American Family Life Assur. Co. v. Intervoice

Decision Date21 September 2009
Docket NumberCase No. 4:08-CV-167 (CDL).
Citation659 F.Supp.2d 1271
PartiesAMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, Plaintiff, v. INTERVOICE, INC., Defendant.
CourtU.S. District Court — Middle District of Georgia

Arthur Lee Smith, III, William L. Tucker, Columbus, GA, Damon J. Whitaker, Powell Goldstein, Charles Scott Greene, Ryan Tyler Pumpian, Atlanta, GA, for Plaintiff.

Carter B. Benson, Dan D. Davison, Kimberly Kay Gustafson, Stephen M. Dollar, Dallas, TX, Charles K. McKnight, Jr., Nations, Toman & McKnight LLP, Atlanta, GA, for Defendant.

ORDER

CLAY D. LAND, District Judge.

This action arises from Defendant Intervoice, Inc.'s alleged refusal to defend Plaintiff American Family Life Assurance Company of Columbus ("AFLAC") against a "claim" of patent infringement. Presently pending before the Court is Defendant's Motion to Dismiss Removed Complaint (Doc. 4). For the following reasons, the Court denies Defendant's motion.1

FACTUAL BACKGROUND

In early February 2001, Plaintiff, an insurance provider headquartered in Columbus, Georgia, entered into negotiations regarding the potential sale by Defendant to Plaintiff of an automated, interactive voice response system (the "System"). Plaintiff alleges that during these negotiations, Defendant had knowledge of patents owned by Ronald A. Katz Technology Licensing, L.P. ("RAKTL") covering technology similar to that contained in the System. Plaintiff also alleges that Defendant knew that some of Defendant's customers had been accused of infringing RAKTL patents while using Defendant's products, which were substantially similar to the System Defendant was attempting to sell Plaintiff. Plaintiff further alleges that Defendant failed to disclose this information to Plaintiff during the sales negotiations.

On or about February 27, 2001, Plaintiff and Defendant entered into a contract (the "Agreement") for the purchase of the System by Plaintiff. The Agreement contained an addendum that permitted Plaintiff to make a copy of the software provided by Defendant for disaster recovery purposes. The Agreement also contained a provision requiring Defendant to

indemnify, hold harmless, and defend [Plaintiff] against any claim that any System or Software as provided by [Defendant] hereunder, exclusive of Software programs specifically developed pursuant to Functional Specifications for applications identified by [Plaintiff], infringes any United States ... patent; provided that [Plaintiff] promptly notifies [Defendant] of any such claim after receiving service of process, provides all reasonable assistance to [Defendant] and allows [Defendant] to control any resulting litigation and/or settlement negotiations.

(Ex. A to Compl. ¶ 6 [hereinafter Agreement].)

Plaintiff maintained a relationship with Defendant over the next several years, contracting to purchase upgrades and to increase the capacity of the System. Plaintiff alleges that throughout these negotiations, Defendant failed to disclose that RAKTL had made claims of patent infringement against Defendant's customers based on systems substantially similar to Plaintiff's System.

On October 12, 2006, RAKTL contacted Plaintiff via mail in an attempt to gauge Plaintiff's interest in purchasing a license for the RAKTL patents. Plaintiff did not respond to RAKTL's first letter. Contending that Plaintiff's "conduct evidences willful infringement of the [RAKTL] portfolio," RAKTL contacted Plaintiff again on July 5, 2007 to inquire about Plaintiff's interest in licensing the RAKTL patents. (Ex. C to Compl.) Plaintiff responded, seeking more information regarding how Plaintiff's operations implicated the RAKTL portfolio. RAKTL replied on December 19, 2007, identifying specific RAKTL patents it believed Plaintiff was infringing. By letter dated January 18, 2008, Plaintiff informed RAKTL that it wished to meet to further discuss RAKTL's contention that Plaintiff was infringing on its patents. Plaintiff and RAKTL agreed to meet on March 25, 2008.

