In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-3365
DEL MONTE FRESH PRODUCE N.A., INC., et al.,
Plaintiffs-Appellants,
v.
TRANSPORTATION INSURANCE CO.,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 06 C 1658—Suzanne B. Conlon, Judge.
____________
ARGUED APRIL 5, 2007—DECIDED SEPTEMBER 5, 2007
____________
Before EASTERBROOK, Chief Judge, and BAUER and
WOOD, Circuit Judges.
WOOD, Circuit Judge. Plaintiffs, six different Del Monte
companies (to which we refer collectively as “Del Monte”),
brought a declaratory judgment action against their
insurance carrier, Transportation Insurance Company.
Del Monte’s general liability policy with Transportation
includes coverage for claims of personal injury or advertis-
ing injury. Del Monte took the position that this coverage
was triggered by a series of class actions filed against it
in 2004. In those cases, the plaintiffs claimed that they
were injured by Del Monte’s alleged monopoly in the extra-
sweet pineapple market. Transportation took the position
2 No. 06-3365
that the claims against Del Monte fell within an exception
from coverage found in the policy. After examining the
policy, the district court concluded that the policy did
exclude Del Monte’s claims, and it therefore granted
summary judgment for Transportation. We affirm.
I
This is a diversity action, and so we begin by noting that
Transportation is an Illinois corporation with its principal
place of business in Illinois, while the states of incorpora-
tion of the six plaintiffs are California, the Cayman
Islands, Delaware, and Florida; all six have their principal
places of business in Florida. The amount in controversy
is substantially in excess of the $75,000 required by 28
U.S.C. § 1332.
Transportation issued a general liability policy to a Del
Monte affiliate covering “advertising injury” and “personal
injury” occurring between December 31, 1995, and Decem-
ber 31, 1996. The pertinent language from the policy
stated:
COVERAGE B. PERSONAL AND ADVERTISING
INJURY LIABILITY
1. Insuring agreement.
a. We will pay those sums that the insured be-
comes legally obligated to pay as damages because
of “personal injury” or “advertising injury” to
which this insurance applies. We will have the
right and duty to defend any “suit” seeking those
damages.
b. This insurance applies to:
(1) “Personal injury” caused by an offense
arising out of your business, excluding adver-
No. 06-3365 3
tising, publishing, broadcasting or telecasting
done by or for you; [and]
(2) “Advertising injury” caused by an offense
committed in the course of advertising your
goods, products or services[.]
The policy defines “advertising injury” and “personal
injury” as follows:
1. “Advertising injury” means injury arising out of one
or more of the following offenses:
a. Oral or written publication of material that
slanders or libels a person or organization or
disparages a person’s or organization’s goods,
products or services;
b. Oral or written publication of material that
violates a person’s right to privacy;
c. Misappropriation of advertising ideas or style of
doing business; or
d. Infringement of copyright, title or slogan.
....
13. “Personal injury” means injury, other than “bodily
injury[,”] arising out of one or more of the following
offenses:
a. False arrest, detention or home imprisonment;
b. Malicious prosecution;
c. The wrongful eviction from, wrongful entry into,
or invasion of the right of private occupancy of a
room, dwelling or premises that a person occupies
by or on behalf of its owner, landlord or lessor;
d. Oral or written publication of material that
slanders or libels a person or organization or
4 No. 06-3365
disparages a person’s or organization’s goods;
products or services; or
e. Oral or written publication of material that
violates a person’s right to privacy.
The policy excludes from coverage many injuries arising
from the insured’s intentional conduct, although the
parties disagree about the extent of the exclusion. Specifi-
cally, the policy states that:
This insurance does not apply to:
a. “Personal injury” or “advertising injury”:
(1) Arising out of oral or written publication of
material, if done by or at the direction of the
insured with knowledge of its falsity; [or]
(2) Arising out of the willful violation of a penal
statute or ordinance committed by or with the
consent of the insured.
(emphasis added).
In 2004, a series of consumer class actions was filed
against Del Monte claiming fraud and violations of the
antitrust laws arising out of Del Monte’s marketing of its
Fresh Del Monte Gold™ pineapples. According to the
complaints, Del Monte applied for and received a patent
on a genetic sibling to the Gold pineapple (“the CO-2
patent”) and misrepresented in its application that the
new pineapple variety was “extra sweet” and therefore
differed from other varieties. The complaints further
allege that Del Monte disseminated its misrepresenta-
tions through industry publications and sued two com-
petitors for patent infringement, even though it knew that
its claims about the extra-sweetness of its new pineapple
were false. Eventually, Del Monte withdrew the CO-2
patent and settled the infringement lawsuits. Del Monte’s
customers alleged injuries that accrued during the period
No. 06-3365 5
of time when, thanks to its patent, Del Monte had a
monopoly in an alleged market for extra-sweet pineapples.
