Otis Elevator Company v. George Washington Hotel Corp. ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
6-23-1994
Otis Elevator Company v. George Washington
Hotel Corp.
Precedential or Non-Precedential:
Docket 93-3447
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1994
Recommended Citation
"Otis Elevator Company v. George Washington Hotel Corp." (1994). 1994 Decisions. Paper 58.
http://digitalcommons.law.villanova.edu/thirdcircuit_1994/58
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1994 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
NO. 93-3447
__________
OTIS ELEVATOR COMPANY
Appellee
v.
GEORGE WASHINGTON HOTEL CORPORATION
STANLEY S. BAZANT
Stanley S. Bazant,
Appellant
__________
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 91-1966)
__________
Argued May 13, 1994
Before: BECKER, LEWIS, Circuit Judges
and POLLAK, District Judge1
Filed June 24, 1994
__________
Albert J. Zangrilli, Jr. (argued)
Yukevich, Blume & Zangrilli
6th Floor, One Gateway Center
Pittsburgh, PA 15222
Attorney for Appellee
Steven M. Petrikis (argued)
Jeffrey P. Brahan
Rose, Schmidt, Hasley & DiSalle, P.C.
900 Oliver Building
Pittsburgh, PA 15222-5369
1
Honorable Louis H. Pollak, United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
1
Attorneys for Appellant
__________
OPINION OF THE COURT
__________
POLLAK, District Judge.
This diversity case arises out of a contractual dispute
between Stanley Bazant, a hotel owner, and Otis Elevator Company.
Intertwined with certain procedural questions is one substantive
question of Pennsylvania law. That question concerns the
construction of a so-called "automatic renewal provision" -- that
is, a contractual provision pursuant to which a contract for a
term is renewed automatically for a further term unless, before a
specified date, one party gives notice of an intent to terminate.
The district court held that Bazant's late notice of his intent
to terminate the contract did not suffice to avoid renewal. On
appeal, Bazant argues that his late notice ought to have been
deemed sufficient since Otis did not demonstrate that it would be
prejudiced by Bazant's tardiness. Bazant relies on a
Pennsylvania Superior Court decision -- Music, Inc. v. Henry B.
Klein Co., 245 A.2d 650 (Pa. Super. 1968) -- which appears to be
the only Pennsylvania appellate case directly addressing the
question. In Music, the Superior Court was sharply divided.
Since Music, and prior to the case at bar, the question has been
addressed on at least three occasions by district judges in this
circuit, and Music has received mixed reviews. We conclude that
in the case at bar the district court correctly declined to
follow the prevailing opinion in Music -- an opinion which we
2
think is not likely to be followed by the Pennsylvania Supreme
Court.
Part I of this opinion describes the background and
procedural history of this case. Part II analyzes the issues
raised by Bazant's appeal.
I.
Otis Elevator Company ("Otis") entered into an elevator
maintenance and service contract with the George Washington Hotel
Corporation on December 12, 1980. The contract provided for
service from January 1, 1981 until December 31, 1990 at the
George Washington Hotel in Washington, Pennsylvania. The
contract also provided that the contract would be renewed
automatically for a five-year term unless a party gave notice of
an intent to terminate at least ninety days before the end of the
contract term:
Either party may terminate this agreement at the end of the
extended contract term selected above or at the end of any
subsequent five year period by giving the other party 90
days prior written notice.
Stanley Bazant ("Bazant") is the successor in interest to
the George Washington Hotel Corporation and is the only remaining
defendant in this case. On November 30, 1990 -- thirty-one days
before the end of the extended contract term -- Robert Bazant,
Stanley Bazant's son and the Hotel's controller, sent a letter to
Otis stating an intent to terminate the contract as of December
31, 1990. On December 6, 1990, a representative of Otis
3
responded by letter. In Otis' view, the contract had already
been automatically renewed for a five-year term.
