Brian Olander v. State Farm Mutual Automobile Insurance Company

LAY, Circuit Judge,

dissenting, with whom HEANEY and McMILLIAN, Circuit Judges, join.

I join in Judge Heaney’s dissent.

This controversy, rooted in diversity jurisdiction, involves the question of whether a contract is ambiguous under North Dakota law. Requiring a routine diversity case such as this to be reheard en banc violates the Federal Rules of Appellate Procedure and the longstanding policy of this court.

The Federal Rules of Appellate Procedure state that an en banc “hearing or rehearing is not favored and ordinarily will not be ordered except (1) when consideration by the full court is necessary to secure or maintain uniformity of its decisions, or (2) when the proceeding involves a question of exceptional importance.” Fed. R. App. P. 35(a). The Internal Operating Procedures of the Eighth Circuit elaborate:

The issue of whether a case should be reheard en banc is separate and distinct from the issue of whether the case should be reheard by the panel. A panel may rehear a case if it questions whether its decision was correct. The court may rehear a case en banc if the case “is of such significance to the full court that it deserves the attention of the full court.”

United States Court of Appeals for the Eighth Circuit, Internal Operating Procedures IV.D. (quoting Western Pac. R.R. Corp. v. Western Pac. R.R. Co., 345 U.S. *813247, 262-63, 73 S.Ct. 656, 97 L.Ed. 986 (1953)).

The first en banc decision I sat on after appointment to this court in 1966 related to a death sentence under federal law. See Pope v. United States, 372 F.2d 710 (8th Cir.1967) (en banc). Since that time, this court has averaged approximately six to ten en banc hearings a year. My research shows there have been eight en banc cases in a period of thirty-six years where diversity of citizenship constituted the jurisdictional root for the case to be in federal court. None of those cases, however, were voted to be heard by the full court simply because of the doubtful application of state law. These cases were heard en banc because they involved significant questions of federal procedure or federal constitutional law. I am unaware of any en banc case from this or any other circuit where the narrow issue presented was the alleged ambiguity of a contract under state law. For example, in Lehman Bros. Kuhn Loeb Inc. v. Clark Oil & Refining Corp., 739 F.2d 1313 (8th Cir.1984) (en banc), the legal merits turned on the construction of a contract, but the case was placed en banc because of a dispute over the constitutionality of the portion of the Federal Magistrate Act providing for trial before the magistrate judge with the consent of the parties. Id. at 1314.

When scheduling a case to be heard en banc in any federal court of appeals, one must consider the limited resources of that court in terms of whether the issue itself is so significant that it should require the time of all of the active and participating senior judges involved. Allowing this case to proceed en banc invites every lawyer in every routine appellate case in this circuit to petition for rehearing en banc without a thought as to the significance of the issue involved or the limited resources of the court. Albeit, the court does not have to grant any petition, but the court must read every petition filed.

Many of our sister circuits have deemed questions of state law to be so inconsequential that they have, by rule, established that such a case cannot be reheard en banc.3 For example, the rule in the Eleventh Circuit reads:

Alleged errors in a panel’s determination of state law, or in the facts of the case (including sufficiency of the evidence, or error asserted in the panel’s misapplication of correct precedent to the facts of the case), are matters for rehearing before the panel but not for en banc consideration.

United States Court of Appeals for the Eleventh Circuit, Rule 35-3; accord United States Court of Appeals for the Sixth Circuit, Rule 35(c).4 The Seventh Circuit has written:

Further, and perhaps most revealing, the petition presents only issues of state law. As such petitioners had an added burden to explain why an issue of [state] law was of such exceptional importance that it warranted review en banc in a federal court, the decision of which would not even be binding on [that state’s] courts. A purely state law issue would need to have national significance to warrant such review.

HM Holdings, Inc. v. Rankin, 72 F.3d 562, 563 (7th Cir.1995). As an example of the type of case with such national signifi-*814canee, the court offers Todd v. Societe Bic., S.A., 21 F.3d 1402 (7th Cir.1994) (en banc), and Todd v. Societe BIC, S.A., 9 F.3d 1216 (7th Cir.1993) (en banc), which considered questions of Illinois law in the context of massive products liability litigation.

Here, as in HM Holdings, there is an utter lack of national significance to the state law issue presented. The decision will have limited significance even within North Dakota since the state supreme court can correct any error in the panel’s interpretation. In fact, it appears the only basis for the petition for rehearing en banc is that State Farm argues it will affect construction of its contracts on a nationwide basis. It has long been recognized that “[t]he function of en banc hearings is not to review alleged errors for the benefit of losing litigants.” United States v. Rosciano, 499 F.2d 173, 174 (7th Cir.1974); see also Western Pac., 345 U.S. at 262-63, 73 S.Ct. 656.

