St. Paul Fire and Ma v. Brother Intl Corp , 319 F. App'x 121 ( 2009 )

Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
4-2-2009
St. Paul Fire and Ma v. Brother Intl Corp
Precedential or Non-Precedential: Non-Precedential
Docket No. 07-3886
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 07-3886
_____________
ST. PAUL FIRE AND MARINE INSURANCE COMPANY
v.
BROTHER INTERNATIONAL CORPORATION
d/b/a Brother Mall
Brother International Corporation,
Appellant
_______________
On Appeal From the United States District Court
for the District of New Jersey
(Civil No. 06-cv-02759)
District Judge: Honorable Freda Wolfson
Submitted Under Third Circuit LAR 34.1(a)
November 21, 2008
Before: BARRY and CHAGARES, Circuit Judges, and RESTANI,* Judge.
(Filed: April 2, 2009)
__________________
OPINION OF THE COURT
__________________
*
The Honorable Jane A. Restani, Chief Judge, United States Court of International
Trade, sitting by designation.
CHAGARES, Circuit Judge.
Brother International Corporation (“Brother”) appeals from the District Court’s
grant of summary judgment in favor of St. Paul Fire and Marine Insurance Company (“St.
Paul”) on St. Paul’s complaint against Brother for declaratory judgment concerning its
rights and obligations under an insurance policy between the two corporations, as well as
on Brother’s counterclaim for coverage. Brother seeks coverage for damages it sustained
in a class-action lawsuit filed against it for sending unsolicited fax advertisements, a
practice commonly known as “blast-faxing.” We conclude that Brother is not entitled to
coverage under St. Paul’s policy, and we will therefore affirm the District Court’s
judgment.
I.
Because we write solely for the benefit of the parties, we will only summarize the
essential facts.
On June 3, 2003, Stonecrafters, Inc. (“Stonecrafters”) brought a nationwide class-
action lawsuit against Brother, alleging that Brother’s unsolicited fax advertisements
violated the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, and various
state laws. The TCPA prohibits the “use [of] any telephone facsimile machine, computer,
or other devise to send, to a telephone facsimile machine, an unsolicited advertisement.”
§ 227(b)(1)(C). The Stonecrafters class challenged Brother’s “policy and practice of
sending unsolicited faxes to fax machines throughout the United States even when it
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knows or should know that it did not have the recipient’s permission to receive
advertising from [Brother] and had no procedures in place to retain recipient’s permission
required by state and federal law.” Joint Appendix (J.A.) 67. In a certification submitted
to the District Court in connection with the parties’ summary judgment motions,
Brother’s in-house counsel stated that Brother “did not intend to cause any injury or
damage to the recipients of the facsimiles.” J.A. 833 (“Brother sent the facsimile
advertisements to provide savings to potential customers and believed that the facsimile
advertisements would result in additional sales – not injury or damages to the
recipients.”).
Brother tendered the Stonecrafters complaint to St. Paul for defense and indemnity
under its insurance policies. St. Paul had previously sold two insurance policies to
Brother (hereinafter “the Policy”)1 , two provisions of which are relevant to this action:
the advertising injury provision and the property damage provision. The advertising
injury provision obligates St. Paul to pay damages for injury (other than bodily injury or
personal injury) that is caused by certain enumerated offenses. J.A. 528-29. The
advertising injury offense is defined as “making known to any person or organization
covered material that violates a person’s right to privacy.” Id.
The property damage provision obligates St. Paul to indemnify amounts that
1
Because the two policies are identical in all relevant respects, we do not
distinguish between them in the below discussion.
3
Brother is legally required to pay for physical damage to others’ tangible property and for
loss of use of that property, where the damage is caused by an accident. J.A. 527-28
(limiting liability to property damage that is “caused by an event,” and defining an
“event” as “an accident, including continuous or repeated exposure to substantially the
same harmful conditions”). The property damage coverage is also subject to an exclusion
for damage that is “expected or intended” by the insured. J.A. 544.
On July 15, 2003, St. Paul rejected Brother’s request to defend or indemnify it in
the Stonecrafters lawsuit, denying any obligation to do so under the Policy. J.A. 849-53.
After some discussion, however, St. Paul agreed, subject to “a complete reservation of
rights,” to defend Brother in the Stonecrafters action and “to reimburse Brother . . . for
the reasonable fees and expenses that it has incurred in defending the Stonecrafters, Inc.
class action lawsuit from the date on which the suit was tendered to St. Paul for a
defense.” J.A. 89.