Stanley Bazant disagreed with Otis' position that automatic
renewal had occurred. In addition, Bazant withheld payments for
the last three months of the contract term (October through
December, 1990). According to Bazant, he withheld payments
because of problems with Otis' service.
Otis filed the instant action in the United States District
Court for the Western District of Pennsylvania on November 15,
1991. On January 2, 1992, Otis filed an amended complaint
alleging two counts against Bazant: (1) count II, seeking
damages from Bazant for breach of contract based on Bazant's
failure to pay Otis the monthly contract price for the months of
October through December, 1990; and (2) count IV, seeking damages
from Bazant based on Bazant's failure to honor the renewed
contract term.
On February 6, 1992, Bazant filed an answer to the amended
complaint that contained a counterclaim. The counterclaim
alleged that Otis had failed to follow through on a commitment to
give Bazant a twenty-percent discount.
On July 21, 1992, Bazant moved for partial summary judgment.
Bazant argued in that motion that he was entitled to
summary judgment on count IV of Otis' complaint because Robert
Bazant's November 30, 1990 letter terminated the contract with
Otis. Otis filed a response to Bazant's motion, but did not file
a cross-motion for summary judgment on count IV.
4
On August 24, 1992, Otis moved for summary judgment on
Bazant's counterclaim. Bazant did not file a response.
In an opinion dated October 9, 1992, the district court
denied Bazant's motion for summary judgment on count IV and,
acting sua sponte, granted summary judgment to Otis on count IV.
The district court also granted Otis' motion for summary judgment
on Bazant's counterclaim.
Up to that point in the proceedings, Bazant's only
substantive defense to Otis' count IV claim had been that, under
the terms of the contract and the applicable Pennsylvania case
law, Robert Bazant's letter of termination sufficed to avoid
automatic renewal. Five months after the district court granted
summary judgment in Otis' favor on count IV, Bazant filed a
motion to amend his answer to the amended complaint to include
the contention that termination was justified due to Otis'
substantial non-performance of its contractual duties. By order
dated March 17, 1993, the district court granted Bazant's motion
to file an amended answer.
At a pre-trial conference on August 4, 1993, Bazant voiced
an objection to the district court's proposed jury instructions:
Bazant complained that the proposed instructions directed the
jury that Bazant's liability with respect to count IV had already
been determined, and that the only issue for the jury with
respect to that count was the measure of damages. Bazant
protested that the proposed instructions did not allow him to
raise non-performance as a defense to liability under count IV;
he was only allowed to raise non-performance as a defense to
5
liability under count II, the count seeking damages for Bazant's
non-payment for services rendered by Otis in October through
December of 1990. Bazant argued that, by allowing him to amend
his answer, the district court had reopened the issue of Bazant's
liability under count IV, notwithstanding the October 9, 1992
order granting summary judgment on that count. The district
court disagreed. The district court regarded the issue of
liability with respect to count IV as decided by its October 9,
1992 order, and concluded that Bazant could assert non-
performance only as a defense to liability under count II.
At trial, on August 5, 1993, Bazant sought to testify about
two events relevant to his claim that he was entitled to a
twenty-percent discount. At side-bar, Bazant made the following
proffer. Bazant said that, if allowed to testify, he would say
that he telephoned Otis in October 1990 and asked to speak to an
Otis representative regarding the Hotel's account. His call was
directed to someone identified as Mr. Mahoney who stated that the
Hotel would be given a twenty-percent discount if it agreed to
the five-year renewal term. The district court excluded the
testimony on the ground that Bazant had not come forward with
evidence that the person identified as Mahoney had authority to
make admissions for Otis. Bazant was permitted to testify that,
at a meeting in December 1990, Otis' account representative for
the Hotel, Peter Volmer, reiterated this twenty-percent discount
offer. The district court, however, later concluded that this
testimony could not support a jury verdict for Bazant on the
counterclaim and directed a verdict in Otis' favor on the
6
counterclaim. The district court reasoned that, because the
December 1990 meeting occurred after the ninety-day deadline for
providing notice of termination, the contract had already been
renewed and thus there was no consideration to support a promise
to give a twenty-percent discount.
