Lead Opinion
OPINION OF THE COURT
Appellant Illinois National Insurance Company (“Illinois National”) and Appellees Wyndham Worldwide Operations, Inc., Wyndham Worldwide Corporation, Wyndham Vacation Ownership Inc., and Wyndham Resort Development Corporation (collectively “Wyndham”) are in a contract dispute over insurance coverage. In resolving this dispute, we must decide whether the doctrine of mutual mistake allows reformation of a contract against a party that did not participate in the negotiations.
Illinois National filed suit seeking a declaratory judgment that a 2008 plane crash did not trigger coverage under an aircraft fleet insurance policy that it issued to Jet Aviation Business Jets, Inc. (“Jet Aviation”). Wyndham filed a counterclaim seeking coverage and filed motions for summary judgment and to dismiss Illinois National’s complaint. The United States District Court for the District of New Jersey granted Wyndham’s motion to dismiss Illinois National’s complaint as well as Wyndham’s motion for summary judgment on its counterclaim. On appeal, Illinois National argues that the District Court erred both when it determined that mutual mistake can only serve as a basis for reformation in an action against a bargaining party and when it held that Illinois National had insufficiently pled mutual mistake. We agree and hold that New Jersey law allows reformation on the basis of mutual mistake against a party that did not participate in the negotiation of a contract and that Illinois National sufficiently pled mutual mistake.
For the following reasons, we conclude that the District Court’s grant to Wyndham of summary judgment was improper, as was its dismissal of Illinois National’s complaint. Accordingly, we will reverse the District Court’s grant of summary judgment and dismissal and remand for further proceedings consistent with this opinion.
I.
A.
Illinois National issues insurance products and sexwices. Jet Aviation offers aircraft maintenance, completions and refurbishment, engineering, and fixed base operations, along with aircraft management, charter services, aircraft sales and personnel services. Wyndham is a recognized seivice leader in the hospitality industry.
Illinois National provided insxxrance coverage to Jet Aviation and to some of Jet Aviation’s clients, so long as Jet Aviation managed the client’s aircraft and aircraft usage. Jet Aviation managed an aircraft owned by Wyndham and provided insurance for that aircraft pursuant to the terms of a series of Aircraft Management Services Agreements.
In 2001, Wyndham’s predecessor, Cendant Operations, Inc., and Jet Aviation entered into the first of these Aircraft Management Semces Agreements. Among other things, the agreements obligated Jet Aviation to provide domestic flight planning and scheduling, flight crew staffing, and management of scheduled and unscheduled maintenance for Wyndham’s aircraft. If Wyndham’s aircraft was not available when needed, Jet Aviation could arrange for an aircraft for Wyndham’s use from another source. Pursuant
For successive one-year periods beginning in 2004, and through the 2008 policy year, a series of aircraft fleet management insurance policies were purchased by Jet Aviation and issued by Illinois National. Each was negotiated by Illinois National and Jet Aviation, directly and through their agents. The policies contained endorsements that provided coverage for Jet Aviation’s clients. These clients were identified on the endorsements as “Insured Owners” and also as “Named Insured.”
4) The insurance afforded by this policy for the interest of the “Insured Owner” described in Item 1. of this endorsement shall not be invalidated by any act or neglect of Jet Aviation Business Jets, Inc. listed in Item 1 of the policy Declarations provided that the “Insured Owner” described in Item 1. of this endorsement did not consent to such act or neglect which would otherwise invalidate the insurance provided by this policy or that the “Insured Owner” described in Item 1. of this endorsement had no knowledge that such act or neglect to which they consented would invalidate the insurance provided by this policy.
The insurance afforded by this policy for the interest of the Jet Aviation Business Jets, Inc. listed in Item 1 of the policy Declarations shall not be invalidated by any act or neglect of the “Insured Owner” described in Item 1. of this endorsement provided that the Named Insured listed in Item 1. of the policy Declarations did not consent to such act or neglect which would otherwise invalidate the insurance provided by this policy.
5) The insurance afforded by this policy for the interest of the “Insured Owner” described in Item 1 of this endorsement or Jet Aviation Business Jets, Inc. (as fully described in Item 1 of the Declarations Page) is extended to other Aircraft insured under this policy but excluding any Non-Owned Aircraft unless such Non-Owned Aircraft is operated by or used at the direction of Jet Aviation Business Jets, Inc....
(App at. A471.)
In the negotiations leading up to the 2008 policy, Jet Aviation proposed new language for the endorsement. The revised endorsement, which was integrated into the 2008 policy, replaced “Jet Aviation” with “Named Insured.” It provided:
4) The insurance afforded by this policy for the interest of the “Insured Own*229 er” described in Item 1. of this endorsement shall not be invalidated by any act or neglect of the Named Insured listed in Item 1 of the policy Declarations provided that the “Insured Owner” described in Item 1. of this endorsement did not consent to such act or neglect which would otherwise invalidate the insurance provided by this policy or that the “Insured Owner” described in Item 1. of this endorsement had no knowledge that such act or neglect to which they consented would invalidate the insurance provided by this policy.
