Welch Foods, Inc. v. National Union Fire Insurance, et al

Filing

OPINION issued by Sandra L. Lynch, Chief Appellate Judge; Juan R. Torruella, Appellate Judge and Jeffrey R. Howard, Appellate Judge. Per Curiam. Published. [10-2261]

Case: 10-2261

Document: 00116280682

Page: 1

Date Filed: 10/24/2011

Entry ID: 5590306

United States Court of Appeals
For the First Circuit
No. 10-2261
WELCH FOODS, INC., a Cooperative,
Plaintiff, Appellant,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA;
ZURICH AMERICAN INSURANCE COMPANY;
AXIS SURPLUS LINES INSURANCE COMPANY,
Defendants-Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella and Howard, Circuit Judges.
Martin C. Pentz, with whom Jeremy A. M. Evans, Foley Hoag
LLP, Richard D. Milone, S. Mahmood Ahmad, and Kelley Drye & Warren
LLP were on brief, for appellant.
Michael P. Duffy, with whom Harvey Weiner, Jane A. Horne,
and Peabody & Arnold LLP were on brief, for appellee National Union
Fire Insurance Company of Pittsburgh, PA.

October 24, 2011

Case: 10-2261

Document: 00116280682

Per Curiam.

Page: 2

Welch

Date Filed: 10/24/2011

Foods,

Inc.

was

Entry ID: 5590306

accused

in two

lawsuits, one by its competitor, POM Wonderful LLC, and one by a
group

of

consumers,

of

deceptive

trade

practices,

false

and

misleading advertising, and deceptive labeling, among other claims.
The claims concerned Welch's product, Welch's 100% Juice White
Grape Pomegranate Flavored Three Juice Blend, which was primarily
apple and grape juice, and the label on which pictured primarily
pomegranates.

Welch says the consumer suit was a copycat of POM's

suit.
As a result of these suits, Welch sought both defense
costs and indemnity from three of its insurers on a variety of
policies.

It brought suit in federal court for a declaratory

judgment that it was so entitled to these benefits.

The court

held, for reasons which varied as to the policy and insurer at
issue, that Welch was not entitled to relief.

Welch Foods, Inc. v.

Nat'l Union Fire Ins. Co., No. 09-12087, 2010 WL 3928704 (D. Mass.
Oct. 1, 2010).

Welch appealed.

Between then and the hearing of this appeal, there were
two developments.

First, before oral argument, Welch and two of

the insurers, Axis Surplus Insurance Company and Zurich American
Insurance Company, settled their differences, leaving only the
dispute with one insurer, National Union Fire Insurance Co. of
Pittsburgh, PA to be decided.

-2-

Case: 10-2261

Document: 00116280682

Page: 3

Date Filed: 10/24/2011

Entry ID: 5590306

Second, a California jury, in the POM suit, found that
the name, label, or advertising of Welch's 100% Juice White Grape
Pomegranate

product,

while

literally

true,

was

nevertheless

deceptive or had a tendency to deceive a substantial number of
actual consumers,
customers.1

and

that Welch

had intended

to

so

deceive

Because the jury also found that POM had not proven

injury, the case was dismissed and POM appealed.
The district court found, and National Union does not
dispute, that the allegations of the POM suit fell within the
coverage

of

the

National

Union

Organization Insurance Policy.

Not-For-Profit

Individual

and

Welch Foods, 2010 WL 3928704, at

*2. However, the court found no coverage because these allegations
also fell within Exclusion 4(c) of the policy.

Id. at *2-3.

The

policy exclusion provides:
Antitrust Exclusion
The Insurer shall not be liable to make any
payment for Loss in connection with a Claim
made against the Insured . . . alleging,
arising out of, based upon or attributable to,
or in any way involving, either directly or

1

Under Massachusetts law (which governs this dispute), the
finding by the jury is not relevant to the question of an insurer's
obligation to pay defense costs. Bos. Symphony Orchestra, Inc. v.
Commercial Union Ins. Co., 545 N.E.2d 1156, 1158 (Mass. 1989) ("The
obligation of an insurer to defend is not, and cannot be,
determined by reference to the facts proven at trial. Rather, the
duty to defend is based on the facts alleged in the complaint and
those facts which are known by the insurer.").
It is, though,
relevant to one of the exclusions on which National Union relies in
this appeal.
-3-

Case: 10-2261

Document: 00116280682

Page: 4

Date Filed: 10/24/2011

Entry ID: 5590306

indirectly,
antitrust
violations,
price
fixing,
price
discriminations,
unfair
competition, deceptive trade practices and/or
monopolies,
including
any
actions,
proceedings, claims or investigations related
thereto . . . .
(Emphasis added).
No definition was provided in the policy for the terms
"unfair competition" or "deceptive trade practice."

