Judge upholds ex-agent's misrepresentation claims in Allstate suit

Judge upholds ex-agent's misrepresentation claims in Allstate suit
A federal judge agreed with a 28-year veteran agent that he was muscled out of his book of business by The Allstate Corp.
SEP 22, 2011
A federal judge has allowed a pair of complaints to proceed in a lawsuit against The Allstate Corp. brought by a 28-year veteran agent who claims he was muscled out of his book of business and wrongfully terminated. The case, filed in April by Paul A. Mattus in the U.S. District Court for the Middle District of Pennsylvania, accused the insurer of a slate of charges, including breach of contract, unjust enrichment, and fraudulent and negligent misrepresentation. Mr. Mattus had claimed that after Allstate terminated the employment contracts of 6,500 captive agents in 2000, they were given the opportunity to become independent contractors if they signed an exclusive agency agreement with the carrier. He also alleged that that the agents were told they'd have a major stake in their own businesses if they went independent. Despite being recognized by Allstate as a “top 10 producer,” the carrier terminated Mr. Mattus in January, citing his “failure to achieve business objectives established by the company,” according to the suit. The insurer allegedly wanted to pass the book of business to a newer, younger agent, Mr. Mattus claimed. The case has proceeded even though Mr. Mattus died last month. Responding to a motion to dismiss the charges from Allstate, Judge John E. Jones III yesterday set aside claims for breach of contract and unjust enrichment, plus four claims related to interference with business relations and infliction of emotional stress. However, two claims — fraudulent and negligent misrepresentation — were allowed to proceed. These allegations claim that there was fraud and negligence in the inducement of the contract, Mr. Jones found. “The statements allegedly made by defendants extolling the virtues of the agreement were made prior to the formation of the contract and were designed to persuade plaintiffs to continue their affiliation with Allstate,” the judge wrote in his opinion. Mr. Jones specifically pointed out the allegation that the insurer told captive agents that they'd be given an ownership stake in their business in exchange for giving up vested employee benefits. "Although these statements are not technically false with respect to independent contractor relationships generally," he wrote, "if, as alleged by plaintiffs, defendants engaged in a scheme to remove older agents like Mr. Mattus, these statements are false with respect to this employment agreement. The litigation is expected to move forward into the discovery process. “We'll be moving forward on the strongest claims that remain,” said Jacqueline Jackson-DeGarcia, Mr. Mattus's attorney. Before the litigation can go further, his survivors will need to appoint an administrator and then decide whether to pursue the case against Allstate as representatives of Mr. Mattus' estate, Ms. Jackson-DeGarcia said. The approval of the two claims is “a preliminary step in the case and merely allows the case to move forward on those two counts,” said Tracey King, spokeswoman for Allstate. “The ruling did not address the merits of those specific allegations. We are confident and believe those allegations are not correct and have no merit." Mr. Mattus' family members could not be reached for comment.

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