The insurance afforded by this policy for the interest of the Named Insured listed in Item 1 of the policy Declarations shall not be invalidated by any act or neglect of the “Insured Owner” described in Item 1. of this endorsement provided that the Named Insured listed in Item 1. of the policy Declarations did not consent to such act or neglect which would otherwise invalidate the insurance provided by this policy.
5) The insurance afforded by this policy for the interest of the “Insured Owner” described in Item 1. of this endorsement or Named Insured (as fully described in Item 1 of the Declarations Page) is extended to other Aircraft insured under this policy but excluding any Non-Owned Aircraft unless such Non-Owned Aircraft is operated by or used at the direction of the Named Insured....
(Id. at A1235.)
Jet Aviation and Illinois National claim that the drafting change was designed to make it more clear that entities affiliated with Jet Aviation were covered. Both contracting parties have stated that they believed that it did not expand coverage to entities that were unaffiliated with Jet Aviation, such as Wyndham. However, the modification, as written, appears to provide third parties with coverage when using non-owned aircraft without Jet Aviation’s involvement.
Despite being drafted to seemingly provide expanded coverage, Wyndham’s premium declined from $61,250 for the 2007 policy to $45,367 for the 2008 policy. Wyndham did not know about the change made to the endorsement for 2008 and continued to obtain non-owned aircraft liability coverage through a policy issued by StarNet Insurance Company (“StarNet”).
It is undisputed that neither Wyndham nor its brokers was involved in the negotiations or drafting of the revised provisions of the endorsement. It was negotiated between Illinois National and Jet Aviation.
In August 2008, Jason Ketcheson, a Wyndham employee, rented a Cessna 172 from Aviation Adventures to travel to a work-related meeting in Oregon. Jet Aviation had no involvement in this transaction. Ketcheson crashed into a house in Gearhart, Oregon, killing five people. As a result, various claimants have sued Wyndham for damages. The crash may have triggered coverage under the language of the 2008 policy.
B.
Illinois National filed suit against Wyndham seeking a declaratory judgment that the 2008 policy did not cover claims arising out of the August 2008 Cessna crash. It argued that the District Court should find that the 2008 policy, as written, did not
The District Court granted both of Wyndham’s motions, holding that Wyndham was entitled to coverage under the 2008 policy and that Illinois National was not entitled to reformation based upon the alleged mistake. The District Court held that the 2008 policy was clear on its face and that Wyndham was entitled to coverage as a matter of law. The District Court went on to explain that “because Wyndham did not participate in the negotiation and drafting of the 2008 policy, there can be no mutual mistake.” Illinois Nat’l Ins. Co. v. Wyndham Worldwide Operations, Inc., No. 09-1724,
Illinois National filed a timely notice of appeal.
II.
The District Court had jurisdiction under 28 U.S.C. § 1332(a) because the parties’ citizenship was completely diverse and the amount in controversy exceeded $75,000. We have jurisdiction under 28 U.S.C. § 1291. We exercise plenary review of the District Court’s order. See McGovern v. Philadelphia,
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal,
III.
Illinois National argues that the District Court erred in granting summary judgment to Wyndham on its counter claim by erroneously interpreting New Jersey law and concluding that reformation on the basis of mutual mistake can never be sought against a third-party that was not present when the contract was consummated. Illinois Nat’l Ins. Co., 2010 WL
When interpreting state law, we follow a state’s highest court; if that state’s highest court has not provided guidance, we are charged with predicting how that court would resolve the issue. Canal Ins. Co. v. Underwriters at Lloyd’s London,
The Supreme Court of New Jersey has set out general principles for contract interpretation and reformation:
As a general rule, courts should enforce contracts as the parties intended. Similarly, it is a basic rule of contractual interpretation that a court must discern and implement the common intention of the parties. The court’s role is to consider what is written in the context of the circumstances at the time of drafting and to apply a rational meaning in keeping with the expressed general purpose.
