Shocklee v. Massachusetts Mutual Life Insurance

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS April 28, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
_______________________ Clerk

NO. 03-30831
_______________________

SANFORD H. SHOCKLEE and MARILYN SHOCKLEE,
individually and on behalf of all others similarly situated,

Plaintiffs-Appellants,

versus

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,

Defendant-Appellee.

_________________________________________________________________

Appeal from the United States District Court
for the Middle District of Louisiana
3:00-CV-279
________________________________________________________________

Before JOLLY, JONES and BARKSDALE, Circuit Judges.

PER CURIAM:

This case arises out of a “vanishing premiums” insurance

policy where the premiums never actually vanished. The insurance

policy at issue in this case is unambiguous on its face, and the

plaintiffs’ claims fail as a matter of Louisiana law. Therefore,

the judgment of the district court dismissing the case is AFFIRMED.
 I. BACKGROUND

In 1985, an agent for the company now known as

Massachusetts Mutual Life Insurance Company (“MassMutual”)1

persuaded Sanford and Marilyn Shocklee to purchase a $25,000 whole

life insurance policy. In the course of selling the policy, the

agent provided the Shocklees with a printed illustration that

showed that if MassMutual’s then-current dividend payments

continued and the dividends were reinvested, the Shocklees might be

able to use the accumulated dividends to pay the policy premiums

after seven years. A variety of disclosures accompanying the

illustration indicated, however, that the policy premiums were

“payable for life,” and the forecast dividend payments were

“neither guarantees nor estimates for the future.” The Shocklees

were issued a policy on June 20, 1985. Sometime thereafter they

received a copy of the actual policy, which afforded them ten days

to review the policy and cancel it at their option. The Shocklees

did not cancel the policy and instead began making annual premium

payments. For seven years, the Shocklees made the scheduled

premium payments, reinvested the policy dividends and received

annual statements indicating the amount of the dividend payments

being reinvested. After receiving an eighth premium bill in 1992,

the Shocklees made at least one additional payment on the policy.

1
Connecticut Mutual Life Insurance Company, the original insurer that
issued the policy at issue in this case, merged with MassMutual in 1996.

2
 In March 2000, the Shocklees filed a class action in

federal court in Louisiana asserting that MassMutual had breached

its contract by failing to “vanish” their premium payments after

seven years. The complaint was later amended to add a breach of

the implied duty of good faith and fair dealing. The district

court initially denied MassMutual’s motion to dismiss, which the

court converted, sua sponte, into a motion for summary judgment.

The district court denied summary judgment based on its view that

the Shocklees’ insurance policy was ambiguous as to the source of

the premium payments. Following discovery, the district court

addressed cross-motions for summary judgment and, relying in part

on statements made by the Shocklees during their depositions,

granted summary judgment in favor of MassMutual. The Shocklees now

appeal.

II. DISCUSSION

A. Standard of Review

A district court’s grant of summary judgment is reviewed

de novo. Hodges v. Delta Airlines, Inc., 44 F.3d 334, 335 (5th

Cir. 1995) (en banc). Summary judgment is appropriate when,

viewing the evidence and all justifiable inferences in the light

most favorable to the non-moving party, there is no genuine issue

of material fact and the moving party is entitled to judgment as a

matter of law. Hunt v. Cromartie, 526 U.S. 541, 552 (1999); see

also FED. R. CIV. P. 56(c). In reviewing a district court's grant

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of summary judgment, the court of appeals may affirm on grounds

raised in the trial court but different than those relied upon by

the district court. Doctor's Hosp. v. S.E. Med. Alliance, 123 F.3d

301, 307 (5th Cir. 1997).

B. Shocklees’ Claim of Contractual Ambiguity

As noted above, the district court initially determined

that the insurance contract was ambiguous as to the source of the

premium payments. We review this determination de novo under the

same standard that guided the district court. Am. Totalisator Co.

v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir. 1993) (noting that

the district court’s “determination of whether the contract is

ambiguous,” as well as its interpretation of the contract is to be

reviewed de novo). The parties agree that Louisiana law governs

this action. Under Louisiana law, “[w]hen the words of a contract

are clear and explicit and lead to no absurd results, no further

interpretation may be made in search of the parties’ intent.” LA.

CIV. CODE ANN. art. 2046 (West 1987). As a result, if a contract is

unambiguous on its face, “the contract's meaning and the intent of

its parties must be sought within the four corners of the document

and cannot be explained or contradicted by extrinsic evidence.”

Am. Totalisator Co., 3 F.3d at 813. Under Louisiana law, a

contract is ambiguous when the contract is “uncertain as to the

parties’ intentions and susceptible to more than one reasonable

meaning under the circumstances and after applying established

4
rules of construction.” In re Liljeberg Enters., 304 F.3d 410, 440

(5th Cir. 2000) (internal quotation marks and citations omitted).

Importantly, Louisiana law “does not allow the parties to create an

ambiguity where none exists and does not authorize courts to create

new contractual obligations where the language of the written

document clearly expresses the intent of the parties.” Omnitech

Int’l, Inc. v. Clorox Co., 11 F.3d 1316, 1326 (5th Cir. 1994).

