Lead Opinion
OPINION OF THE COURT
In this insurаnce coverage dispute, Auto-Owners Insurance Company (“Auto-Owners”) seeks a declaration that it has no obligation to defend or indemnify its insured, Stevens & Ricci, Inc. (“Stevens & Ricci”), in connection with a $2,000,000 judgment entered against Stevens & Ricci
I. BACKGROUND
This case began with the improper use of what now seems an old-fashioned method of communication: fax machines. Stevens & Ricci was solicited by an advertiser claiming to have a fax advertising program that complied with the TCPA. Relying on that representation, Stevens & Ricci аllowed the advertiser to fax thousands of advertisements to potential customers on its behalf. The advertiser sent 18,879 unsolicited advertisements by fax in February 2006.
Much later, on June 1, 2012, Hymed filed a class action lawsuit in the United States District Court for the Eastern District of Pennsylvania against Stevens & Ricci, claiming that the advertisements actually did violate the TCPA, see Hymed Grp. Corp. v. Stevens & Ricci, Inc., Civil Action No. 12-CV-3093 (the “Underlying Action”), which prohibits the “use [of] any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement ....” 47 U.S.C. § 227(b)(1)(C). Hymed asserted that it and other class members— numbering, per the complaint, “more than 39 other recipients” (J.A. at 545) — had not invited or given permission to Stevens & Ricci to send the faxes. Hymed’s complaint further charged that the unsolicited faxes had damaged the recipients by causing them to waste paper and toner consumed in the printing process and to lose the use of their fax machines when the advertisements were being received. In Hymed’s words, the “junk faxes” had also interrupted the class members’ “privacy interest in being left alone.” (J.A. at 549-50.) For relief, Hymed sought actual or statutory damages, whichever was greater, and an injunction against future violations. Given the volume of faxes sent, a finding of liability to the class under the TCPA, with statutory damages of $500 per fax, 47 U.S.C. § 227(b)(3)(B), could have resulted in a damage award in the Underlying Ae
During the time that Stevens & Ricci had the unsolicited faxes sent to Hymed and other class members, it was covered by a “Businessowners Insurance Policy” (the “Policy”) issued by Auto-Owners. (J.A. at 555.) The Policy obligates Autо-Owners to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’, ‘property damage’, ‘personal injury’ or ‘advertising injury’ to which this insurance applies.” (J.A. at 563.) The present dispute centers on whether the sending of unsolicited faxes inflicted two of those four types of injury on the members of the class: property damage and advertising injury.
The term “property damage” is defined in the Policy as “[pjhysical injury to tangible property, including all resulting loss of use of that property.” (J.A. at 576.) For “property damage” to be covered under the Policy, it must be caused by an “occurrence” (J.A. at 563), which the Policy defines as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions” (J.A. at 575). Despite its use of the term, the Policy does not separately define an “accident,” though it does exclude from coverage any property damage “expected or intended from the standpoint of the insured.” (J.A. at 564-65.)
The Policy defines “advertising injury” as injury arising out of one or more of the following events:
a.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;
b. Oral or written publication of material that violates a person’s right of privacy;
c. Misappropriation of advertising ideas or style of doing business; or
d. Infringement of copyright, title or slogan.
(J.A. at 573.) To be covered, an “advertising injury” must also be inflicted “in the course of advertising [the insured’s] goods, products or services.” (J.A. at 563.)
Auto-Owners agreed to defend Stevens & Ricci in the Underlying Action, but reserved its right to later challenge whether the alleged misconduct (ie., the sending of unsolicited faxes) fell within the terms of the insurance policy’s coverage. In November 2013, Hymed, Stevens & Ricci, and Auto-Owners reached an agreement to compromise and settle the Underlying Action. Among other things, the parties agreed to entry of judgment in favor of the class, and against Stevens & Ricci, in the amount of $2,000,000. Hymed and the class also agreed to seek recovery to satisfy the judgment only from Auto-Owners under the Policy. On December 4, 2014, the District Court in the Underlying Action entered an order and final judgment approving the settlement and entering the judgment against Stevens & Ricci. In its order, the Court specifically found that Stevens & Ricci “did not willfully or knowingly violate the TCPA.” (J.A. at 24.)
