Bertram, Inc. v. Citizens Insurance Co. of America

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0508n.06
Case No. 15-2552
UNITED STATES COURT OF APPEALS FILED
FOR THE SIXTH CIRCUIT Aug 26, 2016
DEBORAH S. HUNT, Clerk
S. BERTRAM, INC. )
) ON APPEAL FROM THE
Plaintiff-Appellant, ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
v. ) DISTRICT OF MICHIGAN
)
CITIZENS INSURANCE COMPANY OF )
AMERICA, )
)
Defendant-Appellee. ) OPINION
BEFORE: MOORE, McKEAGUE and DONALD, Circuit Judges.
McKEAGUE, Circuit Judge. “There is a saying that if something looks like a duck,
walks like a duck, and quacks like a duck, then it is probably a duck.” In re Sorah, 163 F.3d
397, 401 (6th Cir. 1998). Non-party Eden Foods, Inc. (Eden Foods) sued plaintiff-appellant S.
Bertram, Inc. (Bertram) for trademark infringement, and Bertram asked defendant-appellee
Citizens Insurance Company of America (Citizens) to defend the lawsuit under an insurance
policy Citizens issued to Bertram. Unfortunately for Bertram, the insurance policy it agreed to
excludes coverage for trademark infringement, and Citizens unsurprisingly refused to defend the
lawsuit. Not to be deterred by the lack of coverage, Bertram seeks to circumvent the policy’s
terms and hold Citizens liable for refusing to defend it by arguing that Eden Foods’ lawsuit also
included claims for disparagement and trade dress infringement, which would be covered by the
Case No. 15-2552, S. Bertram, Inc. v. Citizens Ins. Co. of Am.
policy. However, the record shows that Eden Foods’ claims looked, walked, and quacked only
like typical trademark infringement claims—not unpled disparagement or trade dress claims—
and Citizens had no duty to defend against those claims. Accordingly, we AFFIRM summary
judgment to Citizens.
I
This case stems from an underlying trademark dispute between Bertram and Eden Foods.
Bertram formerly sold food products labeled “Eden Quality Products.” In August 2012, the
Food and Drug Administration (FDA) recalled some of Bertram’s “Eden Quality Products”
labeled apple juice due to high arsenic content. Eden Foods, which had registered “Eden” as a
trademark for its own food products, sued Bertram in September 2012, alleging claims for
trademark infringement, unfair competition, trade name infringement, and trademark dilution by
tarnishment. Eden Foods alleged that Bertram’s use of the “Eden Quality Products” label caused
consumers to confuse Bertram’s products with Eden Foods’ products and harmed Eden Foods’
reputation because consumers mistakenly attributed Bertram’s recalled apple juice to Eden
Foods.
Bertram asked Citizens to defend and indemnify it against Eden Foods’ lawsuit under the
commercial general liability insurance policy (the Policy) Citizens issued to Bertram. The Policy
provides coverage for “personal and advertising injury,” which includes:
d. Oral 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;
****
g. Infringing upon another’s copyright, trade dress or slogan in your
“advertisement”.
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R. 17-3, Policy at 17, Definitions 14.d, 14.g, Page ID 426. However, the Policy contains an “IP
Exclusion” which clearly states that the policy does not cover claims arising out of trademark
and intellectual property infringement:
This insurance does not apply to:
****
“Personal and advertising injury” arising out of the infringement of copyright,
patent, trademark, trade secret or other intellectual property rights. Under this
exclusion, such other intellectual property rights do not include the use of
another’s advertising idea in your “advertisement”.
However, this exclusion does not apply to infringement, in your “advertisement”,
of copyright, trade dress or slogan.
Id. at 9, Exclusion 2.i, Page ID 418. Citing this exclusion, Citizens refused to defend Bertram
because all of Eden Foods’ claims were based on trademark infringement. Bertram ultimately
settled with Eden Foods and, pursuant to that settlement, stopped using the “Eden Quality
Products” label.
Bertram then sued Citizens, claiming Citizens breached its duty to defend under the
Policy. The parties filed cross-motions for summary judgment, with Bertram arguing that
Citizens had a duty to defend because Eden Foods’ lawsuit may have included disparagement
and trade dress claims that are covered by the Policy. In a brief opinion, the district court
disagreed and granted summary judgment in Citizens’ favor. S. Bertram, Inc. v. Citizens Ins. Co.
of Am., No. 14-14241, 2015 WL 7351783 (E.D. Mich. Nov. 20, 2015). Bertram timely appealed.
