Burgett, Inc. v. American Zurich Insurance Company
Filing
22
MEMORANDUM AND ORDER signed by Judge Morrison C. England, Jr on 11/22/11: Plaintiff's motion for summary judgment as to Defendant's duty to defend the underlying Persis action is GRANTED 8 . Plaintiff is awarded reasonable attorneys' fees for breach of its duty to defend the underlying Persis action. However, the Court requires additional briefing as to the amount of attorneys' fees to which Plaintiff is claiming. Such additional briefing from Plaintiff is to be filed not later than forty-five (45) days after this electronic order is filed. The Court orders that Plaintiff is not entitled to prejudgment interest. (Kaminski, H)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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BURGETT, INC.,
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Plaintiff,
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No. 2:11-cv-01554-MCE-JFM
v.
MEMORANDUM AND ORDER
AMERICAN ZURICH INSURANCE
COMPANY,
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Defendant.
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----oo0oo----
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This matter arises out of Plaintiff, Burgett Inc.’s
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(“Plaintiff” or “Burgett”) motion for partial summary judgment
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regarding Defendant’s alleged duty to defend the underlying
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action filed against Plaintiff by Persis International Inc.1 and
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Edward F. Richards (collectively, “Persis”).
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///
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Persis Internationl, Inc. v. Burgett, Inc., 1:09-cv-07451
(N.D. Ill. 2011). Plaintiff attached the relevant complaint in
the underlying action to its complaint. (See Pl.’s Compl., filed
June 08, 2011, [ECF No. 1, Ex. 2].)
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Defendant, American Zurich Insurance, Inc. (“Defendant”),
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Plaintiff’s general liability insurance carrier opposes the
3
motion.
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GRANTED.2
For the reasons set forth below, Plaintiff’s motion is
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BACKGROUND3
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Plaintiff is a corporation organized under the laws of the
State of California with its principal place of business in
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Sacramento, California.
(UF ¶ 1.)
Defendant is a corporation
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licensed to sell insurance in the State of California, with its
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principal place of business in Illinois.
(UF ¶ 2.)
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Zurich issued to Burgett, the named insured, a general
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commercial liability policy for the period May 9, 2003, through
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May 9, 2004.
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personal or advertising injury caused by an offense committed by
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Burgett during the policy period and promises a defense of suits
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that potentially seek those types of damages.
(UF ¶ 3.)
This policy provides indemnity for any
(UF ¶ 4.)
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2
Because oral argument will not be of material assistance,
the Court orders these matters submitted on the briefs. E.D.
Cal. L.R. 78-230(h).
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This case presents almost purely legal issues. Thus, the
facts are, for the most part, undisputed. Where the facts are
disputed, the Court recounts Defendant’s version of the facts as
it must on a motion for summary judgment. In this regard, the
Court notes that, although not required by the Court’s local
rules, Plaintiff did not file a separate statement of “Disputed
Facts.” Thus, in laying out the relevant facts, the Court cites
to Plaintiff’s statement of undisputed fact. (See Pl.’s Separate
Stmt. Of Undisp. Material Fact [“UF”], filed July 7, 2011, [ECF
No. 8-2].) Moreover, the Court, when necessary, cites to the
declaration of Tom Lagomarsino, Vice President of Burgett, and
the exhibits attached thereto. (Decl. Of Tom Lagomarsino
[“Lagomarisino Decl.”], filed July 7, 2011, [ECF No. 8-3].)
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According to the relevant language of the policy,
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“‘[a]dvertisement’ means a notice that is a broadcast published
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to the general public of specific market segments of
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[Plaintiff’s] goods, products or services for the purpose of
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attracting customers or supporters.”4
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advertising injury encompasses “[o]ral or written publication, in
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any manner, of material that slanders or libels a person or
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organization or disparages a person’s organizations’s good,
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products or services.”
(Id.)
(UF ¶ 5.)
Personal or
The policy also includes an
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exclusion for “‘personal and advertising’ injury arising out of
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the infringement of copyright, patent, trademark trade secret or
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other intellectual property.”
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(UF ¶ 6.)
In the matter underlying this duty to defend action, Persis
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filed a first amended complaint on March 26, 2010, in the
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Northern District of Illinois, alleging that Plaintiff made false
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statements to another company, Samick, about its ownership of the
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“SOHMER” trademark, a trademark Persis alleges it owned.
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¶¶ 8-9.)