By that time, Auto-Owners had already filed this case to clarify its obligations under the Policy. In particular, on December 28, 2012, Auto-Owners filed the present declaratory judgment action, pursuant to 28 U.S.C. § 2201, against Stevens & Ricci and Hymed, seeking a declaration
II. Discussion
A. Jurisdiction
This is an action under the Declaratory Judgment Act, 28 U.S.C. § 2201. That Act does not itself create an independent basis for federal jurisdiction but instead provides a remedy for controversies otherwise properly within the court’s subject matter jurisdiction. Shelly Oil Co. v. Phillips Petroleum Co.,
The second requirement for federal jurisdiction under the diversity statute
As the party invoking diversity jurisdiction, Auto-Owners bears the burden to prove, by a preponderance of the evidence, that the amount in controversy exceeds $75,000. Judon v. Travelers Prop. Cas. Co. of Am.,
In making that assessment, “[t]he temporal focus of the court’s evaluation ... is on the time that the complaint was. filed.” Id.; see also Kaufman v. Allstate N.J. Ins. Co.,
In its amended complaint, Auto-Owners alleged that the amount in controversy exceeded $75,000. Typically, “[s]ueh a general allegation when not traversed is sufficient, unless it is qualified by others which so detract from it that the court must dismiss sua sponte or on defendants’ motion.” Gibbs v. Buck,
We have previously recognized that “the amount in controversy is not measured by the low end of an open-ended claim, but rather by a reasonable reading of the value of the rights being litigated.” Angus v. Shiley Inc.,
Consistent with that conclusion, Hymed does not argue that Auto-Owners claimed more than $75,000 in bad faith.
Hymed argues that the “object of the litigation” here is resolution of a dispute between the many members of the class and the insurer, and that Auto-Owners can thus only satisfy the amount-in-controversy requirement by improperly aggregating those various claims. To Hymed, “this action always has been a multi-party dispute between Auto-Owners and the multiplicity of class claimants.” (Hymed Jan. 8, 2016 Letter Br. at 9.) Unsurprisingly, Auto-Owners disagrees, viewing the case as a unitary controversy between it and its insured. Taking that perspective, Auto-Owners argues that, “in coverage litigation commenced by an insurer, the focus is on the amount the insurer will owe to its insured or the value of its coverage obligation.” (Auto-Owners Jan. 4, 2016 Letter Br. at 1.) Given those two competing positions, we must decide whether this case is properly viewed as a dispute between Auto-Owners and the many class members — which would give rise to aggregation problems — or as a dispute between Auto-Owners and its insured concerning its overall obligation to defend and indemnify under the Policy.
Although we have never before spoken precedentially on this question,
Next, the Dissent says there is tension between our standing jurisprudence, “in which we have stressed that parties like Hymed have a significant stake” in insurance coverage actions, and our amount-in-eontroversy conclusion that “parties like Hymed cannot assert federal jurisdiction in declaratory actions seeking similar relief.” (Dissent Op. at 411.) There is no such tension. Standing and amount-in-controversy are two distinct inquiries. Hymed certainly had standing to participate in this insurance coverage action, see supra note 7, but that does not alter the $75,000 amount-in-controversy threshold that it must meet in order for the dispute to fall within our jurisdiction.
The Dissent then cites In re Ford Motor Co./Citibank (South Dakota), N.A.,
Finally, the Dissent would not take into account potential attorney’s fees when determining the amount in controversy here, and faults us for an “unnecessary expansion of our jurisprudence” on the subject. (Dissent Op. at 414.) Even if we were to set attorney’s fees aside entirely, that would not change our conclusion that the amount in controversy exceeds $75,000, for the reasons just set forth. But we ought not discount those costs. As we have endeavored to explain, supra note 11, Auto-Owners is seeking a declaration of its rights and responsibilities with respect to a contract that requires it to pay its insured’s defense costs. Our precedent on the subject is straightforward: “costs and attorneys’ fees should be considered part of the amount in controversy for jurisdictional purposes when they are mandated by underlying instruments or contracts.” Powell,
Accordingly, satisfaction of the amount-in-controversy requirement in this case does not violate the anti-aggregation rule, and the District Court had diversity jurisdiction under 28 U.S.C. § 1332.
