Opinion
No. 02 Civ. 5623 (LTS)(RLE).
September 2, 2004
MEMORANDUM OPINION AND ORDER
In this insurance coverage dispute, Plaintiff seeks a declaration of its insurer's duty to defend and indemnify it for attorneys' fees incurred in a proceeding before the United States International Trade Commission ("ITC"). Defendants now move for summary judgment dismissing Plaintiff's First Amended Complaint ("Complaint"), and Plaintiff cross-moves for summary judgment for the relief requested in the Complaint, pursuant to Rule 56(c) of the Federal Rules of Civil Procedure. The Court has jurisdiction of this matter under 28 U.S.C. § 1332. The Court has considered thoroughly all submissions in connection with the instant motions. For the following reasons, the Court grants Defendants' motion for summary judgment and denies Plaintiff's motion.
BACKGROUND
The following facts are undisputed unless characterized otherwise. Plaintiff, Elite Brands ("Elite" or "Plaintiff"), sells and distributes cameras, binoculars, telescopes, and camera equipment and accessories. (Pl.'s Stmt. of Undisputed Material Facts in Supp. of Cross-Mot. ("Pl.'s 56.1(a) Stmt.") ¶ 6.) Defendants, Pennsylvania General Insurance Company, The Employers' Fire Insurance Company, General Accident Insurance Company, and Commercial Union Insurance Company (collectively "OneBeacon" or "Defendants") have issued various commercial general liability policies to Elite. (See Joint Preliminary Pre-Trial Statement dated Oct. 29, 2002 ("Pre-Trial Stmt.") § C.)
The Insurance Policies
The OneBeacon insurance policies provide in relevant part that OneBeacon is to "pay those sums that the insured becomes legally obligated to pay as damages because of `personal injury' or `advertising injury' to which this insurance applies." (Commercial General Liability Insurance Coverage Form CG00 01 01 96 ("Policy"), Hong Aff. Ex. B, § I(Coverage B) (1) (a).) In addition, OneBeacon has "no duty to defend the insured against any `suit' seeking damages for `personal injury' or `advertising injury' to which this insurance does not apply." (Id.) The insurance policy defines "advertising injury" and "personal injury" as follows:
Defendants have provided copies of various policies that were in effect over the period in question. The substance and language of the policies are essentially the same, and there is no dispute as to the language of the policy provisions at issue in this case. Accordingly, the Court cites to the first version of the policy form that appears in the compilation of policy documents annexed to the affidavit of Woody D. Hong, Esq., submitted in support of Defendants' Motion.
"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 of privacy;
c. Misappropriation of advertising ideas or style of doing business; or
d. Infringement of copyright, title or slogan.
* * *
"Personal injury" means injury, other than "bodily injury," arising out of one or more of the following offenses:
a. False arrest, detention or 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 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 of privacy.
(Id. § V(1), (13).)
The Fuji ITC Proceedings
On March 25, 1998, Fuji Photo Film Co., Ltd. ("Fuji") commenced a proceeding before the ITC asserting certain patent infringement claims. (Pl.'s 56.1(a) Stmt. ¶ 14.) Elite was not a party to that original proceeding. (Id. ¶ 15.)
The ITC is a United States administrative body that is empowered to enforce the Tariff Act, 19 U.S.C. §§ 1301- 1367, 1401-1677. The Tariff Act defines specific unfair practices in the importation of articles and empowers the ITC to investigate alleged violations. See 19 U.S.C.A. § 1337(a)-(b) (West 1999 Supp. 2004). If a violation of the Tariff Act is found, the ITC is empowered to issue an exclusion order and/or cease and desist order (pursuant to 19 U.S.C. § 1337(d)(1), (f)), order payment of a civil penalty to the United States if an ITC order is violated, or impose monetary sanctions for abuse of discovery or process (pursuant to 19 U.S.C. § 1337(f)(2), (h) and Fed.R.Civ.P. 11, 37).
