|7th Circuit Holds There is No Duty to Defend
and Indemnify Junk Faxer Under Advertising Injury and Privacy Violation Clause
12/23. The U.S. Court of Appeals
(7thCir) issued its
opinion [9 pages in PDF] in American States Insurance Company v. Capitol Associates of
Jackson County, a declaratory judgment action involving whether a commercial
insurance policy's advertising injury clause covers civil actions alleging the sending
junk faxes in violation of 47 U.S.C. § 227(b)(1)(C). The District Court held
that there is coverage under the violation of privacy provision of this policy's
advertising injury clause. The Court of Appeals reversed.
In another action, JC Hauling Company filed a complaint in state court against
Capitol Associates of Jackson County, Inc. alleging that it sent it a junk fax
in violation of
U.S.C. § 227(b)(1)(C). JC Hauling also sought class action status.
Capitol Associates demanded that its insurer, American States Insurance
Company, defend and indemnify it. The Appeals Court opinion does not set out all of the
advertising injury language of the policy. The opinion does state that
"``Advertising injury´´ is defined to include ``[o]ral or written publication of
material that violates a person's right of privacy.´´ Another portion of the
policy excludes injury that is ``expected or intended from the standpoint of the
insured.´´" American states proceeded to defend, under a reservation of
Section 227 provides, in part, that "It shall be 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 ..."
In the present action, American States filed a complaint in
U.S. District Court (SDIll) against its
insured, Capitol Associates, seeking a declaratory judgment that it is not obligated to
defend or indemnify Capitol Associates in the JC Hauling action.
The District Court held that a junk fax invades the recipient's privacy, and
hence, American States must defend. The District Court did not rule on the duty
to indemnify. The District Court then dismissed the complaint without prejudice.
appealed. The Court of Appeals reversed. Capitol Associates must fend for itself in the class
action lawsuit. Judge
(at right) wrote the opinion.
The Court of Appeals first finessed its way around its obvious
jurisdictional problem with deconstructive logic. Easterbrook noted that "Dismissals
without prejudice are canonically non-final and hence not appealable under 28
U.S.C. §1291." However, he concluded that the District Court's use of the words
"without prejudice", in Easterbrook's word, "misdescribes" the
action of the District Court. In fact, he wrote, the disposition was "conclusive
in practical effect". Hence, the Court of Appeals possesses jurisdiction.
Then, Easterbrook got to the substance of the case, whether sending a
junk fax constitutes a violation of the recipient's right to privacy, within the
meaning of this insurance policy, thus obligating the insurer to defend and
indemnify its insured, the junk faxer.
Easterbrook wrote that "``Privacy´´ is a word with many
connotations. The two principal meanings are secrecy and seclusion, each of
which has multiple shadings." Easterbrook reasoned that Capitol Associates had not
disclosed or revealed anything about JC Hauling, so, only the seclusion meaning
of the word privacy could give rise to coverage.
Easterbrook then concluded that there could be no violation of seclusion,
because "JC Hauling is a corporation". He wrote that "businesses lack
interests in seclusion. It is not just that they are ``open for business´´ and thus
welcome phone calls and other means to alert them to profitable opportunities. It is
that corporations are not alive. Where does a corporation go when it just wants to be
left alone? Most states hold that business entities lack privacy interests."
However, since JC Hauling also sought class action status, Easterbrook
continued the analysis.
He did not conclude take the approach that junk faxes do not violate the
seclusionary interests of real people. Rather, he concluded that the language of
this particular insurance policy contemplates the secrecy aspect of privacy,
rather than the seclusionary aspect.
He wrote that "The structure of the policy strongly implies that coverage is
limited to secrecy interests. It covers a ``publication´´ that violates a right of
privacy. In a secrecy situation, publication matters; otherwise secrecy is
maintained. In a seclusion situation, publication is irrelevant."
Easterbrook also noted that "§227(b)(1)(C) condemns a particular
means of communicating an advertisement, rather than the contents of that advertisement
-- while an advertising-injury coverage deals with informational content."
