Marvin J Perry, Inc. v. Hartford Casualty Insurance Co

Filing

UNPUBLISHED AUTHORED OPINION filed. Originating case number: 8:08-cv-00138-RWT. Copies to all parties and the district court/agency. [998532196] [09-1639]

Marvin J Perry, Inc. v. Hartford Casualty Insurance Co

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UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 09-1639

MARVIN J. PERRY, INC., Plaintiff - Appellant, v. HARTFORD CASUALTY INSURANCE COMPANY, Defendant - Appellee.

Appeal from the United States District Court for the District of Maryland, at Greenbelt. Roger W. Titus, District Judge. (8:08cv-00138-RWT)

Argued:

October 28, 2010

Decided:

February 25, 2011

Before MOTZ, AGEE, and WYNN, Circuit Judges.

Affirmed by unpublished opinion. Judge Wynn wrote the opinion, in which Judge Motz and Judge Agee joined.

ARGUED: Clifton Merritt Mount, JACKSON & CAMPBELL, PC, Washington, D.C., for Appellant. Jody Manier Kris, WILMERHALE, Washington, D.C., for Appellee. ON BRIEF: Gregory Lee VanGeison, ANDERSON, COE & KING, LLP, Baltimore, Maryland; Jeremy DuQuesnay Dresner, WILMER CUTLER PICKERING HALE AND DORR, LLP, Washington, D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit.

Dockets.Justia.com

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WYNN, Circuit Judge: Under Maryland law, "[i]t is generally true that an insurer has no duty to defend a cause of action against an insured if that cause of action asserts liability on the part of the

insured that comes within an exclusion in the insurance policy." 1 Plaintiff business Insurance contractual against MJP. falling Marvin J. Perry, insurer, ("Hartford provide a Inc. ("MJP") contends Hartford that its

liability Company duty to

Defendant

Casualty its

Insurance"), defense in an

breached action

brought

Because the underlying action involved only claims an express contractual exclusion to Hartford

within

Insurance's duty to defend, we affirm the district court's grant of summary judgment for Hartford Insurance.

I. MJP filed this action in an attempt to recover fees and costs incurred while defending a lawsuit brought against MJP by Perry & Wilson, Inc. ("P&W"). 2 That suit ended in a settlement

agreement, and the matter before us concerns whether Hartford Insurance,
1

by

allegedly

breaching

its

duty

to

defend,

is

Government Employees Ins. Co. v. Ropka, 74 Md. App. 249, 257, 536 A.2d 1214, 1218 (1987), cert. denied, 312 Md. 601, 541 A.2d 964 (1988). 2 The case was originally filed in Circuit Court for Montgomery County, Maryland, but was removed to federal district court on January 16, 2008. 2

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responsible

for

the

defense

expenses

incurred

by

MJP

before

settlement with P&W. Electro Enters.,

See Bankers & Shippers Ins. Co. of N.Y. v. 287 Md. 641, 649, 415 A.2d 278, 283

Inc.,

(1980) ("[W]henever an insured must conduct his own defense at his own expense as a result of an insurer's breach of a

contractual duty to defend its insured, the insured may recover the expenses of that defense from the insurer."). Hartford

Insurance asserted that an exclusion in MJP's insurance policy relieved it of any duty to defend MJP against the suit brought by P&W. Following the filing of cross-motions for summary judgment by the parties, the district court issued an order granting

Hartford Insurance's motion. opinion that, based on the

The court reasoned in a memorandum nature of the claims in the

underlying suit, the "Intellectual Property Rights Exclusion" in the insurance policy relieved Hartford Insurance of the duty to defend. On appeal, MJP contends that the district court erred by granting summary judgment because the underlying suit involved a claim for unfair competition Rights that was not and subject thus, to the

"Intellectual

Property

Exclusion," We disagree.

Hartford

Insurance had a duty to defend.

3

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II. It is well established that our review of a grant of

summary judgment is de novo. 448 F.3d 693, 700 (4th Cir.

