But They Never Made that Argument! The Tenth Circuit Examines Grounds for Reversing a Sua Sponte Grant of Summary Judgment
Summary judgment is a crucial stage of litigation, and lawyers spend a good amount of time briefing what they view as the relevant issues for the court. But what happens if a court ignores those arguments and comes up with an entirely novel reason for granting relief? Can a court sua sponte, or on its own motion, grant summary judgment on a theory that opposing counsel never raised and that is mentioned nowhere in either party’s brief? Technically, yes. But depending on how the district court handles the situation, the fact that the other side didn’t raise and argue the key theory may be grounds for reversal. In Oldham v. O.K. Farms, the U.S. Court of Appeals for the Tenth Circuit explores a challenge to a sua sponte grant of summary judgment and explains when and why these grants might be susceptible to reversal on appeal.
Oldham v. O.K. Farms: The Facts
The case was about a contract dispute involving a bunch of (sadly) drowned chickens. A Farmer had a chicken-growing contract with a larger establishment called O.K. Farms. Under the arrangement, O.K. would give the Farmer chickens to raise, the chickens would remain O.K.’s property, and the Farmer would make money for caring for them. There were a few ways that O.K. could get out of its contract, including “abandonment or neglect of a flock” by the Farmer. Otherwise, the contract was for three years.
Two years into the three-year contract, the Farmer woke up to a crisis. One of his three chicken houses had flooded during the night due to heavy rains. He contacted O.K. to get help and a dispute arose. Ultimately the dispute led to O.K coming and picking up all the surviving chickens from the Farmer, and sending them to another farmer to be raised. A few weeks later, O.K. sent the Farmer a notice that it was terminating his contract. In the termination letter, O.K. listed three reasons why it was permitted to prematurely terminate the contract.
The Farmer filed a lawsuit for breach of contract, arguing that O.K. did not have a valid reason to terminate the contract. O.K. moved for summary judgment, outlining the rationale behind its three reasons. The district court held a hearing on the motion. But in ruling, the court did something unexpected. It granted summary judgment in favor of O.K., but not for any of the reasons that O.K. had raised. Instead, the district court based its decision on the fact that the Farmer had abandoned the chickens by telling O.K. to come pick them all up, and that would have given O.K. the legal basis to terminate the contract. The Farmer appealed.
Oldham v. O.K. Farms: The Tenth Circuit Reverses
In a published opinion, a panel of the Tenth Circuit reversed the grant of summary judgment. In doing so, the Court laid out some principles for how litigants should handle sua sponte grants of summary judgment, and under what circumstances the appellate court might reverse.
The Court first established that O.K. had not actually made the argument upon which the district court based its grant of summary judgment. O.K. had tried to stretch its arguments to fit the district court’s ruling, but the appellate court held it to its exact arguments below. This was key because it teed up the issue of whether the fact that the district court had granted summary judgment based on an argument not raised by the moving party could be reversible error.
District courts are permitted under Federal Rule of Civil Procedure 56(f)(2) to grant summary judgment on grounds not raised by a party. But when they do, the losing party must be given notice and an opportunity to respond. In other words, the district court cannot just spring a new theory on an unsuspecting party and end the case without giving the nonmoving party a chance to come forward with evidence and argument on that point.
Here, the district court did not inform the Farmer that it intended to grant summary judgment on a basis that was not raised by O.K. But just this error alone is not enough to warrant reversal. The losing party also has to show that it was prejudiced by the lack of notice and opportunity to respond. If the district court would have rightly granted summary judgment anyway, then the appellate court will not typically reverse.
Ultimately, the Tenth Circuit was convinced that the Farmer had demonstrated he was prejudiced by not being able to respond to the arguments. On appeal, the Farmer laid out the arguments he would have made in response, had he been given the opportunity. These arguments, the Court noted, were different than the arguments made to the district court.
[A] party who was prejudiced by the lack of advance notice of a sua sponte summary judgment decision generally will not have come forward with all of his evidence or arguments in the district court proceedings; indeed, it is the very fact that the losing party did not develop and present his evidence and/or arguments below that will help to establish prejudice from the lack of notice.
Takeaways for Practice
In some ways, the Oldham case was an easy one for the appellate court. The district court below had specifically made a record that the argument had not been raised by the moving party, and then granted summary judgment at a hearing without giving the other side a chance to come back with evidence to dispute the theory. In other cases, the issue might not be as clear cut. But illustrations from this case can serve as reminders during both litigation and an appeal of summary judgment.
Sua sponte grants of summary judgment are disfavored, but they are allowed under the rules.
The fact that a district court grants summary judgment on a ground it came up with on its own is expressly permitted by the rules, so long as it gives notice and a reasonable time to respond. What is reasonable under the circumstances will depend on the case. But as this case illustrates, notice simultaneous with the ruling is not adequate.
The district court’s ruling was based on a theory that was clearly not raised by the moving party, or briefed by either party.
The focus on the novelty of the theory was key to the appellate court’s decision to reverse in this case. O.K. had tried to argue that it had indeed made the argument, and that the district court did not actually sua sponte grant summary judgment, but just extrapolated on the seed planted by O.K. But the appellate court rejected this suggestion, noting that the theory underlying the defense was different. In some cases, there may be room to argue about whether an argument was raised by a party and whether the court is really acting sua sponte.
Prejudice was key to reversal.
Even if the district court grants summary judgment for a reason that wasn’t raised or briefed by the parties, reversal is not going to be automatic. It is crucial that the losing party shows that he was prejudiced by that action. In order to do this, the challenger “must, at the least, identify for the appellate court what additional arguments he could have made or evidence he could have produced or relied on to undermine the district court’s ruling.” If, by comparison, the losing party is making the same arguments to the appellate court that were made in the district court briefing, chances are the appellate court is not going to reverse. The Court’s contrast of Johnson v. Weld County with this case is instructive to this point.
1 Oldham v. O.K. Farms, Inc., No. 16-7069 (10th Cir. Sept. 25, 2017).
2 Id. (slip op. at 9).
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