AMA Discount, Inc. et al v. Seneca Specialty Insurance Company

Filing 15

ORDER and REASONS granting in part and denying in part 9 Motion for Summary Judgment, as stated within document. Signed by Chief Judge Kurt D. Engelhardt on 1/12/2016. (cbs)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
KRISPY KRUNCHY FOODS, L.L.C

CIVIL ACTION

VERSUS

NO. 15-590

AMA DISCOUNT, INC., ET AL.

SECTION “N” (2)
and

AMA DISCOUNT, INC., ET AL.

CIVIL ACTION

VERSUS

NO. 15-2845

SENECA SPECIALTY INSURANCE COMPANY

SECTION “N” (2)

ORDER AND REASONS
Presently before the Court in these matters are two closely related motions. Given
that relationship, the Court finds it appropriate to address the motions together.1 As set for herein,
IT IS ORDERED that Defendant Seneca Specialty Insurance Company's ("Seneca") motion to
dismiss (Civil Action No. 15cv590, Rec. Doc. 28) is DENIED. IT IS FURTHER ORDERED that
the motion for summary judgment filed by AMA Discount, Inc. d/b/a Chef Discount Market
(“AMA”), Ali M. Allan, and Mohammed Allan (collectively, the “AMA parties") (Civil Action No.
15-2845, Rec. Doc. 9) is GRANTED IN PART and DENIED IN PART.

1

Because these actions were found to be related for purposes of Local Rule 3.1.1, the
later matter was transferred from Section "S" to Section "N" in July 2015. See Civil Action No. 152845 (Rec. Doc. 4).
1

In Civil Action No. 15-590, Krispy Krunchy Foods, L.L.C. ("Krispy") seeks a
judgment in its favor against the AMA parties based on their alleged violation of Krispy's trademark
and trade dress in selling chicken at their "Chef Discount Market" convenience store. Krispy also
seeks judgment against Seneca, as AMA's commercial general liability insurer. In Civil Action No.
15-2845, the AMA parties seek a judgment against Seneca finding that Seneca is obligated to defend
and indemnify the AMA parties in the suit filed by Krispy.
Both motions addressed herein concern Defendant Seneca's alleged duty to defend
and indemnify the AMA parties against the trademark, trade dress, and related state law claims that
Krispy has asserted against them based on AMA's alleged continued use of Krispy's trademark and
trade dress after being notified that Krispy had terminated AMA's license to use those protected
materials in selling Krispy food products pursuant to Krispy's "KKF Program." In support of its
motion to dismiss, Seneca maintains that its policy does not afford any coverage for Krispy’s claims;
therefore, Seneca is not obligated to defend and indemnify the AMA parties. Conversely, the AMA
parties' motion for summary judgment contends that Krispy's claim premised on AMA's alleged
unauthorized use of Krispy's trade dress in its store displays falls within the terms of the Seneca
policy's insuring agreement. Thus, they contend that Seneca is obligated to defend the AMA parties
against Krispy's claim unless it is clear from the complaint that the policy unambiguously excludes
coverage for the claims asserted therein. Krispy joins the AMA parties in contesting the notion that
coverage is unambiguously excluded by the policy such that Seneca bears no defense or indemnity
obligation relative to Krispy's liability claims.

2

LAW AND ANALYSIS
Pertinent to the claims that Krispy has asserted against the AMA parties, the Seneca
insurance policy’s Coverage B, regarding personal and advertising injury, has the following insuring
agreement, exclusion, and definitions:
SECTION I - COVERAGES
***
COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
a.

We will pay those sums that the insured becomes legally
obligated to pay as damages because of “personal and
advertising injury” to which this insurance applies. We will
have the right and duty to defend the insured against any
“suit” seeking those damages. However, we 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.

2. Exclusions
This insurance does not apply to:
a.

Knowing Violation Of Rights Of Another
“Personal and advertising injury” caused by or at the
direction of the insured with the knowledge that the act would
violate the rights of another and would inflict “personal and
advertising injury.”

