United States Court of Appeals,
Eleventh Circuit.
No. 96-6635.
James D. MASSEY; Robert A. Massey, Plaintiffs-Appellees,
v.
CONGRESS LIFE INSURANCE COMPANY; Insurers Administrative Corporation,
Defendants-Appellants.
July 10, 1997.
Appeal from the United States District Court for the Northern District of Alabama. (No. CV-95-G-
1405-S), J. Foy Guin, Jr., Judge.
Before BLACK, Circuit Judge, and FAY and ALARCON*, Senior Circuit Judges.
BLACK, Circuit Judge:
The present case arises out of the termination of health insurance policies held by James D.
Massey and Robert A. Massey for failure to pay the premiums prior to the due date or expiration of
the grace period. The insurance policies at issue were underwritten by Congress Life Insurance
Company (Congress) and administered by Insurers Administrative Corporation (IAC). After
termination of the policies, the Masseys sued Congress and IAC for breach of contract, fraud, bad
faith, outrage, and negligence in the United States District Court for the Northern District of
Alabama. The district court granted in part a motion by Congress and IAC for summary judgment,
but also granted summary judgment sua sponte in favor of the Masseys on a breach of contract
claim. To remedy the perceived breach, the court awarded the Masseys injunctive relief, including
immediate reinstatement of their policies. Congress and IAC then took the instant interlocutory
appeal wherein they contend that the district court erred by partially denying its motion for summary
judgment and then granting summary judgment on the breach of contract claim to the Masseys. We
reverse because the district court failed to afford adequate notice prior to the sua sponte grant of
summary judgment.
*
Honorable Arthur L. Alarcon, Senior U.S. Circuit Judge for the Ninth Circuit, sitting by
designation.
I. BACKGROUND
James and Robert Massey are brothers and the sole shareholders in Massey Amoco, Inc.
(Massey Amoco), the corporate owner of a service station in Birmingham, Alabama. In late 1992
or early 1993, the Masseys explored the possibility of obtaining health insurance for themselves and
two full-time employees. Subsequently, all four individuals elected to purchase health insurance
policies underwritten by Appellant Congress and administered by Appellant IAC.
As administrator of the policies, IAC handled collection of premiums and processing of
claims on behalf of Congress. On approximately October 15, 1994, in accordance with its standard
practice, IAC mailed James and Robert Massey their monthly premium statements at the Massey
Amoco service station. Each statement specified that payment of the monthly premium was due on
November 1, 1994, and warned that "IF PREMIUMS ARE NOT RECEIVED WITHIN 31 DAYS
OF THE DUE DATE, COVERAGE WILL CEASE AS OF THE DUE DATE FOR NON-
PAYMENT OF PREMIUM." Massey Amoco failed to pay the monthly premiums on or before the
November 1, 1994, due date and still had not paid those premiums when IAC mailed the December
statements to policyholders on or about November 15, 1994.
In late November 1994, Massey Amoco received from IAC the premium statements for the
month of December. The statements indicated that the premiums for the month of November were
past due. Near the bottom of each statement, a delinquency notice appeared in bold type set off in
an enclosed box. The notice stated that "THE PAST DUE AMOUNT MUST BE RECEIVED
WITHIN 31 DAYS OF THE DUE DATE FOR THE MONTH IN WHICH IT WAS DUE TO
AVOID LAPSE OF COVERAGE." The statement also contained the standard recitation that
coverage under the policy would cease as of the due date unless premiums were received within 31
days of the due date. On December 9, 1994, IAC received a check from Massey Amoco purporting
to pay the premiums that had been due November 1, 1994. The envelope containing the payment
was postmarked December 5, 1994. Explaining that their insurance policies had lapsed on
December 2, 1994, in accordance with the terms of their insurance certificates, IAC returned the
check to the Masseys.
On June 2, 1995, the Masseys sued Congress and IAC in the United States District Court for
the Northern District of Alabama. The complaint advanced state law causes of action for breach of
contract, bad faith, fraud, outrage, and negligence. In its answer, Congress and IAC maintained that
the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461, preempted the
Masseys' claims. On February 27, 1996, Appellants Congress and IAC filed a motion for summary
judgment arguing both ERISA preemption and, in the alternative, the merits of the Masseys' claims.
