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Ill. Nat'l Ins. Co. v. Wyndham Worldwide Operations, Inc. - 653 F.3d 225 (3d Cir. 2011)

Rule:

When interpreting state law, a federal court follows a state's highest court; if that state's highest court has not provided guidance, a federal court is charged with predicting how that court would resolve the issue. To do so, a federal court must take into consideration: (1) what that court has said in related areas, (2) the decisional law of the state intermediate courts, (3) federal cases interpreting state law, and (4) decisions from other jurisdictions that have discussed the issue. Although lower state court decisions are not controlling on an issue on which the highest court of the state has not spoken, federal courts must attribute significant weight to these decisions in the absence of any indication that the highest state court would rule otherwise

Facts:

Defendants, Wyndham Worldwide Operations, Inc., Wyndham Worldwide Corporation, Wyndham Vacation Ownership Inc., and Wyndham Resort Development Corporation (Wyndham), the owner of a jet, and Jet Aviation Business Jets, Inc. (Jet Aviation), an aircraft maintenance company, had entered into a series of aircraft management services agreements. Plaintiff Illinois National Insurance Company (Illinois National) sought a declaratory judgment that a 2008 plane crash did not trigger coverage under an aircraft fleet insurance policy that Illinois National issued to Jet Aviation.  Illinois National and Jet Aviation were the only parties that negotiated and drafted the 2008 policy. They agreed 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 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.  The district court held that because Wyndham did not participate in the negotiation and drafting of the 2008 policy, there could be no mutual mistake. Illinois National sought appellate review.

Issue:

Did the District Court err when it determined that mutual mistake could only serve as a basis for reformation in an action against a bargaining party and that it had insufficiently pled mutual mistake?

Answer:

Yes

Conclusion:

The appellate court held that New Jersey law allows reformation on the basis of mutual mistake even when it was to the disadvantage of a third party. The complaint was sufficient. It specifically alleged the mistake and the remedy being sought. Wyndham's counterclaim showed that it understood what Illinois National pleading. The complaint met the purpose of Fed. R. Civ. P. 9(b). The appellate court reversed, holding that the District Court's grant to Wyndham of summary judgment was improper, as was its dismissal of Illinois National's complaint. The appellate court remanded for further proceedings.

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