B. Standard of Review
Both parties moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. Summary judgment is proper when, viewing the evidence in the light most favorable to the nonmoving party and drawing all inferences in favor of that party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Appelmans v. City of Phila.,
C. Analysis
A federal court sitting in diversity must apply state substantive law. Chamberlain v. Giampapa,
Because the Policy itself did not contain a choice-of-law provision, to determine which state’s substantive law applies we “must apply the choice of law rules of the forum state.” Kruzits v. Okuma Mach. Tool, Inc.,
But we have, twice. Almost 40 years ago, we “predicted] that Pennsylvania w[ould] extend its Griffith methodology to contract actions.” Melville v. Am. Home Assurance Co.,
Hymed cites “two significant conflicts” between Arizona and Pennsylvania substantive law. (Opening Br. at 17.) First, it contends that a basic Pennsylvania principle of contract interpretation — that courts enforce unambiguous policy language — does not apply to the interpretation of insurance contracts under Arizona law. Instead, as Hymed’s argument goes, Arizona courts interpret insurance contracts by looking to the “reasonable expectations of the insured.” (Id. at 18 (internal quotation marks omitted).) According to Hymed, “in Arizona, even clear and unambiguous boilerplate language is ineffective if it contravenes the insured’s reasonable expectations.” (Id.)
We reject that argument. To begin with, we do not agree that there is a conflict; both states, with limited exceptions not applicable here, give dispositive weight to clear and unambiguous insurance contract language.
Hymed’s second alleged conflict is more tenable and relates to differing interpretations of Arizona and Pennsylvania courts as to the meaning of “property damage.” The Policy requires that any covered “property damage” be caused by an “occurrence” (J.A. at 563), which is defined as an “accident” (J.A. at 575). The Policy does not define the term “accident,” though it does separately exclude from coverage any property damage “expеcted or intended from the standpoint of the insured.” (J.A. at 565.) Hymed contends that the two states define an “accident” differently. Specifically, it says that the two states’ laws are in conflict over whether an insurance policy that covers “accidents” would extend to the “unintended consequences of intentional acts,” in this instance, damage to a fax recipient from an intentionally-sent fax. (Opening Br. at 19.)
Hymed argues that “a construction of Pennsylvania law” results in such damages being excluded from coverage. (Opening Br. at 19.) We agree. In Donegal Mutual Insurance Co. v. Baumhammers, the Supreme Court of Pennsylvania said that, when “accident” is undefined in an insurance policy, Pennsylvania courts should treat the term as “refer[ing] to an unexpected and undesirable event occurring unintentionally .... ”
[ T]he key term in the definition of the “accident” is “unexpected” which implies a degree of fortuity. An injury therefore is not “accidental” if the injury was the natural, and expected result of the insured’s actions.... See also Minnesota Fire and Cas. Co. v. Greenfield,579 Pa. 333 ,855 A.2d 854 , 870 (2004) (“‘Accident’ has been defined in the context of insurance contracts as an event or happening without human agency or, if happening through such agency, an event which, under circumstances, is unusual and not expected by the person to whom it happens.”)
Id. (internal citations omitted). That definition comports with the basic purpose of insurance: “to cover only fortuitous losses.” United Servs. Auto. Ass’n v. Elitzky,
The intentional conduct of third parties may still be a covered “accident” under that definition. By way of example, Baum-hammers involved á killing spree perpetrated by the son of the insured.
Here, in contrast, Hymed’s claimed injury is the use of ink, toner, and time that was caused by the receipt of junk faxes. Those injuries are the natural and expected result of the intentional sending of faxes, a far cry from Pennsylvania’s definition of an “accident.” Though it did not intend injury, Stevens & Ricci clearly intended for the third-party advertiser to send the fax advertisements to the members of the class. Barring a problem with the communication devices, the sending of faxes necessarily results in the receipt of faxes, and any sender of a fax knows that its recipient will need to consume paper and toner and will temporarily lose the use of its fax line. That does not happen by accident. While the Supreme Court of Pennsylvania has not addressed whether unintended damages from faxes sent in violation of the TCPA constitute an “accident,” we predict that the court would reject coverage under the “property damage” provision of the Policy.
In its effort to manufacture a conflict, Hymed next claims that Arizona law would cover its claim as an “accident.” Unfortunately for Hymed, Arizona law defines an “accident” much the same way as does Pennsylvania law:
[ A]n effect which was or should have been reasonably anticipated by an insured person to be the natural or probable result of his own voluntary acts is not accidental. Or to put it in the affirmative form, if the result is one which in the ordinary course of affairs would not be anticipated by a reasonable person to flow from his own acts, it is accidental. The test is, what effect should the insured, as a reasonable man, expect from his own actions under'the circumstances.
