Yahoo! Inc. v. National Union Fire Insurance , 913 F.3d 923 ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
YAHOO! INC., a Delaware No. 17-16452
corporation,
Plaintiff-Appellant, D.C. No.
5:17-cv-00447-NC
v.
NATIONAL UNION FIRE ORDER
INSURANCE COMPANY OF CERTIFYING
PITTSBURGH, PENNSYLVANIA, a QUESTION TO
Pennsylvania corporation, THE CALIFORNIA
Defendant-Appellee. SUPREME COURT
Filed January 16, 2019
Before: MILAN D. SMITH, JR., and JACQUELINE H.
NGUYEN, Circuit Judges, and JANE A. RESTANI, *
Judge.
Order
*
The Honorable Jane A. Restani, Judge for the United States Court
of International Trade, sitting by designation.
2 YAHOO! V. NAT’L UNION FIRE INS. CO.
SUMMARY **
Insurance Law / Right of Privacy
The panel certified to the California Supreme Court the
following question:
Does a commercial liability policy that
covers “personal injury,” defined as “injury .
. . arising out of . . . [o]ral or written
publication . . . of material that violates a
person’s right of privacy,” trigger the
insurer’s duty to defend the insured against a
claim that the insured violated the Telephone
Consumer Protection Act by sending
unsolicited text message advertisements that
did not reveal any private information?
ORDER
We ask the California Supreme Court to resolve an
important and unresolved question of state law. The right to
privacy is generally understood to encompass both a right
“to be free from unwanted intrusions,” known as the right to
seclusion, as well as a right “to keep personal information
confidential,” known as the right to secrecy. State Farm
Gen. Ins. v. JT’s Frames, Inc., 104 Cal. Rptr. 3d 573, 585
(Ct. App. 2010); see ACS Sys., Inc. v. St. Paul Fire & Marine
Ins., 53 Cal. Rptr. 3d 786, 794–95 (Ct. App. 2007).
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
YAHOO! V. NAT’L UNION FIRE INS. CO. 3
Many commercial general liability policies cover “injury
. . . arising out of . . . [o]ral or written publication . . . of
material that violates a person’s right of privacy.” See
Penzer v. Transp. Ins., 545 F.3d 1303, 1311 (11th Cir. 2008)
(discussing this “widely used language”). Courts
nationwide are divided as to whether such a provision covers
injury solely to the right to seclusion, such as where the
insured’s unsolicited advertising message disturbs the
recipient’s privacy but does not reveal a third party’s private
information. Compare, e.g., Columbia Cas. Co. v. HIAR
Holding, L.L.C., 411 S.W.3d 258, 269–70 (Mo. 2013)
(finding coverage), Penzer v. Transp. Ins., 29 So. 3d 1000,
1002 (Fla. 2010) (same), and Terra Nova Ins. v. Fray-
Witzer, 869 N.E.2d 565, 574 (Mass. 2007) (same), with, e.g.,
Auto-Owners Ins. v. Websolv Computing, Inc., 580 F.3d 543,
550–51 (7th Cir. 2009) (finding no coverage under Iowa
law), and Res. Bankshares Corp. v. St. Paul Mercury Ins.,
407 F.3d 631, 642 (4th Cir. 2005) (same under Virginia law).
Of the two California courts to address this issue, ACS
Systems suggested that such a provision would provide
coverage, see 53 Cal. Rptr. 3d at 798, but JT’s Frames held
that it does not, see 104 Cal. Rptr. 3d at 588.
This issue frequently arises in claims under the
Telephone Consumer Protection Act of 1991 (“TCPA”), a
statute which generally prohibits the use of “any . . . device
to send, to a telephone facsimile machine, an unsolicited
advertisement.” 1 47 U.S.C. § 227(b)(1)(C). The TCPA’s
explicit purpose “is to protect privacy rights,” L.A. Lakers,
Inc. v. Fed. Ins., 869 F.3d 795, 803 (9th Cir. 2017) (lead
1
The TCPA permits unsolicited advertisements as part of an
established business relationship or with notice of the recipient’s right to
opt out of future advertising. See 47 U.S.C. § 227(b)(1)(C), (b)(2)(D)–
(E).
4 YAHOO! V. NAT’L UNION FIRE INS. CO.
opinion); see 47 U.S.C. § 227(b)(2)(C) (referencing “the
privacy rights that [the TCPA] is intended to protect”)—
specifically, the right to seclusion. See Park Univ. Enters.,
Inc. v. Am. Cas. Co. of Reading, PA, 442 F.3d 1239, 1249
(10th Cir. 2006) (“Courts have consistently held the TCPA
protects a species of privacy interest in the sense of
seclusion.”). Because the TCPA does not implicate
violations of the right to secrecy, insurance coverage of
TCPA liability turns on whether “publication . . . of material
that violates a person’s right of privacy” applies to the right
to secrecy, seclusion, or both.
