In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1455

Zurich Insurance Company, doing business
as Zurich American Insurance Company,

Plaintiff-Appellee,

v.

Amcor Sunclipse North America,

Defendant-Appellant.



Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 1152--Rebecca R. Pallmeyer, Judge.


Argued January 17, 2001--Decided February 23, 2001




  Before Easterbrook, Evans, and Williams, Circuit
Judges.

  Easterbrook, Circuit Judge. Sunclipse makes and
sells corrugated paper products. One line, which
it introduced in 1993, is coated with a graphite-
based conductive film that protects electronic
components from electrostatic discharge.
Sunclipse initially obtained its coating from
Century Container Corporation under a license
that provided, among other things: "SUNCLIPSE
agrees not to manufacture, distribute or sell any
corrugated box or other container using graphite
liner board purchased from any source other than
CENTURY during the term of this license." While
this license to use Century’s "Centurion"
coatings was still in force, Sunclipse set out to
formulate its own conductive coating, which it
called "Corru-Shield" and began to use late in
1994. Century filed suit, accusing Sunclipse not
only of breaking its promise but also of
misappropriating Century’s trade secrets.
According to Century’s complaint, the
misappropriation took two forms. First, Sunclipse
hired Robert Vermillion as the leader of its
effort to develop its own conductive coating.
Vermillion, according to Century, had learned
some of Century’s trade secrets in December 1993
while seeking employment. Second, Sunclipse sold
its "Corru-Shield" products to customers whose
identities and requirements Century had revealed
as part of the arrangement that gave Sunclipse
access to the "Centurion" coating.

  More than two years after Century launched its
suit, Sunclipse notified Zurich American
Insurance Co., one of its insurers, and asked
Zurich for defense and indemnity. Zurich replied
with this suit under the diversity jurisdiction,
seeking a declaration that the policy does not
cover Century’s claims. (Zurich issued a series
of one-year policies, which are identical in all
important ways. For simplicity, therefore, we
refer to "the policy.") While Zurich’s action was
pending, Sunclipse paid Century $1 million to
settle the underlying suit. It wants Zurich to
reimburse it for this payment, plus the costs of
defense. But the district court granted summary
judgment to Zurich. 85 F. Supp. 2d 842 (N.D. Ill.
2000). It held that California law governs the
dispute and that, as a result, Sunclipse’s delay
does not doom its position. Both sides now accept
these aspects of the decision. The district court
added that the policy does not cover the loss.
This conclusion Sunclipse hotly contests on
appeal.

  The only coverage of the policy relevant to
this case concerns "advertising injury," a term
defined as:

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 of privacy;

c. Misappropriation of advertising ideas or
style of doing business; or

d.   Infringement of copyright, title or slogan.

This language shows why the district court
granted summary judgment to Zurich. How could
sale of an existing product, to established
customers, cause "advertising injury" just
because the product has a different conductive
coating? The circumstances that made Sunclipse’s
conduct objectionable to Century had nothing to
do with "advertising."

  The policy defines four categories of
advertising injury: defamation, publication of
information that invades a right of privacy,
"[m]isappropriation of advertising ideas or style
of doing business", and "[i]nfringement of
copyright, title or slogan." Sunclipse believes
that misappropriation of customers is the same
thing as misappropriation of advertising ideas
and that any use of a rival’s trade secrets is
"[i]nfringement of . . . title", which has the
same defect. Like most other states, California
construes ambiguities in policies against
insurers, and it requires insurers to put up a
defense against any claim colorably within the
policy. Still, there must first be an ambiguity,
and like the district judge we don’t see one, or
indeed any plausible claim of coverage. The nub
of Century’s claim is that Sunclipse used an
anti-static coating other than Century’s on
products sold to customers Century told it about.
Century did not contend that Sunclipse had
engaged in any kind of promotion other than
person-to-person persuasion. Advertising is a
subset of persuasion and refers to dissemination
of prefabricated promotional material.
Sunclipse’s lawyers submitted an appellate brief
and presented an oral argument in an effort to
persuade three judges, but counsel did not engage
in "advertising," and their disagreement with
Zurich’s lawyers in this court did not
"misappropriate . . . advertising ideas". Nor did
Sunclipse’s use of the "Corru-Shield" coating
"infringe" Century’s copyrights or "title";
Century did not own any of Sunclipse’s products,
and Century certainly did not own the customers.

