Shanze Enterprises, Inc. v. American Casualty Company of Reading, PA
Filing
78
MEMORANDUM OPINION AND ORDER granting 58 Motion for Summary Judgment filed by American Casualty Company of Reading PA, and denying 61 Motion for Summary Judgment filed by Shanze Enterprises Inc. (Ordered by Judge Sidney A Fitzwater on 12/15/2015) (Judge Sidney A Fitzwater)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SHANZE ENTERPRISES, INC. d/b/a
BAJA AUTO INSURANCE,
§
§
§
Plaintiff,
§
§ Civil Action No. 3:15-CV-0756-D
VS.
§
§
AMERICAN CASUALTY COMPANY §
OF READING, PA,
§
§
Defendant.
§
MEMORANDUM OPINION
AND ORDER
The instant cross-motions for summary judgment present a question to be decided
under the Texas eight-corners rule: whether the defendant-insurer has a duty to defend the
plaintiff-insured under a businessowners liability policy. Concluding that it does not have
a duty to defend, the court grants summary judgment in the defendant-insurer’s favor.
I
This is an action by plaintiff Shanze Enterprises, Inc. d/b/a Baja Auto Insurance
(“Shanze”)1 against defendant American Casualty Company of Reading, PA (“ACCO”) for
1
ACCO asserts in a footnote in its brief that Shanze has changed its name to “Plano
Insurance Group, Inc.,” that Shanze has advised the court in the Underlying Suit of the name
change, but that Shanze has not yet notified this court that the entity bringing suit “is not the
proper party.” D. 5/15/15 Br. n.1. In response, Shanze acknowledges this change of name
but contends that it is still the proper party. In reply, ACCO maintains that the proper
plaintiff in this case is “Plano Insurance Group, Inc. f/k/a Shanze Enterprises, Inc. d/b/a Baja
Auto Insurance.” D. 6/18/15 Reply n.1. Because the court concludes that ACCO is entitled
to summary judgment on the merits, it need not address this question.
a declaratory judgment establishing that ACCO has a duty to defend Shanze in a lawsuit
pending in federal court in California, and for related relief. The instant suit arises from an
underlying lawsuit brought by Baja Insurance Services, Inc. (“Baja”), an insurance brokerage
firm, against Shanze and other defendants. See Baja Ins. Servs., Inc. v. Shanze Enters., Inc.,
No. 2:14-CV-2423-KJM-AC (E.D. Cal. filed Oct. 15, 2014) (the “Underlying Suit”). In the
Underlying Suit, Baja alleges in its First Amended Complaint for Trademark Infringement
and Related Claims (the “Complaint”) claims against Shanze for trademark infringement,
under the Lanham Act, 15 U.S.C. § 1114(a), and Cal. Bus. & Prof. Code § 14245; and unfair
competition and false advertising, under the Lanham Act, 15 U.S.C. § 1125, and Cal. Bus.
& Prof. Code § 17500. ACCO insured Shanze under a businessowners liability policy (the
“Policy”) for annual periods beginning on February 11, 2010 and ending on February 11,
2015. As pertinent here, ACCO agreed under the Policy to defend Shanze against any suit
seeking damages for a covered “personal and advertising injury,” which “means injury . . .
arising out of one or more [specified] offenses.” D. 5/15/15 App. 9, 22.2 The two “offenses”
at issue are “[t]he use of another’s advertising idea in your ‘advertisement,’” and
“[i]nfringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’” Id.
at 22. The Policy excludes coverage for “personal and advertising injury” “[a]rising out of
the infringement of copyright, patent, trademark, trade secret or other intellectual property
rights.” Id. at 16. But “this exclusion does not apply to infringement, in [the insured’s]
2
The court for clarity will refer to the parties’ appendixes and briefs by the date filed.
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‘advertisement,’ of copyright, trade dress or slogan.” Id. D. 5/15/15 App. 38.
When Shanze requested that ACCO provide a defense in the Underlying Suit, ACCO
declined coverage on several grounds. After Shanze unsuccessfully sought reconsideration
of ACCO’s decision, Shanze filed the instant suit against ACCO in the Eastern District of
California, which then transferred the case to this court under 28 U.S.C. § 1404(a). See
Shanze Enters., Inc. v. Am. Cas. Co. of Reading, Pa., 2015 WL 1014167, at *7 (E.D. Cal.
Mar. 5, 2015).
ACCO now moves the court to enter summary judgment declaring that ACCO has no
duty to defend Shanze in the Underlying Suit, dismissing all of Shanze’s claims, and granting
other relief. ACCO maintains that “personal and advertising injury” coverage only applies
to specific offenses, and does not include coverage for trademark; and that Shanze is
mistakenly contending that the trademark infringement claims made in the Underlying Suit
can be characterized as claims for the use of another’s advertising idea and/or infringing
upon another’s slogan. Shanze moves for partial summary judgment declaring that ACCO
has a duty to defend Shanze in the Underlying Suit, and that Shanze is entitled to recover its
reasonable expenses of defending the Underlying Suit, and prejudgment interest, in amounts
to be determined. Because the parties’ motions present the same issues, the court will
consider them together.
II
In Texas, “[t]he duty to defend arises when a third party sues the insured on
allegations that, if taken as true, potentially state a cause of action within the terms of the
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policy.” St. Paul Guardian Ins. Co. v. Centrum GS Ltd., 283 F.3d 709, 713 (5th Cir. 2002)
(citation and internal quotation marks omitted).3 “Texas follows the ‘eight-corners’ rule,
under which the court looks only to the third-party plaintiff’s pleadings and the provisions
of the insurance policy in determining whether an insurer has a duty to defend.” Trammell
Crow Residential Co. v. Va. Sur. Co., 643 F.Supp.2d 844, 849 (N.D. Tex. 2008) (Fitzwater,
C.J.) (citing GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308
(Tex. 2006)). “Neither facts outside the pleadings nor the truth or falsity of the allegations
should be considered, and the allegations against the insured should be ‘liberally construed
in favor of coverage.’” Id. (quoting GuideOne Elite, 197 S.W.3d at 308); see also Gilbane
Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589, 597 (5th Cir. 2011) (“[W]e may not infer
additional facts that are not in the pleadings.”). The court must “resolve all doubts regarding
the duty to defend in favor of the duty.” Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487,
491 (Tex. 2008) (citing King v. Dall. Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002)). Under
the “eight-corners” rule,
[i]f the four corners of a petition allege facts stating a cause of
action which potentially falls within the four corners of the
policy’s scope of coverage, the insurer has a duty to defend. If
all the facts alleged in the underlying petition fall outside the
scope of coverage, then there is no duty to defend, but we
resolve all doubts regarding duty to defend in favor of the duty.