On June 2, 1999, the ITC issued a general exclusion order prohibiting the unlicensed importation of certain lens-fitted film packages ("LFFPs" or "disposable cameras") that infringed upon Fuji's patents. In addition, the ITC issued cease and desist orders against the respondents to that proceeding. (Pl.'s 56.1(a) Stmt. ¶ 16.)
On June 27, 2001, Fuji commenced an ITC formal enforcement proceeding against twenty respondents, including Elite, and requested an advisory opinion as to whether the respondents could import certain cameras. (Id. ¶ 19.) Fuji complained of the "manufacture outside of the United States and importation into and sale in the United States" by the various respondents of certain types of LFFPs. (See Compl. for Enforcement Proceedings, Inv. No. 337-TA-406, ("Fuji ITC Complaint"), Hong Aff. Ex. G, ¶ 6(a); see also id. ¶ 61, at 24 (alleging that Elite "is importing and selling" certain allegedly infringing LFFPs "and is planning to import and sell" other allegedly infringing LFFPs)). Fuji requested relief in the form of
[i]nformal and/or formal enforcement proceedings pursuant to [ITC] Rule 210.75 against the Enforcement Respondents, all of which are bound by the Commission's Orders but have violated the general exclusion order and, in the case of certain of the Enforcement Respondents, Cease and Desist Orders, and eventually, a civil procedure [sic] seeking imposition of civil penalties against Initial Respondents and others bound by the Commission's Orders.
(Fuji ITC Compl., Didia Aff. Ex. 3, ¶ 11(a).) The Complaint named Elite as an "Enforcement Respondent." (Id. (caption).)
On July 31, 2001, the ITC granted Fuji's request to commence formal enforcement and advisory opinion proceedings upon the complaint, naming Elite as a party to the advisory opinion, rather than the enforcement, aspect of the proceedings. The stated purposes of the proceedings were "to determine whether the . . . [enforcement] respondents . . . are in violation of the Commission's general exclusion order and/or cease and desist orders . . . and what if any enforcement measures are appropriate," and "to determine whether the importation of certain cameras would violate the general exclusion order issued in the [original] . . . investigation." (Notice of Enforcement Advisory Op. Proceeding, Didia Aff. Ex. 1, at 2-3.)
On January 31, 2002, Fuji requested that Administrative Law Judge Luckern impose a Cease and Desist Order and monetary sanctions against Elite because of Elite's importation and sale of cameras allegedly infringing Fuji's patents. (Fuji's Pre-Hearing Stmt., Didia Aff. Ex. 8, at 161-62.) On February 6, 2002, Elite submitted written notice to Schmutter, Strull Fleisch, Inc., agent for OneBeacon, asserting a claim for coverage. (Letter from Norman Didia to Paul Strull of 2/6/01 [sic], Didia Aff. Ex. 9) On February 7, 2002, Fuji withdrew its request for monetary sanctions against Elite. (Pl.'s 56.1(a) Stmt. ¶ 37.) The consolidated enforcement and advisory opinion proceeding took place from February 11-16, 2002. (Id. ¶ 43.) Elite contends that the evidence adduced at this proceeding could "directly serve as a predicate for findings of fact in favor of Fuji" as against Elite, in connection with claims of "advertising injury" or "personal injury" within the meaning of the OneBeacon insurance policies in the ITC proceedings or in other legal actions or proceedings. (Id. ¶¶ 44-46.) Specifically, Elite argues that Fuji's proffers in the ITC proceeding raise the possibility of a covered "advertising injury" claim under the Policy for "`[o]ral or written publication of material that slanders or libels a person or organization or disparages a person's or organizations [sic] goods, products or services[,]'" "`[m]isappropriation of advertising ideas or style of doing business,'" or "`[i]nfringement of copyright, title or slogan,'" as well as a covered "personal injury" claim for "[o]ral or written publication of material that slanders or libels a person or organization or disparages a person's goods, products or services." (Id. ¶ 45 (alterations in original).) Elite seeks a declaratory judgment that "defendants are obligated to defend and indemnify their insured, plaintiff Elite Brands Inc. in connection with the ITC proceeding." (Compl. ¶ 15(D).)
