Del Monte Fresh Produce v. Transportation Insurance Co.

• Decision Date: 05 September 2007
• Docket Number: No. 06-3365.,06-3365.
• Citation: 500 F.3d 640
• Parties: DEL MONTE FRESH PRODUCE N.A., INC., et al., Plaintiffs-Appellants, v. TRANSPORTATION INSURANCE CO., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

500 F.3d 640

DEL MONTE FRESH PRODUCE N.A., INC., et al., Plaintiffs-Appellants, v. TRANSPORTATION INSURANCE CO., Defendant-Appellee.

No. 06-3365.

United States Court of Appeals, Seventh Circuit.

Argued April 5, 2007.

Decided September 5, 2007.

Rehearing and Rehearing En Banc Denied October 11, 2007.

Angela R. Elbert, Neal, Gerber & Eisenberg, Chicago, IL, David A. Gauntlett (argued), for Plaintiffs-Appellants.

Hugh S. Balsam (argued), Joseph A. Hinkhouse, Lord Bissell & Brook, Chicago, IL, for Defendant-Appellee.

Before EASTERBROOK, Chief Judge, and BAUER and WOOD, Circuit Judges.

WOOD, Circuit Judge.

Plaintiffs, six different Del Monte companies (to which we refer collectively as "Del Monte"), brought a declaratory judgment action against their insurance carrier, Transportation Insurance Company. Del Monte's general liability policy with Transportation includes coverage for claims of personal injury or advertising injury. Del Monte took the position that this coverage was triggered by a series of class actions filed against it in 2004. In those cases, the plaintiffs claimed that they were injured by Del Monte's alleged monopoly in the extra-sweet pineapple market. Transportation took the position that the claims against Del Monte fell within an exception from coverage found in the policy. After examining the policy, the district court concluded that the policy did exclude Del Monte's claims, and it therefore granted summary judgment for Transportation. We affirm.

I

This is a diversity action, and so we begin by noting that Transportation is an Illinois corporation with its principal place of business in Illinois, while the states of incorporation of the six plaintiffs are California, the Cayman Islands, Delaware, and Florida; all six have their principal places of business in Florida. The amount in controversy is substantially in excess of the $75,000 required by 28 U.S.C. § 1332.

Transportation issued a general liability policy to a Del Monte affiliate covering "advertising injury" and "personal injury" occurring between December 31, 1995, and December 31, 1996. The pertinent language from the policy stated:

COVERAGE B. PERSONAL AND ADVERTISING INJURY LIABILITY

1. Insuring agreement a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" or "advertising injury" to which this insurance applies. We will have the right and duty to defend any "suit" seeking those damages.

b. This insurance applies to:

(1) "Personal injury" caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you; [and]

(2) "Advertising injury" caused by an offense committed in the course of advertising your goods, products or services[.]

The policy defines "advertising injury" and "personal injury" as follows:

1. "Advertising injury" means injury arising out of one or more of the following offenses:

a. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

b. Oral or written publication of material that violates a person's right to privacy;

c. Misappropriation of advertising ideas or style of doing business; or

d. Infringement of copyright, title or slogan.

. . . .

13. "Personal injury" means injury, other than "bodily injury[,"] arising out of one or more of the following offenses:

a. False arrest, detention or home imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor;

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods; products or services; or

e. Oral or written publication of material that violates a person's right to privacy.

The policy excludes from coverage many injuries arising from the insured's intentional conduct, although the parties disagree about the extent of the exclusion. Specifically, the policy states that:

This insurance does not apply to:

a. "Personal injury" or "advertising injury":

(1) Arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity; [or]

(2) Arising out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured.

(emphasis added).