Cal. State Life Ins. Co. v. Fuqua,
Finally, Hymed argues that coverage is available because the damage to class members from receipt of the junk faxes qualifies as “advertising injury” under the Policy. Because Hymed does not contend that the Arizona definition of “advertising injury” differs from that of Pennsylvania, we look to Pennsylvania law to answer that question.
The Policy defines “advertising injury” as, among other things: “Oral or written publication of material that violates a person’s right of privacy.” (J.A. at 573.)
The Policy does not cover that injury. Read in context, the Policy provides coverage only for violations of the privacy interest in secrecy, and thus does not cover violations of a right to seclusion. This is amply demonstrated by the other three offenses that the Policy includes within the definition of “advertising injury”: “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”; “Misappropriation of advertising ideas or style of doing business”; and “Infringement of copyright, title or slogan.” (J.A. at 573.) All three of those offenses — slander, misappropriation, and infringement — “focus on harm arising from the content of an advertisement rather than harm arising from mere receipt of an advertisement.” Auto-Owners Ins. Co. v. Websolv Computing, Inc.,
And what the provision’s context suggests its plain text confirms. Again, as relevant here, the Policy defines “advertising injury” to include “[o]ral or written publication of material that violates a person’s right of privacy.” (J.A. at 573 (emphasis added).) In that definition, the phrase “that violates a person’s right of privacy” modifies the term “material.” See Pa. Dep’t of Banking v. NCAS of Del., LLC,
Of course, our ultimate endeavor is to apply Pennsylvania law to determine the scope of the Policy’s “advertising injury” provision. Although the Supreme Court of Pennsylvania has not addressed that question, the Superior Court in Brethren interpreted verbatim contract language and reached the same conclusion as we do here, for largely the reasons we have addressed. Brethren,
III. Conclusion
For the foregoing reasons, we will affirm the judgment of the District Court.
Notes
. By agreement of the parties, the declaratory judgment action was heard before a magistrate judge, who was thus empowered to enter final judgment. 28 U.S.C. § 636(c).
. As more fully explained herein, Hymed, rather than Stevens & Ricci, ended up making these coverage arguments because Stevens & Ricci settled its stake in the coverage dispute in a manner that effectively made Hymed the party most interested in securing coverage. See infra at pp. 393-94, 395 n.7.
. The TCPA permits trebling of statutory damages if the defendant acted “willfully or knowingly” in violating the statute. 47 U.S.C. § 227(b)(3).
.Hymed had previously filed a declaratory judgment action on the coverage question in the United States District Court for the Eastern District of Michigan. That case was dismissed for improper venue, because venue was proper in the United States District Court for the Eastern District of Pennsylvania, where the Underlying Action was then pending. See Hymed Grp. Corp. v. Auto Owners Ins. Co., No. 12-12519,
. It appears that, despite having been served, Stevens & Ricci never filed an answer to Auto-Owners's amended complaint seeking a declaratory judgment. The District Court did not issue a default judgment against it, however, opting instead to dismiss Auto-Owners’s motion for a default judgment without prejudice to Auto-Owners’s opportunity to argue later, in its motion for summary judgment, that declaratory relief should be granted against all defendants, including the absent Stevens & Ricci.
