Hartford Fire Ins. Co. v. Vita Craft Corp.

• Decision Date: 03 December 2012
• Docket Number: Civil Action No. 10–2637–KHV.
• Parties: HARTFORD FIRE INSURANCE CO., Plaintiff/Counterclaim Defendant, v. VITA CRAFT CORPORATION, Defendant/Counterclaim Plaintiff.
• Court: U.S. District Court — District of Kansas

911 F.Supp.2d 1164

HARTFORD FIRE INSURANCE CO., Plaintiff/Counterclaim Defendant,

v.VITA CRAFT CORPORATION, Defendant/Counterclaim Plaintiff.

Civil Action No. 10–2637–KHV.

United States District Court, D. Kansas.

Dec. 3, 2012.

Kevin D. Brooks, John G. Schultz, Franke Schultz & Mullen, PC, Kansas City, MO, Perry M. Shorris, Lewis Brisbois Bisgaard & Smith, LLP, Chicago, IL, for Plaintiff/Counterclaim Defendant.

Kimberly K. Winter, Michael J. Abrams, Lathrop & Gage LLP, Kansas City, MO, for Defendant/Counterclaim Plaintiff.

MEMORANDUM AND ORDER

KATHRYN H. VRATIL, District Judge.

Hartford Fire Insurance seeks a declaratory judgment that it had no duty to defend or to indemnify its insured, Vita Craft Corporation, for claims which Thermal Solutions, Inc. asserted against Vita Craft in underlying litigation. Vita Craft brings counterclaims for declaratory judgment, breach of contract and breach of the duty of good faith and fair dealing. This matter is before the Court on Vita Craft Corporation's Motion For Summary Judgment (Doc. # 51) and [Hartford's] Motion For Summary Judgment (Doc. # 53), both filed May 18, 2012. For reasons set forth below, the Court finds that Vita Craft's motion should be sustained in part and that Hartford's motion must be overruled.

Summary Judgment Standards

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. SeeFed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538–39 (10th Cir.1993). A factual dispute is “material” only if it “might affect the outcome of the suit under the governing law.” Liberty Lobby, 477 U.S. at 248, 106 S.Ct. 2505. A “genuine” factual dispute requires more than a mere scintilla of evidence. Id. at 252, 106 S.Ct. 2505.

The moving party bears the initial burden of showing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Hicks v. City of Watonga, 942 F.2d 737, 743 (10th Cir.1991). Once the moving party meets its burden, the burden shifts to the nonmoving party to demonstrate that genuine issues remain for trial “as to those dispositive matters for which it carries the burden of proof.” Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir.1991). The nonmoving party may not rest on its pleadings but must set forth specific facts. Applied Genetics, 912 F.2d at 1241.

The Court must view the record in a light most favorable to the party opposing a motion for summary judgment. Deepwater Invs., Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir.1991). It may grant summary judgment if the nonmoving party's evidence is merely colorable or is not significantly probative. Liberty Lobby, 477 U.S. at 250–51, 106 S.Ct. 2505. “In a response to a motion for summary judgment, a party cannot rely on ignorance of facts, on speculation, or on suspicion, and may not escape summary judgment in the mere hope that something will turn up at trial.” Conaway v. Smith, 853 F.2d 789, 794 (10th Cir.1988). Essentially, the inquiry is “whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law.” Liberty Lobby, 477 U.S. at 251–52, 106 S.Ct. 2505.

Factual Background

The following facts are uncontroverted or deemed admitted. Where disputed, each party's factual contention is stated.

I. Underlying Lawsuit

Thermal Solutions, Inc. (“TSI”) innovates and patents new products, then contracts with others to manufacture its patented products, or licenses to others the right to do so. TSI licensed to Imura International U.S.A., Inc. (“II–USA”) the exclusive right to distribute and sell certain cookware that incorporated Radio Frequency Identification (“RFID”) technology. Vita Craft is a wholly-owned subsidiary of II–USA. Mamoru Imura is CEO and president of Vita Craft.