II
We review a grant of summary judgment de novo. Kleiber v. Honda of Am. Mfg., Inc.,
485 F.3d 862, 868 (6th Cir. 2007). Summary judgment is proper when “the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). We must view the evidence and draw all reasonable
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inferences in favor of the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986). The inquiry is whether a reasonable jury could return a verdict
for the nonmoving party or “whether it is so one-sided that one party must prevail as a matter of
law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
Bertram asks us to hold that Citizens had a duty to defend Bertram against Eden Foods’
lawsuit.1 The duty to defend is broader than the duty to indemnify. Mem’l Props., LLC v.
Zurich Am. Ins. Co., 46 A.3d 525, 529 (N.J. 2012); Am. Bumper & Mfg. Co. v. Hartford Fire Ins.
Co., 550 N.W.2d 475, 481 (Mich. 1996). It is not limited by the specific language of the
pleadings, as the insurer has a duty to look behind the third-party’s allegations to analyze
whether coverage is possible. Abouzaid v. Mansard Gardens Assocs., LLC, 23 A.3d 338, 347
(N.J. 2011); Am. Bumper & Mfg. Co., 550 N.W.2d at 481. The duty to defend applies, even if
the complaint asserts theories of liability that are not covered under the policy, if there are any
theories of recovery supported by the allegations that fall within the policy. Abouzaid, 23 A.3d
at 346; Am. Bumper & Mfg. Co., 550 N.W.2d at 484. “In other words, ‘potentially coverable’
claims require a defense,” and “the potential merit of the claim is immaterial: the duty to defend
is not abrogated . . . because the cause is groundless, false or fraudulent.” Abouzaid, 23 A.3d at
346–47 (citation and internal quotation marks omitted); see Am. Bumper & Mfg. Co.,
550 N.W.2d at 484. We must resolve doubt regarding whether the underlying lawsuit—here,
between Eden Foods and Bertram—alleges potential grounds for liability in favor of the insured
(Bertram). Abouzaid, 23 A.3d at 347; Am. Bumper & Mfg. Co., 550 N.W.2d at 481.
However, insurers have no duty to defend against actions not covered by the policy. See
Abouzaid, 23 A.3d at 350; Zurich Ins. Co. v. Rombough, 180 N.W.2d 775, 778 (Mich. 1970).
1
While the parties dispute whether Michigan or New Jersey law governs interpretation of the Policy, they agree that
the choice of law is relevant only for remedies. Because we affirm summary judgment to Citizens, we need not
address remedies or resolve the choice of law question.
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The question before us, then, is whether Eden Foods’ lawsuit included any potential grounds for
liability that would be covered by the Policy. The district court held that the underlying lawsuit
included only trademark infringement claims, and therefore Citizens had no duty to defend
because of the Policy’s IP Exclusion. S. Bertram, Inc., 2015 WL 7351783, at *2–3. Bertram
disagrees, arguing on appeal that the Policy covered two potential claims that fall outside the IP
Exclusion and triggered Citizens’ duty to defend: (1) disparagement and (2) trade dress
infringement. We address each in turn.
A. Disparagement
Bertram first argues that Eden Foods’ lawsuit included a potential claim for
disparagement because Eden Foods alleged that Bertram harmed the reputation of its “Eden”
trademark when consumers mistakenly attributed Bertram’s recalled apple juice to Eden Foods.
The Policy provides coverage for damages for an injury arising out of the publication of
“material that slanders or libels a[n] . . . organization or disparages a[n] . . . organization’s
goods, products, or services.” R. 17-3, Policy at 17, Definition 14.d, Page ID 426 (emphasis
added). Thus, if Eden Foods’ lawsuit included a potential claim for disparagement, it would be
covered under the Policy, triggering Citizens’ duty to defend.
As an initial matter, Eden Foods did not bring a disparagement claim against Bertram.
The word “disparagement” (or “disparage”) does not even appear in Eden Foods’ complaint.
Still, Bertram correctly notes that we must focus on whether Eden Foods’ complaint or discovery
responses could potentially support a disparagement claim. See Abouzaid, 23 A.3d at 347; Am.
Bumper & Mfg. Co., 550 N.W.2d at 481.
Even then, Bertram’s argument fails because a disparagement claim requires a company
to make false, derogatory, or disparaging communications about a competitor’s product.
