held seven days of

hearings on the (d) versus (e) issue. In the midst of these

hearings, Ohio Casualty issued a Notice of Discontinuance

informing PIM that effective September 1, 1998, Ohio

Casualty would stop accepting renewals and service

requests from PIM for automobile policies under subsection

(l) and would not pay PIM commissions. The Bankruptcy

Court enjoined this Notice of Discontinuance.

Throughout the hearings, the Bankruptcy Court limited

its inquiry into the record to the period prior to November

15, 1993 -- the notice of termination date. The Bankruptcy

Court found that, as of the month-end prior to the

termination notice, only $24,774 of the $217,000 listed as

due to Ohio Casualty prior to reconciliation was actually in

the past due column, and of that amount only $1,930 was

marked due and payable.10 Such a small amount of arrears,

the Bankruptcy Court ruled, did not substantiate Ohio

Casualty’s claim that PIM was terminated for gross and

willful misconduct or for failure to pay over premiums due

under subsection (e) of the Agency Termination Statute. In

re Professional Ins. Management, No. 94-1312, letter op. at

59-60 (Bankr. D.N.J. July 12, 1999). The Bankruptcy Court

concluded that PIM’s termination therefore fell under

subsection (d) of the Agency Termination Statute,

essentially the "at will" provision. This meant that PIM was

entitled to renewal commissions for one year on all policies,

subject to the tolling period instituted by the Bankruptcy

Court, and for renewal commissions on automobile policies

under subsection (l) of the statute for as long as PIM

serviced those accounts.

In a Supplemental Decision on September 15, 1999, the

Bankruptcy Court rejected Ohio Casualty’s claims of

recoupment and constructive trust, and on October 14,

1999, the Bankruptcy Court ordered that all commissions

_________________________________________________________________

10. Support for the Bankruptcy Court’s accounting for the reduction in

the amount PIM owed Ohio Casualty at the time of the notice of

termination is detailed in its July 12, 1999 letter opinion.

12

after April 1, 1996 be turned over to PIM. Ohio Casualty

appealed and requested a stay. After Ohio Casualty failed to

turn over the commissions, the Bankruptcy Court found

Ohio Casualty in contempt in a letter opinion dated

November 17, 1999. The Bankruptcy Court issued its final

decision in the matter before us on January 5, 2000 in a

letter opinion wherein it ruled that Ohio Casualty owes PIM

commissions plus pre-judgment interest from April 1, 1996

forward, in the amount of $259,315.95.

The District Court affirmed the Bankruptcy Court’s

determination that PIM’s termination fell under subsection

(d) of the Agency Termination Statute and ruled that the

Bankruptcy Court’s failure to consider evidence of PIM’s

conduct between the time of notice and the time of

termination was error, though harmless in the context of

the District Court’s analysis. Professional Ins. Management

v. The Ohio Cas. Group of Ins. Cos., 246 B.R. 47, 65 (D.N.J.

2000). It affirmed the denial of recoupment and

constructive trust and the award of prejudgment interest.

Id. at 67, 69, 71. However, the District Court reversed the

finding that Ohio Casualty was in contempt for failure to

turn over commissions to PIM on the ground that Ohio

Casualty filed a timely appeal after the automatic ten-day

stay. Id. at 73. This appeal followed.

II. Jurisdiction

As a threshold matter, we must be satisfied that we have

appellate jurisdiction. Metro Transp. Co. v. North Star

Reinsurance Co., 912 F.2d 672, 676 (3d Cir. 1990). At oral

argument, we posed the question of the statutory basis for

exercising jurisdiction in this case. To resolve this question,

we sought supplemental briefing from the parties.

Specifically, we asked whether we could exercise

jurisdiction over an appeal based on the traditional

jurisdiction provisions in 28 U.S.C. SS 1291-1292, the

bankruptcy jurisdiction provision in 28 U.S.C. S 158(d), or

whether we should otherwise exercise jurisdiction in light of

the factors set forth in In re Blatstein, 192 F.3d 88, 94 (3d

Cir. 1999). After reviewing the submissions of the parties,

we conclude that jurisdiction is proper in this case under

28 U.S.C. S 158(d) and shall entertain the appeal.

13

In the context of an appeal from the District Court

reviewing a Bankruptcy Court decision, our own

jurisdiction is prescribed by S 158(d). Consequently, our

review is limited to final orders and judgments of the

bankruptcy courts and district courts: "The courts of

appeals shall have jurisdiction of appeals from all final

decisions, judgments, orders, and decrees entered under

subsections (a)11 and (b)12 of this section." 28 U.S.C.