For this circuit to differ from all of our sister circuits, I respectfully submit, trivializes the federal judicial process. Throughout my tenure on the court, our judges have stressed the need to conserve judicial resources and to avoid en banc hearings whenever possible. Two senior judges with a combined tenure of seventy years on the court have found the contract was ambiguous. No judge is perfect and we may well be wrong, but that is no reason to place a case such as this before the en banc court. To do so violates the spirit, if not the letter, of the Federal Rules of Appellate Procedure and this court’s longstanding policy.

If this court certified the narrow issue involved to the North Dakota Supreme Court, it would indeed be embarrassing, and the court would undoubtedly refuse to grant certification. Yet, such an effort to certify would be far more desirable than utilizing the limited resources of the full court of appeals to guess what the North Dakota Supreme Court would do. The merits of the case should not in any way control the voting of the active judges to place this case en banc. As a diversity case applying North Dakota law in a particularly fact-bound context, no other court in the country is bound by this decision, including the North Dakota Supreme Court. In addition, my limited research discloses that this is the first case in the United States to ever address en banc a routine question of whether a contract is ambiguous under state law. This fact alone mandates reconsideration of our en banc order as being improvidently granted.

It has been said that this case is important because it is a ruling of this circuit and thus becomes the law of this circuit. Such an argument makes little sense. This argument misunderstands the basic principle of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Our ruling must follow the law of the state from which this case arises. It does not affect the law of any other state. The Supreme Court of North Dakota may well change our ruling tomorrow.

Since this case has such little prece-dential or national significance, the court should not have heard the case en banc. For these reasons, I respectfully dissent.

HEANEY, Circuit Judge,

dissenting, with whom LAY and McMILLIAN, Circuit Judges, join.

In reviewing a diversity case en banc, our only responsibility is to decide the case according to the laws of the relevant state, in this case, North Dakota. It is not, as the majority suggests, our task to determine whether State Farm Insurance Company can terminate agents’ contracts in any state without cause, any more than it is our duty to protect the agents who have *815spent years building a successful agency for themselves, only to have their life’s work taken away from them without cause. National uniformity is not and never has been a goal of federal courts in interpreting contracts in diversity cases. We remain convinced that the original panel decided the matter correctly, and that the district court erred by granting summary judgment to State Farm and denying Brian Olander’s motion to set aside the judgment pursuant to Fed.R.Civ.P. 60(b). We therefore dissent.

Background

We summarize the history of this case to highlight aspects of the matter that the majority did not address. In 1979, Brian Olander became a trainee agent for State Farm and entered into an agent’s agreement in 1981. By the terms of the agreement, Olander was an independent contractor authorized to represent State Farm in Mandan, North Dakota. For seventeen years he was very successful. By 1996, he had secured over 5,000 active policyholders, and his take-home commissions were approximately $200,000 a year. In all his years with State Farm, Olander delivered exemplary service to his customers and provided large profits and fierce loyalty to State Farm. He received no adverse ratings from State Farm.

On August 16, 1996, Olander was arrested for homicide after an altercation with his neighbor. Thereafter, State Farm offered Olander an unpaid leave of absence with the following conditions:

State Farm would service the business assigned to your account, and you would receive no compensation during the term of the leave of absence. State Farm would service the business from a company facility, and you would remove all signs from your current office which identify State Farm. You would not identify yourself as a State Farm Agent, nor would you contact any State Farm policyholders in regard to insurance....
If you are interested in such a leave of absence arrangement, which we would anticipate would continue no longer than the resolution of the criminal prosecution pending against you, but which could be terminated by either of us at any time (thus terminating your Agent’s Agreement), please let me or Lou Santo-ro know by August 30, 1996, and we will prepare an appropriate amendment to your Agent’s Agreement.
.... If I have not heard from you by August 30, we will take steps to terminate your Agent’s Agreement effective August 31,1996.

(J.A. at 69 (emphasis added)). Olander refused to accept the proposal, and State Farm terminated the agent’s agreement. It subsequently seized Olander’s business records, computers, and other policy information, and his policies were assigned to other agencies in the area.

Olander’s murder trial commenced in April 1997. The jury returned a verdict, finding Olander guilty of manslaughter and acquitting him of murder. In March 1998, the North Dakota Supreme Court reversed Olander’s conviction because of instructional error on the issue of self-defense. He was tried a second time and acquitted of all charges. By this time, however, he had lost his valuable agent’s agreement, and without an insurance company sponsor, he could not be licensed as an insurance agent.