. We need not address the citizenship of the-various unnamed members of the class. For one, those unnamed individuals are not parties to this declaratory judgment action. Even if this were the Underlying Action, "in a federal class action only the citizenship of the named class representatives must be diverse from that of the defendants.” In re Sch. Asbestos Litig.,
. We also solicited supplemental briefing on the question of whether Hymed has proper Article III standing, as required for jurisdiction, "to participate in an action seeking a declaration of rights under an insurance contract to which it is not a party.” On that issue, the parties agree — correctly—that Hymed does have standing. That standing is rooted in our previous recognition that, in a declaratory judgment action concerning the scope of an insurance policy, "the injured party has an independent right to present its case upon the ultimate issues, apart from that of the insured, because 'in many of the liability insurance cases, the most real dispute is between the injured third party and the insurance company, not between the injured and oftentimes impecunious insured.' ” Am. Auto. Ins. Co. v. Murray,
. It is perhaps not a coincidence that Hymed only discovered its concern about the District Court’s jurisdiction after losing in that Court. But, because the amount-in-controversy issue goes to jurisdiction, it is immaterial that it only arose on appeal. As we have previously held, “if it develops that the requisite amount in controversy was never present, even if that fact is not established until the case is on appeal, the judgment of the District Court cannot stand.” Meritcare Inc. v. St. Paul Mercury Ins. Co.,
. In assessing whether the amended complaint sufficiently alleged jurisdiction, we may also consider “documents referenced therein and attached thereto.” Gould Elecs. Inc. v. United States,
. As it turned out, thousands of unsolicited faxes had been sent to a like number of recipients, so that the actual amount of the purported damages at the time the complaint was filed was plainly adequate, even if not known at the time. See State Farm Mut. Auto. Ins. Co. v. Powell,
.Attorney's fees do not generally constitute part of the amount in controversy because the successful party typically does not collect its attorney’s fees. As an exception to that rule, however, courts include attorney's fees in the amount-in-сontroversy calculation when, as in this case, their payment is provided for by the terms of an underlying contract. See 14AA Charles Alan Wright et al., Federal Practice & Procedure § 3712 (4th ed. 2016) ("[Tjhe amount expended for attorney’s fees are a part of the matter in controversy for subject matter jurisdiction purposes when they are provided for by contract ..., since these are part of the liability being enforced.... The same is true when the action is for indemnifi-' cation for a prior judgment plus the attorney's fees incurred in defending the earlier action.”); Springstead v. Crawfordsville State Bank,
. It would be awkward for Hymed to even imply there was less than good faith, given that, in both of thе declaratory judgment actions it filed in Michigan federal courts, see supra note 4, it had itself invoked federal diversity jurisdiction and alleged that the amount in controversy exceeded $75,000.
. The Supreme Court has recognized one limitation on the anti-aggregation rule, which is inapplicable here. See Exxon Mobil Corp. v. Allapattah Servs., Inc.,
. We have previously concluded, in a pair of non-precedential opinions, that the district court does have jurisdiction under such circumstances, though we did not address the amount-in-controversy requirement in any detail. Nationwide Mut. Ins. Co. v. David Randall Assocs., Inc.,
. Each case that Hymed cites to the contrary is readily distinguishable. It primarily relies on two cases — Siding & Insulation Co. v. Acuity Mut. Ins. Co.,
At first glance, Good more closely resembles the present suit. The insurer in that case filed the declaratory judgment action against its insured, but did so only after the settlement of the underlying class action for $16 million. Good,
The decisive difference between this case and [Sadowski] is that at the time the insurer filed the declaratory judgment action in that case, the insured’s arguable right to recover under its policy was still completely its own. No assignment had been made. By the time [the insurer] filed this action, however, [the insured] had already assigned its claims to the members of the Good class, and no individual class member had a claim for more than $75,000.... Once [the insured] made the assignment of rights, this was no longer a "unitary controversy" between the insurer and its insured. It had become a multi-party dispute between [the insurer] and thousands of class claimants. [Sadowski] is inapposite.
Id. at 718. Here, as in Sadowski, Stevens & Ricci's right to recovery had not been divided among the class members at the time the declaratory judgment complaint was filed. The subsequent settlement in the Underlying Action did not revoke the jurisdiction that had been established.
We recognize that this results in a situation in which an insurer can invoke federal jurisdiction in a declaratory judgment action while class members cannot. Echoing that notion, the Dissent says we are taking an "insurance-company viewpoint approach” to the amount-in-controversy question. (Dissent Op. at 414.) But our decision reflects no partiality. The fact that Auto-Owners can invoke federal jurisdiction simply follows from application of the amount-in-controversy requirement and its accompanying anti-aggregation rule. To Auto-Owners, the amount in controversy exceeds $75,000; we need not aggregate claims to cross that threshold. To each member of the class, the amount in controversy falls short. Only one party may invoke our diversity jurisdiction because only that party has the requisite amount at stake. We note, however, that any concern about one-sidedness should be mitigated by the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d), which vests district courts with jurisdiction over class actions where the aggregate amount in controversy exceeds $5,000,000 and the parties are minimally diverse. As a consequence, class action plaintiffs may satisfy the amount-in-controversy requirement necessary for federal jurisdiction if their individual claims exceed $75,000 or if the total aggregate claims of the class exceed $5,000,000. Here, the aggregate, statutory damages of the class, as subsequent revelations have made clear, see supra note 10, perhаps exceeded the CAFA threshold. In future cases, if class members cannot satisfy either amount, they are not then entirely without any opportunity for declaratory relief; they just need to proceed in state court.
