Travelers Indemnity Company et al v. Premier Organics, Inc.

Filing 63

ORDER GRANTING DEFENDANT'S MOTION TO ALLOW TIME FOR DISCOVERY; CONTINUING BRIEFING AND HEARING ON PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT by Judge Yvonne Gonzalez Rogers; denying without prejudice to refiling once limited discovery is conducted 51 Motion for Summary Judgment; granting 57 Motion to Continue all Briefing and hearing on plaintiffs' motion for summary judgment. Compliance hearing is set for Friday, 10/20/2017 09:01 AM in Courtroom 1, 4th Floor, Oakland before Judge Yvonne Gonzalez Rogers. (fs, COURT STAFF) (Filed on 9/29/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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TRAVELERS INDEMNITY COMPANY
OF CONNECTICUT, et al.,

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Plaintiffs,

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v.
PREMIER ORGANICS, INC.,

United States District Court
Northern District of California

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Case No.17-cv-00302-YGR
ORDER GRANTING DEFENDANT'S MOTION
TO ALLOW TIME FOR DISCOVERY;
CONTINUING BRIEFING AND HEARING ON
PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT
Re: Dkt. Nos. 51, 57

Defendant.

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Now before the Court is defendant Premier Organics, Inc.'s (“Premier Organics”) motion

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to allow time for discovery and continue all briefing and hearing on plaintiffs Travelers Indemnity

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Company of Connecticut’s and Travelers Property Casualty Company of America’s (collectively

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“Travelers”) motion for summary judgment pursuant to Fed. R. Civ. Pro. 56(d). (Dkt. No 57.)

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Having carefully considered the pleadings and the papers submitted on this motion, and for the

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reasons set forth below, defendant’s motion is GRANTED. All briefing and hearing dates regarding

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plaintiffs’ motion for summary judgment are CONTINUED as set forth herein.

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I.

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RELEVANT BACKGROUND
This declaratory relief action arises from a punitive class action captioned Alan Ducorsky

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v. Premier Organics, Alameda County Superior Court, Case No. HG16801566 (the “Ducorsky

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Class Action”) wherein the class action consumer plaintiffs sought damages from Premier arising

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from its sale of coconut oil. The class action is now-tentatively-resolved and Travelers has

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contributed to the settlement, with a reservation of rights. Travelers submits that no potential for

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insurance coverage ever existed under Premier’s general liability policies. Specifically, Travelers

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argues that the insurance policy covers “bodily injury” caused by an “occurrence” and that the

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Ducorsky Class Action does not allege “bodily injury.” Premier disagrees positing that because

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the class action plaintiffs alleged that coconut oil caused health-related harms, it may fall within

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the purview of bodily injury.
Pursuant to the scheduling order entered in this case on July 10, 2017, the Court permitted

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Travelers to file an early summary judgment motion, but also allowed Premier to file a motion

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specifying whether and which discovery it needed, if at all, to oppose the motion. (Dkt. No. 41.)

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Travelers contends that no discovery is required to resolve its motion. (Dkt. No. 39.)

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II.

LEGAL FRAMEWORK

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A. SUMMARY JUDGMENT

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“[S]ummary judgment is premature unless all parties have ‘had a full opportunity to
conduct discovery.’” Convertino v. DOJ, 684 F.3d 93, 99 (D.C. Cir. 2012) (quoting Anderson v.

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United States District Court
Northern District of California

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Liberty Lobby, Inc., 477 U.S. 242, 257 (1986)). Fed. R. Civ. Pro. 56(d) provides that “[i]f a

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nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts

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essential to justify its opposition, the court may: defer considering the motion . . . [or] allow time

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to obtain affidavits or declarations or take discovery.” The “Supreme Court has restated the rule as

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requiring, rather than merely permitting, discovery ‘where the nonmoving party has not had the

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opportunity to discover information that is essential to its opposition.’” Metabolife Int'l, Inc. v.

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Wornick, 264 F.3d 832, 846 (9th Cir. 2001) (quoting Anderson, 477 U.S. at 250 n. 5).