S 158(d). Although district courts may grant leave to appeal

from interlocutory orders, no such power is granted to

courts of appeals. In re White Beauty View, Inc. , 841 F.2d

524, 525 (3d Cir. 1988).

"The finality of the [orders] must be resolved with respect

to the decisions of both the bankruptcy judge and the

district court." Id. at 526 (citing In re Meyertech Corp., 831

F.2d 410, 413-14 (3d Cir. 1987)). Ordinarily in civil

litigation only those orders that dispose of all issues as to

all parties to the case are considered final. In re Meyertech

Corp., 831 F.2d at 414. However, considerations unique to

bankruptcy appeals have led us consistently in those cases

to construe finality in a more pragmatic, functional sense

than with the typical appeal. In re Amatex Corp., 755 F.2d

1034, 1039 (3d Cir. 1985). With this understanding,

[w]e interpret finality pragmatically in bankruptcy

cases because these proceedings often are protracted

and involve numerous parties with different claims. To

_________________________________________________________________

11. Subsection (a) of section 158 grants the District Court jurisdiction to

hear appeals

(1) from final judgments, orders, and decrees;

(2) from interlocutory orders and decrees issued under section

1121(d) of title 11 increasing or reducing the time periods referred

to in section 1121 of such title; and

(3) with leave of the court, from other interlocutory orders and

decrees;

of bankruptcy judges entered in cases and proceedings referred to

the bankruptcy judges under section 157 of this title.

28 U.S.C. S 158(a).

12. This jurisdictional subsection is not implicated by this appeal.

14

delay resolution of discrete claims until after final

approval of a reorganization plan, for example, would

waste time and resources, particularly if the appeal

resulted in reversal of a bankruptcy court order

necessitating re-appraisal of the entire plan.

In re White Beauty View, 841 F.2d at 526.

This relaxed sense of "practical finality" is not without

limitation. It must be balanced against our traditional

antipathy toward piecemeal appeals.13 In re Meyertech

Corp., 831 F.2d at 414. For example, although an order of

the bankruptcy court expunging a creditor’s claim is final,

Walsh Trucking Co., Inc. v. Insurance Co. of North America,

838 F.2d 698, 701 (3d Cir. 1988), an order of the

bankruptcy court finding the debtor’s attorneys subject to

sanctions (but not determining the amount or form of the

penalty) is not final, In re Jeannette Corp., 832 F.2d 43 (3d

Cir. 1987). Similarly, in In re Brown, 803 F.2d 120 (3d Cir.

1986), we ruled that a district court order remanding to the

bankruptcy court for a determination of damages was not

a final order.

In this case, the District Court was satisfied that

jurisdiction was proper either as an appeal of a final order

of the Bankruptcy Court under 28 U.S.C. S 158(a) or as an

appeal of an interlocutory order granting an injunction

_________________________________________________________________

13. Even within the context of S 1291, balancing "the inconvenience and

costs of piecemeal review on the one hand and the danger of denying

justice by delay on the other" is appropriate. Cox Broadcasting Corp. v.

Cohn, 420 U.S. 469, 479 n.7 (1975). As the Supreme Court noted in Cox

Broadcasting:

[O]ur cases long have recognized that whether a ruling is "final"

within the meaning of S 1291 is frequently so close a question that

decision of that issue either way can be supported with equally

forceful arguments, and that it is impossible to devise a formula to

resolve all marginal cases coming within what might well be called

the "twi-light zone" of finality. Because of this difficulty this Court

has held that the requirement of finality is to be given a "practical

rather than a technical construction." Cohen v. Beneficial Industrial

Loan Corp., 337 U.S. 541, 546 (1949).

Id.

15

under 28 U.S.C. S 1292(a)(1).14 Professional Ins.

_________________________________________________________________

14. The Bankruptcy Court order of July 30, 1999, pertaining to the

applicability of subsection (e) of the Agency Termination Statute,

provides in relevant part:

Ordered as follows:

1. That Ohio’s cross-motion for an order declaring that N.J.S.A.

17:22-6.14a(e) restricts Debtor’s entitlement to renewal commissions

is denied;

2. That the provisions of N.J.S.A. 17:22-6.14a(d) apply regarding

the termination of Debtor’s agency relationship with Ohio;

3. That any other issues remaining for resolution shall proceed in

accordance with this Court’s Opinion filed July 12, 1999 . . . .

