Intel Corporation v. The Insurance Company of the State of Pennsylvania

Filing 89

ORDER by Judge Jeremy Fogel granting in part 44 Motion to Intervene; granting 59 Motion to Continue; denying as moot 85 Motion to Continue and Motion for Joinder; deferring ruling on 24 , 25 Motion for Partial Summary Judgment (jflc1, COURT STAFF) (Filed on 1/9/2009)

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1 **E-Filed 1/9/2008** 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION INTEL CORPORATION, Plaintiff, v. INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA and DOES 1 through 100, Defendants. Case Number C 08-3238 JF (PVT) ORDER1 (1) GRANTING MOTION FOR CONTINUANCE IN PART; (2) GRANTING IN PART MOTION TO INTERVENE; AND (3) DEFERRING DETERMINATION OF MOTION FOR PARTIAL SUMMARY JUDGMENT [re: doc. nos. 24, 25, 44, 49, 85] Plaintiff Intel Corporation ("Intel") moves for partial summary judgment that Defendant Insurance Company of the State of Pennsylvania ("ICSOP") breached its duty to defend Intel in two state court class actions. After Intel filed its motion, ICSOP requested a continuance pursuant to Fed. R. Civ. P. 56(f) on the ground that additional discovery is required to ascertain the costs Intel incurred in the state court actions. In addition, a second insurer of Intel, Markel American Insurance Company ("Markel"), has filed a motion to intervene, seeking declaratory relief because it believes that Intel will file a future suit against it based upon the same claims now being asserted by Intel against ICSOP. Markel also requests that the Court defer This disposition is not designated for publication in the official reports. C a se No. C 08-3238 JF (PVT) O R D E R GRANTING MOTION FOR CONTINUANCE ETC. ( JF L C 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 determination of Intel's motion for partial summary judgment to permit Markel to file a full opposition. For the reasons set forth below, ICSOP's motion for a continuance will be granted and Markel's motion to intervene will be granted in part. Substantive consideration of Intel's motion for partial summary judgment will be deferred in order to provide both ICSOP and Markel additional time to oppose the motion. I. BACKGROUND In the underlying state court actions against Intel, the class plaintiffs alleged that Intel engaged in false and misleading advertising with respect to the performance of its Pentium 4 processors. The first action, entitled Barbara's Sales, Inc., et al. v. Intel Corp., et al., No. 02-L788 (the "Barbara's Sales Action") was filed in Madison County, Illinois in June 2002. The third amended complaint in the Barbara's Sales Action alleged various claims for relief, including unfair competition, and inter alia sought recovery under the California Consumers Legal Remedies Act, Cal. Civil Code 1750 et seq. ("CLRA"); the California Unfair Business Practices Act, Cal Bus. & Prof. Code 17200 et seq. ("UCL"); and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. On November 29, 2007, the Illinois Supreme Court held that Illinois law applied to the claims at issue and that class certification was improper because the generalized allegations set forth by the plaintiffs amounted to "mere puffery" that was not actionable under applicable Illinois law. Barbara's Sales v. Intel, 227 Ill. 2d 45, 74 (2007). On March 20, 2008, the Barbara's Sales Action was dismissed with prejudice. The second action, entitled Janet Skold, et al. v. Intel Corp., No. RG 04145635 (the "Skold Action"), was filed in the Alameda Superior Court in March 2004. The allegations in the Skold Action are similar to those in the Barbara's Sales Action. In August 2006, a specific damages claim was added to the Skold complaint, seeking recovery for violations of the CLRA, UCL, and the California False Advertising Act (Cal. Bus. & Prof. Code 17500). The Skold action still is ongoing. In 2006, Intel sued XL Insurance America, Inc. ("XL"), the issuer of Intel's primary litigation insurance policy (referred to herein as the "XL 00-01 Policy"), in the Santa Clara 2 C a se No. C 08-3238 JF (PVT) O R D E R GRANTING MOTION FOR CONTINUANCE ETC. ( JF L C 1 ) 1 2 3 4 5 6 7 8 9 Superior Court, alleging that XL breached its duty to defend Intel in the Barbara's Sales and Skold Actions. The