Ciber, Inc. v. ACE Am. Ins. Co.

• Decision Date: 09 June 2017
• Docket Number: Civil Action No. 16–cv–1189–WJM–NYW
• Parties: CIBER, INC., Plaintiff, v. ACE AMERICAN INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Colorado

261 F.Supp.3d 1119

CIBER, INC., Plaintiff,

v.ACE AMERICAN INSURANCE COMPANY, Defendant.

Civil Action No. 16–cv–1189–WJM–NYW

United States District Court, D. Colorado.

Signed June 9, 2017

Troy B. Froderman, Jonathan G. Brinson, Polsinelli PC, Phoenix, AZ, Stacy Anne Carpenter, Polsinelli PC, Denver, CO, for Plaintiff.

Christopher S. Clemenson, Cozen O'Connor, Denver, CO, Richard Charles Mason, Cozen O'Connor, Philadelphia, PA, for Defendant.

ORDER ON CROSS–MOTIONS FOR JUDGMENT ON THE PLEADINGS

Judge William J. Martínez

Plaintiff Ciber, Inc. ("Ciber") brings this action against Defendant ACE American Insurance Company ("ACE") asserting claims for declaratory relief, breach of contract, breach of the implied covenant of good faith and fair dealing, unreasonable delay or denial of benefits, and punitive damages. (ECF No. 37–1 ¶ 7.) All claims arise from ACE's refusal to provide Ciber with a defense in a previous lawsuit. (Id. ¶¶ 18, 60; ECF No. 40 ¶¶ 18, 60.)

This matter is before the Court on the Parties' Cross–Motions for Judgment on the Pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, in which the Parties dispute coverage for the underlying lawsuit, thus affecting ACE's duty to defend. (ECF Nos. 47, 48.) For the reasons set forth below, Defendant ACE's Motion for Judgment on the Pleadings (ECF No. 47) is granted and Plaintiff Ciber's Motion for Judgment on the Pleadings (ECF No. 48) is denied.

I. BACKGROUND

A. The New Orleans Action¹

In 2007, Active Solutions, LLC and Southern Electronics Supply, Inc. (hereinafter "Active–Southern") initiated an action in Louisiana state court against Ciber and other defendants, asserting: breach of contract, tortious interference, unfair trade practices, promissory estoppel/detrimental reliance, exemplary damages, civil conspiracy, and unjust enrichment. (ECF No. 37–6 at 20–36.)

The factual allegations in Active–Southern's "Fourth Amended and Supplemental Petition" stem from a 2003 "shootout at a car wash in New Orleans." (Id. at 6.) The shootout was captured on videotape by a privately-owned surveillance camera, the footage was given to law enforcement, and was subsequently used as a critical tool in their pursuit of the alleged suspects. (Id. ) As a result, the Mayor of New Orleans issued a request for proposal ("RFP") to the private sector, inviting bids to develop and implement a wireless surveillance system that could "provide realtime coverage of the immediate areas where the cameras were placed to the local district police stations." (Id. ) Active–Southern collaborated to develop a prototype surveillance system and was "selected as the winning responsive bidder [receiving] the contract to install the cameras" ("July 2004 Contract"). (Id. at 7.) The July 2004 Contract "specified that a minimum of two hundred forty cameras would be purchased by the city during the term of the contract" and "the city agreed not to disclose [Active–Southern's] technology[.]" (Id. )

Active–Southern alleged that after the July 2004 Contract was executed, New Orleans city employees approached them and "communicated very clearly that they wanted their own private companies ... to be employed as subcontractors under the contract." (Id. at 9.) Active–Southern declined this request. (Id. ) However, Active–Southern further alleged that it was common practice for the Mayor's Office of Technology ("MOT") "to hire an outside contractor for the City's technology work ... and then require that contractor to subcontract the work back to companies owned or managed by the city employees." (Id. at 9–10.) Ciber became the outside contractor hired by the MOT. (Id. at 10.) Active–Southern alleged that "Ciber ... intentionally and in concert with the city employee defendants and their companies ... set out to destroy [Active–Southern] by stopping the authorization of [Active–Southern's] work, failing to order cameras and failing to authorize payment for cameras such that the contract minimums would be maintained and the extensive research, testing and development costs could not be covered." (Id. at 11, 28.)

Active–Southern also alleged that Ciber and the other defendants shared confidential information regarding the surveillance system provided to them, and ultimately copied and manipulated the system. (Id. at 30, 35.) Active–Southern specifically alleged that the defendants "knowingly acted intentionally and in concert to conspire to (1) manufacture a copy of [Active–Southern's] system, (2) sell that system to Dell, who would relabel it ‘networking equipment’ ... [and] (3) illegally sell that system [throughout Louisiana]." (Id. at 35.)

Ultimately, Ciber and Active–Southern settled. (ECF No. 54 at 10.)

