John Wiley & Sons, Inc. et al v. Book Dog Books, LLC et al

Filing 363

OPINION AND ORDER. For the reasons in this Opinion and Order, Liberty's motion to intervene (Docket #324) and Westfield's motion to intervene (Docket #327) are denied. re: 327 MOTION to Intervene filed by Westfield Insurance Company, 324 MOTION to Intervene (The Netherlands Insurance Company's Motion to Intervene) filed by The Netherlands Insurance Company. (Signed by Magistrate Judge Gabriel W. Gorenstein on 6/22/2016) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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JOHN WILEY & SONS, INC. et al.,
:
:
Plaintiffs,

OPINION AND ORDER
:

-v.:

13 Civ. 816 (WHP) (GWG)

BOOK DOG BOOKS, LLC et al.,
:
Defendants.
:
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GABRIEL W. GORENSTEIN, United States Magistrate Judge
Plaintiffs John Wiley & Sons, Inc., Cengage Learning, Inc., and Pearson Education, Inc.
brought this suit against Book Dog Books, LLC and Philip Smyres (collectively, “BDB”)
alleging principally claims of copyright infringement, trademark infringement, and fraud. See
Second Amended Complaint, filed May 27, 2015 (Docket # 263) (“SAC”), ¶¶ 59-109; see
generally John Wiley & Sons, Inc. v. Book Dog Books, LLC, 2015 WL 5724915, at *1-*9
(S.D.N.Y. Sept. 30, 2015); Memorandum and Order, filed Mar. 29, 2016 (Docket # 352). The
Netherlands Insurance Company (“Liberty”) and Westfield Insurance Company (“Westfield”)
have now moved to intervene so that they may submit interrogatories to the jury relating to
coverage under their insurance policies.1 For the reasons stated below, Liberty and Westfield’s
1

See The Netherlands Insurance Company’s Motion to Intervene, filed Nov. 2, 2015
(Docket # 324); The Netherlands Insurance Company’s Memorandum of Law in Support of
Motion to Intervene, filed Nov. 2, 2015 (Docket # 325) (“Liberty Mem.”); Declaration of Adam
Woellert, filed Nov. 2, 2015 (Docket # 326) (“Woellert Decl.”); Notice of Motion to Intervene
for a Limited Purpose, filed Nov. 2, 2015 (Docket # 327); Memorandum of Law in Support of
Westfield Insurance Company’s Motion to Intervene for a Limited Purpose, filed Nov. 2, 2015
(“Westfield Mem.”); Declaration of Jaime M. Merritt, Esquire, filed Nov. 2, 2015 (“Merritt
Decl.”); Plaintiffs’ Response to the Motions to Intervene Filed by Westfield Insurance Company
(ECF No. 327) and the Netherlands Insurance Company (ECF No. 324), filed Dec. 9, 2015
(Docket # 345) (“P. Resp.”); Defendants’ Memorandum of Law in Opposition to the Netherlands
Insurance Company’s and Westfield Insurance Company’s Motions to Intervene for a Limited

motions to intervene are denied.2
I. BACKGROUND
Westfield and Liberty (the “Insurers”) each provided insurance coverage to BDB.
Liberty insured BDB from November 30, 2007, through November 30, 2008. See Policy
Number BOP8219953, annexed as Ex. A to Woellert Decl. at 32.3 Westfield insured BDB from
November 30, 2008, through November 30, 2012. See Business Owners Policy No.
BOP4611259 and Umbrella Policy No. BSP4611417, annexed as Ex. A to Merritt Decl. The
language of the policies invoked in the parties’ briefs is nearly identical and covers “personal
and advertising injury” caused by the insured. See Liberty Mem. at 3-4; Westfield Mem. at 2-4.
“Advertising injury” is defined to include “[t]he use of another’s advertising idea in [the
insured’s] ‘advertisement,’” and “infringing upon another’s copyright, trade dress or slogan in
[an] ‘advertisement.’” See Liberty Mem. at 4; Westfield Mem. at 2. The policies have various
exclusions, including exclusions for personal and advertising injury “[c]aused 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,’” injury “[a]rising out of oral or written