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follows:
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(UF
The Persis complaint, in pertinent part, alleges as
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There is no dispute that the allegedly improper statement
made by Burgett constitutes an advertisement in accordance with
the terms of the policy.
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In 2003, Samick began advertising and selling pianos
bearing the SOHMER and SOHMER & CO. trademarks in the
United States, including through an [i]nternet website.
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At all relevant times, Burgett’s representing to samick
that it had valid and enforceable rights in and to the
SOHMER trademark, negotiating and entering into the
purported licensing agreement with Samkick, accepting
compensation from Samick under the purported licensing
agreement, and holding itself out to Samick and the
world as the rightful owner of the SOHMER trademark,
constituted an inducement of Samick’s act of
infringement and unfair competition under federal and
common law.
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(UF ¶ 11.)
The gravamen of Persis’ underlying complaint is that
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by “holding itself out to Samick and the world as the rightful
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owner of the SOHMER trademark...Burgett is contributorily liable
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for Samick’s acts of trademark infringement and unfair
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competition under federal law and common law arising out of
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Samick’s use of SOHMER & SOHMER & CO. trademarks.”
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There is no dispute that the alleged wrongful conduct occurred
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within Defendant’s 2003, 2004 and 2005 policy periods.
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(UF ¶ 12.)
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(Id.)
Plaintiff provided Defendant notice of the Persis action on
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November 3, 2010, thereby tendering defense of that matter in
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accordance with the terms of the policy.
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responded on December 13, 2010, declining to defend or indemnify
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Plaintiff in the underlying Persis action.
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denied defense of the action on the basis that “the definition of
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‘personal and advertising injury’ ha[d] not been met” and because
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the trademark exclusion under the policy would apply to excuse
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Defendant from defending the action.
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///
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(UF ¶ 13.)
(UF ¶ 15.)
Zurich
(UF ¶ 16.)
Defendant
STANDARD
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A motion for partial summary judgment is resolved under the
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same standard as a motion for summary judgment.
See California
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v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998).
Summary judgment
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is appropriate when it is demonstrated that there exists no
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genuine issue as to any material fact, and that the moving party
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is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c);
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Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970).
10
Under summary judgment practice, the moving party
always bears the initial responsibility of informing
the district court of the basis of its motion, and
identifying those portions of “the pleadings,
depositions, answers to interrogatories, and admissions
on file together with the affidavits, if any,” which it
believes demonstrate the absence of a genuine issue of
material fact.
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12
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14
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Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
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nonmoving party will bear the burden of proof at trial on a
17
dispositive issue, a summary judgment motion may properly be made
18
in reliance solely on the ‘pleadings, depositions, answers to
19
interrogatories, and admissions on file.’”
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summary judgment should be entered against a party who fails to
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make a showing sufficient to establish the existence of an
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element essential to that party’s case, and on which that party
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will bear the burden of proof at trial.
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circumstance, summary judgment should be granted, “so long as
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whatever is before the district court demonstrates that the
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standard for entry of summary judgment, as set forth in
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Rule 56(c), is satisfied.”
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///
Id. at 323.
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“[W]here the
Id. at 324.
Id. at 322.
Indeed,
In such a
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If the moving party meets its initial responsibility, the
2
burden then shifts to the opposing party to establish that a
3
genuine issue as to any material fact actually does exist.
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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
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585-87 (1986); First Nat’l Bank v. Cities Serv. Co., 391 U.S.
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253, 288-289 (1968).
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this factual dispute, the opposing party may not rely upon the
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denials of its pleadings, but is required to tender evidence of
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specific facts in the form of affidavits, and/or admissible
In attempting to establish the existence of
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discovery material, in support of its contention that the dispute
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exists.
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demonstrate that the fact in contention is material, i.e., a fact
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that might affect the outcome of the suit under the governing
14
law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986),
15
and that the dispute is genuine, i.e., the evidence is such that
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a reasonable jury could return a verdict for the nonmoving party,
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Id. at 251-52.
18
Fed. R. Civ. P. 56(c).
The opposing party must
In the endeavor to establish the existence of a factual
19
dispute, the opposing party need not establish a material issue
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of fact conclusively in its favor.
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claimed factual dispute be shown to require a jury or judge to
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resolve the parties’ differing versions of the truth at trial.”
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First Nat’l Bank, 391 U.S. at 289.