French v. Assurance Co. of Am., 2006). "Summary judgment is

appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Id.; Fed. R. Civ. P. 56(c). Additionally, we must apply Maryland law because the action was removed to the District of Maryland based on diversity, and Hartford Insurance issued its policy to MJP in Maryland. Klaxon (1941) Co. v. Stentor that apply Elec. a Mfg. Co., court of 313 U.S. 487, See

496-97

(holding must

federal the choice

exercising law

diversity of the

jurisdiction

principles

state in which the federal court is located); Glaser v. Hartford Cas. Ins. Co., that 364 in is F. Supp. 2d 529, 531 n.2 (D. to the Md. 2005) an was

(indicating insurance

Maryland, that of

the

law

used where

construe policy

policy

the

state

delivered and premiums were paid).

III. An insurer's contractual duty to defend arises from the terms of the insurance policy. Co., 346 Md. 217, 225, 695 Litz v. State Farm Fire & Cas. A.2d 566, 569 (1997); see also

Brohawn v. Transamerica Ins. Co., 276 Md. 396, 409, 347 A.2d 4

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842, 851 (1975) ("The promise to defend the insured, as well as the promise to indemnify, is the consideration received by the insured for payment of the policy premiums."). "The obligation of an insurer to defend its insured under a contract provision . . . is determined by the allegations in the tort actions. If the plaintiffs in the tort suits allege a

claim covered by the policy, the insurer has a duty to defend." Brohawn, 276 Md. at 407, 347 A.2d at 850. Indeed, "[e]ven if a

tort plaintiff does not allege facts which clearly bring the claim within or without the policy coverage, the insurer still must defend if there is a potentiality that the claim could be covered by the policy." Id. at 408, 347 A.2d at 850.

In determining whether a liability insurer has a duty to provide its insured with a defense in a tort suit, two types of questions ordinarily must be answered: (1) what is the coverage and what are the defenses under the terms and requirements of the insurance policy? (2) do the allegations in the tort action potentially bring the tort claim within the policy's coverage? St. Paul Fire & Marine Ins. Co. v. Pryseski, 292 Md. 187, 193, 438 A.2d 282, 285 (1981).

A.

The Policy And The Applicable Exception

"In answering the first Pryseski inquiry, we focus on the terms of the insurance policies themselves to determine the

scope and limitations of their coverage."

Aetna Cas. & Sur. Co.

5

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v. Cochran, 337 Md. 98, 104, 651 A.2d 859, 862 (1995).

We

construe the insurance policy according to contract principles. See Litz, 346 Md. at 224-25, 695 A.2d at 569. afford the contract terms their "customary, Thus, we must ordinary, and

accepted meaning."

See Lloyd E. Mitchell, Inc. v. Maryland Cas. "Maryland does

Co., 324 Md. 44, 56, 595 A.2d 469, 475 (1991).

not follow the rule that insurance policies should, as a matter of course, be construed against the insurer." Dutta v. State "To

Farm Ins. Co., 363 Md. 540, 556, 769 A.2d 948, 957 (2001). 3 determine the intention of the parties to the

insurance

contract, which is the point of the whole analysis, we construe the instrument as a whole." Pacific Indem. Co. v. Interstate

Fire & Cas. Co., 302 Md. 383, 388, 488 A.2d 486, 488 (1985) (citations omitted). Mindful of these principles of construction, we begin by noting that MJP's insurance policy provided that Hartford

Insurance: will pay on behalf of the insured those sums that the insured becomes legally obligated to pay as damages Nonetheless, "[i]f the language is ambiguous, extrinsic evidence may be consulted[,]" Collier v. MD-Individual Practice Ass'n, Inc., 327 Md. 1, 6, 607 A.2d 537, 539 (1992), and "if ambiguity is determined to remain after consideration of extrinsic evidence, `it will ordinarily be resolved against the party who drafted the contract,' where no material evidentiary factual dispute exists." Clendenin Bros., Inc. v. U.S. Fire Ins. Co., 390 Md. 449, 459-60, 889 A.2d 387, 394 (2006) (quoting Collier, 327 Md. at 6, 607 A.2d at 539). 6
3

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because of . . . "personal and advertising injury" to which this insurance applies. [Hartford Insurance] will have the right and duty to defend the insured against any "suit" seeking those damages. However, [Hartford Insurance] 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. The injury policy arising defined out of, "personal inter and alia, advertising "[c]opying, injury" in as

your

`advertisement' a person's or organization's `advertising idea' or style of `advertisement.'" "Advertisement" is defined to

include "the widespread public dissemination of information or images that or has the purpose of inducing . . . the sale of goods,

products

services

through

[t]he

Internet."

