Travelers Prop. Cas. Co. of Am. v. Charlotte Russe Holding, Inc.
| Decision Date | 21 June 2012 |
| Docket Number | No. B232771.,B232771. |
| Citation | 144 Cal.Rptr.3d 12,2012 Daily Journal D.A.R. 9673,207 Cal.App.4th 969 |
| Court | California Court of Appeals Court of Appeals |
| Parties | TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Plaintiff and Respondent, v. CHARLOTTE RUSSE HOLDING, INC., et al., Defendants and Appellants. |
OPINION TEXT STARTS HERE
Caldwell Leslie & Proctor, Los Angeles, Christopher G. Caldwell, Andrew Esbenshade and Kelly L. Perigoe for Defendants and Appellants.
Lewis Brisbois Bisgaard & Smith, Los Angeles, Lane J. Ashley, Raul L. Martinez and Raquel Vidal for Plaintiff and Respondent.
Plaintiff and respondent, Travelers Property Casualty Company Of America (Travelers), filed this action for declaratory relief seeking a determination that there was no potential for coverage under its policy, and therefore no duty to defend its insureds, Charlotte Russe Holding, Inc., Charlotte Russe Merchandising, Inc., David Mussafer, Jenny J. Ming, Advent International Corp., Advent CR Holdings, Inc., and Advent CR, Inc. (the Charlotte Russe parties), in litigation against them by Versatile Entertainment, Inc., and its parent, People's Liberation, Inc. (collectively Versatile). The trial court agreed with Travelers, and granted its motion for summary judgment. We will reverse the summary judgment.
Underlying lawsuits by Versatile against the Charlotte Russe parties
The underlying litigation for which the Charlotte Russe parties sought coverage arises out of pleadings filed by Versatile in litigation against the Charlotte Russe parties. On October 26, 2009, certain of the Charlotte Russe parties sued Versatile alleging claims for fraud, breach of contract, and restitution. On October 27, 2009, Versatile filed an action against those parties, alleging causes of action for breach of contract, declaratory relief, and fraudulent and negligent misrepresentation. Also on October 27, 2009, Versatile filed another action against others of the Charlotte Russe parties, alleging their intentional interference with the contractual relationship between Versatile and Charlotte Russe. And on December 23, 2009, Versatile filed a cross-complaint in the Charlotte Russe parties' action against it. 2
As relevant here, Versatile's pleadings alleged that the Charlotte Russe parties had contracted in December 2008 to become the exclusive sales outlet for Versatile's “ ‘People's Liberation’ ” brand of apparel, which included jeans and knits. Versatile identified the People's Liberation brand as a “ ‘premium,’ ” “ ‘high end’ ” brand, claiming that it had “ ‘invested millions of dollars developing the [b]rand so that it became associated in the marketplace with high-end casual apparel” which “was distributed ... exclusively through fine department stores and boutiques....' ” (Italics omitted.) Versatile alleged that although Charlotte Russe had never before offered this sort of apparel for sale “ ‘at a higher price point commanded by a premium brand such as People's Liberation Brand,’ ” (italics omitted) Charlotte Russe had promised to provide the investment and support necessary to “ ‘promote the sale of premium brand denim and knit products in order to encourage [Charlotte Russe's] customers to purchase such premium products at a higher price point at its [Charlotte Russe] stores.’ ” (Italics omitted.) Versatile's pleadings went on to allege that the Charlotte Russe parties had failed to live up to those representations, however, giving rise to its allegation of causes of action for breach of contract, declaratory relief, and fraudulent and negligent misrepresentation.
Specifically, Versatile alleged, the Charlotte Russe parties had threatened, and had begun, “ ‘the “fire sale” of People's Liberation Branded apparel at “close-out” prices.’ ” This sale of Versatile's premium brand clothing at severe discounts not only violated the parties' agreement, it alleged, but “will also certainly result in significant and irreparable damage to and diminution of the People's Liberation Brand and trademark.” Versatile sought declaratory relief and damages for its losses “as a result of Defendants' breaches, including damage to and diminution of the People's Liberation Brand and trademark which will certainly result from Defendants' ‘fire sale’ of People's Liberation Branded goods at ‘close-out’ prices.”