The jury rendered a verdict in favor of Otis and against
Bazant, in the amount of $4,000 for the months of October,
November and December of 1990 (count II), and $33,194 for the
five-year renewal period (count IV).
On appeal, Bazant challenges the rulings of the district
court: (1) denying Bazant's motion for summary judgment on count
IV; (2) granting summary judgment, sua sponte, in Otis' favor on
count IV, and instructing the jury that Bazant's liability had
been established with respect to that count; and (3) excluding
evidence relevant to Bazant's counterclaim and directing a
verdict in Otis' favor on the counterclaim.
II.
A. The denial of Bazant's motion for summary judgment
on count IV
In his motion for summary judgment on count IV, Bazant
argued that his son's November 30, 1990 letter stating the
Hotel's intention to terminate the contract with Otis sufficed to
avoid automatic renewal. To support his position, Bazant relied
upon Music, Inc. v. Henry B. Klein Co., 245 A.2d 650 (Pa. Super.
1968). In Music, the prevailing opinion in the Pennsylvania
Superior Court observed that the automatic renewal provision at
7
issue did not contain a "time is of the essence" clause. After
making this observation, the Music court refused to enforce the
automatic renewal provision because the plaintiff had not shown
that it was prejudiced by the late notice. The district court in
the present case declined to follow Music and instead endorsed
the approach taken in Sungard Services Co. v. Joint Computer
Center, 1989 U.S. Dist. LEXIS 4449, No. 88-8367 (E.D. Pa. April
26, 1989). In Sungard Services v. Joint Computer, Judge Newcomer
enforced an automatic renewal provision that did not contain a
"time is of the essence" clause without requiring a showing of
prejudice. Accordingly, in the case at bar, the district court
concluded that Bazant's untimely notice was not effective to
terminate the contract and denied Bazant's motion for summary
judgment. On appeal, Bazant challenges the district court's
unwillingness to follow Music.
The contract at issue in Music provided for automatic
renewal for a second term of nearly four years unless a party
gave written notice of termination sixty days before the end of
the term. The defendant mailed such notice sixty-one days before
the end of the contract term; the notice was received fifty-eight
days before the end of the term. The sole question raised on
appeal was whether effective termination notice was given
pursuant to the terms of the contract and the intent of the
parties. Judge Spaulding, joined by Judges Wright and Jacobs,2
2
Judge Montgomery concurred in the result. Judge Hoffman filed a
dissenting opinion in which Judge Watkins joined. Judge Hannum
did not participate in the disposition of the case.
8
first noted that "[t]here was no specific provision in the
contract making time of the essence and no circumstances have
been demonstrated which clearly indicate that both parties
intended that time should be of the essence." Music, 245 A.2d at
651. The Superior Court next observed that "[s]everal other
courts have applied a rule of construction which permits a
finding that a termination is sufficient even though delivered
later than the period specified in the contract when the
terminating party acted reasonably under the circumstances and
there is no demonstrable prejudice resulting from the delayed
notice." Id. at 652. The Music court concluded that, "[a]bsent
a showing that appellant was damaged in any way by receipt of the
termination notice on October 3rd, or that he changed his
position to his detriment, it would be unconscionable to hold
appellee to an additional contract of three years and eight
months." Id.
In dissent, Judge Hoffman argued that "[t]his holding
disregards the clear meaning of the contract and the intent of
the parties." Id. at 653. Judge Hoffman reasoned that the time
limitation was included for the benefit of both parties, and
contended that "[t]o allow the defendant to expand the time
limitation, in and of itself reasonable, by an additional
reasonable period of time would give it something for which it
did not bargain." Id. Because the requirement of the automatic
renewal clause was "clear and unequivocal," Judge Hoffman
concluded that no "time is of the essence" clause should be
required, and that the contract should be enforced as written.