3
The court assumes arguendo that Texas law applies because both parties’ briefs
apply Texas law to interpret the Policy, and the California district court transferred this case,
in part, because it concluded that Texas law governs the interpretation of the Policy. See
Shanze Enters., 2015 WL 1014167, at *4.
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Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 600 (5th Cir. 2006) (footnotes omitted). “If
an insurer has a duty to defend any portion of a suit, the insurer must defend the entire suit.”
St. Paul Fire & Marine Ins. Co. v. Green Tree Fin. Corp.–Tex., 249 F.3d 389, 395 (5th Cir.
2001).
The insured has the initial burden of showing that a claim is potentially within the
scope of policy coverage, and, once the insured’s burden is met, “the insurer bears the burden
of showing that the plain language of a policy exclusion or limitation allows the insurer to
avoid coverage of all claims, also within the confines of the eight corners rule.” Northfield
Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 528 (5th Cir. 2004) (citing Tex. Ins. Code
Ann. art. 21.58(b) (Vernon Supp. 1997)) (citing Texas cases). “If the insurer proves that an
exclusion applies, the burden shifts back to the insured to show that an exception to the
exclusion brings the claim back within coverage.” Gilbert Tex. Constr., L.P. v. Underwriters
at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010) (citations omitted).
Each party’s summary judgment burden depends on whether it is addressing a claim
or defense for which it will have the burden of proof at trial. To be entitled to summary
judgment on a matter for which it will have the burden of proof, a party “must establish
‘beyond peradventure all of the essential elements of the claim or defense.’” Bank One, Tex.,
N.A. v. Prudential Ins. Co. of Am., 878 F. Supp. 943, 962 (N.D. Tex. 1995) (Fitzwater, J.)
(quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)). When the summary
judgment movant will not have the burden of proof at trial, it need only point the court to the
absence of evidence of any essential element of the opposing party’s claim or defense. See
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Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once it does so, the nonmovant must
go beyond its pleadings and designate specific facts demonstrating that there is a genuine
issue for trial. See id. at 324; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)
(en banc) (per curiam). An issue is genuine if the evidence is such that a reasonable jury
could return a verdict for the party with the burden of proof. See Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). The nonmovant’s failure to produce proof as to any essential
element renders all other facts immaterial. Trugreen Landcare, L.L.C. v. Scott, 512
F.Supp.2d 613, 623 (N.D. Tex. 2007) (Fitzwater, J.). Summary judgment is mandatory
where the nonmoving party fails to meet this burden. Little, 37 F.3d at 1076.
III
Before turning to the parties’ merits-based arguments, the court will address a
preliminary question concerning what summary judgment evidence is properly considered.
A
In opposition to Shanze’s motion, ACCO challenges, in pertinent part, Shanze’s
reliance on the contents of the Baja and Shanze websites. Shanze responds that this evidence
should be included because, under the eight-corners rule, the court must consider exhibits
attached to the complaint. Shanze also contends that the court must consider Baja’s entire
website because, “[l]ike a hyperlink, [Baja’s] attachment of the website attaches the entire
website,” since “[n]o one truly expects a plaintiff to print out each and every page of the
website and attach it to the complaint.” P. 6/18/15 Resp. to D. Objs. 1. Shanze contends that
attaching the entire website to the complaint would be impractical and infeasible because
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“[w]ebsites may include thousands of web pages; hundreds of daily iterations and changes;
and dozens of interactive features that are not captured by a paper copy.” Id. at 1-2.
The court will assume arguendo that it must consider exhibits to the Complaint,
because doing so does not affect the court’s decision. But the court will not consider
information found on the Baja website that is included neither in the Complaint nor in an
exhibit to the Complaint. The court has found no authority to support the proposition that,
when ruling on the duty to defend, the court must consider an entire website when only part
of the website is included in a printout that is attached as an exhibit to the complaint in the
underlying lawsuit. Moreover, Baja attached the printout of its website for the purpose of
providing an example of its use of its trademark. See P. 5/15/15 App. 3 (“Attached hereto
as Exhibit 3 are copies of representative samples of materials showing [Baja’s] use of the
[Baja] Marks in connection with these insurance related products and services.”).4
B
Under the rubric of its judicial notice argument, and in its brief in support of its
4
Shanze also relies on Rule 201 of the Texas Rules of Evidence to contend that the
court can take judicial notice of the contents of the websites. This argument lacks force.
Setting to one side that the Texas Rules of Evidence do not control where the evidence issue
does not involve a question of privilege, and recognizing that courts have taken judicial
notice of the contents of websites under Fed. R. Evid. 201, Shanze is still unable to
demonstrate that it is proper under the eight-corners rule to consider the contents of an entire
website when only part of the contents are included as an exhibit to the complaint in the
underlying lawsuit. In other words, even if the entire contents are admissible in evidence
because they are judicially noticeable, the contents not included in the exhibit to the
complaint do not have substantive significance because they are not properly considered
when applying the eight-corners rule.
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motion for partial summary judgment, Shanze also asks the court to consider the printouts
of the Baja and Shanze websites under an exception to the eight-corners rule that allows
consideration of extrinsic evidence. Shanze maintains that “Texas courts recognize a limited
exception to the eight-corners rule where extrinsic evidence is referenced in the underlying
complaint. Especially, when it is relevant to an independent and discrete coverage issue, but
not touching on the merits of the underlying third-party claim.” P. 6/18/15 Resp. to D. Objs.
