Mesa Laboratories, Inc. v. Federal Insurance Co., No. 20-1983 (7th Cir. 2021)
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Mesa sent faxes promoting its services. Some recipients had not consented to receive such faxes, and the faxed materials did not include an opt‐out notice as required by the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227(b)(1)(C). Orrington filed a class‐action lawsuit under the TCPA and the Illinois Consumer Fraud and Deceptive Business Practices Act and alleged that Mesa’s conduct constituted common‐law conversion, nuisance, and trespass to chattels for Mesa’s appropriation of the recipients’ fax equipment, paper, ink, and toner. Mesa notified its insurer, Federal, of the Orrington action. Federal declined to provide a defense. After Mesa and Orrington reached a settlement, Mesa sued Federal, alleging breach of contract, bad faith, and improper delay and denial of claims under Colorado statutes.
The Seventh Circuit affirmed summary judgment in favor of Federal. The policy’s “Information Laws Exclusion” provides that the policy “does not apply to any damages, loss, cost or expense arising out of any actual or alleged or threatened violation of “ TCPA “or any similar regulatory or statutory law in any other jurisdiction.” The exclusion barred all of the claims because the common-law claims arose out of the same conduct underlying the statutory claims.
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In the United States Court of Appeals For the Seventh Circuit ____________________ No. 20 1983 MESA LABORATORIES, INC., Plaintiff Appellant, v. FEDERAL INSURANCE COMPANY, Defendant Appellee. ____________________ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 19 cv 2340 — John Z. Lee, Judge. ____________________ ARGUED NOVEMBER 10, 2020 — DECIDED APRIL 20, 2021 ____________________ Before EASTERBROOK, KANNE, and SCUDDER, Circuit Judges. KANNE, Circuit Judge. Mesa Laboratories, Inc., was sued for sending unsolicited fax advertisements, but when it sought a defense from its insurer, its claim was denied. In support of the denial, the insurer cited an exclusion in the policy barring coverage for any claims “arising out of” the Telephone Con sumer Protection Act (“TCPA”) of 1991. 2 No. 20 1983 The question in this case is straightforward: When an in surance policy provides that the insurer has no duty to defend its insured against any claim “arising out of” the TCPA, does that exclusion extend to common law claims arising from the TCPA violating conduct? The district court said yes, and we agree. We therefore af firm the district court’s decision granting judgment on the pleadings in favor of the insurer. I. BACKGROUND Mesa Laboratories, Inc., a Colorado corporation, sent faxes promoting its dental industry related services. But some (if not all) of the recipients had not consented to receive such faxes, and the faxed materials did not include an opt out no tice as required by the TCPA. 47 U.S.C. § 227(b)(1)(C). In 2018, James L. Orrington, II, a Chicago area dentist, filed a class action lawsuit against Mesa in federal court for sending unsolicited fax advertisements in violation of the TCPA and the Illinois Consumer Fraud and Deceptive Busi ness Practices Act (“ICFA”), 815 ILCS 505/2. He also alleged that Mesa’s conduct constituted common law conversion, nuisance, and trespass to chattels for Mesa’s appropriation of the recipients’ fax equipment, paper, ink, and toner. Orrington v. Mesa Lab’ys, Inc., No. 18 cv 841 (N.D. Ill.). During the litigation, Mesa notified its insurer, Federal In surance Company, of the Orrington action and asked Federal to defend it. Federal declined to provide a defense because it contended that the suit fell outside of the policy’s coverage. After Mesa and Orrington reached a settlement agree ment, Mesa filed this suit against Federal, alleging breach of contract, bad faith, and improper delay and denial of claims No. 20 1983 3 under Colorado Revised Statute sections 10 3 1115 and 10 3 1116. Federal moved for judgment on the pleadings. In January 2020, the district court granted Federal’s mo tion. It concluded that two of the policy’s exclusions applied to bar Mesa’s claim. As explained below, we need only con sider one of the exclusions to decide this case—the “Infor mation Laws Exclusion.” It provides that the policy “does not apply to any damages, loss, cost or expense arising out of any actual or alleged or threatened violation of … the United States of America Telephone Consumer Protection Act (TCPA) of 1991 … or any similar regulatory or statutory law in any other jurisdiction.” The district court concluded that this exclusion barred all of the claims because the common law claims arose out of the same conduct underlying the stat utory claims. Mesa filed a motion to vacate the judgment and for leave to file an amended complaint, which the court denied. Mesa now appeals. II. ANALYSIS As stated in Landmark American Insurance Co. v. Hilger, we review a district court’s grant of a motion for judgment on the pleadings de novo, applying the same standard as a Rule 12(b)(6) motion to dismiss for failure to state a claim. 