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judgment is to ‘pierce the pleadings and to assess the proof in
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order to see whether there is a genuine need for trial.’”
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Matsushita, 475 U.S. at 587 (quoting Rule 56(e) advisory
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committee’s note on 1963 amendments).
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///
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It is sufficient that “the
Thus, the “purpose of summary
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In resolving the summary judgment motion, the Court examines
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the pleadings, depositions, answers to interrogatories, and
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admissions on file, together with the affidavits, if any. Rule 56(c);
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SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th Cir. 1982).
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The evidence of the opposing party is to be believed, and all
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reasonable inferences that may be drawn from the facts placed
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before the court must be drawn in favor of the opposing party.
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Anderson, 477 U.S. at 255.
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out of the air, and it is the opposing party’s obligation to
Nevertheless, inferences are not drawn
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produce a factual predicate from which the inference may be drawn.
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Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45
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(E.D. Cal. 1985), aff’d, 810 F.2d 898 (9th Cir. 1987).
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Finally, to demonstrate a genuine issue, the opposing party
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“must do more than simply show that there is some metaphysical
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doubt as to the material facts....Where the record taken as a
16
whole could not lead a rational trier of fact to find for the
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nonmoving party, there is no ‘genuine issue for trial.’”
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Matsushita, 475 U.S. at 586-87, 106 S. Ct. at 1356.
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ANALYSIS
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A.
Duty to Defend
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Plaintiff contends that Defendant improperly denied defense
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of the underlying Persis action because the complaint “alleges
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misstatements by [Plaintiff] regarding Persis’ legal rights to
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the SOHMER trademark,” thus providing “potential grounds for
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liability within [Defendant’s] ‘peronal injury’ coverage for both
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‘defamation’ and ‘disparagement.’”
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(Pl.’s Mot. for Summ. J, filed July 07, 2011, [ECF No. 8], at
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1:11-13.)
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the Persis lawsuit do not assert a claim for defamation or
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disparagement, there was and is no duty to defend.”
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Opp’n, filed July 28, 2011, [ECF No. 10], at 1:26-28)
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Defendant maintains that there is no conceivable theory which
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could bring the allegations in the underlying complaint within
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the coverage pursuant to the policy because Plaintiff’s alleged
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statements to Samick that it owned the SOHMER trademark did not
Defendant asserts that, “because the allegations in
(Def.’s
Similarly,
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specifically reference Plaintiff, and thus, Plaintiff is not
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potentially liability for disparagement or defamation.
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Defendant argues that it has no duty to defend because the
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trademark exclusion would apply to bar any coverage for liability
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based on the specific claims asserted in the underlying
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complaint.
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Moreover,
An insurer’s evidentiary burden is particularly high in a
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duty-to-defend case.
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of a potential for coverage,...the insurer must establish the
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absence of any such potential.”
Montrose Chem. Corp. v. Super.
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Ct., 6 Cal. 4th 287, 300 (1993).
“In other words, the insured
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need only show that the underlying claim may fall within policy
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coverage; the insurer must prove it cannot.”
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While “the insured must prove the existence
Id.
The duty to defend extends to all suits that raise the
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“possibility” or “potential” for coverage.
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Co., 65 Cal. 2d 263, 275 (1966); accord Montrose, 6 Cal. 4th at
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295 (1993); CNA Cas. of Cal. v. Seaboard Sur. Co., 176 Cal. App.
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3d 598, 606 (1986).
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///
8
Gray v. Zurich Ins.
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Courts in California have frequently stated that an insurer’s
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duty to defend is broader than the duty to indemnify.
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Mann Ins. Co. v. Barbara B., 4 Cal. 4th 1076, 1081 (1993). Thus,
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under California law, an insurer must defend against groundless,
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false, or even fraudulent claims, regardless of their merits.
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Horace Mann, 4 Cal. 4th at 1086.
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from its duty to defend only when “the third party complaint can
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by no conceivable theory raise a single issue which could bring
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it within the policy coverage.”
Horace
In fact, an insurer is excused
Montrose, 6 Cal. 4th at 295
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(quoting Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 275 n.15
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(1966)).
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doubt and ultimately does not develop.
13
Saylin v. Cal. Ins. Guar. Ass’n, 179 Cal. App. 3d 256, 263
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(1986)).
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The duty to defend may exist even where coverage is in
Id. at 295 (quoting
“The determination whether the insurer owes a duty to defend
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is usually made in the first instance by comparing the
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allegations of the complaint with the terms of the policy.”