"`Advertising idea' means any idea for an `advertisement[.]'" Thus, the policy obligates Hartford Insurance to defend

against some suits alleging advertising injury.

But the policy

also states, in what the district court called the Intellectual Property Rights Exclusion, that the "insurance does not apply to . . . `personal and advertising injury' . . . [a]rising out of any violation of any intellectual property rights, such as

patent, trademark, trade name, trade secret, service mark or other designation of origin or authenticity." Under Maryland

law, "where the insurer properly and unambiguously uses language in its exclusion, the clear and specific terms must be enforced . . . ." Megonnell v. United Servs. Auto. Ass'n, 368 Md. 633,

7

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656, 796 A.2d 758, 772 (2002) (quoting Eric Mills Holmes & Mark S. Rhodes, Holmes's Appleman on Insurance, 2d 276-81 (Eric Mills Holmes ed., vol. 2 § 7.2, West 1996)). In Superformance Int'l, Inc. v. Hartford Cas. Ins. Co., 332 F.3d 215 (4th Cir. 2003), this Court interpreted an

exclusion almost identical to that at issue in this case as relieving Hartford Insurance of the duty to defend claims of unfair competition Id. claims at based on, inter alia, trademark have also

infringement.

222-24. 4

Other

circuits

recognized similar exclusions as relieving an insurer of the right to defend claims alleging trademark violations. See,

e.g., Native Am. Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729, 732-35 for (7th Cir. 2006) (holding out of that any clause excluding of any of and

coverage

injury property

"[a]rising rights" alleging

violation

intellectual duty to

relieved

Hartford of

Insurance products

defend

suit

mislabeling

trademark violations); Parameter Driven Software, Inc. v. Mass.

In its reply brief, MJP attempts to distinguish Superformance based on the nature of the underlying dispute. However, the nature of the dispute is not why Superformance is relevant to this case. Rather, Superformance provides useful guidance insofar as the Court interpreted the "trademark exclusion" (containing almost identical language to that constituting the "Intellectual Property Rights Exclusion" at issue here) to apply to all claims based on trademark violation. In other words, Superformance provides support for Hartford Insurance's argument that if the unfair competition claim stems from a trademark violation, it is excluded under the policy. 8

4

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Bay Ins. Co., 25 F.3d 332, 337 (6th Cir. 1994) (holding that because "[a]ll four counts of [the] complaint were based upon [the insured's] use of the trademark," out of . policy . . exclusion for of

advertising

offenses

"arising

infringement

trademark" applied to relieve insurer of duty to defend). Accordingly, we answer the first Pryseski inquiry by

concluding that the language of the Intellectual Property Rights Exclusion establishes that Hartford Insurance is relieved of its duty to defend under the policy when a suit brought against the insured contains only allegations arising out of trademark or trade name violations.

B.

The Allegations In The Underlying Tort Action

Next we address the second Pryseski inquiry, which we use to determine whether the allegations in the underlying action potentially fall within the scope of coverage for "advertising injury," Exclusion. In the underlying suit, P&W alleged "unfair competition by infringement of common-law rights" (Count One) as well as as limited by the Intellectual Property Rights

dilution and diminishment of P&W's "famous mark" in violation of the Lanham Act (Count Two). MJP concedes that Count Two did not

trigger Hartford Insurance's duty to defend but contends that Count One did. Specifically, 9 MJP argues that the complaint

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alleged an unfair competition cause of action that (1) arose from MJP's internet marketing activities--thus qualifying as

"advertising injury," and (2) did not arise from a violation of P&W's intellectual property rights--and therefore did not fall under the Intellectual Property Rights Exclusion. To determine

the merit of MJP's argument, it is useful to examine the nature of unfair competition claims under Maryland law before

considering whether such a claim was raised in P&W's complaint. Unfair competition is generally defined in Maryland as