****

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SECTION V- DEFINITIONS
***
14. “Personal and advertising injury” means injury, including
consequential “bodily injury,” arising out of one or more of the
following offenses:
***
g. Infringing upon another’s copyright, trade dress or slogan in
your “advertisement.”
***
18. “Suit” means a civil proceeding in which damages because of
“bodily injury,” “property damage,” or “personal and advertising
injury” to which this insurance applies are alleged.
Having carefully reviewed the parties's submissions, Krispy's Second Amended
Complaint, and applicable law, the Court finds, on the present showing made, that Seneca has not
demonstrated the unambiguous applicability of its "Knowing Violation of Rights of Another"
exclusion to the trade dress infringement claims that Krispy has asserted against the AMA parties.
In short, although Krispy's Second Amended Complaint does allege AMA's "deliberate course of
action," inter alia, in support of its requests for certain enhanced remedies provided by statute for
intentional or willful behavior,2 it is far from apparent that Krispy's claims do not also contemplate
and encompass the lesser compensatory relief available for less egregious conduct. See, e.g,
Looney Ricks Kiss Architects, Inc. v. Bryan, Civil Action No. 07-0572, 2014 WL 931781, *6 (W.D.
La. March 10, 2014) (("'knowing violation of rights exclusion' has been classified as an intentional
acts exclusion" such that "courts have refused to apply the exclusion where the insured could be

2

See Second Amended Complaint (Civil Action 15-590, Rec. Doc. 22) at ¶136 (citing
15 U.S.C. §1117 (b)(1), (c)(1) and (c)(2).
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liable even if the infringement was inadvertent, negligent, or reckless."). Indeed, Krispy seeks relief
for the AMA's alleged trade dress infringement (Count 3) under 15 U.S.C. § 1117(a), which requires
no finding of intentional or willful conduct and authorizes an award of a sum that is compensatory
rather than punitive. See 15 U.S.C. § 1117(a); 15 U.S.C. § 1125(a).
Thus, while it is possible that Seneca, by virtue of the aforementioned exclusion,
actually may bear no indemnity obligation relative to certain components of any damages that the
AMA parties ultimately may be ordered to pay, Krispy's allegations are not such that "every claim
pleaded in the complaint (and otherwise falling within the insurance clause) unambiguously falls
within an exclusion." See Martco Limited Partnershp v. Wellons, Inc. 588 F.3d 864, 876 (5th Cir.
2009). Accordingly, Seneca's policy obligates it to defend the AMA parties against the entirety of
the claims that Krispy has asserted in Civil Action No. 15-590. See Alert Centre, Inc. v. Alarm
Protection Services, 987 F.2d 161, 163 (5th Cir. 1992) ("an insurer's duty to defend is broader than
its duty to indemnify [and] allegations in the complaint are liberally interpreted to determine whether
they establish a duty to defend")); Montgomery Elevator Co. v. Building Engineering Services, Co.,
730 F.2d 377, 382 (5th Cir. 1984) ("'once a complaint states one claim with the policy's coverage,
the insurer has a duty to accept defense of the entire lawsuit, even though other claims in the
complaint fall outside of the policy's coverage'") (quoting American Automobile Association v.
Globe Indemnity Co., 362 So. 2d 1206, 1209 (La. App. 1978)); see also Adventure Harbor Estates
v. LeBlanc, Civil Action Nos. 12-1848, 13-142, 13-4925, 2014 WL 1389628, *3 (E.D. La. April 9,
2014) (Zainey, J) (same).

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Given the foregoing, the Court denies Seneca's motion to dismiss and, insofar as it
addresses Seneca's duty to defend, grants the AMA parties' motion for summary judgment. On the
other hand, certain language in AMA parties' motion arguably suggests it likewise seeks a favorable
ruling relative to Seneca's duty of indemnity. As stated above, the Court is unable to determine
Seneca's indemnity obligation, if any, at this stage of the proceeding. Accordingly, to the extent the
AMA parties' motion for summary judgment seeks a favorable indemnity determination, it is denied.
New Orleans, Louisiana, this 12th day of January 2016.

KURT D. ENGELHARDT
United States District Judge

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