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Storek v. Fid. & Guar. Ins. Underwriters, Inc., 504 F. Supp. 2d
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803, 807 (N.D. Cal. 2007) aff’d, 320 F. App’x 508 (9th Cir. 2009)
20
(quoting Horace Mann, 4 Cal. 4th at 1081).
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whether the facts give rise to a duty to defend is resolved in
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the insured’s favor.”
23
Cas,, 176 Cal. App. 3d at 607).
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beyond the specific claims set forth in the third-party
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complaint. Indeed, “the duty to defend is so broad that as long
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as the complaint contains language creating the potential of
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liability under an insurance policy, the insurer must defend an
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action against its insured....”
“Any doubt as to
Horace Mann, 4 Cal. 4th at 101 (citing CNA
The duty to defend extends
9
1
CNA Cas., 176 Cal. App. 3d at 606.
2
repeatedly found that remote facts buried within causes of action
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that may potentially give rise to coverage are sufficient to
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invoke the defense duty.”
5
Eng’rs v. Fed. Ins. Co., 307 F.3d 944, 951 (9th Cir. 2002).
6
“California courts have
Pension Trust Fund for Operating
An insurer’s duty to defend is not limited to the face of
7
the underlying complaint.
Rather, “the duty to defend arises
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when the facts alleged in the underlying complaint give rise to a
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potentially covered claim regardless of the technical legal cause
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of action pleaded by the third party.”
Barnett v. Fireman’s Fund
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Ins. Co., 90 Cal. App. 4th 500, 510 (2001); see also Swain v.
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Cal. Cas. Ins. Co., 99 Cal. App. 4th 1, 8 (2002) (emphasizing the
13
importance of examining facts alleged in the complaint).
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addition, “facts extrinsic to the complaint also give rise to a
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duty to defend when they reveal a possibility that the claim may
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be covered by the policy.”
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determining whether or not the [insurer is] bound to
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defend...courts do not examine only the pleaded word but the
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potential liability created by the suit.”
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276.
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focus on the facts of a case rather than the theory of recovery
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in the complaint, the duty to defend should be fixed by the facts
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which the insurer learns from the complaint, the insured, or
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other sources.
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insured whenever it ascertains facts which give rise to the
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potential of liability under the policy.
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///
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///
In
Horace Mann, 4 Cal. 4th at 1081.
“In
Gray, 65 Cal. 2d at
Courts have noted that because “modern procedural rules
An insurer, therefore, bears a duty to defend its
10
Id. at 276-77.
1
“[T]hat the precise causes of action pled by the third-party
2
complaint may fall outside policy coverage does not excuse the
3
duty to defend where, under the facts alleged, reasonably
4
inferable, or otherwise known, the complaint could fairly be
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amended to state a covered liability.”
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Transp., 36 Cal. 4th 643, 654 (2005).
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Scottsdale Ins. Co. v. MV
While the duty to defend is broad, “[a]n insurer...will not
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be compelled to defend its insured when the potential for
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liability is tenuous and farfetched.”
Lassen Canyon Nursery,
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Inc. v. Royal Ins. Co., 720 F.2d 1016, 1018 (9th Cir. 1983). In
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other words, the duty to defend does not require an insurer to
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undertake a defense as to claims that are factually and legally
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untethered from the third party’s complaint.
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504 F. Supp. 2d at 812; Upper Deck Co. v. Fed. Ins. Co., 358 F.3d
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608, 615-16 (9th Cir. 2004).
See e.g., Storek,
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1.
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Defamation
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Under California law,5 defamation consists of either libel
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or slander.
Cal. Civ. Code § 44.
“Libel is a false and
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unprivileged publication by writing, printing, picture, effigy,
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or other fixed representation to the eye, which exposes any
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person to hatred, contempt, ridicule, or obloquy, or which causes
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him to be shunned or avoided, or which has a tendency to injure
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him in his occupation.”
Cal. Civ. Code § 45.
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5
There is no dispute that, in this diversity action,
California law applies to determine the scope Defendant’s duty to
defend.