The Bankruptcy Court order of October 14, 1999, pertaining to the

turnover of commissions and clarified in the letter opinion of October 22,

1999, reads in relevant part:

ORDERED that the Debtor is entitled to receive commissions due on

its Ohio book of business from April 1, 1996 and continuing

through and after the date of this Order; and it is further

ORDERED that Ohio be and is hereby directed to turnover to the

Debtor within seven (7) days from the date of the entry of this Order,

the sum of Two Hundred Sixteen Thousand Five Hundred Sixty-nine

and 79/100 ($216,569.79) Dollars in direct bill commissions that

have accrued since April 1, 1996 through July 26, 1999, as well as

all direct bill commissions after July 26, 1999 to the date of this

Order . . . and it is further . . .

ORDERED that Ohio be and is hereby directed to pay to the Debtor

all direct bill commissions that accrue to the Debtor as a terminated

agent under New Jersey law after the date of this Order, . . . and it

is further . . .

ORDERED that the Debtor’s claim for commissions due for the

period August 1994 through April 1996 be and are hereby preserved

and reserved pending a determination of Ohio’s administration claim

by this Court; and it is further

ORDERED that Ohio’s application for a constructive trust to be

imposed on the above commissions for its benefit be and is hereby

denied; and it is further

ORDERED that Ohio’s application for this Court to exercise its

equitable powers to grant Ohio a right of recoupment from these

commissions in order to satisfy the Debtor’s pre-petition debt to

Ohio be and is hereby denied . . . .

16

Management, 246 B.R. at 59-60. With respect toS 158(a),

the District Court noted that

the Bankruptcy Court specifically declined to

characterize the nature of the October 14, 1999 Order,

"except to note that [it] was a final resolution of the

debtors’ motion for turnover of commissions from April

1, 1996, which motion was made in Adversary

Proceeding No. 94-1312, and to recognize that

additional issues remain to be heard in that proceeding

. . . ."

Id. at 57 (citing In re Professional Ins. Management, No. 94-

1312, letter op. at 3 (Bankr. D.N.J. Oct. 22, 1999)). The

Bankruptcy Court also denied Ohio Casualty’s request for

a stay of the October 14, 1999 Order pending resolution of

the remaining issues in the adversary proceeding because

none of the issues remaining in the case "relate to debtor’s

entitlement to commissions since April 1, 1996." In re

Professional Ins. Management, No. 94-1312, letter op. at 3

(Bankr. D.N.J. Oct. 22, 1999).

Invoking the doctrine of "practical finality," the District

Court agreed that the issues decided by the Bankruptcy

Court were discrete and that "no effect or impact of those

decisions would change as a result of the Bankruptcy

Court’s future ultimate decision as to whether PIM is

entitled to damages for wrongful termination." Professional

Ins. Management, 246 B.R. at 59. Therefore, the District

Court ruled that the Bankruptcy Court orders of July 30,

1999 and October 14, 1999 were final orders subject to its

review.

We agree with this conclusion. We note that Congress

had previously provided that orders in bankruptcy cases

finally disposing of discrete disputes within the larger case

may be immediately appealed, and that "a bankruptcy

court order ending a separate adversary proceeding is

appealable as a final order even though that order does not

conclude the entire bankruptcy case." In re Moody, 817

F.2d 365, 367-68 (5th Cir. 1987) (citing In re Saco Local

Development Corp., 711 F.2d 441, 445-46 (1st Cir.1983)).

The Bankruptcy Court’s orders finally determined whether

Ohio was obligated to pay PIM commissions following the

17

termination of its agency agreement and the amount of that

obligation. PIM disagrees, contending that the order is

interlocutory and that additional, related issues remain to

be heard before the Bankruptcy Court. It is true that the

Bankruptcy Court is still considering the resolution of

significant issues between these two parties, specifically (1)

an adversary proceeding alleging Ohio Casualty’s wrongful

termination of PIM under the FAIR Act, and (2) the

allegation that Ohio failed adequately to service the Book of

Business pre-April 1, 1996, resulting in commissions owed

to PIM during this period. However, we agree with the

District Court that this appeal is entirely distinct and that

the issues noted above are unaffected by our resolution of

this appeal.15

Moreover, the two orders, considered together, effect a

turnover of commissions, which is widely regarded as a

final order for purposes of appeal.