DISCUSSION
Summary Judgment Standard
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is "material" only when it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). A material fact issue is `genuine' when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The standard for cross-motions for summary judgment "is the same as that for individual motions for summary judgment." Aviall, Inc. v. Ryder Sys., 913 F. Supp. 826, 828 (S.D.N.Y. 1996).
Interpretation of Insurance Contracts
"`[T]he initial interpretation of a contract is a matter of law for the courts to decide,' and if the wording on the duty to defend is clear and unambiguous, it will be enforced according to its terms." Int'l Bus. Machs. Corp. v. Liberty Mutual Ins. Co., 363 F.3d 137, 144 (2d Cir. 2004) (quoting Morgan Stanley Group, Inc. v. New England Ins. Co., 225 F.3d 270, 275 (2d Cir. 2000)) (internal citations omitted). "Under New York law, the court determines the proper construction of an insurance contract, as with other contracts, as a matter of law." United States Fid. Guar. Co. v. Frosty Bites, 232 F. Supp. 2d 101, 103 (S.D.N.Y. 2002).
"Under New York law, insurers have a broad obligation to defend and may not relieve themselves of that duty unless there is no possible factual or legal basis that would bring the action within the purview of the insurance policy." Smart Style Indus., Inc. v. Pennsylvania Gen. Ins. Co., 930 F. Supp. 159, 162 (S.D.N.Y. 1996). "An insurer's duty to defend claims made against its policyholder is ordinarily ascertained by comparing the allegations of a complaint with the wording of the insurance contract." Int'l Bus. Machs. Corp., 363 F.3d at 144. "If the facts alleged [in the complaint] raise a reasonable possibility that the insured may be held liable for some act or omission covered by the policy, then the insurer must defend." A. Meyers Sons Corp. v. Zurich Am. Ins. Group, 74 N.Y.2d 298, 302 (N.Y. 1989); see also Cont'l Cas. Co. v. Rapid-Am. Corp., 80 N.Y.2d 640, 648 (N.Y. 1993) ("An insurer must defend whenever the four corners of the complaint suggest — or the insurer has actual knowledge of facts establishing — a reasonable possibility of coverage.").
[I]f the wording [of the insurance contract] on the duty to defend is clear and unambiguous, it will be enforced according to its terms. . . . The duty is to defend any action, regardless of its merit, that seeks damages potentially within the indemnity coverage. At the same time, an insurer's duty to defend is limited absolutely by the scope of the coverage purchased. If there is no legal or factual circumstance that could trigger the duty to indemnify against a claim, then there is no duty to defend against it. . . . Any ambiguity as to the insurer's duty to defend is resolved in favor of the insured.Int'l Bus. Machs., 363 F.3d at 144 (citations omitted).
For the following reasons, the Court finds that no genuine issue of material fact precludes resolution of this matter on the parties' motions for summary judgment, and that neither Fuji's ITC complaint nor the evidence and proposed findings of fact tendered in that proceeding and cited by Elite as potential bases for coverage under the Policy raises a reasonable possibility that OneBeacon may be liable for damages arising from an act or omission covered under the cited Policy provisions.
Policy Coverage and the ITC Proceedings
Fuji's Complaint in the ITC proceeding alleges that Elite has imported and sold cameras that infringe Fuji's patents, and that Elite has further plans to import and sell other infringing cameras. (Fuji ITC Compl., ¶¶ 59-62.) The ITC complaint focuses on alleged violations of the general preclusion and cease and desist orders, and nowhere refers to advertising activities or communications, actions or omissions constituting disparagement of Fuji's products. Elite argues here, however, that evidence elicited in the course of the proceeding, and certain findings of fact proposed by Fuji in connection with the proceeding, are sufficient to raise the possibility of a covered "advertising injury" or "personal injury" claim, and thus to trigger OneBeacon's duty to defend Elite under the Policy. Although, as explained above, the general rule is that courts look to the four corners of the complaint in determining whether there is duty to defend under the terms of an insurance policy, the Court has also reviewed and considered carefully Elite's arguments relating to matters proffered by Fuji in the course of the ITC proceeding. Even taking such additional materials into account, it is clear that no duty to defend that proceeding arises under the Policy.