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B. CONTRACTUAL INTERPRETATION

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The California Court of Appeals decision in London Mkt. Insurers v. Super. Ct., 146

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Cal.App.4th 648, 656 (2007) provides the relevant framework for evaluating the instant motion

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under California law:
Although insurance contracts have special features, they are still contracts to
which the ordinary rules of contractual interpretation apply. Foster–Gardner, Inc.
v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868, 77 Cal.Rptr.2d 107,
959 P.2d 265; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264, 10
Cal.Rptr.2d 538, 833 P.2d 545.) Thus, the mutual intention of the contracting
parties at the time the contract was formed governs. (Civ.Code, § 1636; Foster–
Gardner, Inc., supra, 18 Cal.4th at p. 868, 77 Cal.Rptr.2d 107, 959 P.2d 265.) We
ascertain that intention solely from the written contract if possible, but also
consider the circumstances under which the contract was made and the matter to
which it relates. (Civ.Code, §§ 1639, 1647; American Alternative Ins. Corp. v.
Superior Court (2006) 135 Cal.App.4th 1239, 1245, 37 Cal.Rptr.3d 918.) We
consider the contract as a whole and interpret the language in context, rather than

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interpret a provision in isolation. (Civ.Code, § 1641; American Alternative Ins.
Corp., supra, 135 Cal.App.4th at p. 1245, 37 Cal.Rptr.3d 918.) We interpret
words in accordance with their ordinary and popular sense, unless the words are
used in a technical sense or a special meaning is given to them by usage.
(Civ.Code, § 1644; American Alternative Ins. Corp., supra, 135 Cal.App.4th at p.
1245, 37 Cal.Rptr.3d 918.)

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United States District Court
Northern District of California

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A policy provision is ambiguous if it is capable of two or more reasonable
constructions. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18, 44
Cal.Rptr.2d 370, 900 P.2d 619; Bay Cities Paving & Grading, Inc. v. Lawyers’
Mutual Ins. Co. (1993) 5 Cal.4th 854, 867, 21 Cal.Rptr.2d 691, 855 P.2d 1263.) In
determining if a provision is ambiguous, we consider not only the face of the
contract but also any extrinsic evidence that supports a reasonable interpretation.
(Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 37,
39–40, 69 Cal.Rptr. 561, 442 P.2d 641.) Even apparently clear language may be
found to be ambiguous when read in the context of the policy and the
circumstances of the case. (American Alternative Ins. Corp., supra, 135
Cal.App.4th at p. 1246, 37 Cal.Rptr.3d 918, citing MacKinnon v. Truck Ins.
Exchange (2003) 31 Cal.4th 635, 652, 3 Cal.Rptr.3d 228, 73 P.3d 1205.)
If policy language is ambiguous, an interpretation in favor of coverage is
reasonable only if it is consistent with the objectively reasonable expectations of
the insured. (Bank of the West, supra, 2 Cal.4th at p. 1265, 10 Cal.Rptr.2d 538,
833 P.2d 545.) Thus, the court must determine whether the coverage under the
policy that would result from such a construction is consistent with the insured’s
objectively reasonable expectations. (Nissel v. Certain Underwriters at Lloyd’s of
London (1998) 62 Cal.App.4th 1103, 1111–1112, 73 Cal.Rptr.2d 174.)
In London Market, the Court considered the drafting history of the policy term in question.
Under California law, the “fundamental goal of contractual interpretation is to give effect

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to the mutual intention of the parties.” Bank of the W. v. Superior Court, 2 Cal.4th 1254, 1264

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(1992). “The mutual intention to which the courts give effect is determined by objective

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manifestations of the parties’ intent, including the words used in the agreement, as well as

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extrinsic evidence of such objective matters such as the surrounding circumstances under which

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the parties negotiated or entered into the contract; the object, nature and subject matter of the

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contract; and the subsequent conduct of the parties.” Morey v. Vannucci, 64 Cal.App.4th 904, 912

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(1998) (emphasis supplied). “Such intent is to be inferred, if possible, solely from the written

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provisions of the contract.” Foster-Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal.4th 857,

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868 (1998) (citation omitted). However, in determining whether an ambiguity exists in the written

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provisions, “language in a contract must be construed in the context of the instrument as a whole
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and in the circumstances of that case.” Id. (Internal quotations and citation omitted). Extrinsic

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evidence may be admissible to “prove that a term is, in fact, ambiguous.” Lexington Ins. Co. v.