. Despite the Dissent’s charge to the contrary, our approach is also consistent with our opinion in Packard v. Provident National Bank,
. Our dissenting colleague takes issue with this characterization but cites no cases that have ever taken his view.
. Our dissenting colleague says we are "tak[ing] Powell out of context,” and uses a block quotation from that case to shed light on its reasoning. (Dissent Op. at 413.) One could read that block quote, as the Dissent does, as expressing some doubt about the rule of law discussed in the case. But that is not so. Powell recognized the common-sense notion that if the payment of attorney's fees is provided for by an underlying contract, then those fees should be considered for amount-in-controversy purposes.
The problem we identified in Powell was that a previous district court opinion on which a party to the case had relied — Nationwide Mut. Ins. Co. v. Rowles,
. Hymed makes no argument concerning the scope of Auto-Owners’s duty to defend Stevens & Ricci, as distinct from its duty to indemnify. Hymed argues only that Auto-Owners must indemnify its insured per the 'Policy, and thus pay the $2,000,000 settlement. Subject to the terms of the insurance policy, an insurer’s duty to defend may be broader than its duty to indemnify. Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co.,
. Neither party has argued in favor of applying the law of Michigan, the state where Auto-Owners is based and where Hymed previously filed two declaratory judgment actions of its own, see supra note 4. We therefore do not consider Michigan in our choice-of-law analysis.
. Pennsylvania and Arizona generally apply clear and unambiguous language in an insurance contract. See Erie Ins. Exch. v. Conley, 29 A.3d 389, 392 (Pa. Super. Ct. 2011); D.M.A.F.B. Fed. Credit Union v. Emp’rs Mut. Liab. Ins. Co. of Wis.,
That narrow exception is irrelevant here, however, as Hymed makes no argument that this case falls into any of those categories. Instead, Hymed seems to suggest that Arizona’s law concerning insurance contract interpretation simply traces the expectations of the insured, and Arizona courts conclude that an insured has coverage if it reasonably thinlcs it has coverage. (See Reply Br. at 11 n.2 (arguing that, under Arizona law, "the reasonable expectation of the insured is controlling" (original emphasis)).) That would allow the exception to swallow the rule, would be oddly one-sided, and is not the law of Arizona.
. In reaching that conclusion, we are guided and persuaded by the extensive analysis of the United States District Court for the Eastern District of Pennsylvania, which applied Pennsylvania law in the closely analogous case of Melrose Hotel Co. v. St. Paul Fire & Marine Insurance Co.,
. Hymed primarily relies on two cases in its effort to demonstrate that the unintentional damage from the sending of the faxes is covered by the Policy as interpreted under Arizona law — Transamerica Insurance Group v.
Similarly, Phoenix Control involved a situation in which the insured acted under a claim of right or justification. There, the insured intended to use copyrighted material, but did so under a belief "that he had the legal right’ to use the information because it was in the public domain.”
. As previously discussed, Hymed relies on its misapprehension of Arizona law regarding the "reasonable expectations of the insured” exception as a way to survey the nationwide legal landscape and to argue that Arizona law has incorporated Hymed’s preferred definition of “advertising injury.” Although Hymed cites law from a number of jurisdictions to support its argument that "advertising injury” coverage exists here, it omits any citations from one notable jurisdiction: Arizona. Given the absence of any proper argument or even citation to Arizona law, we apply the law of Pennsylvania.
. The Policy also defines "advertising injury” as: "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”; "Misappropriation of advertising ideas or style of doing business”; and "Infringement of copyright, title or slogan.” (J.A. at 573.)
