Source: https://www.injurylawyerhawaii.com/cases-news/personalinjurycases023.html
Timestamp: 2018-02-24 04:05:09
Document Index: 213588927

Matched Legal Cases: ['§ 13', '§ 227', '§ 1332', '§ 227', '§ 227', '§ 227', '§ 1', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 1', '§ 13', '§ 13', '§ 13']

HOOTERS OF AUGUSTA, INC.; and Sam Nicholson, and all other persons or entities similarly situated, Plaintiffs, v.
No. CV102-061. July 23, 2003.
Insured restaurant, which prevailed in its action for declaration that umbrella and excess liability insurers were required to pay judgment that resulted from settlement of consumers' class action against insured, for violating Telephone Consumer Protection Act (TCPA), could not recover attorney fees from insurers, as insurers did not act in bad faith in denying coverage, under Georgia law; issues presented in dispute were novel, and not addressed by any Georgia case. West's Ga.Code Ann. § 13-6-11.
On June 23, 1995, Sam Nicholson, the lead plaintiff in a class action, [FN1] brought suit pursuant to the Telephone Consumer Protection Act ("the TCPA"), 47 U.S.C.A. § 227 (West 2001), in the Superior Court of Richmond County. (Doc. No. 1.) In this suit, the plaintiffs alleged that Hooters of Augusta used co-defendant Value-Fax of Augusta ("Value-Fax") to send unsolicited facsimile ("fax") advertisements to fax machines in Georgia. (Id.) On March 21, 2001, a jury verdict was returned against Hooters. (Id.) Thereafter, on April 25, 2001, the trial judge entered judgment against Hooters in the amount of $11,889,000. (Id.) After the judgment was entered, Hooters filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Georgia. (Id.)
Hooters filed the instant action (CV102-061) pursuant to the terms of the settlement between it and Nicholson, on February 20, 2002 against (1) Zurich, (2) AGIC, and (3) Nicholson. (Doc. No. 1.) The case was thereafter removed by Zurich and AGIC from the Superior Court of Richmond County on April 19, 2002 based upon the diversity of the parties' citizenship and the amount in controversy. 28 U.S.C.A. § 1332 (1993). In its Notice of Removal (Doc. No. 1), AGIC and Zurich argued that "the Court should look beyond the pleadings and arrange the parties according to their sides in this dispute, and in doing so realign Defendant Nicholson as a party plaintiff." (Doc. No. 1 at 2.) Zurich and AGIC further argued that "Nicholson is simply a sham defendant named for no other purpose than to attempt to defeat diversity. Plaintiff makes no claim for relief against Nicholson whatsoever." (Id. at 3.) After a hearing was held on June 18, 2002 on Plaintiff's motion for remand, the Court agreed with AGIC and Zurich and "realigned Nicholson as a p. 1369 plaintiff, maintaining jurisdiction over the case." (Doc. No. 62 at 7.)
FN3. The CGL Policy at issue in this case covers "those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay by reason of liability ... because of Bodily Injury, Property Damage, Personal Injury or Advertising Injury that takes place during the Policy Period and is caused by an Occurrence...." (AGIC Policy § I.) The only two types of harm at issue in this case are property damage and advertising injury.
I must first consider whether the injury in the underlying case was an "advertising injury" within the meaning of the policy. The definition of "advertising injury", in pertinent part, [FN4] is as follows: "Advertising Injury means injury arising solely out of your [the insured's] advertising activities as a result of ... [o]ral or written publication of material that violates a person's right of privacy...." (AGIC Policy § IV.A (emphasis added).) [FN5]
The TCPA makes it "unlawful for any person within the United States ... to use any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine...." 47 U.S.C.A. § 227(b)(1). As defined in the statute, an "unsolicited advertisement" means "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission." Id. § 227(a)(4).