Following the lead of every circuit court that has

considered the question directly or indirectly, we hold

_________________________________________________________________

15. Ohio Casualty submitted the recent decision of the New Jersey

Supreme Court, R. J. Gaydos Ins. Agency, Inc. v. Nat’l Consumer Ins. Co.,

773 A.2d 1132 (N.J. 2001), pursuant to Federal Rule of Appellate

Procedure 28(j), as possibly negating our authority to decide this matter

on appeal. In Gaydos, the New Jersey Supreme Court held that the FAIR

Act "does not create a private right of action for an agent to pursue a

claim that it was wrongly terminated as a result of an insurer’s alleged

FAIRA violations." Id. at 1147. Instead, the FAIR Act vests enforcement

powers exclusively with the Commissioner of Insurance. Id. The Court

noted that the New Jersey Legislature did not adopt the FAIR Act to

benefit insurance agents and insulate them from potential termination.

Id. However, the Court held that the agent could assert a common-law

contract claim for breach of the implied covenant of good faith and fair

dealing stemming from the carrier’s termination of the agency

agreement, citing to N.J.S.A. 17:22-6.14a(d) -- the same statute at issue

in this appeal. Id. at 1148. Because we conclude that the FAIR Act claim

currently before the Bankruptcy Court will not be affected by our

disposition of this case and because the Agency Termination Statute,

enacted to protect the rights of terminated insurance agents, provides a

common-law cause of action, the Courts below did not abuse their

discretion in failing to defer to the Commissioner of Insurance. This

matter was properly before the Bankruptcy and District Courts, and as

an appeal of a final order is properly before us.

18

that a bankruptcy court’s turnover order, in a separate

adversary proceeding, compelling a defendant to turn

over property in his possession to the trustee in

bankruptcy, is a final order and hence appealable as of

right.

In re Moody, 817 F.2d at 366. See also In re Cash Currency

Exchange, Inc., 762 F.2d 542, 546 (7th Cir. 1985); In re

Flying W. Airways, Inc., 442 F.2d 320, 321 n.1 (3d Cir.

1971); Sproul v. Levin, 88 F.2d 866, 869 (8th Cir. 1937); cf.

George A. Fuller Co. of P.R., Inc. v. Matta, 370 F.2d 679, 680

(1st Cir. 1967); O’Keefe v. Landow, 289 F.2d 465, 466 n.1

(2d Cir. 1961). We conclude that the effect of the

Bankruptcy Court’s determination that subsection (d) of the

Agency Termination Statute was triggered by Ohio’s

termination of PIM, in conjunction with the turnover order,

completely disposed before that Court of the issues under

appeal. Therefore the Bankruptcy Court orders were final,

appealable orders to the District Court under 28 U.S.C.

S 158(a).16

Having concluded that the Bankruptcy Court orders were

_________________________________________________________________

16. In addition, we agree that the District Court, sitting as an appellate

court, was authorized to hear the appeal from the Bankruptcy Court as

an appealable injunctive order under 28 U.S.C. S 1292(a), which

provides:

(a) Except as provided in subsections (c) and (d) of this section, the

courts of appeals shall have jurisdiction of appeals from:

(1) Interlocutory orders of the district courts of the United States,

the United States District Court for the District of the Canal Zone,

the District Court of Guam, and the District Court of the Virgin

Islands, or of the judges thereof, granting, continuing, modifying,

refusing or dissolving injunctions, or refusing to dissolve or

modify injunctions, except where a direct review may be had in

the Supreme Court . . . .

28 U.S.C. S 1292(a)(1). Both the District Court and the Bankruptcy Court

characterized the Bankruptcy Court orders as providing injunctive relief.

"The injunctive character of these orders is . . . evident from the [larger,

continuing order to pay commissions and] the duty imposed upon Ohio

Casualty with respect to the ongoing accrual of PIM’s commissions,

namely, to pay them over as they are earned, now and in the future."

Professional Ins. Management, 246 B.R. at 59.

