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
3
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.
5
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
7
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
Shocklee v. Massachusetts Mutual Life Insurance
Court: Court of Appeals for the Fifth Circuit
Date filed: 2004-04-28
Citations: 369 F.3d 437
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