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

• Decision Date: 16 February 2013
• Docket Number: 10–0791,Civil Action Nos. 06–9170,09–3394,11–1499.
• Citation: 11 F.Supp.3d 672
• Parties: SOUTHERN SNOW MANUFACTURING CO., INC. v. SNOWIZARD HOLDINGS, INC., et al.
• Court: U.S. District Court — Eastern District of Louisiana

11 F.Supp.3d 672

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.

Signed Feb. 16, 2013.

Mark EDW. Andrews, Andrews Arts & Sciences Law, LLC, Earl J. Schmitt, Jr., New Orleans, LA, for Plaintiff.

Jack Edward Morris, Kenneth L. Tolar, 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 the Motion for Summary Judgment¹ filed by Hanover Insurance Company (“Hanover”). Therein, Hanover requests that summary judgment be entered in its favor upon a finding that Hanover no longer owes SnoWizard, Inc. (“SnoWizard”) a defense. This Court previously granted the motion in part, but ordered supplemental briefing on the applicability of the Settlement Agreement between the parties to Hanover's duty to defend.² Having considered the motion, the supplemental briefing and responses from each party, the record, and the applicable law, the Court will deny the motion.

I. Background³

Southern Snow Manufacturing Co., Inc., Simeon, Inc., Parasol Flavors, LLC, among other plaintiffs, (collectively, “Plaintiffs”) and SnoWizard, Inc. 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”).⁴ 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.⁵ 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. 06–9170.⁶ 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 seeking declaratory judgment, claiming breach of contract, and claiming bad faith insurance claims adjusting under Louisiana insurance and contract law on May 3, 2007.⁷

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. Judge Zainey 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.⁸ Hanover moved for reconsideration, but the Court administratively closed the case until the cancellation proceedings before the United States Patent & Trademark Office (“USPTO”) were resolved.

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 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.”⁹ 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.”¹⁰

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. ¹¹

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.¹² 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.¹³ Hanover filed a Motion for Reconsideration¹⁴ in each of the Consolidated Suits,¹⁵ which Judge Zainey denied on June 27, 2011.

On November 7, 2012, Hanover filed the instant Motion for Summary Judgment¹⁶ in the Consolidated Suits, wherein Hanover requests that the Court reconsider Judge Zainey's orders partially denying 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.¹⁷ This Court previously granted the motion for summary judgment, in part, finding that Judge Zainey was clearly erroneous in concluding that Hanover had a continuing duty to defend implicit in Louisiana law, and the Court held that the duty to defend terminated upon the judicial determination that the undisputed facts excluded coverage.¹⁸ However, for the first time, in opposition to the motion for summary judgment, SnoWizard argued that the Settlement Agreement entered into by the parties on October 25, 2010 obligates Hanover to continue furnishing a defense—an argument that was never advanced before Judge Zainey in the motions for summary judgment filed in 2011. Therefore, the Court ordered supplemental briefing on “the issue of whether the parties intended the Settlement Agreement and Reservation of Rights letter to require Hanover to continue its defense of SnoWizard if a determination that coverage is excluded was made prior to trial.”¹⁹ On February 5, 2013, the parties formally entered a stipulation into the record that “any issue of fact involving Hanover's duty to defend SnoWizard will be tried to and decided by the court, not the jury.”²⁰ SnoWizard filed supplemental briefing on February 6, 2013,²¹ and Hanover filed its supplemental memorandum on February 7, 2013.²² Hanover and SnoWizard filed responses on February 8, 2013,²³ in accordance with the Court's order.

II. The Parties' Arguments

A. Interpretation of the Settlement Agreement

SnoWizard argues that the motion for summary judgment should be denied and Hanover should be required to continue to furnish a defense, because nothing in the Settlement Agreement or Reservation of Rights letters entitles Hanover to terminate its defense. SnoWizard explains that if the Settlement Agreement is unambiguous, Louisiana Civil Code article 2046 provides that “it must be enforced as written, and ‘no further interpretation may be made in search of the parties' intent.’ ”²⁴ SnoWizard avers that the Settlement Agreement is not ambiguous regarding “Hanover's express ‘agreement to defend SnoWizard in the Consolidated Suits,’ ” and therefore, it must be enforced as written.²⁵ SnoWizard explains that, in the Settlement Agreement, it “released its claims against Hanover for bad faith claims adjusting pursuant to La. R.S. 22:658 and La. R.S. 22:1220 expressly, clearly, and unambiguously ‘in consideration of Hanover's agreement to defend SnoWizard in the Consolidated Suits.’ ”²⁶ SnoWizard contends that the Settlement Agreement is not rendered ambiguous by the fact “that the express agreement to defend SnoWizard in the Consolidated Suits is ‘subject to Hanover's three July 12, 2010, Reservation of Rights letters.’ ”²⁷ According to SnoWizard, the rights reserved by Hanover are “clearly, unambiguously, and emphatically expressed in those letters,” and all the rights reserved “relate to Hanover's ‘position on coverage in this matter,’ not ‘its undertaking to defend SnoWizard.’ ”²⁸ SnoWizard argues that its interpretation of the rights Hanover reserved is buttressed by Judge Zainey's order of partial dismissal, which reserved unto Hanover only “coverage defenses.”²⁹ SnoWizard concludes that “while Hanover reserved its right to deny coverage based on policy defenses, it did not reserve any ‘separate and distinct’ right to deny or terminate its defense of SnoWizard.”³⁰

In contrast, Hanover reasons that if the “intent of the Settlement Agreement [had] been that Hanover was precluded from withdrawing its defense of SnoWizard, that intent would have been expressed.”³¹ Instead, according to Hanover, the Settlement Agreement provided that the defense of SnoWizard was “(1) ‘subject to Hanover's three July 12, 2010, Reservation of Rights letters to SnoWizard concerning SnoWizard's tender of defense ... in the Consolidated Suits' and (2) ‘subject to Hanover's stipulations and affirmative defense set forth by Hanover in its response to the Third Party Complaint.’ ”³² Hanover argues that the Settlement Agreement and Reservation of Rights letters should be interpreted to mean that:

Hanover had agreed to defend SnoWizard going forward, but reserved its right to alter its position on coverage “should additional information come to light, should circumstances change” and in return for $20,000, SnoWizard released Hanover from bad faith claims and defense costs incurred before July 10, 2010, but reserved its rights to seek indemnity under the policy.³³

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