Purpose, filed Dec. 9, 2015 (Docket # 346) (“D. Opp.”); Declaration of Evan Mandel, filed Dec.
9, 2015 (Docket # 347); The Netherlands Insurance Company’s Reply Memorandum of Law in
Support of Motion to Intervene, filed Dec. 23, 2015 (Docket # 348) (“Liberty Reply”); Reply
Memorandum of Law in Support of Westfield Insurance Company’s Motion to Intervene for a
Limited Purpose, filed Dec. 23, 2015 (Docket # 349) (“Westfield Reply”).
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Because this motion to intervene for the sole purpose of presenting interrogatories to a
jury is not dispositive as to any claim, it is decided pursuant to 28 U.S.C. § 636(b)(1)(A). See
United States v. Certain Real Property and Premises Known as 1344 Ridge Road, Laurel
Hollow, Syosset, N.Y., 751 F. Supp. 1060, 1061 (E.D.N.Y. 1989) (motion to intervene not
“dispositive”).
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We refer to this document according to the page numbers assigned by the ECF system.
2

publication of material, if done by or at the direction of the insured with knowledge of its
falsity,” and injury “[a]rising out of a breach of contract, except an implied contract to use
another’s advertising idea in [the insured’s] ‘advertisement.’” See Liberty Mem. at 4; Westfield
Mem. at 3. The policies also exclude injury “[a]rising out of the infringement of copyright,
patent, trademark, trade secret or other intellectual property rights.” Liberty Mem. at 4;
Westfield Mem. at 3. This exclusion does not apply, however, to “infringement” in the insured’s
“‘advertisement’ . . . of copyright, trade dress or slogan.” See Liberty Mem. at 4; Westfield
Mem. at 3. As Westfield puts it, “the Policies do not cover copyright infringement unless the
infringement occurs within an advertisement.” Westfield Mem. at 2.
The Insurers seek to intervene so that they can submit interrogatories to the jury to “make
possible a division of the money damages between covered and noncovered acts.” Westfield
Mem. at 5; see also Liberty Mem. at 5 (purpose of the interrogatories will be to “allocate covered
and uncovered acts and damages”). The Insurers never state what specific interrogatories they
will seek to have submitted to the jury. Westfield hints that the critical issue will be the degree
to which plaintiffs have claims “for injuries related to [BDB’s] advertising activities” as opposed
to “infringement existing outside of advertising.” Westfield Mem. at 5. It notes that “it cannot
be determined the amount, if any, of alleged infringement that has occurred within advertising.”
Id. For its part, Liberty notes that coverage is not afforded for “intentional and knowing
misconduct,” for infringement that does not take place in an “advertisement,” and for injury that
occurs outside the policy period, see Liberty Mem. at 6, thus implying that Liberty would seek to
have such issues submitted to the jury.
BDB opposes the motions to intervene. D. Opp. at 1. The plaintiffs do not oppose
intervention, but argue that the parties should have an opportunity “to review and respond to the
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proposed special interrogatories” before the Court permits them to be given to the jury. P. Resp.
at 1-2. The Insurers state that they are willing to submit their proposed interrogatories for such
review. Liberty Reply at 1 n.1; Westfield Reply at 2.
Westfield asserts that it is entitled to intervention as of right under Fed. R. Civ. P. 24(a).
Westfield Mem. at 5. Liberty does not seek intervention as of right. Liberty Reply at 2. Both
parties seek permissive intervention under Fed. R. Civ. P. 24(b). Liberty Mem. at 5; Westfield
Mem. at 12. We begin by discussing permissive intervention.
II. PERMISSIVE INTERVENTION
Fed. R. Civ. P. 24(b) provides in relevant part: that “[o]n timely motion, the court may
permit anyone to intervene who . . . has a claim or defense that shares with the main action a
common question of law or fact.” Fed. R. Civ. P. 24(b)(1). The rule further provides that “[i]n
exercising its discretion, the court must consider whether the intervention will unduly delay or
prejudice the adjudication of the original parties’ rights.” Fed. R. Civ. P. 24(b)(3). Thus, we
analyze three criteria in adjudicating a motion for permissive intervention: (1) the timeliness of
the motion; (2) a common question of law or fact; and (3) undue delay or prejudice. The Second
Circuit has held that the issue of prejudice and undue delay is “[t]he principal guide in deciding
whether to grant permissive intervention.” United States v. Pitney Bowes, Inc., 25 F.3d 66, 73
(2d Cir. 1994). .
We will assume arguendo that common questions of law or fact exist. See D. Opp. at 19
(“BDB concedes that its entitlement to indemnification under its insurance contracts with
Insurers involves factual issues that should be resolved if the Wiley litigation results in a jury
verdict.”). Thus, we assess only the motions’ timeliness and whether undue delay or prejudice
would result from intervention.
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A. Timeliness
“[A] threshold consideration under Rule 24(b) . . . is timeliness.” Pitney Bowes, 25 F.3d
at 74 (citation omitted).
A district court has broad discretion in assessing the timeliness of a motion to
intervene, which “defies precise definition.” United States v. Pitney Bowes, Inc.,
25 F.3d 66, 70 (2d Cir. 1994). The court may consider, inter alia, the following
factors: (1) how long the applicant had notice of its interest in the action before
making its motion; (2) the prejudice to the existing parties resulting from this
delay; (3) the prejudice to the applicant resulting from a denial of the motion; and
(4) any unusual circumstance militating in favor of or against intervention. See
id. Generally, the court’s analysis must take into consideration the totality of the
circumstances. See, e.g., Farmland Dairies v. Comm. of the New York State
Dep’t of Agric. & Mkts., 847 F.2d 1038, 1044 (2d Cir. 1988).
In re Holocaust Victim Assets Litig., 225 F.3d 191, 198 (2d Cir. 2000); see also Aristocrat
Leisure Ltd. v. Deutsche Bank Tr. Co. Ams., 262 F.R.D. 348, 352 (S.D.N.Y. 2009) (“[E]ach
intervention case is highly fact specific and tends to resist comparison to prior cases.”) (internal
citations and quotation marks omitted). No party has suggested any “unusual circumstance”
present here. Accordingly, we will examine the other three factors.
I. Notice
The initial complaint in this lawsuit was filed on February 4, 2013. See Complaint, filed
Feb. 4, 2013 (Docket # 1). The complaint alleged, inter alia, copyright infringement, id. ¶¶ 7286, trademark infringement, id. ¶¶ 87-93, and conspiracy to commit fraud, id. ¶¶ 124-30. The
plaintiffs amended their complaint on April 24, 2013, see First Amended Complaint, filed Apr.
24, 2013 (Docket # 16), and again on May 27, 2015, see SAC. There was no material change in
the nature of the claims made in the various versions of the complaint.
BDB brought the lawsuit to the Insurers’ attention in December 2013. Liberty Mem. at
3; Westfield Mem. at 4; D. Opp. at 3. Eventually, both Insurers agreed to defend the suit subject