. See Riccio v. Am. Republic Ins. Co.,
. We recognize that the rule of the last antecedent is “not an absolute and can assuredly be overcome by other indicia of meaning ....” Barnhart v. Thomas,
. Brethren also represents a validation of the earlier prediction of state law made by the Eastern District of Pennsylvania in Melrose Hotel, "which applied Pennsylvania policy interpretation rules to an insurance policy con
. Hymed argues that the Policy’s "advertising injury” definition "provides coverage for violations of all rights of privacy.” (Opening Br. at 26.) It does so by contrasting the Policy's coverage for “publication of material that violates a person's right of privacy" (J.A. at 573 (emphasis added)), with the "advertising injury” language in Melrose Hotel, which extended coverage to the act of “\m\aking known to any person or organization covered material that violates a person's right to privacy,”
Dissenting Opinion
dissenting,
I would dismiss for lack of subject matter jurisdiction. In deciding that the amount-in-controversy threshold is satisfied, the majority adopts the reasoning in Meridian Security Insurance Company v. Sadowski,
First, the majority’s view that the instant controversy is “unitary” is questionable as a practical matter and creates tension with our previous decisions. Plaintiff-Appellee Auto-Owners Insurance Company named Appellant Hymed Group Corporation as a defendant in its declaratory action “in the hope of attaining a binding judgment against both the insured and the injured party,” American Automobile Insurance Company v. Murray,
It is hard to conceive of what controversy actually exists between Auto-Owners and Stevens & Ricci given the fact that Stevens & Ricci has not so much as entered an appearance in the matter. As Auto-Owners itself states in its Brief: “Hymed and Auto-Owners are the parties currently engaged in the ‘real dispute’ that has reached this Court on appeal ... and Hymed (and the class members) are the only ones that have a financial interest in the coverage issue .... ” Appellee’s Supp. Br. at 12.
The notion that insurance coverage disputes occur only between the insurance company and its insured fits uneasily with our Article III standing decisions in which we have stressed that parties like Hymed have a significant stake. See Murray,
As the majority notes, the import of its decision is that parties like Hymed cannot assert federal jurisdiction in declaratory actions seeking similar reliеf. In my view, this retreats from our previous decisions emphasizing the particularized interest of the injured party. The majority observes that “[standing and amount-in-controversy are two distinct inquiries.” Majority Op. at 400. It misses the point. My uneasiness with the majority’s characterization of coverage disputes arises from the practical anomaly of the real party in interest losing part of its stake in the suit.
Further, I believe that the majority’s approach is essentially a run around the anti-aggregation rule. We have prohibited measuring the amount-in-controversy by the defendant’s total cost on the basis that it violates anti-aggregation principles. In Packard v. Provident National Bank,
The majority’s response to this reasoning is that it is not aggregating but rather assessing the amount-in-controversy as the total “value of the right being litigated” from the perspective of Auto-Owners. Majority Op. at 400. On this point, the majority invokes the plaintiffs viewpoint rule, under which the test for determining the amount-in-controversy relies solely on the value of the benefit to the plaintiff. In other words, the majority believes that because the defendant in the underlying action is now the plaintiff, the reasoning in Packard does not apply.
But the majority’s approach does not actually elude the aggregation of class members’ claims. This becomes clear if we consider courts’ treatment of the “either viewpоint” approach, under which the amount-in-controversy is based on the pecuniary result to either party that would be produced by the judgment. See 14AA Charles A. Wright et al., Federal Practice and Procedure § 3702.5 (4th ed. 2016).
Courts addressing the either-viewpoint approach have declined to adopt the rule in suits involving class actions, for the simple fact that total cost is the same as aggrega
The Ninth Circuit Court of Appeals has made the same point. In Ford Motor Co.,
Here, the relief requested is different but the implications are the same. Auto-Owners asks us to view the amount-in-controversy as its total detriment on the presumption that this eludes application of the anti-aggregatiоn rule. But the “inherent conflict” noted in Ford does not really disappear simply by assessing the amount-in-controversy from the plaintiff-insurance company’s viewpoint. This is because in a declaratory action, the court looks to the underlying suit to determine the amount in controversy. See e.g., Jumara v. State Farm Ins. Co.,
The majority believes that its approach is “consistent” with Ford. Majority Op. at 400.1 disagree. Ford straightforwardly explained that it would not consider the total detriment of the defendant in reaching the amount in controversy because “total detriment” and “aggregation” are one and the same. Here, the majority concludes that total detriment and aggregation are not the same simply because the insurance company is the plaintiff in the declaratory action. Rather than being consistent with Ford, the majority skirts the relevant point of Ford through a narrow focus on party status.