In mid-2004, Brother and Stonecrafters began settlement discussions, which
resulted in settlement of the underlying action in April 2005. J.A. 838. Thereafter, St.
Paul filed a complaint for declaratory relief against Brother, seeking a determination of
the parties’ rights and obligations with respect to the Stonecrafters lawsuit under the
Policy, and Brother filed a counterclaim for coverage.2 The parties both moved for
2
St. Paul filed this case on September 22, 2005 in the United States District Court
for the Northern District of Illinois, Eastern Division. Pursuant to Brother’s Motion to
Transfer Venue, the case was transferred to the United States District Court for the
4
summary judgment and the District Court granted St. Paul’s motion and denied Brother’s
cross-motion.3
The District Court held that St. Paul is not obligated to defend or indemnify
Brother under either the advertising injury provision or the property damage provision of
the Policy. The Court noted that TCPA claims involve invasions of the privacy right of
seclusion, but the advertising injury provision in the Policy is limited to violations of the
privacy right of secrecy. Thus, the District Court determined that the Stonecrafters
lawsuit did not trigger the Policy’s advertising injury provision.
The District Court also held that the Stonecrafters lawsuit did not trigger the
Policy’s property damage provision because the alleged injury was not “accidental.”
Specifically, the Court determined that the consumption of a fax recipient’s toner and
paper is the intended consequence of the insured’s intentional act in sending the fax, and
is therefore not “accidental” within the meaning of the Policy. The District Court also
held that the Policy’s exclusion provision precluded coverage because the property
damage was “expected or intended” from the standpoint of the insured.
Brother filed a timely appeal from the District Court’s judgment.
II.
This is a diversity action governed by New Jersey law. The District Court had
District of New Jersey.
3
St. Paul also filed two Motions to Strike, which the District Court granted in part
and denied in part. St. Paul does not appeal from this disposition.
5
jurisdiction over this action pursuant to 28 U.S.C. § 1332(a)(1) because this is an action
between citizens of different States, and the amount in controversy exceeds $75,000.
This Court has jurisdiction pursuant to 28 U.S.C. § 1291 because this is an appeal of a
final decision of a District Court.
When reviewing an order granting summary judgment, “[w]e exercise plenary
review . . . and we apply the same standard that the lower court should have applied.”
Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000). Summary judgment
is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the party is entitled to a judgment as a matter of law.” Fed. R. Civ.
P. 56(c). In making this determination, we “view the facts in the light most favorable to
the nonmoving party and draw all inferences in that party’s favor.” Farrell, 206 F.3d at
278 (citation omitted). “There must, however, be sufficient evidence for a jury to return a
verdict in favor of the nonmoving party; if the evidence is merely colorable or not
significantly probative, summary judgment should be granted.” Armbruster v. Unisys
Corp., 32 F.3d 768, 777 (3d Cir. 1994).
Where the non-moving party will bear the burden of proof at trial, the moving
party’s burden can be “discharged by ‘showing’ . . . that there is an absence of evidence
to support the non-moving party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325
(1986). If the moving party has carried this burden, the burden shifts to the non-moving
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party to point to sufficient cognizable evidence to create material issues of fact “such that
a reasonable jury can find in its favor.” McCabe v. Ernst & Young, LLP, 494 F.3d 418,
424 (3d Cir. 2007) (citing Fed. R. Civ. P. 56(e)); see Celotex, 477 U.S. at 332.
III.
Brother asserts that the District Court erred in holding that St. Paul had no duty to
defend or indemnify Brother under the Policy. Specifically, Brother contends that the
District Court wrongly concluded, as a matter of law, (1) that St. Paul’s advertising injury
provision only pertains to disclosure of otherwise secret information to third parties, not
violations of the right of the recipients to be free of unwanted intrusions; and (2) that St.
Paul’s property damage provision does not apply to Brother’s claims because the damage
was not “accidental” within the meaning of the Policy. Brother also argues that the
interpretation of the advertising injury provision involves unsettled questions of New
Jersey state law, and should therefore be certified to the New Jersey Supreme Court.
We conclude that the District Court interpreted the relevant policy language
correctly, and the advertising injury question is not appropriate for certification. We will
therefore affirm the District Court’s judgment.
A.
Brother claims that its conduct, as alleged in the Stonecrafters complaint, falls
within the Policy’s definition of “advertising injury offense,” defined as “making known
to any person or organization covered material that violates a person’s right to privacy.”
