Opinion
14-P-915
05-12-2015
ROSE ACRE FARMS, INC. v. LIBERTY INSURANCE CORPORATION.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
Rose Acre Farms, Inc. (Rose Acre), one of the nation's largest egg producers, filed this declaratory judgment action seeking a determination that its insurer, Liberty Insurance Corporation (Liberty), has a duty to defend consolidated class action lawsuits (underlying litigation) brought against Rose Acre and others by indirect purchasers of eggs. The plaintiffs in the underlying litigation are proceeding under a "Fourth Amended Consolidated Class Action Complaint" (underlying complaint) alleging that Rose Acre and the other defendants conspired to fix the price of eggs in violation of the Sherman Act and State unfair competition and consumer protection laws. While Rose Acre acknowledges that there is no coverage under Liberty's policies (and hence no duty to defend) arising from the allegations of Sherman Act violations, it contends that other allegations in the underlying complaint give rise to a duty to defend under the terms of a "Personal and Advertising Injury Endorsement" (Endorsement) included in both Liberty policies. A judge of the Superior Court allowed Liberty's motion to dismiss pursuant to Mass.R.Civ.P. 12(b)(6), 365 Mass. 754 (1974). After consideration of Rose Acre's appeal, we affirm.
The underlying litigation is part of a multidistrict proceeding pending in the Eastern District of Pennsylvania, In re: Processed Egg Products Antitrust Litigation.
The judge had before her an ample record on which to decide the motion. Rose Acre's declaratory judgment complaint appends and incorporates by reference eight exhibits, including the Liberty policies, the underlying complaint, and other documents which, Rose Acre contends, are relevant to Liberty's duty to defend. The complaint and exhibits comprise more than 400 pages.
Relevant here, the Endorsement covers injury "arising out of" one or more of seven identified "offenses." Rose Acre argues that allegations of the underlying complaint implicate two of these offenses: "(4) oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;" and "(6) the use of another's advertising idea in your 'advertisement'". We discuss them in reverse order.
Insofar as offense (6) is concerned, Rose Acre contends that the underlying complaint, interpreted in light of extrinsic evidence of its web-based advertisements, may be read to allege that the plaintiffs were injured by Rose Acre's use of an "advertising idea" developed by one of its codefendants, the United Egg Producers (UEP), an industry trade association. This "advertising idea" was to use animal husbandry concerns as a false justification for reductions in supply and higher egg prices, and to convince retailers not to purchase eggs unless they were UEP-certified as compliant with animal husbandry guidelines.
Rose Acre's argument pertaining to offense (6) was firmly rebuffed by the Federal courts in Indiana, where Rose Acre sued two other insurers whose policies contained the identical policy language at issue here. See Rose Acre Farms, Inc. v. Columbia Cas. Co., 772 F. Supp. 2d 994, 1003 (S.D. Ind. 2011), affirmed in Rose Acre Farms, Inc. v. Columbia Cas. Co., 662 F.3d 765, 768 (7th Cir. 2011) (collectively, Rose Acre I). Liberty, therefore, argues that Rose Acre is collaterally estopped from seeking coverage under the Liberty policies on the same theory rejected in Rose Acre I. However, we need not decide whether or to what extent collateral estoppel applies in these circumstances, as we reject Rose Acre's argument on its merits.
The underlying complaint in that case was an earlier iteration of the current underlying complaint. The parties disagree as to whether any differences are material to the coverage analysis.
Even if we assume, without deciding, that UEP's alleged actions may be viewed as an "advertising idea," and that Rose Acre may rely upon extrinsic evidence to show that it used UEP's idea, Rose Acre's coverage position is untenable. As stated by Judge Posner in the 7th Circuit opinion in Rose Acre I, "Coverage of liability for an 'offense' defined as 'the use of another's advertising idea' in one's own advertising cannot extend to using another's advertising idea with that other's consent." 662 F.3d at 768-769. See Trailer Bridge, Inc. v. Illinois Natl. Ins. Co., 657 F.3d 1135, 1139 (11th Cir. 2011). Here, there are no allegations in the underlying complaint that state or roughly sketch any claim that Rose Acre misappropriated the advertising idea of another. See Billings v. Commerce Ins. Co., 458 Mass. 194, 200 (2010). To the contrary, the conspiracy alleged in the underlying complaint is predicated upon UEP having fostered the use of its plan by the egg producers.
Insofar as offense (4) is concerned, Rose Acre apparently relies on a statement in the underlying complaint that the defendants "promoted" the UEP certification program as making "better eggs." According to Rose Acre, this is the equivalent of saying that Rose Acre disparaged the eggs of other producers. Even if we were to accept that premise, the complaint cannot reasonably be understood to raise a claim of disparagement under the terms of the Endorsement. Coverage for the offense of disparagement is for claims brought by the insured's competitors, "not by plaintiffs who never themselves suffered any reputational injury and whose allegations of disparagement instead concerned anticompetitive conduct directed against others not party to the suit." Great Am. Assur. Co. v. Riso, 479 F.3d 158, 162 (1st Cir. 2007) (applying Massachusetts law). See BASF AG v. Great American Assur. Co., 522 F.3d 813, 820 (7th Cir. 2008).
Rose Acre implicitly acknowledges that disparagement is not directly alleged in the underlying complaint. Its argument is that the underlying complaint states "indirect claims for disparagement" by including a citation to "D.C. Code § 28-3904 et seq." According to Rose Acre, "et seq." indicates that one of thirty ensuing subsections, D.C. Code § 28-3904(g), which identifies disparagement as an unfair trade practice, is "contemplated by" the underlying complaint. This strained argument is unsupported by any factual assertion in the underlying complaint. The conduct of which the underlying plaintiffs complain is the defendants' restraint of trade or commerce by "unfairly and deceptively fixing, raising, stabilizing, and maintaining prices of, allocating markets for, and restraining and manipulating the supply of eggs at competitive levels."
Because we conclude that the underlying complaint does not state or roughly sketch claims within the insuring agreements of the endorsement, we need not address the potential applicability of the endorsement's exclusions.
Judgment affirmed.
By the Court (Cohen, Hanlon & Sullivan, JJ.),
The panelists are listed in order of seniority.
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Clerk Entered: May 12, 2015.