  Recent years have witnessed a surge of claims
that one or another breach of contract or
business tort that to a normal reader has nothing
to do with advertising nonetheless should be
classified as "advertising injury" under policies
similar to Zurich’s. Interpreting the law of all
three states in this circuit, and of several
others too, we have held that advertising-injury
clauses should be given an ordinary-language
reading, the one the parties likely supposed they
were achieving when negotiating this language.
See, e.g., Western States Insurance Co. v.
Wisconsin Wholesale Tire, Inc., 184 F.3d 699 (7th
Cir. 1999); Erie Insurance Group v. Sear Corp.,
102 F.3d 889 (7th Cir. 1996); Playboy
Enterprises, Inc. v. St. Paul Fire & Marine
Insurance Co., 769 F.2d 425, 428-30 (7th Cir.
1985). Cf. Curtis-Universal, Inc. v. Sheboygan
Emergency Medical Services, Inc., 43 F.3d 1119
(7th Cir. 1994).

  Sunclipse does not deny that, if the law of
Illinois or Indiana or Wisconsin were applied to
this case, then Zurich would prevail. Still,
Sunclipse insists, California has taken a
different road, concluding that even one-on-one
selling efforts constitute "advertising". For
this proposition it relies exclusively on two
decisions of federal district courts, Sentex
Systems, Inc. v. Hartford Accident & Indemnity
Co., 882 F. Supp. 930, 939-40 (C.D. Cal. 1995),
affirmed on other grounds, 93 F.3d 578 (9th Cir.
1996); New Hampshire Insurance Co. v. Foxfire,
Inc., 820 F. Supp. 489, 494 (N.D. Cal. 1993).
These are weak support at best, and not only
because they are federal rather than state
decisions. (Most cases concerning advertising
injury seem to arise between parties of diverse
citizenship, at least one of which prefers
federal court. The resulting paucity of state
decisions has made ascertaining state law
difficult.) The statement in Foxfire is dictum;
the case concerned not a series of one-on-one
solicitations but a letter sent to approximately
30 customers as a group. The district court’s
opinion in Sentex has negligible authority not
only because decisions of district courts lack
precedential (as opposed to persuasive) force,
see Colby v. J.C. Penney Co., 811 F.2d 1119 (7th
Cir. 1987), but also because the court of appeals
went out of its way not to approve the language
on which Sunclipse now relies, deciding the
appeal on other grounds, and later disapproved
some of Sentex’s reasoning expressly. See Simply
Fresh Fruit, Inc. v. Continental Insurance Co.,
84 F.3d 1105, 1108 n.2 (9th Cir. 1996).

  Since Sentex and Foxfire at least one
California decision has implied that individual
solicitations are not advertising. See Peerless
Lighting Corp. v. American Motorists Insurance
Co., 82 Cal. App. 4th 995, 98 Cal. Rptr. 2d 753
(1st Dist. 2000). Sunclipse rightly observes that
Peerless Lighting is not dispositive, because it
dealt with solicitation of a single customer, so
it does not foreclose the possibility that
California would deem a series of similar
solicitations to be "advertising." 98 Cal. Rptr.
at 764 n.11. But although Peerless Lighting does
not scuttle Sunclipse’s position, neither does it
suggest that California will sail a lonely
course, tacking away from the position of other
states on the meaning of "advertising." No case
decided by any state court in California supports
Sunclipse’s position. The best it can say is that
apparently adverse decisions (there are cases in
addition to Peerless Lighting) can be
distinguished. Perhaps so, but that is not enough
for us to conclude, when making a prediction
under Erie about how the Supreme Court of
California would handle this subject, that
California would depart from the normal
understanding of "advertising."

  Nor do we think it likely that California would
treat customer solicitation as "infringement of
title". Once again Zurich has the benefit of the
leading state case on the topic. Palmer v. Truck
Insurance Exchange, 21 Cal. 4th 1109, 988 P.2d
568 (1999), holds that solicitation of customers
whose identity had been learned from another firm
was not "infringement of title" under a policy
similar to Zurich’s. Sunclipse responds that
Palmer dealt with the duty to indemnify rather
than the broader duty to defend, and that the
policies’ language is not identical. The Supreme
Court of California reserved decision on policies
phrased differently, as Zurich’s is. 988 P.2d at
575. True enough, but even if this means that
California law is not conclusively against it,
Sunclipse is bereft of any argument that
California law supports it. Vendors do not have
"title" in their customers, or their custom, so
it would take a bold court indeed to say that a
policy with this language covered solicitation of
customers. "Infringement of . . . title" can’t be
understood without considering "copyright" and
"slogan," the other two words in the coverage
provision. Reading these words together implies
that "infringement" means using someone else’s
words, so that "title" refers to names and
related trademarks, following the pattern of the
phrase "copyright infringement." To rule in
Sunclipse’s favor, a court would have to give
both "infringement" and "title" unusual meanings,
ripping them from the context that is the best
guide to their meaning. No decision that has been
cited to us suggests that California is prepared
to take such liberties with the language.

Affirmed