9
Id. Judge Hoffman recognized that the law will infer that time
is not of the essence in order to avoid a severe penalty or
forfeiture. See id. (citing 5 A. Corbin, Contracts, § 1177
(1964)). However, Judge Hoffman explained:
[N]o forfeiture or penalty results here if it is held that
the termination notice as given is ineffective. The
defendant would still be entitled in the future to whatever
benefits were conferred upon him by the contract. While
defendant may have determined that these benefits were of
little or no value to him, he can no more seek to avoid the
clear obligations of the second term of his contract than if
he had discovered this fact immediately after the
commencement of the initial term of the contract.
Id.
Two district judges have followed the approach taken by
Judge Spaulding for the plurality in Music. The contract in
Eastern Milk Producers Cooperative Assoc. v. Lehigh Valley
Cooperative Farmers, 568 F. Supp. 1205 (E.D. Pa. 1993), contained
an automatic renewal provision that required sixty-days notice to
avoid renewal for another year. Judge Troutman noted that, as in
Music, the contract contained no "time is of the essence" clause.
See id. at 1209. However, Judge Troutman concluded that the
plaintiff had made an unrebutted showing that it was damaged by
the forced sale of large volumes of milk at distress prices. See
id. For this reason, Judge Troutman held that the untimely
notice was not effective.
In Schindler Haughton Elevator Corp. v. The America College,
Slip Opinion, No. 85-2577 (E.D. Pa. February 11, 1986), then
District Judge Scirica addressed the question of the
10
enforceability of an automatic renewal provision. Judge Scirica
explained that, "[u]nder Music, such untimely notice is
effective, provided 'the terminating party acted reasonably under
the circumstances and there is not demonstrable prejudice
resulting from the delayed notice.' These issues of
reasonableness and prejudice are questions of fact to be
determined at trial." (citations to Music and Eastern Milk
omitted).
In contrast, Judge Newcomer declined to follow Music in
Sungard Services v. Joint Computer. Judge Newcomer explained
that "two sophisticated business entities," Sungard and JCC, had
a written contract with a "clear and unambiguous automatic
renewal provision" that required six months notice to avoid a new
two-year term. Three and one-half months before the end of the
term, JCC gave notice to Sungard of its wish to terminate the
contract and refused to make payments for the next term. Judge
Newcomer first observed:
As a result of this breach, Sungard suffered damages by
being deprived of revenue that it would have received
through the remainder of the contract period. At the risk
of stating the obvious, this revenue would serve as a source
of funds by which Sungard could meet its contractual
obligations to entities supplying it with goods and services
and would also provide profit to Sungard. Clearly, then,
the loss of such revenue harmed Sungard.
Id. at *9. After making this observation, Judge Newcomer
reviewed the facts and holdings of Music, Eastern Milk,
11
Schindler, and Sungard Services Co. v. Wang Laboratories, Inc.,
No. 87-3150 (E.D. Pa. April 5, 1988).3
Based on his review of the applicable Pennsylvania case law,
Judge Newcomer concluded that the automatic renewal provision at
issue was not, in and of itself, unconscionable. Judge Newcomer
stated:
To the extent that the court's holding conflicts with the
Pennsylvania Superior Court's holding in Music, I
respectfully disagree with that court. I note, however,
that the facts of the instant case are distinguishable from
those in Music, as Music involved a notice of termination
mailed prior to the time required and received only two days
after the deadline for advance termination of the contract.
Id. at *14.
In the case at bar, the district court enforced the
automatic renewal provision and held that Bazant's late notice of
termination was ineffective. The court first undertook to
distinguish Music: "Bazant's reliance on Music . . . is
misplaced. Music involved a notice of termination mailed prior
3
In Sungard Services Co. v. Wayne Laboratories, Inc., No. 87-3150
(E.D. Pa. April 5, 1988), an automatic renewal provision required
six-months notice to avoid renewal for an additional two year
term. Judge Bechtle held that, in light of the defendant's
untimely termination notice, the contract was automatically
renewed. Judge Bechtle did not require a showing of prejudice;
however, this omission probably did not reflect a decision by
Judge Bechtle not to follow Music. It appears from Judge
Bechtle's opinion, delivered from the bench, that the defendant
did not argue that the plaintiff had to show prejudice or
otherwise call Music to the attention of the district court.