In an order issued on May 29, 1996, the district court granted in part and denied in part Appellants'
motion for summary judgment. After rejecting the ERISA preemption argument, the district court
awarded Congress and IAC summary judgment on the outrage, negligence, and bad faith claims, but
denied summary judgment on the breach of contract and fraud claims. In addition, although the
Masseys had not moved for summary judgment, the district court granted them summary judgment
sua sponte on their breach of contract claim. The court then awarded the Masseys injunctive relief
for the perceived breach, ordering Congress and IAC to reinstate the Masseys' policies and to pay
any insurance claims that had accrued since cancellation. In addition, the court enjoined Congress
and IAC from canceling the medical policy of James Massey prior to the time "all of the benefits
have been paid for his terminal renal disease" up to the limits of the policy. On June 24, 1996,
Congress and IAC filed a notice of interlocutory appeal pursuant to 28 U.S.C. § 1292(a)(1).
II. DISCUSSION
A. Scope of Appellate Review.
Section 1292(a)(1) confers upon courts of appeals jurisdiction over appeals from
interlocutory district court orders "granting, continuing, modifying, refusing or dissolving
injunctions." As a general rule, when an appeal is taken from the grant or denial of an injunction,
the reviewing court will go no further into the merits than is necessary to decide the interlocutory
appeal. Callaway v. Block, 763 F.2d 1283, 1287 n. 6 (11th Cir.1985). Courts have adopted this
approach not out of jurisdictional necessity, but merely as a matter of sound judicial administration.
Id. As we perceive no justification for departing from these principles of sound judicial
administration in the instant case, we confine our analysis to the propriety of the district court's
breach of contract ruling, which constitutes the sole basis for the grant of injunctive relief.
B. The District Court's Sua Sponte Grant of Summary Judgment in Favor of the Non-Moving Party.
We initially consider the propriety of the district court's sua sponte grant of summary
judgment in favor of the Masseys. The critical question is not whether the district court had the
power to grant summary judgment sua sponte in favor of a nonmoving party. District courts
unquestionably possess the power to trigger summary judgment on their own initiative. See, e.g.,
Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986); Bosarge
v. United States Dep't of Educ., 5 F.3d 1414, 1416 n. 4 (11th Cir.1993), cert. denied, 512 U.S. 1226,
114 S.Ct. 2720, 129 L.Ed.2d 845 (1994); Lindsey v. United States Bureau of Prisons, 736 F.2d
1462, 1463 (11th Cir.), vacated on other grounds, 469 U.S. 1082, 105 S.Ct. 584, 83 L.Ed.2d 695
(1984); accord Jardines Bacata, Ltd. v. Diaz-Marquez, 878 F.2d 1555, 1560 (1st Cir.1989). At the
same time, however, district courts must temper their exercise of that power by the need to ensure
that the parties receive adequate notice that they must bring forward all of their evidence. See
Celotex Corp., 477 U.S. at 326, 106 S.Ct. at 2554. Accordingly, the central inquiry focuses upon
whether the district court provided sufficient notice prior to any sua sponte award of summary
judgment.
The restrictions upon the ability of the district court to award summary judgment sua sponte
emanate from Rule 56 of the Federal Rules of Civil Procedure. The Rule provides that motions for
summary judgment "shall be served at least 10 days before the time fixed for the hearing," and
expressly allows nonmovants to "serve opposing affidavits" at any time prior to the day of the
hearing. Fed.R.Civ.P. 56(c). We have recognized repeatedly that this notice provision is not an
unimportant technicality, but a vital procedural safeguard. National Fire Ins. v. Bartolazo, 27 F.3d
518, 520 (11th Cir.1994); Hanson v. Polk County Land, Inc., 608 F.2d 129, 131 (5th Cir.1979).
Most notably, the notice provision ensures that litigants will have at least ten days in which to
formulate and prepare their best opposition to an impending assault upon the continued viability of
their claim or defense. Stella v. Town of Tewksbury, 4 F.3d 53, 55 (1st Cir.1993); see Bartolazo,
27 F.3d at 520 (stating that the notice requirement ensures an adequate opportunity for litigants to
prepare a reasoned, complete response to the motion before the court).