The United States Court of Appeals for the Eighth Circuit has stated that "individuals p. 1373 at work in private businesses are entitled to expect that they will not be disturbed except by personal or business invitees...." Van Bergen v. Minnesota, 59 F.3d 1541, 1554 (8th Cir.1995). The Eighth Circuit's premise comports with the layman's expectation that he will be "left alone" by marketers while he is pursuing his livelihood. To that effect, the TCPA provides that no one is to be harassed with advertisement faxes unless he specifically solicits them. 47 U.S.C.A. § 227(b)(1); see S.Rep. No. 102-178, at 8 (1991), reprinted in 1991 U.S.C.C.A.N.1968, 1975, 1991 WL 211220 ("[T]he recipient [of a fax advertisement] either must invite or must give his or her permission to receive an advertisement via a fax machine."). Implicit in this statutory provision is the expectation that those who do not request fax advertisements will not be bothered by them. While there is a paucity of decisional law on the TCPA, one court has specifically analyzed whether the receipt of advertisements at a business location violates a person's "right of privacy". See Merchants & Business Men's Mut. Ins. Co. v. A.P.O. Health Co. (Sup.Ct. Nassau County, N.Y. Aug. 29, 2002) (Westlaw, New York Law Journal Database). The Merchants court, citing the legislative history of the TCPA, determined that "receipt of unsolicited facsimile transmissions qualifies as a violation of the right of privacy, thereby triggering the coverage provisions of the subject policies." Id. As the Merchants court explained, the TCPA "was enacted precisely because unchecked telemarketing was regarded [as] an unacceptable invasion of the right of privacy. Indeed, the Act's legislative history repeatedly characterizes telemarketing excesses--which include unsolicited facsimile transmissions--as invasions of privacy." Id. (citations omitted); see also Minnesota ex rel. Hatch v. Sunbelt Communications & Marketing, LLC, No. CIV.02CV770 (JEL/JGL), 2002 WL 31017503, at p. 6 (D.Minn. Sept. 4, 2002) ("[T]he Court is convinced that the TCPA materially furthers the State's interests in preventing the invasion of privacy ... that result[s] from fax advertising...."). The Merchants court was careful to explain that it was analyzing the insurance policy "[a]pplying the test of common speech and focusing on the reasonable expectations of the insured...." See Merchants & Business Men's Mut. Ins. Co. v. A.P.O. Health Co. (Sup.Ct. Nassau County, N.Y. Aug. 29, 2002) (Westlaw, New York Law Journal Database); Prime TV, LLC v. Travelers Ins. Co., 223 F.Supp.2d 744 (M.D.N.C.2002) ("[T]he act of faxing DirectTV advertisements to the recipients is covered under the 'advertising injury' liability section in the Travelers [CGL] policies.").
FN7. The Insurers argue that "[b]y the plain terms of the policy, there is no 'advertising injury' coverage whatever invasion of privacy Nicholson contends was suffered as a result of the fax to his business because the invasion (if it occurred) was to an 'organization' and not to a 'person' ". (Doc. No. 62 at 46.) First, the fax advertisement the Insurers provided to this Court specifically had the following in the top margin: "To: Sam Nicholson". (Id. at Ex. A.) Second, the fax number to which the fax was sent might have been a business number, but these faxes were intended for individuals; indeed, the advertisements would be worthless if people did not receive them. Third, the term "person" in the policy is ambiguous. In Georgia, for instance, the term "person" includes a corporation. See O.C.G.A. § 1-3-3(14) (Supp.2000); World Trade Business, Inc. v. Amit, Inc., 239 Ga.App. 383, 385, 521 S.E.2d 40 (1999). Thus, the Insurers' argument is not persuasive.
Q. Value-Fax faxes to business fax numbers, correct?
Q. Was Mr. Nicholson's fax number on that database?
A. Yes, sir, it was?
Q. And that would be Mr. Nicholson's business fax, correct?
Q. Therefore, it is your understanding that Mr. Nicholson was receiving faxes from Value-Fax prior to your acquisition of Value-Fax?
(Doc. No. 62 at Ex. B, pp. 153-54.) The jury in the underlying case found that unsolicited faxes were sent to various individuals at their workplaces. As a result, the circumstances of this case fall within the ambit of the policy.