Each complaint is based on allegations that Del Monte
knowingly submitted fraudulent patent applications,
knowingly sent false letters to competitors regarding
its patent rights, and knowingly engaged in fraudulent
patent litigation.
Del Monte tendered these complaints to Transportation,
seeking coverage under its policy. Transportation rejected
the tender on two bases: (1) the class actions did not
arise from “advertising injury” or “personal injury” under
the policy; and (2) the class actions were excluded from
coverage because they alleged fraud. Del Monte then filed
this action for a declaratory judgment establishing Trans-
portation’s duty to defend and indemnify it under the
policy. All parties agreed that the duty-to-defend issue
could be adjudicated as a matter of law with only minimal
discovery. Following discovery, both parties moved for
summary judgment. The district court granted Transporta-
tion’s motion.
II
Del Monte urges us to find that its policy with Transpor-
tation covered its alleged disparagement of its competitors’
pineapples, its alleged defamation of those companies, and
its alleged “misuse of advertising ideas.” Furthermore, it
continues, the “knowledge of falsity” exclusion does not
apply here. The policy, in its view, does not exclude
coverage for intentional acts but only for the narrower
set of acts that are done with knowledge of falsity. Trans-
portation responds with, in essence, a moral hazard
argument: the policy cannot be used as a “get out of jail
free” card for Del Monte. If Del Monte knows that some-
thing is wrong and does it anyway, it should not, and does
not, have the right to demand that Transportation pick up
6 No. 06-3365
the pieces. In granting summary judgment for Del Monte,
the district court concluded that the class actions are Del
Monte’s mess to clean up. Del Monte wants to hand the
broom back to Transportation. We review the court’s de-
cision de novo, Connecticut Indemnity Co. v. DER Travel
Service, Inc., 328 F.3d 347, 349 (7th Cir. 2003), applying
Illinois law to this diversity action.
A
In a duty-to-defend action, we begin with the deck
stacked in favor of the insured. “[A]llegations of the
underlying complaint must be construed liberally, and any
doubt as to coverage must be resolved in favor of the
insured.” Ill. State Med. Ins. Servs., Inc. v. Cichon, 629
N.E.2d 822, 826 (Ill. App. Ct. 1994). The court must “look
to the allegations in the underlying complaint and compare
these allegations to the relevant coverage provisions of the
insurance policy.” Crum & Forster Managers Corp. v.
Resolution Trust Corp., 620 N.E.2d 1073, 1079 (Ill. 1993).
Therefore, “[i]f the facts alleged in the underlying com-
plaint fall within, or potentially within, the policy’s
coverage provisions, then the insurer has a duty to de-
fend the insured in the underlying action.” Id.
B
Our task is to evaluate the allegations in the class
action cases to see whether the district court correctly
concluded that the policy does not cover them. In conduct-
ing this analysis, “it is the actual complaint, not some
hypothetical version, that must be considered.” Conn.
Indem., 328 F.3d at 350-51. A complaint that is “barren of
any mention of negligence, inadvertence, error, or mistake,
or anything even implying such conduct [and says] . . . only
that [the insured] deceived, schemed, and defrauded
No. 06-3365 7
consumers,” would not escape an exclusion clause like the
one Transportation issued here. Id. at 350; see also United
Fire & Cas. Co. v. Jim Maloof Realty, Inc., 435 N.E.2d 496,
498 (Ill. App. Ct. 1982) (“The inclusion of [a few isolated]
words . . . does not transform what is in essence a specific
intent to deceive into an aggravated form of negligence.
The complaint must be read as a whole in order to assess
its true nature.”). We have previously noted that
“[p]hrases such as ‘mislead and conceal,’ ‘scheme or de-
vice,’ and ‘intentionally and willfully’ are the paradigm of
intentional conduct and the antithesis of negligent ac-
tions.” Conn. Indem., 328 F.3d at 351.
Implied claims that are not specifically alleged can be
ignored. Legal labels in complaints are often incomplete or
missing altogether; as we noted in an earlier decision,
“[w]hat is important is not the legal label that the plaintiff
attaches to the defendant’s (that is, the insured’s) conduct,
but whether that conduct as alleged in the complaint is
at least arguably within one or more of the categories of
wrongdoing that the policy covers.” Cincinnati Ins. Co. v.
