The fight is not over yet, but the insurance industry just had a significant victory in the United States Court of Appeals for the Ninth Circuit.
The scenario is likely familiar to most. You’re invited to send a text and get something in return—maybe news updates, maybe a chance to win concert tickets. In this case it was the promise of having your sent text posted at a basketball game. Someone sent a text hoping to see their message on a big screen at a Lakers game, and then shortly thereafter got a text back reading something along the lines of: “Thnx! Got your txt. If you want more texts from us, respond with ‘yes,’ if not respond with ‘stop.’” About five weeks after he received such a text while at a Lakers game, and apparently received other texts at subsequent times, David Emanuel sued the Los Angeles Lakers, Inc., proposing a class action based on two alleged violations of the Telephone Consumer Protection Act.
In turn, the Lakers sought coverage from their insurer. The policy provided no coverage was available for a claim “based upon, arising from, or in consequence of . . . invasion of privacy.” Categorizing Mr. Emanuel’s suit as based on invasion of privacy, the Lakers’ carrier denied coverage. The Lakers sued, claiming breach of contract and tortious breach of the implied covenant of good faith and fair dealing.
The United States District Court of the Central District of California granted the carrier’s Rule 12(b)(6) motion. The Lakers appealed to the Ninth Circuit, which recently issued a decision with three different written opinions: an opinion for the court affirming the District Court, with significant and favorable implications for the insurance industry; a concurrence advocating a narrower ruling; and a harsh dissent.
Writing for the court, Ninth Circuit Judge N. R. Smith’s opinion hinges largely on two factors: the broad interpretation given by relevant courts to the clause “arising from” in insurance contracts, and the “explicitly stated purpose of the TCPA” as based on invasion of privacy. Judge Smith acknowledges that the TCPA “does not dedicate a section of its text to describing its purpose,” but he derives the purpose from sections directing the FCC to implement future regulations. In two separate subsections of 47 U.S.C. § 227(b)(2), Congress referred to “the privacy rights [that] this section is intended to protect.” Based on the broad “arising from” language and the purpose of the TCPA, Judge Smith concluded that coverage was excluded under the policy at issue.
If this was a 3–0 decision, and the rest of the country always lined up with the Ninth Circuit, perhaps the rest of the insurance industry could be excused for taking the day off early. But, “not so fast.”
First, visiting Judge Murphy wrote a short but meaningful concurrence. He wrote that, because Mr. Emanuel’s complaint itself referred to an invasion of privacy several times, that was sufficient to determine that the claims arose from such an invasion, and the Ninth Circuit “need not hold more broadly that a TCPA claim is inherently an invasion of privacy claim.” That concurrence alone may be reason for some pause in applying this decision as widely Judge Smith’s opinion proposes.
Second, Ninth Circuit Judge Tallman’s dissent argues this issue is far from over. He begins by reminding that Judge Smith is “writing for a divided court.” He then argues that Mr. Emanuel’s complaint actually disavowed any invasion of privacy claim. He also takes issue with Judge Smith’s reliance on statutory purpose when the language of the statute is unambiguous. According to Judge Tallman, the statutory language is not ambiguous, and therefore an examination of the statute should start and end with the statutory language, with resort to examining the statutory purpose
These and other arguments will likely be considered again when this issue is addressed by other circuits. They may also be considered again by the full Ninth Circuit. The Lakers filed a petition for rehearing en banc.
TCPA litigation has proliferated over the past few years. TCPA claims are often explicitly excluded from general liability policies. Therefore, if this ruling holds, plaintiffs, at least in the Ninth Circuit, may have a significant, potentially insurmountable, wall to climb.