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Myron Corp. v. Atlantic Mutual Insurance Corp.

July 27, 2010

MYRON CORPORATION, PLAINTIFF-RESPONDENT,
v.
ATLANTIC MUTUAL INSURANCE CORPORATION, DEFENDANT-APPELLANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 407 N.J. Super. 302 (2009).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

(NOTE: This Court wrote no full opinion in this case. Rather, the Court's affirmance of the judgment of the Appellate Division is based substantially on the reasons expressed in Judge Reisner's opinion below.)

The issue in this appeal is whether plaintiff, as the prevailing party in coverage dispute with its commercial general liability insurer, was entitled to counsel fees pursuant to New Jersey fee-shifting provision, for litigation that occurred in Illinois.

Plaintiff Myron Corporation (Myron) is a New Jersey-based business with principal offices in Maywood, New Jersey. Myron obtained a commercial general liability (CGL) policy from defendant Atlantic Mutual Insurance Corporation (Atlantic) covering, among other things, liability for property damage and for "personal and advertising injury." As part of its operations as "a direct seller of business promotional products," Myron sent telefaxes (faxes) to various businesses throughout the country, prompting the filing of several lawsuits against Myron for allegedly sending "junk faxes" in violation of the Telephone Consumer Protection Act (TCPA), 47 U.S.C.A. § 227, and various state laws.

On June 3, 2003, Stonecrafters, Inc., an Illinois corporation, filed a class action complaint against Myron in Illinois state court (Stonecrafters lawsuit), alleging violations of the TCPA and the Illinois Consumer Fraud and Deceptive Business Practices Act, as well as common law conversion. On October 28, 2003, Myron's counsel sent Atlantic the Stonecrafters complaint along with several other TCPA-related claims for defense and indemnity under the CGL policy. In a letter, Myron's counsel set forth the legal basis for the claim that Atlantic was obligated to provide a defense under New Jersey law, since the policy was issued in New Jersey. Atlantic initially agreed to defend Myron, but on March 8, 2005, it filed a complaint against Myron in the United States District Court for the Northern District of Illinois, seeking a declaration that the Atlantic policy did not cover the assorted multi-state TCPA claims against Myron. On August 22, 2005, the Illinois federal district court dismissed Atlantic's action for lack of diversity jurisdiction, because at that time the amount in controversy was less than $75,000.

On August 24, 2005, Atlantic re-filed the federal court complaint after finding additional defense invoices to meet the $75,000 threshold. On August 29, 2005, Myron filed its own declaratory judgment complaint in the Law Division, Bergen County, New Jersey. On November 4, 2005, on Atlantic's motion, the New Jersey judge dismissed Myron's action without prejudice "pending the resolution of the earlier-filed" Illinois federal court action. Subsequently, on Myron's motion, the Illinois federal district court abstained from the litigation finding, in part, that New Jersey had the most substantial interest in the coverage issue.

Myron re-filed its declaratory judgment action in New Jersey and obtained a favorable decision on the merits of the underlying coverage issue, with respect to Atlantic's duty to defend. In addition, the Bergen County judge determined that Atlantic had a duty to defend Myron in the Stonecrafters case. The judge deferred a decision on the indemnity issue pending the outcome of the underlying TCPA suit. Thereafter, the parties settled all of Myron's counsel fee claims in connection with the Stonecrafters case and the Bergen County declaratory judgment action. They did not settle Myron's claim for counsel fees for the Illinois federal declaratory judgment litigation.

On June 6, 2008, in an oral opinion placed on the record, the Law Division judge denied Myron's application, under Rule 4:42-9(a)(6), for approximately $160,000 in legal fees and costs it claimed to have incurred in defending against Atlantic's two federal court declaratory judgment actions. He reasoned, in part, that the New Jersey Supreme Court would not have intended to apply Rule 4:42-9 "extraterritorially."

Myron appealed to the Appellate Division. On June 5, 2009, in a published opinion, the Appellate Division reversed and remanded for further proceedings, finding that Myron was entitled to counsel fees for the Illinois litigation which was part of the same controversy over the coverage issue. Reviewing the matter de novo, and acknowledging the novelty of the issue, the Appellate Division disagreed with the Law Division's conclusion that applying Rule 4:42-9(a)(6) under the circumstances was "extra-territorial" and concluded that Myron's right to counsel fees stemmed from its success in the New Jersey litigation. The Appellate Division further concluded that allowing Myron to recover ensured the bargained for coverage.

The Supreme Court granted defendant's petition for certification.

HELD: The judgment of the Appellate Division is AFFIRMED substantially for the reasons expressed in Judge Reisner's opinion.

JUSTICE RIVERA-SOTO filed a separate, dissenting opinion, stating that the Court's award of counsel fees incurred entirely in actions litigated outside of New Jersey represents an unwarranted and unwise extension of the fee-shifting Rule.

CHIEF JUSTICE RABNER and JUSTICES LONG, LaVECCHIA, ALBIN, WALLACE, and HOENS join in the Court's opinion. JUSTICE RIVERA-SOTO ...


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