Premier Pools Mgmt. Corp. v. Colony Ins. Co.

• Decision Date: 25 July 2018
• Docket Number: No. 2:13-cv-02038-JAM-EFB,2:13-cv-02038-JAM-EFB
• Citation: 328 F.Supp.3d 1075
• Parties: PREMIER POOLS MANAGEMENT CORP., a Nevada Corporation, Plaintiff, v. COLONY INSURANCE COMPANY, a Virginia Corporation, Defendant.
• Court: U.S. District Court — Eastern District of California

328 F.Supp.3d 1075

PREMIER POOLS MANAGEMENT CORP., a Nevada Corporation, Plaintiff,

v.COLONY INSURANCE COMPANY, a Virginia Corporation, Defendant.

No. 2:13-cv-02038-JAM-EFB

United States District Court, E.D. California.

Signed July 25, 2018

Filed July 26, 2018

Reid A. Winthrop, Winthrop Law Group, Newport Beach, CA, Richard Lawrence Antognini, Law Offices of Richard L. Antognini, Lincoln, CA, for Plaintiff.

Marc Jeremy Feldman, Peter H. Klee, Sheppard Mullin Richter & Hampton LLP, San Diego, CA, Ray Tamaddon, Hinshaw & Culbertson, Los Angeles, CA, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

JOHN A. MENDEZ, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Plaintiff Premier Pools Management Corp. ("Plaintiff") brings this lawsuit against Defendant Colony Insurance Company ("Defendant") alleging that Defendant breached the parties' insurance agreement by declining to defend Plaintiff in a lawsuit brought against it by Premier Pools, Inc. ("PPI") in Texas state court (the "Texas Case"). See Second Amended Complaint ("SAC"), ECF No. 38-1. This Court granted Defendant's first summary judgment motion in April 2014. ECF No. 20. The Court reasoned that Plaintiff was not a named insured under the parties' insurance agreement's plain language and so Defendant had no duty to defend in the Texas Case. Id. at 8. In May 2016, the Ninth Circuit reversed. ECF No. 27 (the "Ninth Circuit Ruling"), 649 Fed. Appx. 490 (9th Cir. 2016).

After the Ninth Circuit mandate issued, Plaintiff filed its SAC in August 2017 and Defendant initially moved for judgment on the pleadings in January 2018. See ECF Nos. 38-1 and 45. After that motion was denied without prejudice for failing to meet and confer, Plaintiff filed its motion for partial summary judgment in April 2018. ECF No. 54; ECF No. 71 ("Pl. Mem."). Plaintiff seeks summary judgment on its first claim for declaratory relief, second claim for breach of insurance contract-duty to defend, and third claim for breach of insurance contract-duty to indemnify. Pl. Mem. Defendant opposed and filed a cross-motion for summary judgment as to all of Plaintiff's claims-the three claims Plaintiff moved on and also Plaintiff's claims for breach of the implied covenant of good faith and fair dealing and its claim for punitive damages. Def. Mem., ECF No. 74. Plaintiff opposed the cross-motion. Pl. Opp., ECF No. 75. The motions were heard on June 26, 2018.

II. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff entered into an insurance agreement with Defendant in 2010 (the "Policy"). The Pertinent policy language reads as follows:

"We will pay those sums that insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies.

We will have the right and duty to defend the insured against any ‘suit’ seeking those damages."

" ‘Personal and advertising injury means’ injury, including consequential ‘bodily injury’, arising out of one or more of the following offenses: ... Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services ... The use of another's advertising idea in your ‘advertisement’; or Infringing upon another's copyright, trade dress or slogan in your ‘advertisement.’ "

" ‘Advertisement’ means a notice that is broadcast or published to the general public or specific marketing segments about your goods, products or services for the purpose of attracting customers or supports."

See Insurance Policy No. AC800001A-2, Ex. 1 to SAC, ECF No. 38-1, at 29, 55-65; Insurance Policy No. AC800001A-3, Ex. 2 to SAC, ECF No. 38-1, at 95, 124-134. The Policy's coverage exclusions state, in relevant part:

"Knowing Violation Of Rights Of Another: ‘Personal and advertising injury’ caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury’."

"Material Published With Knowledge Of Falsity: ‘Personal and advertising injury’ arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity."

"Infringement Of Copyright, Patent, Trademark Or Trade Secret: ‘Personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in your ‘advertisement.’ However, this exclusion does not apply to infringement, in your ‘advertisement’, of copyright, trade dress or slogan."

Id.

A. The Texas Case-The First Trial

In July 2012, Premier Pools, Inc. ("PPI," with its principal place of business in Lewisville, Texas) filed its First Amended Petition ("FAP") in Texas state court against Plaintiff and Shan Pools, Inc. (Plaintiff's licensee incorporated in Allen, Texas), bringing claims for: (1) common law trade name infringement; (2) common law service mark infringement; (3) unfair competition; (4) infringement of Texas service mark; and (5) trade name and service mark dilution. SAC, ECF No. 38-1, Ex. 6, at 217-244.

