WELCH FOODS, INC., a Cooperative v. National Union Fire Insurance Company of Pittsburgh, Pa

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

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Per Curiam. Welch Foods, Inc. was 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.
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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, and that Welch had intended to so deceive
customers. Because the jury also found that POM had not proven 1
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 Not-For-Profit Individual and
Organization Insurance Policy. 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
Under Massachusetts law (which governs this dispute), the 1
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.
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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
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11 (1st Cir. 2002), is not to the contrary and is easily
distinguishable.
2. The policy itself, in Section 19, states "[t]he
descriptions 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.
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4. 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. First, the terms of the exclusion are materially
different. 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 protection for
liability arising out of deceptive acts. See id. at 1158. 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.
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