In 1999, Olander instituted an action against State Farm alleging that: (1) the termination of his agent’s agreement constituted a breach of contract; (2) State Farm tortiously interfered with the business relationship he developed with his *816clients; and (3) State Farm was unjustly enriched by Ms termination. State Farm promptly filed a motion for summary judgment, which was granted by the magistrate on February 7, 2001. Thereafter, the district court adopted the magistrate’s report, dander then filed a motion to set aside the judgment pursuant to Fed. R.Civ.P. 60(b) based on newly discovered evidence and failure to make disclosure required by discovery. The district court denied both motions, and dander appeals the district court’s summary judgment ruling on his breach of contract claim and its denial of his 60(b) motion.

Discussion

The majority holds that the independent agent’s agreement was terminable at will by State Farm with or without cause. We disagree with that conclusion because the majority ignores North Dakota law, which requires that any ambiguity in a written agreement be resolved by considering the four corners of the agreement. The majority looks only at the termination clause and disregards the preamble and a contract provision that provides for a review following termination.

The North Dakota Supreme Court has given a succinct summary of the law relating to the interpretation of written agreements:

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; Pami-da, 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. Wackier 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).

The North Dakota Century Code instructs that when interpreting a contract, “The whole of a contract is to be taken together so as to give effect to every part if reasonably practicable. Each clause is to help interpret the others.” N.D.C.C. § 9-07-06. It is also well settled under North Dakota law that “[t]he intention of the parties to a contract must be gathered from the entire instrument, not from isolated clauses, and every clause, sentence, and provision should be given effect consistent with the main purpose of the contract.” Nat’l Bank of Harvey v. Int’l Harvester Co., 421 N.W.2d 799, 802 (N.D.1988).

State Farm has persuaded the majority to rely upon the following language within the insurance agreement to assert that the contract is unambiguous in instructing that the agency relationship with dander was at all times terminable at will:

A. This agreement will terminate upon your death. You or State Farm *817have 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 about 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).

Initially, paragraph B of section III, which immediately follows the provision at issue, entitles the agent to a review following termination of the agreement by State Farm.5 While by no means foreclosing other interpretations, one rational explanation for the existence of the review procedure is to ensure that any termination was made for good cause, and not capriciously. Cf. Kaldi, 21 P.3d at 21 (finding the review procedure offers “the agent the opportunity to assert it is not in the company’s best interest of the insurer to sever the agency relationship .... ”). In addition, the preamble to the contract lends further support to the plaintiffs argument. See United States v. Tilley, 124 F.2d 850, 854 (8th Cir.1941). Among a number of other provisions, it states: “The Companies and the Agent expect that by entering into this Agreement, and by the full and faithful observance and performance of the obligations and responsibilities herein set forth, a mutually satisfactory relationship will be established and maintained.” Id. (emphasis added). This language is far from dispositive. It is, however, additional textual support for plaintiffs argument located within the four corners of the document. It suggests that if the parties meet their contractual obligations, the relationship will continue. Such an interpretation is inconsistent with State Farm’s assertion that the agreement unambiguously allows for termination regardless of the parties’ performance.6

*818The majority cites three cases for the proposition that the Supreme Court of North Dakota would apply the North Dakota Code provision relating to personal services to insurance contracts and permit insurance agency contracts to be terminable at will. We are not persuaded that these cases support the view that the North Dakota Supreme Court would accept the majority’s view in this case.

In Myra Foundation v. Harvey, 100 N.W.2d 435 (N.D.1959), the North Dakota Supreme Court held that an agreement to provide bookkeeping services had been formed by the parties through an exchange of letters. The plaintiff brought an action to recover possession of certain books and records that it alleged had been unlawfully detainéd by the defendant. The defendant answered that he had legal possession of the books and records by virtue of a lien for services performed for the plaintiff and counterclaimed for the reasonable value of the services. The case was tried, and the defendant obtained a judgment on his counterclaim. Plaintiff moved for judgment notwithstanding the verdict or for a new trial. The motion was denied and the plaintiff appealed. The North Dakota Supreme Court remanded the case on a damage issue and simply noted “that the contract, neither expressly nor impliedly, fixes any time for its duration. Either party might therefore terminate the contract upon giving reasonable notice to the other.” Id. at 437. No argument was made by either party on this issue, and the only citation by the North Dakota Supreme Court was to 17 C.J.S. Contracts § 398 and 12 Am.Jur. (Contracts, Sec.305) 860.

In North American Pump Corp. v. Clay Equipment Corp., 199 N.W.2d 888 (N.D.1972), the plaintiff, a sales and service corporation engaged in selling farm equipment, asserted that an oral contract with the defendant, a manufacturer, gave it the exclusive right to sell the defendant’s products within the northern half of North Dakota and a small area in northwestern Minnesota. The jury returned a verdict for the plaintiff in the sum of $3,000. The North Dakota Supreme Court affirmed the judgment after eliminating interest on the amount prior to the verdict. The only reference by. the North Dakota Supreme Court to the issues facing us is a statement that because a contract neither expressly nor impliedly fixed the time of duration, “the agreement could have been terminated by either party on reasonable notice [and thus] ... the agreement was not within the statute of frauds, even though it was not terminated within one year of its commencement.” Id. at 894.