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to a reservation of rights. See Liberty Mem. at 5; Westfield Mem. at 4. The Insurers did not
seek to file the instant motions to intervene until October 12, 2015, however. Letter from Jaime
M. Merritt, dated Oct. 12, 2015 (Docket # 310); Letter from Timothy D. Kevane, dated Oct. 12,
2015 (Docket # 311). The Insurers do little to explain this long delay. Liberty states only that
there was a five-month period between May and September 2014 during which it appeared that
the suit might settle. Liberty Mem. at 8. Westfield notes that its motion was filed only “four
months” after the Second Amended Complaint was filed. Westfield Mem. at 7. Neither of these
statements, however, provides an adequate explanation for the Insurers’ failure to act. The fivemonth potential settlement period does not explain the remaining 17 months of delay. The filing
of the Second Amended Complaint is irrelevant to the issue of timeliness inasmuch as it was
filed after discovery was closed and added no new claims to the First Amended Complaint. The
delay here was thus not justified. Additionally, it is longer than many cases in which permissive
intervention has been denied. See Kamden-Ouafo v. Pepsico, Inc., 314 F.R.D. 130, 135-36
(S.D.N.Y. 2016) (collecting cases denying permissive intervention where delay was less than 18
months). Thus, the Insurers’ lengthy delay in filing suit, and their failure to justify the delay,
weighs heavily against granting their motions. See D’Amato v. Deutsche Bank, 236 F.3d 78, 84
(2d Cir. 2001) (upholding district court’s denial of intervention motion where, inter alia,
intervenor delayed by over a year and failed to explain the delay).
ii. Prejudice to Existing Parties Resulting from the Delay
BDB argues that the Insurers’ delay in filing these motions has significantly prejudiced
them. The chief reasons it gives relate to the discovery process. BDB states:
To the extent the Insurers want to ask the jury to opine on whether this case
involves “advertising injury” as that term is defined in the relevant policies, BDB
would need to re-open discovery to obtain, among other things: advertisements
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and other marketing efforts that BDB’s partners and former partners (e.g.
Amazon) conducted to sell BDB’s books; documents and testimony from
consumers regarding the role that advertisements and other marketing efforts
played in their purchase of the books; and documents and testimony from
distributors about the marketing of used books.
D. Opp. at 7. BDB’s argument correctly recognizes that the Court will not re-open discovery at
this late stage of the case. Discovery concluded long ago, and all summary judgment motions
have been briefed in full. One has been decided. Case law holds that where a grant of a motion
to intervene would require further discovery, a court may properly deny the motion. See, e.g.,
Bassett Seamless Guttering, Inc. v. GutterGuard, LLC, 2007 WL 2079718, at *2 (M.D.N.C. July
13, 2007) (denying intervention where “[d]efendants would necessarily have to engage in further
discovery”) (citing cases).
The Insurers do not respond directly to DBD’s argument on the issue of the prejudice that
would result from the lack of discovery on the issue of “advertising.” Liberty states only that it
finds it “questionable” that BDB should need to reopen discovery at all because the pleadings
“alleged” that some infringements resulted from advertising. Liberty Reply at 6. This is no
answer, however. That a pleading has “alleged” a particular fact does not mean that a defendant
should be expected to seek discovery on that allegation. Nor does Liberty explain why the issue
of advertising was so germane to plaintiffs’ claims that discovery regarding “advertising” should
have occurred in this case. We note that in marshaling their evidence to oppose BDB’s two
motions for summary judgment, the plaintiffs never once mentioned BDB’s advertising. See
Memorandum in Support of Plaintiffs’ Opposition to Defendants’ Motion for Partial Summary
Judgment, filed Mar. 9, 2015 (Docket # 239); Plaintiffs’ Supplemental Memorandum in
Opposition to Defendants’ New Motion for Partial Summary Judgment, filed June 29, 2015
(Docket # 276). Indeed, Liberty makes no argument whatsoever that the plaintiffs’ claims in the
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case required an exploration of the advertising issues that will be raised by its proposed (and, as
yet, undisclosed) jury interrogatories. And because Liberty does not reveal what particular
interrogatories it hopes to pose, it has not explained why BDB is incorrect in its perceived need
for discovery.
Similarly, Westfield has no real response to BDB’s argument that discovery would have
to be re-opened. Instead, it makes the irrelevant proposal that its intervention be limited to the
submission of jury interrogatories and that it be granted no “continuances.” Westfield Reply at 2
(quoting Tomcany v. Range Const., 2004-Ohio-5314, 2004 WL 2801671 (Ohio Ct. App. Sept.