Having determined that a TCPA violation may constitute an "invasion of privacy" within the meaning of the insurance policy, I must now determine whether Hooters' advertising activity is causally connected to Nicholson's advertising injury. The requirement that the Court find a causal connection stems from the policy's declaration that an "Advertising Injury" is an "injury arising solely out of [the Insured's] advertising activities...." See AGIC Policy § IV.A; Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 1191 (11th Cir.2002). To have a causal connection, "the injury for which coverage is sought must be caused by the advertising itself." Hyman, 304 F.3d at 1191 (quoting Microtec Research, Inc. v. Nationwide Mut. Ins. Co., 40 F.3d 968, 971 (9th Cir.1994)) (internal quotation marks omitted). The advertising injury in the underlying case was caused by Hooters advertising activity. When Nicholson received the fax, his right of privacy was invaded, and the injury was complete. Thus, a nexus is established between the advertising and the harm.
The Insurers maintain that to the extent coverage is found, it should be nullified for several reasons. First, they contend (1) p. 1375 that § 227 is a penal statute, which the policy does not cover; (2) that § 227 imposes a penalty that the insured, not the insurer, should pay; and (3) that Endorsement No. 4 nullifies coverage for the advertising injury under the circumstances of this case. If any of the Insurers' arguments succeed, the Insurers are not liable for damages.
AGIC and Zurich maintain that § 227 is a penal statute (Doc. No. 62 at 46-48) and, thus, coverage is not afforded for an insured's violation of it. Under § 227, a plaintiff may elect to either prove actual monetary loss or receive $500 in statutory damages for each violation of the TCPA. 47 U.S.C.A. § 227(b)(3)(B). If a court finds that the defendant willfully or knowingly violated the TCPA, it may increase the amount of the award to an amount equal to not more than three times the amount awarded as actual or statutory damages. Id. § 227(b)(3).
Exclusion K of the policy states that no coverage is provided for an "Advertising Injury ... Arising out of the willful violation of a penal statute or ordinance committed by or with the consent of the Insured...." (AGIC Policy § V.K.). Because the jury in the underlying case specifically found that Hooters had willfully violated § 227, AGIC and Zurich contend that Exclusion K prevents coverage.
The first factor indicates that § 227 is a remedial statute. Several courts have indicated that one of the purposes of the statute is to redress harms to individuals who are forced to absorb the costs associated with receiving unsolicited faxes. See Destination Ventures Ltd. v. FCC, 844 F.Supp. 632, 637 (D.Or.1994) (indicating that Congress was intent on protecting fax machine owners from the economic harm caused by unsolicited faxes); Kenro, Inc. v. Fax Daily, Inc., 962 F.Supp. 1162, 1167 (S.D.Ind.1997) (citing Destination Ventures and noting that § 227 was intended to prevent advertisers from unfairly shifting advertising costs to the individual consumer who receives faxes). Indeed, a congressional Report notes that lawmakers were seeking to protect those people whose fax machines were being unfairly utilized by advertisers. H.R.Rep. No. 102-317, at 10 (1991), 1991 WL 245201. [FN9] p. 1376 Thus, § 227 was intended to provide a remedy to the individual fax machine owner who is harmed by the receipt of unsolicited fax advertisements.
FN9. The text of the report provides as follows:
Facsimile machines are designed to accept, process, and print all messages which arrive over their dedicated lines. The fax advertiser takes advantage of this basic design by sending advertisements to available fax numbers, knowing that it will be received and printed by the recipient's machine. This type of telemarketing is problematic for two reasons. First, it shifts some of the costs of advertising from the sender to the recipient. Second, it occupies the recipient's facsimile machine so that it is unavailable for legitimate business messages while processing and printing the junk fax.
The second factor also indicates that § 227 is remedial. Section 227 provides that any award of actual or statutory damages issues to the harmed individual or entity, not to a third party. 47 U.S.C.A. § 227(b)(3). Further, any award of treble damages goes to the harmed fax machine owner.