crux of the dispute between Intel and XL was the following provision in the XL 00-01 Policy, which applies to liabilities for claims related to "Advertising Liability." This provision defines Advertising Liability as including: Injury arising out of offenses such as, but not limited to, libel, slander, defamation, infringement of copyright, title (including trademark) or slogan, piracy, unfair competition, idea misappropriation, (including trade secrets), breach of confidential information, electronic mail intercepts, misappropriation of the style of doing business (including website/homepage design), or invasion of rights of privacy committed, or alleged to have been committed, in any software, advertisement, promotion, publicity article, broadcast, or telecast. Labrador Decl., Ex. B at I.E. The XL 00-01 Policy also contains various exclusions. One of 10 the exclusions applies to claims for advertising liability, as set forth below: 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 C a se No. C 08-3238 JF (PVT) O R D E R GRANTING MOTION FOR CONTINUANCE ETC. ( JF L C 1 ) This policy shall not apply: *** (C) Under Advertising Liability for: (1) Breach of written contract; (2) Incorrect description of any article or commodity; or (3) Mistake in advertised price. Id. at VII.C(1)-(3). After Intel and XL filed cross motions for summary judgment, the Alameda Superior Court held that XL had failed to establish that Intel had no potentially covered liability under the XL 00-01 Policy. Subsequently, the parties settled for an amount equal to the full coverage limits of the XL 00-01 Policy. ICSOP is the issuer of one of Intel's excess insurance policies, entitled Follow Form Excess Liability Policy No. 4798-2252 (the "ICSOP Policy"). The ICSOP Policy requires ICSOP to defend Intel with respect to litigation costs in excess of the amount provided for in the XL 00-01 Policy. As the ICSOP Policy is a "follow form" policy, it contains the same rights and duties contained in the XL 00-01 Policy. Intel first notified ICSOP of the Barbara's Sales and Skold Actions in April 2004, but it did not notify ICSOP that its defense costs had accumulated to the attachment point of the ICSOP policy until December 2007. Markel is the issuer of another excess insurance policy for Intel (the "Markel Policy"), 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 which requires Markel to defend once costs exceed a threshold above that provided for by the ICSOP Policy. Markel alleges that in November 2007, Intel tendered the Barbara's Sales and Skold Actions for coverage and requested that Markel sign a confidentiality agreement. Markel asserts that Intel has breached its duty to cooperate with Markel's investigation as to whether it has a duty to defend Intel. II. DISCUSSION A. Deferral of Motion for Partial Summary Judgment Summary judgment should be granted only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Intel argues that the Court should rule on its motion for partial summary judgment now because Intel merely seeks a ruling as to whether ICSOP breached its duty to defend. In response, ICSOP contends not only that the language of the policy exclusion bars Intel's request for reimbursement of defense costs but also that ICSOP requires additional time to investigate whether the attachment point of the ICSOP policy in fact has been reached. Specifically, ICSOP alleges by affidavit that it has not been able to determine whether Intel exhausted certain additional primary insurance policies held by Intel. Absent such horizontal exhaustion, ICSOP would not have a duty to defend. See Cmty. Redevelopment Agency v. Aetna Cas. & Surety Co., 50 Cal. App. 4th 329, 339 (1996) ("It is settled under California law that an excess or secondary policy does not cover a loss, nor does any duty to defend the insured arise, until all of the primary insurance has been exhausted."). ICSOP also asserts that Intel's prior settlement with XL included funds allocated to costs associated with litigation other than the Barbara's Sales and Skold Actions, casting further doubt upon whether the attachment point of the ICSOP Policy has been reached. Finally, ICSOP seeks additional time to analyze expense forms that already have been produced by Intel. The Court concludes that