Citations
- 393 F. Supp. 2d 722
Full opinion text
ORDER
READE, District Judge.
TABLE OF CONTENTS
I. INTRODUCTION.723
II. THE UNDISPUTED FACTS.724
A. The Contract.724
B. The Lawsuit.724
III.PRINCIPLES OF REVIEW.725
IV THE MERITS lO
It does not matter that there is extrinsic evidence that CIGNA entered into the Group Contract for the benefit of third parties, namely, its subsidiary, CGLIC, and employees of CGLIC. CIGNA, not CGLIC, signed the Group Contract. A party is generally bound to honor contracts the party signed. See Kuehl v. Freeman Bros. Agency, Inc., 521 N.W.2d 714, 719-20 (Iowa 1994); see also Joseph L. Wilmotte & Co. v. Rosenman Bros., 258 N.W.2d 317, 323 (Iowa 1977). Further, CGLIC is not mentioned in the Group Contract. “In construing a written contract, the intent of the parties must control; and except in cases of ambiguity, this is determined by what the contract itself says.” Estate of Pearson ex rel. Latta v. Interstate Power & Light Co., 700 N.W.2d 333, 343 (Iowa 2005) (internal quotation omitted).
Even assuming the assertions pertaining to CGLIC are true, CGLIC was a third-party beneficiary of the contract, not a party to the contract. “Where performance will benefit a person other than a promisee, that person is a beneficiary.” Restatement (Second) of Contracts § 2(4) (1981). A beneficiary of a contract is not transformed into a party to the contract simply because the beneficiary makes payments on the contract. Although the record suggests CIGNA’s duty to make payments to Medical Associates was delegated to CGLIC, such suggestion does not make CIGNA a non-party to the Group Contract. Stated differently, even if CIGNA delegated the duty to make payments under the Group Contract to CGLIC, CIG-NA is still liable.
Many a debtor wishes that by such an expression of an intention to delegate he could get rid of his debts .... [Nonetheless, t]he debtor’s duty remains absolutely unchanged. The performance required by a duty can often be delegated; but by such a delegation the duty itself is not escaped.
In re Integrated Res. Life Ins. Co., 562 N.W.2d 179, 182-83 (Iowa 1997) (quoting 4 Arthur L. Corbin, Corbin on Contracts § 866 (1951) (citations and alterations omitted)).
A party such as CIGNA “may not avoid [its] contractual obligation without a contract to the contrary, i.e., a novation.” B & H Apartments P’ship v. Tharp, 466 N.W.2d 694, 696 (Iowa Ct.App. 1990). Novation is not presumed. Integrated Res., 562 N.W.2d at 182. The party asserting it must prove “(1) a previous valid obligation, (2) agreement of all parties to the new contract, (3) extinguishment of the old contract, and (4) validity of the new contract.” Id. There is no evidence in the record of a novation. CIGNA is the party to the contract and is bound to honor it. See Kuehl, 521 N.W.2d at 719-20.
2. The Group Contract Governs
CIGNA argues that, even if it is a party to the contract, it has not breached the contract. CIGNA maintains it properly cancelled the contract on April 9, 2004 because it gave Medical Associates written notice of cancellation on February 17, 2004. CIGNA claims it sent the requisite notice on February 17, 2004, which is when a CIGNA employee sent a Medical Associates’ Account Executive an email. CIG-NA claims the terms of the Subscriber Agreement largely govern this dispute, and therefore it could justifiably cancel the contract after giving 31 days notice. Medical Associates claims the Group Contract governs. The Group Contract does not permit CIGNA to cancel before December 31, 2004, even if advance notice is given.
The construction of a contract is generally a question of law for the court to decide. See Magina v. Bartlett, 582 N.W.2d 159, 163 (Iowa 1998). It is therefore appropriate to resolve this case at the summary judgment stage.
The court concludes the Group Contract governs. The language that CIGNA relies upon in the Subscriber Agreement is limited in scope to the Subscriber Agreement itself and does not cover the Group Contract. The relied-upon language states: “ This Subscriber Agreement may be canceled at any time by the Member or Member’s Employer by giving written notice 31 days in advance.” (Emphasis added.).
The Subscriber Agreement is not the governing contract between CIGNA and Medical Associates. The Subscriber Agreement states it was part of the “agreement between [Medical Associates] and you, the Subscriber.” That is, the Subscriber Agreement is not a contract between Medical Associates and CIGNA, but rather a contract between Medical Associates and subscribers. The notice provision CIGNA refers to in the Subscriber Agreement is simply the mechanism by which individual employees leaving employment at CIGNA could terminate then-health maintenance benefits, or through which CIGNA could terminate such benefits for them.
It is true the Subscriber Agreement was attached to the Group Contract. The Subscriber Agreement was attached to the Group Contract because the Group Contract specified that Medical Associates was required to “provide health maintenance benefits to [CIGNA] employees who are subscribers according to the provisions of the Subscriber Agreement ... and subject to the limitations and exclusions therein.” The Subscriber Agreement lists the specific terms of Medical Associates’ coverage, such as what medical services are covered, the maximum benefits, the method of payment to physicians, and various exclusions. The Group Contract, on the other hand, is the governing agreement between the parties to this dispute, CIGNA and Medical Associates. It is the framework within which individual Subscriber Agreements are authorized.