Indeed, the defendant apparently conceded that its late notice
was ineffective under the automatic renewal clause, and argued
instead that it had terminated the contract under a separate
provision allowing termination on ninety days notice if certain
conditions were satisfied. See Bench Opinion, at 17.
12
to the time required and received only two days after the
deadline for advanced termination of the contract. The instant
case involves notice of termination which was dated (and
presumably mailed) 58 days after the required date for advanced
termination." Opinion, at 6-7 (citation omitted) (emphasis in
original). The court next undertook to draw an analogy to
Eastern Milk: "The automatic renewal provision in [Eastern Milk]
was upheld in the absence of a 'time of the essence' clause,
because the Court found that there had been a showing of
prejudice as a result of the late notice. The instant case is no
different." Opinion, at 7. The court explained that, just as in
Sungard Services v. Joint Computer, the damage in the instant
case is obvious:
"[The plaintiff] suffer[s] damages by being deprived of
revenue that it would have received through the remainder of
the contract period. . . . [T]his revenue would serve as a
source of funds by which [the plaintiff] could meet its
contractual obligations to entities supplying it with goods
and services and would also provide profit to [the
plaintiff]. Clearly, then, the loss of revenue harmed [the
plaintiff]."
Opinion at 7 (quoting Sungard Services v. Joint Computer).
Finally, the district court concluded that because the automatic
renewal provision is clear and unambiguous, it would be enforced.
The court indicated that it was adopting "the cogent perspective
set forth by Judge Newcomer in [Sungard Services] v. Joint
Computer." Opinion, at 9.
We do not concur in the district court's conclusion that,
even under the approach taken in Eastern Milk (building on the
13
plurality opinion in Music), Otis made a showing of prejudice
sufficient to justify enforcement of the automatic renewal
provision. The case at bar is not like Eastern Milk in this
respect. In Eastern Milk, there was evidence that the plaintiff
was harmed by the lateness of the notice -- the plaintiff was
forced to sell large volumes of milk at distress prices. In
contrast, the harm to the plaintiff in the present case is harm
caused by the breach of contract, not harm caused by the late
notice. That is, even if the notice had been timely, Otis would
have suffered the same harm (loss of profits expected under the
contract). This type of harm cannot be characterized as
prejudice in the sense used by the Eastern Milk and Music courts.
We are persuaded, however, by the district court's
decision to enforce the automatic renewal provision without
requiring a showing of prejudice -- that is, by the district
court's rejection of Music in favor of the approach taken by
Judge Newcomer in Sungard Services v. Joint Computer. We do not
believe that the Pennsylvania Supreme Court, if it has occasion
to address this issue, will acquiesce in the rationale adopted by
the plurality opinion in Music. Instead, we conclude that the
analysis pursued by Judge Hoffman in his dissent is confirmed by
the reasoning of Brakeman v. Potomac Insurance Co., 371 A.2d 193
(Pa. 1977), decided by the Pennsylvania Supreme Court nine years
after the Superior Court's decision in Music.
Brakeman involved an automobile insurance policy that
required, as a condition of coverage, that the insured give
notice of an accident "as soon as practicable." Prior to
14
Brakeman, the Pennsylvania Supreme Court had held that untimely
notice releases an insurer from its obligation to pay, regardless
of whether the insurer was prejudiced by the delay. In Brakeman,
the Pennsylvania Supreme Court overruled its prior decisions to
this effect and announced that an insurer would have to show that
it was prejudiced by the delay. The court explained that "[t]he
rationale underlying the strict contractual approach reflected in
our past decisions is that courts should not presume to interfere
with the freedom of private contracts and redraft insurance
policy provisions where the intent of the parties is expressed by
clear and unambiguous language." Id. at 196.
