Comsat Corp. v. St. Paul Fire

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 00-2529
___________
COMSAT Corporation, a Washington *
D.C. corporation, *
*
Plaintiff-Appellant, *
* Appeal from the United States
v. * District Court for the District
* of Minnesota.
St. Paul Fire and Marine Insurance *
Company, a Minnesota Corporation, *
*
Defendant-Appellee. *
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Submitted: March 12, 2001
Filed: April 10, 2001
___________
Before LOKEN, MURPHY, and BYE, Circuit Judges.
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MURPHY, Circuit Judge.
COMSAT Corporation (COMSAT) brought this diversity action for breach of
an insurance contract against St. Paul Fire & Marine Insurance Company (St. Paul)
after St. Paul refused to defend it in a lawsuit. Both parties filed motions for summary
judgment, and the district court1 granted St. Paul’s motion and dismissed COMSAT’s
complaint. After judgment was entered in St. Paul’s favor, COMSAT wrote to the
court requesting leave to file a motion for reconsideration. The court denied the
request. COMSAT appeals from the judgment and the order denying its request. We
affirm.
COMSAT, a provider of commercial satellite services, formed a consortium
named Intelsat to create a global communications satellite service. Intelsat operates
under a 1971 agreement entered into by a number of countries, and COMSAT is the
signatory party to the agreement for the United States. Alpha Lyracom Space
Communications, Inc. (Alpha) began to develop a satellite system in 1984 to compete
with Intelsat in South America. In order to succeed, Alpha needed Intelsat consultation
which it alleged could not be obtained because of COMSAT’s anticompetitive
behavior.
Alpha sued COMSAT in the Southern District of New York in 1989 for
anticompetitive conduct in violation of Sections 1 and 2 of the Sherman Act and for
interference with contractual relations. Alpha’s complaint was dismissed on the
grounds that COMSAT was immune from liability as a signatory of Intelsat. See
Alpha Lyracom Space Communications, Inc. v. Communications Satellite Corp., No.
89 CIV. 5021, 1990 WL 135637, at *8 (S.D.N.Y. Sept. 13, 1990). The Second Circuit
affirmed the dismissal of the complaint, but remanded so that Alpha could amend its
pleading in respect to COMSAT’s role as a common carrier. See Alpha Lyracom
Space Communications, Inc. v. Communications Satellite Corp., 946 F.2d 168, 176 (2d
Cir. 1991). COMSAT had been insured by Aetna and Hartford
1
The Honorable Michael J. Davis, United States District Judge for the District
of Minnesota.
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insurance companies, and they eventually paid COMSAT $4.375 million for its
successful defense of Alpha’s original complaint.
Before Alpha filed its amended complaint in New York, COMSAT purchased
general commercial liability insurance from St. Paul, to be effective October 1, 1990.
The St. Paul policy provided coverage for personal injury and advertising injury liability
occurring “while this agreement is in effect.” Personal injury included “libel or
slander” and “written or spoken material made public which belittles the products or
work of others[.]” Advertising injury included such conduct, as well as the
“unauthorized taking of advertising ideas or style of doing business[.]” The policy had
a material “first made public” exclusion which stated that St. Paul would not cover
personal or advertising injury that “results from written or spoken material if the
material was first made public before this agreement went into effect.” Finally, the
policy required that St. Paul defend COMSAT in “any claim or suit for covered injury
or damages.”
On November 13, 1991, after the St. Paul policy was in effect, Alpha filed its
amended complaint which included allegations that COMSAT was a common carrier.
COMSAT tendered the defense of the case to St. Paul on June 4, 1993. James Craig,
a claims attorney for St. Paul, notified COMSAT in July 1993 that coverage was being
denied and that St. Paul would not take up the defense because the conduct alleged in
the amended complaint had not occurred while St. Paul’s policy was in effect. Craig
also stated that Alpha had not alleged bodily injury, property damage, or advertising
injury covered by the St. Paul policy. During the process of reaching his conclusions,
Craig reviewed both of Alpha’s complaints, the insurance policy, and the letter from
COMSAT tendering the suit. No other information had been submitted by COMSAT
in support of its tender.