Thus to calculate the amount-in-controversy, I would do what our precedents suggest: look to Hymed’s underlying suit
To be sure, the total amount potentially owed by Auto-Owners also falls short of the $75,000 threshold. The majority attempts to overcome this problem by tacking onto the amount the cost of hypothetical attorneys’ fees. I also depart from this approach. Generally, attorneys’ fees are not considered a part of the amount-in-controversy. 28 U.S.C. § 1332(a); see also 14AA Charles A. Wright et al., Federal Practice and Procedure § 3712 (4th ed. 2016). We have referenced a narrow exception to this rule when “the contracts at issue called for the payment of attorneys’ fees and costs by the party breaching the contract.” State Farm Mut. Auto Ins. Co. v. Powell,
The majority relies on Powell in concluding that attorneys’ fees are duly included here, but that case provides only apparent support. In Powell, we declined to include arbitration costs in the amount-in-controversy because the policy at issue did “not specifically impose a duty to pay on the part of the [insurance company].” Id. Similarly, the Policy contains no provision specifically imposing on Auto-Owners a duty to pay attorneys’ fees and costs. While the majority points out that the Policy imposes on Auto-Owners a general “duty to defend,” this duty only applies to suits that fall within coverage. Thus, it is not an unconditional requirement from which we could comfortably speculate as to costs that may be incurred.
The way the majority presents it, it might appear that Powell straightforwardly adopts the position it embraces. Not so. The full text of the language cited by the majority is as follows:
As an initial mаtter, we question the reasoning of the district court’s decision in [Nationwide Mutual Insurance Company v. Rowles by Rowles,818 F.Supp. 852 (1993)]. In arriving at its conclusion, the Rowles court relied upon two cases, [Springstead v. Crawfordsville State Bank,231 U.S. 541 ,34 S.Ct. 195 ,58 L.Ed. 354 (1913)] and [Farmers Insurance Company v. McClain,603 F.3d 821 (10th Cir. 1979)] which held that costs and attorneys’ fees should be considered part of the amount in controversy for jurisdictional purposes when they are mandated by underlying instruments or contracts. In those two cases, however, the contracts at issue called for the payment of attorneys’ fees and costs by the party breaching the contract.
Id. at 98. What should be readily apparent is that the majority takes Powell out of context. There, we did not hold that “costs and attorneys’ fees should be considered part of the amount in controversy for jurisdiction purposes when they are mandated by underlying instruments or contracts;” we merely cited a district court case that made a conclusion to that effect. The upshot of Powell’s holding is more limited — it is, where an underlying instrument does not “specifically impose a duty to pay” fees and costs, such costs are not duly included in the amount in controversy. Id.
To be clear, I would agree that where a contract requires a breaching party to pay attorneys’ fees, those may be considered part of the amount in controversy — after all, in those contexts, “the costs [are] essentially additional damages to be assessed against the party found to have breached the instrument.” Id. This narrow exception to the general prohibition does not apply
In sum, the inclusion of attorneys’ fees here is an unnecessary expansion of our jurisprudence for which the majority articulates no basis.
“It is axiomatic that federal courts are courts of limited jurisdiction, and as such are under a continuing duty to satisfy themselves of their jurisdiction before proceeding to the merits of any case.” Packard,
Thus, because of the difficult fit between the majority’s reasoning and our Article III standing jurisprudence in similar contexts, the tension between the insurance-company viewpoint approach and the anti-aggregation rule, and my reservations regarding the inclusion of the attorneys’ fees to reach the amoúnt-in-controversy, I am not satisfied of our jurisdiction over this dispute. I would dismiss the appeal on that ground and therefore respectfully dissent.
. The majority calls this approach unprecedented. But we have clearly suggested as much in Jumara. Further, the proposition that we look to the underlying suit to determine the amount in controversy is apparent as a matter of common sense.
. This is so even if we adopt the fiction that because declaratory relief is sought, the controversy becomes unitary, only involving the insurer and its insured. Even viewing this suit in this way, we do not derive the amount of controversy out of thin air — rather, we must look to the value of damages sought in the underlying suit.
. The majority cites an influential treatise for the proposition that the law in this area is "quite settled.” Majority Op. at 401-02 n.18. However, one treatise does not law make. And, a closer look at the cases collected in that treatise demonstrates that what is "quite settled” is that where an underlying contract contains a fee-shifting provision, attorneys' fees may be included in the amount-in-controversy, a point I do not dispute. See 14AA Charles Alan Wright et al., Federal Practice & Procedure § 3712 (4th ed. 2016). What is less settled, and has received less circuit attention, is the context we are presented with here— with only one circuit sharing the majority's view and other circuits employing a similar approach only where the relevant defense or indemnification occurs before the declaratory suit is brought. See Stonewall Ins. Co. v. Lopez,