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Neshewat v. Salem, 173 F.3d 357, 362 (6th Cir. 1999) (applying Michigan law); Dairy Stores,
Inc. v. Sentinel Publ’g Co., 516 A.2d 220, 238 (N.J. 1986) (listing the elements of product
disparagement in New Jersey as “(1) publication (2) with malice (3) of false allegations about
the plaintiff’s product or property (4) that causes special damages” (emphasis added)). Eden
Foods did not allege in its complaint or discovery responses that Bertram made any statements
about Eden Foods’ products, disparaging or otherwise. Rather, Eden Foods alleged harm from
Bertram’s publication of the FDA recall notice regarding Bertram’s product.
Bertram insists that its publication of the FDA’s recall notice is the requisite false
statement, but that argument misunderstands the nature of a disparagement claim. The recall
notice is a true statement about Bertram’s own product, not a false or disparaging statement
about Eden Foods’ products, and so it cannot serve as the basis for a disparagement claim. See
Duramax Marine LLC v. Travelers Indem. Co. of Ill., 107 F. App’x 465, 466 (6th Cir. 2004) (per
curiam) (applying substantively identical Ohio law and holding that a company’s statements
about its own products cannot be the basis for libel, slander, or disparagement claims—even
when the statements are false).
Bertram’s various remaining arguments are similarly unpersuasive. Bertram next asserts
that Eden Foods alleged disparagement in its discovery responses. In one response, Eden Foods
denied Bertram’s request to admit that Bertram “ha[d] not disparaged [Eden Foods] or [its]
products.” R. 17-8, Eden Foods’ Response to Request for Admission No. 1 at 2–3, Page ID 483–
84. In another, Eden Foods stated that “[t]he resulting publicity relating to the [recall notice]
issued by the [FDA] has had a disparaging effect on the food and beverage products sold by
[Eden Foods] under the mark EDEN.” Id., Admission No. 7 at 7, Page ID 488. But Bertram
confuses Eden Foods’ use of the word “disparage”—in other words, “harm”—with a legal claim
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Case No. 15-2552, S. Bertram, Inc. v. Citizens Ins. Co. of Am.
for disparagement. While Eden Foods certainly alleged that Bertram’s trademark infringement
harmed (“disparaged”) Eden Foods’ products, Eden Foods did not allege anything resembling a
legal claim for disparagement. Again, Bertram publishing the recall notice about its own product
is not a false or disparaging statement about Eden Foods’ products.
Bertram next cites a number of cases to support its position, but they only confirm that a
disparagement claim requires one company to make disparaging statements referring to another
company’s product, not its own. See, e.g., Eng’g Tech., Ltd. v. Aetna Cas. & Sur. Co., No. 91-
1659, 1991 WL 278971, at *2 (6th Cir. 1991) (per curiam) (applying Michigan law, noting that
“[a] disparaging statement is one that discredits or casts into doubt another’s work or product,”
and holding that an insurer had no duty to defend because the insured did not act to discredit
another company’s product). Bertram also suggests that the recall notice may have disparaged
Eden Foods by implication. But the cases Bertram cites again cut against it, as they show that a
disparagement-by-implication claim still requires one company to clearly compare its products to
a competitor’s. See, e.g., Infor Global Solutions (Mich.), Inc. v. St. Paul Fire & Marine Ins. Co.,
686 F. Supp. 2d 1005, 1007 (N.D. Cal. 2010) (“[T]he Court here found that the allegations in the
underlying complaint referred disparagingly to a competitor by clear implication.”). That did not
occur here, as “Eden Foods did not allege that publication of the recall notice communicated
anything (disparaging or not) about Eden Foods, either directly or by implication.” S. Bertram,
Inc., 2015 WL 7351783, at *2.
Finally, Bertram seems to argue that Eden Foods may have alleged additional claims
separate from the common-law tort of disparagement. This argument is not entirely clear, but
Bertram does not point to any other potential claims, and we are not required to theorize about
what they might be. See McPherson v. Kelsey, 125 F.3d 989, 994–96 (“It is not sufficient for a
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party to mention a possible argument in the most skeletal way, leaving the court to . . . put flesh
on its bones.” (citation omitted)). Any harm to Eden Foods’ reputation occurred only because
consumers confused Eden Foods’ products for Bertram’s recalled products, and not because
Bertram made any statements about Eden Foods products. Accordingly, we hold that Eden
Foods did not allege actual or potential claims for disparagement.