In 2004, a series of consumer class actions was filed against Del Monte claiming fraud and violations of the antitrust laws arising out of Del Monte's marketing of its Fresh Del Monte Gold™ pineapples. According to the complaints, Del Monte applied for and received a patent on a genetic sibling to the Gold pineapple ("the CO-2 patent") and misrepresented in its application that the new pineapple variety was "extra sweet" and therefore differed from other varieties. The complaints further allege that Del Monte disseminated its misrepresentations through industry publications and sued two competitors for patent infringement, even though it knew that its claims about the extra-sweetness of its new pineapple were false. Eventually, Del Monte withdrew the CO-2 patent and settled the infringement lawsuits. Del Monte's customers alleged injuries that accrued during the period of time when, thanks to its patent, Del Monte had a monopoly in an alleged market for extra-sweet pineapples. Each complaint is based on allegations that Del Monte knowingly submitted fraudulent patent applications, knowingly sent false letters to competitors regarding its patent rights, and knowingly engaged in fraudulent patent litigation.

Del Monte tendered these complaints to Transportation, seeking coverage under its policy. Transportation rejected the tender on two bases: (1) the class actions did not arise from "advertising injury" or "personal injury" under the policy; and (2) the class actions were excluded from coverage because they alleged fraud. Del Monte then filed this action for a declaratory judgment establishing Transportation's duty to defend and indemnify it under the policy. All parties agreed that the duty-to-defend issue could be adjudicated as a matter of law with only minimal discovery. Following discovery, both parties moved for summary judgment. The district court granted Transportation's motion.

II

Del Monte urges us to find that its policy with Transportation covered its alleged disparagement of its competitors' pineapples, its alleged defamation of those companies, and its alleged "misuse of advertising ideas." Furthermore, it continues, the "knowledge of falsity" exclusion does not apply here. The policy, in its view, does not exclude coverage for intentional acts but only for the narrower set of acts that are done with knowledge of falsity. Transportation responds with, in essence, a moral hazard argument: the policy cannot be used as a "get out of jail free" card for Del Monte. If Del Monte knows that something is wrong and does it anyway, it should not, and does not, have the right to demand that Transportation pick up the pieces. In granting summary judgment for Del Monte, the district court concluded that the class actions are Del Monte's mess to clean up. Del Monte wants to hand the broom back to Transportation. We review the court's decision de novo, Connecticut Indemnity Co. v. DER Travel Service, Inc., 328 F.3d 347, 349 (7th Cir.2003), applying Illinois law to this diversity action.

A

In a duty-to-defend action, we begin with the deck stacked in favor of the insured. "[A]llegations of the underlying complaint must be construed liberally, and any doubt as to coverage must be resolved in favor of the insured." Ill. State Med. Ins. Servs., Inc. v. Cichon, 258 Ill.App.3d 803, 196 Ill.Dec. 277, 629 N.E.2d 822, 826 (1994). The court must "look to the allegations in the underlying complaint and compare these allegations to the relevant coverage provisions of the insurance policy." Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1079 (1993). Therefore, "[i]f the facts alleged in the underlying complaint fall within, or potentially within, the policy's coverage provisions, then the insurer has a duty to defend the insured in the underlying action." Id.

B

Our task is to evaluate the allegations in the class action cases to see whether the district court correctly concluded that the policy does not cover them. In conducting this analysis, "it is the actual complaint, not some hypothetical version, that must be considered." Conn. Indem., 328 F.3d at 350-51. A complaint that is "barren of any mention of negligence, inadvertence, error, or mistake, or anything even implying such conduct [and says] . . . only that [the insured] deceived, schemed, and defrauded consumers," would not escape an exclusion clause like the one Transportation issued here. Id. at 350; see also United Fire & Cas. Co. v. Jim Maloof Realty, Inc., 105 Ill.App.3d 1048, 61 Ill. Dec. 799, 435 N.E.2d 496, 498 (1982) ("The inclusion of [a few isolated] words . . . does not transform what is in essence a specific intent to deceive into an aggravated form of negligence. The complaint must be read as a whole in order to assess its true nature."). We have previously noted that "[p]hrases such as `mislead and conceal,' `scheme or device,' and `intentionally and willfully' are the paradigm of intentional conduct and the antithesis of negligent actions." Conn. Indem., 328 F.3d at 351.

Implied claims that are not specifically alleged can be ignored. Legal labels in complaints are often incomplete or missing altogether; as we noted in an earlier decision, "[w]hat is important is not the legal label that the plaintiff attaches to the defendant's (that is, the insured's) conduct, but whether that conduct as...