In Wadeson v. American Family Mutual Insurance Co., 343 N.W.2d 367 (N.D.1984), the plaintiff brought an action against American Family, alleging his agency had been terminated without cause. There was no indication in the case that *819there was a written agreement between the parties and certainly no indication that the agreement contained any provisions similar to those contained in the instant case. The North Dakota Supreme Court referred to the North Dakota Code, stating: “An employment having no specified term may be terminated at the will of either party on notice to the other .... ” Id. at 369.

State Farm contends that North Dakota law prohibits the use of parol evidence to vary the terms of a written contract where, as here, the parties agree that the contract contains the entire agreement. This argument is without merit. Putnam v. Dickinson held parol evidence was admissible where a deed was silent on a matter. The court indicated the parties did not intend the agreement “to be a complete and final statement of the whole of the transaction between them,” and the extrinsic evidence was consistent with the terms of the agreement. Putnam, 142 N.W.2d at 119. However, the North Dakota Supreme Court has never held this to be the only circumstance where parol evidence is admissible in a contract dispute. For instance, in Jorgensen v. Crow, 466 N.W.2d 120 (N.D.1991), the state supreme court held the trial court had erred in admitting parol evidence “that varied the purchase price of the contract for deed.” Id. at 124. However, it found no error in the trial court’s admitting “a prior oral agreement that the yearly payment due under the contract for deed would be satisfied by one season’s use of the pasture because that testimony does not contradict a term of the written contract.” Id. The court has explicitly stated that, when an ambiguity exists, “parol evidence is admissible to explain existing essential terms or to show the parties’ intent.” Bye v. Elvick, 336 N.W.2d 106, 111 (N.D.1983). That is the situation we are presented with here. Whether or not the agent’s agreement expressed the entire transaction between State Farm and dander is of no consequence.

In the instant case, we are presented with a contractual provision that is silent on the subject of cause. Both parties offer plausible explanations for this silence and dander has directed us to provisions within the agreement itself supporting his interpretation. Therefore, reasonable persons could rationally argue that the termination provision merely sets forth the procedure for giving notice of termination without specifying whether or not termination requires cause. “Because reasonable people could make rational arguments in support of contrary positions ... there was a genuine issue of material fact rendering summary judgment on this issue inappropriate.” Pamida, Inc. v. Meide, 526 N.W.2d 487, 493 (N.D.1995). In light of this conclusion, it is unnecessary to address Olander’s claims regarding his Rule 60(b) motion.

Because it is well settled under North Dakota law that the entire contractual instrument, inclusive of all clauses and provisions, must be considered to determine the intention of the parties, we would remand this matter to the district court for a trial on the merits.

. Several of our sister circuits include similar admonitions in their local rules and internal operating procedures. See United States Court of Appeals for the Third Circuit, Local Appellate Rule 35.4; United States Court of Appeals for the Fifth Circuit, Rule 35.1; United States Court of Appeals for the Tenth Circuit, Rule 35.2.

. In the Ninth Circuit, diversity cases are deemed non-precedential and seldom result in published opinions.

. The provision reads:

B. In the event we terminate this Agreement, you are entitled upon request to a review in accordance with the termination review procedures approved by the Board of Directors of the Companies, as amended from time to time.

. In 1966, State Farm amended its agent's agreement to delete from the termination clause in effect at that time the words, "with or without cause.” The reasons for this change were set forth by Henry Keller, Jr., the agency vice president for State Farm at the time the decision to revise the termination clause was made. In the detailed affidavit, Keller swore under oath as follows:

13. In order to obtain the agent perspective on issues which needed to be addressed in the new contract, we set up a program to obtain information from the agents. This informational program revealed a major concern [on] the part of the agents that the company might terminate them arbitrarily or capriciously, without good reason. If that were to occur, then the agents' entire investment in his agency would be lost. We determined that we needed to address that concern, in order to assure that agents would be willing to make the substantial investment in time, effort and money contemplated by our independent contractor/career agent approach.
*81814. We took steps in the AA 660 contract to address that concern. First, we removed the words “with or without cause” from the termination provision that was in the LA 540 form. Second, we added a termination review provision, which would entitle any agent whose agreement had been terminated by the company to a review of the decision....
15. We considered adding provisions which would specify the reasons for which termination would occur, but ... opted for the approach ... which gave agents the protection of a due cause contract, but with more flexibility in defining the cause.
16.The removal of the words “with or without cause” from the termination provision was a necessary part of this exercise. We knew that it would be neither logical nor consistent to keep a provision stating that we could terminate “with or without cause” right above a termination review provision to guard against arbitrary and capricious terminations.

(J.A. at 714-15.)