OneBeacon Am. Ins. Co. v. Urban Outfitters, Inc.

• Court: U.S. District Court — Eastern District of Pennsylvania
• Writing for the Court: DALZELL, District Judge.
• Citation: OneBeacon Am. Ins. Co. v. Urban Outfitters, Inc., 21 F.Supp.3d 426 (E.D. Pa. 2014)
• Decision Date: 15 May 2014
• Docket Number: Civil Action No. 13–5269.
• Parties: ONEBEACON AMERICA INSURANCE COMPANY v. URBAN OUTFITTERS, INC. and Anthropologie, Inc. v. The Hanover Insurance Group.

21 F.Supp.3d 426

ONEBEACON AMERICA INSURANCE COMPANY

v.URBAN OUTFITTERS, INC. and Anthropologie, Inc.

v.The Hanover Insurance Group.

Civil Action No. 13–5269.

United States District Court, E.D. Pennsylvania.

Signed May 15, 2014.

Joshua A. Mooney, Michael O. Kassak, White & Williams LLP, Philadelphia, PA, for OneBeacon America Insurance Company.

Ashley Lauren Lerch, Samuel W. Cortes, Fox Rothschild LLP, Exton, PA, Bradley J. Lorden, Paul L. Langer, Stephen R. Gilford Proskauer Rose LLP Chicago, IL, for Urban Outfitters, Inc. and Anthropologie, Inc.

Mark Shaughnessy, Boyle Shaughnessy & Campo PC, Boston, MA, Andrew J. Gallogly, Margolis Edelstein, Philadelphia, PA, for The Hanover Insurance Group.

MEMORANDUM

DALZELL, District Judge.

The parties to this declaratory judgment action filed cross-motions for summary judgment seeking a declaration as to whether OneBeacon America Insurance Company (“OneBeacon”) and The Hanover Insurance Group (properly known as The Hanover Insurance Company and herein “Hanover”) have a duty to defend retailers Urban Outfitters, Inc. and its Anthropologie, Inc. subsidiary (collectively, “Urban Outfitters”) in three putative class-action suits regarding the retailers' collection of customer ZIP code data in alleged violation of state or local privacy laws.¹

We will grant OneBeacon and Hanover motions for summary judgment for the reasons detailed below and deny Urban Outfitters' motion for partial summary judgment. For the reasons that follow, we declare that neither insurer has a duty to defend either Urban Outfitters or Anthropologie in any of the three class actions at issue here.

I. Factual and Procedural Background

A. The Parties

This insurance dispute arises from Urban Outfitters' request for defense coverage in three underlying lawsuits alleging that the retailers violated state statutes and common law privacy rights when they gathered personal ZIP code information while processing credit card purchases. Urban Outfitters (“UO”) MSJ at 2. Both retailers are co-defendants in Hancock v. Urban Outfitters, Inc. (“Hancock”)² and Dremak v. Urban Outfitters, Inc. (“Dremak”);³ and Urban Outfitters is the sole defendant in a third action, Miller v. Urban Outfitters, Inc. (“Miller”).⁴ Joint Appendix (“JA”), Ex. 1–3.

OneBeacon issued Urban Outfitters a combined commercial general liability (“CGL”) and umbrella policy⁵ for the period July 7, 2008 to July 7, 2009⁶ and an identical policy for July 7, 2009 to July 7, 2010,⁷ under which Urban Outfitters and Anthropologie are named insureds. OneBeacon MSJ at 7. OneBeacon also issued a similar policy for July 7, 2010 to July 7, 2011 which is a “fronting” policy for which Hanover is responsible.⁸ Id. at 8; see also Hanover MSJ at 3.

Separately, Hanover issued Urban Outfitters primary CGL and umbrella policies for the periods July 7, 2011 to July 7, 2012⁹ and July 7, 2012 to July 7, 2013.¹⁰ Hanover MSJ at 3. Urban Outfitters and Anthropologie are named insureds under each of the four policies. JA, Ex. 7–10.

B. The Underlying Actions

1. The Hancock Complaint

Plaintiffs in Hancock assert two statutory causes of actions against Urban Outfitters and Anthropologie. They allege that, since June 21, 2010, the retailers requested and collected customer ZIP codes in violation of the District of Columbia's Consumer Identification Information law, which provides in relevant part that:

(a) Except as provided in subsection (b) of this section, no person shall, as a condition of accepting a credit card as payment for a sale of goods or services, request or record the address or telephone number of a credit card holder on the credit card transaction form.

(b) A person may record the address or telephone number of a credit card holder if the information is necessary for the shipment, delivery, or installation of consumer goods, or special orders of consumer goods or services.

D.C.Code § 47–3153(a) –(b) ; see JA, Ex. 1, ¶¶ 3, 23, 34.

Pursuant to D.C.Code § 47–3154, any customer whose consumer identification information is obtained in violation of Section 3153 shall be entitled to actual damages or $500, whichever is greater, as well as to injunctive relief. See JA, Ex. 1, ¶ 4.

