Scott, Blane and Darren Recovery LLC v. Auto Owners Insurance Company, No. 2:2014cv03675 - Document 27 (C.D. Cal. 2014)

Court Description: ORDER GRANTING DEFENDANT AUTO-OWNERS INSURANCE COMPANYS MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION 17 and DENIES AS MOOT Auto-Ownerss remaining bases for dismissal. The Clerk of Court shall close this case by Judge Otis D. Wright, II.( MD JS-6. Case Terminated ) (lc). Modified on 8/27/2014 (lc).

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Scott, Blane and Darren Recovery LLC v. Auto Owners Insurance Company Doc. 27 O JS-6 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 SCOTT, BLANE AND DARREN 12 Case 2:14-cv-03675-ODW(AJWx) RECOVERY LLC, Plaintiff, 13 14 ORDER GRANTING DEFENDANT v. AUTO-OWNERS INSURANCE 15 AUTO-OWNERS INSURANCE COMPANY’S MOTION TO 16 COMPANY, DISMISS FOR LACK OF Defendant. 17 PERSONAL JURISDICTION [17] I. 18 INTRODUCTION 19 This case is the sequel to the Lanham Act litigation that King Tuna, Inc. 20 instituted against its competitor Anova Food, Inc. in 2007. After King Tuna first filed 21 suit against Anova in the United States District Court for the District of Oregon, 22 Anova tendered the action to its insurer, Defendant Auto-Owners Insurance Company. 23 Auto-Owners rejected the claim, contending that it did not fall within the coerage of 24 the general liability policy. King Tuna subsequently refiled its suit in this Court. 25 After two trials, the Court awarded Anova over $3.3 million against King Tuna on its 26 counterclaims. 27 Plaintiff Scott, Blane and Darren Recovery LLC (“SBD”), Anova’s successor in 28 interest, now sues Auto-Owners for alleged bad faith in refusing to defend Anova in 1 the King Tuna litigation. But since Auto-Owners has absolutely no ties to California, 2 the Court finds that it is not subject to personal jurisdiction in this state. The Court 3 accordingly GRANTS Auto-Owners’s Motion to Dismiss for Lack of Personal 4 Jurisdiction and DENIES AS MOOT the other bases for the Motion.1 (ECF No. 17.) II. 5 FACTUAL BACKGROUND 6 SBD is a Virginia limited-liability company, which is the successor in interest 7 to Anova Food, Inc. (Compl. ¶ 1.) Anova has since discontinued active operations. 8 (Id.) Auto-Owners is an insurance company with its principal place of business in 9 Michigan. (Id. ¶ 2.) 10 1. Auto-Owners issues two insurance policies to Anova 11 Anova obtained two general-liability policies from Auto-Owners, which 12 together were in effect between July 8, 2005, and July 8, 2007. (Id. ¶ 10; Exs. 1, 2.) 13 Anova acquired the policies through Noell Insurance Agency in Tampa, Florida, and 14 Auto-Owners delivered the policies to Anova’s headquarters in Riverview, Florida. 15 (Id. ¶ 10.) 16 The policies’ coverage territory included the United States, Puerto Rico, and 17 Canada. (Id. Ex. 1.) They covered Anova for, among others, “those sums that the 18 insured becomes legally obligated to pay as damages because of ‘personal injury’ or 19 ‘advertising injury.’” (Id. Exs. 1, 2.) Auto-Owners had “the right and duty to defend 20 any ‘suit’ seeking those damages.” (Id.) The policies also specified that coverage 21 applied to advertising injury “caused by an offense committed in the course of 22 advertising [the insured’s] goods, products or services,” subject to several exclusions. 23 (Id.) 24 2. King Tuna first files suit; Anova tenders the action 25 On July 30, 2007, King Tuna—an Anova competitor—filed suit against Anova 26 in the United States District Court for the District of Oregon alleging claims for false 27 28 1 After carefully considering the papers filed in support of and in opposition to the Motion, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. 2 1 marketing under the Lanham Act, 15 U.S.C. § 1125(a); and Oregon’s Unlawful Trade 2 Practices Act, Or. Rev. Stat. § 646.608. (Id. ¶ 11, Ex. 4); King Tuna, Inc. v. Anova 3 Food, Inc., No. 07-6191-TC (D. Or. case filed July 30, 2007). 