PJ Noyes Co. v. American Motorists Ins. Co.

• Decision Date: 12 July 1994
• Docket Number: No. C-93-103-L.,C-93-103-L.
• Citation: 855 F. Supp. 492
• Parties: The P.J. NOYES COMPANY v. AMERICAN MOTORISTS INSURANCE COMPANY.
• Court: U.S. District Court — District of New Hampshire

855 F. Supp. 492

The P.J. NOYES COMPANY v. AMERICAN MOTORISTS INSURANCE COMPANY.

No. C-93-103-L.

United States District Court, D. New Hampshire.

March 29, 1994.

Order Denying Reconsideration or Clarification July 12, 1994.

Eileen Fox, Steven E. Grill, Devine, Millimet & Branch, PA, Manchester, NH, for plaintiff.

Gary M. Burt, Wiggin & Nourie, Manchester, NH, for defendant.

Order

LOUGHLIN, Senior District Judge.

Before the court is the plaintiff's Motion for Partial Summary Judgment (doc. # 8). For the reasons stated below the motion is granted in part and denied in part.

Background

The plaintiff, P.J. Noyes Company Inc. ("Noyes"), is a New Hampshire corporation engaged in the manufacture and distribution of a variety of products including food pellets for laboratory animals. On May 10, 1991, Holton Industries filed suit against Noyes in the United States District Court for the District of New Jersey. The complaint alleged that Noyes intentionally infringed upon a trademark held by Holton by using the designation "Dustfree Precision Pellets" for its own product. Holton claimed that this practice constituted false designation of origin and misrepresentation in violation of 15 U.S.C. § 1125, trademark infringement in violation 15 U.S.C. § 1114 and common law trademark infringement and unfair competition.

Noyes carried an American Motorists Insurance Company ("AMICO") general liability insurance policy from March 17, 1991 until March 17, 1992. The policy provides that AMICO will pay "those sums which the insured becomes legally obligated to pay as damages because of `personal injury' or `advertising injury' to which this coverage part applies." See Plaintiff's Exhibit B, p. 4. The policy further provides that AMICO has the duty to defend any suit for damages.

On November 5, 1991, Noyes notified AMICO of the Holton suit and requested that AMICO defend the suit. AMICO refused and on March 8, 1993, Noyes filed this action seeking a declaration that AMICO is obligated to defend Noyes in the underlying action and damages for breach of contract.

Discussion

A. Summary Judgment Standard

Summary judgment is proper only if, viewing the record in the light most favorable to the non-moving party, the documents on file disclose no genuine issue of material fact. The moving party is then entitled to judgment as a matter of law. Oliver v. Digital Equipment Corp., 846 F.2d 103, 105 (1st Cir.1988); Fed.R.Civ.P. 56(c). "Only disputes over facts that might affect the outcome of the suit" are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute over a material fact is genuine if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id.; Oliver, 846 F.2d at 105. The moving party must initially "demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Once the moving party has made the required showing, the adverse party must "go beyond the pleadings" and designate specific facts to demonstrate the existence of genuine issue for trial. Id. at 324, 106 S.Ct. at 2553; Oliver, 846 F.2d at 105; Fed.R.Civ.P. 56(e).

B. Obligation to Defend Underlying Action

In New Hampshire, the insurer is required to provide a defense for the insured for any suit that comes within the terms of the policy, even though the suit may ultimately be without merit. United States Fidelity & Guaranty Co. v. Johnson Shoes, Inc., 123 N.H. 148, 152, 461 A.2d 85 (1983). The insurer's obligation to defend is determined by whether the pleadings sufficiently state facts which bring the suit within the express terms of the policy. Id. If the facts alleged in the complaint do not fall within the express terms of the policy yet do not clearly preclude coverage, the court may look beyond the pleadings. See Happy House Amusement v. New Hampshire Insurance Company, 135 N.H. 719, 722, 609 A.2d 1231 (1992). Any doubt must be resolved in favor of the insured. Id.

Whether a trademark infringement constitutes an advertising injury has not been addressed by the New Hampshire courts. In cases which have addressed this issue, the decision has turned on the connection between the infringement and advertising activity. See J.A. Brundage Plumbing & Roto-Rooter, Inc. v. Massachusetts Bay Ins., Co., 818 F.Supp. 553 (W.D.N.Y.1993) (servicemark infringement by use of mark in connection with advertising held to be advertising injury); Sentry Insurance v. R.J. Weber Co., 2 F.3d 554 (5th Cir.1993) (copying and selling portion of company's lists did not constitute sufficient connection between infringement and advertising).