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1
Slander consists of “a false and unprivileged publication, orally
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uttered...which: (1) charges any person with crime, or with
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having been indicted, convicted, or punished for crime;
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(2) imputes in him the present existence of an infectious,
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contagious, or loathsome disease; (3) tends directly to injure
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him in respect to his office, profession, trade or business,
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either by imputing to him general disqualification in those
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respects which the office or other occupation peculiarly
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requires, or by imputing something with reference to his office,
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profession, trade, or business that has a natural tendency to
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lessen its profits; (4) imputes to him impotence or a want of
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chastity; or (5) which, by natural consequence, causes actual
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damage.
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The California Supreme Court, in adherence to United States
15
Supreme Court precedent, has held that “[i]n defamation actions
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the First Amendment...requires that the statement on which the
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claim is based must specifically refer to, or be ‘of and
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concerning’ the Plaintiff in some way.”
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Co. 42 Cal. 3d 1033, 1042.
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“derives directly and ultimately from the First Amendment.”
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Thus, in order to demonstrate that there is potential for
22
liability in the underlying Persis claim, Plaintiff must show
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that there are factual allegations that it made specific
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reference to Persis.
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///
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///
Blatty v. New York Times
This limitation on defamation actions
Id.
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Id.
1
In this case, Defendant’s duty to defend cannot be triggered
2
on a defamation theory because the underlying Persis complaint
3
does not allege that Plaintiff made any defamatory statement that
4
either specifically referred to, or was “of and concerning”
5
Persis.
6
Zurich policy for defamation because the “of and concerning”
7
element required to establish a claim for defamation is wholly
8
absent from the underlying complaint.
9
duty to defend is not triggered under that provision of the
Thus, there is no potential for coverage under the
To this end, Defendant’s
10
Zurich policy covering “material that slanders or libels a person
11
or organization” because there is no potential for coverage
12
thereunder.
13
The case law relied on by Plaintiff for its contention that
14
there is a potential for coverage under the defamation provision
15
of the policy is wholly inapposite.
16
(citing Atlantic Mutual Ins. Co. V. J. Lamb Inc., 100 Cal. App.
17
4th 1017 (2002); American Ins. Co. V. Laserage Tech. Corp.,
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2 F. Supp. 2d 296, 304 (W.D.N.Y.); Winokur, Winokur v. Commerce
19
Ins. Co., 2004 WL 1588259 (Mass. Sup. Ct.).)
20
each of those cases, the Plaintiff in the underlying action
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specifically alleged that the Plaintiff made specific comments
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“of and concerning” the Plaintiff in the underlying action.
23
Both J. Lamb6 and Laserage, the underlying complaint alleged that
24
the party asserting a duty to defend made statements that the
25
underlying Plaintiff was infringing a trademark.
(See Pl.’s Mot at 914-19
Specifically, in
In
26
6
27
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In J. Lamb, the only California authority cited by
Plaintiff, the Court did not find that the statements constituted
defamation; it only found that the allegations potentially stated
a claim for disparagement.
13
1
Those courts held that there was potential coverage under the
2
policy for advertising injury because the party seeking defense
3
of the underlying action made overt statements specifically
4
referencing plaintiffs and their business, according to the
5
underlying complaint.
6
there was potential coverage under the advertising injury
7
provisions of the relevant policy for charging the “underlying
8
Plaintiff and its officers and directors with malicious abuse of
9
process, malicious interference with advantageous business
Moreover, in Winokur, the court held that
10
relationship, and conspiracy.”
Winokur, 2004 WL 1588259 at *1.
11
Filing a lawsuit naming the underlying Plaintiff clearly
12
satisfies the specific reference requirement for stating a
13
defamation claim.
14
to demonstrate the underlying complaint meets the specific
15
reference requirement, and thus, there is no factual or legal
16
basis for Plaintiff’s contention that there is potential coverage
17
under the defamation provision of the policy.
Conversely, in this case, Plaintiff has failed
18
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2.
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Disparagement
21
22
At its base, an action for product disparagement “involves
23
the imposition of liability for injuries sustained through
24
publication to third parties of a false statement affecting the
25
plaintiff.
26
App. 4th 161, 169 (2010) (quoting Polygram Records Inc. v.
27
Superior Court, 170 Cal. App. 3d 543, 549 (1985).
28
///
Total Call Int’l Inc. v. Peerless Ins. Co., 181 Cal.
14
1
Under California law, in order to establish a duty to defend,
2
Burgett must show that the underlying Plaintiff alleges that it
3
made derogatory statements about Persis products, causing it
4
pecuniary damages.