Finally, although the statutory damages do not closely correspond to actual damages, this fact does not convert a remedial statute into a penal one. Decisional law binding on this court indicates that disproportionate statutory damages and even multiplied damages awards do not necessarily make a statute penal. See In re Wood, 643 F.2d 188, 193 n. 12 (5th Cir.1980) [FN10] ("The fact that the statute allows for accumulated recovery does not convert an otherwise remedial statutory scheme into a penal one."); id. at 192 ("[The party] initially contends that section 130 is penal because it imposes liability beyond the amount of actual damages suffered by the debtor. This argument ... is [ ] rejected...."). Even were the trebling portion of § 227 considered to be penal in nature, this one factor cannot transform § 227 into a penal statute. To find otherwise would be to treat this one fact as dispositive thereby nullifying all the other indications that the statute is remedial. See Citronelle-Mobile Gathering, Inc. v. O'Leary, 499 F.Supp. 871, 887 (S.D.Ala.1980) (noting that one factor in the abstract weighed in favor of finding a particular statute penal, but nonetheless determining it to be remedial).
For the aforementioned reasons, I find that § 227 is a remedial statute and, thus, Exclusion K does not apply.
2. Whether § 227 Imposes a Monetary Penalty
I begin with the language of the policy, which states that the Insurers "will pay on behalf of the Insured those sums ... that the Insured becomes legally obligated to pay by reason of liability imposed by law ... because of ... Advertising Injury that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world." (AGIC Policy § I (emphasis added).) First, the term "sum" is broad and is defined as "the whole amount." Webster's New Collegiate Dictionary p. 1377 1157 (1979). Second, and significantly, no provision in the policy excludes the payment of punitive damages or penalty amounts, and I have already determined that the statute is remedial one.
Applying Georgia law, the policy promises to pay "those sums" that an insured becomes legally obligated to pay. (AGIC Policy § I.) Because the Georgia Supreme Court has held that punitive damages are a legal liability and the policy does not exclude coverage for a punitive award or a penalty amount, the policy covers Nicholson's award in the instant case. Furthermore, when the Georgia courts have refused to find coverage for a punitive award, the insurance policy has had a specifically applicable exclusion. See Capitol Indemnity, Inc. v. Brown, 260 Ga.App. 863, 866, 581 S.E.2d 339, 342 (2003) ( "The policy also provides no coverage for his punitive damage claims, which are specifically excluded from the Commercial General Liability Coverage Part.") (emphasis added); Southern v. Sphere-Drake Ins. Co., 226 Ga.App. 450, 452, 486 S.E.2d 674 (1997) (stating that in a general liability policy "the punitive damage exclusion endorsement specifically foreclosed coverage for those damages"). As a result, and regardless of whether Nicholson's award is construed as a "penalty" or as "punitive damages", the sum was covered under the insurance policies.
The insurance policy states that the Insurer will pay on behalf of the Insured those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay by reason of liability imposed by law ... because of ... Advertising Injury that takes place during the Policy Period and is caused by an Occurrence.... (AGIC Policy § I.) An "Advertising Injury" is thereafter defined as an "injury arising solely out of [the Insured's] advertising activities as a result of ... Oral or written publication of material that violates a person's right of privacy." (Id. § IV.A.) However, Endorsement No. 4 sets forth a broad exclusion providing that the "insurance does not apply to ... [1] Advertising Injury arising out of the utterance or [2] dissemination of matter [3] p. 1378 published by or on behalf of the Insured." (Id. at Endorsement No. 4 (emphasis added).)
FN12. The Insurers contend that the word "publication" in the coverage provision and the word "published" refer to two different situations. (Doc. No. 62 at 48-49.) They contend that the word "publication" refers to the release of material to the public while the word "published" in the exclusion refers to the "actual act of creating written material." (Id. at 49.) This distinction in definition, they contend, make the terms applicable to different circumstances. (Id.)
I am not persuaded by the Insurer's argument. Neither term is defined in the policy and no layman would know that the terms had such precise definitions. Indeed, the policy is ambiguous concerning what the words mean. It has long been Georgia law that "[i]n the case of ambiguity, the insurance contract must be construed against the drafter...." Isdoll v. Scottsdale Ins. Co., 219 Ga.App. 516, 518, 466 S.E.2d 48 (1995) (emphasis added). As the Eleventh Circuit has stated (citing Isdoll ), if "an insurance policy is confusing to a layman, the policy is ambiguous." York Ins. Co. v. Williams Seafood of Albany, Inc., 223 F.3d 1253, 1255 (11th Cir.2000). At best the Insurers' contention means that the policy is ambiguous. Thus, there is no basis for excluding coverage based on the purportedly different definitions of "publication" and "published".