Hence, there is no coverage, and the District Court is reversed.
This case is American States Insurance Company v. Capitol Associates of
Jackson County, Inc., U.S. Court of Appeals for the 7th Circuit, App. Ct. No.
04-1659, an appeal from the U.S. District Court for the Southern District of Illinois,
D.C. No. 02-00975-DRH, Judge David Herndon presiding. Judge Frank Easterbrook wrote the
opinion of the Court of Appeals, in which Judges Bauer and Kanne joined.
|Financial Regulators Publish Notice of Final
Rule Implementing Section 216 of FACT Act
12/28. The Department of the Treasury's (DOT) Office of the Comptroller of
the Currency (OCC), the DOT's Office of Thrift Supervision (OTS), the Federal
Reserve System, and the Federal Deposit Insurance Corporation (FDIC) published a
notice in the Federal Register that recites, describes and sets the
effective date (July 1, 2005) for their final rule implementing Section 216 of
the Fair and Accurate Credit Transactions Act of 2003, which is also known as
the FACT Act.
The FACT Act was
HR 2622 in
the 108th Congress. It is now Public Law No. 108-159. Section 216 of the
FACT Act adds a new Section 628 to the Fair Credit Reporting Act (FCRA) that
pertains to protecting consumers against the risks associated with unauthorized
access to information about the consumer contained in a consumer report, such as
fraud and related crimes, including identity theft. The FCRA is codified at 15
U.S.C. § 1681 et seq. The new section is codified at 15 U.S.C. § 1681w.
The statute requires certain federal agencies to promulgate regulations
"requiring any person that maintains or otherwise possesses consumer
information, or any compilation of consumer information, derived from consumer
reports for a business purpose to properly dispose of any such information or
See, Federal Register, December 28, 2004, Vol. 69, No. 248, at Pages
77610 - 77621.
12/28. The U.S. Court of Appeals
(7thCir) issued its
[PDF] in Sutter Insurance v. Applied Systems, a contract dispute regarding
the sale of business software. Sutter is an insurance company that purchased a commercial
software program from Applied Systems. This is an appeal from the
U.S. District Court (NDIll). It exercised
jurisdiction based upon diversity of citizenship. The law involved is entirely contract
law of the state of Illinois. The District Court rejected both Sutter's claim, Applied
System's counterclaim. The Court of Appeals vacated and remanded. This case is Sutter
Insurance Company v. Applied Systems, Inc., U.S. Court of Appeals for the 7th Circuit,
App. Ct. No. 04-1871, an appeal from the U.S. District Court for the Northern District of
Illinois, Eastern Division, D.C. No. 02 C 5849, Judge Matthew Kennelly presiding. Judge
Richard Posner wrote the opinion of the Court of Appeals, in which Judges Bauer and Rovner
12/28. The Department of Homeland Security
(DHS) announced that it selected Electronic Data
Systems Corporation (EDS) as the vendor for the DHS's eTravel Services (eTS)
program. The DHS stated in a
"EDS will provide a web-based reservation service as well as implementation
support, and training and customer support. The eTS program scope includes
travel planning, cost estimating, approval processing, reservation booking, and
activity reporting. EDS is also committed to integrating their solution with the
eMerge2 and MAXHR programs."
12/28. The Copyright Office published a
notice in the Federal Register that recites, describes and sets the
effective date (January 27, 2005) of its final rule regarding reconsideration
procedure. See, Federal Register, December 28, 2004, Vol. 69, No. 248, at Pages
77636 - 77637.
12/27. The U.S. Patent and Trademark Office
(USPTO) published a
in its web site regarding increases in trademark fees that will take effect on
January 31, 2005.
|Washington Tech Calendar
New items are highlighted in red.
|Wednesday, December 29
The House will next meet on January 4, 2004 at 12:00 NOON. See,
Republican Whip Notice.
The Senate will next meet on January 4, 2005 at 12:00 NOON.