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Commonwealth Ins. Co., 1999 WL 33292943, *4 (N.D. Cal. 1999) (citing Pac. Gas & Elec., 69

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Cal.2d at 37).

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III.

DISCUSSION

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Plaintiffs’ motion for summary judgment hinges in large part on the interpretation of two

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policy terms, namely “bodily injury” and “occurrence.” (See Dkt. 51 at 1.) In essence, Travelers

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argues that the consumer class action is merely one of a labeling concern. While those allegations

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certainly exist, Travelers chooses to ignore the allegations regarding the harm to one’s health.
(See Dkt. No. 1, Complaint for Declaratory Judgment and Reimbursement ¶¶ 12-21, 36-46.) It is

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United States District Court
Northern District of California

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on these that defendant focuses.

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As discussed above, California law requires the Court to interpret the terms in light of

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extrinsic evidence regarding the drafting, negotiation, and performance of the policy. See Pac.

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Gas & Elec, 69 Cal.2d at 37; London Mkt. Insurers, 146 Cal.4th at 661-62. Accordingly,

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defendant is entitled to discovery of extrinsic evidence relevant to whether these terms are “in fact,

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ambiguous.” Lexington, 1999 WL 33292943, *4 (citing Pac. Gas & Elec., 69 Cal.2d at 37). Such

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extrinsic evidence is not unlimited but rather focuses on “the surrounding circumstances under

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which the parties negotiated or entered into the contract; the object, nature and subject matter of

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the contract; and the subsequent conduct of the parties.” Morey, 64 Cal.App.4th at 912; see also

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Hernandez v. Badger Construction Equipment Co. 28 Cal.App.4th 1791, 1814 (1994).

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Here, Premier has provided a declaration, (Dkt. No. 58, Declaration of Thiele R. Dunaway

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¶¶ 20-30 (“Dunaway Decl.”)), which states that without discovery on certain categories of

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extrinsic evidence it “cannot present facts essential to justify its opposition” to plaintiffs’ summary

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judgment motion. See Fed. R. Civ. Pro. 56(d). Specifically, defendant avers that such evidence

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“will assist in determining what facts relating to the Ducorsky claims were known by Travelers at

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the time it made its coverage decisions . . . how Travelers has interpreted the language in the

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policies, as well Travelers’ intent with respect to the policies . . . . what risks Travelers expected to

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cover when it used the terms at issue. . . . [and] how Travelers has interpreted the pertinent
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provisions of the policies as well as how it has evaluated similar claims in making a coverage

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determination. . . .” (Dunaway Decl. ¶¶ 23, 25-26, 30.) According to defendants, relevant and

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discovery evidence includes:

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all documents specifically referring to or related to Premier and the Ducorsky
Action . . . . the identity of all claims adjusters who handled Premier’s claim and
the identity of all persons who evaluated, analyzed or otherwise participated in the
coverage determination for Premier. . . . Travelers’ claims manuals, underwriting
files and manuals, and Travelers’ internal communications related to the
interpretation of the terms ‘bodily injury,’ ‘occurrence,’ ‘accident,’ ‘expected or
intended,’ ‘personal injury,’ and ‘advertising injury[]’. . . . documents related to
information Travelers’ insurance adjusters received while attending seminars,
conferences, presentations and/or other meetings relating to interpretation of those
policy terms. . . . all documents related to the action[s] styled Hunter v. Nature’s
Way Products, LLC and Schwabe North America, Inc. . . . [and] Sonner v.
Schwabe North America, Inc. and Nature’s Way Products, LLC . . . . documents
relating to any other Travelers’ insureds where third party plaintiffs have asserted
claims similar to those alleged against Premier in the Ducorsky Action . . . the
identification of all actions filed against Travelers’ insureds asserting claims
against defendants regarding the sale of herbal supplements. . . . [and] expenses
actually incurred by Travelers [in providing a defense to Premier]

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United States District Court
Northern District of California

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(Dkt. No. 57 at 15-19.)
As an initial matter, the Court finds defendant’s proposed discovery unduly burdensome

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and inconsistent with the revisions to the Code which now provides as to scope, discovery of “any

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nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs

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of the case, considering the importance of the issues at stake in the action, the amount in

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controversy, the parties’ relative access to relevant information, the parties’ resources, the

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importance of the discovery in resolving the issues, and whether the burden or expense of the

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proposed discovery outweighs its likely benefit.” Fed. R. Civ. P. 26(b)(1).