We need guidance in applying California’s rules
governing the interpretation of insurance policies in this
context. Although we may hazard a guess, the tension
between the two California Court of Appeal decisions
“inhibit[s] our ability to ‘predict how the [California
Supreme Court] would decide,’ as we are bound to do.”
Patterson v. City of Yuba City, 884 F.3d 838, 841 (9th Cir.
2018) (second alteration in Patterson) (quoting McKown v.
Simon Prop. Grp. Inc., 689 F.3d 1086, 1091 (9th Cir. 2012)).
The California Supreme Court sometimes looks to decisions
in other jurisdictions for their persuasive value, see, e.g.,
People v. Wade, 369 P.3d 546, 548 (Cal. 2016); TRB Invs.,
Inc. v. Fireman’s Fund Ins., 145 P.3d 472, 476 (Cal. 2006)
(reversing Court of Appeal’s construction of insurance
policy based in part on “different interpretations of this or
similar language” by out-of-state courts), but the
inconsistent results from courts outside of California only
increase the difficulty in predicting how the California
Supreme Court would rule. Compare Am. States Ins. v.
Capital Assocs. of Jackson Cty., Inc., 392 F.3d 939, 940, 943
(7th Cir. 2004) (holding it was “[s]o clear” under Illinois law
that TCPA claims were not “publication of material that
violates a person’s right of privacy” that the insurer did not
YAHOO! V. NAT’L UNION FIRE INS. CO. 5
need to provide a defense), with Valley Forge Ins. v.
Swiderski Elecs., Inc., 860 N.E.2d 307, 323 (Ill. 2006)
(holding that under Illinois law such a policy provision did
indeed cover TCPA claims).
I.
Certified Question
Therefore, pursuant to Rule 8.548 of the California Rules
of Court, we respectfully ask the California Supreme Court
to exercise its discretion to decide the following certified
question:
Does a commercial liability policy that
covers “personal injury,” defined as “injury
. . . arising out of . . . [o]ral or written
publication . . . of material that violates a
person’s right of privacy,” trigger the
insurer’s duty to defend the insured against a
claim that the insured violated the Telephone
Consumer Protection Act by sending
unsolicited text message advertisements that
did not reveal any private information?
Our phrasing of the question should not restrict the
California Supreme Court’s consideration of the issues
involved. The California Supreme Court may rephrase the
question as it sees fit in order to address the parties’
contentions. See Cal. R. Ct. 8.548(f)(5). If the California
Supreme Court agrees to decide this question, we agree to
accept its decision. See id. R. 8.548(b)(2). We recognize
that the California Supreme Court has a substantial caseload,
and we submit this question because of its significance to the
many class actions involving TCPA claims against insureds
6 YAHOO! V. NAT’L UNION FIRE INS. CO.
with these policies and the large amounts of potential
liability at stake.
II.
Background Facts
National Union sold Yahoo! five consecutive one-year
policies for commercial general liability insurance, which
consisted of a standard policy form modified by an
endorsement that the parties negotiated. Subject to certain
exclusions, the standard policy covered liability for both
“personal and advertising injury,” defined as injury arising
out of any of seven specified offenses, including “[o]ral or
written publication, in any manner, of material that violates
a person’s right of privacy.” The standard policy excluded
personal and advertising injury arising from the distribution
of material in violation of the TCPA.
The endorsement modified this coverage in three key
ways. First, it deleted the express exclusion of injuries
arising from TCPA violations. Second, it limited the scope
of coverage to “personal injury,” which it defined as injury
arising out of any of five offenses:
a. False arrest, detention, or imprisonment;
b. Malicious prosecution;
c. The wrongful eviction from, wrongful entry into, or
invasion of the right of private occupancy of a room,
dwelling or premises that a person occupies,
committed by or on behalf of its owner, landlord or
lessor;
YAHOO! V. NAT’L UNION FIRE INS. CO. 7
d. Oral or written publication, in any manner, of
material that slanders or libels a person or
organization or disparages a person’s or
organization’s goods, products or services; or
e. Oral or written publication, in any manner, of
material that violates a person’s right of privacy.
Third, the endorsement excluded coverage of
“advertising injury,” which it defined as injury arising from
any of four offenses:
a. Oral or written publication, in any manner, of
material in your “advertisement” 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, in any manner, of
material in your “advertisement” that violates a
person’s right of privacy;
c. The use of another’s advertising idea in your
“advertisement”; or
d. Infringing upon another’s copyright, trade dress or
slogan in your “advertisement.”