2-3 (citing GuideOne Elite, 197 S.W.3d at 307). Shanze concedes that the question whether
there is an exception to the eight-corners rule is unsettled under Texas law, but it maintains
that it is appropriate here because the websites are both referenced in the Complaint, and both
evidence the use of “Baja Insurance” as an advertising idea and a slogan and do not have any
bearing on the merits of the Underlying Suit. The court disagrees.
“The Texas Supreme Court has never recognized any exception to the strict eight
corners rule.” Gilbane Bldg., 664 F.3d at 597 (quoting Northfield, 363 F.3d at 529, 531); see
also Zurich Am., 268 S.W.3d at 497. At most, the Fifth Circuit has stated that if the Texas
Supreme Court were to recognize an exception, it would likely do so “‘when it is initially
impossible to discern whether coverage is potentially implicated and when the extrinsic
evidence goes solely to a fundamental issue of coverage which does not overlap with the
merits of or engage the truth or falsity of any facts alleged in the underlying case.’”
GuideOne Elite, 197 S.W.3d at 308-09 (emphasis in original) (footnotes omitted) (quoting
Northfield, 363 F.3d at 531); see also Zurich Am., 268 S.W.3d at 497 (quoting GuideOne
Elite, 197 S.W.3d at 309) (refusing to decide whether the exception discussed in GuideOne
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Elite exists because “it [was] not ‘initially impossible to determine whether coverage [was]
potentially implicated’”).
Shanze has also failed to cite any case, and the court located none, that recognizes an
exception where extrinsic evidence is referenced in the underlying complaint. “[T]his court
is obligated in this diversity case to apply Texas law, not to extend it in circumstances where
it is unable to predict that the Supreme Court of Texas would do so.” Sentry Ins. v. DFW
Alliance Corp., 2007 WL 669418, at *2 (N.D. Tex. Mar. 6, 2007) (Fitzwater, J.). The court
therefore declines to recognize such an exception to the eight-corners rule. And even if such
an exception existed, it would not be warranted in this case because the court can determine
from the allegations of the Complaint whether Baja alleges that its trademark is an
advertising idea or a slogan. Thus “it is not ‘initially impossible to determine whether
coverage is potentially implicated.’” Zurich Am., 268 S.W.3d at 497 (quoting GuideOne
Elite, 197 S.W.3d at 309). And Shanze is attempting to present extrinsic evidence of its
website to show that it actually infringed Baja’s trademark, which clearly touches on the
merits of the Underlying Suit.
Accordingly, except for considering the exhibits to Baja’s Complaint in the
Underlying Suit, the court otherwise declines to consider other parts of the Baja and Shanze
websites.5 See Colony Ins. Co. v. Peachtree Constr., Ltd., 647 F.3d 248, 253 (5th Cir. 2011)
5
ACCO has filed other objections to summary judgment evidence that Shanze offers
in opposition to ACCO’s motion and in support of its own motion. These objections are
denied as moot because they relate to evidence that the court has not relied on in rendering
its decision.
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(citing Pine Oak Builders, 279 S.W.3d at 654) (explaining that under the eight-corners rule,
“an insurer’s duty to defend is determined solely by the facts alleged in the petition and the
terms of the policy”); Gilbane Bldg., 664 F.3d at 596-97 (citing Nat’l Fire Ins. Co. v. Merchs.
Fast Motor Lines, Inc., 939 S.W.2d 139, 142 (Tex. 1997)) (“In performing its eight-corners
review, a court may not . . . look outside the pleadings.”).
IV
The court now turns to the merits of the parties’ cross-motions.
A
Shanze asserts that the Complaint states a claim that falls within the Policy’s coverage
for “personal and advertising injury” arising out of the offense of “[i]nfringing upon
another’s . . . slogan in your ‘advertisement’” and/or “use of another’s advertising idea in
your ‘advertisement.’” ACCO maintains that Baja’s claims are not even potentially covered,
and it relies primarily on the following two grounds to contend that it properly denied a duty
to defend: first, the Complaint does not allege facts that constitute a potentially covered
“personal and advertising injury;” and, second, the Complaint alleges only trademark
infringements claims, which are precluded by the Policy’s intellectual property exclusion.
ACCO posits that the Complaint does not assert a potentially covered “personal and
advertising injury” offense because it only alleges claims for trademark infringement, and
trademark infringement is not listed as a covered offense under the definition of “personal
and advertising injury.”
Shanze contends that Baja’s claim for unfair competition premised on false
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advertising is broader than, and distinct from, the trademark infringement claim, and is
covered under the “personal and advertising injury” arising out of the offense for “use of
another’s advertising idea.”
Shanze also maintains that Baja’s claim for trademark
infringement is covered under the “personal and advertising injury” arising out of the offense
for slogan infringement.
B
The Policy provides that ACCO has “no duty to defend [Shanze] against any ‘suit’
seeking damages for . . . ‘personal and advertising injury,’ to which this insurance does not
apply.” D. 5/15/15 App. 53. The Policy covers “personal and advertising injury” only for
enumerated “offenses.” See, e.g., Trammell Crow, 643 F.Supp.2d at 851 (stating that
“‘[p]ersonal injury’ damages are those arising out of an enumerated ‘offense’”). The
Complaint alleges one claim for trademark infringement, under federal and California law,
and one claim for unfair competition and false advertising, under federal and California law.
None of these is an enumerated offense.
ACCO’s duty to defend is determined, however, not by the legal theories pleaded but
by the factual allegations of the Complaint in the Underlying Suit. See Mid-Continent Cas.
