Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co.

• Decision Date: 30 December 1996
• Docket Number: 95-1387,Nos. 95-1367,s. 95-1367
• Citation: 99 F.3d 795
• Parties: ADVANCE WATCH COMPANY, LIMITED, Plaintiff-Appellee, Cross-Appellant, v. KEMPER NATIONAL INSURANCE COMPANY, Defendant, The Travelers Indemnity Company of America, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 795

99 F.3d 795

40 U.S.P.Q.2d 1545

ADVANCE WATCH COMPANY, LIMITED, Plaintiff-Appellee, Cross-Appellant, v. KEMPER NATIONAL INSURANCE COMPANY, Defendant The Travelers Indemnity Company of America Defendant-Appellant, Cross-Appellee.

Nos. 95-1367, 95-1387.

United States Court of Appeals, Sixth Circuit.

Argued June 3, 1996.

Decided Nov. 5, 1996.

Rehearing and Suggestion for Rehearing En Banc Denied Dec. 30, 1996.

Mark A. Cantor (argued and briefed), Frank A. Angileri, Maria Franek, Brooks & Kushman, Southfield, MI, for plaintiff-appellee.

Michael D. Prough, William C. Morison-Knox (argued and briefed), Sonnenschein, Nath & Rosenthal, San Francisco, CA, for defendant-appellant.

Before: MILBURN and SUHRHEINRICH, Circuit Judges; JORDAN, District Judge. ^*

JORDAN, District Judge.

In this diversity action, the defendant The Travelers Indemnity Company of America ("Travelers") appeals from the district court's order granting the motion for summary judgment of the plaintiff Advance Watch Company, Limited ("Advance"). In granting the plaintiff's motion, the district court ruled that Travelers, as Advance's liability insurance carrier, owed a duty to defend Advance in a civil action brought against Advance in the United States District Court for the District of Rhode Island by A.T. Cross Company and A.T.X. International, Inc. (collectively, "Cross").

Advance cross-appeals from the district court's denial of its motion for the recovery of attorneys' fees and costs against Travelers in this civil action.

I.

A.

On May 17, 1994, Advance commenced this civil action against Travelers and another defendant, Kemper National Insurance Company ("Kemper"). ¹ Advance alleged that these insurance carriers were bound to indemnify Advance against any liability owed to Cross, and to defend Advance in the Cross action. Advance also claimed attorneys' fees and costs in the present action.

The parties litigated this civil action on cross-motions for summary judgment. The district court denied Travelers' motion for summary judgment, ruled that Travelers had an obligation to defend Advance in the Cross action, and entered summary judgment for Advance on February 28, 1995. ² The district court denied Advance's motion for attorneys' fees incurred in the present action, but granted Advance's motion for costs incurred in this action. This timely appeal and cross-appeal followed.

B.

This civil action was properly before the district court on the basis of the parties' diversity of citizenship. 28 U.S.C. § 1332. The diverse citizenship of the parties is established in the record. The jurisdictional amount requirement of § 1332(a) was met by the facts that when Advance commenced this civil action, the extent of its liability in the Cross action had not been determined, and that Advance alleged in the present action that it anticipated defense costs in the Cross action of "well over $50,000.00." Advance also prayed for damages in its complaint filed in this action, and for punitive or exemplary damages for Travelers' alleged bad faith. See Jones v. Knox Exploration Corporation, 2 F.3d 181, 182-83 (6th Cir.1993) ("if a good-faith claim of sufficient amount is made in the complaint, subsequent events that reduce the amount below the statutory requirement do not require dismissal"); compare Stonewall Ins. Co. v. Lopez, 544 F.2d 198 (5th Cir.1976) (the jurisdictional amount requirement was met in a declaratory judgment action brought by a liability insurance carrier even though the applicable policy limit did not exceed $10,000.00, the jurisdictional amount then stated in the statute; it was proper to include the pecuniary value of the cost of defending the putative insured in determining the amount in controversy).

This court has jurisdiction of this appeal and cross-appeal by virtue of 28 U.S.C. § 1291.

C.

Under familiar rules concerning contracts of liability insurance, the district court was required to consider the allegations pleaded in the Cross action in the light of the coverage provisions and exclusions in the policy issued by Travelers to Advance. These aspects of the record are undisputed, and reveal as follows.