Advertising Injury
Elite argues that a covered "advertising injury" claim may be discerned from Fuji's claims of patent infringement, from testimony indicating that Elite sold certain allegedly infringing goods, and testimony to the effect that Fuji believed that the low-priced allegedly infringing goods would lead Fuji's customers to believe that Fuji's prices were unreasonably high. (See Pl.'s 56.1(a) ¶¶ 44-45 and evidence cited therein.) Elite asserts that the evidence and proposed findings could support claims covered by the Policy based on "`[m]isappropriation of advertising ideas or style of doing business[,]'" "`[o]ral or written publication of material that slanders or libels a person or organization or disparages a person's or organizations [sic] goods, products or services'" or "`[i]nfringement of copyright, title or slogan.'" (Id. ¶ 45.)
The Policy provides unambiguously that a covered "advertising injury" must be "caused by an offense committed in the course of advertising [the insured's] goods, products or services." (Policy, § I(Coverage B) (1) (b) (2).) Here, neither Fuji's Complaint in the ITC proceeding nor the evidence and proposed findings cited by Elite alleges any connection of the activities complained of with any Elite advertising activities. Rather, the claims, evidence and proposed findings relate to importation and sales of allegedly infringing merchandise.
At pages 5-6 of Elite's Reply Memorandum and Exhibit 29 to the Reply Affidavit of Richard Carmen, Elite identifies a number of proposed findings of fact proffered by Fuji in connection with the ITC proceeding. Elite asserts that the proposed findings, which identify certain accused products and describe various elements of packaging, display and labeling of certain of the products "would support material inferences that the claimed injuries of Fuji arose out of an `offense occurring in the course of the "insured's advertising activities" and constitute one of the enumerated offenses'." (Pl.'s Mem. of Law in Reply at 6-7.) Having reviewed carefully the cited passages, the Court finds no factual basis for an inference of a connection between the claims asserted in the ITC Proceeding and advertising activities within the meaning of the Policy provision.
The importance of the "course of advertising" element of the Policy provision was made clear by the decision of the New York State Court of Appeals in A. Meyers Sons Corp. v. Zurich Am. Ins. Group, 74 N.Y.2d 298 (N.Y. 1989). There, Meyers Sons ("Meyers") sought a declaratory judgment against its insurer, Zurich American Insurance Group ("Zurich"), decreeing that a proceeding before the ITC triggered an "advertising injury" claim, which term was defined in the Zurich policy by language similar in all pertinent respects to that of the OneBeacon policies. Id. at 298. The ITC complaint at issue in Meyers, like the Fuji ITC complaint, "allege[d] injury arising out of the manufacture, importation and sale in the United States" of patent-infringing products. Id. at 303. The relief requested from the ITC in Meyers, like the relief sought by Fuji in its ITC proceeding, focused on enjoining the importation and sale of infringing products, "without reference to preventing any type of false, misleading or injurious advertising." Id. The Meyers court found that "acts of `unfair competition' arising out of the illegal manufacturing, importation and sale of goods in violation of another's patent rights . . . [were] not covered under the [insurance] policy" because they were not alleged to "aris[e] out of Meyers' `advertising activities.'" Id. See also Century 21, Inc. v. Diamond State Ins. Co., No. 03 Civ. 5163, 2004 WL 1117897, at *3 (S.D.N.Y. May 18, 2004) ("[W]here New York courts have sustained a duty to defend predicated on advertising injury, the underlying complaint has explicitly alleged, or at a minimum adverted to, advertising activities.") and cases cited therein. Here, Fuji's allegations against Elite focus on Elite's alleged importation and sale of cameras infringing upon Fuji's patents, and make no reference to Elite's advertising activities. Plaintiff has therefore failed entirely to demonstrate that the facts alleged by Fuji in the ITC proceeding raise a reasonable possibility that Elite may be liable for an act or omission covered by the unambiguous advertising injury provisions of the Policy. Personal Injury
Plaintiff also contends that Fuji either a) asserted claims of "personal injury" within the meaning of that term provided in the OneBeacon insurance policies or b) elicited testimony in the ITC proceeding that could provide a predicate for the later assertion of such claims. Elite contends that the enumerated offense of disparagement is at issue in the Fuji ITC proceeding. The Policy provides coverage for "[o]ral 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." (Policy, § V(13)(d).)