The Supreme Court will next
meet on Monday, January 10, 2005. See,
List [9 pages in PDF] at page 9.
|Thursday, December 30
EXTENDED TO JANUARY 31.
Extended deadline to submit reply comments to
Federal Communications Commission (FCC) in
response to its
Notice of Proposed Rulemaking (NPRM) [38 pages in PDF] regarding use by
unlicensed devices of broadcast television spectrum where the spectrum is not
in use by broadcasters. See,
titled "FCC Adopts NPRM Regarding Unlicensed Use of Broadcast TV Spectrum" in
TLJ Daily E-Mail Alert No.
898, May 14, 2004, and story titled "FCC Releases NPRM Regarding Unlicensed Use
of TV Spectrum" in
TLJ Daily E-Mail Alert No.
905, May 26, 2004. This NPRM is FCC 04-113 in ET Docket Nos. 04-186 and
No. 02-380. See,
notice (setting original deadlines) in the Federal Register, June 18,
2004, Vol. 69, No. 117, at pages 34103-34112; and
notice [PDF] of extended deadlines, and
erratum [PDF]. See, December 22, 2004
Public Notice [PDF] (DA 04-4013) further extending the deadline for reply
comments to January 31.
|Monday, January 3
Deadline to submit comments to the
National Archives and Records Administration
(NARA) in response to its notice of proposed rulemaking regarding permitting the destruction
of "very short-term temporary e-mail" of federal agencies. See,
notice in the Federal Register, November 3, 2004, Vol. 69, No. 212, at Pages 63980
|Wednesday, January 5
2:00 - 4:00 PM. The Department of State's
Telecommunication Advisory Committee (ITAC) will meet to prepare for the
International Telecommunications Union's ITU-T
Study Group 3 (tariff and accounting principles) meeting. See, the ITU's
notice in the Federal Register, December 20, 2004, Vol. 69, No. 243, at Page
76027. For more information, including the location, contact Julian Minard at
|Thursday, January 6
10:00 AM. The Senate
Judiciary Committee will hold a hearing on the nomination of Alberto Gonzales
to be Attorney General. Sen. Arlen Specter (R-PA)
will preside. Location: Room 216, Hart Building.
10:00 AM. The Senate Health, Education, Labor and Pensions Committee will hold
a hearing on the nomination of Margaret Spelling to be Secretary of Education.
Location: Room 430, Dirksen Building.
Deadline to submit comments to the Export-Import
Bank of the United States regarding its
notice in the Federal Register that states that it "has received an
application to finance the export of approximately $1.2 billion in U.S.
semiconductor manufacturing equipment to dedicated foundries in China." The
notice adds that "The U.S. exports will enable the dedicated 200-mm and 300-mm
foundries to produce approximately 80,000 wafers per month (200-mm equivalent)
of logic products. Available information indicates that some of this new
production will be exported from China and consumed globally." See, Federal
Register, December 23, 2004, Vol. 69, No. 246, at Page 76945.
|People and Appointments
Taniguchi was elected Chairman of the of the
World Trade Organization's (WTO) Dispute
Settlement Body's (DSB) Appellate Body
for a term that will run until December 16, 2005. He will replace Georges Abi-Saab,
who was the Chairman for 2004. See, WTO
12/21. The Federal Reserve Bank of Dallas
announced that Richard Fisher will become its President, effective April 4,
2005. Fisher is currently Vice Chairman of Kissinger
McLarty Associates, Henry Kissinger's firm. He will replace Robert McTeer,
who resigned November 4, 2004, to become Chancellor of the Texas A&M University System.
McTeer had been vocal on several technology related public policy issues, including
providing more visas for high tech workers. See for example, May 20, 1999 op ed in the
Wall Street Journal by McTeer, 1998 Annual Report of the Federal Reserve Bank of
Dallas, and TLJ story
titled "Sen. Gramm to Introduce Bill to Raise H1B Visa Cap", June 3, 1999.
|About Tech Law Journal
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