FARM BUREAU MUTUAL INS CO V GRAPHICS HOUSE SPORTS
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STATE OF MICHIGAN
COURT OF APPEALS
FARM BUREAU MUTUAL INSURANCE
COMPANY,
UNPUBLISHED
June 17, 2008
Plaintiff-Appellant,
v
No. 277659
Muskegon Circuit Court
LC No. 06-044737-CK
GRAPHICS HOUSE SPORTS and DISPLAY
SOUTH, INC.,
Defendants-Appellees,
and
PROMOTIONS, INC.,
Defendant.
Before: Gleicher, P.J., and Fitzgerald and Hoekstra, JJ.
PER CURIAM.
Plaintiff, Farm Bureau Mutual Insurance Company, appeals as of right the order granting
summary disposition pursuant to MCR 2.116(C)(6) in favor of defendants, Graphics House
Sports Promotions, Inc., and Display South, Inc., on the ground that “another action has been
initiated between the same parties involving the same claim.” The order also denied Farm
Bureau’s motion for summary disposition. We affirm.
The underlying facts are generally not in dispute. Graphics House is a Michigan
corporation whose business is the sale and placement of advertising materials that promote
various sports ventures. During 2002, Graphics House acquired a CD-Rom from American
Business Directory containing the names, facsimile (fax) numbers, and contact information for
approximately 300,000 businesses. Graphics House provided the fax numbers of businesses to
Infolink Technologies, Inc., a Canadian Company, and Vision Lab Telecommunications, Inc., a
Florida Company, for the purpose of conducting separate “fax broadcast” operations from each
entity promoting Graphics House’s products and services to the fax recipients. Graphics House
contracted with Infolink to send out broadcast faxes to recipients in several states and billed
Graphics House $7,849.21 for fax transmissions ordered. The Infolink transmissions were
allegedly sent at various times between June 2001 and September 2003. Graphics House entered
into a similar contract dated January 6, 2003, with Vision Lab to perform a fax advertising
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campaign in several states, including Louisiana. Graphics House paid $2,205.92 for fax
transmissions that Vision Lab allegedly sent on behalf of Graphics House on January 7, 2003,
April 26, 2003, and September 15, 2003.
The Louisiana Action
On March 12, 2003, Display South initiated a class action lawsuit against Graphics
House in the Louisiana 19th District State Court. Display South’s claim stemmed from its receipt
of unsolicited fax advertisements from Graphics House. Display South relied on the Telephone
Consumer Protection Act (“TCPA”), 47 USC § 227 et seq., which prohibits the transmission of
unsolicited fax transmissions.1 Display South alleged that it received faxes sent by or on behalf
of Graphics House between March 12, 1999, and March 12, 2003, during which time Farm
Bureau provided insurance coverage to Graphics House for both advertising injury and property
damage. Display South later amended its claim on September 23, 2003, to include Farm Bureau
as a defendant under Louisiana’s direct action statute, asserting that Farm Bureau had an
obligation to defend Graphics House pursuant to that insurance policy.
On January 13, 2006, Farm Bureau filed a motion for summary judgment, requesting the
Louisiana court to dismiss Display South’s claim against Farm Bureau. Farm Bureau argued that
no coverage existed under the applicable policies for the claims asserted by Display South
against Graphics House. On March 21, 2006, a hearing was held on Farm Bureaus’ motion for
summary judgment. The Louisiana court denied the motion and set forth the basis for its denial
during the hearing, essentially finding that Farm Bureau’s policy includes coverage and the
obligation to provide a defense to any claims asserted by Display South against Graphics House.
The court signed a written judgment denying Farm Bureau’s motion on June 5, 2006.2
1
Display South’s complaint described the scope of the proposed class:
¶ 5 – The Class members are “all recipients of unsolicited telefacsimile messages
and/or advertisements” sent by or on behalf of Graphics House from March 12,
1999, through March 12, 2003, as long as such recipients had no “prior
contractual relationship.”
¶ 6 – “Defendant transmitted or initiated the transmission of thousands” of
unsolicited faxes to Louisiana.
¶ 10 – “All [Members of the Class] have received unsolicited telefacsimile
messages by the defendants in the State of Louisiana.”
2
On July 5, 2006, Farm Bureau appealed the Louisiana court’s denial of summary judgment by
filing an Application for Supervisory Writ in the First Circuit Court of Appeals for Louisiana,
which is apparently equivalent to an interlocutory appeal. Display South opposed the
application, and Farm Bureau subsequently filed a Second Application for a Supervisory Writ on
September 5, 2006. Farm Bureau requested the court to grant Farm Bureau’s motion for
summary judgment and dismiss Display South’s claims against Farm Bureau because the
policies do not provide coverage for the claims made by Display South against Graphics House.
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In the meantime, on March 23, 2006, counsel for Display South sent to Farm Bureau’s
Louisiana counsel, via e-mail, facsimile, and U.S. mail, a letter identified as a “Confidential
Settlement Proposal.” The letter began by stating:
In view of the trial court’s ruling pursuant to which Judge Kelley found
advertising injury coverage for all allegations in the Petition, including those acts
which might give rise to treble damages, we want to take this opportunity to
extend a settlement offer which will allow Farm Bureau and its insured to resolve
all claims within policy limits.
