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Words Matter: Court Sides with Translation Company in Insurance Coverage Dispute

The US Court of Appeals for the First Circuit concluded that a company’s general liability insurer was obligated to provide coverage for legal fees incurred in fending off a trade secret and defamation lawsuit brought by a competitor. Lionbridge Tech., LLC v. Valley Forge Ins. Co., Case No. 21-1698 (1st Cir. Nov. 21, 2022) (Kayatta, Selya, Thompson, JJ.)

Lionbridge and TransPerfect are competitors in the language-translation industry. TransPerfect sued Lionbridge for misappropriation of trade secrets and defamation. TransPerfect alleged that Lionbridge concocted a scheme through its corporate owner to feign interest in acquiring TransPerfect and, through this scheme, improperly gained access to TransPerfect’s trade secrets, which could be used to poach TransPerfect’s customers and otherwise undermine TransPerfect’s business.

Shortly after the lawsuit was filed, Lionbridge informed its liability insurance carrier, Valley Forge, about the litigation. Valley Forge initially indicated that it would provide Lionbridge with coverage for legal costs associated with the litigation. Valley Forge subsequently disputed the requested coverage based on both the reasonableness of the fees incurred and the nature of the suit. Lionbridge filed suit against Valley Forge seeking full coverage from Valley Forge for its defense costs. The dispute centered on whether the fees incurred could be considered injury arising out of “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organizations goods, products, or services,” as provided by Lionbridge’s insurance policy. The district court granted summary judgment in favor of Valley Forge, finding that Valley Forge did not owe Lionbridge a duty to defend under the relevant policy provisions and exclusions. Lionbridge appealed.

The First Circuit reversed, explaining that an insurer’s duty to defend depends on whether the allegations in the underlying litigation are reasonably susceptible to an interpretation that the policy provisions apply. The focus of the inquiry is the source of the injury, not any specific theories of liability set forth in the underlying complaint. The Court explained that this inquiry required a comparison of the allegation made in the underlying litigation against the insurance policy provisions.

After analyzing the underlying complaint against the insurance policy, the First Circuit determined that the policy provisions applied because the allegations “roughly sketch[ed]” an injury arising from a defamation claim. TransPerfect’s claims were rooted in alleged reputational harm to its business, which fit within the relevant provision. The Court noted that complete overlap between the policy provisions and the claims was not required.

The First Circuit next considered whether any policy coverage exclusions applied to preclude coverage. The relevant exclusions fell into two buckets:

  • Injuries caused by an insured with direct knowledge that its actions would inflict injury, or injuries arising out of an oral or written publication that the insured knows is false
  • Trade secret misappropriation.

Valley Forge carried the burden of proving that either or both categories of exclusions applied. The Court concluded that the first category did not apply because Valley Forge failed to show that all allegations [...]

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Re-Poster Child for § 230: Immunity under the CDA for Reposting Content of Another

The US Court of Appeals for the First Circuit affirmed a district court’s decision to dismiss claims for defamation under the Communications Decency Act (CDA), 47 USC § 230, and for copyright infringement under the fair use doctrine. Monsarrat v. Newman, Case No. 21-1146 (Kayatta, Lipez, Gelpí, JJ.).

The parties’ dispute arose from a series of posts on a community message board. Residents of the Davis Square neighborhood in Massachusetts maintained a Live Journal forum for several years. In response to a revision of the Live Journal terms of service in 2017, Ron Newman, a member of the community, copied the entirety of the content from the Live Journal forum to another online platform: Dreamwidth. The copied content included a series of allegedly defamatory posts about Jonathan Monsarrat and a post that Monsarrat had copyrighted. Monsarrat sued Newman for both defamation and copyright infringement. Newman moved to dismiss the defamation claim under the CDA, § 230, and the copyright claim under the fair use doctrine. After the district court granted the motions, Monsarrat appealed.

The First Circuit first addressed the defamation claim under § 230. Newman argued that § 230 provided him immunity from defamation. Specifically, § 230 states “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” It also provides a shield from state law claims that would be “inconsistent with this section.” Courts apply a three-part analysis to determine whether a defendant is entitled to immunity under § 230:

  1. Is the defendant a “provider or user of an interactive computer service”?
  2. Is the claim based on “information provided by another information content provider”?
  3. Does the claim treat the defendant “as the publisher or speaker” of that information?

Monsarrat did not challenge the fact that Newman was a “user” under the first prong. Regarding the second prong, the analysis hinged on whether Newman was an “information content provider,” which in turn relied on whether Newman was responsible for the allegedly defamatory content in whole or in part. The factual record showed that Newman did nothing but copy the allegedly defamatory posts that had been created by another. Monsarrat unsuccessfully argued that Newman was responsible because Newman copied the posts from Live Journal to a different digital platform with an allegedly different audience. The First Circuit was not persuaded, ruling that providing essentially the same content on a different platform did not make a defendant responsible for that content under § 230. Regarding the third prong, Monsarrat’s complaint clearly alleged that Newman was acting as a publisher. The Court affirmed the dismissal of the defamation claim under § 230.

Monsarrat’s copyright claim related to a Live Journal post by Monsarrat in the Davis Square forum. He had created a post with a link to Live Journal’s harassment policy, a quotation from the policy and a brief message regarding his attempts to report the abuse he felt he had suffered by other [...]

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