Yahoo! was a defendant in five putative class actions—
two in California, two in Illinois, and one in Pennsylvania—
alleging injuries that arose during the time periods covered
by the National Union policies. All five lawsuits alleged that
Yahoo! violated the TCPA by transmitting unsolicited text
message advertisements to putative class members. The
California lawsuits alleged that Yahoo! “invad[ed] [the
plaintiffs’] privacy” by negligently or willfully sending them
8 YAHOO! V. NAT’L UNION FIRE INS. CO.
unsolicited text messages in violation of the TCPA. In
addition, one of the Illinois lawsuits asserted that the TCPA
claim was “an effort to enforce [the plaintiffs’] fundamental
federal right to privacy.”
When National Union refused to tender a defense in the
underlying TCPA litigation, Yahoo! commenced this action
for breach of contract. The district court granted National
Union’s motion to dismiss, concluding that the policy’s
coverage of personal injury arising out of “publication . . . of
material that violates a person’s right of privacy” does not
apply to Yahoo!’s TCPA liability.
III.
California Case Law
Two California Courts of Appeal have addressed
whether “right of privacy” insurance provisions cover TCPA
violations. In ACS Systems, the policy covered “advertising
injury” only and the advertising injury offense at issue was
“[m]aking known to any person or organization written or
spoken material that violates an individual’s right of
privacy.” 53 Cal. Rptr. 3d at 790, 794 (emphasis added).
The court interpreted this language “such that the injured
party is the one whose private material is made known, not
the one to whom the material is made known.” Id. at 795
(quoting Res. Bankshares, 407 F.3d at 641). Thus, ACS
Systems held that TCPA claims, which implicate the right to
seclusion, were not covered under the policy, which was
limited to violations of the right to secrecy, because “the
recipient of an unauthorized advertising fax has no claim that
‘material that violates an individual’s right of privacy’ has
been ‘made known’ to a third party.” Id. at 795–96.
YAHOO! V. NAT’L UNION FIRE INS. CO. 9
ACS Systems distinguished several cases finding TCPA
coverage where the policy language, like that here, covered
advertising injury “arising out of . . . oral or written
publication of material that violates a person’s right of
privacy.” Id. at 798 (quoting Park Univ. Enters., Inc. v. Am.
Cas. Co. of Reading, PA, 314 F. Supp. 2d 1094, 1099 (D.
Kan. 2004)). ACS Systems concluded that those cases
involved “differ[ent]” policy language that “did not define
‘right of privacy’ or ‘oral or written publication.’” Id.; cf.
Swiderski Elecs., 860 N.E.2d at 322 (finding coverage under
the policy language at issue here and observing that
“wording seems to have been an important factor” in
Resource Bankshares’ opposite result under policy language
similar to that in ACS Systems).
In JT’s Frames, the Court of Appeal considered the
policy language that ACS Systems found distinguishable—
advertising injury arising from “oral or written publication
of material that violates a person’s right of privacy”—and
held that it did not cover TCPA liability. JT’s Frames,
104 Cal. Rptr. 3d at 576, 588. In reaching this holding, JT’s
Frames relied principally on the “last antecedent” canon of
construction, which provides that “qualifying words, phrases
and clauses are to be applied to the words or phrases
immediately preceding and are not to be construed as
extending to or including others more remote.” People v.
Pennington, 400 P.3d 14, 21 (Cal. 2017) (quoting People v.
Lewis, 181 P.3d 947, 1002 (Cal. 2008)). Applying this rule,
JT’s Frames concluded that “the phrase ‘that violates a
person’s right to privacy’ must be construed to modify the
word ‘material’” rather than the phrase “publication of
material.” 104 Cal. Rptr. 3d at 586. The court reasoned that
“to come within the policies’ definition of advertising injury,
the material at issue must ‘violate[] a person’s right to
privacy.’” Id. (alteration in original). And that would be the
10 YAHOO! V. NAT’L UNION FIRE INS. CO.
case “only if the material contained confidential information
and violated the victim’s right to secrecy.” Id.
Other courts disagree that the last antecedent canon
necessarily applies in this context. See Penzer, 29 So. 3d at
1007 (observing that “the doctrine . . . is not an absolute
rule” and finding “that the clause ‘that violates a person’s
right of privacy’ is applicable as much to ‘publication’ as to
‘material;’ therefore, the clause should be read as applicable
to all”); Owners Ins. v. European Auto Works, Inc., 695 F.3d
814, 821 (8th Cir. 2012) (“While it is possible that the
limiting phrase was intended to modify only the word
‘material,’ it is equally possible to read the provision so that
the limiting phrase modifies the preceding phrase
‘publication of material.’”); Cynosure, Inc. v. St. Paul Fire
and Marine Ins., 645 F.3d 1, 5 n.3 (1st Cir. 2011) (“It is not
so clear that ‘publication’ would not be fairly read as
modified, even with ‘material’ in between.”).
