State Farm General Ins. Co. v. Jt's Frames, Inc.

• Citation: 104 Cal.Rptr.3d 573,181 Cal.App.4th 429
• Decision Date: 27 January 2010
• Docket Number: No. B215457.,B215457.
• Court: California Court of Appeals
• Parties: STATE FARM GENERAL INSURANCE COMPANY, Plaintiff and Respondent, v. JT'S FRAMES, INC., Defendant and Appellant.

181 Cal.App.4th 429

104 Cal.Rptr.3d 573

STATE FARM GENERAL INSURANCE COMPANY, Plaintiff and Respondent, v. JT'S FRAMES, INC., Defendant and Appellant.

No. B215457.

Court of Appeals of California, Second District, Division Four.

January 27, 2010.

Law Offices of Ryan G. Richardson, Ryan G. Richardson; Law Offices of Leah Nico and Phillip A. Bock for Defendant and Appellant.

Robie & Matthai, James R. Robie, Steven S. Fleischman and David J. Weinman for Plaintiff and Respondent.

OPINION

MANELLA, J.

In an Illinois lawsuit, appellant JT's Frames, Inc. (JT's), obtained a settlement on behalf of itself and a class of similarly situated entities based on defendant's transmission of over 74,000 unsolicited faxes to class members. In the underlying lawsuit, respondent State Farm General Insurance Company (State Farm) sought a declaration that JT's claims were not covered as "advertising injury" or "property damage" under policies State Farm allegedly issued to the Illinois defendant. JT's moved to quash service of State Farm's complaint on the ground JT's was not subject to personal jurisdiction in California. The trial court denied the motion to quash, and JT's sought a writ in this court. While the writ petition was pending, the parties moved forward with the litigation, and the trial court granted summary judgment in favor of State Farm shortly before the writ was summarily denied.

JT's appeals both the judgment entered and the order denying its motion to quash. We conclude the order denying the motion to quash is not appealable where, as here, the party contesting jurisdiction enters a general appearance and litigates the merits. We further conclude that the claims asserted in the Illinois action were not covered by the State Farm policies. Accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Insurance Policies

The essential facts are not disputed. In October 2002, State Farm, an Illinois corporation with its principal place of business in California, issued an insurance policy to "[t]he Friedman Group." Similar policies followed in 2003, 2004, 2005 and 2006. The final policy was in effect until April 2007.

The policies covered "advertising injury caused by an occurrence committed in the coverage territory during the policy period."¹ "[A]dvertising injury" was defined to include: "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 of privacy; c. misappropriation of advertising ideas or style of doing business; or d. infringement of copyright, title or slogan."

The policies also covered "property damage caused by an occurrence." With respect to property damage, "occurrence" was defined to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions which result in bodily injury or property damage."

B. The Prior Litigation

During the period the policies were in effect, a company identifying itself as "[t]he Friedman Group" transmitted tens of thousands of unsolicited advertisements via facsimile machine or "fax" to a number of parties, including appellant JT's Frames, an Illinois corporation.² In April 2007, JT's filed a class action lawsuit against "[t]he Friedman Group International,"³ alleging violation of the Telephone Consumer Protection Act of 1991 (47 U.S.C. § 227; TCPA).⁴ JT's also alleged conversion and violation of the Illinois Consumer Fraud and Deceptive Practices Act (815 Ill. Comp. Stat. Ann. 505/1 et seq.). Defendant tendered the defense to State Farm. State Farm denied coverage.

In February 2008, JT's entered into a settlement agreement with defendant in the amount of $19,520,000. In the settlement agreement, the parties stipulated to certification of a class defined as "`[a]ll persons to whom Defendant sent advertising faxes during the period of April 2, 2003 through January 30, 2007 without the recipients' prior express permission or invitation and with whom Defendant had not done business.'"⁵ The settlement specified that the judgment would be enforceable only against the proceeds of defendant's insurance policies, and defendant assigned to the class its claims and rights under the State Farm policies.

C. Instant Litigation—Motion to Quash

In July 2008, State Farm brought the instant action for declaratory relief against JT's, suing JT's in its capacity as class representative and as assignee of the Friedman Group International. The complaint contended, among other things, that State Farm owed no duty to defend the class action because the policies did not cover the claims alleged and because "[t]he Friedman Group International" was not the named insured.