"damaging or jeopardizing another's business by fraud, deceit, trickery or unfair methods." Baltimore Bedding Corp. v. Moses, It consists of

182 Md. 229, 237, 34 A.2d 338, 342 (1943).

attempting to pass the goods or business of one person off as those of another, to Md. either that 38, by an express Edmondson A.2d 377, or implied public v. To

representation Einbinder, 208

effect. 44, 116

Vill. 380

Theatre

(1955). 5

5

The Einbinder court explained:

Like most doctrines of the common law, the law of unfair competition is an outgrowth of human experience. The rules relating to liability for harm caused by unfair trade practices developed from the established principles in the law of torts. These rules developed largely from the rule which imposes liability upon one who diverts custom from another to himself by fraudulent misrepresentation that the goods he is offering are the goods produced by the other. 208 Md. at 43, 116 A.2d at 379. 10

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constitute unfair competition, "the acts complained of must be of such a nature as to mislead and deceive the public, so that the defendant is in effect taking advantage of the good will and business reputation which the complainant has built up through service or advertising or in any manner regarded as lawful and proper." Id.

As recognized by Maryland courts, the doctrine of unfair competition is not limited to actions based on a violation of trademark. Moses, 182 Md. at 236, 34 A.2d at 342; see also

Einbinder, 208 Md. at 45, 116 A.2d at 380 ("While the law of trade-marks is a part of the doctrine of unfair competition, there is a difference between them."). 6 However, the mere

The doctrine was expanded beyond trademark violation at least in part on the theory that, even when there has not been a technical trademark violation, the law must protect Business A from Business B's improper appropriation of the goodwill associated with a word, mark, or symbol of Business A. The Einbinder court stated: The infringement of a trade-mark is a violation by one person of an exclusive right of another person to the use of a word, mark or symbol. On the other hand, where two rivals in business have an equal right to use the same words on similar articles sold by them, but such words were used by one of them before the other and by association have come to indicate to the public that the goods to which they applied were produced by the former, the latter will not be permitted to use them in such a manner as to deceive or be capable of deceiving the public as to the origin, manufacture or ownership of the goods to which they are applied. 208 Md. at 45, 116 A.2d at 380 (citation omitted). 11

6

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possibility

that

an

unfair

competition

claim

can

exist

independent of an allegation of trademark violation does not mean that an independent claim was raised in P&W's complaint. Turning action, complaint evidence we now focus to an examination on of the underlying that combine on tort the to the

initially from

MJP's

contention testimony 7

and a

excerpts claim for

deposition

unfair

competition

based

misappropriation of the "style of advertising of P&W" rather than a violation of P&W's intellectual property rights. P&W's complaint alleged that in December 1993, MJP formally transferred its furniture dealing business to P&W. Before the

transfer to P&W, MJP operated as both a furniture manufacturer's representative and a furniture dealer. complaint, "[a] furniture As explained in P&W's representative is

manufacturer's

merely an agent (generally paid on commission) for a furniture

Maryland law permits the consideration of extrinsic evidence proffered by the insured when necessary to determine if there is a potentiality of coverage under an insurance policy. Aetna, 337 Md. at 111-12, 651 A.2d at 866; Walk v. Hartford Cas. Ins. Co., 382 Md. 1, 12, 852 A.2d 98, 104 (2004) ("[I]n Maryland, an insurer's duty to defend is not determined solely by the eight corner rule (reviewing the complaint and policy) but rather includes consideration of extrinsic evidence."); see also Montgomery Cnty. Bd. of Educ. v. Horace Mann Ins. Co., 383 Md. 527, 538, 860 A.2d 909, 915 (2004) (stating that "at least where the underlying complaint in the tort action neither conclusively establishes nor conclusively negates a potentiality of coverage, an insurer must examine any relevant extrinsic evidence brought to its attention that might establish a potentiality of coverage"). 12

7

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manufacturer

which

contracts

in

its

own

name.