19

final, we now briefly discuss the finality of the District

Court order of February 29, 2000. That order:

(1) affirmed the Bankruptcy Court order with respect

to subsection (d) of the Agency Termination Statute;

(2) affirmed the turnover of accrued commissions and

interest and continuing commissions;

(3) vacated the order holding Ohio Casualty in

contempt for failure to pay over commissions;

(4) directed the Clerk of Court to withdraw

$259,215.95 from the registry of Court and make

payment to PIM’s counsel; and

(5) ordered Ohio Casualty to calculate the additional

interest and commissions due to date.

Professional Ins. Management, No. 99-5919, order (D.N.J.

Feb. 29, 2000). Just as the Bankruptcy Court proceeding

below fully adjudicated a specific adversary proceeding

between the parties, the challenged order of the District

Court does the same.17 Therefore, jurisdiction over this final

order is proper in our Court pursuant to 28 U.S.C.S 158(d).

III. New Jersey’s Agency Termination Statute

Having jurisdiction over this appeal, we now turn to the

merits of the District Court’s decision regarding New

Jersey’s Agency Termination Statute. "Because the District

Court sat as an appellate court, reviewing an order of the

Bankruptcy Court, our review of the District Court’s

determinations is plenary." In re Rashid, 210 F.3d 201, 205

(3d Cir. 2000). "In reviewing the bankruptcy court’s

determinations, we exercise the same standard of review as

the district court." Fellheimer, Eichen & Braverman, P.C. v.

Charter Technologies, Inc., 57 F.3d 1215, 1223 (3d Cir.

_________________________________________________________________

17. Notably, the District Court did not remand to the Bankruptcy Court

for additional findings or legal determinations. Thus, the merits of the

discrete adversary case before the District Court were finally adjudicated.

As a result, we do not need to elaborate on the four factors set forth in

In re Blatstein, 192 F.3d 88, 94 (3d Cir. 1999), which provides additional

guidance on our jurisdiction where the District Court remands to the

Bankruptcy Court in whole or in part.

20

1995). Therefore, we review the Bankruptcy Court’s legal

determinations de novo, its factual findings for clear error,

and its exercises of discretion for abuse thereof. In re Engel,

124 F.3d 567, 571 (3d Cir. 1997).

After reviewing the voluminous record before us, we

conclude that both the Bankruptcy Court and the District

Court correctly interpreted the provisions of the Agency

Termination Statute to be predicated on the termination of

an agency relationship. We agree with the District Court

that an "at will" termination (under N.J. Stat. Ann. S 17.22-

6.14a(d)) could morph into a "for cause" termination (under

N.J. Stat. Ann. S 17.22-6.14a(e)) prior to the effective date

of termination and that the Bankruptcy Court erred when

it set the notice date as the relevant point of inquiry into

whether the statute’s "at will" or "for cause" provisions

apply. However, we do not subscribe to the District Court’s

conclusion that the Bankruptcy Court’s error was

nonetheless harmless. Because neither the District Court

nor the Bankruptcy Court considered the relevant conduct

(PIM’s failure to pay over premiums due between the date

of notice and the effective date of termination) and whether

Ohio Casualty recognized this conduct as a reason for

termination (irrespective of whether it was aware of

subsection (e)), the error was prejudicial and the case is

remanded to the Bankruptcy Court.

A. Interpretation of the Statute

That New Jersey considers the insurance industry to be

strongly affected by the public interest is demonstrated

through its comprehensive regulation of the industry. In

enacting the "No Fault Law," for example, it was the New

Jersey Legislature’s intent to provide insureds"the

advantage of guaranteed renewals of indefinite duration

with a particular company." Sheeran v. Nationwide Mutual

Insurance Co., Inc., 404 A.2d 625, 629 (N.J. 1979). With

respect to New Jersey’s Agency Termination Law, the

Legislature was "primarily concerned with the rights of

insurance agents. . . . The protection which it affords to the

insured public, although important, is only secondary." Id.

at 630. The Legislature enacted the statute to "regulate the

termination of agency agreements between insurance

companies and their independent agents." Cohen v. Home

21

Ins. Co., 230 N.J. Super. 72, 75 (App. Div. 1989). The

legislative history and case law also reflect a concern "that

New Jersey policyholders should not be deprived of the

benefit of continued effective policy service by motivated

agents." In re Terminated Aetna Agents, 248 N.J. Super.

255, 260 (App. Div. 1990), certif. denied, 126 N.J. 319

(1991). This case illustrates a point of conflict over the

protection of the interests of agents and the public at the

expense of the insurance carrier.