Co. v. Acad. Dev., Inc., 476 Fed. Appx. 316, 319 (5th Cir. 2012) (per curiam) (quoting Zurich
Am., 268 S.W.3d at 495) (“In reviewing the underlying complaint, ‘[i]t is the factual
allegations instead of the legal theories alleged which determine the existence of a duty to
defend.’”); Zurich Am., 268 S.W.3d at 495 (quoting Lamar Homes, Inc. v. Mid-Continent
Cas. Co., 242 S.W.3d 1, 13 (Tex. 2007)) (“[W]e have said that the label attached to the cause
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of action . . . does not determine the duty to defend.”); Jim Walter Homes, Inc. v. Reed, 711
S.W.2d 617, 617-18 (Tex. 1986) (“[W]e must look to the substance of the cause of action and
not necessarily the manner in which it was pleaded.”).
These are the relevant factual allegations in the Complaint:
(8) Defendant, Shanze Enterprises, Inc. uses in interstate
commerce the trade name or service mark “Baja Auto
Insurance” (“infringing mark”) and also uses the infringing
mark as a web site domain name (www.bajaautoinsurance.com)
to promote services that are virtually identical to those offered
by Plaintiff. For an unknown time period, Defendant has been
offering for sale and selling insurance related products and
services that bear confusingly similar imitations of BAJA’s
registered trademarks and that are directly competitive with
those of BAJA. . . .
(9) BAJA is the owner of valid and subsisting United States
Trademark/Service Mark Registration No.’s 3,568,815 and
3,919,175 on the Principal Register in the United States Patent
and Trademark Office for the trademark/service mark BAJA
INSURANCE SERVICES, INC. (hereinafter “[BAJA]
MARKS”) for insurance related products and services. . . .
(10) BAJA has used the [BAJA] MARKS in commerce
throughout the California region in the United States
continuously since 1998, in connection with the offering for
sale, sale, marketing, advertising and promotion of insurance
related products and services. . . .
(11) As a result of its widespread, continuous and exclusive use
of the [BAJA] MARKS to identify its insurance related goods
and services and BAJA as their source, BAJA owns valid and
subsisting federal statutory and common law rights to the
[BAJA] MARKS.
(12) BAJA’s [BAJA] MARKS are distinctive to both the
consuming public and BAJA’s trade. BAJA has expended
substantial time, money and resources marketing, advertising
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and promoting the insurance related goods and services sold
under the [BAJA] MARKS including through BAJA’s radio,
television, print and internet marketing and advertising. During
the period from 1998 to present alone, BAJA has expended
approximately Four Million ($4,000,000.00) US Dollars on the
marketing, advertising and promotion of the insurance related
goods and services sold under the [BAJA] MARKS.
(15) As a result of BAJA’s expenditures and efforts, the [BAJA]
MARKS have come to signify the high quality of the insurance
related goods and services designated by the [BAJA] MARKS,
and acquired incalculable distinction, reputation and goodwill
belonging exclusively to BAJA.
(16) BAJA’s [BAJA] MARKS and the insurance related goods
and services offered thereunder have received widespread
coverage in various media, including radio, television, print and
internet.
(18) [] Plaintiff continued to enlarge its operations, developing
a niche market in the Hispanic community with its customer
base being made up of approximately 80-85% Hispanic clients.
Plaintiff has always made the [BAJA] MARKS as part of
targeted advertising and marketing directed predominately
towards the Hispanic demographic.
(21) [] Plaintiff began receiving telephone calls, emails and
written correspondence from various Texas residents who were
either requesting insurance quotes, asking for customer service,
making insurance claims and/or making yearly premium
payments. Plaintiff also began receiving numerous letters from
insurance carriers that referenced Texas policy holders. . . .
Eventually, Plaintiff realized that these communications were
intended for Defendant. . . .
(25) The foregoing circumstances have cause[d] actual
interference with Plaintiff’s efforts to expand into other
Hispanic markets . . . .
(26) Plaintiff is informed and believes that Baja Auto Insurance
is set to be purchased by one of Plaintiff’s direct competitors,
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Freeway Insurance. . . . The sale of Baja to Freeway would
cause further confusion to the public and further actual injury to
Plaintiff if Freeway were to conduct business in California under
the name Baja Auto Insurance and/or continue to conduct
business under the name Baja Auto Insurance in the State of
Texas.
(28) Plaintiff has also acquired common law trademark rights in
the [BAJA] MARKS through continuous prior use of said marks
in commerce since 1998. . . .
(30) Defendant’s trade name and domain name “Baja Auto
Insurance” is confusingly similar to the [BAJA] MARKS in
meaning and overall impression and is similar in appearance and
pronunciation. Additionally, the goods/services sold by
Defendant in connection with its mark are virtually identical to
those sold by Plaintiff under the [BAJA] MARKS. As such, the
use of Defendant’s mark in connection with its goods/services
is likely to cause confusion, or to cause mistake, or to deceive
consumers in light of Plaintiff[’]s trademarks. Defendant has
thus infringed Plaintiff’s trademark rights under the Lanham
Act, 15 U.S.C. §1114(a) and Cal. Bus. & Prof. Code § 14245.
(32) Upon information and belief, Defendant was aware of the
Plaintiff’s trademarks and Defendant’s unauthorized use of its
infringing mark was therefore willful, intentional, and/or
deliberate as a matter of fact and law. . . .
(34) Defendant’s use of the infringing mark on goods/services
virtually identical to Plaintiff’s has caused, and is likely to
caus[e] confusion, deception[,] mistake among consumers in
light of Plaintiff’s use of the [BAJA] MARKS.
(35) Defendant has therefore engaged in trademark
infringement, false advertising and unfair competition under the
Lanham Act, 15 U.S.C. §1125(a), and under the common law.
(37) By engaging in the foregoing activities, Defendants have
engaged in unfair competition as defined by California Bus. &
Prof. Code §§17200, et seq. and Defendants’ wrongful use of
Plaintiff’s Mark and violation of the aforementioned laws and
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regulations represents unfair, deceptive, and misleading
advertising in violation of California Bus. & Prof. Code
§§17500, et seq.