AMICO's obligation to defend rests upon a determination of whether the facts alleged in the complaint fall within the definition of an advertising injury. In their complaint, Holton alleged three counts: false designation of origin and misrepresentation in violation of 15 U.S.C. § 1125; trademark infringement in violation of 15 U.S.C. § 1114; and common law trademark infringement and unfair competition. Holton alleged that Noyes "intentionally sought to trade upon the well-known reputation and good will of Holton's Trademark Right and to pass off its products as those of Holton." See Defendant's Exhibit B. Holton requested the New Jersey District Court to order Noyes to relinquish all "packages, literature, labels, advertising and other materials" which infringe upon Holton's trademark. AMICO argues that these actions do not constitute an advertising injury within the meaning of the policy.

The AMICO policy defines advertising injury as:

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

b. Oral or written publication of material that violates a person's right of privacy;

c. Misappropriation of advertising ideas or style of doing business; or

d. Infringement of copyright, title or slogan.

See Plaintiff's Exhibit B at 9.

The facts alleged in the complaint, are clearly not encompassed within subparts a or b of the definition of advertising injury. However, the allegation that Noyes used the name "Dustfree Precision Pellets" in their advertising, literature and packaging, arguably falls within the ambit of misappropriation of advertising ideas or style of doing business or infringement of a title or slogan.

AMICO argues that since the complaint failed to allege specific facts concerning Noyes' advertising activities, the action does not fall within the definition of advertising injury. AMICO asserts that the copy of an advertisement for "Dustfree Precision Pellets" attached to the complaint is insufficient to demonstrate an advertising injury. Instead, AMICO urges the court to view the action strictly as one for trademark infringement.

The court finds AMICO's argument unpersuasive. Although the underlying action is one for trademark infringement, the infringement occurred as a result of Noyes using the term "Dustfree Precision Pellets" in their advertisements. But for the use of the term in the packaging, literature and advertisements, there would have been no trademark infringement. Accordingly, the court finds that the underlying suit comes within the terms of the policy.

C. Policy Exclusions

The AMICO policy excludes advertising injuries:

1) Arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity;

2) Arising out of oral or written publication of material whose first publication took place before the beginning of the policy period;

3) Arising out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured ...

See Plaintiff's Exhibit B at 4.

AMICO argues that there is a material issue of fact as to whether the action against Noyes is for advertising published prior to the issuance of the policy and thus is excluded. In support of their assertion, AMICO submitted the Affidavit of David C. Hill, President of Noyes. In his affidavit, David Hill stated that Noyes first began using the designation "dustfree" and "dustless" in 1986 to describe their food pellets. AMICO asserts that the use of the term "dustfree" in 1986 raises a genuine issue of fact as to whether Noyes was infringing on the Holton trademark prior to the inception of the AMICO policy. The court agrees.

The affidavit of David Hill stated that Noyes began using the designation "dustfree" in 1986. Noyes later filed suit against Holton in May 1987 alleging trademark infringement and unfair competition. Holton filed a counterclaim seeking to enjoin Noyes from using the designation "dustfree". The affidavit stated that Noyes continued using the designation in reliance on a settlement agreement dated April 20, 1989. The settlement agreement did not restrict the use of the term "dustfree" and resolved all outstanding claims of the parties prior to the date of the agreement.

In reliance on the settlement agreement, Noyes used the designation "dustfree". However on June 7, 1990, Noyes received a letter from Holton's counsel which stated that use of the term "Dustfree Precision Pellets" was in violation of the Holton trademark. This dispute lead to Holton filing the underlying suit in May 1991. It is not clear from the complaint whether Holton based that action on publication of material using the designation "dustfree" which was circulated prior to March 17, 1991. Accordingly, the court finds that a genuine issue of material fact exists.

AMICO also asserts that the underlying suit is excluded from coverage on the grounds that Noyes was aware of the trademark infringement at the time the AMICO policy was issued. In support of this assertion AMICO cites the deposition of Robert Ballard, attorney for Holton in the previous litigation. In his deposition, Mr. Ballard...