The letter referenced transmission logs for faxes sent into Louisiana on behalf of
Graphics House, including 461 fax advertisements transmitted in Louisiana on January 7, 2003,
April 26, 2003, and September 15, 2003. The letter thereafter stated, “Based on these facts, and
the supporting evidence, we expect that Judge Kelley will certify this case as a class action.”
The letter also contained a section entitled “Overview of Claim Exposure,” which stated:
Also, other evidence suggests that Graphics House transmitted hundreds
of thousands of fax advertisements nationwide, in addition to those identified
above. Besides McKinnon’s testimony, invoices produced in the course of this
litigation show that Graphics House paid for the transmission of over 200,000 fax
advertisements between January 1, 2001 and December 31, 2003.
The letter contained a chart, including calculations, based on either 461 total faxes or 210,101
faxes, calculated at both regular damages and treble damages, and concluded: “Thus, Graphics
House faces liability which could exceed $350 million. Its exposure in Louisiana alone exceeds
$800,000.” Ultimately, the letter stated in pertinent part:
We are willing to recommend settlement of any and all claims on behalf of
a Louisiana settlement class defined as all persons who were sent a fax by or on
behalf of Graphics house during the requisite time period, subject to court
approval, under the following terms and conditions:
• A total payment of $461,000, which shall represent a payment of $1,000
to each participating class member.
The Louisiana court held a hearing on the motion for class certification on December 1,
2006. In an order signed on January 3, 2007, the Louisiana court granted Display South’s
motion for class certification. The Louisiana court found that “The Class, consisting of
approximately 461 persons or legal entities located within the State of Louisiana, satisfies the
numerosity requirement of La. C.C.P. at 591(A)(1).” The court certified a plaintiff class
comprised of:
All recipients within the State of Louisiana of unsolicited telefacsimile messages
and/or advertisements which were transmitted and/or initiated by or on behalf of
Graphics House Sports Promotions, Inc. d/b/a GH Imaging and CHImaging.com
between the dates of March 12, 1999, and through the present, in violation of 47
USCC § 227.
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The Michigan Action
On August 28, 2006, Farm Bureau filed the present complaint for declaratory judgment
in Muskegon County Circuit Court against Graphics House and Display South. Farm Bureau
sought a declaration as to whether its policy provided coverage for fax transmissions allegedly
sent on Graphics House’s behalf to (1) the Louisiana recipients identified as purported class
members in the Louisiana Class Action, and (b) all other recipients located in Louisiana and/or
other states. Farm Bureau requested the following relief:
A. Declare that the Policy does not include or expressly excludes
coverage and the obligation to provide a defense to any claims asserted by
Graphics House for violations of the TCPA, 47 USC 227(B)(3)(A);
B. Declare that the Policy does not include or expressly excludes
coverage and the obligation to provide a defense to any claims asserted against
Graphics House in the Louisiana Class Action.
C. Grant Plaintiff such other relief as is just and equitable, including
statutory costs, interest and fees.
The parties filed cross-motions for summary disposition. Defendants argued that the
action should be dismissed under MCR 2.116(C)(6) because of the pending Louisiana action,
while Farm Bureau maintained that there were no factual issues in dispute and that the trial court
should declare whether the policy issued to Graphics House provided insurance coverage and
defense for violations of the TCPA. During a motion hearing held on February 12, 2007, the
trial court noted that this case involves “foreseeable litigation in other states than Louisiana.”
The trial court issued a written opinion and order on April 3, 2007. The trial court acknowledged
that “Farm Bureau seeks a declaratory judgment that it does not have to defend or indemnify its
insured, Graphics House, for current litigation in the 19th District Court for the Parish at Easton
Baton Rouge, Louisiana, and feared litigation in other states.” The trial court denied Farm
Bureau’s motion for summary disposition, but granted defendants’ motion for summary
disposition under MCR 2.116(C)(6) “on the strength of Valeo [Switches & Detection Systems,
Inc v EMCom, 272 Mich App 309; 725 NW2d 364 (2006).]” The trial court furthered ordered
that “The resulting dismissal will be without prejudice because of the complicated jurisdictional
issues.”
I
Farm Bureau argues that the trial court erred by dismissing its claim for a declaration
under MCR 2.605 that its insurance policy issued to Graphics House does not provide coverage
for non-Louisiana TCPA claims against Graphics House. A trial court’s decision on a motion for
summary disposition is reviewed de novo. McClements v Ford Motor Co, 473 Mich 373, 380;
702 NW2d 166 (2005).
Farm Bureau’s argument in this issue does not involve the 461 cases involved in the
Louisiana class action suit. Rather, the argument in this case involves 201,101 “potential nonLouisiana TCPA claims that are not at issue in the Louisiana case.” Although the trial court
refers to these potential claims in its opinion, the court does not specifically address them in its
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opinion. Rather, the trial court granted defendants’ motion for summary disposition under MCR
2.116(C)(6) with regard to the 461 claims involved in the Louisiana class action suit, but
apparently denied Farm Bureau’s request for a declaration with regard to the 201,101 potential
non-Louisiana TCPA claims “without prejudice because of the complicated jurisdictional
issues.”
