In Los Angeles Lakers, Inc. v. Federal Insurance Company, __ F.3d __ (2017), the United States Court of Appeals for the Ninth Circuit determined the liability insurance policy at issue, which "unequivocally and broadly excludes coverage for invasion of privacy claims," excludes coverage for a Telephone Consumer Protection Act ("TCPA") claim, which is, "by its nature, an invasion of privacy claim."
While at a Los Angeles Lakers game, David Emanuel sent a text message to a number displayed on the scoreboard, hoping to have his text message displayed on the scoreboard. In response, he 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." Emanuel brought a class action lawsuit against the Lakers, alleging the Lakers sent the response text message with an "automatic telephone dialing system" in violation of the TCPA. Emanuel's First Amended Complaint "asserted, several times, that this message was an invasion of his privacy, and that the Lakers had invaded the privacy of other class members."
Shortly after Emanuel filed the First Amended Complaint, the Lakers notified their insurer, Federal Insurance Company ("Federal"). Federal insured the Lakers under a "ForeFront Portfolio" insurance policy, which "provided that '[n]o coverage will be available' for a claim, 'based upon, arising from, or in consequence of" invasion of privacy, inter alia. Federal concluded this provision excluded Emanuel's invasion of privacy suit from coverage. The Lakers filed this suit against Federal, asserting breach of contract and bad faith causes of action. Federal removed the action from state court, then brought a motion to dismiss for failure to state a claim under Federal Rules of Civil Procedure Rule 12(b)(6). The district court granted the motion, determining "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.'" The Lakers appealed.
The Court identified the standard of review as de novo, noting it would "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.'"
The Court first turned to the policy language, applying California rules of contract interpretation:
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. [Citations.] "[A]rising out of" encompasses "originating from, having its origin in, growing out of, . . . flowing from, . . . incident to, or having connection with." [Citation.] Thus, this clause broadly excludes from coverage claims with "a minimal causal connection or incidental relationship" to invasion of privacy. [Citations.] California courts also give the clause "based on" the same broad reading as "arising out of." [Citation.]
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]." [Citation.] Included in this list is "intrusion upon the plaintiff's seclusion or solitude." [Citation.] This form of invasion of privacy has been described as "the right to be let alone." [Citation.] This right to be let alone is relative and is not absolute. [Citation.] However, unwanted calls, received at inconvenient times, generally invade an individual's privacy and right to be let alone. [Citations.]
The Court turned to the TCPA to ascertain the purpose thereof, looking to the language of the statute itself. The Court found "Congress explicitly stated the purpose of the TCPA in two sections: § 227(b)(2)(B) and § 227(b)(2)(C)" both of which specifically reference "the privacy rights that this section is intended to protect."
Thus, the TCPA twice explicitly states that it is intended to protect privacy rights. Equally as significant, the TCPA contains no other statement regarding its intended purpose. Thus, we must presume from this unequivocal statement, and the lack of any other statements expressing an alternative intent, that the purpose of the TCPA is to protect privacy rights and privacy rights alone. [Citations.]
We have before outlined the three elements of a TCPA claim: "(1) the defendant called a cellular telephone number; (2) using an automatic telephone dialing system; (3) without the recipient's prior express consent." [Citation.] Absent from this list is proof that the call invaded the recipient's privacy. This omission is no mistake. As demonstrated by the explicitly stated purpose of the TCPA, Congress concluded that the calls it prohibited in passing the TCPA were an implicit invasion of privacy. In practice, there may be other interests that the TCPA protects. But these alternative interests do not transform Congress's express intent to craft the TCPA to serve privacy interests. Accordingly, in pleading the elements of a TCPA claim, a plaintiff pleads an invasion of privacy claim.
Moreover, once a TCPA plaintiff has established these three elements, and has thus proven an invasion of privacy, the plaintiff may obtain either actual or statutory damages. [Citation.] Such damages are available only because the plaintiff has suffered a cognizable, personal injury. As the district court explained, the "fact that [a plaintiff] seeks only economic damages does not strip [TCPA claims] of their privacy-based character." [Citation.] Instead, "[t]he economic injury stems from" and is a result of a defendant's invasion of a plaintiff's privacy. [Citation.] The availability of statutory damages only eases the burden on plaintiffs of establishing the actual value of the harm they suffered when a defendant invaded their privacy. Of course, if the invasion of privacy resulted in a loss greater than the fixed statutory award, actual damages are available.
