S. Snow Mfg. Co. v. Snowizard Holdings, Inc.

• Decision Date: 31 January 2013
• Docket Number: 10–0791,Civil Action Nos. 06–9170,11–1499.,09–3394
• Citation: 921 F.Supp.2d 548
• Parties: SOUTHERN SNOW MANUFACTURING CO., INC. v. SNOWIZARD HOLDINGS, INC., et. al.
• Court: U.S. District Court — Eastern District of Louisiana

921 F.Supp.2d 548

SOUTHERN SNOW MANUFACTURING CO., INC.

v.SNOWIZARD HOLDINGS, INC., et. al.

Civil Action Nos. 06–9170, 09–3394, 10–0791, 11–1499.

United States District Court, E.D. Louisiana.

Jan. 31, 2013.

Mark Edw. Andrews, Andrews Arts & Sciences Law, LLC, New Orleans, LA, for Southern Snow Manufacturing Co., Inc.

Jack Edward Morris, Jack E. Morris, Attorney at Law, Kenneth L. Tolar, Kenneth L. Tolar, APLC, Metairie, LA, Brad Elliot Harrigan, Simeon B. Reimonenq, Jr., Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, New Orleans, LA, for Defendants.

ORDER AND REASONS

NANNETTE JOLIVETTE BROWN, District Judge.

Before the Court is Hanover Insurance Company's (“Hanover”) Motion for Summary Judgment requesting reconsideration of Judge Zainey's partial denial of prior earlier motions for summary judgment regarding insurance issues in Civil Actions Nos. 06–9170, 09–3394, and 10–0791.¹ Judge Zainey partially granted Hanover's earlier motions for summary judgment upon finding that SnoWizard's insurance policy with Hanover did not afford coverage for the claims asserted in Civil Actions Nos. 06–9170, 09–3394, and 10–0791; however, Judge Zainey denied the motions insofar as Hanover sought to terminate SnoWizard's defense, finding that the duty to defend was broader than coverage, and Hanover had a continuing duty to defend implicit in Louisiana law. ²Having considered the motion, the memorandum in support, the response, the reply, the record and the applicable law, the Court will grant the motion in part.

I. Background

A. Procedural Background

Southern Snow Manufacturing Co., Inc., Simeon, Inc., Parasol Flavors, LLC, among other plaintiffs, (collectively, “Plaintiffs”) and SnoWizard, Inc. (“SnoWizard”) are engaged in extensive litigation in the United States District Court for the Eastern District of Louisiana that extends further than the suits involved in the instant motion, namely Civil Actions Nos. 06–9170, 09–3394, and 10–0791 (hereinafter, the “Consolidated Suits”).³ Plaintiffs and SnoWizard are competitors in the business of manufacturing and selling snowball ice-shaving machines and snowball flavor concentrates. Plaintiffs filed suit against SnoWizard for, inter alia, trademark infringement, false assertion of trademark rights, and for disparaging Plaintiffs' businesses concerning certain flavor names.⁴ Civil Action No. 06–9170 was originally assigned to Judge Jay C. Zainey, Section “A.” Civil Actions Nos. 09–3394 and 10–0791 were originally assigned to Judge Mary Ann Vial Lemmon, Section “S,” but those matters were subsequently transferred to Judge Zainey and consolidated with Civil Action No. 06–9170.⁵ On October 7, 2011, consolidated matter No. 06–9170 was reassigned to this Section, Section “G,” as part of a new docket for a newly appointed judge.

SnoWizard approached Hanover, its commercial liability insurer under policy ZHO 9287162 (hereinafter, the “policy”), to provide it with a legal defense in this case. Upon considering the allegations of Plaintiffs' complaint, Hanover concluded that the policy provisions of its contract with SnoWizard did not compel it to defend SnoWizard in this case. SnoWizard responded by filing a third-party complaint against Hanover for a declaratory judgment, breach of contract, and bad faith insurance claims adjusting under Louisiana insurance and contract law on May 3, 2007.⁶

In late 2007, Hanover and SnoWizard filed cross motions for summary judgment on the issue of coverage under the policy in Civil Action No. 06–9170. The Court ruled against Hanover reasoning that the term “disparages” was broad enough to leave open the possibility that a cease and desist letter, allegedly containing a false accusation of trademark infringement, could trigger liability under the policy.⁷ Hanover moved for reconsideration, but the Court administratively closed the case until the resolution of cancellation proceedings before the United States Patent & Trademark Office (“USPTO”).

