Dish Network Corp. v. Arch Specialty Ins. Co.

• Decision Date: 19 August 2010
• Docket Number: Civil Action No. 09-cv-00447-JLK
• Citation: 734 F.Supp.2d 1173
• Parties: DISH NETWORK CORPORATION, and Dish Network LLC, Plaintiffs, v. ARCH SPECIALTY INSURANCE COMPANY, Arrowood Indemnity Company, Travelers Indemnity Company of Illinois, XL Insurance America, Inc., and National Union Fire Insurance Company of Pittsburgh, PA, Defendants.
• Court: U.S. District Court — District of Colorado

734 F.Supp.2d 1173

DISH NETWORK CORPORATION, and Dish Network LLC, Plaintiffs,

v.ARCH SPECIALTY INSURANCE COMPANY, Arrowood Indemnity Company, Travelers Indemnity Company of Illinois, XL Insurance America, Inc., and National Union Fire Insurance Company of Pittsburgh, PA, Defendants.

Civil Action No. 09-cv-00447-JLK.

United States District Court,

D. Colorado.

Aug. 19, 2010.

Todd Estes MacKintosh, MacKintosh Law Office, LLC, Denver, CO, Lee M. Epstein, Fried & Epstein LLP, Philadelphia, PA, for Plaintiffs.

Robert James Zavaglia, Jr., Thomas Neville Alfrey, Treece, Alfrey, Musat & Bosworth, P.C., Kevin F. Amatuzio, Montgomery, Kolodny, Amatuzio & Dusbabek, LLP, Lisa F. Mickley, Hall & Evans, LLC, Della S. Nelson, John W. Grund, Grund, Dagner & Nelson, P.C., Denver, CO, Roger K. Heidenreich, Deborah C. Druley, Sonnenschein Nath & Rosenthal, LLP, St. Louis, MO, John C. Parks, Laurence Murray McHeffey, McElroy Deutsch Mulvaney & Carpenter, LLP, Greenwood Village, CO, George S. McCall, Sedgwick Detert Moran & Arnold, LLP, Dallas, TX, Richard H. Nicolaides, Jr., Daniel I. Graham, Jr., Bates & Carey, LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

Plaintiffs, DISH Network Corporation and DISH Network LLC (formerly known as EchoStar Communications Corporation and EchoStar Satellite LLC; collectively "DISH") have filed suit against Arch Speciality Insurance Company ("Arch"), Arrowood Indemnity Company ("Arrowood"), Travelers Indemnity Company ("Travelers"), XL Insurance America ("XL"), and National Union Fire Insurance Company ("National Union") (collectively "Defendant Insurers") seeking a declaratory judgment that Defendant Insurers are obligated to defend DISH in a patent infringement action pending against them in the Central District of California ("Katz lawsuit").¹ DISH also seeks a declaratory judgment that Defendant Insurers are obligated to indemnify DISH for any settlement or judgment paid in connection with the Katz lawsuit.² Defendant Insurers contest whether EchoStar Satellite LLC is covered under the policies sold to Plaintiffs, and in any event, whether the policies cover the Katz lawsuit at all. Specifically, the parties dispute whether the insurance contract provisions allowing coverage for "advertising injury" implicate Defendant Insurers' duties to defend and indemnify.

The parties agreed to simplify the case by proceeding in multiple phases, first addressing whether the Katz lawsuit triggered the Defendant Insurers' duty to defend DISH. See Scheduling Order, Doc. 51 at 22. Defendant Insurers have filed summary judgment motions arguing that they are under no duty to defend DISH in the Katz lawsuit. I have considered the parties' arguments in support of and in opposition to these motions. Defendant Insurers have no duty to defend DISH against the patent infringement claims contained in the Katz lawsuit and are, as a result, entitled to summary judgment. In the absence of a duty to defend, Defendant Insurers have no duty to indemnify DISH and cannot have breached any contractual duties. Defendant Insurers' Motions for Summary Judgment, Docs. 62, 65, 66, 68, and 72 are GRANTED.

JURISDICTION AND VENUE

Plaintiffs and Defendants are citizens of different states for purposes of establishingdiversity jurisdiction.³ 28 U.S.C. § 1332(c)(1). Additionally, the amount in controversy in this case exceeds the $75,000 statutory threshold. 28 U.S.C. § 1332(a). Accordingly, jurisdiction in the United States District Court is proper. Further, because a significant part of the events or omissions giving rise to the claim for insurance coverage occurred in the District of Colorado and the Defendants "reside" in this judicial district for venue purposes, venue in the District of Colorado is proper. 28 U.S.C. § 1391(a)(2).