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Much of defendant’s proposed discovery appears to be irrelevant as to whether the policy

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terms at issue are ambiguous and extends beyond the parties’ “mutual intention.” Further, none

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of the discovery which defendant proposes speaks to “the objectively reasonable expectations of

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the insured.” London Mkt. Insurers, 146 Cal.App.4th at 656 (citing Bank of the W., 2 Cal.4th at

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1065.

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Accordingly, at this juncture the Court finds that defendant is only entitled to discovery relevant to
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whether there exists ambiguity with regard to the policy terms “bodily injury” and “occurrence.”

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This includes, to the extent not already produced, (i) all documents specifically referring to

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Premier and the Ducorsky action which discuss the meaning of the terms “bodily injury” or

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“occurrence”; (ii) underwriting files and manuals specifically related to the terms “bodily injury”

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or “occurrence”; (iii) the identity of all claims adjusters who handled defendant’s claim; (iv) the

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identity of all persons who evaluated, analyzed or otherwise participated in the coverage

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determination for defendant; (v) Travelers’ internal communications related to the interpretation of

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the terms “bodily injury” and “occurrence”; and (vi) expenses actually incurred by Travelers in

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providing a defense to Premier, broken down for each party which shared defense costs.1 Under

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Rule 56, the Court must “defer considering the [summary judgment] motion” and allow time for

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United States District Court
Northern District of California

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defendant to take limited discovery of these materials only. See Fed. R. Civ. Pro. 56; Metabolife,

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264 F.3d at 846 (quoting Anderson, 477 U.S. at 250 n. 5).

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IV.

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CONCLUSION
Having carefully considered the pleadings and the papers submitted on this motion, and for

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the reasons set forth above, defendant’s motion to continue all briefing and hearing on plaintiffs’

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motion for summary judgment is GRANTED. Plaintiffs’ pending motions are DENIED WITHOUT

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PREJUDICE to refiling once limited discovery is conducted.

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The Court hereby SETS a compliance hearing for October 20, 2017 on the Court’s 9:01

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By contrast, at this juncture defendant is not entitled to discovery regarding the identity
of all persons who approved the language used in all Travelers commercial general liability
policies; Travelers’ claims manuals, underwriting files and manuals related to terms other than
“bodily injury” or “occurrence”; all actions ever filed in any court against a Travelers insured
asserting similar claims, including each attorney representing a plaintiff such actions; all persons
who communicate with any governmental regulatory agency referring or related to Travelers
commercial general liability policies; all persons who testified as expert witnesses on behalf of
Travelers in the past ten years in any action with an insured related to any dispute regarding a duty
to defend or indemnify under a Travelers commercial general liability policy; documents related to
information Travelers’ insurance adjusters received while attending seminars, conferences,
presentations and/or other meetings relating to interpretation of those policy terms; documents
related to the Hunter and Sonner actions; other Travelers’ insureds where third party plaintiffs
have asserted claims similar to those alleged against Premier in the Ducorsky action; Travelers’
internal communications related to the interpretation of the terms other than “bodily injury” or
“occurrence;” or actions filed against Travelers’ insureds asserting claims regarding the sale of
herbal supplements. The Court will consider whether defendant is entitled to these materials at a
later date if Premier is able to establish that the terms at issue are in fact ambiguous, as provided
herein.
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a.m. calendar, in the Federal Courthouse, 1301 Clay Street, Oakland, California, Courtroom 1,

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for the filing of a JOINT discovery plan with potential dates for the refiling of plaintiffs’ motion

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for summary judgment. Five (5) business days prior to the date of the compliance hearing, the

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parties shall file their JOINT discovery plan with potential dates for the refiling of plaintiffs’

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motion for summary judgment or a one-page JOINT STATEMENT setting forth an explanation

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regarding the failure to comply.

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If compliance is complete, the parties need not appear and the compliance hearing will be
taken off calendar.
This terminates Docket No. 51, 57.
IT IS SO ORDERED.

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United States District Court
Northern District of California

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Dated: September 29, 2017

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YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT JUDGE

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