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Nationwide Shakes Off Agents' 2nd Benefit Suit Attempt

Nationwide Mutual Insurance Co. on Monday once again fended off a Pennsylvania federal lawsuit brought by an insurance agents' association that claimed the insurer altered agents' contracts in an attempt to unfairly coerce them into signing away deferred compensation benefits.

U.S. District Judge Mary McLaughlin dismissed the amended lawsuit with prejudice, again citing lack of standing based on Nationwide Insurance Independent Contractors Association Inc.'s failure to name individual agents adversely affected by the contract changes.

"Because the plaintiffs were unable to remedy this deficiency and have not explained how they could adequately plead their claims, the court concludes that allowing the plaintiffs to amend again would be futile," McLaughlin wrote.

NIICA's initial suit, filed in May 2011, accused Nationwide of discrimination against member agents who refused to sign a contract addendum that would cause them to forfeit future accruals to a "deferred compensation incentive credits" program, which allows agents to parlay commission earnings into secure retirement-fund-like accounts. In exchange for signing the addendum, agents received higher commission rates on certain products and services.

Denial of these commission rates, according to plaintiffs, constituted an attempt by Nationwide to coerce agents into signing away their DCIC benefits and discrimination against those who choose not to. The court found that this reasoning was insufficient to prove discrimination, as no actual harm could be demonstrated by it.

"At most, the plaintiffs seem to object to those agents who participate in the agreements receiving benefits [that] are not available to those who do not participate," McLaughlin wrote.

McLaughlin dismissed the suit with leave to amend in October, ruling that in order to establish standing the association would need to include plaintiff agents who had been adversely affected. A month later NIICA re-filed, adding agent and independent contractor David A. Gardner to the suit.

This addition proved insufficient, however, as Gardner's contract lacked any provision entitling him to the bonus payments in question, and therefore failure to pay those bonuses did not constitute injury, the judge ruled.

NIICA's attempts to establish associational standing were also harmed by their failure to address issues of internal conflict that arose from the the fact that certain members of NIICA had signed the adjusted contract while others had not, according to the ruling.

Though NIICA had attempted to remedy this discrepancy by bringing the suit on behalf of only those members who did not enter the agreements, the court found that NIICA could not simply "carve its membership into groups" to get around the requirements of associational standing.

"Nationwide is pleased with the court ruling on the matter," a representative for the insurer told Law360 Wednesday. "We agree NIICA does not have standing in the case."

This is Nationwide's second victory over NIICA in recent weeks, following an April 16 decision in which a Texas federal judge found the insurer did not breach its contractual duties by forcing contract agents to choose between receiving deferred compensation or selling non-Nationwide insurance products.

NIICA is represented by Gerhard P. Dietrich and William Tedards Jr. of Ward Greenberg Heller & Reidy LLP.

Nationwide is represented by Daniel F. Attridge, Elizabeth Locke and Thomas A. Clare of Kirkland & Ellis LLP and by Scott Bennett Freemann of Freemann Law Offices PC.

The case is Nationwide Insurance Independent Contractors Association Inc. v. Nationwide Mutual Insurance Co., case number 2:11-cv-03085, in the U.S. District Court for the Eastern District of Pennsylvania.