JT's moved to quash for lack of personal jurisdiction and moved to dismiss on the ground of inconvenient forum. In support of its motion to quash, JT's submitted a declaration from its managing director and corporate secretary, stating that JT's was an Illinois corporation with its only place of business in Illinois and with no contacts with California. State Farm opposed, contending JT's status as an assignee of a California entity justified jurisdiction.⁶

On November 17, 2008, the court denied JT's motions.⁷ On December 1, JT's filed a writ petition seeking review of the order denying the motion to dismiss for lack of personal jurisdiction. On February 4, 2009, State Farm filed a motion to dismiss JT's writ petition, contending JT's had made a general appearance by engaging in various activities (described further below) while the writ was pending. The motion was denied. By order dated February 27, 2009, this court summarily denied JT's petition for writ.

During the period the parties were awaiting resolution of the jurisdictional issue, they continued to press forward with the litigation in the trial court. While JT's motion to quash was pending, the parties filed case management statements. On November 20, State Farm submitted a motion seeking to have the court determine that California law governed the interpretation of the insurance policies. On December 4, the parties signed a stipulation stating their intention to file cross-motions for summary judgment or summary adjudication by January 2009. On December 8, JT's promulgated discovery requests. On December 15, JT's opposed State Farm's choice of law motion.⁸ On January 14, State Farm moved for summary judgment. On January 28, JT's filed its opposition. The motion for summary judgment was granted on February 11, while the writ seeking review of the order denying JT's motion to quash was pending.

D. Motion for Summary Judgment

In its January 2009 motion for summary judgment, State Farm contended that the fax blasting claims did not fall under the policies' "advertising injury" or "property damage" coverage.⁹ JT's opposed, contending coverage was available under the provision defining advertising injury to include "`oral or written publication of material that violates a person's right of privacy,'" and that the act of sending faxes could result in "property damage" within the meaning of the policies.

The trial court granted the motion. The court concluded that fax blasting was "not an invasion of privacy" under the policies' advertising injury coverage "in any ordinary or simple English usage." The court further concluded that there was no coverage for property damage because the action of sending tens of thousands of faxes over the course of many years was "no accident." Judgment was entered for State Farm. This appeal followed.

DISCUSSION

A. Personal Jurisdiction

(1) Pursuant to California's long-arm statute, California courts may exercise jurisdiction on any basis not inconsistent with the California or United States Constitution. (Code Civ. Proc., § 410.10.) "A state court's assertion of personal jurisdiction over a nonresident defendant who has not been served with process within the state comports with the requirements of the due process clause of the federal Constitution if the defendant has such minimum contacts with the state that the assertion of jurisdiction does not violate `"traditional notions of fair play and substantial justice."'" (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444 [58 Cal.Rptr.2d 899, 926 P.2d 1085], quoting Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316 [90 L.Ed. 95, 66 S.Ct. 154].)

JT's contends that it is not susceptible to suit in California and that the trial court erred in denying its motion to quash for lack of personal jurisdiction. We conclude the issue is not cognizable on appeal.

1. Traditional Rule

(2) It has long been the rule in California that a defendant who chooses to litigate the merits of a lawsuit after its motion to quash has been denied has no right to raise the jurisdictional question on appeal. (Jardine v. Superior Court (1931) 213 Cal. 301, 304 ; accord, Remsberg v. Hackney Manufacturing Co. (1917) 174 Cal. 799, 801 ; Olcese v. Justice's Court (1909) 156 Cal. 82, 87 .) It was said that by contesting the merits, "`the defendant made a general appearance and submitted itself to the jurisdiction of the court'" and "`thereby waived any right it may have had to insist that jurisdiction of its person had not been obtained.'" (Jardine v. Superior Court, supra, 213 Cal. at p. 304, quoting Remsberg v. Hackney Manufacturing Co., supra, 174 Cal. at p. 801.) As one court explained, to leave the door open for a later appeal of the jurisdictional issue after resolution of the merits would give the defendant an "unconscionable advantage": "[I]f the determination of the court [on the merits] be in his favor he may avail himself of it, while, if it be against him, he may fall back upon his plea of lack of jurisdiction of the person." (Olcese v. Justice's Court, supra, 156 Cal. at p. 87.)

As a result of this rule, a defendant...