Norick, Inc. v. Hays Companies

Background

Norick, Inc. and Hays Companies, Inc. (HCI) were insurance brokerage firms. In 1994, their principals signed a memorandum describing an arrangement under which the companies would share revenue from new business written together. The memorandum listed a 60% share for sales and a 40% share for marketing, with the policy belonging to the producer. The parties later worked together on more than 100 shared clients.

Norick originated the Summit Fire Protection Company account in 2003. Hays Companies and later HCI handled the account’s marketing and servicing. HCI nevertheless shared Summit revenue with Norick for years, first under the 60/40 arrangement and later under a 50/50 split. HCI stopped making those payments on September 15, 2021, while continuing to receive payments connected with work it performed for Summit.

Norick sued for breach of contract, promissory estoppel, and a declaratory judgment. The parties filed cross-motions for summary judgment, which asks whether the evidence presents any genuine dispute of important fact requiring a trial. The court denied HCI’s motion at a June 27, 2023 hearing and took Norick’s motion under advisement. Norick did not seek summary judgment on its promissory-estoppel claim.

Contract Formation

Applying Minnesota law, the court held that the 1994 memorandum was an enforceable contract. Although its introductory language could suggest an informal description of a future arrangement, the document contained specific reciprocal promises, including office-sharing, support services, independent-contractor work, and revenue sharing. The signatures of the companies’ principals objectively showed an intent to bind the companies.

The court rejected HCI’s argument that the memorandum lacked essential terms concerning its duration, modification, or termination. It also treated HCI’s argument about the meaning of “sell” as an issue of contract interpretation rather than contract formation.

Meaning of “Sell” and “Sales”

The court found that “sell” and “sales” were ambiguous because they could reasonably mean either originating an account alone or originating an account while maintaining an ongoing client relationship. Ordinarily, that type of ambiguity would present a fact question for a jury. Here, however, the court found that the parties’ undisputed and conclusive conduct resolved the ambiguity as a matter of law.

The evidence showed that the parties distinguished selling from marketing and servicing, that HCI repeatedly paid Norick for the Summit account despite Norick’s lack of ongoing work, and that HCI’s principals and internal communications repeatedly recognized Norick’s right to receive its share. The court therefore held that the parties understood “sell” and “sales” to mean originating the business opportunity, without requiring the originator to perform continuing day-to-day work.

Because Norick originated the Summit account, the court held that Norick was the seller under the memorandum. The court also held that the parties had modified the Summit account’s original revenue split to 50/50.

Duration and Breach

The court rejected HCI’s argument that the agreement was of indefinite duration and therefore could be terminated at will with reasonable notice. It held that the agreement contained an implied duration: revenue sharing on a shared account would continue for as long as the marketer continued servicing the account and collecting revenue.

The parties’ conduct supported that interpretation. HCI could stop working for Summit, but while it continued servicing the shared account and receiving revenue, it could not unilaterally keep all of the revenue for itself. The court also found that the parties’ 2021 communications did not create an agreement ending the revenue sharing because HCI’s response to Norick’s settlement proposal was not an unequivocal acceptance.

The court concluded that Norick fully performed its obligations, was entitled to continued performance by HCI, and had no genuine factual dispute on its breach-of-contract claim. HCI breached by unilaterally ending the 50% payments on the Summit account.

Disposition and Remaining Remedies

Judge Menendez ruled that Norick was entitled to summary judgment on its breach-of-contract and declaratory-judgment claims. The order states that Norick’s motion for summary judgment was GRANTED IN PART and DENIED IN PART. The court declined at that time to decide whether to order specific performance, meaning an order requiring HCI to make future payments under the agreement. The court noted that Norick could be entitled to readily calculated damages for revenue HCI received from September 2021 through the date of the order, and directed the parties to meet and confer about damages, other remedies, and any additional proceedings.