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After St. Paul denied coverage, COMSAT and Alpha engaged in discovery in
the New York case. In response to interrogatories, Alpha stated that it was alleging
that COMSAT had disparaged it after the St. Paul policy became effective. COMSAT
did not make St. Paul aware of Alpha’s answers, however, until six years after St. Paul
had denied coverage and two years after COMSAT had successfully defended Alpha’s
action in New York.
On June 24, 1999, COMSAT commenced this diversity action against St. Paul
for breach of contract. It alleged that St. Paul had owed a duty to defend it in Alpha’s
renewed action in the Southern District of New York. COMSAT moved for summary
judgment. St. Paul filed a cross motion for summary judgment and moved for a
Fed.R.Civ.P. 56(f) continuance if summary judgment were not granted in its favor.
While those motions were pending, COMSAT moved to compel discovery of claims
attorney Craig. St. Paul moved for a protective order and sought a hearing. United
States Magistrate Judge Jonathan Lebedoff held a hearing and then allowed COMSAT
to take Craig’s deposition.
The district court granted summary judgment to St. Paul, dismissed COMSAT’s
complaint, and dismissed St. Paul’s Rule 56(f) motion as moot. After comparing
Alpha’s original and amended complaints, the district court concluded that the amended
complaint did not allege any conduct other than that alleged in the first complaint. The
court found that the “pattern and practice” language in the amended complaint had not
put St. Paul on notice that Alpha was asserting conduct covered by its policy. The
court also noted that Alpha’s responses to interrogatories in the action on the amended
complaint had not been furnished to St. Paul until after COMSAT filed this case. St.
Paul thus had had no duty to investigate or defend COMSAT in the New York case.
Judgment was entered on May 4, 2000, and seven days later COMSAT wrote to the
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court pursuant to Local Rule 7.1(g)2 requesting leave to move for reconsideration and
notifying the court for the first time of the new evidence from Craig’s deposition. The
district court issued an order denying the request. COMSAT then filed a timely notice
of appeal on May 31, 2000 from both the judgment and the order.
On appeal COMSAT argues that the district court erred by granting summary
judgment to St. Paul, by denying it summary judgment, and by not permitting it to move
for reconsideration. It seeks judgment in its favor or the opportunity for further
discovery and introduction of new evidence. COMSAT asserts that St. Paul had a duty
to defend Alpha’s amended complaint because that pleading alleged personal and
advertising injury covered by St. Paul’s policy and conduct occurring after the policy
went into effect. It points to Alpha’s interrogatory responses in the New York case and
Craig’s deposition testimony to support its argument that conduct was alleged that took
place during the policy period. COMSAT also disputes the relevance of the policy
exclusion for material first made public which excludes anything published before the
policy became effective. St. Paul responds that the amended complaint did not allege
any conduct that occurred after its policy went into effect because the new complaint
alleged the same acts as had the original. It also argues that even if the alleged injuries
occurred after the policy was effective, they are not covered by the terms of the policy
and would in any event come under the material first made public exclusion.
2
The rule provides that “[m]otions to reconsider are prohibited except by express
permission of the Court, which will be granted only upon a showing of compelling
circumstances. Requests to make such a motion . . . shall be made by letter to the
Court . . . .” LOCAL RULE 7.1(g)
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The district court’s grant of summary judgment and its determination of
Minnesota law3 are reviewed de novo. See Allstate Ins. Co. v. Burrough, 120 F.3d
834, 838 (8th Cir. 1997). Summary judgment is appropriate if there is no genuine issue
of material fact or if the moving party is entitled to judgment as a matter of law. See
id. The district court’s denial of a request for leave to file a motion for reconsideration
may be treated as the “functional equivalent of a motion to alter or amend the judgment
under Fed.R.Civ.P. 59(e),” see Dubose v. Kelly, 187 F.3d 999, 1002 (8th Cir. 1999),
and it should be reviewed for an abuse of discretion. See Beverly Hills Foodland Inc.
v. Union, 39 F.3d 191, 194 n.3 (8th Cir. 1994).