FACTS

On June 14, 2007, Ronald A. Katz Technology Licensing, L.P. ("Katz") sued EchoStar Satellite Communications, LLC for patent infringement. The Katz plaintiff filed a "Complaint for Patent Infringement and Demand for Jury Trial" and identified one count of "Patent Infringement" as the sole cause of action. In its amended complaint filed August 28, 2008, Katz alleges EchoStar "directly and contributorily infringed, and induced others to infringe, one or more claims of each of the patents [in suit] by making, using, offering to sell, and/or selling within the United States automated telephone systems, including without limitation the DISH Network customer service telephone system, that allow their customers to perform pay-per-view ordering and customer service functions over the telephone." ⁴

According to the Katz amended complaint, Katz acquired from Ronald A. Katz the rights to his entire "interactive call processing" patent portfolio in 1994, and twenty-three of these patents are identified as infringing patents-in-suit. Katz describes the patents-in-suit as having multiple fields of use, including but not limited to financial services call processing, automated securities transactions, automated credit card authorization services, automated wireless telecommunication services and support, automated health care services, and product and service support. DISH asserts claims in some of the patents in suit are relevant to the Defendant Insurers' duty to defend DISH. For example, Claim 219 of patent-in-suit # 5828734 states that the patent claims "[a] telephone interface system ... wherein said selective operating format involves advertising a product for sale."

Upon being served with the Katz complaint, DISH tendered the matter to Defendant Insurers. From August 1, 2001, through August 1, 2004, Defendant Insurers issued commercial general liability coverage forms ("CGL's") to EchoStar Communications Corporation, DISH's predecessor, that provided coverage against "advertising injury" claims, subject to certain exceptions and exclusions. The Arrowoodand Travelers policies provided primary coverage while the Arch, National Union, and XL policies provided protection for excess liability, which type of coverage is available only if the insured's primary coverage has been exhausted.

LEGAL STANDARDS AND ANALYSIS

A. Summary Judgment

Summary judgment is appropriate only if 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(c)(2); Adamson v. Multi. Cmty. Diversified Servs., Inc., 514 F.3d 1136, 1145 (10th Cir.2008). A fact is material if it could affect the outcome of the suit under governing law; a dispute of fact is genuine if a rational jury could find for the nonmoving party on the evidence presented. Id.

As the moving parties, Defendant Insurers bear the burden of demonstrating that no genuine issue of material fact exists. Id. at 1145. Because they do not bear the ultimate burden of persuasion at trial, however, they may satisfy this burden by demonstrating a lack of evidence for an essential element of DISH's claim. Id. I do not weigh the evidence in deciding whether Defendant Insurers have carried their burden. Instead I draw all reasonable inferences from it in the light most favorable to DISH. Id. Neither unsupported conclusory allegations nor mere scintilla of evidence, however, are sufficient to create a genuine dispute of material fact on summary judgment. See MacKenzie v. City & County of Denver, 414 F.3d 1266, 1273 (10th Cir.2005). If Defendant Insurers carry their burden under Rule 56(c), DISH must demonstrate more than "some metaphysical doubt" as to the material facts to survive summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

B. Choice of Law

Because I exercise jurisdiction pursuant to the diversity statute, the substantive law of Colorado controls. Erie R.R. v. Tompkins, 304 U.S. 64, 78-79, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Blackhawk-Central City Sanitation Dist. v. Am. Guar. & Liab. Ins. Co., 214 F.3d 1183, 1188 (10th Cir.2000) (citing Blanke v. Alexander, 152 F.3d 1224, 1228 (10th Cir.1998)). Therefore, Colorado choice-of-law rules apply.

In contract actions, Colorado applies the "most significant relationship" test articulated in Chapter 8 of the Restatement (Second) of Conflict of Laws (1971). See ITT Specialty Risk Servs. v. Avis Rent A Car Sys., 985 P.2d 43, 47 (1998) (citing Wood Bros. Homes, Inc. v. Walker Adjustment Bureau, 198 Colo. 444, 601 P.2d 1369 (1979)). Because there is no choice of law provision in the contested insurance policies, I apply the law of the state with the most significant relationship to the transaction at issue and the parties. Restatement (Second) of Conflict of Laws § 188 (1971). In making this determination, I consider: (a) the place of contracting, (b) the place the contract was negotiated, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicile, residence, nationality, place of incorporation, and place of business of the parties. Id.

In the instant case, each of the contested policies was negotiated and delivered in Colorado. See National Union Policy, Doc. 62-3 at 2; Arrowood Policy, Doc. 65-3 at 4; Traveler's Policy, Doc. 66-1 at 1; XL Policy, Doc. 68-1 at 1; and Arch Policy, Doc. 72-1 at 2. Although the underlying action has been filed in California, the bulk of performance was in Colorado; DISH paid their premiums and maintain their principal place of business in Colorado. Furthermore, the parties are residents of or incorporated in multiple states; there isno one jurisdiction with an overriding interest in this litigation. Colorado is the state with the most significant relationship to the transactions at issue and the parties, and I apply Colorado law to this dispute.

C. Determining the Duty to Defend ⁵

As discussed above, Defendant Insurers must demonstrate a lack of evidence for an essential element of DISH's claim to prevail on summary judgment. DISH, for its part, "need only show that the underlying claim may...