Consistent with the importance of the procedural protection afforded by Rule 56(c), courts
have strictly enforced the requirement that a party threatened by summary judgment must receive
notice and an opportunity to respond. Bartolazo, 27 F.3d at 520 ("[T]he 10-day advance notice
requirement for all litigants is mandatory in this Circuit to satisfy the notice and hearing dictates of
Rule 56."); Milburn v. United States, 734 F.2d 762, 765 (11th Cir.1984) ("This circuit strictly
enforces the 10-day notice requirement for all litigants."); 11 James Wm. Moore, Moore's Federal
Practice § 56.10[2][b] (3d ed. 1997) ("A court may not enter summary judgment sua sponte without
providing a minimum of 10 days' notice to the parties as required by the Federal Rules of Civil
Procedure or its own local rules."); see also Lindsey, 736 F.2d at 1463 ("Because Fed.R.Civ.P. 56
requires that the party threatened by summary judgment be given notice and opportunity to respond,
courts must exercise great care to apprise the moving party that the court sua sponte is considering
entering judgment against him."). The notice provisions retain their mandatory character even when
the district court contemplates awarding summary judgment sua sponte against a party that itself had
moved for summary judgment. See Bartolazo, 27 F.3d at 520; accord Otis Elevator Co. v. George
Washington Hotel Corp., 27 F.3d 903, 910 (3d Cir.1994). In other words, parties who move for
summary judgment do not thereby waive their right to receive notice, and an adequate opportunity
to respond should the court sua sponte elect to test the strength of the movant's case under the
summary judgment standard. Congress and IAC therefore were entitled to an opportunity to marshal
their strongest evidence and legal arguments in opposition to summary judgment. As the district
court denied them that opportunity by failing to comply with the mandatory notice provisions of
Rule 56, we conclude the award of summary judgment was procedurally improper.
The district court's reliance on Black Warrior Electric Membership Corp. v. Mississippi
Power Co., 413 F.2d 1221 (5th Cir.1969), as support for its decision to grant summary judgment sua
sponte is misplaced. That decision has never been understood to confer upon a district court the
power to grant summary judgment without affording the party against whom summary judgment is
rendered a full and fair opportunity to meet the proposition that there is no genuine issue of material
fact to be tried. See Pollock v. Birmingham Trust Nat'l Bank, 650 F.2d 807, 810 (5th Cir. Unit B
July 1981). Moreover, the former Fifth Circuit predicated its decision in Black Warrior upon the
parties' acknowledgment that only a question of law remained in that case. Black Warrior, 413 F.2d
at 1226. By contrast, the issues upon which the district court in the instant case granted summary
judgment involved a question of fact. See, e.g., Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266
(9th Cir.1991) (noting that the existence of an ERISA plan is a question of fact, to be answered in
light of all the surrounding facts and circumstances from the point of view of a reasonable person).
Equally unavailing is the Masseys reliance upon Lindsey v. United States Bureau of Prisons,
736 F.2d 1462 (11th Cir.), vacated on other grounds, 469 U.S. 1082, 105 S.Ct. 584, 83 L.Ed.2d 695
(1984), and Bosarge v. United States Department of Education, 5 F.3d 1414 (11th Cir.1993), cert.
denied, 512 U.S. 1226, 114 S.Ct. 2720, 129 L.Ed.2d 845 (1994), as support for the district court's
sua sponte grant of summary judgment. Those decisions merely endorse the unremarkable
proposition that district courts possess the power to award summary judgment in favor of a
nonmovant. See Bosarge, 5 F.3d at 1416 n. 4; Lindsey, 736 F.2d at 1463. Neither decision
suggests, however, that the existence of this power entitles district courts to disregard the mandatory
notice requirements imposed by the Federal Rules of Civil Procedure.
III. CONCLUSION
In accordance with the foregoing, we conclude that the district court's sua sponte grant of
summary judgment, without affording notice to Congress and IAC, contravenes both Rule 56 and
Eleventh Circuit precedent. We therefore reverse that portion of the district court's order granting
the Masseys' summary judgment on their breach of contract claim. In addition, we vacate the
injunction issued by the district court because it rested entirely upon the inappropriate grant of
summary judgment. We decline to address any other issues raised by the parties because the above
disposition conclusively resolves all issues necessary to decide the interlocutory appeal. We remand
the remainder of the case to the district court for further proceedings not inconsistent with this
opinion.1
REVERSED in part, VACATED in part, and REMANDED.
1
We further note that on remand the district court must satisfy itself that it has jurisdiction
over the present controversy. The parties represent that the district court had jurisdiction based
upon diversity of citizenship. See Appellants' Brief at 1; Appellees' Brief at viii. For a federal
court to have diversity jurisdiction, however, the plaintiff must allege a proper jurisdictional
basis in the complaint. Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir.1994). In particular,
the plaintiff must allege that the plaintiff and defendants are citizens of different states and that
the amount in controversy exceeds $50,000, exclusive of interest and costs. 28 U.S.C. § 1332(a).
Based upon our review of the complaint, we harbor serious doubts regarding the sufficiency of
the Masseys' jurisdictional allegations.