COMSAT argues that Alpha’s amended complaint alleged advertising injury and
personal injury that occurred after the policy went into effect and that these allegations
gave rise to a duty to defend or at least to investigate the allegations. It further argues
that even if it was not clear from the complaint that St. Paul had a duty to defend,
discovery showed that Alpha had alleged acts that occurred after the effective date of
the policy. Finally, COMSAT contends that Craig’s deposition testimony shows that
even if it had provided St. Paul with Alpha’s answers, he would have incorrectly
concluded that there was no duty to defend. St. Paul responds that the language in the
amended complaint which COMSAT cites would not have led it to conclude that
covered conduct was alleged because the same overt acts were pleaded as in the
original complaint. It also points out that Alpha’s interrogatory answers were not
presented to St. Paul until six years after COMSAT’s claim was tendered and argues
that the information from Craig’s deposition testimony would not affect the outcome
even if it were properly before the court.
3
The parties agree that the substantive issues in this case are governed by
Minnesota law.
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Under Minnesota law a duty to defend arises “if any part of the claims asserted
against [the insured] in the underlying case ‘arguably’ falls within the scope of
coverage,” and the burden of showing that all parts of the cause of action fall clearly
outside the scope of coverage is on the insurer. Ross v. Briggs & Morgan, 540 N.W.2d
843, 847 (Minn. 1995); see Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161, 165-66
(Minn. 1986). If an insurer has no knowledge to the contrary, it can make an initial
determination, whether to defend or to conduct a further investigation, from the facts
in the complaint. See Garvis v. Employers Mut. Cas. Co., 497 N.W.2d 254, 258
(Minn. 1993). The insurer’s duty to defend is to be determined as of the time the claim
was tendered to it by the insured, and it is the insured’s obligation to provide
information that would trigger coverage. See Jostens, 387 N.W.2d at 166. If the
insured fails to provide such information, the insurer “need not speculate about facts
that may trigger its duty to defend.” St. Paul Mercury Ins. Co. v. Dahlberg, Inc., 596
N.W.2d 674, 677 (Minn. Ct. App. 1999).
COMSAT relies on language in Alpha’s amended complaint to establish that St.
Paul should have been aware that the suit arguably fell within the scope of the policy:
[t]he . . . overt acts . . . of the monopolization . . . include the following
course of conduct . . . . (b) COMSAT and other . . . companies have
combined, conspired, and agreed to refuse to do business with competing
satellite systems . . . . This conspiracy has been in effect continuously
from 1984 through the present . . . . (f) COMSAT has hindered and
interfered with [Alpha’s efforts] to do business in Chile . . . . This conduct
is part of a pattern and practice of COMSAT.
COMSAT also relies on Alpha’s prayer for “a permanent injunction enjoining and
prohibiting COMSAT from engaging in the violations of law set forth hereinabove.”
St. Paul responds that the phrases “course of conduct” and “pattern and practice” in the
complaint refer to the same overt acts alleged in the original complaint and again in the
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amended complaint. All acts must therefore have occurred before its policy went into
effect, and it would have only been speculation for it to surmise what new facts might
possibly have been included in “course of conduct” or “pattern and practice.”
The district court did a side by side comparison of both complaints4 and
determined that although the amended complaint slightly changed the wording of the
allegations, it did not allege any new overt acts of disparagement but only clarified
COMSAT’s position as a common carrier.5 Our own de novo comparison of the
complaints leads us to the same conclusion.