P. 5/15/15 App. 3-8 (bracketed material and ellipses added).
C
1
ACCO maintains that the Complaint does not allege a claim that potentially falls
within coverage for a “personal and advertising injury” arising out of the offense for
“infringing upon another’s . . . slogan in your ‘advertisement’” because Baja only alleges that
Shanze infringed its trademark, not its slogan. ACCO points out that the Complaint never
asserts that “Baja Insurance Services, Inc.,” or a component of its name (i.e., “Baja” or “Baja
Insurance”), is a slogan. It contends that “Texas law does not allow Shanze to ‘read facts
into the pleadings,’ or ‘imagine factual scenarios’ that would trigger coverage.” D. 6/4/15
Br. 21 (quoting Nat’l Union Fire Ins., 939 S.W.2d at 142).
Shanze maintains that the Complaint does contain factual allegations that potentially
fall within the Policy’s coverage for slogan infringement.6 It asserts that a slogan is “a
distinctive cry, phrase, or motto . . . catchword or catch phrase,” and that some registered
trademarks are slogans. P. 6/5/15 Br. 9-10. Shanze contends that inferences drawn from the
Complaint support the conclusion that Baja uses the tagline “Baja Insurance” as a slogan for
6
The court assumes arguendo that Shanze has sufficiently pleaded the other elements
of this offense and that the only issue remaining is whether the Complaint alleges that Baja’s
trademark is a slogan.
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its trademark “Baja Insurance Services, Inc.” to promote lower prices and target a Hispanic
market. Shanze maintains that it is unnecessary that the Complaint allege a cause of action
for slogan infringement or specifically describe “Baja Insurance” as a slogan; rather, it is
only necessary that the factual allegations in the Complaint potentially state a cause of action
for slogan infringement.
2
Under Texas law, the Complaint in the Underlying Suit need only plead facts that
potentially state a covered claim. Applying the Texas eight-corners rule, the court concludes,
however, that the Complaint does not plead facts that potentially state a claim that Shanze
infringed Baja’s slogan. It is clear from the facts alleged that Baja does not assert that its
trademark is a slogan. All of Baja’s allegations are premised on Shanze’s use of “the trade
name or service mark ‘Baja Auto Insurance’ (‘infringing mark’),” which Baja alleges
infringes on its “trademark/service mark Baja Insurance Services, Inc. (hereinafter ‘[Baja]
Mark]’).” P. 5/15/15 App. 3. The Complaint only mentions a shorthand of the Baja
trademark in two instances: first, Baja refers to itself as “Baja,” see id. at 1 (“Plaintiff, Baja
Insurance Services, Inc. (hereinafter ‘Baja’ or ‘Plaintiff’).”); and, second, Baja provides its
domain name www.bajains.com in Exhibit 3, which is attached to the Complaint only to
show “[Baja’s] use of the [Baja] Marks,” id. at 3; see also supra at § III(A). There is no
other mention of “Baja Insurance,” “baja,” or any other component of Baja’s trademark. It
is therefore clear that any shorthand use of Baja’s trademark is only for the purpose of
referring to its party name and as part of its website address, not as a slogan. Moreover, the
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Complaint neither alleges nor suggests that the Baja trademark is associated with low prices;
rather, Baja repeatedly emphasizes that its trademark is associated with high quality. See id.
3-4 (alleging that “Baja has earned a sterling reputation in the insurance industry and among
customers”; that the “[Baja] Marks have come to signify the high quality of the insurance
related goods and services”; and that the goods and services offered under the Baja Marks
“are of high quality”).
Additionally, the Complaint never uses the terms “slogan,” “phrase,” “tagline,” or the
like. See id. at 1-10. Although there may be cases in which a phrase is so obviously a slogan
that the court can infer slogan infringement despite the absence of any reference to a “slogan”
in the underlying complaint, it would be unreasonable to draw such an inference here with
respect to the trademark and house name “Baja Insurance Services, Inc.” This is so because
the Complaint does not address whether this trademark is a slogan, and all the allegations of
the Complaint rest on the premise that Baja’s trademark has been infringed. See supra at
§ IV(B); see also Am.’s Recommended Mailers Inc. v. Md. Cas. Co., 579 F.Supp.2d 791,
796-97 (E.D. Tex. 2008) (holding that the underlying complaint “only sound[ed] in
trademark infringement,” and rejecting plaintiff’s argument that the underlying suit alleged
the exact offense as here—a “personal and advertising injury,” arising out of “[i]nfringing
upon another’s copyright, trade dress or slogan in your ‘advertisement’”—because the
underlying complaint “[did] not address a copyright, trade dress or slogan”), aff’d, 339 Fed.
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Appx. 467 (5th Cir. 2009).7 The court therefore cannot reasonably infer from the facts
alleged in the Complaint that “‘Baja Insurance’ is a slogan used to promote or advertise the
‘Baja Insurance Services’ house mark.” P. 6/5/15 Br. 13; see also Liberty Mut., 473 F.3d at
601(citing Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 645 (Tex. 2005)) (“Texas law
requires us to consider the allegations in the complaint along with any reasonable inferences
that flow from the facts alleged.”) (emphasis added).
Shanze is essentially asking the court to imagine that every mention of the term “Baja
Mark” in the Complaint is replaced with the word “slogan.” For instance, Shanze maintains
that Baja is alleging that it uses its “slogan ‘in commerce throughout the California region
. . . in connection with the offering for sale, sale, marketing, advertising and promotion of
insurance related products and service,’” and “that the slogan ‘and the insurance related
goods and services offered thereunder have received widespread coverage in various media,
including radio, television, print and internet.’” P. 5/15/15 Br. 22 (emphasis added) (quoting
P. 5/15/15 App. 3-4). But the Complaint actually alleges that “Baja has used the [Baja]
Marks in commerce throughout the California region . . . ,” and that “Baja’s [Baja] Marks
and the insurance related goods and services offered thereunder have received widespread
7
Shanze attempts to distinguish America’s Recommended on the basis that “AARP”
was an abbreviation, not a shorthand for any brief attention-getting phrase, and that “Baja
Insurance” is a brief, attention-getting phrase. The court disagrees. The Complaint does not
mention “Baja Insurance,” much less allege that “Baja Insurance” is a brief, attention-getting
phrase. Shanze also avers that America’s Recommended did not address whether “AARP”
qualified as a slogan. This is because, as here, the underlying complaint “[did] not address
a copyright, trade dress or slogan.” Am.’s Recommended, 579 F.Supp.2d at 797.
