Olander v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 25 January 2002
• Docket Number: No. 01-1947.,01-1947.
• Citation: 278 F.3d 794
• Parties: Brian OLANDER, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY; State Farm Life Insurance Company; State Farm Fire & Casualty Insurance Company; State Farm General Insurance Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 794

278 F.3d 794

Brian OLANDER, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY; State Farm Life Insurance Company; State Farm Fire & Casualty Insurance Company; State Farm General Insurance Company, Defendants-Appellees.

No. 01-1947.

United States Court of Appeals, Eighth Circuit.

Submitted: November 14, 2001.

Filed: January 25, 2002.

Rehearing En Banc Granted; Opinion Vacated: March 26, 2002.^*

William P. Tedards, Jr., Washington, DC, argued (Irvin B. Nodland, on the brief), for plaintiff-appellant.

Dale L. Beckerman, Kansas City, KS, argued (Robert J. Udland, on the brief), for defendants-appellees.

Before LOKEN, LAY, and HEANEY, Circuit Judges.

LAY, Circuit Judge.

This case presents the question of whether, under North Dakota law, parol evidence is permitted to interpret the termination clause of an insurance agency agreement. The district court granted summary judgment in favor of the defendant insurance companies (collectively, "State Farm") and denied plaintiff Brian Olander's motion to set aside the judgment pursuant to Fed.R.Civ.P. 60(b). Because we hold there are questions of fact yet to be resolved, we reverse the district court's grant of summary judgment.

I. Background

In 1979, Brian Olander became a trainee agent for State Farm and entered into an agency agreement in 1981. By the terms of the agreement, Olander was an independent contractor and agent authorized to represent State Farm in Mandan, North Dakota. The relationship continued satisfactorily for seventeen years. In August 1996, Olander was charged with murder after a violent altercation with his neighbor. Shortly thereafter, State Farm offered Olander an unpaid leave of absence until the criminal charges were resolved. Olander refused and State Farm terminated the agency contract. As a result, the North Dakota Insurance Department suspended his license. State Farm subsequently seized Olander's business records, computers, and other policyholder information. His policies were assigned to other agents in the area.

The murder trial commenced in April 1997. On May 2, 1997, the jury returned a verdict finding Olander guilty of manslaughter and acquitting him of murder. He was sentenced to ten years in the state penitentiary. In March 1998, the North Dakota Supreme Court reversed Olander's conviction because of instructional error on the issue of self-defense. In a second trial in 1998, Olander was acquitted. Nonetheless, without an insurance company sponsor, Olander cannot be licensed as an insurance agent.

In 1999, Olander instituted this suit against State Farm alleging (1) termination of his agency agreement constituted a breach of contract, (2) State Farm tortiously interfered with the business relationships he had developed with his clients, and (3) State Farm was unjustly enriched by his termination. State Farm moved for summary judgment on all claims. The magistrate judge issued his Report and Recommendation on February 7, 2001, concluding that State Farm's motion should be granted. After considering the parties' arguments in opposition to and support of the Report and Recommendation, the district court adopted the magistrate judge's report in its entirety on February 28, 2001. Olander then filed a motion to set aside the judgment pursuant to Fed.R.Civ.P. 60(b) based upon newly discovered evidence and failure of the defendants to make disclosures required by discovery. The district court denied plaintiff's motion, finding his newly discovered evidence to be cumulative of the parol evidence already submitted to the court and his charges of misconduct regarding defendants' disclosures unsubstantiated. Olander appeals the district court's summary judgment ruling on his breach of contract claim and its denial of his Rule 60(b) motion. We reverse.

II. Discussion

Olander claims the district court erred by adopting the magistrate judge's report and granting summary judgment in favor of State Farm on the breach of contract action. He argues the agreement was ambiguous as to whether the contract could be terminated "at will" or whether termination required "good cause." The district court concluded the relevant terms of the agreement were unambiguous and created a contract terminable at will. Because the contract was unambiguous, under North Dakota law, Olander was unable to present parol evidence to support his understanding of the agreement. Des Lacs Valley Land Corp. v. Herzig, 621 N.W.2d 860, 862 (N.D.2001) (explaining that parol evidence is not admissible to contradict the unambiguous language of a written contract). Thus, there was no issue of material fact, and summary judgment was granted in favor of defendants. We review the grant of summary judgment de novo, viewing any evidence in the light most favorable to the party opposing the motion. In re Craig, 144 F.3d 593, 595 (8th Cir.1998).