4 contentions largely arose out of Anova’s claim that it used wood smoke from the 5 Clearsmoke® process, the ingredients used to make its filtered wood smoke, and that 6 the Clearsmoke® products were “generally recognized as safe” by the Food and Drug 7 Administration. (Id. ¶¶ 11–14.) King Tuna’s 8 On August 6 and 10, 2007, Anova’s counsel tendered the Oregon action to 9 Auto-Owners. (Id. ¶ 18; Ex. 5.) On August 22, 2007, Auto-Owners sent a letter from 10 its Clearwater, Florida, office to Anova rejecting the claim. (Id. ¶ 19; Ex. 6.) SBD 11 contends that Auto-Owners had a duty to defend Anova, arguing that King Tuna’s 12 lawsuit arose from an “advertising injury” covered under the policies. (Id. ¶¶ 20–25.) 13 3. King Tuna refiles in California and loses 14 On November 2, 2007, King Tuna voluntarily dismissed its Oregon action 15 without prejudice. (Marcus Decl. Ex. B.) One week later, King Tina filed a nearly 16 identical action in this Court. King Tuna, Inc. v. Anova Food, Inc., No. 2:07-cv- 17 07451-ODW(AJWx) (C.D. Cal. case filed Nov. 14, 2007); (Compl. Ex. 3.) The action 18 proceeded to a bench trial at which the Court found against King Tuna. (Compl. 19 ¶¶ 26–27; Ex. 8.) The Court later awarded Anova $1,517,019.00 under the Lanham 20 Act and $1,845,522.00 in punitive damages under the Patent False Marketing Act 21 arising out of Anova’s counterclaims. 22 bankruptcy shortly afterwards. (Id. ¶ 30.) (Id. ¶ 28; Ex. 10.) King Tuna filed for 23 4. SBD files this action against Auto-Owners 24 On May 13, 2014, SBD—asserting rights as Anova’s successor in interest— 25 filed this action against Auto-Owners, alleging claims for breach of contract and 26 breach of the insurer’s duty of good faith and fair dealing. (ECF No. 1.) On July 7, 27 2014, Auto-Owners moved to dismiss SBD’s Complaint for lack of personal 28 jurisdiction and failure to state a claim. (ECF No. 17.) Alternatively, Auto-Owners 3 1 moves to transfer this action to the United States District Court for the Middle District 2 of Florida. (Id.) SBD timely opposed. (ECF No. 22.) That Motion is now before the 3 Court for decision. III. 4 LEGAL STANDARD 5 A defendant may move to dismiss a case for lack of personal jurisdiction under 6 Federal Rule of Civil Procedure 12(b)(2). The plaintiff bears the burden of 7 demonstrating that jurisdiction exists. Love v. Assoc. Newspapers Ltd., 611 F.3d 601, 8 608 (9th Cir. 2010). But when a district court acts on a defendant’s motion to dismiss 9 without holding an evidentiary hearing, the plaintiff must only make a prima facie 10 showing of jurisdictional facts to withstand the motion to dismiss. Doe v. Unocal 11 Corp., 248 F.3d 915, 922 (9th Cir. 2001). Moreover, the court must accept the 12 plaintiff’s version of facts as true and must resolve conflicts between the facts in the 13 plaintiff’s favor. Id. 14 IV. DISCUSSION 15 Auto-Owners moves to dismiss SBD’s Complaint for lack of personal 16 jurisdiction and failure to state a claim, or, alternatively, to transfer this action to 17 Florida. Given the current state of Ninth Circuit’s personal-jurisdiction law for out- 18 of-state, non-admitted insurance companies, the Court finds that Auto-Owners is not 19 subject to personal jurisdiction in California. 20 The United States Supreme Court has held that district courts must generally 21 assess personal jurisdiction in advance of other issues, such as venue. Leroy v. Great 22 W. United Corp., 443 U.S. 173, 180 (1979). The Court therefore addresses Auto- 23 Owners’s Rule 12(b)(2) Motion first. 24 Federal courts have the power to exercise personal jurisdiction to the extent of 25 the law of the state in which they sit. Fed. R. Civ. P. 4(k)(1)(A); Panavision Int’l, 26 L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1988). California’s long-arm 27 jurisdictional statute is coextensive with federal due-process requirements. Cal. Civ. 28 Proc. Code § 410.10; Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir. 1991). 