30, 2004)). Notably, the case Westfield cites in support of this argument, Tomcany v. Range
Const., completely undermines its premise. In Tomcany, the court had found that there was “no
reason to think that any . . . further discovery would be necessary.” Tomcany, 2004 WL
2801671, ¶ 45. Westfield never even addresses BDB’s contention that further discovery will be
necessary here.
iii. Prejudice to the Insurers if Intervention is Denied
The Insurers claim two forms of prejudice if their motions to intervene are denied: (1) the
effect of collateral estoppel under Ohio law, Westfield Mem. at 9-10; Liberty Reply at 7, and (2)
the general expense and burden of conducting a second lawsuit to determine the extent of their
responsibility under the insurance contracts for any judgment against BDB in this case, Liberty
Mem. at 8; Westfield Mem. at 10-11.
a. Collateral Estoppel. The Insurers argue that they will be substantially prejudiced if
their intervention motions are denied because (1) choice-of-law rules require applying Ohio law
to any claims under the insurance policies and (2) Ohio law holds “that because insurers are in
privity with their insureds, insurers are generally bound by the facts and findings of an
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underlying action brought against their insured by . . . claimants.” Westfield Mem. at 9 (citing
Howell v. Richardson, 544 N.E.2d 878 (Ohio 1989).
Assuming arguendo that Ohio law applies to these policies, it is clear that whatever
collateral estoppel doctrine Ohio law may apply disappears when intervention is denied. In other
words, Ohio law at most requires that an insurer make a motion to intervene. If the motion to
intervene is denied, Ohio law is clear that there is no collateral estoppel effect. See Gehm v.
Timberline Post & Frame, 112 Ohio St.3d 514, 2007-Ohio-607, 861 N.E.2d 519, ¶ 15 (Ohio
2007) (“When a party has sought and been denied intervention, collateral estoppel will not
prohibit future litigation of similar issues.”).
b. Subsequent Litigation. Westfield and Liberty briefly allude to the fact that it would
be more “economical” to resolve issues regarding coverage in this litigation. Westfield Mem. at
10; Westfield Reply at 5; Liberty Reply at 7-8 (insurers would be prejudiced by “duplicative
litigation”). The Court accepts arguendo that there might have been some economy to be
realized by addressing issues regarding insurance coverage in this litigation had intervention
been timely sought. The insurers overstate such economy, however, inasmuch as the central
issue relating to coverage — advertising injury — has not been part of the discovery process or
summary judgment briefing in this case. In any event, any such economies to be achieved are
far outweighed by the prejudice that would arise if intervention were allowed at this stage of the
case.
iv. Conclusion
After considering the “totality of the circumstances,” we find that the four factors for
assessing the timeliness of an intervention motion, In re Holocaust Victim Assets Litig., 225
F.3d at 198, strongly favor the conclusion that the Insurers’ motions are untimely.
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B. Prejudice and Delay to the Original Parties
Even if the Insurers’ motions were timely, the motions would still have to be denied
because intervention would cause “undu[e] delay or prejudice [to] the adjudication of the
original parties’ rights.” Fed. R. Civ. P. 24(b)(3). As already explained, see section II.A.ii.
above, intervention would require the reopening of discovery and further delay in this threeyear-old case. Additionally, we agree with BDB’s argument that allowing the Insurers to raise
coverage issues would require BDB to present alternative factual arguments to the jury, D. Opp.
at 18 — specifically, it would require BDB to argue that it did not infringe the plaintiffs’
copyrights and trademarks but that if any infringements did occur, they were related to
“advertisement” within the meaning of the policies. See generally Gadley v. Ellis, 2015 WL
3938543, at *4 (W.D. Pa. June 26, 2015) (intervention denied where, after discovery and
summary judgment, insurer was “asking to create categories of damages on the jury form . . . not
necessarily consistent with the issues that have been developed in this case.”). Thus, this factor
too weighs against permitting intervention.
For the above reasons, the motion for permissive intervention is denied.
III. INTERVENTION AS OF RIGHT
Fed. R. Civ. P. 24(a)(2), commonly referred to as the rule governing “intervention as of
right,” requires courts to permit intervention when the intervenor
[o]n timely motion . . . claims an interest relating to the property or transaction
that is the subject of the action, and is so situated that disposing of the action may
as a practical matter impair or impede the movant’s ability to protect its interest,
unless existing parties adequately represent that interest.
Thus, to intervene as a matter of right under Rule 24(a)(2), a party must “(1) timely file an
application, (2) show an interest in the action, (3) demonstrate that the interest may be impaired