A

furniture The 1993 of MJP's

dealer contracts and sells furniture in its own name." transfer was of the "furniture dealer" portion

portfolio; MJP retained certain "manufacturer's representative" contracts. As part of the transfer, P&W became the owner of the assets of the furniture dealing business, including the trade name

"Marvin J. Perry & Associates."

The complaint noted that since

the transfer, P&W has continued to do business with the federal government using the trade name "Marvin J. Perry & Associates." P&W has also J. registered & its logo, as including a the in trade name

"Marvin

Perry

Associates"

trademark

Maryland.

Further, according to the complaint "[s]ince 1993, [P&W] has spent considerable sums of money and devoted great effort to advertise and publicize the trade name `Marvin J. Perry &

Associates' to its primary customer, the federal government." The complaint also alleged that in 1999 P&W registered the internet domain name "marvinjperry.com" and used it to operate a website for Marvin J. Perry & Associates. Because the federal

government required internet publication of the price lists of the manufacturers represented by MJP, and because MJP did not yet have a website, P&W allowed MJP to post the price lists for the manufacturers MJP represented on marvinjperry.com.

However, in 2002, an MJP employee "updated the website in a way 13

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that gave the appearance that there was one entity, Marvin J. Perry & Associates, which was engaged in both furniture dealer and manufacturer's no representative were 2005, business." to Despite P&W's the

objections, businesses.

changes in

made an

differentiate of MJP

Later,

employee

allegedly

"accessed the marvinjperry.com website without authorization and unlawfully removed all contact information for [P&W's] business, operating as Marvin J. Perry & Associates, and substituted

contact information for [affiliates of MJP], as if they were the business trading as `Marvin J. Perry & Associates' and owner of the website." The `Marvin complaint, J. Perry & in Count One, stated has come that to "[t]he indicate mark to

Associates'

purchasers that they are purchasing goods and services from the company that has used the name and been an authorized government contractor in that name since the mid-1970s, and in fact that they are purchasing the goods and services from [P&W] doing

business as Marvin J. Perry & Associates."

P&W further alleged

that "as indicated by defendants' alterations to the website . . . defendants are attempting to deceive purchasers by their use of the name `Marvin J. Perry & Associates.'" Notwithstanding that the common theme of the complaint is P&W's frustration at MJP's attempts to use the Marvin J. Perry & Associates trade name and registered 14 trademark, MJP contends

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that Count One asserted an unfair competition action that was based on MJP's misleading use of "P&W's style of advertising" on the internet. from Hartford MJP's web Insurance concedes would that an injury as an

arising

advertising

qualify

"advertising injury" under the policy. question for this Court is whether

Thus, the dispositive P&W asserted an unfair

competition claim that did not arise out of a violation of P&W's trademark or trade name. Notably, Count One is captioned "Unfair Competition by Infringement of Common-Law Rights" and includes six separate

paragraphs discussing the "Marvin J. Perry & Associates" mark. Nonetheless, MJP points out that under Count One, P&W alleged that the "acts of [MJP] constitute unfair competition and an infringement of plaintiff's common-law rights in the mark

`Marvin J. Perry & Associates.'" the conjunction "and" indicated

MJP asserts that the use of that of its P&W was raising unfair

competition claim.

claims

independent

trademark

infringement

MJP argues that P&W was concerned, at least in part, with how the "style" "Marvin of J. advertising, Perry & rather than the use of the

trademark

Associates,"

deceived

consumers

into thinking the two businesses were one entity.

Specifically,

MJP contends that P&W's complaint asserted a claim for unfair competition arising out of MJP's use of a website to advertise 15

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"in the same style as [P&W's], `project categories,' `contract categories,' separate contact information, and companies

represented by each litigant." clear language of the

This contention is belied by the indicating that P&W was

complaint

concerned with how, by making "alterations to the website, . . . defendants [were] attempting to deceive purchasers by their use of the name `Marvin J. Perry & Associates.'" Indeed, the complaint itself makes no reference to project categories, represented contract by each categories, litigant. or the specific companies is no

Furthermore,

there

indication as to how the style of P&W's website had developed a meaning such that utilizing a similar style would constitute unfair competition. Instead, the complaint makes clear that the

reason that the web presentation was potentially confusing to customers Associates" was and because the trade logo name "Marvin the J. Perry same &

trademarked

containing

were

utilized throughout the website. MJP's citation of the deposition testimony of Malcolm

Wilson, P&W's designee, does little to advance its argument to the contrary. When asked why he it was was dissatisfied altered by with an the MJP

marvinjperry.com

website

after

employee, Wilson replied "[b]ecause it created a vision that we were all one company." Wilson reiterated that even after some

changes in 2004, the website "still didn't adequately separate 16

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the two companies."