The Court concluded Emanuel's claims were excluded under the policy:
Emanuel asserted two claims for relief: negligent violation of the TCPA and knowing/willful violation of the TCPA. Because, as explained above, a plaintiff asserts an invasion of privacy claim when he or she asserts a TCPA claim, Emanuel asserted two invasion of privacy claims and nothing else in his complaint.
When Federal received a request from the Lakers to defend them against the Emanuel complaint, Federal correctly identified the two TCPA claims as claims for invasion of privacy. It is evident from the plain language of the insurance contract that the parties intended to exclude all invasion of privacy claims. We recognize that exclusionary clauses are to be construed against the insurer; but here we must reconcile this rule with our canon of giving effect to the intent of the parties in light of a clause that broadly excludes coverage for any claim originating from, incident to, or having any connection with, invasion of privacy. A TCPA claim falls within the category of intrusion on the "right to be let alone" recognized under California law as an invasion of privacy. Emanuel's claim is unquestionably, at the very least, connected to an alleged invasion of privacy. Therefore, Federal properly concluded that the claims asserted in the Emanuel complaint were excluded from coverage under the Policy. The dissent's narrow construction of the exclusionary clause conflicts with the clear intent of the contracting parties.
The Court rejected the Lakers' contention that Federal had a duty to defend because (1) "Emanuel asserted that he suffered multiple harms, not just an invasion of privacy" and (2) "Emanuel only sought 'recovery of economic injury' and explicitly swore off 'any recovery for personal injury' in his complaint, he did not actually seek relief for invasion of his privacy, which is generally a form of 'personal injury.'"
These statements from Emanuel's complaint regarding economic injury and personal injury cannot overcome the reality that Emanuel asserted two claims for relief, both under the TCPA. As explained above, a TCPA claim is an invasion of privacy claim, regardless of the type of relief sought. Moreover, we will not allow Emanuel to redefine the TCPA by disclaiming any recovery for personal injury. Therefore, Federal would only have had a duty to defend if the facts alleged or known could support a claim other than a TCPA claim. The facts Emanuel asserted are straightforward. He received an unwanted text message from the Lakers and he thought it was sent using an automatic telephone dialing system. The Lakers have not identified what other claim this set of facts could support. The Lakers have also failed to identify any other relevant facts that were known at the time the Emanuel complaint was filed.
Finally, in the motion to dismiss the Emanuel complaint, the Lakers argued that the text message at issue was not the type of "privacy violation or . . . abusive telemarketing practice that Congress aimed to curb by enacting the TCPA," and that the "[p]olicy at the heart of the TCPA therefore . . . warrants dismissal of [Emanuel's] TCPA claims with prejudice." [Citations.] Thus, even the Lakers acknowledged that "y enacting the TCPA, Congress intended to 'protect the privacy interests of . . . telephone subscribers by placing restrictions on unsolicited, automated telephone calls . . . .'" [Citations.] The Lakers also acknowledged that "[c]ourts have consistently held the TCPA protects a species of privacy interest in the sense of seclusion." [Citations.] Our decision should not now allow the Lakers to "manufacture coverage" by changing their argument to suggest that the Emanuel complaint could have been amended to divorce itself completely from the "policy at the heart of the TCPA": protecting individuals from abusive privacy invasions.
For all of these reasons, we must conclude that there was no potential that Emanuel could amend his complaint to assert a claim for relief that would be supported by any of the facts alleged or otherwise known. Federal, therefore, did not have a duty to defend the Lakers against the Emanuel complaint.
The Court affirmed the district court's dismissal of the Lakers' complaint.
District Judge Murphy concurred in affirming the decision, but wrote "separately because the Court can-and should-decide the question of whether Emanuel's claim arose from an invasion of privacy on narrower grounds," namely, that Emanuel repeatedly alleged in his complaint that the receipt of the text message was an invasion of privacy and "[t]he Court need not hold more broadly that a TCPA claim is inherently an invasion of privacy claim."
Circuit Judge Tallman dissented, asserting, in sum:
Because nothing within the words Congress chose suggests that a TCPA plaintiff must prove invasion of privacy, a TCPA claim is not automatically a privacy claim. And because Emanuel expressly disavowed his privacy claims and instead sought recovery under the TCPA, his claims were not common law privacy claims. They were statutory TCPA claims.
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