The district

court found that the ordinary usage and meaning of the terms
encompassed

the

allegations

made

by

POM

(and

so

the

copycat

allegations), and so coverage was excluded and National Union had
no obligation to defend or indemnify.

Welch Foods, 2010 WL

3928704, at *2-3.
On appeal, Welch is entitled to de novo review.

See

Penn-Am. Ins. Co. v. Lavigne, 617 F.3d 82, 84 (1st Cir. 2010).
Welch largely repeats the arguments it made to the district court.
We reject the arguments for the reasons given by the district court
and add this brief summary:
1.

Although Exclusion 4(c) bears the label "Antitrust

Exclusion," and several of the descriptions of covered claims refer
to "antitrust" or typical antitrust claims such as "monopolies,"
the plain language of the other excluded claims -- particularly
"unfair competition" and "deceptive trade practices" -- is far
broader

and

not

so

limited.

Our

decision

in

Open

Software

Foundation, Inc. v. United States Fidelity & Guaranty Co., 307 F.3d

-4-

Case: 10-2261

11

Document: 00116280682

(1st

Cir.

2002),

is

Page: 5

not

to

Date Filed: 10/24/2011

the

contrary

and

Entry ID: 5590306

is

easily

distinguishable.
2.
descriptions

The policy itself, in Section 19, states "[t]he
in

the

headings

of

this

policy

are

solely

for

convenience, and form no part of the terms and conditions of
coverage," thus precluding the weight Welch wishes to assign the
heading.
3.

We reject Welch's argument that we should ignore the

actual language of the policy in favor of distilling some essence
of all the terms (which it says is anticompetitive behavior,
reducing or discouraging competition).

As held in Allmerica

Financial Corp. v. Certain Underwriters at Lloyd's, London, 871
N.E.2d 418, 425 (Mass. 2007), "[a]n insurance contract is to be
interpreted according to the fair and reasonable meaning of the
words in which the agreement of the parties is expressed." (quoting
Cody v. Conn. Gen. Life Ins. Co., 439 N.E.2d 234, 237 (Mass. 1982))
(internal quotation marks omitted).

"Every word in an insurance

contract must be presumed to have been employed with a purpose and
must be given meaning and effect whenever practicable."

Id.

(quoting Jacobs v. U.S. Fid. & Guar. Co., 627 N.E.2d 463, 464
(Mass. 1994)) (internal quotation marks omitted).

Further, the

terms are in the disjunctive, e.g., unfair competition or deceptive
trade practices, and the word or must be given effect.

-5-

Case: 10-2261

Document: 00116280682

4.

Page: 6

Date Filed: 10/24/2011

Entry ID: 5590306

The doctrine of noscitur a sociis has no place here.

Even by its own rules, it cannot be used to overrule the plain
meaning of the terms.

See Sanford v. Bos. Edison Co., 56 N.E.2d 1,

4 (Mass. 1944) (holding that the "maxim noscitur a sociis has no
application" to the interpretation of the word "otherwise" in the
phrase "by general rule or otherwise"); see also Schenkel & Shultz,
Inc. v. Homestead Ins. Co., 119 F.3d 548, 551 (7th Cir. 1997)
(holding that courts "cannot use the doctrine to create uncertainty
in an otherwise unambiguous term").

Beyer v. Heritage Realty,

Inc., 251 F.3d 1155 (7th Cir. 2001), relied upon by Welch, is
inapposite here.
different.

First, the terms of the exclusion are materially

Here, at least two terms extend beyond the antitrust

context, while in Beyer there was only a single term.

See id. at

1157. Second, the Beyer court found that a broad interpretation of
the exclusion would have defeated the purpose of the insurance
coverage,

which was

in

large

part

to provide

liability arising out of deceptive acts.

protection

See id. at 1158.

for

Here,

no such risk is present.
Because Exclusion 4(c) applies, we do not go on to
discuss the issue of whether the jury verdict means that Exclusion
4(b), excluding coverage where "any final adjudication establishes
that . . . [a] deliberate fraudulent act was committed," also
applies.
Affirmed.

Costs are awarded to National Union.

-6-