During their later correspondence with Travelers, the Charlotte Russe parties informed Travelers that Versatile's discounting claim was factually based on the Charlotte Russe parties' “ ‘public display of signs in store windows and on clothing racks announcing that People's Liberation brand jeans were on sale,’ ” as well as on their “written mark-downs on individual People's Liberation clothing items.” And in connection with Travelers' summary judgment motion, the Charlotte Russe parties presented evidence of 70 to 85 percent price markdowns of People's Liberation brand clothing, and the opinion of an experienced apparel industry expert that such markdowns and “dramatic price reduction[s], promoted in such a manner, had the potential to have a disparaging effect on the People's Liberation brand,” for it suggests to the consumer that the product—particularly “premium, high-end or luxury goods such as the People's Liberation brand products”—is of an inferior quality.” 3
The relevant Travelers policies
The Charlotte Russe parties were covered by two consecutive Travelers policies, from September 30, 2008 to September 30, 2010, providing commercial general liability coverage. Both policies include “personal injury” and “advertising injury” liability coverage, with insuring agreements providing that the insurer has a duty to defend the insured against any suit seeking damages for “personal injury” and “advertising injury” claims.
The policies' personal injury coverage applies to “ ‘[p]ersonal injury’ caused by an offense arising out of your business, excluding advertising....” Its advertising injury coverage applies to “ ‘[a]dvertising injury’ caused by an offense committed in the course of advertising your goods, products or services; ...” Both provide “broad ‘offense-based’ coverage” for claims alleging injury arising out of “[o]ral, 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, provided that claim is made or ‘suit’ is brought by the person or organization that claims to have been slandered or libeled, or whose goods, products or services have allegedly been disparaged; ...” The policies exclude coverage for an “ ‘advertising injury’ arising out of a breach of contract.” There is no similar exclusion for a personal injury arising out of a breach of contract.
Travelers denies coverage
The Charlotte Russe parties tendered the Versatile actions to Travelers for a defense on December 24, 2009.
On May 13, 2010, Travelers notified the Charlotte Russe parties by letter that it was declining to either indemnify or defend them against the claims asserted by Versatile, on the ground that there was no potential for coverage. In the ensuing exchange of correspondence, Charlotte Russe took the position that Versatile's claims involved disparagement within the policies' terms, potentially within the policies' coverage for both personal injury and advertising injury. Travelers maintained that “coverage was not available under its Policies because ‘the reduction of a product's price is not ... a disparagement of that product.’ ”
The coverage litigation and Travelers' motion for summary judgment
On July 29, 2010, Travelers filed a declaratory relief action, seeking a determination that it owed no duty to defend or indemnify the Charlotte Russe parties in the various underlying actions. The Charlotte Russe parties cross-complained for declaratory relief, breach of contract, and breach of the implied covenant of good faith and fair dealing, alleging that Travelers' denial of a defense under the liability policies resulted in serious damages.
Travelers moved for summary judgment, contending that the Charlotte Russe parties would be unable to establish a potential for coverage under the Travelers' policies. The motion's key contention was that in order for the Charlotte Russe parties to be eligible for coverage under its policies' personal injury or advertising injury provisions, the claims against them must amount to actionable claims of trade libel. According to Travelers' motion, “under established California law, the allegations in the underlying Versatile litigation against the Charlotte Russe entities must be compared with the elements of the trade libel tort in order to properly assess the potential for coverage under the Travelers' disparagement coverage.” The motion contended that a cause of action for trade libel or disparagement requires an allegation of the publication of a false statement and resulting loss of business, and that Versatile's claims against the Charlotte Russe parties alleged neither.
Travelers is awarded summary judgment; the Charlotte Russe parties appeal
The trial court heard Travelers' summary judgment motion on March 9, 2011, overruling Travelers' objections to certain of the Charlotte Russe parties' opposing evidence, but granting Travelers' motion. Judgment was entered in Travelers' favor on April 22, 2011, and notice of its entry was filed April 29, 2011. The Charlotte Russe parties filed a timely appeal on May 3, 2011.
The critical question in this appeal is whether Versatile's claims against the Charlotte Russe parties constitute allegations that the Charlotte Russe parties disparaged its goods, within the meaning of the Charlotte Russe parties' coverage under the Travelers' policies. If they do not, there was no potential for coverage, and Travelers had no duty to defend.
However, if Versatile's allegations can reasonably be interpreted to encompass claims that the Charlotte Russe parties...
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