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coverage[.]” P. 5/15/15 App. 3-4. The court must “examine what is in the actual complaint”;
it is “not permitted to read facts into the pleadings or imagine factual scenarios that might
trigger coverage.” Am.’s Recommended Mailers Inc. v. Md. Cas. Co., 339 Fed. Appx. 467,
469 (5th Cir. 2009) (per curiam) (citing Gore Design Completions, Ltd. v. Hartford Fire Ins.
Co., 538 F.3d 365, 369 (5th Cir. 2008)). “A ‘policy imposes no duty to defend a claim that
might have been alleged but was not, or a claim that more closely tracks the true factual
circumstances surrounding the third-party claimant’s injuries but which, for whatever reason,
has not been asserted.’” Gilbane Bldg., 664 F.3d at 597 (quoting Pine Oak Builders, 279
S.W.3d at 655-56).
Shanze also appears to concede that there is no slogan infringement claim in the
Complaint. Shanze maintains that the Complaint alleges that Shanze infringed Baja’s slogan,
but it also asserts that whether Baja’s trademark is a slogan does not go to the merits of the
Underlying Suit. The court therefore concludes under the eight-corners rule that Shanze has
not shown that the Complaint alleges facts that, taken as true, state a potentially covered
claim for slogan infringement. See Northfield, 363 F.3d at 528 (“The insured has the burden
of showing that a claim is potentially within the scope of policy coverage.”). Shanze is not
entitled to a defense on this basis.
D
1
ACCO maintains that the Complaint does not allege potential coverage for a “personal
and advertising injury” arising out of “the use of another’s advertising idea in your
- 19 -
‘advertisement’” because all of Baja’s claims arise out of Shanze’s alleged infringement of
its trademark. Relying on Sport Supply Group, Inc. v. Columbia Casualty Co., 335 F.3d 453
(5th Cir. 2003), and America’s Recommended, 339 Fed. Appx. 467, ACCO asserts that the
Fifth Circuit has held that a trademark is not an “advertising idea” within the scope of
“personal and advertising injury” coverage under Texas law.
Shanze contends that the Complaint alleges facts that trigger potential coverage for
“the use of another’s advertising idea in your ‘advertisement.’”8 It posits that “Baja
Insurance” is an “advertising idea” because Baja uses the word “baja”— which in Spanish
means “to come down”—to promote low prices and appeal to a Hispanic market.9 Shanze
maintains that the Complaint pleads that “Baja Insurance” is an advertising idea because it
alleges that Baja “‘offers and sells insurance related goods and services’ to the general public
using the ‘Baja Insurance’ name because Baja Insurance has ‘come to signify the high quality
of insurance related goods and services.’” P. 5/15/15 Br. 10 (quoting P. 5/15/15 App. 4).
Shanze also posits that “[t]he fact that [Baja] secured a trademark to protect ‘Baja Insurance’
reveals that [Baja] considers the phrase to be a valuable ‘advertising idea.’” Id.
8
The court assumes arguendo that Shanze has sufficiently pleaded the other elements
of this offense and the only remaining issue is whether the idea for Baja’s trademark is an
“advertising idea.”
9
Shanze also posits that slogans are advertising ideas, and the facts alleged in the
Complaint give rise to an inference that Baja uses the advertising idea “Baja Insurance” as
a slogan. The court has already concluded, however, that Baja does not assert that its
trademark “Baja Insurance Services, Inc.” or any words therein, is a slogan. See supra at
§ IV(C)(2).
- 20 -
2
ACCO relies on two cases that are instructive. Sport Supply addressed whether a
claim for the alleged infringement of the “Macgregor” trademark in an underlying suit fell
under the policy’s coverage for “advertising injury” arising out of the offense for
“misappropriation of advertising ideas.” Sport Supply, 335 F.3d at 455, 459. The court held
under Texas law that “the term ‘advertising’ refers to a common device for soliciting
business,” and that “Texas law has adopted the more conventional understanding of a
trademark as a label that serves primarily to identify and distinguish products.” Id. at 464
(emphasis in original). The court explained that “Texas law does not appear to view a
trademark as a marketing device,” and it concluded that the Macgregor trademark was not
“advertising” under Texas law. Id. at 464-65. Accordingly, the idea for the Macgregor
trademark was not an “advertising idea,” and the infringement of the Macgregor trademark
could not be seen as the “misappropriation of an advertising idea,” even under the broadest
reading of the phrase to mean the “wrongful taking of an idea about the solicitation of
business.” Id. at 465 (internal alterations, quotation marks, and citation omitted).
America’s Recommended addressed whether a claim for the alleged infringement of
the “AARP” trademark triggered coverage for “personal and advertising injury” arising out
of the offense for “misappropriation of advertising ideas.” Am.’s Recommended, 339 Fed.
Appx. at 468-69. The court held that the “AARP” trademark was not advertising under
Texas law because “[a] previous decision of this court applying Texas law to similar issues
held that the definition of advertising does not include trademarks; therefore, trademark
- 21 -
infringement claims do not involve misappropriation of advertising ideas.” Id. at 469 (citing
Sport Supply, 335 F.3d at 464-65).
Shanze maintains on several grounds that the court should not follow these decisions
in this case. It posits that Sport Supply is distinguishable because the potential coverage
arose from trademark infringement claims, and the potential coverage in the present case
arises from unfair competition and false advertising claims. Shanze also contends that Sport
Supply addressed “misappropriation of advertising ideas,” and this case involves “use of
another’s advertising idea,” which is a broader offense. Shanze contends that Sport Supply
assumed coverage under the policy, found that an exclusion applied, and considered whether
an exception to the exclusion for “misappropriation of advertising ideas” provided coverage,
and the issue here is whether the underlying claims fall within the Policy’s coverage. Shanze
also asserts that, while the trademark at issue in Sport Supply was “a mere trademarked
surname,” Baja’s trademark “contain[s] graphics and words intended to evoke trust within
the Hispanic community.” P. 6/18/15 Br. 7.