When an exclusion completely nullifies the coverage provided in a policy, that exclusion has no effect according to the Georgia Court of Appeals:
[W]e have a situation where one provision of the policy excludes liability and another accepts liability. Every written provision of an insurance contract must be given its apparent meaning and effect. The provisions currently under consideration are repugnant to one another. When that occurs in an insurance contract, the provision most favorable to the insured will be applied.
Isdoll v. Scottsdale Ins. Co., 219 Ga.App. 516, 518, 466 S.E.2d 48 (1995) (internal quotation marks omitted). Under the circumstances of this case, the policy grants coverage under one provision and then excludes it in another. Pursuant to Georgia law, the effective provision, therefore, shall be the coverage provision since that provision is the most favorable to Hooters. See Isdoll, 219 Ga.App. at 518, 466 S.E.2d 48.
The AGIC policy provides that the company will pay "those sums in excess of the Retained limit...." (AGIC Policy § I.) The "Retained Limit" is defined, in relevant part, as "[t]he total of the applicable limits of the underlying policies listed in the Schedule of Underlying Insurance and the applicable limits of any other underlying insurance providing coverage to the Insured." (Id. § III.E.)
The Eleventh Circuit has determined that when an umbrella policy clearly sets a threshold starting point for payment, the contract is unambiguous and must be enforced:
The umbrella policy sets a threshold point of liability for loss "in excess of p. 1380 ... the limits of the underlying insurances as set out in the attached schedule." That schedule sets the limits of the Fireman's Fund primary policy as $500,000. The provisions contain no alternative possibilities or contingencies, nor do they attempt to account for variances in coverage as to different situations encountered under the same underlying policy. These two clauses, when read in tandem, unambiguously set a fixed point at which Mission's liability under the excess policy arises--$500,000. We simply do not discern any ambiguity under this--the only reasonable construction of the umbrella policy. Garmany, 785 F.2d at 946 (emphasis added). [FN14]
According to the example of the Garmany court, I begin with the provision of AGIC's policy that states the threshold point of liability. That provision provides that the policy covers those sums "in excess of the Retained Limit...." (AGIC Policy § 1.) The definition of "Retained Limit" is the "total of the applicable limits of the underlying policies listed in the Schedule of Underlying Insurance and the applicable limits of any other underlying insurance providing coverage to the Insured...." (Id. § III.E (emphasis added).) AGIC's "Schedule of Underlying Insurance" then lists New Hampshire as providing AGIC coverage for $1 million per occurrence (Doc. No. 62 at Ex. H), which would be the limit of the policy if there were only one occurrence.
Count III asserts that AGIC and Zurich should pay Hooters' attorney's fees pursuant to O.C.G.A. § 13-6-11. Georgia law allows a plaintiff to recover attorney's fees where "the defendant [1] has acted in bad faith, [2] has been stubbornly litigious, or [3] has caused the plaintiff unnecessary trouble and expense...." O.C.G.A. § 13-6-11 (Supp.2002). After a review of the evidence in this case, I conclude that Hooters cannot meet this standard.
The Georgia appellate court has held that "[a]n attorney fee award based upon unnecessary trouble and expense cannot be upheld on a breach of contract claim if the evidence showed that a bona fide controversy existed between the parties." Freightliner Chattanooga, Llc v. Whitmire, 262 Ga.App. 157, 162, 584 S.E.2d 724, 729 (2003). At the time Hooters filed suit, no Georgia case addressed the issues presented in this matter. The novelty of this dispute precludes finding that the insurers either put Hooters and Nicholson to unnecessary trouble and expense or were stubbornly litigious. Furthermore, to establish bad faith, the plaintiffs must demonstrate that the defendants refusal to pay "is not prompted by an honest mistake as to one's rights or duties but [rather] by some interested or sinister motive." Id. The record is devoid of any evidence that would authorize an award of attorney's fees in this circumstance. As a result, Plaintiffs may not collect attorney's fees pursuant to O.C.G.A. § 13-6-11.
Hooters of Augusta, Inc. v. American Global Ins. Co. 272 F.Supp.2d 1365 (S.D.Ga.,2003)