Plaintiff argues that testimony proffered by Fuji in the ITC proceeding, to the effect that Fuji's reputation was damaged by the allegedly counterfeit cameras because Fuji customers would believe that Fuji's products were priced unreasonably high, constitutes a potential foundation for a claim of disparagement covered by the "personal injury" provision of the policy. (Richard E. Carmen Aff. Ex.18.) Similarly, Plaintiff cites the following findings of fact, proposed by Fuji in the ITC proceeding, as supportive of a claim potentially covered by the disparagement paragraph of the personal injury provision:
CFF. 1019 Respondents' cameras take sales away from Fuji and its licensees. In addition, Fuji and its licensees lose customers for the product category (LFFPs) due to the inferior quality of most of the Respondents' cameras. If the customer has not enjoyed its experience with the product purchased from a competitor, the customer can assume that its dissatisfaction was due to single-use-cameras in general, rather than the specific model, and therefore, not buy single-use cameras in the future. In addition, Respondents' cameras place price point pressure on Fuji and its dealings with customers, while tarnishing Fuji's reputation. Finally, there has been a loss of space at retail to these unauthorized third parties.
CFF 1020 The low prices charged for Respondents' cameras tarnish Fuji's reputation because it (sic) gives rise to the belief, by Fuji's customers for LFFPs, which (sic) Fuji is attempting to take advantage of them by selling them overpriced goods.
(Id. Ex. 19, at 279.)
The plain language of the personal injury provision of the Policy makes it clear, however, that there is no reasonable possibility that the cited testimony or proposed findings could support a covered claim. The Policy covers " [o]ral or written publication of material that . . . disparages a person's or organization's goods, products or services." (Policy, § V(13)(d) (emphasis supplied).) None of the evidence or proposed findings relied upon by plaintiff asserts that Fuji complained of disparagement or similar injury arising from any oral or written publication of material by Plaintiff. Rather, Fuji's proffers speak to the alleged effect of the presence of Plaintiff's lower-priced goods in the market. Furthermore, a claim of disparagement is not supported by "`[m]ere general statements of comparison, declaring that the defendant's goods are the best on the market, or are better than plaintiff's . . . so long as they contain no specific assertions of unfavorable facts reflecting upon the rival product.'" Brignoli v. Balch Hardy Scheinman, Inc., 645 F. Supp. 1201, 1209 (S.D.N.Y. 1986) (internal citations omitted). Thus, even if Fuji's proffers could be construed to suggest that the pricing or packaging of Plaintiff's products implicitly represented that Plaintiff's products were of equal or superior quality to Fuji's, at a better price, the proffers would be insufficient to support a reasonable possibility that such claim would be covered under the personal injury provision of the Policy.
Elite thus has not proffered any evidence that Fuji is asserting injury based on the publication by Elite of an oral statement or written material that disparaged Fuji's products or that Fuji has proffered or elicited evidence that could serve as a factual predicate for the later assertion of such injury. The activities Fuji alleges Elite engaged in, selling and importing infringing cameras, do not support a potential claim of disparagement within the meaning of the advertising or personal injury provisions of the Policy. Accordingly, Defendants' motion is granted. Because the Court is granting the motion and dismissing the Complaint, Plaintiff's cross-motion is denied.
CONCLUSION
For the foregoing reasons, Defendants' motion for summary judgment is granted, and Plaintiff's Complaint is dismissed pursuant to Rule 56(c) of the Federal Rules of Civil Procedure. Plaintiff's cross-motion is denied. Judgment shall be entered in Defendants' favor and this case shall be closed.
SO ORDERED.