Nautilus Insurance Company v. Access Medical, LLC ( 2019 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUL 2 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
NAUTILUS INSURANCE COMPANY, No. 17-16265
Plaintiff-Appellant, D.C. No.
2:15-cv-00321-JAD-GWF
v.
ACCESS MEDICAL, LLC; et al., MEMORANDUM*
Defendants-Appellees.
NAUTILUS INSURANCE COMPANY, No. 17-16272
Plaintiff-Appellee, D.C. No.
2:15-cv-00321-JAD-GWF
v.
ACCESS MEDICAL, LLC; ROBERT
CLARK WOOD II,
Defendants-Appellants,
and
FLOURNOY MANAGEMENT, LLC,
Defendant.
NAUTILUS INSURANCE COMPANY, No. 17-16273
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Plaintiff-Appellee, D.C. No.
2:15-cv-00321-JAD-GWF
v.
ACCESS MEDICAL, LLC; ROBERT
CLARK WOOD II,
Defendants,
and
FLOURNOY MANAGEMENT, LLC,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Nevada
Jennifer A. Dorsey, District Judge, Presiding
Argued and Submitted June 10, 2019
San Francisco, California
Before: GOULD, IKUTA, and R. NELSON, Circuit Judges.
Nautilus appeals the district court’s denial of a motion for further relief
under 28 U.S.C. § 2202 following a declaratory judgment that Nautilus owed no
duty to defend Access Medical, Flournoy Management, and Robert Clark Wood II
(collectively “Insureds”) in the underlying cross-complaint brought by Ted Switzer
for claims relating to a breach of a partnership agreement. The Insureds cross-
appeal, arguing that the district court erred in granting summary judgment in favor
of Nautilus and denying its motion for reconsideration on the duty to defend issue.
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We review a grant of summary judgment de novo and a denial of a motion for
reconsideration for abuse of discretion. Pac. Grp. v. First States Ins. Co., 70 F.3d
524, 527 (9th Cir. 1995); Benson v. JPMorgan Chase Bank, N.A., 673 F.3d 1207,
1211 (9th Cir. 2012). We conclude that the district court properly entered a
declaratory judgment in favor of Nautilus because the underlying proceedings did
not trigger Nautilus’s duty to defend.
Under Nevada law, an insurer bears a duty to defend whenever there is a
potential for liability under the policy. United Nat’l Ins. Co. v. Frontier Ins. Co.,
99 P.3d 1153, 1158 (Nev. 2004). “Once the duty to defend arises, this duty
continues throughout the course of the litigation.” Id. (internal quotation marks
omitted). “[A]n insurer’s breach of its duty to defend can be determined
objectively by comparing the facts alleged in the complaint with the insurance
policy.” Century Sur. Co. v. Andrew, 432 P.3d 180, 186 (Nev. 2018).
In the cross-complaint, Switzer brought claims for interference with
prospective economic advantage against Insureds. The policy requires Nautilus to
defend Insureds against “any ‘suit’ seeking damages” because of a “personal and
advertising injury . . . arising out of . . . [o]ral or written publication, in any
manner, of material that slanders or libels a person or organization or disparages a
person’s or organization’s goods, products or services.” Because the allegations in
the underlying action stem from an injury that occurred in California, California
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law governs the rights and liabilities of the parties as it pertains to Nautilus’s duty
to defend. Gen. Motors Corp. v. Eighth Judicial Dist. Court of State of Nev. ex rel.
Cty. of Clark, 134 P.3d 111, 113 (Nev. 2006).
In California, to plead a claim of intentional interference with prospective
business advantage, the plaintiff must show that the defendant “engaged in conduct
that was wrongful by some legal measure other than the fact of interference itself.”
Della Penna v. Toyota Motor Sales, U.S.A., Inc., 902 P.2d 740, 751 (Cal. 1995).
Insureds agree Switzer’s cross-complaint for intentional interference with
prospective economic advantage did not specify wrongful acts that are legally
independent from the interference. Nevertheless, Insureds argue that an email
from a representative of Flournoy and Access Medical to a third-party hospital,
stating that a “Distributor in the California area is now banned from selling”
products, created additional evidence that there was a defamation, libel, or business
disparagement claim in the cross-complaint. Even if this email could be
understood to reference Switzer, it does not contain a false statement that explicitly
disparaged him, see Hartford Cas. Ins. Co. v. Swift Distribution, Inc., 59 Cal. 4th
277, 291 (2014); Blatty v. New York Times Co., 728 P.2d 1177, 1182 (Cal. 1986)
(in bank), and therefore it did not trigger a duty to defend, see United Nat’l Ins.
Co., 99 P.3d at 1158.
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There remains a dispute over whether Nautilus is entitled to reimbursement
of defense costs where it explicitly reserved the right to seek reimbursement while
defending Insureds in the underlying action. The district court denied Nautilus’s
request for reimbursement for three reasons: (1) Nautilus did not include a claim
for reimbursement or damages in its complaint; (2) § 2202 itself does not allow for
an award of damages; and (3) Nevada law did not permit Nautilus to recover
defense costs under a unilateral reservation of rights.
As to the first two reasons, § 2202’s language is broad and does not seem to
impose any stringent pleading requirements. Moreover, by its plain language,
§ 2202 allows the district court to grant “[f]urther necessary or proper relief based
on a declaratory judgment . . . after reasonable notice and hearing.” We reserve
judgment, however, on the proper scope of relief available in this case under
§ 2202. That is because whether further relief can be granted ultimately depends
on whether Nautilus is entitled to reimbursement under Nevada law. Because our
review of the district court’s legal determination rests entirely on an unaddressed
question of Nevada state law, we have certified the question whether Nautilus is
entitled to reimbursement under Nevada law in a separate order filed concurrently
with this memorandum.
We stay further proceedings in this appeal regarding the availability of
further relief under § 2202 pending resolution of our certified question to the
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Nevada Supreme Court. For the reasons stated above, however, the district court’s
grant of declaratory judgment and denial of Insureds’ motion for reconsideration is
AFFIRMED.
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