5
Ins. Co., 40 F.3d 968, 9472-973 (9th Cir. 1994); Truck Ins.
6
Exchange v. Bennet, 53 Cal. App. 4th 75, 89 (1997).
7
element of a claim for disparagement is that the alleged
8
disparaging publication specifically reference the plaintiff;
9
this element can be met by either direct or indirect reference.
10
E.piphany, Inc. V. St. Paul Fire & Marine Ins. Co., 590 F. Supp.
11
2d 1244, 1252-1253 (citing Blatty, 42 Cal. 3d at 1042).
Microtec Research Inc. v. Nationwide Mut.
A requisite
12
In this case, Defendant’s contention that there is no
13
potential for coverage under the disparagement provision of the
14
policy because the underlying complaint does not allege that
15
Plaintiff specifically references Persis is unavailing.
16
to Defendant’s assertion, the underlying complaint makes
17
sufficient allegations that could potentially establish a claim
18
for disparagement by implication.
19
Defendant to deny defense of the underlying Persis action.
20
Contrary
Therefore, it was improper for
E.piphany provides particularly insightful guidance.
21
E.piphany was also a duty to defend case based on a nearly
22
identical disparagement policy provision in which the underlying
23
Plaintiff alleged that E.piphany released a public statement that
24
it “offer[ed] the only full footprint CRM suite natively built on
25
a service oriented J2EE architecture.”
26
added).
27
representations have caused E.pihpany to gain, and Sigma to lose,
28
profits, market share, reputation, and goodwill.”
Id. at 1249 (emphasis
The underlying Plaintiff alleged that “[s]uch
15
Id. at 1250.
1
The court held that because E.piphany “falsely stated that it was
2
the ‘only’ producer of ‘all java’ and ‘fully J2EE software
3
solutions,’” the allegations in the underlying complaint
4
demonstrated “a claim for disparagement by ‘clear implication’”
5
Id. at 1253 (citing Blatty, 42 Cal. 3d at 1044 n.1).
6
Importantly, the E.piphany court relied on a similar case from
7
the Northern District of Illinois, the same district where the
8
underlying Persis action is pending, which held that a claim for
9
disparagement by implication may lie where a competitor claims
10
that is “more effective than or superior to...other drugs
11
available.”
12
Of Hartford, 152 F. Supp. 2d 1026, 1036 (N.D. Ill. 2001).
See Knoll Pharmaceutical Co. v. Automobile Ins. Co.
13
Similarly to the facts underlying E.pihphany, in this case,
14
Burgett represented to Samick that it was the only holder of the
15
SOHMER trademark.
16
underlying complaint in E.pihphany, Persis alleges that Plaintiff
17
made false representations that harmed Persis “by implying to the
18
marketplace that Burgett had the superior right to use the SOHMER
19
trademark,” and thus, by implication, represented that Persis did
20
not have the rights to the SOHMER trademark.
21
Persis further alleges that Plaintiff’s “willfull statements to
22
Samick and others regarding [Plaintiff’s] use of the SOHMER
23
trademark, created a likelihood of confusion or of
24
misunderstanding as to the source, sponsorship or approval of
25
[Plaintiff’s] and/or Persis goods, as well as...confusion of or
26
misunderstanding as to affiliation, connection or association of
27
[Plaintiff] and Persis.”
28
///
In the underlying complaint, similar to the
(UF ¶ 11.)
16
(UF ¶ 11.)
1
At the time of the alleged misrepresentations, Persis contends
2
that Plaintiff “was fully aware that Persis was using the SOHMER
3
trademark in commerce.”
4
concludes that these allegations, taken as a whole, create
5
potential liability and thus, potential coverage for
6
disparagement of Persis’ product —— the alleged ownership of the
7
SOHMER trademark.
8
9
(Pl.’s Compl., Ex 2 ¶ 41.)
The Court
While E.piphany properly supports the finding of a potential
claim for disparagement by implication, the cases relied on by
10
Defendant —— Jarrow Formulas v. Steadfast Ins. Co, 2011 WL
11
1399805 (C.D. Cal. 2011); Total Call, 181 Cal. App. 4th 161. ——
12
are easily distinguishable.
13
plaintiff alleged that the party seeking defense falsely
14
advertised the benefits of their products, which, in turn,
15
deceived consumers, detrimentally affecting the reputation and
16
goodwill of the market for that product type generally and the
17
underlying plaintiffs specifically.
