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Los Angeles Lakers, Inc. v. Federal Insurance Co.

United States Court of Appeals, Ninth Circuit

August 23, 2017

Los Angeles Lakers, Inc., a California corporation, Plaintiff-Appellant,
Federal Insurance Company, an Indiana corporation, Defendant-Appellee.

          Argued and Submitted February 15, 2017 Pasadena, California

         Appeal 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

          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.


          SUMMARY [**]

         Telephone Consumer Protection Act

         The 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.

         The 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 from coverage.

         The 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 claim.

         Dissenting, 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.


          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.


         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 (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.


         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).


         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., 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).

         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., 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).

         It is 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."[1]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)).

         II. The TCPA

         With an 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.

         In making this determination we start, as we must, with the text of the statute.[2] 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 (2000)).

         We must 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 ...

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