the proper resolution of Intel's motion would be aided by providing ICSOP with additional time to investigate the aforementioned issues. See State of Cal v. Campbell, 138 F.3d 772, 779 (9th Cir. 1998) ("a district court should continue a summary judgment motion upon a good faith showing by affidavit that the continuance is needed to obtain facts essential to 4 C a se No. C 08-3238 JF (PVT) O R D E R GRANTING MOTION FOR CONTINUANCE ETC. ( JF L C 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 preclude summary judgment."). At oral argument, counsel for ICSOP represented that a period of ninety days would be sufficient to evaluate Intel's defense costs and the applicability of additional insurance policies held by Intel. Accordingly, ICSOP will be granted ninety days from the date of this order to conduct further discovery. B. Intervention by Markel In the Ninth Circuit, there are four requirements for intervention as of right under Fed. R. Civ. P. 24(a)(2): (1) the application for intervention must be timely; (2) the applicant must have a "significantly protectable" interest relating to the property or transaction that is the subject of the action; (3) the applicant must be so situated that disposition of the action may, as a practical matter, impair or impede the applicant's ability to protect that interest; and (4) the applicant's interest must be inadequately represented by the existing parties in the lawsuit. Nw. Forest Res. Council v. Glickman, 82 F.3d 825, 836 (9th Cir. 1996). Alternatively, a court may grant permissive intervention under Rule 24(b) if there is an independent ground for jurisdiction, the motion to intervene is timely, and a common question of law or fact exists. Southern Calif. Edison Co. v. Lynch, 307 F.3d 794, 803 (9th Cir. 2002). Even if the threshold requirements for permissive intervention are met, a court has discretion to deny permissive intervention. Id. Intel argues that Markel has not satisfied the requirements for either permissive intervention or intervention as of right because there is no realistic chance that the higher coverage levels provided by the Markel Policy will be reached. In other words, Intel's position is that Markel's claims are not ripe and that accordingly the Court lacks jurisdiction to consider Markel's request for declaratory relief. Intel also argues that intervention as of right is unavailable because Markel's desire to avoid an unfavorable ruling with respect to the meaning of the policy provisions at issue is not a protectable interest within the meaning of Rule 24(a). Intel contends that because different facts underlie the various defenses asserted by the two insurers, permissive intervention will impair the efficient resolution of the dispute between Intel and ICSOP. In response, Markel asserts that the total damages sought by the plaintiffs in the Skold Action, if proven, will reach the Markel Policy. Markel also alleges that a duty to cooperate 5 C a se No. C 08-3238 JF (PVT) O R D E R GRANTING MOTION FOR CONTINUANCE ETC. ( JF L C 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 arose once Intel tendered the Skold Action to Markel, and that Intel has breached that duty by not cooperating with Markel's investigation to determine whether coverage in fact is appropriate. Finally, Markel disputes whether the factual differences underlying each of the insurers' respective defenses as to Intel's duty to cooperate are sufficiently significant that they would impede judicial economy. In an action for declaratory relief, a district court may exercise jurisdiction only over a case or controversy that is ripe for review. See Am. States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994). The Ninth Circuit has held that a district court may exercise jurisdiction over a declaratory relief action filed by an insurer with respect to its duty to defend still-pending state court litigation. Id. at 144. Thus, while the actual costs incurred by Intel may not have reached an amount sufficient to trigger the Markel Policy, this fact by itself does not prevent the Court from exercising jurisdiction. See id. See also Employers Ins. of Wausau v. Fox Entm't Group, Inc., 522 F.3d 271, 278 (2d Cir. 2008) ("That the liability may be contingent does not necessarily defeat