4 1 The Due Process Clauses of the Fifth and Fourteenth Amendments require that a 2 defendant “have certain minimum contacts with [the forum state] such that the 3 maintenance of the suit does not offend traditional notions of fair play and substantial 4 justice.” Int’l Shoe Co. v. Wash., Office of Unemployment Comp. & Placement, 326 5 U.S. 310, 316 (1945). 6 Under the “minimum contacts” analysis, a court may obtain either general 7 jurisdiction or specific jurisdiction over a nonresident defendant. Unocal Corp., 248 8 F.3d at 923. A court has general jurisdiction when the defendant engages in 9 “continuous and systematic general business contacts . . . that approximate physical 10 presence in the forum state.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 11 797, 801 (9th Cir. 2004) (internal quotations marks omitted). For specific jurisdiction, 12 the Ninth Circuit has expounded a three-part test: (1) the defendant must purposefully 13 avail himself of the benefits and protections of the forum state; (2) the claim must 14 arise out of, or be related to, the defendant’s forum-based activity; and (3) exercise of 15 jurisdiction must comport with fair play and substantial justice. King v. Am. Family 16 Mut. Ins. Co., 632 F.3d 570, 579-80 (9th Cir. 2011); Schwarzenegger, 374 F.3d at 17 802; see also Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). The crux of the personal-jurisdiction analysis in this action is purposeful 18 19 availment.2 20 Denckla, 357 U.S. 235 (1958), holding that “it is essential in each case that there be 21 some act by which the defendant purposefully avails itself of the privilege of 22 conducting activities within the forum State, thus invoking the benefits and 23 protections of its laws.” Id. at 253. The Court has continued to refine this prong, 24 recognizing that it serves to ensure “that a defendant will not be haled into a 25 jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts.” 26 Burger King, 471 U.S. at 475 (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770 27 (1984)). While a defendant need not have actually been physically present in the 28 2 The Supreme Court first expressed this requirement in Hanson v. SBD does not argue that Auto-Owners is subject to general jurisdiction. 5 1 forum state to be subject to personal jurisdiction there, the defendant still must have 2 “purposefully directed” its commercial efforts at the forum state’s residents to satisfy 3 the purposeful-availment prong. Burger King, 471 U.S. at 475–76. 4 Auto-Owners argues that it has not purposefully availed itself of the benefits 5 and protections of California law, because it has no direct connection with California. 6 Auto-Owners contends that since Anova never tendered the California action to it, 7 Auto-Owners never had a chance to evaluate coverage issues and reach a coverage 8 determination under California law. Auto-Owners also points out that it does not 9 engage in systematic and continuous business in California, as it is not licensed to do 10 business in California, does not sell insurance in the state, and has no California 11 brokers or agents licensed to sell its policies here. 12 maintain any office or bank account in California, has never advertised its insurance 13 products for sale in California, and has never sought or received approval from the 14 California Department of Insurance for issuing and delivering its products in 15 California. 16 California, does not use a California address, and did not issue the policies at issue in 17 this action in California. Auto-Owners also does not Moreover, Auto-Owners does not accept insurance applications in 18 But SBD asserts that under the Ninth Circuit’s opinion in Farmers Insurance 19 Exchange v. Portage La Prairie Mutual Insurance Company, 907 F.2d 911 (9th Cir. 20 1990), Auto-Owners is subject to personal jurisdiction in California. SBD contends 21 that Auto-Owners meets both prongs of the Ninth Circuit’s test expounded in that 22 case: the policies’ coverage territory included California, and an insured event—that 23 is, the California action—occurred in the forum state. 