Defamation and Disparagement
ABM Indus., Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, Nos. 06-16939, 06-17144, 2008 WL 3992334 (9th Cir. (Cal.) Aug. 14, 2008) (Fletcher, Tallman, Dawson)
The court looked to the elements under Texas law for pleading causes of action for slander and libel in evaluating whether potential coverage arose. Although hard to believe from the court’s opinion, it appears that there were
tenant estoppel certificates that set forth an opinion by ABM reflecting how two potential lenders evaluated the risk of making a loan. These lenders were then sued for interference with prospective economic advantage. The court also found that it was a “mere legal opinion, not a statement of fact,” that was the subject matter of the tenant estoppel certificate. The court does not explain why a legal opinion is not actionable. It urged:
Texas law requires as essential elements of [a libel] claim a factual statement that harms an individual’s or corporation’s reputation.
Id. at *1.
This approach does not permit reference to any implications which may have flowed from statements which were libelous, which implications the court does not evaluate.
Turning its attention to disparagement, the court found that the assertion of a legal position on the enforceability of a lease agreement expressed in a tenant estoppel certificate did not implicate a good, service or product under the ordinary meaning of those terms. This is a curious interpretation of the services to be rendered by a landlord to a tenant under the terms of a lease, which legal obligations include a number of actions which would be deemed services in most contexts. Notably, there is no contention that the particular statement was protected by a litigation privilege. So long as it could be actionable, it seems to matter not whether an opinion is stated which has the effect of libeling a party or disparaging its goods.
The Ninth Circuit’s perfunctory treatment of this issue evidences the court’s unwillingness to look to other prior precedent where it more broadly construed the scope of defamation/disparagement claims. The notion that a legal opinion is not actionable so as to create coverage for defamation and disparagement is inconsistent with Nvidia Corp. v. Federal Ins. Co., No. 04 C 7178, 2005 WL 2230190, at *12 (N.D. Ill. Sept. 6, 2005), where the statement that VisionTek was selling unlicensed goods was found to be both defamatory and disparaging. In Western Int’l Syndication Corp. v. Gulf Ins. Co., No. 05-55092, 2007 WL 625264, at *2 (9th Cir. (Cal.) Feb. 26, 2007), disparagement was implicated by statements which cast doubt on Apollo’s intangible right to broadcast shows. In Pennfield Oil Co. v. American Feed Industry Inc. Co. Risk Retention Group, Inc., No. 8:05CV315, 2007 WL 1290138, at *1, 8 (D. Neb. March 12, 2007), the assertion of FDA approval for multiple uses of a drug was in question. In Liberty Mutual Ins. Co. v. OSI Indus., Inc., 831 N.E.2d 192, 199 (Ind. Ct. App. 2005), statements that questioned who had ownership rights to exclusive secret technology were pertinent.
In short, in a number of prior cases, including those from the Ninth Circuit, the fact that a statement was part of an opinion – even a legal opinion – made no difference to the actionable character of the conduct, and the Texas cases cited do not require a contrary result even if the elements for proof of liability in the underlying action are of any moment. However, this juxtaposition of the underlying case with the coverage case is contrary to applicable law.
In Aurafin-OroAmerica, LLC v. Federal Ins. Co., No. 04-56681, 188 Fed. Appx. 565, 2006 WL 1880088 (9th Cir. (Cal.) June 26, 2006), the court reasoned:
The facts alleged in D & W’s counterclaims, taken together, could potentially allege a claim for true libel because an allegation that D & W was a patent infringer – a pejorative allegation of shady business practices – was implicit in OroAmerica’s statement to QVC that D & W’s gold chains infringed its patents. See Atlantic Mut. Ins. Co. v. J. Lamb Inc., 100 Cal.App.4th 1017, 123 Cal.Rptr.2d 256, 269 (Cal.App.2002).
. . . The viability of the underlying claim against the insured does not affect an insurance company’s duty to defend. Rather, even “when the underlying action is a sham,” the insurer may terminate its duty to defend only by “demur[ring] or obtain[ing] summary judgment on its insured’s behalf.” Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 17 Cal.Rptr.2d 210, 846 P.2d 792, 799 (Cal.1993). Thus, the district court erred when it relieved Federal of its duty to defend based on the merits of D & W’s underlying defamation claim.
Id. at 566.