jurisdiction of a declaratory judgment action."). Moreover, the fact that Intel has tendered the Barbara's Sales and Skold Actions to Markel for coverage is inconsistent with Intel's position that no case or controversy exists between Markel and Intel. Nonetheless, the Court agrees with Intel that Markel has not made an adequate showing to support intervention as of right, and that Markel's desire to avoid unfavorable precedent with respect to the construction of the policy provisions at issue is not a protectable interest under Rule 24(a)(2). See In re Estate of Ferdinand E. Marcos Human Rights Litig., 536 F.3d 980, 986-87 (9th Cir. 2008). Instead, the Court concludes that permissive intervention is appropriate but should be limited in scope. "The district court's discretion, at least under Rule 24(b), to grant or deny an application for permissive intervention includes discretion to limit intervention to particular issues." Van Hoomissen v. Xerox Corp., 497 F.2d 180, 181 (9th Cir. 1974). Here, the proper interpretation of the Advertising Liability provision and the various exclusions within the insurance policies is an issue common to all of the disputes among the parties. In contrast, whether Intel has breached its duty to cooperate with Markel presents a separate question. The resolution of that question would require additional time and discovery. Accordingly, Markel 6 C a se No. C 08-3238 JF (PVT) O R D E R GRANTING MOTION FOR CONTINUANCE ETC. ( JF L C 1 ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 will be permitted to intervene for the limited purpose of opposing Intel's motion for partial summary adjudication that the policy provisions at issue impose a duty to defend the Barbara's Sales and Skold Actions. Such intervention will not create any additional delay in light of the Court's decision to defer resolution of Intel's motion.2 IV. ORDER Good cause therefor appearing, IT IS HEREBY ORDERED that ICSOP's motion for a continuance is GRANTED, and Markel's motion to intervene is GRANTED IN PART.3 ICSOP shall have ninety (90) days from the date of this order to conduct additional discovery. The resolution of Intel's motion for partial summary judgment is deferred pending such discovery. Any dispute over the nature or scope of discovery shall be referred to Magistrate Judge Trumbull. Once the record has been developed sufficiently, the parties may file additional briefs and reserve a hearing date for oral argument. IT IS SO ORDERED. DATED: January 9, 2009 ___________________________ JEREMY FOGEL United States District Judge Because intervention likely would result in issue preclusion between Markel and Intel as to this particular issue, Markel may withdraw its motion to intervene and instead file an amicus brief if it believes that it would be more prudent for it to present all of its claims and defenses together or if it requires additional discovery to oppose Intel's motion for summary judgment. Either of the two latter approaches should be pursued in a separate action against Intel. Markel also filed a separate motion for a continuance and for joinder in ICSOP's opposition to Intel's motion for partial summary judgment. This motion is denied as moot in light of the instant order. 7 C a se No. C 08-3238 JF (PVT) O R D E R GRANTING MOTION FOR CONTINUANCE ETC. ( JF L C 1 ) 3 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 This Order has been served upon the following persons: Howard M. Garfield hgarfield@longlevit.com, chipc@longlevit.com, cratcliff@longlevit.com, jlocker@longlevit.com Kevin Grier McCurdy kevin.mccurdy@mccurdylawyers.com, danielle.torres@mccurdylawyers.com, lena.nielsen@mccurdylawyers.com, mary.mccurdy@mccurdylawyers.com Lester Owen Brown brownl@howrey.com, chaneyf@howrey.com, dillardg@howrey.com, hilliardb@howrey.com, kiyotokic@howrey.com, mcmahont@howrey.com Mary P. McCurdy mary.mccurdy@mccurdylawyers.com, danielle.torres@mccurdylawyers.com, lena.nielsen@mccurdylawyers.com Fiona Anne Chaney Howrey LLP 550 South Hope Street Suite 1100 Los Angeles, CA 90071 Mary Plungy McCurdy McCurdy & Fuller LLP 4300 Bohannon Drive Suite 240 Menlo Park, CA 94025 8 C a se No. C 08-3238 JF (PVT) O R D E R GRANTING MOTION FOR CONTINUANCE ETC. ( JF L C 1 )

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