18
3; Total Call, 181 Cal. App. 4th at 165-166.
19
Total Call International, the [c]ourt conclude[d] that this falls
20
within the [p]olicy’s exclusion for advertising injury arising
21
out of ‘the failure of goods products or services to conform with
22
advertised quality or performance.”
23
*6.
24
allegations fall under any exclusion for false advertising.
25
generally Def.’s Opp’n.)
26
///
27
///
28
///
In both cases, the underlying
Jarrow, 2011 WL 1399805 *2In Jarrow, “as in
Jarrow, 2011 WL 1399805 at
Unlike these cases, Defendant does not contend that the
17
(See
1
Indeed, in Jarrow, the court expressly distinguished
2
E.piphany by pointing out that “the underlying complaint, brought
3
by [E.piphany’s] direct competitors, alleged that the insured
4
stated that it was the only producer of a certain product,
5
resulting in damage to the competitor’s market share, sales, and
6
reputation.”
7
original).
8
Plaintiff misrepresented that it was the only owner of the SOHMER
9
trademark, “resulting in damage to [Persis’] market share, sales,
Jarrow, 2011 WL 1399805 at *7 (emphasis in
Similarly here, the underlying complaint alleges that
10
and reputation.”
11
finding of disparagement by implication is bolstered by the fact
12
that Persis alleges that it was the only owner of the SOHMER
13
trademark.
14
Id.
Moreover, in this case, a potential
Given the factual and legal similarities between this case
15
and E.piphany, and since there is established precedent upholding
16
claims for disparagement by implication in the district in which
17
that action is pending, Plaintiff is potentially liable for
18
disparagement by implication.
19
Court must resolve any question as to the duty to defend in the
20
insured’s favor, the Court finds that the underlying complaint
21
alleges sufficient facts to establish the potential for coverage,
22
and thus, the duty to defend was triggered.
23
4th at 101.
24
///
25
///
26
///
27
///
28
///
Thus, in this case, where the
18
Horace Mann, 4 Cal.
3.
1
Trademark Exclusion
2
3
Defendant argues that “[a]ll of the causes of action in the
4
Persis lawsuit either allege trademark infringement directly
5
(first cause of action) or are dependent on the trademark
6
infringement.”
7
exclusion in the Zurich policy applies to preclude coverage for
8
all the claims in the Persis lawsuit.”
9
Defendant’s position, however, ignores the relevant standard
As such, Defendant contends “the trademark
(Def.’s Opp’n at 14:7-9.)
10
applicable to an insurer’s duty to defend.
Specifically, “Since
11
the modern procedural rules focus on the facts of the complaint
12
and extrinsic evidence, the duty to defend should be fixed by the
13
facts which the insurer learns from the complaint.”
14
65 Cal. 2d at 276.
15
action pled by the third-party complaint may fall outside policy
16
coverage does not excuse the duty to defend where, under the
17
facts alleged, reasonably inferable, or otherwise known, the
18
complaint could fairly be amended to state a covered liability.”
19
Scottsdale Ins. Co. v. MV Transp., 36 Cal. 4th 643, 654 (2005).
20
As set forth above, while the underlying complaint does not
21
explicitly state a claim for disparagement, the Court finds that
22
the complaint could be amended to state a claim for the same.
23
Thus, the trademark exclusion does not apply to bar coverage.
24
///
25
///
26
///
27
///
28
///
Gray,
Thus, the fact “that the precise causes of
19
B.
1
Attorneys’ Fees and Prejudgment Interest
2
3
Plaintiff contends that it is entitled to reasonable
4
attorneys’ fees because Defendant has breached its duty to defend
5
the underlying Persis action.
6
it is entitled to prejudgment interest.
7
contest that Plaintiff is entitled to reasonable attorneys’ fees
8
if the Court finds that it breached its duty to defend.
9
Defendant does assert that Plaintiff is not entitled to
Moreover, Plaintiff contends that
Defendant does not
However,
10
prejudgment interest because the amount of damages is in dispute
11
and has not been established.
12
Under California law, where an insurer wrongfully “refuse[s]
13
to defend an action against its insured...the insurer is liable
14
for the total amount of the fees” unless the insurer produces
15
undeniable evidence that it is not liable for all of the
16
attorney’s fees.”
17
553, 564 (1970).
18
potentially covered by the insurance contract, the insurer
19
breaches its duty to defend by refusing to defend its insured.