Courts in other jurisdictions also take issue with JT’s
Frames’ assumption that “material” violates a person’s right
to privacy only if it reveals that person’s secret information
to a third party. See Penzer, 29 So. 3d at 1007 (“[E]ven if
the phrase ‘that violates a person’s right of privacy’ only
modifies the term ‘material,’ it does not follow that only the
secrecy right to privacy is implicated because ‘material’
could also invade one’s seclusion.”); Fray-Witzer,
869 N.E.2d at 574 (“In effect, the insurers argue that the
policy’s definition of injury should be read to say ‘[o]ral or
written publication of material, the content of which violates
a person’s right of privacy.’”).
JT’s Frames also looked to the provision’s context in the
policy as one of four “advertising injury” offenses. 104 Cal.
Rptr. 3d at 587. The other three types of advertising injury
“all involve[d] injury caused by the information contained in
YAHOO! V. NAT’L UNION FIRE INS. CO. 11
the advertisement.” Id. Given that context, JT’s Frames
concluded that the “right of privacy” provision “may most
reasonably be interpreted as referring to advertising material
whose content violates a person’s right of privacy.” Id.
One of the neighboring “advertising injury” offenses in
JT’s Frames, “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,” id.,
is nearly identical to one of the “personal injury” offenses
here. However, the other three “personal injury” offenses
covered in the policy here—“[f]alse arrest, detention, or
imprisonment,” “malicious prosecution,” and “wrongful . . .
invasion of the right of private occupancy”—are different
and do not involve injury caused by information in an
advertisement. Moreover, the two “personal injury”
offenses covered here that are similar to “advertising injury”
offenses covered in the JT’s Frames policy also have
analogues in the “advertising injury” offenses here that are
excluded from coverage. The difference between the
parallel provisions in the policy here is that in the
“advertising injury” offenses, the word “material” is
immediately followed by “in your ‘advertisement’” whereas
the “personal injury” offenses lack this modification. Thus,
there are significant differences between the contextual
setting here and in JT’s Frames.
We would greatly benefit from knowing whether the
California Supreme Court agrees with JT’s Frames
application of the last antecedent rule and to what extent its
interpretation of the relevant policy language depends on
other contextual factors—in particular, the distinction
between personal and advertising injury. We therefore
respectfully ask that the California Supreme Court decide the
certified question.
12 YAHOO! V. NAT’L UNION FIRE INS. CO.
IV.
Administrative Information
We provide the following information as required by
California Rule of Court 8.548(b)(1).
The title of this case is: YAHOO! INC., Plaintiff-
Appellant v. NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PENNSYLVANIA,
Defendant-Appellee.
The case number in our court is 17-16452.
Plaintiff-Appellant Yahoo! Inc. is represented by the
following counsel:
William T. Um
Jassy Vick Carolan LLP
800 Wilshire Boulevard, Suite 800
Los Angeles, California 90017
Defendant-Appellee National Union Fire Insurance
Company of Pittsburgh, Pennsylvania is represented by the
following counsel:
Jodi S. Green
Nicolaides Fink Thorpe Michaelides Sullivan LLP
626 Wilshire Boulevard, Suite 1000
Los Angeles, California 90017
Richard H. Nicolaides, Jr. and Daniel I. Graham, Jr.
Nicolaides Fink Thorpe Michaelides Sullivan LLP
10 South Wacker, 21st Floor
Chicago, Illinois 60606
YAHOO! V. NAT’L UNION FIRE INS. CO. 13
Matthew Lovell
Nicolaides Fink Thorpe Michaelides Sullivan LLP
101 Montgomery Street, Suite 2300
San Francisco, California 94104
We designate Yahoo! Inc. as the petitioner if our request
for a decision is granted, as it is the appellant before our
court.
* * *
We direct the Clerk of Court to transmit immediately to
the California Supreme Court, under official seal of the
United States Court of Appeals for the Ninth Circuit, copies
of all relevant briefs and excerpts of record, as well as an
original and 10 copies of this order, with a certificate of
service on the parties. See Cal. R. Ct. 8.548(c)–(d).
This case is withdrawn from submission and will be
resubmitted following receipt of the California Supreme
Court’s opinion on the certified question or notification that
it declines to answer the certified question. The Clerk of
Court shall administratively close this docket pending a
ruling by the California Supreme Court. The panel shall
retain jurisdiction over further proceedings in this court.
The parties shall notify the Clerk of Court within one
week after the California Supreme Court accepts or rejects
certification. In the event that the California Supreme Court
grants certification, the parties shall notify the Clerk of Court
within one week after the California Supreme Court renders
its opinion.
IT IS SO ORDERED.