Pacifico v. Pacifico,
“Generally, when interpreting an insurance policy, courts should give the policy’s words their plain, ordinary meaning.” Nav-Its, Inc. v. Selective Ins. Co. of Am.,
However, in New Jersey, even an unambiguous contract may be reformed when there was mutual mistake and the written contract does not match what the parties intended. Cent. State Bank v. Hudik-Ross Co., Inc.,
Mutual mistake is evaluated by determining the understanding of the parties at the time the contract was formed. Bonnco Petrol, Inc. v. Epstein,
“The power of a court of equity to reform deeds and other writings for the correction of mistakes stands among its most ancient and useful powers.” Cummins v. Bulgin, 37 N.J.Eq. 476, 476 (1883). That power is not limited to the original parties to the contract, but extends to all those standing in privity with them. Union Fur Shop. v. Max Melzer, Inc.,
The District Court held that “because Wyndham did not participate in the negotiation and drafting of the 2008 policy, there can be no mutual mistake.” Illinois Nat’l Ins. Co.,
Turning to the facts, Illinois National and Jet Aviation were the only parties that negotiated and drafted the 2008 policy. (App. at A397-98.) As Wyndham admits, it “had [no] involvement with ... [the] revision to the Endorsement. [The contracting parties] never communicated with Wyndham to discuss the revision or request input---- [And,] Wyndham never had an opportunity to form an understanding of what [the contracting parties] intended when [they] inserted ‘Named Insured.’ ” (Br. for Appellee Wyndham at 7.) Jet Aviation and Illinois National agree that their intent, at the time the contract was drafted, was to limit coverage for non-owned aircraft to aircraft used by or at the direction of Jet Aviation. (App. at A1773.)
Under these circumstances, the District Court erred by not analyzing the contract under the principles of mutual mistake set forth under New Jersey law. On remand, the District Court should evaluate Illinois National’s and Jet Aviation’s intent as well as Wyndham’s arguments that reformation may be inequitable due to negligence and because the remedy is sought after an accident.
IV.
Illinois National argues that the District Court also erred by determining that Illinois National’s complaint seeking declaratory judgment should be dismissed under Fed.R.Civ.P. 9(b). The District Court stated that Illinois National had failed to “identify with the required particularity ‘the who, what, when, where, and how’ of the mistake as required by Rule 9(b).” Illinois National,
To survive a motion to dismiss, a plaintiff must allege facts sufficient to nudge his claims across the line from conceivable to plausible. Phillips v. Cty. of Allegheny,
The complaint was sufficient. It specifically alleged the mistake and the remedy being sought. (Id. at A43-6.) Wyndham’s counterclaim shows that it understood what was being pleaded. (Id. at A52-64.) Illinois National’s complaint met the purpose of Rule 9(b) in that Wyndham was able to answer, engage in discovery, and move for summary judgment on its counterclaim.
The District Court therefore erred in granting Wyndham’s motion to dismiss Illinois National’s complaint pursuant to Rule 9(b).
V.
We conclude that the District Court’s grant of Wyndham’s motion for summary judgment and motion to dismiss Illinois National’s complaint were in error. Accordingly, we will reverse and remand for further proceedings consistent with this opinion.
Notes
. The Managed Aircraft Endorsement from 2004-2008 stated:
1) Jet Aviation Business Jets, Inc. has entered into an Aircraft Management Agreement with the person(s) or organization(s) described below and referred to as “Insured Owner":
Wyndham Worldwide Operations, Inc., Wyndham Worldwide Corporation & Bank of America, N.A., as
Lessor
7 Sylvan Way
Parsippany, NJ 07504
And/or subsidiary (and/or subsidiary thereof).
2) The definition of Named Insured is extended to include the person(s) or organization(s) described in Item 1 of this endorsement.
(App. at A471 (2004 Policy, with Cendant listed because Wyndham had not yet been spun off); {Id. at A1235 (2008 Policy).).)
. The StarNet policy provided coverage for non-owned aircraft that were not operated by or used at the direction of Jet Aviation. In other words, it explicitly provides coverage for incidents like the 2008 plane crash.
. Illinois National also contends that the' District Court erred in its interpretation of the Managed Aircraft Endorsement and in its refusal to allow Illinois National additional discovery pursuant to Fed.R.Civ.P. 56(f) (now Fed.R.Civ.P. 56(d)) prior to its grant of Wyndham’s motion for summary judgment. Because we dispose of this case on the grounds that Illinois National’s complaint was sufficient and that the District Court applied the incorrect test for mutual mistake, we do not reach the Illinois National’s other arguments for reversal.
Dissenting Opinion
dissenting.
The majority’s exclusive focus upon mutual mistake, and the intent of Illinois National and Jet Aviation is, I respectfully submit, misplaced. There is no mutual mistake here, only negligence and ignorance — neither of which is a legitimate basis for an equitable reformation of the contract. The insurer made changes to its policy, and negligently sold the altered policy to the insured, who was ignorant of the changes. Although Jet Aviation facilitated the procurement of Wyndham’s air
As we have previously stated, New Jersey law insists that insurance policies are to be interpreted according to their “plain, ordinary meaning.” Colliers Lanard, & Axilbund v. Lloyds of London,