PIM’s entitlement to renewal commissions, following the

termination of its agency relationship with Ohio, is

governed by New Jersey’s Agency Termination Statute. As

already noted, if Ohio terminated PIM because of gross and

willful misconduct or failure to pay premiums due after

written notice, New Jersey law would preclude PIM from

receiving post-termination commissions or renewals. On the

other hand, if Ohio terminated PIM at will, New Jersey law

provides PIM with the right to renewal commissions on the

commercial policies for one year, and automatic renewal

commissions on personal automobile policies indefinitely.

Both the District Court and the Bankruptcy Court

interpreted the exception to S 17:22-6.14a(d) created in (e)

to apply specifically to terminations, as opposed to

situations where an agent fails to remit premiums at some

point after the termination of the agency relationship. What

Ohio Casualty initially disputes is the Courts’ construction

of subsection (e) to include the phrase "or failure to pay

over to the company moneys due to the company after his

receipt of a written demand therefor, . . ." as a termination

condition rather than an independent reason disqualifying

the agent from receipt of commissions.

To aid in this interpretation, we turn first to general rules

of statutory construction established by the United States

Supreme Court. As a general rule, "the meaning of a statute

must . . . be sought in the language in which the act is

framed, and if that is plain . . . , the sole function of the

courts is to enforce it according to its terms." Caminetti v.

United States, 242 U.S. 470, 485 (1917); see, e.g., Vreeland

v. Byrne, 370 A.2d 825 (N.J. 1977). In applying this rule,

courts have generally agreed that where a legislature has

"made a choice of language which fairly brings a given

22

situation within a statute, it is unimportant that the

particular application may not have been contemplated by

the legislators." Sears, Roebuck & Co. v. United States, 504

F.2d 1400, 1402 (Cust. Ct. Pat App. 1974); see, e.g., Barr

v. United States, 324 U.S. 83, 90 (1945); Vreeland, 370

A.2d at 832 (finding no room for judicial interpretation).

The New Jersey Supreme Court upheld these principles of

statutory construction in the insurance regulation context

when it rejected a defendant’s argument to rewrite the clear

wording of New Jersey’s No-Fault Act to exempt that

defendant from its proscriptions. Sheeran, 404 A.2d at 628.

The District Court applied these general rules of statutory

construction and agreed with the Bankruptcy Court’s

interpretation of the statute, noting that "[t]he plain and

unambiguous language of subsection (e) . . . clearly

establishes that subsection (e) applies if the termination is

a result of gross and willful misconduct or failure to pay

over funds; the causal relationship is a necessary predicate

to subsection (e)’s applicability." Professional Ins.

Management, 246 B.R. at 63 (italics in original). Upon

review of the text, this reading is correct.

Ohio Casualty asserts that strict application of

subsection (e) produces the inequitable result of preserving

(indeed requiring) PIM’s right to receive commissions even

where it failed to remit premiums after the date of

termination. The District Court, sympathetic to the

inequities posed by Ohio Casualty’s situation, agreed that

the ruling in Department of Insurance v. Universal

Brokerage Corp., 303 N.J. Super 405 (App. Div. 1997),

supports the policy that a "terminated agent cannot profit

from failure to remit premiums after demand therefor even

when it occurs after the termination date." Professional Ins.

Management, 246 B.R. at 63. Nonetheless, the Court

explained that while "[t]his policy statement may well have

an effect on the Bankruptcy Court’s equitable

determinations . . .[,] Universal Brokerage did not interpret

subsection (e)" nor could it alter the effect of the statute’s

plain language. Id. at 63-64. The District Court firmly

declared that "this Court is not free to rewrite the statute

to preclude that result where the unambiguous language of

subsection (e) does not." Id. at 64. The purpose and policy

23

behind this statute -- to preserve the rights of terminated

agents and to maintain the benefit of continued service by

motivated agents -- support this interpretation. We

therefore conclude that the Bankruptcy Court and the

District Court correctly read subsection (e) necessarily to

apply to the termination of agents as opposed to an agent’s

conduct independent of termination.

B. Application of the Statute

On appeal, Ohio Casualty claims that PIM’s improper

credits and failure to turn over commercial premiums from

January, 1994 forward was a continuation of the improper

accounting practices and indebtedness for which Ohio

Casualty initially terminated PIM. PIM’s conduct, therefore,

arguably constitutes gross and willful misconduct and the

failure to pay over premiums due, thus qualifying as a

termination under subsection (e) of the Agency Termination

Statute. Moreover, Ohio Casualty advises us that the

Agency Termination Statute does not direct how a carrier is

to terminate an agent; the agency contract does. According

to Ohio Casualty, "the sole purpose of the Statute is to

guide the renewals of policies of agents after termination."