Since no new acts of disparagement were alleged in the amended complaint, the
language in both complaints about “course of conduct” and “pattern and practice”
referred to the same overt acts described in both complaints and the language did not
arguably refer to actions after the policy went into effect. St. Paul was not required to
4
COMSAT argues that the district court erred in stating that claims attorney
Craig had done a side by side comparison of the two complaints. It bases this argument
upon Craig’s failure to state explicitly in his denial letter or his deposition that he had
done a side by side comparison. The insurer’s duty is to analyze the pleadings and all
other information provided by the insured. Whether or not the district court was
precisely accurate in using the language “side by side” for Craig’s review is not of
material significance.
5
COMSAT also contends that the district court’s statement that the amended
complaint “does not establish that it engaged in any conduct after the policy went into
effect” shows that it used the standard for indemnity rather than for the duty to defend.
This argument is without merit because the court correctly cited and applied the
controlling law of Minnesota. See Garvis, 497 N.W.2d at 258.
The parties also disagree about whether the amended complaint alleged an
advertising injury or personal injury and whether there was proximate cause. Since
none of the alleged conduct arguably occurred while the policy was in effect, we need
not resolve this dispute or discuss the exclusion for material first made public.
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speculate as to what other acts Alpha might have intended to include in the allegations.
See Dahlberg, 596 N.W.2d at 677. Moreover, the phrase “continuously from 1984
through the present” refers to a conspiracy which does not arguably fall within the
scope of the St. Paul policy. Although COMSAT argues that Alpha’s request for a
permanent injunction should have been interpreted by St. Paul to allege ongoing
violations covered by its policy, conspiracy was the only ongoing violation alleged in
the complaints and no new overt acts were pleaded in the amended version. St. Paul
was therefore entitled to conclude that the request for injunctive relief was to enjoin the
previously alleged conspiracy and could not arguably be aimed at preventing other
advertising or personal injury. We conclude that the amended complaint did not allege
conduct arguably occurring during the policy period, and St. Paul was not required
under its policy to defend the lawsuit brought by Alpha.
COMSAT also argues that even if the complaint alone did not raise a duty to
defend, that duty was established by Alpha’s answers to its interrogatories. St. Paul
responds that COMSAT did not furnish those answers until six years after it had
tendered the defense of Alpha’s renewed action. It also argues that the answers do not
even raise the duty to defend. The initial burden is on the insured to provide
information that would trigger coverage. See SCSC Corp. v. Allied Mut. Ins. Co., 536
N.W.2d 305, 311 (Minn. 1995). COMSAT had these answers for six years and did not
provide them to St. Paul until after it filed this case in 1999. COMSAT failed to meet
its burden to provide evidence to the insurer in a timely manner. See Dalhberg, 596
N.W.2d at 678 (no duty to defend where insured failed to present extrinsic evidence
until two years after coverage was denied).
Finally, COMSAT argues that the deposition of claims attorney Craig shows that
Alpha’s answers to the interrogatories would not have changed his mind and that Craig
did not understand the suit COMSAT tendered to him for defense. St. Paul responds
that Craig’s deposition is irrelevant because it does not change the fact that he did not
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have Alpha’s answers when he denied coverage. Although COMSAT had the
deposition results eighteen days before the court issued its ruling, it took no action to
ask for a continuance or to supplement the record until after judgment was entered.
This evidence was not placed before the district court in a timely fashion, and the court
did not abuse its discretion by denying COMSAT’s request to file a motion for
reconsideration so that it could present the evidence. See Chism v. W.R. Grace & Co.,
158 F.3d 988, 992 n.4 (8th Cir. 1998). Even if the material from the Craig deposition
were part of the record, it would not affect the outcome because it was not given to St.
Paul when COMSAT tendered the defense or for many years thereafter. See Jostens,
387 N.W.2d at 166 (determination of duty to defend is based on the facts present at the
time suit tendered).
The amended complaint did not allege any conduct that arguably occurred during
St. Paul’s policy period, and COMSAT did not timely present extrinsic evidence to the
contrary. The district court correctly concluded that St. Paul had no duty to defend
COMSAT in Alpha’s New York action, and it did not abuse its discretion in denying
leave to file a motion for reconsideration. We affirm the judgement.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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