20
Id. (citing Gray v. Zurich Ins. Co., 65 Cal. 2d 263).
21
Furthermore, “[a] liability insurer’s breach of the duty to
22
defend results in the insurer’s forfeiture of the right to
23
control defense of the action or settlement, including the
24
ability to take advantage of the protections and limitations set
25
forth in the statute governing liability insurers’ duty to
26
provide independent counsel.”
27
183 Cal. App. 4th 16 (2010).
28
///
Hogan v. Midland Nat’l Ins. Co., 3 Cal. 3d
When the underlying complaint states an injury
Intergulf Devel. v. Super. Ct.,
20
1
California Civil Code § 3287 provides that “[e]very person
2
who is entitled to recover damages certain, or capable of being
3
made certain by calculation, and the right to recover which is
4
vested in him upon a particular day, is entitled also to recover
5
interest thereon from that day....”
6
“the court has no discretion, but must award prejudgment interest
7
upon request, from the first day there exists both a breach and a
8
liquidated claim.”
9
App. 4th 498, 535 (2010) (quoting N. Oakland Med. Clinic v.
Under this code section,
Howard v. Am. Nat. Fire Ins. Co., 187 Cal.
10
Rogers, 65 Cal. App. 4th 824, 828 (1998)).
Courts generally
11
apply a liberal construction in determining whether a claim is
12
certain or liquidated.
13
Togova Enter., Inc., 149 Cal. App. 3d 901, 907 (1983)).
14
for determining certainty under section 3287(a) is whether the
15
defendant knew the amount of damages owed to the claimant or
16
could have computed that amount from reasonably available
17
information.
Id. (citing Chesapeake Indus., Inc., 149 Cal. App.
18
3d at 907)).
Uncertainty as to the defendant’s liability is
19
irrelevant to the determination.
20
Comp. Appeals Bd., 76 Cal. App. 4th 513, 517 (1999).
21
certainty required by section 3287(a) is not lost when the
22
existence of liability turns on disputed facts but only when the
23
amount of damages turns on disputed facts.” Howard, 187 Cal. App.
24
4th at 536 (citing Olson v. Cory, 35 Cal. 3d 390, 402 (1983)).
25
///
26
///
27
///
28
///
Id. (citing Chesapeake Indus., Inc. v.
21
The test
Boehm & Assocs. v. Workers’
“The
1
Under California law, Plaintiff is entitled to reasonable
2
attorneys’ fees as Defendant has breached its duty to defend by
3
failing to provide Plaintiff with a defense in the Persis action,
4
which states an injury potentially covered by the insurance
5
contract.
6
would allow the Court to calculate the proper amount of fees it
7
should award.
8
entitled to reasonable attorneys’ fees, but the amount of
9
attorneys’ fees that Plaintiff is entitled to remains a question
However, neither party has submitted any evidence that
Accordingly, the Court finds that Plaintiff is
10
of fact.
11
from the parties as to the amount of attorneys’ fees to which
12
Plaintiff is entitled
13
To this end, the Court requests additional briefing
It is entirely unclear at this point whether Defendant knows
14
or is capable of computing the amount of damages that are
15
potentially owed to Plaintiff.
16
is reasonably available information about the amount of damages
17
potentially owed to Plaintiff.
18
the amount of damages will be disputed between the parties.
19
Thus, it is not appropriate for the Court to order prejudgment
20
interest at this time.
It is also unclear whether there
Furthermore, it is likely that
21
CONCLUSION
22
23
24
25
26
For the foregoing reasons, Defendant’s motion for summary
judgment is GRANTED. Specifically:
1.
Plaintiff’s motion for summary judgment as to
27
Defendant’s duty to defend the underlying Persis action is
28
GRANTED.
22
1
2.
Plaintiff is awarded reasonable attorneys’ fees for
2
breach of its duty to defend the underlying Persis action.
3
However, the Court requires additional briefing as to the amount
4
of attorneys’ fees to which Plaintiff is claiming. Such
5
additional briefing from Plaintiff is to be filed not later than
6
forty-five (45) days after this electronic order is filed.
7
8
9
10
3.
The Court orders that Plaintiff is not entitled to
prejudgment interest.
IT IS SO ORDERED.
Dated: November 22, 2011
11
12
13
_____________________________
MORRISON C. ENGLAND, JR.
UNITED STATES DISTRICT JUDGE
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
23
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