In a recent case, the Eighth Circuit examined similar

“vanishing premiums” insurance policies under Louisiana law. See

In re Minn. Mut. Life Ins. Co. Sales Practices Litig., 346 F.3d

830, 836-37 (8th Cir. 2003).2 The policies at issue in Minnesota

Mutual are identical in all material respects to the policy at

issue here. First, both sets of policies contain an explicit

merger and integration clause. Id. at 837. The MassMutual policy

provides that “[t]he policy and the application constitute the

entire contract” and that the insurance company’s “agents cannot

alter or modify any of the terms of the policy . . . [nor] waive

any of its provisions.” Second, both sets of policies state that

a premium is due annually. Id. Indeed, both the cover page and

the benefits and premiums section of the Shocklees’ policy

explicitly so indicate. Third, the allegations made by the

2
The plaintiffs’ opening brief failed even to mention Minnesota Mutual
although the Shocklees’ counsel also represented the plaintiffs in Minnesota
Mutual and the opinion in that case was issued nine days before the plaintiffs
filed their brief in this court. Such behavior is inexcusable despite the
attorney’s assertion at oral argument that he did not cite this other case
because he was planning to or had filed a motion for reconsideration with the
Eighth Circuit.

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Minnesota Mutual plaintiffs are nearly identical to those made by

the MassMutual plaintiffs - that insurance agents using sales

illustrations represented that the policy premiums would vanish

after seven years. Id. at 832-33. Finally, in Minnesota Mutual,

the Eighth Circuit faced the same claims for breach of contract and

breach of the duty of good faith and fair dealing under Louisiana

law that confront this court. Id. at 836. As a result, the

plaintiffs’ attempt to distinguish Minnesota Mutual from this case

is without merit.3

The Eighth Circuit held that the Minnesota Mutual

plaintiffs’ contract claims failed on the merits because the

policies were unambiguous as to the source of the premiums. The

Minnesota Mutual court noted that “[n]othing in the policies

themselves suggests that the source of the premiums [was] to be

anything other than the insured’s own funds” and that “[t]he

policies [did] not specifically state the source of the premium

payments due in the first seven years when the Appellants admit to

being responsible for payment.” Id. As a result, the Eighth

3
The plaintiffs argue that Minnesota Mutual is “readily
distinguishable” because that case “dealt with a different insurance company,
different sales illustrations and different policies.” A first-year law student
could point out the fallacy of such a distinction. Courts regularly apply the
legal principles contained in analogous cases to new factual scenarios. In this
case, however, we need not even draw on analogical reasoning because the material
facts in the two cases are virtually identical. In such a situation, we often
look to sister circuits for guidance on how to approach similar claims. The
plaintiffs also argue that Minnesota Mutual “never addressed the claim for breach
of the implied duty of good faith and fair dealing, so it is of little use on
that point.” To the contrary, the Minnesota Mutual court held that all of the
plaintiffs’ contract claims were unsustainable in the absence of contractual
ambiguity. See Minnesota Mutual, 346 F.3d at 836-38 (consistently referring to
the viability of the plaintiffs’ contractual “claims” as a whole).

6
Circuit declined to find ambiguity in the policies simply because

“they failed to specify the source of the premium payments in the

following years.” Id.

The Eighth Circuit’s analysis is persuasive. Courts

should not strain to find an ambiguity in an insurance policy when

none exists. Indeed, Louisiana law discourages such an effort.

See LA. CIV. CODE ANN. art. 2046; Succession of Fannaly v. Lafayette

Ins. Co., 805 So. 2d 1134, 1138 (La. 2002) (noting that Louisiana’s

“rules of contractual interpretation ‘do not authorize a perversion

of the words or the exercise of inventive powers to create an

ambiguity where none exists’”) (quoting Peterson v. Schimek, 729

So. 2d 1024, 1029 (La. 1999)); Bergeron v. Pan Am. Assurance Co.,

731 So.2d 1037, 1043 (La. Ct. App. 1999) (“An insurance contract

. . . should not be interpreted in an unreasonable or strained

manner under the guise of contractual interpretation to enlarge or

to restrict its provisions beyond what is reasonably contemplated

by the unambiguous terms”).

The district court, in initially holding that the policy

was ambiguous as to the source of the premium payments, appears to

have been unduly influenced by the plaintiffs’ allegations

regarding representations made by the MassMutual sales agent. The

policy on its face, however, evinces no ambiguity as to where the

payments will come from; as with most individually-purchased life

insurance policies, the insured is responsible for paying the

premiums. Indeed, the Shocklees do not dispute that they were

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required to make payments for the first seven years of the policy

and, as in Minnesota Mutual, nothing within the four corners of the

contract suggests that payments would come from any other source in

the following years. In the absence of any ambiguity on the face

of the contract, Louisiana law bars this court from examining

extrinsic evidence. Id. Without the extrinsic evidence regarding

the sales illustrations, the plaintiffs are unable to support

either of their theories of recovery. That is, without being able

to demonstrate that their policy contained a promise to “vanish

premiums,” the Shocklees cannot maintain claims for breach of

contract or breach of the implied duty of good faith and fair

dealing with regard to such a promise. Therefore, the Shocklees’

claim fails as a matter of law and summary judgment in favor of

MassMutual was proper.4

III. CONCLUSION

For the reasons discussed above, the judgment of the

district court is AFFIRMED.

4
The parties also discuss the potential prescription of the Shocklees’
breach of contract claim under Louisiana law. However, because we find that the
Shocklees have no cognizable legal claims under Louisiana law, we need not reach
this issue.

8