Ohio Casualty’s Br. at 36.

Whether Ohio Casualty’s allegations legitimately

constituted a reason for termination under subsection (e)

was the inquiry that the Bankruptcy Court undertook. In

reaching its holding that PIM’s termination was effectively

at will (i.e., under subsection (d)), the Bankruptcy Court

limited its review of the record to the period prior to the

date of the notice of termination. In re Professional Ins.

Management, No. 94-1312, letter op. at 65 (Bankr. D.N.J.

July 12, 1999). "It cannot be disputed that the agency

relationship between the debtor and Ohio was terminated

by letter dated November 15, 1993. Any indebtedness that

arose following the termination will not be considered as a

basis for the activation of subsection (e)." It did so because

PIM was effectively prevented from writing new business

pursuant to the terms of the notice of termination, and

because by that time Ohio Casualty’s reasons for

termination were already fully formed. Professional Ins.

Management, 246 B.R. at 64.

24

The District Court ruled that this limited review was

erroneous.18 Although noting that the Bankruptcy Court’s

"decision to ignore evidence from after November 15, 1993

was based on an incorrect assumption that an agent could

not be terminated under both subsection (d) and

subsection (e)," the District Court nevertheless found this

error harmless. Professional Ins. Management, 246 B.R. at

64-65. In its harmless error analysis, the District Court

relied on evidence in the record that Ohio Casualty gave

PIM 90-days notice, paid PIM commissions in apparent

accordance with subsection (d), and never gave a

subsequent notice to PIM (or anyone) that it was terminated

for failure to remit premiums. The District Court concluded

that there was simply no evidence that Ohio Casualty

affirmatively changed the character of the termination

between November 15, 1993 and March 1, 1994. Id. at 65.

We agree with the District Court that the Bankruptcy

Court’s failure to extend its inquiry to PIM’s conduct post-

November 15, 1993 is error. However, we cannot support

the District Court’s conclusion that the Bankruptcy Court’s

error in this matter was harmless under Rule 61 of the

Federal Rules of Civil Procedure.19 See In re Barclay

_________________________________________________________________

18. The District Court distinguished the Bankruptcy Court’s equating the

notice of termination to a "practical termination" due to the inability of

the agent to write any new business.

By the very terms of subsection (d) . . . , though the agent is

practically "terminated" as of the date upon which the Notice is sent

because it cannot write new business, the termination itself does

not become effective in less than ninety days (and Ohio Casualty

gave slightly more than ninety days notice by listing March 1, 1994

as the effective date). In many instances, there are practical

differences beyond the statutory ones as well: even though agents

cannot write new business in the ninety day period, they may

attempt to move the entire book of business to another insurance

company during that time.

Professional Ins. Management, 246 B.R. at 65 n.11.

19. Rule 61 states that

[n]o error in either the admission or the exclusion of evidence and

no error or defect in any ruling or order or in anything done or

omitted by the court or by any of the parties is ground for granting

25

Industries, Inc., 736 F.2d 75 (3d Cir. 1984) (overturning

District Court’s harmless error ruling in the context of a

Bankruptcy Court’s failure to consider factors relevant to

the legal determination at issue). The Bankruptcy Court’s

limited time-frame precludes the application of the correct

legal determination made by the District Court, namely that

the reasons for terminating an agent can change between

the time of notice and the effective date of termination.

Consequently, the relevant factual inquiry was not made:

whether PIM’s conduct post-notice legitimately qualifies as

a reason for termination under subsection (e) and whether

Ohio Casualty recognized this conduct (not necessarily

subsection (e) itself), sometime prior to March 1, 1994, as

one of the reasons for terminating PIM. Such an omission

appears to us as inequitable.

