Telephone Consumer Protection Act (TCPA)

Earlier this month, the California Supreme Court, in Yahoo Inc. v. National Union Fire Insurance Co. of Pittsburgh, Pennsylvania, Supreme Court of California No. S253593, ruled in favor of Yahoo, Inc. (Yahoo!), a policyholder seeking insurance coverage for Telephone Consumer Protection Act (TCPA) claims.

The case came to the California Supreme Court as a certified question of law from the Ninth Circuit Court of Appeals. The Supreme Court reviewed the federal district court’s ruling, which dismissed Yahoo!’s insurance coverage action, and entered a judgment in favor of National Union Fire Insurance Company of Pittsburgh, PA (National Union). The high court disagreed, applying well-settled California rules of insurance policy interpretation, and found that the commercial general liability policy was ambiguous and must be interpreted in accordance with Yahoo!’s objectively reasonable expectations.

The facts

Congress passed the TCPA in 1991 to protect telephone users from unsolicited robocalls, robotexts, and junk faxes. Yahoo! has been named in a series of putative class action lawsuits alleging unsolicited text messages in violation of the TCPA. National Union declined to defend or indemnify Yahoo! in these lawsuits, claiming that the policy language in its commercial general liability insurance policy unambiguously bars coverage.Continue Reading California Supreme Court rules in favor of policyholders: what we learn from Yahoo! Inc. v. National Fire Insurance 

On June 5, 2009, in response to the appeal filed by Myron Corporation, a New Jersey appellate court held that Atlantic Mutual Insurance Corp. was responsible for Myron’s counsel fees incurred in fending off Atlantic’s Illinois declaratory judgment action pursuant to NJ Rule 4:42-9(a)(6). The coverage dispute centered on defense coverage for numerous cases filed against Myron, alleging that junk faxes sent by Myron violated the Telephone Consumer Protection Act (“TCPA”). Atlantic defended Myron in the cases under a reservation of rights. After the Seventh Circuit ruled that insurance coverage was not available for TCPA claims in an unrelated case [Am. States Ins. Co. v. Capital Assoc. of Jackson County, Inc.], Atlantic decided it was a good time to file a DJ action against Myron in Illinois federal court.

The problem with this brilliant strategy was that, as the Illinois court wrote, dismissing the case: “a New Jersey court has the greatest interest in resolving an insurance coverage dispute arising from policies which appear to have been issued in New Jersey to a New Jersey corporation with its principal place of business in New Jersey.” Once in the hands of a New Jersey court, Atlantic lost. The court held that Atlantic owed a defense to Myron for the TCPA cases. The parties then settled, except on the issue of whether Myron was entitled to counsel fees for both the New Jersey and Illinois insurance coverage litigations under NJ Rule 4:42-9(a)(6).

Things didn’t improve for Atlantic on appeal:

We agree with Myron that, unless the insured can recover its counsel fees for out-of-state litigation in this situation, an insurer could wear down the insured financially through forum-shopping. In this case, there is no doubt that Atlantic filed its action in Illinois to take advantage of a favorable Seventh Circuit ruling on coverage. While this may have been good legal strategy from Atlantic’s point of view, it imposed costs on Myron to fight its way out of what the Illinois court found was an inappropriate forum, and to get the case back into an appropriate venue.

Continue Reading Have NJ Court Rules, Will Travel: NJ Court Holds Insurer Must Pay Counsel Fees Incurred in Illinois Declaratory Judgment Action