Once Civil Action No. 06–9170 was reopened, Civil Actions Nos. 09–3394 and 10–0971 were transferred and consolidated with No. 06–9170. On October 25, 2010, SnoWizard and Hanover later settled the third-party claims, with Hanover reserving “all coverage defenses which have been asserted or may hereafter be asserted against any of the parties to the Consolidated Suits.” ⁸ The Settlement Agreement bound Hanover “to defend SnoWizard in the Consolidated Suits subject to Hanover's three July 12, 2010, Reservation of Rights letters to SnoWizard concerning SnoWizard's tender of defense and indemnification in the Consolidated Suits ... and subject to Hanover's stipulations and affirmative defenses set forth by Hanover in its response to the Third–Party Complaint.” ⁹

On February 23, 2011, March 8, 2011, and March 9, 2011, Hanover filed motions for summary judgment in Civil Actions Nos. 06–9170, 09–3394, and 10–0791, respectively.¹⁰ In each of these motions, Hanover argued that the undisputed facts unearthed by discovery demonstrate that the policy does not provide coverage for the claims asserted, and that Hanover therefore has no indemnity obligations nor any further duty to provide a defense for SnoWizard. ¹¹ Judge Zainey granted Hanover's motions as they pertained to indemnity in each case, holding that the policy did not afford coverage for the asserted claims, but he denied Hanover's motions insofar as Hanover sought to prospectively terminate its defense obligations.¹² Hanover filed a Motion for Reconsideration ¹³ in each of the Consolidated Suits, ¹⁴ which Judge Zainey denied on June 27, 2011.¹⁵

The original scheduling order entered in the Consolidated Suits set a deadline of October 29, 2010 for the filing of dispositive motions.¹⁶ The Consolidated Suits were subsequently consolidated with Civil Action No. 11–1499, and a new scheduling order was entered on July 13, 2011 stating that “the following deadlines apply to case number[ ] ... 11–1499. Deadlines in case numbers 06–9170, 09–33[9]4 and 10–791 are not extended.” ¹⁷ The deadline for filing dispositive motions set by the more recent scheduling order was November 6, 2012.¹⁸

On November 7, 2012 at 12:11 a.m., Hanover filed the instant Motion for Summary Judgment ¹⁹ in the Consolidated Suits, wherein Hanover requests that the Court reconsider Judge Zainey's orders that partially denied summary judgment on the basis of Hanover's continuing duty to defend even after the Court determined that SnoWizard had no coverage for the asserted claims under the policy.²⁰ SnoWizard opposed the motion on November 27, 2012, ²¹ and Hanover subsequently filed a reply with leave of Court. ²²

B. The Insurance Policy

According to the Louisiana Changes–Insuring Agreement (hereinafter, the “Louisiana Insuring Agreement”),²³ the policy provides coverage to SnoWizard for “personal and advertising injury” liability as follows:

We 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. We will have the right and duty to defend the insured against any “suit” seeking those damages.²⁴

The Commercial and General Liability Coverage Form (hereinafter, the “General Coverage Form”),²⁵ which is modified by the aforementioned Louisiana Insuring Agreement, further states with respect to coverage of “personal and advertising injury”: “However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘personal and advertising injury’ to which this insurance does not apply.” ²⁶

The only relevant provision in both the Louisiana Insuring Agreement and the General Coverage Form explicitly addressing Hanover's duty to defend provides in Subsection (2):

Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B.... No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under [another section of the policy]. ²⁷

The policy defines “personal and advertising injury” in pertinent part as: “Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organizations's goods, products, or services.” ²⁸ Based on this definition, the Court has already determined—and it is undisputed by the instant motion—that the policy does not afford coverage for the claims asserted in the Consolidated Suits.²⁹

III. The Parties' Arguments

A. Hanover's Motion for Summary Judgment

1. Hanover's Interpretation of Judge Zainey's Prior Summary Judgment Orders³⁰

According to Hanover, Judge Zainey based his partial denial of summary judgment on three reasons: (1) the Louisiana Insuring Agreement does not expressly state that Hanover's duty to defend terminates upon a judicial determination that the plaintiff cannot prove any claims covered under the policy; ³¹ (2) Allstate Insurance Co. v. Roy³² does not apply because the instant case does not involve a matter where “the undisputed facts clearly preclude coverage but the plaintiff simply chooses to omit those crucial, determinative facts from the petition;” ³³ and (3) Hanover's omission of certain language from the Louisiana Insuring Agreement is “likely in recognition of Hanover's broad and continuing duty to defend implicit in Louisiana law.” ³⁴

Hanover contends that Judge Zainey erred in reasoning that the “broad and continuing duty to defend that is implicit in Louisiana law requires Hanover to defend its insured even after it has been determined that its insured will not be legally obligated to pay any sums as damages because of injuries to which the Hanover policy applies.” ³⁵ Hanover moved for reconsideration, ³⁶ which Judge Zainey denied without written reasons. Hanover argues that this was also error.³⁷

2. The “Duty to Defend” Within Louisiana Law

Hanover argues that reconsideration is necessary to “correct a manifest error of...