Contrary to the ruling of the District Court, we conclude

that the fact that Ohio Casualty gave PIM 90-days notice

and continued its commissions for a period of one year

does not automatically place the termination under

subsection (d). First, Ohio Casualty was obligated to do so

according to its agency contract with PIM. Ohio Casualty

continued to renew and pay commissions in accordance

with the contract and subsection (d) because, at the time,

PIM had not yet taken the improper credits. In addition,

Ohio Casualty’s employees admitted at trial that they were

not aware of subsection (e) when the initial termination

notice was sent. Professional Ins. Management , 246 B.R. at

64. The question, however, is not whether Ohio Casualty

complied with the Agency Termination Statute when it

terminated PIM, but whether the reason Ohio Casualty

terminated PIM was one of the reasons listed in subsection

(e). Ohio Casualty’s knowledge of subsection (e) is irrelevant

to answer this question.

_________________________________________________________________

a new trial or for setting aside a verdict or for vacating, modifying,

or otherwise disturbing a judgment or order, unless refusal to take

such action appears to the court inconsistent with substantial

justice.

Fed. R. Civ. P. 61.

26

Furthermore, that Ohio Casualty did not send a

subsequent notice of termination to PIM citing the improper

credits taken after January, 1994 does not disqualify Ohio

Casualty from the protection that subsection (e) affords. In

fact, subsection (e) does not contain a notice requirement.

The only requirement triggering subsection (e) is that the

agent be terminated for one of the reasons listed. We

cannot reconcile the District Court’s recognition of this fact20

with its subsequent conclusion that because Ohio Casualty

never notified anyone that PIM was being terminated for

one of the reasons listed in subsection (e), it therefore by

default terminated PIM at will. After Ohio Casualty sent

PIM its initial termination notice alleging improper

accounting procedures resulting in substantial

indebtedness (which, if proved, would satisfy subsection

(e)), Ohio Casualty was not thereafter required to re-notify

PIM that its increased indebtedness stemming from

additional improprieties was yet another reason for the

termination. The District Court’s expressed concern (when

it declared that "an insurance company cannot just decide

that an agent’s termination is now under subsection (e)

without telling anybody; there must be some evidence that

the insurance company told someone--perhaps the

insureds themselves--that renewals would no longer come

through the terminated agent," Professional Ins.

Management, 246 B.R. at 65) is not implicated by the facts

of this case. Ohio Casualty’s continued correspondence

with PIM post-termination declaring that premiums were

due and payable and documenting the improper credits

_________________________________________________________________

20. The District Court pointed out this feature of subsection (e):

Nothing in subsection (e), . . . indicates that a formal Notice of

Termination must be sent; an insurance company can terminate an

agent immediately upon discovering the agent’s gross or willful

misconduct or failure to pay over moneys due after receipt of a

written demand therefor, without being subject to the agency

termination provisions of subsection (d). Because no separate Notice

is needed for a subsection (e) termination, and because the

subsection (d) termination cannot, by law, be effective for ninety

days after the Notice is sent, it is possible that a subsection (d)

termination can transform into a subsection (e) termination before

the effective date of the subsection (d) termination passes.

Professional Ins. Management, 246 B.R. at 64-65.

27

effectively put PIM on notice of the reasons for its

termination and satisfied any implied notice requirement.21

Because a termination under subsection (d) of the statute

can be converted into a subsection (e) termination based on

conduct of the agent between the time of notice of

termination and the effective date of the termination, and

this can occur without formal notice by Ohio Casualty to

PIM that a termination under (e) has occurred, the

Bankruptcy Court needs to apply this legal determination

to the evidence of PIM’s improper credits and failure to

remit premiums after November 15, 1993, in ascertaining if

that conduct is sufficient under subsection (e) to effect

PIM’s termination as Ohio Casualty’s agent and whether

Ohio Casualty recognized this conduct, sometime prior to

March 1, 1994, as one of the reasons for terminating PIM.22

IV. Conclusion

Accordingly, we vacate the order of the District Court and

remand to that Court so that in turn the case may be

remanded to the Bankruptcy Court for further proceedings

consistent with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

_________________________________________________________________

21. In light of the circumstances of this case, which involved the

potential morphing of a subsection (d) termination into a subsection (e)

termination, we need not decide what notice, if any, must be given in

other cases arising under subsection (e) when there is an insufficient

basis to find an effective notice.

22. Our disposition of this case makes it premature for us to resolve the

question of the availability of the equitable remedies of recoupment and

of prejudgment interest, as they would be appropriate only if the

Bankruptcy Court rules on remand that the agency relationship remains

governed by subsection (d). We express no opinion as to the merits of

these determinations, but leave that decision for the Bankruptcy Court

in the first instance.

28