The plaintiffs also allege that Urban Outfitters knew or should have known that the District of Columbia Protection Act makes it illegal to (1) misrepresent a material fact which has a tendency to mislead; (2) fail to state a material fact if such failure tends to mislead; or (3) use deceptive representations in connection with the sale of consumer goods. Id. at ¶ 5. The plaintiffs allege that requesting credit card holders' ZIP code information at checkout constitutes misrepresenting a material fact that has a tendency to mislead, that is, that the cardholders' disclosure of a ZIP code was needed to complete the transaction. Id. at ¶ 62. Violation of this statute subjects the violator to treble damages or $1500 per violation, whichever is greater, plus reasonable attorney's fees, punitive damages and an injunction against further violations, remedies that are cumulative to other penalties. Id. at ¶¶ 6, 58.

The complaint alleges that Urban Outfitters matched the illegally obtained ZIP code information with customers' names “to identify the customers' home/business address via commercially available databases.” JA, Ex. 1 at ¶ 2. The complaint further alleges that it is the defendants' corporate policy to “train and require” their employees to ask credit card customers for their ZIP code information “despite knowing, or being on constructive notice” that this policy violates District of Columbia law. Id. at ¶¶ 66, 67.

On March 14, 2014, the district court for the District of Columbia granted defendants' motion to dismiss and plaintiffs have filed an appeal with the Court of Appeals for the District of Columbia Circuit.¹¹

2. The Dremak Complaint

The California plaintiffs in this consolidated action also assert a statutory claim. They allege that, since February 15, 2010, Urban Outfitters “systematically and intentionally” violated the Song–Beverly Credit Card Act of 1971 which prohibits the “misuse of personal identification information for ... marketing purposes.” JA Ex. 3, ¶¶ 2, 14. The complaint alleges the retailers violated this Act by requesting personal identification information, including ZIP code information, during credit card transactions, and then recording that information at the electronic point-of-sale register, as a result of which the retailers recorded customers' name, credit card number and ZIP code information in their electronic databases. Id. at ¶¶ 2, 6–10.

The defendants allegedly used the information collected in the databases—information not required to complete the credit card purchase—to “mine[ ] and index[ ] for their own business purposes, e.g. targeted marketing, and ... also sell the personal information to other businesses.” Id. at ¶¶ 16, 17. Plaintiffs seek penalties, restitution, disgorgement, injunctive relief and attorney's fees. Id. at 13.

On February 24, 2014 the parties in the underlying California action stipulated to voluntary dismissal of three common law claims for negligence, violation of privacy, and intentional intrusion on seclusion. Id. at ¶¶ 35–41, 53, 56–59; see also Dkt. entries 44 and 45 (OneBeacon and Urban Outfitters' letters to the Court). The sole remaining count in the underlying case is the statutory claim.

3. The Miller Complaint

Plaintiffs in this Massachusetts class action sued Urban Outfitters alone for allegedly violating a state statute that prohibits unfair and deceptive business practices. JA, Ex. 2 at ¶ 35. They also assert a claim for unjust enrichment. Id. at ¶¶ 44–47. The Miller plaintiffs allege that since August 15, 2009 Urban Outfitters collected and recorded ZIP code information for its own promotional and marketing purposes and used that information, along with the customer's name, to identify his address and telephone number through publicly available databases. Id. at ¶¶ 15, 24.

The class members allege they were injured when they received Urban Outfitters' unsolicited promotional and marketing material. Id. at ¶¶ 36, 37. As part of the claimed statutory violation, plaintiffs also allege that Urban Outfitters misappropriated their commercially valuable personal identification information and invaded their privacy, id. at ¶¶ 38, 39, in willful and knowing violation of the state statute. Id. at ¶ 40. They separately alleged unjust enrichment, that is, that defendant Urban Outfitter's acceptance of the commercially-valuable personal information was inequitable and requires restitution. Id. at ¶ 47.

Plaintiffs seek actual and statutory damages, double or treble damages, disgorgement of profits attributable to those allegedly unlawful acts, injunctive relief and attorney's fees. Id. at ¶ 42. In September of 2013, Urban Outfitters removed Miller to the United States District Court for the District of Massachusetts, where discovery is currently underway pursuant to that Court's scheduling order.¹²

C. Procedural History

OneBeacon filed this coverage action against Urban Outfitters and Anthropologie on September 10, 2013, seeking a declaration that it has no duty to defend or indemnify the defendants in the three ZIP code suits. Urban Outfitters joined Hanover as a third-party defendant on October 25, 2013 seeking coverage from Hanover in those state actions, and amended the complaint on November 15, 2013. Hanover filed an answer and counterclaim to the amended third-party complaint on December 2, 2013 seeking a declaratory judgment that it has no obligation to defend or indemnify the defendants in those underlying state actions.

These motions followed. Urban Outfitters, in its motion for partial summary judgment, seeks a determination that both insurers have a duty to defend the underlying lawsuits. It contends that the underlying actions allege “oral or written publication, in any manner, of material that violates a person's right of privacy,” triggering...