24 While SBD faults Auto-Owners for not citing to Portage La Prairie, SBD itself 25 actually misses a later Ninth Circuit case that materially distinguished Portage La 26 Prairie. In Portage La Prairie, Portage—a Canadian insurance company—refused to 27 defend the driver in a lawsuit arising out of an automobile accident that occurred in 28 Montana. 907 F.2d at 912. Farmers Insurance Exchange—the excess insurer—then 6 1 stepped in, defended the driver, and paid out to the policy limit. 2 subsequently brought an indemnity action against Portage in the United States District 3 Court for the District of Montana. Id. But the district court dismissed the action for 4 lack of personal jurisdiction. Id. On appeal, the Ninth Circuit reversed, holding that 5 Portage had purposefully availed itself of Montana because its territorial policy limit 6 included Montana and a covered event occurred in the forum state. Id. at 913–14. Id. Farmers 7 Had Portage La Prairie been the last word from the Ninth Circuit on foreign- 8 insurance-company personal jurisdiction, the Court would have little problem finding 9 that Auto-Owners is subject to personal jurisdiction in California. But it was not. In 10 King v. American Family Mutual Insurance Company, 632 F.3d 570 (9th Cir. 2011), 11 the Court of Appeals specifically distinguished Portage La Prairie in a case 12 procedurally analogous to SBD’s action. After reciting the three-prong personal- 13 jurisdiction analysis, the court turned to Montana state law. Id. at 580. The Ninth 14 Circuit noted that “[u]nder the [purposeful-availment] prong, the Montana Supreme 15 Court has previously considered whether Montana courts have specific personal 16 jurisdiction over an insurer that, like the [defendants at issue], ‘has no offices or 17 agents in Montana, does not advertise [t]here, and is not authorized to conduct 18 business in Montana as a foreign insurer.’” Id. (quoting Carter v. Miss. Farm Bureau 19 Cas. Ins. Co., 109 P.3d 735, 738 (Mont. 2005)). In Carter, the Montana Supreme 20 Court had found that “even though the accident triggering coverage under a 21 nationwide insurance policy took place in Montana, ‘there was no basis for a finding 22 of jurisdiction under’ the state long-arm statute.” King, 632 F.3d at 580 (quoting 23 Carter, 109 P.3d at 742). The Ninth Circuit accordingly found that the defendant– 24 insurers were not subject to personal jurisdiction in Montana. 25 Most importantly, the court specifically distinguished Portage La Prairie, 26 finding that the decision was “not to the contrary.” King, 632 F.3d at 580 n.10. The 27 court reasoned, 28 /// 7 1 Although we held in Farmers that a foreign insurer could be subjected to 2 personal jurisdiction in Montana, Farmers was an indemnity dispute. As 3 a result, Farmers was “a case in which a company’s insured is sued as a 4 result of a car accident in a foreign state,” “arguably [giving rise to] an 5 obligation to appear and defend the driver,” while this is a case, like 6 Carter, in which “the insured is suing its . . . insurer in a foreign state for 7 breach of contract.” 8 Id. The court therefore made clear that its reasoning in Portage La Prairie applies in 9 indemnity actions, while King applies in duty-to-defend actions brought by the 10 insured. Since SBD brings a duty-to-defend suit against Auto-Owners, King—not 11 Portage La Prairie—applies to determine whether Auto-Owners is subject to personal 12 jurisdiction in California. 