Direct Techs. Int'l, Inc. v. Maxum Indem. Co.
| Decision Date | 26 November 2019 |
| Docket Number | 3:19-cv-81-MOC-DCK |
| Court | U.S. District Court — Western District of North Carolina |
| Parties | DIRECT TECHNOLOGIES INTERNATIONAL, INC., d/b/a DTI, Inc., Plaintiff, v. MAXUM INDEMNITY CO., Defendant. |
Daniel Stephen Trimmer, Skufca Law, Charlotte, NC, and Joseph Walker Futon, Martineau King PLLC, Charlotte, NC, Counsel for Direct Technologies International, Inc.
Sina Bahadoran and Evan Andronis, Clyde & Co. US LLP, Miami, FL, Counsel for Maxum Indemnity Company.
THIS MATTER comes before the Court on a Motion for Judgment on the Pleadings, filed by Plaintiff Direct Technologies International, Inc. ("DTI"). (Doc. No. 16). Also pending is a Motion for Summary Judgment by Defendant Maxum Indemnity Company ("Maxum"). (Doc. No. 22).
This is a dispute regarding insurance coverage. In the underlying action between Hyundai and DTI, Hyundai sued DTI for trademark infringement, alleging that DTI was selling counterfeit Hyundai branded parts. See Hyundai Motor Am., Inc. v. Direct Techs., Inc., No. 3:17cv732, 2018 WL 4110544 (W.D.N.C.). At issue in this action is whether an insurance policy that DTI purchased from Maxum requires Maxum to defend DTI in the underlying lawsuit with Hyundai, and whether the Maxum policy covers the claims raised in the underlying lawsuit. For the following reasons, the court finds that Maxum owes no coverage and is not obligated to defend or indemnify DTI in the underlying dispute with Hyundai.
Hyundai Motor Company manufactures, sells, and distributes branded products in the United States and around the world. Hyundai Motor America, Inc. is the exclusive distributor of Hyundai-branded parts in the United States.1 According to Hyundai, the only "genuine" Hyundai-branded parts and accessories are those manufactured by Hyundai-authorized suppliers and then distributed through a Hyundai-authorized chain of distributors to authorized Hyundai dealers.
On December 21, 2017, Hyundai filed a lawsuit against DTI in this Court, and that action is pending. DTI is a Florida corporation with its principal place of business in North Miami Beach, Florida. Hyundai alleges in the lawsuit that DTI is selling unauthorized Hyundai-branded parts of an inferior quality and falsely representing, on its website and elsewhere, that those parts are genuine and/or covered by the Hyundai warranty. The lawsuit centers on DTI's infringement of four of Hyundai's registered trademarks, in which Hyundai alleges that DTI intentionally and knowingly engaged in conduct that infringed on the Hyundai Marks. Hyundai asserts the following seven counts against DTI in the underlying lawsuit: trademark infringement under the Lanham Act; false designation of origin under the Lanham Act; trademark dilution under the Lanham Act; common law common law unfair competition; intentional interference with contractual relations; and a violation of the North Carolina Unfair and Deceptive Trade Practices Act.
On May 3, 2013, DTI applied for a surplus lines insurance policy from Maxum.2 On June 11, 2013, Maxum issued a Binder to DTI. The Binder contained an Intellectual Property Exclusion ("IP Exclusion"). Based on DTI's acceptance of the terms of the Binder, Maxum issued a surplus lines insurance policy to DTI, bearing Policy No. BDG 0066733-01, effective from June 7, 2013, until June 7, 2014. Like the Binder, the policy contained an IP Exclusion. The premium for the entire Commercial General Liability ("GCL") part of the policy was $771. DTI renewed the policy five more times. Each policy is materially identical and has the same IP Exclusion.3
The CGL Policy provides, in pertinent part, coverage for, among other things, "personal and advertising injury":
(Doc. No. 1-1, pp. 25, 31-33).
The Policy contains Form E706 (08/01/2007), the IP Exclusion, which provides:
Exclusion i. of COVERAGE B is deleted and replaced with the following:
This insurance does not apply to "personal and advertising injury" arising out of the infringement of patent, trademark, service mark, trade name, trade dress, trade secrets, copyright, title, or slogan, or other intellectual property rights.
In addition, the Policy contains Form E714 (08/01/2007), which provides:
The following exclusion is added to COVERAGE B:
This insurance does not apply to "personal and advertising injury" arising out of unfair competition.
(Doc. No. 1-1, p. 55/111).
On February 15, 2019, DTI filed this breach of contract and declaratory judgment action against Maxum, seeking an order from the Court determining DTI's rights under the insurance policy issued by Maxum. In the Complaint, DTI contends that the policy provides coverage, both for defense and indemnity, for damages in the underlying lawsuit by Hyundai against DTI based on "personal and advertising injury" arising out of DTI's business, including DTI's use of Hyundai's advertising idea in DTI's advertisement or DTI's alleged infringing upon Hyundai's copyright, trade dress, or slogan in DTI's advertisements. Maxum has refused to defend or indemnify DTI in the underlying suit. DTI filed a motion for judgment on the pleadings on May 24, 2019. Maxum filed a motion for summary judgment on June 28, 2019, arguing that, under the policy's exclusions, it is not required to defend or indemnify DTI in the underlying action.
As noted, DTI has filed a motion for judgment on the pleadings, and Maxum has filed a motion for summary judgment.
A Rule 12(c) motion for judgment on the pleadings is subject to the same standards as a Rule 12(b)(6) motion to dismiss for failure to state a claim. Portales Place Prop., LLC v. Guess, No. 3:08CV143, 2009 WL 112847, at *1 (W.D.N.C. Jan. 15, 2009) (citing Burbach Broad. Co. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002) ). When faced with a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must accept as true all well-pleaded allegations and view the complaint in the light most favorable to the nonmoving party. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). The Court "assume[s] the[ ] veracity" of these factual allegations, and "determine[s] whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Thus, a "complaint may proceed even if it strikes a savvy judge that actual proof of [the facts alleged] is improbable, and that a recovery is very remote and unlikely." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotation marks and citation omitted). However, the Court "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. Partnership, 213 F.3d 175, 180 (4th Cir. 2000).
Summary judgment shall be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). A factual dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party."...
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