By letter dated March 14, 2008, Plaintiff notified Defendant of RAKTL's patent infringement allegations. The stated purpose of the letter was "to advise you [Defendant] of the claim of [RATKL], to ask for your assistance in this matter, to offer you the opportunity to defend or settle this claim, and to offer you the opportunity to meet with [RAKTL] representatives." (Ex. G to Compl.) By letter dated March 24, 2008, Defendant declined to participate in the meeting while also affirming its contractual obligation to indemnify, defend, and hold Plaintiff harmless against claims of patent infringement, as specified in the Agreement. Following the March 25, 2008 meeting with RAKTL, Plaintiff again requested Defendant's assistance in negotiating RAKTL's patent infringement claim; Plaintiff also forwarded a copy of the information RAKTL presented to Plaintiff during the March 25th meeting. The information presented by RAKTL purports to demonstrate how the System infringes RAKTL patents. After reviewing this information, Defendant again declined to assist, contending that it failed to see where RAKTL had made a claim against one of its products, that it was unaware of such a claim ever being made against one of its products, and that the Agreement contained exclusions to any defense or indemnification obligations and damage limitation provisions that would appear to be applicable to any claim against one of its products. (Ex. K to Compl.)

Plaintiff filed the presently pending action alleging claims for fraud and breach of contract. In its fraud claim, Plaintiff alleges that although Defendant promised to defend, indemnify, and hold Plaintiff harmless from claims of patent infringement, Defendant never intended actually to do so. Plaintiff's breach of contract claim is based upon Defendant's alleged failure to honor the Agreement's indemnity provision. Defendant seeks dismissal of Plaintiff's complaint based upon lack of subject matter jurisdiction and for failure to state a claim. For the following reasons, the Court denies Defendant's Motion to Dismiss.

DISCUSSION
I. Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)(1)

Defendant contends that the Court lacks subject matter jurisdiction over Plaintiff's claims because Plaintiff does not presently have standing to sue. Defendant argues that Plaintiff has suffered no injury caused by Defendant's alleged refusal to indemnify and defend because no "claim" has been made against Plaintiff for which a duty to defend or indemnify exists under the Agreement. Thus, Defendant maintains that the present dispute has not yet ripened into a claim that can be adjudicated in federal court.

Federal courts are limited to adjudicating actual "cases" and "controversies." U.S. Const. art. III, § 2, cl. 1. "This case-or-controversy doctrine fundamentally limits the power of federal courts in our system of government." Ga. State Conference of NAACP Branches v. Cox, 183 F.3d 1259, 1262 (11th Cir.1999). The concept of "standing" is an important element of the case-or-controversy doctrine. See id. In order to establish standing to sue, "a plaintiff must first have suffered an `injury in fact.'" Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). "The injury must be an invasion of a legally protected interest that is sufficiently concrete and particularized rather than abstract and indefinite." Id. A plaintiff must next establish "a causal connection between the injury and the challenged action of the defendant which is not too attenuated." Id. Finally, "it must be likely rather than speculative that `the injury will be redressed by a favorable decision.'" Id. (quoting Lujan, 504 U.S. at 561, 112 S.Ct. 2130).

In support of its argument that Plaintiff has not suffered the requisite injury in fact to establish standing to sue, Defendant contends that under the plain terms of the Agreement, its duty to defend, indemnify, and hold Plaintiff harmless is not triggered until RAKTL actually files suit against Plaintiff. Thus, because Plaintiff does not allege that RAKTL has filed suit against it, any alleged injury is merely abstract or hypothetical and has not yet ripened to support a cognizable cause of action. In support of its position, Defendant points to the language of the Agreement, which provides that Plaintiff is required to notify Defendant of "any claim" of patent infringement after receiving "service of process" regarding "such claim." (Agreement ¶ 6.)

Under Plaintiff's interpretation of the Agreement, a "claim" was made against it by RAKTL when RAKTL notified Plaintiff that Plaintiff was infringing upon RAKTL patents. Consequently, Plaintiff responds that Defendant's contractual duty to defend, indemnify, and hold harmless was triggered when RAKTL informed Plaintiff of its belief that Plaintiff was infringing RAKTL patents. Further, Plaintiff alleges that it has suffered a cognizable injury in fact because it "has been forced to expend its own resources investigating RAKTL's allegations and negotiating with RAKTL." (Compl. ¶ 36.) Plaintiff also argues that it "has incurred significant costs in connection with RAKTL's patent infringement claims and will incur additional costs related to investigating, defending against, and attempting to resolve RAKTL's patent infringement claims." (Id. ¶ 37.)

Whether Plaintiff's claims are presently ripe such that Plaintiff has standing to pursue them in this Court depends on whether Defendant's contractual duty to defend, indemnify, and hold Plaintiff harmless was triggered.2 The resolution of this issue depends on the meaning of the term "claim" in the parties' Agreement. The Agreement contains a choice of law provision designating the governing law as that of the state of Texas. (See Ex. A to Compl. ¶ 9(c).) Georgia honors such provisions unless "application of the chosen law would contravene the policy of, or...

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