The Brakeman court gave two reasons for departing from a
strict contractual approach. First, the court explained that the
only aspect of an insurance contract over which an insured can
bargain is the amount of coverage. See id. at 196. The court
noted that an automobile is a virtual necessity, that liability
insurance coverage is required by state law, and that insurance
policies uniformly include provisions requiring notice "as soon
as practicable." See id. at 196 & n.6. Second, the court
explained:
A strict contractual approach is also inappropriate here
because what we are concerned with is a forfeiture. The
insurance company in the instant case accepted the premiums
paid by the insured for insurance coverage and now seeks to
deny that coverage on the ground of late notice.
Id. at 197. See also id. at 198 ("Allowing an insurance company,
which has collected full premiums or coverage, to refuse
compensation to an accident victim or insured on the ground of
15
late notice, where it is not shown timely notice would have put
the company in a more favorable position, is severe and
inequitable.").
The reasons given in Brakeman for departing from a strict
contractual approach do not justify requiring a showing of
prejudice to enforce the automatic renewal provision in the case
at bar. First, although the automatic renewal provision appears
in Otis' standard form contract, there is no indication that
Bazant lacked the power to bargain over the contractual terms.
Indeed, Bazant's contention in his counterclaim that he had
negotiated a twenty-percent discount is incompatible with the
notion that Bazant lacked significant bargaining power. Second,
enforcement of the automatic renewal provision does not result in
a forfeiture. Although -- assuming enforcement of the provision
-- Bazant would be obligated by the automatic renewal of the
contract to continue to make payments to Otis, Otis would be
correspondingly obligated to continue to maintain and provide
service for the Hotel's elevators. Because the reasons given in
Brakeman for departing from a strict contractual approach do not
apply, we conclude that the district court correctly held that
Bazant's untimely notice did not enable him to avoid a new five-
year term. Accordingly, we affirm the district court's denial of
Bazant's motion for summary judgment on count IV.
B. The sua sponte grant of summary judgment in favor of Otis
on count IV
16
The district court not only denied Bazant's motion for
summary judgment with respect to count IV, it granted summary
judgment for Otis with respect to that count, sua sponte.
Bazant argues on appeal that the district court improperly
granted Otis summary judgment sua sponte, because the court did
not give Bazant notice of its intent to do so or an opportunity
to oppose summary judgment.
The district court's decision to grant Otis summary judgment
on count IV sua sponte was understandable given the state of the
record. The only defense Bazant had raised in his answer to the
amended complaint was that the November 30, 1990 letter sufficed
to terminate the contract. Bazant moved for summary judgment on
count IV, arguing that there was no disputed issue of material
fact. Accordingly, after the district court concluded that
Bazant was incorrect on the legal issue -- that is, after
determining that Robert Bazant's notice was ineffective -- the
district court entered summary judgment for Otis. Although the
district court's decision was understandable, it nonetheless
constituted error under Rule 56 of the Federal Rules of Civil
Procedure.
Under our cases, a district court may not grant summary
judgment sua sponte unless the court gives notice and an
opportunity to oppose summary judgment. See Davis Elliott
Intern. v. Pan American Container, 705 F.2d 705, 707-08 (3d Cir.
1983) ("'[b]ecause the procedure of Rule 56 requiring an
opportunity to present pertinent material, which presumes notice
to the party so that he may take advantage of the opportunity,
17
was not followed, the entry of judgment must be reversed'")
(quoting Bryson v. Brand Insulations, Inc., 621 F.2d 556, 559 (3d
Cir. 1980)). See also Bradley v. Pittsburgh Bd. of Educ., 913
F.2d 1064, 1069-70 (3d Cir. 1990) ("[I]n the absence of a formal
motion for summary judgment, plaintiff was under no formal
compulsion to marshall all of the evidence in support of his
claims").