On May 9, 2008, TSI filed suit against II–USA, Vita Craft and Imura. See Thermal Solutions, Inc. v. Imura Int'l U.S.A, Inc., Vita Craft Corp. & Mamoru Imura, Case No. 08–cv–2220–JWL (the “underlying lawsuit” or the “TSI lawsuit”). On July 11, 2008, TSI filed a first amended complaint (the “underlying complaint”) which asserted seven counts.¹ Count I sought a declaration that Imura's patent on “radio frequency identification controlled heatable objects,” U.S. Patent No. 7,157,675, is invalid. Counts II, III and VII alleged breach of contract.² Count IV alleged that Vita Craft and Imura infringed TSI patents by manufacturing and selling TSI technology without authorization. Count V alleged misappropriation of trade secrets.³ Count VI alleged a common law claim for unfair competition. The underlying complaint did not contain separate counts which sought recovery for libel, slander or disparagement of goods, products and/or services. Each count, however, incorporated the allegations that Vita Craft and Imura engaged in a scheme to damage and injure TSI by spreading false rumors regarding one of TSI's licensees.

On August 20, 2010, the Honorable John W. Lungstrum granted summary judgment to all defendants on TSI's claims for unfair competition, misappropriation of trade secrets and breach of contract.⁴ As a result, only two TSI claims remained in the underlying lawsuit: Count I, which sought a declaration that Imura's U.S. Patent No. 7,157,675 was invalid and Count IV, which alleged infringement of TSI's patent. On March 9, 2012, Judge Lungstrum granted defendants summary judgment on those claims. On March 19, 2012, Judge Lungstrum realigned the parties for purposes of trial on defendants' counter-claim, in which II–USA and Vita Craft alleged that three TSI patents were unenforceable because of inequitable conduct before the United States Patent and Trademark Office. After a bench trial, Judge Lungstrum granted judgment to TSI on that counterclaim. See Memorandum And Order (Doc. # 434) filed April 24, 2012 in Case No. 08–cv–2220–JWL.

On July 20, 2012, Judge Lungstrum granted TSI leave to assert a claim against II–USA and Vita Craft for specific performance of one provision of two contracts between the parties. The parties tried that claim to Judge Lungstrum on September 11 and 12, 2012. On September 28, 2012, Judge Lungstrum awarded TSI judgment on the claim for specific performance and ordered II–USA and Vita Craft to return specific confidential information to TSI on or before October 26, 2012.

II. The Insurance Policies

Effective December 31, 2003 through December 31, 2007, Hartford issued successivegeneral liability policies to Vita Craft as named insured and Imura as CEO and president of Vita Craft (collectively, “the policies”). See Pretrial Order (Doc. # 45) filed April 24, 2012 ¶ 4; Memorandum In Support Of Vita Craft Corporation's Motion For Summary Judgment (Doc. # 52) filed May 16, 2012 ( Vita Craft's Memorandum ), Ex. A. Effective December 31, 2003 through December 31, 2007, Hartford also issued umbrella policies to Vita Craft and Imura as CEO and president of Vita Craft, (collectively, “the umbrella policies”). See Pretrial Order (Doc. # 45), ¶ 4; Vita Craft's Memorandum (Doc. # 52), Ex. B.

The policies required Hartford to defend and indemnify third-party claims for “personal and advertising injury” against Vita Craft as follows:

[Hartford] will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. [Hartford] will have the right and duty to defend the insured against any “suit” seeking those damages....” ⁵

Doc. # 52, Ex. A. The policies define “personal and advertising injury” to include

injury ... arising out of one or more of the following offenses:

* * *

d. oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

Id. The policies exclude liability for breach of contract and infringement of intellectual property rights, as follows:

2. Exclusions

This insurance does not apply to:

* * *

f. Breach Of Contract

“Personal and advertising injury” arising out of a breach of contract, except an implied contract to use another's “advertising idea” in your “advertisement” or on “your web site”;

* * *

I. Infringement Of Intellectual Property Rights

“Personal and advertising injury” arising out of any violation of any intellectual property rights such as copyright, patent, trademark, trade name, trade secret, service mark or other designation of origin or authenticity. However, this exclusion does not apply to infringement, in your “advertisement” or on “your web site”, of:

(1) copyright;

(2) slogan, unless the slogan is also a trademark, trade name, service mark or other designation of origin or authenticity; or

(3) title of any literary or artistic work.

Id.

Hartford's umbrella policies incorporate the definition of “personal and advertising injury” contained in the primary policies, and provide as follows:

A. Umbrella Liability Insurance

We will pay those sums that the “insured” becomes legally obligated to pay as “damages” in excess of the “underlying insurance,” or of the “self-insured retention” when no “underlying insurance” applies, because of “bodily injury,” “property damage,” or “personal and advertising injury” to which this insurance applies caused by an “occurrence”.

B. Exclusions

This policy does not apply to:

* * *

4. Personal And Advertising Injury

This policy...