The court declines to give force to these immaterial distinctions. The court has
already held that all the claims asserted in the Complaint are premised on trademark
infringement, just as in Sport Supply, and the Complaint contains no factual allegations
concerning a graphic or words that constitute Baja’s trademarked name. See supra at
§ IV(C)(2). And the court is relying on Sport Supply to determine whether an idea for a
trademark can be an “advertising idea” under Texas law in the context of insurance coverage.
Shanze next asserts that Sport Supply did not hold that a trademark cannot be an
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“advertising idea.” It maintains that Sport Supply cited two Texas appellate decisions, both
of which suggest that a trademark can be an advertisement. See P. 5/15/15 Br. 14 (citing
Horseshoe Bay Resort Sales Co. v. Lake Lyndon B. Johnson Improvement Corp., 53 S.W.3d
799, 806 (Tex. App. 2001, pet. denied); All Am. Builders, Inc. v. All Am. Siding of Dall., Inc.,
991 S.W.2d 484, 488 (Tex. App. 1999, no pet.)). Sport Supply cited these cases, however,
only for the proposition that Texas law had adopted the understanding that “the primary
function of a trademark is to serve as a label—a mark that identifies and distinguishes a
particular product.” Sport Supply, 335 F.3d at 460-61. Shanze argues that Sport Supply itself
conceded that a trademark could be an “advertising idea.” P. 5/15/15 Br. 14 (citing Sport
Supply, 335 F.3d at 464). But this interpretation of Sport Supply is misplaced. The court
stated, in relevant part:
as a theoretical matter, any trademark could constitute
“advertising.” That does not mean, however, that any trademark
constitutes “advertising” under the terms of this insurance
policy. We must remember that our mission, in interpreting this
insurance policy, is not to consider all possible definitions of the
policy terms. Instead, in a diversity case such as the present
one, we must apply the law of the forum state. Thus, our task is
to examine whether, under Texas law, this trademark constitutes
“advertising.” . . . As we have seen, Texas law does not appear
to view a trademark as a marketing device.
Sport Supply, 335 F.3d at 464.
Shanze also argues that Sport Supply is no longer controlling because later Texas
authorities clarify that a trademark is an advertisement. P. 5/15/15 Br. 15-16 (citing US Risk
Ins. Gr., Inc. v. U.S. Risk Mgmt., LLC, 2013 WL 4504754, at *15 (N.D. Tex. Aug. 20, 2013)
- 23 -
(Lynn, J.); Sun Water Sys., Inc. v. Vitasalus, Inc., 2007 WL 628099, at *3 (N.D. Tex. Feb.
28, 2007) (Means, J.); City of Corpus Christi v. Azoulay, 2006 WL 1172330, at *2 (Tex.
App. 2006, pet. denied) (mem. op.)). The court again disagrees. These cases do not address
the issue decided in Sport Supply—whether a trademark can be an “advertising idea.” See
US Risk Ins., 2013 WL 4504754, at *6, 15 (explaining that, when assessing the likelihood
of confusion element of a trademark infringement claim, the court should consider the
similarity of advertising media used because the greater the similarity, the greater the
likelihood of confusion); Sun Water Sys., 2007 WL 628099, at *3 (describing the facts
surrounding use of a trademark before ruling on motion for preliminary injunction); City of
Corpus Christi, 2006 WL 1172330, at *2 (stating that city zoning ordinance defined the term
“sign” to include every “trademark . . . used or intended to be used to attract attention,
convey information, identify or advertise any establishment, product, goods or service”).
Finally, Shanze maintains that America’s Recommended is not controlling because it
addressed whether the underlying complaint stated a covered claim for trade dress
infringement, which is not at issue here. Shanze contends that, like Sport Supply, the policy
offense at issue in America’s Recommended was “misappropriation of advertising ideas,”
not the broader offense for “use of another’s advertising ideas.” P. 5/15/15 Br. 17. Shanze
posits that America’s Recommended did not address the issue presented here—whether a
defense is owed for claims of unfair competition in the event the trademark infringement
claims fail.
None of these arguments is persuasive. The court has already determined that all the
- 24 -
claims in the Complaint arise out of trademark infringement, see supra at § IV(C)(2), and the
court is not permitted to imagine a factual scenario in which all of Baja’s alleged claims fail,
see Am.’s Recommended, 339 Fed. Appx. at 469 (citing Gore Design Completions, 538 F.3d
at 369) (explaining that court must “examine what is in the actual complaint,” and is “not
permitted to read facts into the pleadings or imagine factual scenarios that might trigger
coverage”). The court looks to America’s Recommended only to determine whether an idea
for a trademark can be an “advertising idea” under Texas law in the context of an insurer’s
duty to defend.
The question presented in this case has already been answered by the Fifth Circuit.
“[T]he definition of advertising does not include trademarks.” Am.’s Recommended, 339
Fed. Appx. at 469 (citing Sport Supply, 335 F.3d at 464-65). Thus Baja’s trademark “Baja
Insurance Services, Inc.” is not advertising, and the idea for Baja’s trademark is not an
“advertising idea.” Also, the court cannot reasonably infer from the facts asserted in the
Complaint that Baja alleges that a component of its trademark (“baja” or “Baja Insurance”)
is an “advertising idea.” As discussed supra at § IV(C)(2), all of Baja’s allegations are
premised on Shanze’s use of “the trade name or service mark ‘Baja Auto Insurance’
(‘infringing mark’),” which infringes on its “trademark/service mark Baja Insurance
Services, Inc. (hereinafter ‘[Baja] Mark]’).” P. 5/15/15 App. 3. And other than Baja’s party
name (“Baja”) and its website address (www.bajains.com), mentioned only in Exhibit 3, the
Complaint never refers to “Baja Insurance,” “baja,” or any other component of Baja’s
trademarked name, and it never alleges that the Baja trademark is associated with low prices.