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by the disposition of the action, and (4) show that the interest is not protected adequately by the
parties to the action.” R Best Produce, Inc. v. Shulman-Rabin Mktg. Corp., 467 F.3d 238, 240
(2d Cir. 2006) (internal citations and quotation marks omitted). “The intervention application
will be denied unless all four requirements are met.” Pitney Bowes, 25 F.3d at 70.
The issue of timeliness is evaluated according to the same criteria whether intervention is
sought as of right or permissively. See generally NAACP v. New York, 413 U.S. 345, 365
(1973) (“Whether intervention be claimed as of right or as permissive . . . the court where the
action is pending must first be satisfied as to timeliness.”); Pitney Bowes, 25 F.3d at 74 (“The
district court’s finding that [the proposed intervenor’s] application was untimely for purposes of
intervention as of right applies as well to permissive intervention.”); see also In re Initial Pub.
Offering Sec. Litig., 499 F. Supp. 2d 415, 418 (S.D.N.Y.2007). Thus, Westfield’s motion is
untimely for the reasons already stated.
In addition, the Second Circuit in Restor-A-Dent Dental Labs., Inc. v. Certified Alloy
Prods., Inc., 725 F.2d 871, 875-76 (2d Cir. 1983), held that an insurer who had reserved its right
not to indemnify lacked the requisite “interest relating to the property or transaction that is the
subject of” an action brought against an insured for which coverage is sought. Id. Restor-ADent Dental Labs., Inc. concluded the requisite interest was lacking because the insurer’s interest
depended upon “two contingencies”: a verdict against the insured and a “finding in litigation not
yet even commenced between” the insurer and insured that the insured was not covered by the
policy. Id. at 875; see generally Washington Elec. Co-op, Inc. v. Mass. Mun. Wholesale Elec.
Co., 922 F.2d 92, 97 (2d Cir. 1990) (“An interest that is remote from the subject matter of the
proceeding, or that is contingent upon the occurrence of a sequence of events before it becomes
colorable, will not satisfy the rule.”) (citation omitted).
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