Under North Dakota law, parol evidence is not admissible to vary the terms of a written contract.¹ Des Lacs, 621 N.W.2d at 862. However, a court may accept extrinsic evidence if the contract language is "vague or uncertain ... to explain such terms and explain the true meaning of them." Smith v. Michael Kurtz Constr. Co., 232 N.W.2d 35, 39 (N.D. 1975) (quoting Gilbert Mfg. Co. v. Bryan, 39 N.D. 13, 166 N.W. 805, 808 (N.D.1918)). The North Dakota Supreme Court has given a succinct summary of the law in this area:

The construction of a written contract to determine its legal effect is generally a question of law. Pamida, Inc. v. Meide, 526 N.W.2d 487, 490 (N.D.1995). A court must interpret a contract to give effect to the mutual intention of the parties as it existed at the time of contracting. N.D.C.C. § 9-07-03; Pamida, at 490. In interpreting a written contract, a court should ascertain the intention of the parties from the writing alone if possible. N.D.C.C. § 9-07-04; Pamida, at 490. A written agreement supersedes any prior oral agreements or negotiations between the parties in the absence of any ambiguity. Norwest Bank North Dakota, Nat'l Ass'n v. Christianson, 494 N.W.2d 165, 168 (N.D. 1992).

A contract is ambiguous when rational arguments can be made for different positions about its meaning. Felco, Inc. v. Doug's North Hill Bottle Shop, Inc., 1998 ND 111, P12, 579 N.W.2d 576. Whether or not a contract is ambiguous is a question of law. Moen v. Meidinger, 547 N.W.2d 544, 547 (N.D.1996). Determining an ambiguity exists is merely the starting point in a search for the parties' intent because an ambiguity creates questions of fact to be resolved using extrinsic evidence. Id. When a contract is ambiguous, the terms of the contract and parties' intent become questions of fact. Wachter Development, L.L.C. v. Gomke, 544 N.W.2d 127, 131 (N.D.1996).

Kaler v. Kraemer, 603 N.W.2d 698, 702 (N.D.1999).

We disagree with the district court's characterization of the relevant terms as "unambiguous." State Farm relies upon the following language within the insurance agreement to assert that the contract is unambiguous in instructing that the agency relationship with Olander was at all times terminable at will:

A. This agreement will terminate upon your death. You or State Farm have the right to terminate this Agreement by written notice delivered to the other or mailed to the other's last known address. The date of termination shall be the date specified in the notice, but in the event no date is specified, the date of termination shall be the date of delivery if the notice is delivered, or the date of the postmark, if the notice is mailed. Either party can accelerate the date of termination specified by the other by giving written notice of termination in accordance with this paragraph.

This section, on its face, sets forth the procedure by which the parties to the agreement must give notice of termination. It says nothing as to whether the termination must be for cause or may be at will. Certainly, rational arguments can be made for different positions about its meaning. North Dakota's parol evidence rule recognizes this reality by allowing "proof of the existence of any separate oral stipulations or agreements as to matters on which a written contract is silent." Schue v. Jacoby, 162 N.W.2d 377, 382 (N.D.1968); see also Putnam v. Dickinson, 142 N.W.2d 111, 119 (N.D.1966).

State Farm contends that Olander's argument from silence is merely an attempt to create an ambiguity where none exists. If this were Olander's only argument, State Farm might be correct. See Martin v. Equitable Life Assurance Soc'y of the United States, 553 F.2d 573, 574 (8th Cir.1977); Ins. & Consulting Assocs., LLC v. ITT Hartford Ins. Group, 48 F.Supp.2d 1181, 1192 (W.D.Mo.1999) (no ambiguity where the only argument presented was the absence of a provision allowing the agent to sue the insurance company if the insured chose to bypass the agent and deal directly with the insurer); Metro. Life Ins. Co. v. RJR Nabisco, Inc., 716 F.Supp. 1504, 1515 (S.D.N.Y.1989) (holding the absence of a provision prohibiting or allowing leveraged buy-outs could not, by itself, create an ambiguity that can avoid the parol evidence rule given the relevant bond indentures at issue imposed no debt limitations); Lewis v. Finetex, Inc., 488 F.Supp. 12, 14 (D.S.C.1977) (silence insufficient to overcome statutory presumption directly bearing on the issue); McMillin v. Great Southern Corp., 63 Tenn.App. 732, 480 S.W.2d 152, 155 (Tenn.Ct.App.1972) (option agreement's silence as to whether the optionee must be an employee or officer at the time of exercise did not create ambiguity allowing for the consideration of parol evidence); Patillo v. Equitable Life Assurance Soc'y, 199 Mich.App. 450, 502 N.W.2d 696, 699 (Mich.App.1993); James H. Washington Ins. Agency v. Nationwide Mut. Ins. Co., 95 Ohio App.3d 577, 643 N.E.2d 143, 147 (Ohio App.1993); but cf. Kaldi v. Farmers Ins. Exch., 21 P.3d 16, 18, 21 (Nev.2001) (discussing, in addition to mere silence on termination, the...