The FAP includes the following relevant allegations:

"... I[n] 2011, Defendant Pools Management licensed Defendant Shan to use the name "Premier Pools and Spas" and began advertising Defendant Shan as its "Dallas/Fort Worth location on its website." FAP, ¶ 2.

"Defendants have taken advantage of Plaintiff's well known "Premier Pools" name and mark, and its reputation for providing services of the highest quality, to cause Plaintiff to lose business and harm its valuable reputation." FAP, ¶ 2.

"For over 22 years, the Dodds have built a favorable and valuable reputation for themselves in this geographic area under the trade name and service mark ‘Premier Pools’ [.]" FAP, ¶ 12.

"In early 2012, Defendant Pools Management blanketed the Dallas-Fort Worth market with advertising about ‘Premier Pools and Spas’ and its operations in Dallas, sending advertisements to homes all over the Dallas-Fort Worth area..." FAP, ¶ 21.

"Beyond all of the confusion that is being caused and the business that is being lost, Plaintiff's reputation and goodwill are being seriously harmed because Defendant Shan's work does not rise to the level of quality and professionalism that has defined Plaintiff's business." FAP, ¶ 34.

"A direct example of how Defendant Shan's work is tarnishing Plaintiff's reputation occurred in Flower Mound, when a city official, as a courtesy, called Plaintiff to ask if a pool that had been built in the area was Plaintiff's product, saying effectively that the pool that had been built was so deficient and in violation of the relevant code provisions that it could not have been Plaintiff's work." FAP, ¶ 34.

"By using the name ‘Premier Pools and Spas,’ Defendant Shan has unfairly competed with Plaintiff by appropriating Plaintiff's valuable goodwill and business and injuring Plaintiff thereby. FAP, ¶ 50.

On March 5, 2013, four days after receiving Plaintiff's tender of the Texas state court case, Colony's adjuster, Becky Vogel ("Vogel") notified Plaintiff's founder Paul Porter ("Porter") by email that Defendant was "in receipt of the notice of the lawsuit in Texas alleging trademark infringement. Colony will investigate this matter under a full and complete reservation of rights as afforded by the policy." Pl. Notice of Lodgment ("PNOL"), ECF No. 71-5, Ex. 2, ECF No. 71-7. Vogel also asked Porter for a copy of PPI's complaint against Plaintiff to investigate whether there was coverage under the Policy. Id. On March 15, 2013, Vogel told Porter that based on her initial review, it appeared PPI was alleging trade name and service mark claims that the Policy did not cover. Decl. of Rebekah Vogel ("Vogel Decl."), ECF No. 74-4, ¶ 4.

To investigate further, Vogel spoke with Plaintiff's counsel in the Texas Case, Leland de la Garza ("de la Garza"), on March 27, 2013, and went through each of the offenses listed in the definition of "personal and advertising injury" with him. Vogel Decl., ¶ 5. Vogel claims that de la Garza told her there was (1) no allegation in the lawsuit that Plaintiff used PPI's advertising ideas or that Plaintiff was infringing upon a copyright, trade dress or slogan; (2) that "Premier Pools" was not a slogan; and (3) the PPI lawsuit was purely a trade name and service mark infringement matter. Id. de la Garza testified that he recalls reviewing the claims with Vogel but does not recall her using the terms "offenses" and he does not believe he stated that "PPI was not alleging any claim that fit within the covered offenses." Decl. of Leland de la Garza ("de la Garza Decl."), ECF No. 75-5, ¶ 2.

The next day, Colony (via Vogel) formally denied Plaintiff's tender by letter. SAC, Ex. 8, ECF No. 38-1, at 247-256. Vogel explained in her letter that trade name infringement and service mark infringement did not fit within the "Personal and Advertising Injury" definition under the Policy and that Plaintiff was not named as an insured on the Policy. Id. Defendant also reserved the right to rely on the exclusion for "Infringement Of Copyright, Patent, Trademark Or Trade Secret" claims and reserved the right to assert that Plaintiff did not qualify as an insured. Id.

The Texas Case went to trial in July 2013 and the jury found in favor of PPI, but awarded no damages. Decl. of Paul Porter ("Porter Decl."), ECF No. 71-3, ¶¶ 6-7. Plaintiff moved for, and was granted, a second trial. Id.

B. The Texas Case-The Second Trial

In July 2012, Plaintiff again tendered a coverage request to Defendant, and Defendant again declined. Porter Decl., ¶ 7. In September 2013, PPI brought substantially the same claims against Plaintiff and Shan Pools in its Second Amended Petition ("SAP"). PNOL, Ex. 1, ECF No. 71-6. The only apparent differences in the claims are that the...