13 Just like the Montana Supreme Court’s decision in Carter, the California Court 14 of Appeal has repeatedly held that out-of-state insurers with no direct connections 15 with the state are not subject to personal jurisdiction here. See, e.g., Elkman v. Nat’l 16 States Ins. Co., 173 Cal. App. 4th 1305, 1321 (Ct. App. 2009) (holding that merely 17 accepting premium payments from California residents was not sufficient to subject 18 the insurer to personal jurisdiction); HealthMarkets, Inc. v. Super. Ct., 171 Cal. App. 19 4th 1160, 1173 (Ct. App. 2009) (finding no personal jurisdiction over an out-of-state 20 insurance company that had no California-based contacts); Penn. Health & Life Ins. 21 Guar. Ass’n v. Super. Ct., 22 Cal. App. 4th 477, 484 (Ct. App. 1994) (concluding that 22 a guarantor–insurer was not subject to personal jurisdiction in California, because it 23 “had no involvement in soliciting or issuing the policy, did not enter into a contract 24 with a California resident and did not seek to profit from or engage in any economic 25 activity in California”); In re Marriage of Martin, 207 Cal. App. 3d 1426, 1437 (Ct. 26 App. 1989) (reviewing the defendant–insurer’s complete lack of contacts with 27 California and finding no basis for exercising personal jurisdiction). 28 /// 8 1 Auto-Owners easily falls within these California appellate decisions precluding 2 the exercise of personal jurisdiction. Auto-Owners has absolutely no connection with 3 California. It is not licensed to do business, does not sell insurance, and has no 4 brokers or agents in California. It does not maintain any offices, bank accounts, or 5 employees in the state. 6 California, and never accepted, processed, reviewed, or denied any policy or tender 7 relevant to this action in California. Auto-Owners contacts with California are not 8 even “attenuated”—they are quite simply nonexistent. The Court has no colorable 9 legal basis for subjecting the company to jurisdiction here in light of King and the 10 Supreme Court’s extensive purposeful-availment case law. Cf. McGee v. Int’l Life 11 Ins. Co., 355 U.S. 220, 223 (1957) (finding that an out-of-state insurer was subject to 12 personal jurisdiction in California because the contract was delivered in California, the 13 premiums were mailed from the state, and the insured was a California resident); 14 Haisten v. Grass Valley Med. Reimbursement Fund, Ltd., 784 F.2d 1392, 1398 (9th 15 Cir. 1986) (finding personal jurisdiction over a Cayman Islands insurance company 16 because the insurance fund was created for California residents’ benefit); Hirsch v. 17 Blue Cross, Blue Shield of Kan. City, 800 F.2d 1474, 1480 (9th Cir. 1986) (subjecting 18 an insurer to personal jurisdiction in California because it provided healthcare 19 coverage for California employees and accepted premiums paid by California 20 residents). Auto-Owners does not accept insurance applications in 21 Contrary to SBD’s argument, the District Court for the District of Hawaii’s 22 decision in Robinson Corp. v. Auto-Owners Insurance Company, 304 F. Supp. 2d 23 1232 (D. Haw. 2003), does not change this result. In that case, the court found that 24 Auto-Owners was subject to personal jurisdiction in Hawaii after applying the Ninth 25 Circuit’s Portage La Prairie personal-jurisdiction rubric. 26 importantly, the district court decided Robinson prior to the Ninth Circuit’s decision in 27 King distinguishing Portage La Prairie. Since Robinson was a bad-faith duty-to- 28 /// 9 Id. at 1238. But 1 defend action just like King, the purposeful-availment holding in Robinson is of 2 doubtful continued viability. 3 Since the Court finds that Auto-Owners has not purposefully availed itself of 4 the benefits and protections of California, the Court cannot exercise personal 5 jurisdiction over it. See Schwarzenegger, 374 F.3d at 802 (“If the plaintiff fails to 6 satisfy either of these prongs, personal jurisdiction is not established in the forum 7 state.”). V. 8 CONCLUSION 9 For the reasons discussed above, the Court GRANTS Auto-Owners’s Motion to 10 Dismiss for lack of personal jurisdiction and DENIES AS MOOT Auto-Owners’s 11 remaining bases for dismissal. (ECF No. 17.) The Clerk of Court shall close this 12 case. 13 IT IS SO ORDERED. 14 15 August 27, 2014 16 17 18 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27 28 10

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