On July 27, 1994, Cross sued Advance in the district court in Rhode Island under the federal trademark statute, the Lanham Act, as amended, 15 U.S.C. §§ 1051, et seq. The Cross action arose out of Advance's license agreement with Pierre Cardin, which granted Advance the right to use the "Pierre Cardin" trademark and stylized "PC" logo on writing instruments advertised and sold by Advance in the United States. The basis for the complaint was that the Pierre Cardin writing instruments advertised and sold by Advance had "a trade dress, product design and configuration which are reproductions, counterfeits, copies and colorable imitations," Jt.App. at 65, of Cross writing instruments, particularly in their imitation of Cross' frusto-conical top trademarks. Cross alleged that Advance had committed statutory and common-law trade dress and trademark infringement, unfair competition, and dilution. The counts of Cross' complaint stated causes of action for (1) trade dress infringement in violation of the Lanham Act, including infringement of Cross' frusto-conical top trademarks, constituting false designations of origin, false descriptions, and false representations; (2) trademark infringement in violation of the Lanham Act, by importing, advertising, offering for sale, and selling writing instruments which were reproductions, counterfeits, copies, and colorable imitations of Cross' registered frusto-conical top trademarks; (3) trade dress infringement and trademark infringement in violation of the common law of Rhode Island, leading to unjust enrichment of Advance through "misappropriation" of Cross' trade dress, trademarks, and associated goodwill; (4) unfair competition in violation of the common law of Rhode Island, arising out of the same conduct as the trade dress and trademark infringement; and (5) dilution of the distinctiveness of Cross' trademarks and injury to Cross' business reputation in violation of Rhode Island statutory law, also arising out of the same conduct. Cross prayed for injunctive relief, an accounting, damages, treble damages, punitive damages, and attorneys' fees and costs under 15 U.S.C. § 1117. Cross alleged that Advance had published a writing instrument catalog depicting the writing instruments alleged to be imitations of Cross writing instruments, and requested specifically that Advance be enjoined from further advertising of the imitation Cross writing instruments, and that all advertisements of those instruments be destroyed.

The commercial general liability coverage part of the insurance policy issued by Travelers to Advance, in a portion entitled "PERSONAL AND ADVERTISING INJURY LIABILITY," required Travelers to indemnify Advance against liability determined in, and to defend Advance in, any action for liability involving an "advertising injury" caused by "an offense committed in the course of advertising [Advance's] goods, products or services." "Advertising injury" is defined in the policy to mean injury arising out of one or more of the following:

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.

Jt.App. at 121-22. The policy does not mention trademark or trade dress infringement, either in defining advertising injury or in stating exclusions from coverage.

Advance properly tendered the Cross action to Travelers for defense and indemnity. Travelers duly notified Advance that coverage was denied, and declined to provide a defense in the Cross action. While the present action was pending in the district court, Advance settled the Cross action by agreeing to alter the design of its Pierre Cardin writing instruments and to halt sales of the writing instruments alleged to imitate Cross writing instruments.

II.

A.

The defendant Travelers argues that the district court erred in granting summary judgment to Advance on the issue of Travelers' duty to defend Advance in the Cross action. We review grants of summary judgment de novo. Brooks v. American Broadcasting Companies, Inc., 999 F.2d 167, 174 (6th Cir.), cert. denied, 510 U.S. 1015, 114 S.Ct. 609, 126 L.Ed.2d 574 (1993). Summary judgment is appropriate when 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); see LaPointe v. United Autoworkers Local 600, 8 F.3d 376, 378 (6th Cir.1993); Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 601 (6th Cir.1988). In the present case, the facts are not disputed, and we are presented solely with a question of law concerning the correct construction of the Travelers insurance policy.

As required by the Rules of Decision Act, 28 U.S.C. § 1652, the district court in the present action applied Michigan law, including that concerning choice of law, see Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), and determined that Michigan law governs construction of the Travelers policy in this case, Travelers having issued the policy to Advance in the State of Michigan. See Advance Watch Co., Ltd. v. Kemper Nat'l Ins. Co., 878 F.Supp. 1034, 1037 (E.D.Mich.1995), and authorities cited therein. As the district court noted, the parties agree that Michigan law governs the substantive issues in this case.

The district court summarized Michigan law concerning a liability insurer's duty to defend its insured...