B. The Baton Rouge Action²

In 2009, Camsoft Data Systems, Inc. ("Camsoft") initiated an action in Louisiana state court naming as defendants Ciber, Active–Southern, and several of the other defendants named in the New Orleans Action. (ECF No. 37–4 at 3–4.)³ Camsoft asserted claims for: "conspiracy to commit intentional torts, including fraud, tortious interference with contract, and conversion of Camsoft's confidential business information," violation of Louisiana's Uniform Trade Secrets Act, conspiracy to violate Louisiana's Antitrust Act, and conspiracy to violate Louisiana's Unfair Trade Practices Act. (Id. at 16–27.)

Camsoft alleged that Active–Southern approached Camsoft and asked if it "would be interested in joining [them] to develop a wireless surveillance system for" their RFP bid. (Id. at 5.) Thus, Camsoft asserted that it was part of the team that developed the surveillance system for the City of New Orleans. (Id. at 5–6.) However, Camsoft alleged that prior to Active–Southern winning the July 2004 Contract, Active–Southern had a "secret dinner meeting" with city-employee defendants (the same defendants alleged in the New Orleans Action) and entered into a "kickback contract" whereby the city-employees would ensure that Active–Southern would win the city's contract in exchange for the city employee defendants taking over Camsoft's "wireless network integrator role on both the New Orleans project, as well as all future crime camera system sales outside of New Orleans[.]" (Id. at 6–7.)

As for Ciber's participation, Camsoft alleged that "the city defendants entered into another similar kickback contract with Ciber" in which Ciber agreed to steer additional subcontractor work to city employee controlled companies. (Id. at 8–9.) Accordingly, Camsoft alleged that "Ciber and its subcontractors (i.e. , the city [employee] defendants) engaged in the knowing misappropriation and theft of Camsoft's confidential technical and business information." (Id. at 10.)

C. Tender of Defense to ACE

On October 15, 2015, Ciber provided notice to ACE—its insurer—of the Baton Rouge Action and informed ACE that it believed it was entitled to indemnification for any liability. (ECF No. 37–1 ¶ 42; ECF No. 40 ¶ 42.) Despite Ciber's demand, on January 27, 2016, ACE wrote to Ciber "concerning its denial of coverage, including any obligation to defend[.]" (ECF No. 40 ¶ 60; see ECF No. 37–1 ¶ 60.) According to ACE, the policy only provided coverage for those claims first made during the policy period, which "incepted on July 1, 2009." (ECF No. 40 ¶¶ 111, 154.) Because, as ACE contends, the claim serving as the basis for the Baton Rouge Action was first made in 2007 (the year in which the New Orleans Action was commenced), prior to the inception of the subject policy, the Baton Rouge Action did not trigger coverage. (Id. ¶¶ 146, 155.)

D. The Policy

ACE issued a claims-made⁴ Digital and Technology Professional Liability Insurance Policy to Ciber, which was effective from July 1, 2009 to July 1, 2010 (the "Policy"). (ECF No. 37–2.) The Policy provides coverage for liability stemming from technology and internet errors and omissions, electronic media activities, and network operations security. (Id. at 3.) The Policy has a maximum $20,000,000 aggregate limit of liability. (Id. at 4.)

Under the Policy, ACE will provide coverage to Ciber for claims made against Ciber during the coverage period. (Id. at 6.) A "claim" means "a civil proceeding against any insured seeking monetary damages[.]" (Id. at 7.) The Policy provides, however: "[a]ll claims arising out of the same wrongful act and all interrelated wrongful acts of the insureds shall be deemed to be one claim, and such claim shall be deemed to be first made on the date the earliest of such claims is first made, regardless of whether such date is before or during the policy period." (Id. at 18 (emphasis added).) In other words, if more than one claim involving interrelated wrongful acts is made against Ciber, the multiple claims are considered a single claim made on the date on which the earliest of the claims was made. The Policy expansively defines "interrelated wrongful acts" as "all wrongful acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause or series of related facts, circumstances, situations, events, transactions or causes." (Id. at 9.)

E. The Instant Action

As a result of ACE's refusal to defend Ciber against the Baton Rouge Action or otherwise provide coverage, Ciber filed the instant action against ACE seeking, in part, a declaratory judgment stating "(1) the Policy provides coverage for the [Baton Rouge Action], (2) ACE has a duty to reimburse Ciber for defense costs and fees incurred in defending the [Baton Rouge Action], (3) ACE ... breached its duty of good faith and fair dealing under the Policy, (4) ACE's conduct ... constituted a breach of contract, and (5) ACE's refusal to defend precludes ACE from denying coverage under the Policy." (ECF No. 37–1 at 17.)

On October 13, 2016, ACE filed an Answer and Counterclaim, seeking a contrary declaration, that "the Policy affords no coverage, including for any defense obligation, for Ciber's insurance claims relating to the Baton Rouge [Action], and that ACE is not liable for breach...