7
Stonecrafters’ TCPA claim is essentially an invasion of privacy claim. Brother
emphasizes that the “right to privacy” encompasses two rights: the privacy right of
secrecy and the privacy right of seclusion. Under New Jersey law, courts must interpret
undefined policy terms according to their “plain and ordinary meaning,” Progressive Cas.
Ins. Co. v. Hurley, 765 A.2d 195, 201 (N.J. 2001), and where “the controlling language
will support two meanings, one favorable to the insurer, and the other favorable to the
insured, the interpretation sustaining coverage must be applied,” Mazilli v. Accident &
Cas. Ins. Co., 170 A.2d 800, 803 (N.J. 1961). Accordingly, Brother argues that the
District Court erred in construing the Policy to encompass only the privacy right of
secrecy, not the privacy right of seclusion.
We disagree. Importantly, “although the term privacy can imply multiple
meanings, that fact alone cannot suffice to create ambiguity.” See, e.g., Melrose Hotel
Co. v. St. Paul Fire & Marine Ins. Co., 432 F. Supp. 2d 488, 501 (E.D. Pa. 2006), aff’d,
503 F.3d 339 (3d Cir. 2007) (judgment order). A policy’s “failure to define a term should
not send the Court scurrying to a dictionary hunting for ambiguity” if that term’s meaning
is unambiguous when “read in context.” Id. at 501-02. “The real question,” therefore, “is
whether, when read in context, a reasonable purchaser of insurance would believe that the
sort of privacy interests protected by the policies overlap with the sort of privacy with
which the TCPA is concerned.” Res. Bankshares Corp. v. St. Paul Mercury Ins. Co., 407
F.3d 631, 640 (4th Cir. 2005) (emphasis in original).
8
As the District Court acknowledged, the New Jersey Supreme Court has never
ruled on the advertising injury coverage issue. However, every court to consider the
policy language before us has concluded that the advertising injury provision does not
encompass TCPA blast-faxing claims. See, e.g., Melrose Hotel Co., 432 F. Supp. 2d at
504 (finding that St. Paul has no duty to defend Melrose against blast-faxing claims
because “the clear and unambiguous provision ‘making known to any person or
organization covered material that violates a person’s right of privacy’ requires that the
content contained in the covered material must violate a person’s right of privacy and
must be made known to a third party”); Res. Bankshares Corp., 407 F.3d at 641 (holding
that the language “making known to any person or organization written or spoken
material that violates a person’s right to privacy” deals with violations of the privacy right
of secrecy, while blast-faxing claims deal with violations of the privacy right of seclusion
because the phrase “making known” implicates the “content of the advertisements” while
fax-blasting claims deal with the “manner of the advertisement”); ACS Sys., Inc. v. St.
Paul Fire & Marine Ins. Co., 53 Cal. Rptr. 3d 786, 794-95 (Cal. App. 2007) (same).
We agree with the reasoning of these courts, and conclude that the Policy’s
advertising injury provision does not apply to TCPA blast-faxing claims. As the Melrose
court noted, “the phrase ‘making known’ suggests a focus on secrecy not present in []
policies which define advertising injury offense to include ‘oral or written publication of
material that violates a person’s right to privacy.’” Melrose, 432 F. Supp. 2d at 503
9
(citation omitted). This is because the “[m]aking known to any person or organization”
language “implies a disclosure to a third party,” which “stands in contrast with the term
‘publication,’ which can include the simple act of issuing or proclaiming.” Id.
Brother counters, emphasizing that two courts applied New Jersey law to hold that
the right of privacy encompasses both seclusion and secrecy interests. See Myron Corp.
v. Atl. Mut. Ins. Corp., BER-L-5539-06, slip op. (N.J. Super. Ct. Law Div. Jan. 22, 2007)
(unpublished); Terra Nova Ins. Co. v. Fray-Witzer, 869 N.E.2d 565 (Mass. 2007). As St.
Paul correctly notes, however, these cases are not only not binding upon this Court, but
are also distinguishable because the advertising injury provisions in Myron and Terra
Nova are worded differently than the advertising injury provision in the instant case.
Compare Myron Corp., BER-L-5539-06, at 5 (defining advertising injury, in part, as
“[o]ral or written publication, in any manner, of material that violates a person’s right of
privacy”), and Terra Nova Ins. Co., 869 N.E.2d at 569 (defining advertising injury, in
part, as “[o]ral or written publication of material that violates a person’s right of
privacy”), with J.A. 528-29 (defining advertising injury offense as “making known to any
person or organization covered material that violates a person’s right to privacy”). Thus,
Myron and Terra Nova do not undermine our analysis in any way.
