Opinion ID: 783242
Heading Depth: 2
Heading Rank: 1

Heading: Breach of Contract Action

Text: 59 The majority holds that collateral estoppel does not bar relitigation in this case of the identical issue that was decided in Sandberg v. State Farm Mut. Auto. Ins. Co., 182 F.3d 927 (9th Cir.1999) (table) (memorandum disposition). Sandberg held that, under California law, the contract provisions that are at issue here permit termination only for good cause. The majority concedes that the district court erred in holding that the preconditions for estoppel were not met in this case, see majority opinion, supra, but the majority nonetheless defers to the district court's ultimate decision not to estop State Farm from relitigating the issue. The majority errs. 60 To decide as it does, the majority must rely on the exception that [a]llowing offensive collateral estoppel may ... be unfair to a defendant if the judgment relied upon as a basis for the estoppel is itself inconsistent with one or more previous judgments in favor of the defendant. Parklane Hosiery Co., v. Shore, 439 U.S. 322, 331, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) (emphasis added). We do not apply a mechanical approach to the question of when prior inconsistent judgments preclude the application of collateral estoppel. Instead, we have held that Parklane Hosiery is a guide to determining when the application of collateral estoppel may be unfair to a defendant. See Robi v. Five Platters, Inc., 838 F.2d 318, 330 (9th Cir.1988) (We prefer to read Parklane as providing guidance to the district courts for the appropriate exercise of discretion as to when to apply offensive issue preclusion in the presence of inconsistent judgments.). 61 Although Sandberg decided that State Farm had good cause to terminate the agent in that case, it held that under California law the same termination clause that is at issue here permitted termination only for good cause. The majority's conclusion that Sandberg is inconsistent with other authority so as to preclude applying collateral estoppel against State Farm is simply wrong. To be inconsistent in this sense, a decision must conflict with relevant legal authority on the same issue. 62 This case involves two groups of plaintiffs: (1) those from Arizona, California, Colorado, Iowa, Maryland, Nevada, Utah, and Washington — states that the district court held follow a rule that permits extrinsic evidence to be used to illuminate the meaning of unambiguous contract terms; and (2) those plaintiffs from Florida, Idaho, Kansas, Louisiana, Nebraska, Ohio, and Texas — states that the district court held permit the introduction of extrinsic evidence if a contract term is ambiguous. Neither party has challenged the district court's conclusions in this regard. Accordingly, the only authority that would be relevant in determining that Sandberg was inconsistent would need to be authority interpreting the rule of law that we applied in Sandberg — that is, authority applying California law, or the law of a state that follows the same rule. 63 The pre- Sandberg authorities that State Farm proffers applied New Hampshire law, Illinois law, New Mexico law, and Kansas law — none of which is at issue here (except Kansas). Although State Farm cites three cases from California courts, two are from trial courts, and none of them is California Supreme Court authority. It is wrong to hold, on such a basis, that Sandberg is inconsistent with the law of California and of the other states that follow the same rule. Nor do any of the authorities that post-date our decision in Sandberg indicate that Sandberg is inconsistent. 64 Moreover, the majority is wrong to defer to the district court's decision in disregarding Sandberg. The district court has no such discretion, and we owe the district court's decision on this point no deference. The district court held that our decision in Sandberg was sufficiently inconsistent with prior decisions in other jurisdictions (not our court) that it would be unfair to estop State Farm from relitigating the scope of the termination clauses at issue. In such circumstances, the lower court's refusal to follow a decision of this circuit is reversible error. 65 The question of the consistency of Sandberg with prior decisions — and, hence, in some sense Sandberg 's fairness — was a matter for the panel that decided that case. It is improper to assume that the Sandberg panel was unaware of, or disregarded, the state of the law when it issued its disposition. Moreover, State Farm had ample opportunity to challenge the consistency (and fairness) of our decision with prior authority when it petitioned for rehearing by the original panel. State Farm again had the chance to raise the issue in its petition for certiorari that was denied by the Supreme Court. See Sandberg v. State Farm Mutual Auto. Ins. Co., 528 U.S. 1118, 120 S.Ct. 938, 145 L.Ed.2d 816 (2000) (denying petition for certiorari). I submit that the district court here had no discretion to refuse to follow our Sandberg decision because, in the lower court's judgment, our decision did not agree with prior judgments from different courts. 1 66 Nothing in Parklane Hosiery suggests that the Supreme Court intended to upset the usual channels of appellate review or to grant discretion to district courts to refuse to accord preclusive effect to prior judgments of their circuit courts. Nor does Parklane Hosiery suggest that we should defer to an inferior court within our jurisdiction as to the correct legal application of our own decisions. Parklane Hosiery involved the question of whether to grant preclusive effect to a decision by the Second Circuit in a case that was before a district court within the same circuit. See id. at 324-25, 99 S.Ct. 645. But the Supreme Court did not reach the actual question presented here of whether a district court may disregard a prior decision by the court of appeals that sits above it on the ground that the circuit's decision conflicts with foreign authority. Although the Court noted that a general exception might be made for decisions that are inconsistent with prior decisions, it held that none of the circumstances that might justify reluctance to allow the offensive use of collateral estoppel is present. Id. at 331, 99 S.Ct. 645. 67 The district court has no special expertise nor license to assess, as a matter of law, whether our decisions are right, wrong, consistent, or inconsistent. That is, quite simply, our task (and that of the Supreme Court). Our decisions, whether memorandum dispositions or opinions, state the law of the circuit and must be followed by a district court in cases where they properly govern the issues presented. See Ninth Circuit Rule 36-3. The district court has no authority to disregard our decision. 68 In short, the district court's decision that State Farm is not collaterally estopped from relitigating whether the contracts here are terminable for cause was reversible error. The district court may not disregard our decision, and the conclusion that Sandberg is inconsistent with the weight of authority from other jurisdictions on the questions presented in this case is inaccurate.
69 I also disagree with the majority that summary judgment was proper. I would reverse and remand for trial. In affirming the grant of summary judgment, the majority ignores the settled standards for summary judgment and substitutes its own interpretation of the evidence for one that views the evidence in the light most favorable to the nonmoving party. At summary judgment, the court is prohibited from taking such a view of the evidence. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). 70 Neither party disputes that extrinsic evidence may be used to illuminate and interpret the meaning of the contract terms that are at issue here — at least as to the plaintiffs who have stated claims for breach of contract under the law of states, such as California, that permit such evidence to be used to interpret unambiguous contract terms. See, e.g., Pacific Gas and Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal.2d 33, 69 Cal.Rptr. 561, 442 P.2d 641, 644-47 (1968) (en banc). The plaintiffs allege that the deletion of the at will provision from a previous version of the agency agreement, the addition of a termination review procedure, and State Farm documents that state that State Farm would not terminate agents except for serious infractions require a holding that the contract permits termination only for cause. Read together, this evidence, considered in the light most favorable to the plaintiffs, clearly supports the reasonable inference that the agency contracts were terminable only for cause. 2 At summary judgment the plaintiffs need show no more in order to proceed to trial. 71 The majority is wrong to hold that what the plaintiffs ask us to do is to write in or graft onto the contract a for cause provision. All that is required for the plaintiffs to prevail at this stage of the case is to present evidence (that we must view in the light most favorable to the plaintiffs) that raises a disputed issue of material fact as to the meaning of the contract. That they have done. 72 Of course, because the contracts, considered in the light most favorable to the plaintiffs, reasonably may be read to allow termination only for cause, the district court's rulings that State Farm breached no implied covenants of good faith and fair dealing as to the agents' other claims should be reversed as well.