This testimony merely reinforces the notion

that the claims arose out of a concern about confusion in the market. Nothing in Wilson's testimony indicated whether the

feared confusion arose from the general "style" of the website or instead from the use of the Marvin J. Perry & Associates name throughout the website. MJP also referenced the deposition testimony of Howard

Yeager, its own managing director, as support for the contention that similarity in website style created the market confusion giving rise to P&W's unfair competition claim. Brief of

Appellant at 8.

Yeager testified as to how a consumer visiting

P&W's website could access information regarding various project categories involved. market and contract categories in which P&W or MJP were

But nothing in Yeager's testimony indicates that the complained of by P&W arose out of anything

confusion

other than a violation of P&W's intellectual property rights. Likewise, between support the for MJP's parties its reference in the to the settlement suit to agreement scant the

underlying MJP attempts

provides

argument.

distinguish

supposed "website style" claims from the trademark claims by noting that, in the settlement agreement, there were separate paragraphs detailing the transition of the domain name to MJP's website. reassignment Yet of the the fact that the name 17 settlement contemplated only

domain

"MarvinJPerry.com"

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underscores

that

the

underlying

suit

was

not

about

"website

style" but rather an infringement on right to use the trade name "Marvin J. Perry & Associates." 8 Indeed, the bulk of the settlement agreement concerned the allocation of rights to names related to "Marvin J. Perry." instance, one provision indicated that MJP would be the For new

owner of "a family of `Marvin J. Perry' marks and trade names, including but not limited to Marvin J. Perry, Marvin J. Perry, Inc., and Marvin J. Perry & Associates" while another discussed a royalty-free license for P&W to use the trade name "Marvin J. Perry & Associates" for a period of 10 years. Also, there was

little mention in the settlement agreement about restrictions on the style or presentation of advertisement on the internet other than a restriction on the use of certain trade names/trademarks and domain names. Further, the settlement agreement called the

underlying suit "a trademark infringement action." Ultimately, as the district court stated, "the independent unlawful conduct that caused P&W's business injury, which is the gravamen of P&W's underlying complaint and an element of the tort [of unfair competition] is based upon MJP's use of its This Court, in a case arising out of Maryland, has held that the unauthorized use of a trademark in an internet domain name can constitute trademark infringement when the domain name is intended to confuse internet users. See People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359 (4th Cir. 2001). 18
8

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trade name, trademark, logo, and website . . . in violation of P&W's registration and ownership of that name and mark[.]" As

such, any allegation of unfair competition would necessarily be excluded from coverage as a claim "arising out of any violation of any intellectual property rights, such as . . . trademark, trade name . . . or other designation of origin or

authenticity."

IV. In sum, to determine whether Hartford Insurance, the

liability insurer, had a duty to provide its insured, MJP, with a defense in the underlying tort suit brought by P&W, we answer the two Pryseski inquiries as follows: (1) Under the terms of

the insurance policy, although coverage is provided for some advertising injury, the Intellectual Property Rights Exclusion relieves Hartford Insurance of its duty to defend when a suit brought against MJP contains only allegations arising out of trademark or trade name violations; and (2) The allegations in the underlying use action of P&W's within hold by P&W, which and of focused trade the exclusively name, did on not

improper

trademark the scope

potentially Accordingly,

fall we

coverage had no

provided. duty to

that

Hartford

Insurance

defend against the underlying suit, and the district court did

19

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not

err

by

granting

Hartford

Insurance's

motion

for

summary

judgment. AFFIRMED

20