L. A. Lakers, Inc. v. Fed. Ins. Co.

• Decision Date: 23 August 2017
• Docket Number: No. 15-55777,15-55777
• Citation: 869 F.3d 795
• Parties: LOS ANGELES LAKERS, INC., a California corporation, Plaintiff-Appellant, v. FEDERAL INSURANCE COMPANY, an Indiana corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

869 F.3d 795

LOS ANGELES LAKERS, INC., a California corporation, Plaintiff-Appellant,

v.FEDERAL INSURANCE COMPANY, an Indiana corporation, Defendant-Appellee.

No. 15-55777

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 15, 2017 Pasadena, California

Filed August 23, 2017

Kirk Pasich (argued), Pamela M. Woods, and Anamay M. Carmel, Liner LLP, Los Angeles, California, for Plaintiff-Appellant.

Robert M. Traylor (argued), Seltzer Caplan McMahon Vitek, San Diego, California, for Defendant-Appellee.

Before: Richard C. Tallman and N. Randy Smith, Circuit Judges, and

Stephen Joseph Murphy, III,^** District Judge.

Concurrence by Judge Murphy, III

Dissent by Judge Tallman

OPINION

N.R. SMITH, Circuit Judge:

When Congress passed the Telephone Consumer Protection Act ("TCPA") it sought to protect individuals against invasions of privacy, in the form of unwanted calls (and now text messages) using automatic telephone dialing systems. Congress explicitly stated this purpose in the text of the TCPA. In light of this plainly stated purpose, and the lack of any other indicia of congressional intent in the statute, a TCPA claim is, by its nature, an invasion of privacy claim. Accordingly, a liability insurance policy that unequivocally and broadly excludes coverage for invasion of privacy claims also excludes coverage for TCPA claims.

BACKGROUND

On October 13, 2012, David M. Emanuel attended a basketball game at the Los Angeles Lakers' home arena—the Staples Center. While at the game, Emanuel observed a message on the scoreboard, inviting attendees to send a text a message to a specific number. Emanuel sent a text message to the number, hoping the Lakers would display the message on the scoreboard. In response, Emanuel received the following text message:

Thnx! Txt as many times as u like. Not all msgs go on screen. Txt ALERTS for Lakers News alerts. Msg&Data Rates May Apply. Txt STOP to quit. Txt INFO for info

On November 20, 2012, Emanuel, on behalf of himself and others similarly situated, brought a class action lawsuit against the Lakers. Emanuel filed a First Amended Complaint in the case on February 8, 2013 ("Emanuel complaint"). Emanuel alleged that the Lakers sent the response text message using an "automatic telephone dialing system," in violation of the TCPA. He asserted, several times, that this message was an invasion of his privacy, and that the Lakers had invaded the privacy of other class members. Emanuel brought two claims for relief—(1) negligent violation of the TCPA and (2) knowing and/or willful violation of the TCPA—and sought statutory damages and injunctive relief.

The Lakers promptly asked their insurance provider, the Federal Insurance Company ("Federal"), to defend them against the lawsuit. The Lakers notified Federal of the lawsuit on November 27, 2012, shortly after the first complaint was filed. Federal insured the Lakers from January 1, 2012, to January 1, 2013, under a "ForeFront Portfolio" insurance policy ("the Policy"). The Policy contained a "Directors & Officers Liability Coverage Section." This section provided "Corporate Liability Coverage," which would require Federal to pay for losses (with some restrictions) suffered by the Lakers "resulting from any Insured Organization Claim ... for Wrongful Acts." An "Insured Organization Claim" included "a civil proceeding commenced by service of a complaint or similar pleading ... against [the Lakers] for a Wrongful Act." The Policy defined "Wrongful Acts" as "any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed, attempted, or allegedly committed or attempted by" the Lakers. The Policy also contained a number of exclusions from Corporate Liability Coverage. Specifically, the Policy provided that "[n]o coverage will be available" for a claim,

based upon, arising from, or in consequence of libel, slander, oral or written publication of defamatory or disparaging material, invasion of privacy, wrongful entry, eviction, false arrest, false imprisonment, malicious prosecution, malicious use or abuse of process, assault, battery or loss of consortium[.]

Finally, the "General Terms and Conditions Section" of the Policy provided that Federal had "the right and duty to defend any Claim covered by th[e] Policy." This duty applied even if the allegations in the claim were "groundless, false or fraudulent."

Federal denied coverage and declined to defend the Lakers, concluding that Emanuel had brought an invasion of privacy suit, which was specifically excluded from coverage. After asking Federal to reconsider its position, the Lakers filed this suit in Los Angeles Superior Court on September 2, 2014. The Lakers asserted two claims for relief. First, the Lakers brought a claim for breach of contract, asserting that Federal had violated the Policy by denying coverage for the Emanuel lawsuit. Second, the Lakers brought a claim for tortious breach of the implied covenant of good faith and fair dealing, based on Federal's denial of coverage.

