Los Angeles Lakers, Inc., a California corporation, Plaintiff-Appellant,
Federal Insurance Company, an Indiana corporation, Defendant-Appellee.
and Submitted February 15, 2017 Pasadena, California
from the United States District Court for the Central
District of California No. 2:14-cv-07743-DMG-SH, Dolly M.
Gee, District Judge, Presiding
Pasich (argued), Pamela M. Woods, and Anamay M. Carmel, Liner
LLP, Los Angeles, California, for Plaintiff-Appellant.
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.
Consumer Protection Act
panel affirmed the district court's Fed.R.Civ.P. 12(b)(6)
dismissal of an action brought under diversity jurisdiction
by the Los Angeles Lakers against the Federal Insurance
Company after it denied coverage and declined to defend the
Lakers in a lawsuit alleging violations of the Telephone
Consumer Protection Act.
underlying action alleged that the Lakers violated the
Telephone Consumer Protection Act when, during a game, they
invited attendees to send a text to a specific number and
then sent a response text message using an "automatic
telephone dialing system, " in violation of the Act.
Federal Insurance Company denied coverage and declined to
defend the Lakers, concluding that the underlying lawsuit was
an invasion of privacy suit, which was specifically excluded
panel held that because a Telephone Consumer Protection Act
claim is inherently an invasion of privacy claim, Federal
Insurance Company correctly concluded that the underlying
Telephone Consumer Protection Act claims fell under the
Policy's broad exclusionary clause. Accordingly, Federal
Insurance Company did not breach the insurance policy, or the
implied covenant of good faith and fair dealing, under any
cognizable legal theory, when it declined to defend against
or cover the underlying complaint.
District Judge Murphy concurred and wrote separately to state
that this court should have decided the case on narrower
grounds. Judge Murphy stated that the allegations in the
underlying action were sufficient to determine that the
claims arose from an invasion of privacy and the Court did
not need to hold more broadly that a Telephone Consumer
Protection Act claim is inherently an invasion of privacy
Judge Tallman stated that because the underlying action
sought recovery based on an alleged violation of the
Telephone Consumer Protection Act, and did not seek recovery
based on invasion of privacy, he would reverse the district
court's order dismissing the Lakers' claims.
SMITH, Circuit Judge:
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.
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
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
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.
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[.]
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."
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.
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 (SHx), 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.
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.
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
courts interpret insurance contracts under the "ordinary
rules of contractual interpretation." Palmer v.
Truck Ins. Exch., 988 P.2d 568, 652 (Cal. 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, 76 Cal.Rptr.3d 585, 601 (Cal.Ct.App. 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, 130 Cal.Rptr.3d 466, 470
(Cal.Ct.App. 2011) (citation omitted). In contrast, courts
are to interpret "exclusionary clauses . . . narrowly
against the insurer." Id. (citation omitted).
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., 186
Cal.Rptr.3d 1, 7 (Cal.Ct.App. 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., 35 Cal.Rptr.3d 738, 744 (Cal.Ct.App. 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., 81
Cal.Rptr.2d 557, 561 (Cal.Ct.App. 1999)); State Farm Fire
& Cas. Co. v. Salas, 271 Cal.Rptr. 642, 645 n.4 (Cal
Ct. App. 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., 49
Cal.Rptr.2d 567, 571 n.4 (Cal.Ct.App. 1996).
also necessary for us to examine the clause "invasion of
privacy" in this exclusion. California courts have
recognized "four distinct forms of tortious invasion [of
privacy]." Johnson v. Harcourt, Brace, Jovanovich,
Inc., 118 Cal.Rptr. 370, 375 (Cal.Ct.App. 1974).
Included in this list is "intrusion upon the
plaintiff's seclusion or solitude."Id.
(citation omitted). This form of invasion of privacy has been
described as "the right to be let alone."
Miller v. Nat'l Broad. Co., 232 Cal.Rptr. 668,
678 (Cal.Ct.App. 1986) (quoting Gill v. Curtis Publ'g
Co., 239 P.2d 630, 632 (Cal. 1952)). This right to be
let alone is relative and is not absolute. Sanders v. Am.
Broad. Cos., 978 P.2d 67, 72 (Cal. 1999). However,
unwanted calls, received at inconvenient times, generally
invade an individual's privacy and right to be let alone.
See Restatement (Second) of Torts § 652B (1977)
(cited in Shulman v. Grp. W Prods. Inc., 955 P.2d
469, 481-90 (Cal. 1998)).
understanding of the scope of the exclusionary clause, we
turn next to the TCPA. Federal argues a TCPA claim is
inherently an invasion of privacy claim. The district court
agreed, concluding that the protection of privacy interests
was "the conceptual wellspring of the TCPA's
protections." 2015 WL 2088865, at *5. The Lakers assert
in response that invasion of privacy is just one of the harms
which the TCPA sought to protect the public against. Thus, we
must determine whether the purpose of the TCPA was to prevent
invasions of privacy, or, in addition, some other harm.
making this determination we start, as we must, with the text
of the statute. McDonald v. Sun Oil Co., 548 F.3d
774, 780 (9th Cir. 2008), abrogated on other grounds by
CTS Corp. v. Waldburger, 134 S.Ct. 2175 (2014); see
also Lamie v. U.S. Tr., 540 U.S. 526, 534 (2004)
("The starting point in discerning congressional intent
is the existing statutory text."). Our inquiry will
"end there as well if the text [of the statute] is
unambiguous." BedRoc Ltd. v. United States, 541
U.S. 176, 183 (2004). "The preeminent canon of statutory
interpretation requires us to 'presume that [the]
legislature says in a statute what it means and means in a
statute what it says there.'" Id.
(alteration in original) (quoting Conn. Nat'l Bank v.
Germain, 503 U.S. 249, 253-54 (1992). If "the
statute's language is plain, the sole function of the
courts . . . is to enforce it according to its terms."
Lamie, 540 U.S. at 534 (quoting Hartford
Underwriters Ins. v. Union Planters Bank, 530 U.S. 1, 6
also "assum[e] that the legislative purpose is expressed
by the ordinary meaning of the words used" by the
legislature. Richards v. United States, 369 U.S. 1,
9 (1962). Like plain meaning, "[t]he 'plain
purpose' of legislation . . . is determined in the first
instance with reference to the plain language of the statute
itself." Bd. of Governors of Fed. Reserve Sys. v.
Dimension Fin. Corp., 474 U.S. 361, 373 (1986) (citing
Richards, 369 U.S. at 9); Antonin Scalia & Bryan
A. Garner, Reading Law: The Interpretation of Legal
Texts 56 (2012) ("[T]he purpose [of a statute] must
be derived from the text, not from extrinsic sources such as
legislative history or an assumption about the legal
drafter's desires."). In debating and considering a
statute, Congress often gives numerous reasons why the
statute would be advantageous. But not all of these stated
objectives potentially served by the statute constitute the
statute's "purpose." To find a statute's
purpose we must look to see if Congress has clearly stated it
in the text of the statute itself. Thus, the language of the