As pertinent to this issue, Farm Bureau alleged in its complaint for declaratory relief that
“Display South has threatened to expand the Louisiana class action to include recipients from
other states and/or to file additional cases seeking redress pertaining to the alleged fax
transmissions.” Declaratory judgments are governed by MCR 2.605(A), which provides:
(1) In a case of actual controversy within its jurisdiction, a Michigan court
of record may declare the rights and other legal relations of an interested party
seeking a declaratory judgment, whether or not other relief is or could be sought
or granted.
(2) For the purpose of this rule, an action is considered within the
jurisdiction of a court if the court would have jurisdiction of an action on the same
claim or claims in which the plaintiff sought relief other than a declaratory
judgment.
The grant of a declaratory judgment is within the trial court's discretion and can only be
granted where there is an actual controversy. MCR 2.605(A)(1); Shavers v Attorney General,
402 Mich 554, 588; 267 NW2d 72 (1978). Without an actual controversy, the court lacks
subject-matter jurisdiction to enter a declaratory judgment. Genesis Ctr, PLC v Comm'r of
Financial & Ins Services, 246 Mich App 531, 544; 633 NW2d 834 (2001). An actual
controversy exists when a declaratory judgment is necessary to guide the plaintiff's future
conduct in order to preserve his legal rights. Id. A case of actual controversy does not exist,
however, where the injury sought to be prevented is merely hypothetical. Shavers v Attorney
General, 402 Mich 554, 588, 267 N.W.2d 72 (1978).
Here, Farm Bureau sought a declaratory judgment regarding potential liability and a
threat of nationwide litigation for potential non-Louisiana claims as a result of comments made
by counsel for Display South, which is not its insured, in the Louisiana class action lawsuit. The
claims are merely speculative and rest upon contingent future events that may not occur,
Michigan Chiropractic Council v Comm’r of the Office of Financial Ins Services, 475 Mich 363,
371; 716 NW2d 561 (2006), and the injuries claimed by Farm Bureau are merely potential and
feared. In fact, it is unknown whether any claims will ever be brought on behalf of any nonLouisiana recipients of fax transmissions sent on behalf of Graphics House. In other words,
Farm Bureau asked the court to issue a declaratory judgment with regard to whether its policy
provides Graphics House insurance coverage against claims that may never be brought. This is
not a case where a declaratory judgment is necessary to guide Farm Bureau’s future conduct in
order to preserve its legal rights. Associated Builders & Contractors v Wilbur, 472 Mich 117;
693 NW2d 374 (2005). In a case where an actual controversy exists, the insurer is generally
anxious to determine the coverage question because, if coverage does not exist, it need not
defend or indemnify its insured in the underlying suit. Thus, a declaration that coverage does or
does not exist is valuable to the insurer to determine the course of its actions. In the present case,
however, there is no controversy between insurer and insured with regard to non-Louisiana
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TCPA claims because there is no underlying suit. Once an insurer pleads and proves that an
actual controversy exists between itself and its insured, the trial court possesses the power to
make a declaration regarding the coverage provided by the policy. Farm Bureau failed to plead
and prove that an actual controversy exists with regard to “all other recipients [not involved in
the Louisiana class action suit] located in Louisiana and/or other states.”
II
With regard to the Louisiana class action suit, Farm Bureau argues that the trial court
erred by following Valeo, supra, and granting summary disposition pursuant to MCR
2.116(C)(6) in favor of defendants with regard to the claims involved in the Louisiana class
action suit. Farm Bureau recognizes in its brief on appeal that “this Court is required to follow
Valeo, supra, pursuant to MCR 7.215(J)(1),” but maintains that Valeo ignored “binding Supreme
Court precedent which states that a court does not lose jurisdiction due to another pending case
in another state or foreign jurisdiction.”
In Valeo, supra at 319, a panel of this Court concluded that MCR 2.116(C)(6) applies
equally to pending foreign jurisdiction cases as it does to pending Michigan cases. The Valeo
panel recognized a long line of cases holding that MCR 2.116(C)(6) did not apply to cases
pending outside of Michigan. After analyzing each one, the panel determined that it was not
required to follow such opinions pursuant to MCR 7.215(J)(1), and held that MCR 2.116(C)(6)
applies equally to pending foreign cases and pending Michigan cases alike, given the clear and
unambiguous language of the court rule.
Valeo is the first opinion issued on this issue after November 1, 1990, and therefore is
precedential for purposes of stare decisis. The trial court did not err by relying on Valeo in
granting defendants’ motion under MCR 2.116(C)(6) with regard to Farm Bureau’s request that
the trial court declare that the policy does not include or expressly excludes coverage and the
obligation to provide a defense to any claims asserted against Graphics House in the Louisiana
class action.
Affirmed.
/s/ Elizabeth L. Gleicher
/s/ E. Thomas Fitzgerald
/s/ Joel P. Hoekstra
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