E. Atl. Ins. Co., 260 F.3d 742, 745 (7th Cir. 2001) (quoting
Curtis-Universal, Inc. v. Sheboygan Emergency Med.
Servs., Inc., 43 F.3d 1119, 1122 (7th Cir. 1994)). In the
Cincinnati case, the insurance policy had a similar
“knowledge of falsity” exception, and the underlying claim
in the complaint was one of tortious interference, which
can be alleged as either a negligence or an intentional tort
action. The court concluded that, because the complaint
did not limit itself to intentional tort allegations, and
because the insured could be found liable even if “knowl-
edge of falsity” was not proved, there was a duty to defend.
Cincinnati, 260 F.3d at 746-47. The important question is
therefore whether the tendered complaint alleges facts
that, if proved, would show that the insured has commit-
ted acts that fall within the policy’s coverage. Id. at 745.
8 No. 06-3365
There are sixteen complaints against Del Monte in the
underlying class actions. For the sake of efficiency, we
focus our discussion on the allegations on which Del Monte
most heavily relies. Del Monte begins with James Linden’s
complaint, which alleges that “Del Monte implied that
the CO-2 patent covered the MD-2 variety.” The full
allegation in the cited paragraph, however, reads as
follows: “Del Monte actively sought to defraud its competi-
tion, through a series of letters that it sent to pineapple
growers that it believed were cultivating the MD-2. In
these letters, Del Monte implied that the CO-2 patent
covered the MD-2 variety.” This can be read only as a
specific allegation of fraudulent and knowingly false
statements; it does not charge, or even imply, negligence
or mistake. This allegation of fraud is essential to the
plaintiffs’ claim, given the fact that Walker Process
Equipment, Inc. v. Food Machinery & Chemical Corp.,
382 U.S. 172 (1965), recognizes a Sherman Act claim only
for fraud on the Patent Office, not for negligent misstate-
ments. Id. at 176-77.
Del Monte also points the court to Marianne Barry’s
complaint, which alleges that “Del Monte used [the CO-2
patent] to convince competitors that it had patented the
‘Fresh Del Monte Gold’ as a proprietary variety, and that
Del Monte has the exclusive right to sell that variety of
extra sweet pineapple.” However, this paragraph begins,
“Rather than recognize the invalidity of [the CO-2 pat-
ent] . . .” and continues with allegations that the patent
was obtained illegally, pointing to Del Monte’s “inten-
tional[ ]” exclusion of critical information about the pineap-
ple’s development, Del Monte’s “purposeful[ ]” inaccurate
descriptions of the pineapple “to conceal the fact that it
was not really a new variety,” and a memo sent to Del
Monte from a competitor prior to Del Monte’s actions
toward its competitors, which outlined the reasons why
the Del Monte patent was illegal. The paragraph that
No. 06-3365 9
picks up where Del Monte’s quotation leaves off states
that “Del Monte’s misconduct in obtaining and asserting
the invalid patent was deliberate.” Del Monte relies on
another allegation in the Barry complaint, which alleges
that “Del Monte threatened to sue or stop potential
competitors from developing or marketing extra sweet
pineapples.” Those allegations, however, can lead to re-
lief only if the plaintiffs first prove that Del Monte knew
that its patent was invalid. These are all specific allega-
tions of fraud, again with no alternative negligence theory.
Del Monte next lays out a list of “allegations support-
ing liability for disparagement/defamation based on theft
of Del Monte’s ‘proprietary’ pineapple seeds.” Yet when
we turn to the actual complaints, we find that each one
is based on fraud or knowingly false acts. Not one could
lead to relief on a showing of negligent conduct alone. For
example, Del Monte quotes from the Schwam complaint,
but in the complaint, the quoted text begins “using the
fraudulently obtained patent to threaten legal action.” The
American Banana allegation quoted by Del Monte is
about Del Monte’s letters to competitors that are repeat-
edly described as “false, misleading, and threatening” that
were part of an alleged “anticompetitive campaign de-
signed to stifle competition and maintain a monopoly.” The
J. Bonafede citation is about letters alleged to be “threat-
ening . . . attempts by Fresh Del Monte to mislead grow-
ers.” The Just-A-Mere passage describes Del Monte’s
legal action against one competitor in which the com-
petitor alleged “that Del Monte had attempted to monopo-
lize the fresh whole extra-sweet pineapple market through
fraudulent obtainment of [the CO-2 patent].”
Del Monte now claims that plaintiffs’ allegation that
it sent letters including false and misleading statements
does not require a finding of knowledge of falsity in order
to be proved. This may be true in the abstract, but that
reading is precluded by the allegations in the complaints.