After removing the suit to federal court, Federal filed a motion to dismiss the suit for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion and dismissed the case without giving the Lakers leave to amend. L.A. Lakers, Inc. v. Fed. Ins. Co. , No. CV 14-7743 DMG, 2015 WL 2088865, at *9 (C.D. Cal. Apr. 17, 2015). The district court found that the Lakers could not succeed in the suit under any cognizable legal theory, because TCPA claims are "implicit invasion-of-privacy claims" that fall squarely within the Policy's "broad exclusionary clause." Id. at *8. The Lakers timely appealed.

STANDARD OF REVIEW

We review de novo a district court's order granting a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Shroyer v. New Cingular Wireless Servs., Inc. , 622 F.3d 1035, 1041 (9th Cir. 2010). We will affirm a dismissal for failure to state a claim "where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory." Id. (quoting Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001) ). "In conducting this review, we accept the factual allegations of the complaint as true and construe them in the light most favorable to the plaintiff." AE ex rel. Hernandez v. Cty. of Tulare , 666 F.3d 631, 636 (9th Cir. 2012). We also review de novo the district court's interpretation of state contract law, AmerisourceBergen Corp. v. Dialysist W., Inc. , 465 F.3d 946, 949 (9th Cir. 2006), and its interpretation of an insurance policy, Stanford Ranch, Inc. v. Md. Cas. Co. , 89 F.3d 618, 624 (9th Cir. 1996).

ANALYSIS

This case requires us to interpret both the Policy and the TCPA. We start with the Policy and, accordingly, the California rules for interpreting insurance contracts.

I. The Policy

California courts interpret insurance contracts under the "ordinary rules of contractual interpretation." Palmer v. Truck Ins. Exch. , 21 Cal.4th 1109, 90 Cal.Rptr.2d 647, 988 P.2d 568, 652 (1999)(citation omitted). In interpreting a contract, courts must " ‘give[ ] effect to the mutual intention of the parties as it existed’ at the time the contract was executed." Wolf v. Walt Disney Pictures & Television , 162 Cal.App.4th 1107, 76 Cal.Rptr.3d 585, 601 (2008) (quoting Cal. Civ. Code § 1636 ). Where possible, the courts should determine the mutual intention of the parties "solely from the written provisions of the insurance policy." Palmer , 988 P.2d at 652 (citation omitted). In addition, courts must give a contract's terms their "ordinary and popular" meaning, "unless used by the parties in a technical sense or a special meaning is given to them by usage." Id. (citation and internal quotation marks omitted). Courts are to interpret coverage clauses in insurance contracts "broadly so as to afford the greatest possible protection to the insured." Aroa Mktg., Inc. v. Hartford Ins. of the Midwest , 198 Cal.App.4th 781, 130 Cal.Rptr.3d 466, 470 (2011) (citation omitted). In contrast, courts are to interpret "exclusionary clauses ... narrowly against the insurer." Id. (citation omitted).

The Policy on its face clearly excludes from coverage claims "based upon, arising from, or in consequence of ... invasion of privacy." The Policy does not explicitly exclude coverage of TCPA claims, so we must determine whether Emanuel's TCPA claims fall within this exclusion. However, first we must acknowledge how broad this exclusionary clause is. California courts and our court have consistently given a broad interpretation to the clause "arising from" in an insurance contract. See Cont'l Cas. Co. v. City of Richmond , 763 F.2d 1076, 1080 (9th Cir. 1985) (quoting Underwriters at Lloyd's of London v. Cordova Airlines, Inc. , 283 F.2d 659, 664 (9th Cir. 1960) ) (interpreting exclusionary clause in insurance contract under California law); Crown Capital Sec., L.P. v. Endurance Am. Specialty Ins. , 235 Cal.App.4th 1122, 186 Cal.Rptr.3d 1, 7 (2015). "[A]rising out of" encompasses "originating from, having its origin in, growing out of, ... flowing from, ... incident to, or having connection with." Crown , 186 Cal.Rptr.3d at 7 (quoting Davis v. Farmers Ins. Grp. , 134 Cal.App.4th 100, 35 Cal.Rptr.3d 738, 744 (2005) ). Thus, this clause broadly excludes from coverage claims with "a minimal causal connection or incidental relationship" to invasion of privacy. Id. (quoting Acceptance Ins. v. Syufy Enters. , 69 Cal.App.4th 321, 81 Cal.Rptr.2d 557, 561 (1999) ); State Farm Fire & Cas. Co. v. Salas , 222 Cal.App.3d 268, 271 Cal.Rptr. 642, 645 n.4 (1990) (holding that "arising out of" is also broadly construed in exclusionary clauses). California courts also give the clause "based on" the same broad reading as "arising out of." Century Transit Sys., Inc. v. Am. Empire Surplus Lines Ins. , 42 Cal.App.4th 121, 49 Cal.Rptr.2d 567, 571 n.4 (1996).

It is also necessary for us to examine the...