Unpublished Disposition, 935 F.2d 275 (9th Cir. 1990)

Annotate this Case
U.S. Court of Appeals for the Ninth Circuit - 935 F.2d 275 (9th Cir. 1990)

SAFECO INSURANCE COMPANY OF AMERICA,Plaintiff/Counter-Defendant-Appellee,v.PENCON INTERNATIONAL, INC., dba General Magnetics, CharleyContreras, Defendants/Counter-Claimants-Appellants.

No. 90-55057.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 6, 1990.Decided June 14, 1991.



Pencon International, Inc. and Charley Contreras, its

president (collectively, "Pencon"), appeal the district

court's grant of summary judgment in favor of Safeco

Insurance Company of America ("Safeco") in Safeco's

diversity action for declaratory relief. The district court

found that Safeco had no duty to indemnify or defend Pencon

in four district court actions ("the underlying actions")

and granted Safeco's motions for summary judgment on its

duty to defend and on Pencon's counterclaim for fraud. We affirm.


Safeco, a Washington corporation, issued a "Safeplan" liability insurance policy1  in late 1987 to Pencon International, a California corporation doing business as General Magnetics. Pencon is an electrical supply business which rebuilt and repaired circuit breakers and other electrical products, and allegedly "palmed them off" as new.2  The four underlying complaints accuse Pencon of trademark infringement, trademark dilution, unfair competition, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq.


In two separate judgments, Safeco won declaratory relief against Pencon and all four third-party plaintiffs. First, the district court declared in its Statement of Uncontroverted Facts and Conclusions of Law that Safeco had no duty to defend Pencon or to indemnify Pencon in the first underlying action, based on the contract language. Its subsequent grant of summary judgment adopted the original findings and also declared no duty to defend in cases two, three, and four. Finally, Pencon's affirmative defense of equitable estoppel and fraud counterclaim were denied in a second summary judgment order. Pencon timely appeals both summary judgment orders.


A grant of summary judgment is reviewed de novo. Kruso v. International Telephone & Telegraph Corp., 872 F.2d 1416, 1421 (9th Cir. 1989); State Farm Fire and Casualty Co. v. Martin, 872 F.2d 319, 320 (9th Cir. 1989). The appellate court's review is governed by the same standard used by the trial court under Fed. R. Civ. P. 56(c), i.e., whether there are any genuine issues of material fact, viewing the evidence in the light most favorable to the nonmoving party, and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989); Judie v. Hamilton, 872 F.2d 919, 920 (9th Cir. 1989).

We review a district court's interpretation of state law de novo. Matter of McLinn, 739 F.2d 1395, 1397 (9th Cir. 1984) (en banc). When interpreting state law, a federal court is bound by the decision of the highest state court. Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir. 1986), reh'g denied, op. modified, 810 F.2d 1517 (9th Cir. 1987).

Pencon contends that the district court erred in holding that Safeco had no duty to defend because the trademark infringement alleged in the four underlying complaints could not potentially fall within the coverage of the policy. Its claim rests on two arguments.3  First, it contends that the reason for Safeco's denial of coverage was "because the insured had done willfully wrongful acts," and such willfulness can only be established after full trials of the underlying actions. Secondly, Pencon argues that the trademark and unfair competition claims here fall within the policy's coverage of "advertising injury," or infringement of "copyright, title or slogan."4 

Although California courts have historically construed insurance contracts against insurers, AIU Ins. Co. v. Sup. Court, 51 Cal. 3d 807, 822, 274 Cal. Rptr. 820, 831, 799 P.2d 1253, 1264 (Nov. 15, 1990), and the duty to defend may be broader than the duty to indemnify, Gray v. Zurich Insurance Co., 65 Cal. 2d 263, 54 Cal.Rptr 104, 419 P.2d 168, 176 (1966), unambiguous contract language must be given effect.

In this case, the contract language at issue is unambiguous. It clearly covers only injuries caused by "oral or written publication ... that disparages ... goods, products or services," or "infringement of copyright, title, or slogan ... in the course of your advertising activities." The district court correctly held that no "disparagement" occurred here, relying on Aetna Cas. & Sur. Co. v. Centennial Ins. Co., 838 F.2d 346 (9th Cir. 1988) (finding no duty to defend a manufacturer accused of "palming off" goods as its own). Pencon has proffered no evidence or caselaw to indicate otherwise. In addition, Pencon has failed to make any showing that its alleged acts occurred "in the course of advertising" as required by the policy, see National Union Fire Ins. Co. v. Siliconix, 729 F. Supp. 77, 79-80 (N.D. Cal. 1989) (such clauses must be given effect in establishing or negating a duty to defend), or that the policy's exclusion of "intentional or knowing" acts should not apply here.

In sum, Pencon has failed to meet its burden on any of these three issues under Celotex v. Catrett, 477 U.S. 317, 322-23 (1985). No matter how generously we construe the policy language, Pencon's bare allegations have not demonstrated any "potential for liability" or objectively reasonable expectation of coverage. State Farm Mutual Auto. Ins. Co. v. Spann, 31 Cal. App. 3d 97, 100 (1973), Gray, 419 P.2d at 174. Therefore, the grants of summary judgment as to all four underlying cases and the counterclaim are AFFIRMED.


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


The policy covered "bodily injury," "property damage," "personal injury," and "advertising injury" liability. It defined "advertising injury" as

injury ... arising out of one or more of the following offenses committed in the course of your advertising activities:

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;

D. Infringement of copyright, title or slogan.

The Business Liability coverage excluded any "advertising injury" "done ... with knowledge of its falsity."


Pencon claims that they kept the original manufacturer's name on the products merely for purposes of identification, while the aggrieved parties alleged that Pencon intentionally applied false and/or counterfeit labels, and/or sold used and inferior parts with the original labels still affixed. It was this controversy which led to the four underlying lawsuits


Pencon also claims that a pending California Superior court case, Safeco v. MCCB, Inc. and Ricardo Contreras, No. NEC 59724, mandates reversal of this summary judgment as "premature and against California law." However, it failed to provide any coherent explanation of the relationship between that case and this one, or to submit copies of any relevant motions, pleadings, or orders in the Excerpt of Record here. Therefore, it is next to impossible to determine the relevance of that case


Pencon's reply brief also attempts to raise the question of whether the underlying actions allege "personal injury." However, as we stated in Baker v. Limber, 647 F.2d 912, 914, n. 2 (9th Cir. 1981), "matters raised for the first time in an appellant's reply brief normally may not be considered on appeal." See also Levy v. Urbach, 651 F.2d 1278, 1280 n. 3 (9th Cir. 1981). Accordingly, this argument is not addressed here

In addition, neither of Pencon's briefs points to any evidence to support its fraud counterclaim. Since "claims which are not addressed in the appellant's brief are deemed abandoned," Collins v. City of San Diego, 841 F.2d 337, 339 (9th Cir. 1988), the summary judgment on the issue of fraud is affirmed.

However, Safeco's request that Pencon's brief be stricken for failure to include a jurisdictional statement and statement of issues, as required by Fed. R. App. P. 28(a) (2) and Ninth Circuit Rule 28-2.2(a), is denied.