For the foregoing reasons, we hold that the Policy’s advertising injury provision
does not encompass TCPA blast-faxing claims. We also deny Brother’s motion for
certification to the New Jersey Supreme Court. This case requires the application of basic
10
New Jersey contract principles to construe an insurance policy, the language of which has
already been interpreted in a consistent manner by several courts. We will therefore
affirm the District Court’s judgment that St. Paul owes Brother no duty to defend Brother
under the Policy’s advertising injury provision.
B.
Brother also claims that the District Court erred in holding that St. Paul had no
duty to defend Brother under the Policy’s property damage provision. The Policy’s
property damage provision limits St. Paul’s obligations to damage “caused by an event,”
and “event” is defined as “an accident, including continuous or repeated exposure to
substantially the same general harmful conditions.” J.A. 527-28. The Policy also
contains a specific exclusion for damage that is “expected or intended” by the insured.
J.A. 544. Thus, the key issue here is whether the property damage was caused by “an
accident,” or whether it was “expected or intended.” Brother asserts that the District
Court erred in concluding, as a matter of law, that where a sender transmits an unsolicited
fax advertisement, that sender subjectively expects or intends to cause property damage
The New Jersey Supreme Court generally applies a subjective test in determining
an actor’s intent to cause injury. Voorhees v. Preferred Mut. Ins. Co., 607 A.2d 1255,
1265 (N.J. 1992) (“Absent exceptional circumstances that objectively establish the
insured’s intent to injure, we will look to the insured’s subjective intent to determine
intent to injure.”). We must therefore determine “whether the alleged wrongdoer
11
intended or expected to cause an injury.” Id. at 1264. Brother argues that this question
should have been presented to the jury because it raises genuine issues of material fact.
We disagree. Brother’s argument is premised on its contention that the District
Court erred by focusing on the intentional nature of the act -- the sending of unsolicited
faxes -- rather than on whether Brother intended the resulting injury. Brother emphasizes
that its in-house counsel certified that Brother “did not intend to cause any injury or
damage to the recipients of the facsimiles.” J.A. 833. Brother’s unmodified and
undefined use of the word “injury,” however, unnecessarily complicates the relevant
inquiry: whether Brother expected or intended the property damage sustained by the
Stonecrafters class members. Because the property damage here is the depletion of paper
and toner, and because Brother knew that this damage would occur as a result of its
unsolicited advertisements, we hold that Brother expected or intended to cause the injury.
This conclusion is consistent with prior case law. See Melrose, 432 F. Supp. 2d at
510 (holding that where the insured knew that “its actions would cause the very harm that
the TCPA aims to prevent,” those actions were “expected or intended” and “no duty to
defend ar[ose] under the Policy’s property damage provisions”); Res. Bankshares Corp.,
407 F.3d at 638-39 (holding that property damage was not caused by an accident where
the insured “does not deny that it intentionally sent advertisements by fax” and it is
“obvious” that the “‘natural or probable consequence’ of sending a fax” is the “depletion
of the recipient’s time, toner, and paper, and occupation of the fax machine and phone
12
line”). In Melrose, the court held that St. Paul owed no duty to defend under the property
damage provision because “Melrose clearly intended to fax its advertisements to Class
members” who had not given prior consent. Melrose, 432 F. Supp. 2d at 510. The court
also noted that “Melrose’s knowledge about the TCPA and its lack of intent to violate the
TCPA are irrelevant to whether it intended to cause harm that befell Class members.” Id.
We find Melrose particularly instructive because that case dealt with policy
language identical to the language before us, and the insured put forth many of the same
arguments that Brother now asserts. Although Melrose interpreted Pennsylvania law and
not New Jersey law, Pennsylvania courts also have a subjective standard to determine
intent to cause injury. Applying New Jersey’s subjective intent standard to the present
case, we conclude that Brother intended or expected to cause an injury when it knowingly
sent faxes to recipients without their permission. Because, as Brother concedes, the
relevant property damage here is the consumption of paper and toner, Brother must have
expected or intended that damage to occur when it engaged in blast-faxing. Thus, St.
Paul has no duty to defend or indemnify Brother under the Policy’s property damage
provision.
IV.
For these reasons, we will affirm the District Court’s judgment in all respects.
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