Even if the court were to assume the Subscriber Agreement and the Group Contract were both contracts between Medical Associates and CIGNA, the court would not adopt CIGNA’s interpretation of the competing termination provisions. CIGNA’s interpretation ignores the termination provision of the Group Contract. CIGNA’s interpretation renders the termination provision of the Group Contract superfluous; it would make no sense to have one provision forbid cancellation until December 31, 2004 and another provision allow cancellation after giving 31 days notice. A court must “assume no part of the contract is superfluous or of no effect and a construction giving meaning to all its clauses is preferred.” See Estate of Pearson, 700 N.W.2d at 343. Thus, the cancellation provision of the Group Contract permitted CIGNA to end its contract with Medical Associates, and the cancellation provision of the Subscriber Agreement permitted individual employees or CIGNA to cancel such employees’ health maintenance benefits.
At best, CIGNA seems to contend that it cancelled coverage for all its employees when it invoked the cancellation provision of the Subscriber Agreement. That is, in the February 17, 2004 email CIGNA was simply providing notice that it would have no “eligible” employees.
At the outset, the court seriously questions the validity of this argument in light of the well-settled rule that “[c]ontractual obligations may arise from implication as well as from the express writing of the parties.” Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp. 266 N.W.2d 22, 27 (Iowa 1978); see also Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214, 214-15 (1917) (same). In cases where the compensation due under the contract depends on the efforts of a party, the Iowa Supreme Court has remarked that “there will nearly always be found an implied promise of diligent and careful performance in good faith and of forbearance to make performance impossible by going out of business or otherwise.” Pundzak, Inc. v. Cook, 500 N.W.2d 424, 427 (Iowa 1993). It would appear that the Group Contract necessarily implied that CIGNA would offer Medical Associates’ plan to at least some employees.
Setting aside this concern, the court concludes CIGNA’s argument still lacks merit. Even if CIGNA had no eligible employees subscribing to Medical Associates’ plan on March 31, 2004, the contract itself would still be in force. CIGNA could not unilaterally “cancel” the contract at any time because CIGNA might deem other employees eligible in the coming months.
The Group Contract included a provision by which Medical Associates could terminate the Group Contract based on the number of employees who were enrolled in Medical Associates’ plan. The Group Contract stated:
If at any time less than 2 of [CIGNA’s] employees are enrolled, [Medical Associates] may terminate this Contract and all contracts it has with [CIGNA’s] employees by giving written notice of cancellation to [CIGNA] which shall be effective 90 days after the date thereof.
Importantly, this provision does not allow CIGNA to terminate the Group Contract. Therefore, CIGNA only could have terminated the Group Contract after December 31, 2004.
For the foregoing reasons, the court concludes CIGNA breached the Group Contract when it unilaterally cancelled it before December 31, 2004. Accordingly, the court grants Medical Associates’ Motion for Partial Summary Judgment. Having established liability, this matter shall proceed to trial on the issue of damages. See Fed.R.Civ.P. 56(c).
B. CIGNA’s Motion for Summary Judgment
In its Motion for Summary Judgment, CIGNA argues it is entitled to judgment as a matter of law on account of the termination provision of the Subscriber Agreement and the fact that it notified CIGNA of cancellation on February 17, 2004. CIGNA incorporated this entire summary judgment motion in its Resistance to Medical Associates’ Motion for Partial Summary Judgment. The court discussed this same argument in its discussion of Medical Associates’ Motion for Partial Summary Judgment and determined the argument lacked merit. The court therefore denies CIGNA’s Motion for Summary Judgment.
V. CONCLUSION
In light of the foregoing, IT IS ORDERED:
1. Plaintiff Medical Associates’ Motion for Partial Summary Judgment (docket no. 17) is GRANTED;
2. Defendant CIGNA’s Motion for Summary Judgment (docket no. 18) is DENIED;
and
3. This matter shall proceed to trial as scheduled on the issue of damages.
SO ORDERED.
. The Group Contract states that Iowa law governs. Because the parties assume the same, the court uses Iowa law to construe the contract.
. The third and fifth elements of Medical Associates’ breach-of-contract claim are not at issue in this order. It is undisputed that Medical Associates performed all the terms and conditions of the Group Contract until the time of CIGNA's alleged breach. Medical Associates also admits the amount of damages is a factual dispute for the jury to decide and, hence, only seeks partial summary judgment. See Fed.R.Civ.P. 56(c).
. Even if CIGNA had presented the court with an affidavit to contradict this admission, it would be unavailing. A party opposing summary judgment may not create a ‘'sham” issue of fact by filing such a contradictory affidavit. See, e.g., Herring v. Canada Life Assurance Co., 207 F.3d 1026, 1030-31 (8th Cir.2000) (citing Camfield Tires, Inc. v. Michelin Tire Corp., 719 F.2d 1361, 1365-66 (8th Cir.1983)).
. The court notes that there is no evidence in the record of such a delegation other than the mere fact of the payments.
. The email stated:
I know that we put you on notice about cancellation at the end of March. At the outside chance we need to extend the coverage for a few additional months, is that doable and if so, when would you need to know. It looks like it may take longer than expected to get all the approvals.
The parties dispute whether this was sufficient notice. Because the court ultimately concludes CIGNA was not permitted to cancel the contract until December 31, 2004, it need not resolve this dispute.