B. Trade Dress
Bertram’s remaining argument is that Eden Foods alleged trade dress infringement in
addition to trademark infringement, and that Citizens had a duty to defend because the Policy
covers claims for trade dress infringement. “The trade dress of a product is essentially its total
image and overall appearance. It . . . may include features such as size, shape, color or color
combinations, texture, graphics, or even particular sales techniques.” Citizens Ins. Co. v. Pro-
Seal Serv. Grp., Inc., 730 N.W.2d 682, 683 n.1 (Mich. 2007); see also Two Pesos, Inc. v. Taco
Cabana, Inc., 505 U.S. 763, 764 n.1 (1992); FileNet Corp. v. Chubb Corp., 735 A.2d 1203, 1210
(N.J. Super. Ct. 1997).2
Bertram argues that its use of the word “Eden” in its “Eden Quality Products” label was
potential trade dress infringement because it had a similar design to Eden Foods’ “Eden” label.
“This design,” according to Bertram, “consists of a purportedly distinctive use of the word
‘Eden’ prominently displayed on the product labels in large distinct letters.” Appellant Br. at 37.
2
In Two Pesos, for example, the plaintiff, a Mexican restaurant, described its trade dress as “a festive eating
atmosphere having interior dining and patio areas decorated with artifacts, bright colors, paintings and murals. . . .
The stepped exterior of the building is a festive and vivid color scheme using top border paint and neon stripes.
Bright awnings and umbrellas continue the theme.” 505 U.S. at 765 (citation omitted). In another case, an
automobile manufacturer described its trade dress as “the exterior appearance and styling of the vehicle design
which includes the grille, slanted and raised hood, split windshield, rectangular doors, squared edges, etc.” Gen.
Motors Corp. v. Lanard Toys, Inc., 468 F.3d 405, 415 (6th Cir. 2006).
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Eden Foods’ label Bertram’s label
R. 16-3, Eden Foods’ Trademark, Page ID 133; R. 16-4, Bertram Trademark Application, Page
ID 148. The district court rejected Bertram’s argument. Although “[t]he printing of the same
word on two products necessarily establishes some degree of visual similarity,” the district court
explained that such similarity alone cannot be enough for trade dress infringement, otherwise
“conceivably . . . any plaintiff alleging that its trademark was infringed when the mark was
printed on another’s product could recast that claim as a claim for trade dress infringement.” S.
Bertram, Inc., 2015 WL 7351783, at *2.
The district court’s point is well taken, and the evidence here is insufficient for a potential
claim for trade dress infringement. As with disparagement, Eden Foods never alleged trade dress
infringement. Although that is not dispositive, Eden Foods also never alleged anything that
could conceivably support a claim for trade dress infringement. Eden Foods did not allege any
visual similarity between its products and Bertram’s products aside from the use of the word
“Eden” on the label, and Bertram’s label was similar only because it used Eden Foods’
trademarked word “Eden.” Thus, the complaint states nothing more than “fairly typical” claims
for trade mark infringement. S. Bertram, Inc., 2015 WL 7351783, at *3; see Gen. Cas. Co. of
Wisconsin v. TDC Int’l Corp., No. 289180, 2010 WL 376776, at *1 (Mich. Ct. App. Feb. 2,
2010) (per curiam) (holding that insurer had no duty to defend because “the crux of this
underlying complaint . . . involves the use of confusingly similar names, not an infringement of
the underlying plaintiff’s trade dress”); see also Parameter Driven Software, Inc. v. Mass. Bay
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Ins. Co., 25 F.3d 332, 337 (6th Cir. 1994) (applying Michigan law). Because the Policy excludes
coverage for such claims, Citizens had no duty to defend against them.
Our prior decision in Parameter, 25 F.3d at 337, is on point and settles the argument in
Citizens’ favor. In that case, a competitor sued the insured for trademark infringement. Id. The
competitor, like Eden Foods, included claims for trademark infringement, trade name
infringement, and unfair competition under 15 U.S.C. § 1125(a)—which covers both trademark
infringement and trade dress infringement. Id. The insurance policy, like the Policy here,
excluded coverage for trademark infringement claims. Id. When the insured sued the insurer for
refusing to defend the lawsuit, we held that the insurer had no duty to defend because the insured
had used only a competitor’s trademarked word (“PDS”) and “[a]ll four counts of [the
competitor’s] complaint were based upon [the insured’s] use of the trademark PDS.” Id. The
circumstances here are indistinguishable. Bertram used a competitor’s trademarked word
(“Eden”), Eden Foods sued for trademark infringement, all four of Eden Foods’ claims “were
based upon [Bertram’s] use of the trademark [Eden],” and the Policy excludes coverage for
claims arising out of trademark infringement. See id. Bertram offers no compelling reason why
Parameter should not govern this case.3
Allowing Bertram to mischaracterize Eden Foods’ claims as potential trade dress claims
would also run contrary to the parties’ intent. The Policy is a contract, and under its
unambiguous terms Bertram and Citizens intended to exclude coverage for trademark
infringement claims. See Stone v. Auto-Owners Ins. Co., 858 N.W.2d 765, 768 (Mich. Ct. App.
