Mr. Emanuel, on behalf of himself and others similarly situated, subsequently brought a class action lawsuit against the Lakers. He alleged that the Lakers had sent the response text message using an “automatic telephone dialing system,” in violation of the Telephone Consumer Protection Act (“TCPA”).

Mr. Emanuel brought two claims for relief: (1) negligent violation of the TCPA, and (2) knowing and/or willful violation of the TCPA. He sought statutory damages and injunctive relief.

The Lakers asked their insurance provider, the Federal Insurance Company, to defend them against the lawsuit.

Federal denied coverage and declined to defend the Lakers, concluding that Mr. Emanuel had brought an invasion of privacy suit, which was specifically excluded from coverage.

The Lakers sued Federal, asserting two claims for relief. First, the Lakers brought a claim for breach of contract, asserting that Federal had violated the policy by denying coverage for the Emanuel lawsuit. Second, the Lakers brought a claim for tortious breach of the implied covenant of good faith and fair dealing, based on Federal's denial of coverage.

Federal moved to dismiss, and the U.S. District Court for the Central District of California granted its motion. The district court found that the Lakers could not succeed in the suit under any cognizable legal theory, because TCPA claims were “implicit invasion-of-privacy claims” that fell squarely within the policy's “broad exclusionary clause.”

The Lakers appealed to the Ninth Circuit.

The Federal Insurance Policy

The Federal Insurance policy provided that no coverage was available for a claim:

based upon, arising from, or in consequence of libel, slander, oral or written publication of defamatory or disparaging material, invasion of privacy, wrongful entry, eviction, false arrest, false imprisonment, malicious prosecution, malicious use or abuse of process, assault, battery or loss of consortium[.] 

The TCPA makes it unlawful for a person,

to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice . . .

to any telephone number assigned to a . . . cellular telephone service . . . or any service for which the called party is charged for the call. . . .

47 U.S.C. § 227(b)(1)(A)(iii).

In addition, Section 227(b)(2)(B) provides that the Federal Communications Commission,

may, by rule or order, exempt from the requirements of paragraph (1)(B) of this subsection, subject to such conditions as the Commission may prescribe-

. . .

(ii) such classes or categories of calls made for commercial purposes as the Commission determines-

(I) will not adversely affect the privacy rights that this section is intended to protect

(Emphasis added.)

Section 227(b)(2)(C) provides that,

In implementing the requirements of this subsection, the Commission-

may, by rule or order, exempt from the requirements of paragraph (1)(A)(iii) of this subsection calls to a telephone number assigned to a cellular telephone service that are not charged to the called party, subject to such conditions as the Commission may prescribe as necessary in the interest of the privacy rights this section is intended to protect.

(Emphasis added.)

The Ninth Circuit's Decision

The circuit court affirmed.

In its decision, the circuit court pointed out that the Federal policy excluded from coverage claims “based upon, arising from, or in consequence of . . . invasion of privacy.” The “broad interpretation” of the “arising from” clause under California law excluded from coverage claims with even “a minimal causal connection or incidental relationship” to invasion of privacy, the Ninth Circuit stated.

The circuit court observed that the Federal policy did not explicitly exclude coverage of TCPA claims, but it declared that the “purpose of the TCPA was to prevent invasions of privacy.” It reasoned that the TCPA twice “explicitly” stated that it was intended to protect privacy rights – and contained no other statement regarding its intended purpose. Thus, the circuit court found, “from this unequivocal statement, and the lack of any other statements expressing an alternative intent,” that the purpose of the TCPA was “to protect privacy rights and privacy rights alone.”

Accordingly, the Ninth Circuit ruled, in pleading the elements of a TCPA claim, a plaintiff pleaded an invasion of privacy claim.

Therefore, it concluded, the exclusion in the Federal policy for invasion of privacy claims meant that Federal had no obligation to defend the Lakers against Mr. Emanuel's complaint, which asserted negligent violation of the TCPA and knowing/willful violation of the TCPA.

The case is Los Angeles Lakers, Inc. v. Federal Ins. Co., No. 15-55777 (9th Cir. Aug. 23, 2017). Attorneys involved include: Kirk Pasich (argued), Pamela M. Woods, and Anamay M. Carmel, Liner LLP, Los Angeles, California, for Plaintiff-Appellant. Robert M. Traylor (argued), Seltzer Caplan McMahon Vitek, San Diego, California, for Defendant-Appellee.

FC&S Legal Comment

It should be noted that, in dissent, one circuit judge said that a TCPA claim was not automatically a privacy claim. The dissent said that Mr. Emanuel's claims were “statutory TCPA claims.” The dissent concluded that Mr. Emanuel's claims did not fall under the privacy exclusion of the insurance policy, that Federal Insurance had a duty to defend the Lakers, and that the district court had erred when it had dismissed the Lakers' claims.