The district court could have cured its error by allowing
Bazant to reopen the issue of his liability under count IV, but
did not do so. Five months after the court sua sponte granted
Otis summary judgment on count IV, Bazant moved to amend his
answer to the amended complaint to add, as a defense, the
allegation that Otis's substantial non-performance of its
contract was cause for termination. It is apparent from this
motion that Bazant wanted to assert non-performance as a defense
against liability with respect to both count II and count IV --
not with respect to count II only. For example, paragraph 13 of
the motion recites: "The bulk of evidence of such non-
performance has already been submitted with respect to Count II
and allowance of evidence with respect to Count IV would not
materially prolong the arbitration which is set to continue on
March 5, 1993." (A.78). The district court granted Bazant's
motion to amend on March 17, 1993.
At a pre-trial conference on August 4, 1993, Bazant
protested that the proposed jury charge instructed the jury that
Bazant's liability under count IV had been determined as a matter
of law and that the jury's role was simply to determine damages.
18
Bazant reminded the district court that, after summary judgment
was granted for Otis on count IV, the district court gave Bazant
leave to amend his answer to add the non-performance defense. The
district court responded: "Well, once we enter summary judgment,
it doesn't matter what you do in way of amending your answer."
(A.119). The district court noted that it saw nothing in the
"opinion [granting leave to amend] that talks about any counts,"
(A.120) and concluded that "liability [with respect to Count
[IV]] had already been established, and so that your amendment
has nothing to do with Count [IV]." (A.122).
It is arguable that the district court's decision to
instruct the jury that Bazant's liability was established with
respect to count IV was inconsistent with the district court's
decision to grant Bazant's motion for leave to file an amended
answer. We need not, however, address this possible
inconsistency. Because the district court erroneously granted
summary judgment in Otis' favor sua sponte and without giving
Bazant notice and an opportunity to oppose summary judgment, and
did not cure this error by allowing Bazant to reopen the issue of
his liability under count IV, we vacate the order granting Otis
summary judgment sua sponte on count IV. Our ruling is not to be
taken as a direction to the district court to allow Bazant to
raise non-performance as a defense to count IV liability. Whether
Bazant is now entitled to raise that defense and whether that
defense is substantively cognizable, are, at this point,
questions for the district court to consider.
19
C. The order directing a verdict in favor of Otis on
Bazant's counterclaim
As explained above, Bazant brought a counterclaim asserting
that Otis breached an agreement to give the Hotel a twenty-
percent discount. In the October 9, 1992 opinion, the district
court granted Otis' motion for summary judgment on the
counterclaim for two reasons. "First, and foremost, defendant
Bazant failed to reply to this motion [for summary judgment],"
although he had been given two extensions of time within which to
file his brief in opposition. Opinion, at 4. Second, there was
no evidence in the record to support Bazant's assertion that he
was entitled to a twenty-percent discount. Opinion, at 4-5.
Bazant argues on appeal that, at trial, the court erred by
refusing to allow the jury to consider evidence offered to
support his counterclaim -- namely, the evidence of his
conversations with Peter Volmer and the person identified as Mr.
Mahoney -- and by directing a verdict for Otis on the
counterclaim. We need not, however, consider the court's
specific evidentiary rulings. Having already determined that
summary judgment in Otis' favor was warranted by virtue of
Bazant's failure to oppose the summary judgment motion, the court
was under no obligation to let the counterclaim go to the jury.
For this reason, we affirm the district court's order directing a
verdict for Otis on the counterclaim.
III.
20
For the foregoing reasons: (1) the denial of Bazant's
motion for summary judgment on count IV of Otis' complaint is
affirmed; (2) the sua sponte grant of summary judgment in Otis'
favor on count IV is vacated; and (3) the order directing a
verdict for Otis on the counterclaim is affirmed. The case is
remanded for proceedings consistent with this opinion.
21