2014) (“The primary goal in the construction or interpretation of any contract is to honor the
intent of the parties.”) (quoting Klapp v. United Ins. Grp. Agency, Inc., 663 N.W.2d 447, 456
3
Bertram tries to distinguish Parameter by noting that the underlying lawsuit in that case did not include
disparagement claims. Reply Br. at 25. If anything, that makes the two cases more similar, because Eden Foods’
lawsuit also did not include disparagement claims.
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(Mich. 2003)); Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 773 A.2d 665, 672
(N.J. 2001). Finding an unpled and unsupported trade dress claim would eviscerate that intent by
requiring an insurer to defend any lawsuit where the insured copies the plaintiff’s trademark—
even when the policy contains a clear trademark exclusion and there is no conceivable trade
dress claim. You get what you pay for, and (as the district court pointed out) Bertram could have
negotiated to include trademark infringement coverage in the Policy. S. Bertram, Inc., 2015 WL
7351783, at *2–3.
Bertram’s arguments to the contrary are again unpersuasive. The only case Bertram cites
for the proposition that using a trademarked word, on its own, is enough for trade dress
infringement actually involved slogan infringement. See Cincinnati Ins. Co. v. Zen Design Grp.,
Ltd., 329 F.3d 546, 555 (6th Cir. 2003) (applying Michigan law). A slogan, we explained, is a
“distinctive cry, phrase, or motto of any party . . . [a] catchword or catch phrase.” Id. at 556.
We thus held that the insured’s “alleged use of the same phrase” as a competitor was a potential
basis for slogan infringement. Id. at 557. That is not this case, as Eden Foods did not allege (nor
does Bertram argue for) slogan infringement.
Bertram next argues that Count II in Eden’s complaint could encompass a potential trade
dress claim because it arises under 15 U.S.C. § 1125(a). Section 1125(a) covers “unfair
competition,” which we have previously noted may include up to a dozen different acts by an
insured, including trademark infringement and trade dress infringement. See Parameter, 25 F.3d
at 336–37 (quoting J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND UNFAIR
COMPETITION § 1.05 (3rd ed. 1992)). Yet citing § 1125(a), on its own, is not enough for a
potential claim for trade dress infringement, or else Eden Foods would have alleged a potential
claim for every cause of action that might fall under that statute. See Parameter, 25 F.3d at 336–
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37 (holding that there was no duty to defend despite the plaintiff bringing a claim under
§ 1125(a) because that claim was based on the insured’s use of a trademarked word). We must
“focus on the basis for the injury,” Zen Design Grp., 329 F.3d at 555, which is indisputably
trademark infringement. Count II contains two allegations: (1) that Bertram used its unregistered
mark “EDEN QUALITY PRODUCT & Design” to misrepresent that its products were related to
Eden Foods’ products; and (2) that Bertram put the federal trademark registration symbol close
to this unregistered mark to deceive customers. These allegations relate to Bertram using a label
with an unregistered mark that infringed on Eden Foods’ trademarked word “Eden,” and have
nothing to do with the trade dress of Eden Foods’ products beyond trademark infringement.
Bertram’s final argument is a repeated assertion that Citizens’ duty to defend was so
broad that it must apply in this case even if Eden Foods did not allege facts that could
conceivably substantiate a trade dress claim. Bertram went so far at oral argument as to suggest
that, had Eden Foods brought a one-claim complaint for trademark infringement, Citizens would
have been obligated to defend the lawsuit until Eden Foods admitted in discovery that it was not
bringing a trade dress claim. Bertram cites no legal authority for this proposition, and we have
found none. The duty to defend applies only if the plaintiff’s lawsuit includes actual or potential
claims that would be covered under the insurance policy. It does not require insurers to play
legal whack-a-mole by defending every lawsuit until the plaintiff affirmatively disclaims every
possible unpled claim, even those wholly unsupported by the plaintiff’s allegations. Try as it
might, Bertram cannot simply rename Eden Foods’ trademark claims as trade dress claims and
make them so. Eden Foods’ claims were based on trademark infringement, and because the
Policy excludes coverage for those claims we hold that Citizens had no duty to defend Bertram
against Eden Foods’ lawsuit.
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CONCLUSION
For the foregoing reasons, we AFFIRM summary judgment to Citizens.
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