838 F.3d 821, 824 (7th Cir. 2016). “Thus, we view the facts in the com plaint in the light most favorable to the nonmoving party and will grant the motion ‘only if it appears beyond doubt that [Mesa] cannot prove any facts that would support [its] claim for relief.’” Id. (quoting Buchanan Moore v. County of Milwau kee, 570 F.3d 824, 827 (7th Cir. 2009)). 4 No. 20 1983 “A federal court exercising its diversity jurisdiction over state law claims applies the choice of law rules of the state in which it sits.” Gunn v. Cont’l Cas. Co., 968 F.3d 802, 808 (7th Cir. 2020) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941)). Here, the district court sits in Illinois. Before the court is required to make a choice of law deter mination, the moving party must establish that “there is a conflict between Illinois law and the law of another state such that ‘a difference in law will make a difference in the out come.’” West Side Salvage, Inc. v. RSUI Indemnity Co., 878 F.3d 219, 223 (7th Cir. 2017) (quoting Townsend v. Sears, Roebuck & Co., 879 N.E.2d 893, 898 (Ill. 2007)). “If the party fails to estab lish the existence of such a conflict, the court applies the law of the forum state.” Id. (citing Bridgeview Health Care Ctr., Ltd. v. State Farm Fire & Cas. Co., 10 N.E.3d 901, 905 (Ill. 2014)). Although the parties dispute whether Colorado or Illinois law applies, Mesa points to no true conflict between the laws of those states regarding the interpretation of the Information Laws Exclusion. Indeed, Mesa acknowledged in its opening brief that there is no Colorado case law on point. Therefore, we, like the district court sitting in Illinois, look to Illinois law. In Illinois, “[a]n insurer has a duty to defend its insured ‘unless it is clear from the face of the underlying complaint that the facts alleged do not potentially fall within the policy’s coverage.’” Zurich Am. Ins. Co. v. Ocwen Fin. Corp., 990 F.3d 1073, 1078 (7th Cir. 2021) (quoting G.M. Sign, Inc. v. State Farm Fire & Cas. Co., 18 N.E.3d 70, 77 (Ill. App. Ct. 2014)). One way for an insured’s claim to fall outside of a policy’s coverage is for it to fall within an exclusion. See id. But if even one claim is covered, then the insurer has a duty to defend the entire suit. Health Care Indus. Liab. Ins. Program v. Momence Meadows No. 20 1983 5 Nursing Ctr., Inc., 566 F.3d 689, 694 (7th Cir. 2009). Moreover, “a decision to excuse an insurer’s duty to defend based on an exclusionary clause in the contract ‘must be clear and free from doubt.’” Zurich, 990 F.3d at 1078 (quoting Evergreen Real Est. Servs., LLC v. Hanover Ins. Co., 142 N.E.3d 880, 887 (Ill. App. Ct. 2019)). To make this determination, we compare the factual alle gations in the underlying complaint to the relevant policy provisions. Health Care, 566 F.3d at 694 (citing Outboard Marine Corp. v. Liberty Mut. Ins., 607 N.E.2d 1204, 1212 (Ill. 1992)). The Information Laws Exclusion provides that the policy “does not apply to any damages, loss, cost or expense arising out of any actual or alleged or threatened violation of … the United States of America Telephone Consumer Protection Act (TCPA) of 1991 … or any similar regulatory or statutory law in any other jurisdiction.” Orrington’s complaint asserted claims against Mesa under the TCPA, the ICFA, and common law. And the alleged con duct underlying each claim was the same: Mesa sent unsolic ited fax advertisements to Orrington’s office. The parties agree that the exclusion covers Orrington’s statutory claims, but they diverge on its application to the common law claims. The answer is now clear under our recent decision in Zur ich—the “arising out of” language subjects the common law claims to the exclusion, as well. Zurich, 990 F.3d at 1078–79. In Zurich, we considered a similar policy exclusion for property damage “resulting from or arising out of any actual or alleged violation of … the [TCPA].” Id. at 1076. We con cluded that “[t]he ‘arising out of’ language excludes the un derlying conduct that forms the basis of the violation of an 6 No. 20 1983 enumerated law, even if liability for that underlying conduct might exist under a legal theory that is not expressly men tioned in the policy exclusion (e.g., common law invasion of privacy).” Id. 1079. The same is true here. The common law claims of conver sion, nuisance, and trespass to chattels arise out of the same underlying conduct as the statutory claims—the sending of unsolicited faxes. As we explained in Zurich, “the ‘arising out of’ phrase presents a ‘but for’ inquiry: if the plaintiff would not have been injured but for the conduct that violated an enumerated law, then the exclusion applies to all claims flow ing from that underlying conduct regardless of the legal the ory used.” Id. (citing G.M. Sign, 18 N.E.3d at 78). None of Or rington’s injuries would have occurred but for Mesa’s send ing unsolicited fax advertisements, so the Information Laws Exclusion applies to all of Mesa’s claims. III. CONCLUSION We thus AFFIRM.
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