- 25 -
See id. at 3-10.
Accordingly, the court concludes under the eight-corners rule that Shanze has not
shown that the Complaint alleges facts that, taken as true, state a potentially covered claim
for the “use of another’s advertising idea.” See Northfield, 363 F.3d at 528. Shanze is not
entitled to a defense on this basis.
E
ACCO is also entitled to summary judgment because it has established beyond
peradventure that each claim alleged in the Complaint falls within the Policy’s exclusion for
“‘personal and advertising injury’ . . . [a]rising out of the infringement of . . . trademark . .
. or other intellectual property rights.” D. App. 55, 59-60; see also Northfield, 363 F.3d at
528 (“[T]he insurer bears the burden of showing that the plain language of a policy exclusion
or limitation allows the insurer to avoid coverage of all claims.”).
Shanze argues that this exclusion does not preclude all of Baja’s claims. It contends
that a claim for unfair competition in the form of a Lanham Act § 1125 false advertising
claim includes allegations beyond violation of trademark or intellectual property rights.
Shanze also maintains that the Complaint alleges an unfair competition and false advertising
claim that are separate from the trademark infringement claim, because the Complaint uses
the word “and” to separate these claims, pleads them in separate counts, and asserts distinct
liability for them. Finally, Shanze contends that, even if all mention of Baja’s trademark
were disregarded, the Complaint would still state a cause of action for unfair competition and
- 26 -
false advertising.10 The court disagrees.
As previously explained, the factual allegations, not the legal theories pleaded, in the
Complaint control whether the Policy imposes a duty to defend. See Mid-Continent Cas.
Co., 476 Fed. Appx. at 319 (quoting Zurich Am., 268 S.W.3d at 495) (“In reviewing the
underlying complaint, ‘[i]t is the factual allegations instead of the legal theories alleged
which determine the existence of a duty to defend.’”); see also supra at § IV(B). “Under
Texas law, when an exclusion prevents coverage for injuries ‘arising out of’ particular
conduct, ‘[a] claim need only bear an incidental relationship to the described conduct for the
exclusion to apply.’” Sport Supply, 335 F.3d at 458 (alteration and emphasis in original)
(quoting Scottsdale Ins. Co. v. Tex. Sec. Concepts & Investigation, 173 F.3d 941, 943 (5th
Cir. 1999)). The court has already concluded that all the claims in the Complaint, including
the claim for unfair competition and false advertising, bear an incidental relationship to
Shanze’s alleged trademark infringement. See supra at § IV(C)(2). Shanze’s attempt to
separate these claims therefore fails.
10
For instance, Shanze maintains that the following claim is not barred by the
intellectual property exclusion because it alleges conduct in addition to Shanze’s use of the
Baja trademark: “[Shanze] has been offering for sale and selling insurance related products
and services . . . that are directly competitive with those of [Baja].” P. 5/15/15 Br. 28
(quoting P. 5/15/15 App. 3). But the Complaint alleges that “[Shanze] has been offering for
sale and selling insurance related products and services that bear confusingly similar
imitations of the Baja’s registered trademarks and that are directly competitive with those
of Baja.” P. 5/15/15 App. 3 (emphasis added). Shanze cannot rewrite the Complaint to
avoid the intellectual property exclusion. See Am.’s Recommended, 339 Fed. Appx. at 469
(citing Gore Design Completions, 538 F.3d at 369) (explaining that court must “examine
what is in the actual complaint,” and is “not permitted to read facts into the pleadings or
imagine factual scenarios that might trigger coverage”); see also supra at § IV(D)(2).
- 27 -
Because all of Baja’s claims bear an incidental relationship to, and cannot be
separated from, its trademark infringement claim, the court holds that the intellectual
property exclusion precludes a duty to defend all the claims alleged in the Complaint.11 And
because the court has already determined that the Complaint does not allege a possible claim
for slogan infringement, coverage is not triggered by the exception to the exclusion for
“infringement, in your ‘advertisement,’ of copyright, trade dress or slogan.” D. 5/15/15 App.
38.
11
Because the court concludes that the intellectual property exclusion applies, it need
not address whether the “unauthorized use of another’s name” exception also applies. See
D. 5/15/15 App. 37-38 (excluding coverage for a “‘personal or advertising injury’ . . .
[a]rising out of the unauthorized use of another’s name or product in your e-mail address,
domain name or metatags, or any other similar tactics to mislead another’s potential
customers”).
- 28 -
*
*
*
For the reasons explained, the court grants ACCO’s motion for summary judgment
and denies Shanze’s motion for partial summary judgment.12 The court today enters
judgment in favor of ACCO dismissing this action with prejudice.13
SO ORDERED.
December 15, 2015.
_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE
12
On October 30, 2015 Shanze filed a notice of supplement authority in support of its
motion for partial summary judgment. ACCO objected to this filing on the ground that it
violates N.D. Tex. Civ. R. 56.7, which provides that “[e]xcept for the motions, responses,
replies, briefs, and appendixes required by these rules, a party may not, without the permission of
the presiding judge, file supplemental pleadings, briefs, authorities, or evidence.” Although ACCO
is correct that Shanze’s filing violates Rule 56.7, the court will not strike the notice because
the supplemental authority on which Shanze relies (an opinion of a district court in another
circuit) does not establish that Shanze is entitled to relief.
13
In its summary judgment motion, ACCO requests, in addition to dismissing
Shanze’s action with prejudice, “such other relief to which [it] may be entitled, including,
where permitted, attorney’s fees and costs.” D. 5/15/15 Mot. for Summ. J. 1. Although no
basis for awarding attorney’s fees and non-taxable costs is apparent, if ACCO determines
that there are grounds to seek monetary relief other than taxable costs of court, it may file a
timely motion under Fed. R. Civ. P. 54(d)(2).
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