10 No. 06-3365
Here, the class plaintiffs have said that the false and
misleading letters are part of a knowingly fraudulent
scheme; they do not seek any relief based on the contents
of the letters.
Del Monte also contends that “[n]owhere is it alleged
that Del Monte knew these statements to be false at the
time they were made” and therefore this conduct does
not fall within the knowledge of falsity exclusion. As we
just pointed out, however, the complaints allege that the
letters were sent well after Del Monte committed its
allegedly fraudulent acts. Unless Del Monte is claiming
that it did not know about its own alleged actions, this
claim too asserts just such knowledge on Del Monte’s part.
Del Monte does not point to a single factual allegation
that is not a part of a specific allegation of fraud and that
does not use the language of the “paradigm of intentional
conduct.” The class plaintiffs can prevail only if they are
able to prove that the underlying statements made by
Del Monte were knowingly false. Therefore, the complaints
at issue in this case fall squarely within the exclusion in
the policy for personal or advertising injury if the injury
arose out of statements made by the insured (or at its
direction) with knowledge of falsity.
Even if that exclusion bars some claims, Del Monte
argues that there are others that fall outside the exclusion.
It points out that some of the class complaints include
allegations under various state statutes that do not re-
quire proof of knowledge of falsity. We repeat that the
application of the “knowledge of falsity” exclusion is
based on the actual pleadings, even when the statute
underlying the action allows relief on a lesser showing of
culpability. At oral argument, Transportation acknowl-
edged that the class action complaints could have in-
cluded requests for relief based on conduct that does not
require a showing of knowingly false statements. But they
No. 06-3365 11
did not. As we said in Connecticut Indemnity, “[w]hile . . .
negligent conduct is actionable under the Consumer Fraud
Act, it is the actual complaint, not some hypothetical
version, that must be considered.” 328 F.3d at 350-51.
Liability will not attach in the cases against Del Monte
without a showing of knowledge of falsity, because the
allegations against Del Monte are not grounded in any
theory of relief except fraud. The statutes underlying
the class action complaints do not change this conclusion.
III
Del Monte argues in the alternative that the accusa-
tions that it marketed its Gold™ pineapple as “unique”
are, in reality, advertising injury claims of misappropria-
tion that trigger Transportation’s duty to defend. Once
again, careful analysis of the complaint does not bear
that out.
Misappropriation of an advertising idea occurs when the
insured wrongfully takes a competitor’s idea about the
solicitation of business. Winklevoss Consultants, Inc. v.
Fed. Ins. Co., 991 F. Supp. 1024, 1038 (N.D. Ill. 1998)
(applying Illinois law). In Native American Arts, Inc. v.
Hartford Casualty Insurance Co., 435 F.3d 729 (7th Cir.
2006), for example, the insured was accused of “trad[ing]
upon a reputation, history, and sales advantage that it
did not deserve.” 435 F.3d at 733. By contrast, nowhere
in the class action complaints is Del Monte accused of
taking the descriptions “unique” or “extra-sweet” or “Gold”
from a competitor. Rather, the class plaintiffs allege that
Del Monte misled consumers by labeling its products as
the only products worthy of such labels. Furthermore, the
conduct at issue in the class actions is not Del Monte’s
advertising; it is Del Monte’s fraudulent conduct to
undermine its competitors’ advertising. The class actions
will not succeed by proving only that Del Monte used the
12 No. 06-3365
descriptions “unique” or “extra-sweet” or “Gold,” or even by
proving that some of Del Monte’s competitors could have
used these descriptions. The class actions premise the
right to relief on the allegation that Del Monte knew that
it was not entitled to the exclusive use of these descrip-
tions.
Because the allegations here specifically charge fraudu-
lent conduct and an underlying fraudulent scheme, there
is no duty to defend under the policy. Del Monte’s misap-
propriation argument does not change that result.
IV
The allegations against Del Monte in the underlying
complaints are specific. They depend on a showing of
knowledge of falsity as part of an underlying fraudulent
scheme in order to obtain relief. Del Monte believes that
Transportation still has the duty to defend them because,
as it claimed at oral argument, the statements Del Monte
made were true. But this misses the point. Whether there
is a duty to defend depends on the complaint, not on the
insured’s belief that the complaint is mistaken. If Del
Monte’s statements prove to be true, it will not be liable
in the class actions. It cannot be the case that the policy
exclusion applies only when the insured concedes that it
has engaged in false or fraudulent acts. The allegations
rule, and under these allegations, Transportation had
no duty to furnish a defense for Del Monte.
We AFFIRM the judgment of the district court.
No. 06-3365 13
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—9-5-07