GK Skaggs, Inc. v. Hartford Casualty Insurance

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT JUN 16 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
GK SKAGGS, INC. And GREGORY No. 12-56501
SKAGGS, an individual,
D.C. No. 8:12-cv-00169-JVS-JPR
Plaintiffs-counter-defendants
- Appellants,
MEMORANDUM*
v.
HARTFORD CASUALTY INSURANCE
COMPANY, a Connecticut corporation,
Defendant-counter-claimant -
Appellee.
Appeal from the United States District Court
for the Central District of California
James V. Selna, District Judge, Presiding
Argued and Submitted June 6, 2014
Pasadena, California
Before: GOULD and N.R. SMITH, Circuit Judges, and KORMAN, Senior District
Judge.**
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Edward R. Korman, Senior District Judge for the U.S.
District Court for the Eastern District of New York, sitting by designation.
GK Skaggs, Incorporated and Gregory Skaggs (collectively “GKS”) sued
Hartford Casualty Insurance Company (“Hartford”), seeking a declaratory
judgment that Hartford had a duty to defend GKS in an action filed against GKS,
Cerveceria Centro Americana (“CCA”), and Central Beer Import & Export
(“Central Beer”) by non-party Leonel & Noel Corporation (“L&N”). GKS and
Hartford filed cross-motions for summary judgment. The district court denied
GKS’s motion and granted Hartford’s. Reviewing de novo, see Travelers Cas. &
Sur. Co. of Am. v. Brenneke, 551 F.3d 1132, 1137 (9th Cir. 2009) (summary
judgment); McHugh v. United Serv. Auto. Ass’n, 164 F.3d 451, 454 (9th Cir. 1999)
(insurance policy interpretation), we affirm.
1. The policy language itself forecloses GKS’s argument that statements in
GKS’s termination letter formed the basis for potential disparagement liability.
There were no “damages because of . . . injury . . . arising out of” GKS’s
disparagement, because GKS sent L&N the termination letter after CCA and
Central Beer had terminated their contracts with L&N. See Medill v. Westport Ins.
Corp., 49 Cal. Rptr. 3d 570, 578-79 (Cal. Ct. App. 2006) (noting that policy
language “arising out of” requires a “minimal causal connection or incidental
relationship”).
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2. The Second Amended Complaint (“SAC”) alleged (1) a tortious
interference claim, (2) that GKS was a “middleman” in the chain of beer
distribution, and (3) that GKS “chastised [the downstream distributor] for its
decline in sales.” GKS argues that these allegations imply that GKS made
disparaging statements about L&N to CCA and Central Beer, other than those
contained in GKS’s termination letter. However, there is no precedent holding that
such speculative inferences would “‘fairly apprise’ the insurer that the suit is upon
a covered claim.” Shanahan v. State Farm Gen. Ins. Co., 122 Cal. Rptr. 3d 572,
577 (Cal. Ct. App. 2011) (quoting Michaelian v. State Comp. Ins. Fund, 58 Cal.
Rptr. 2d 133, 141 (Cal. Ct. App. 1996). Moreover, any inference of falsity is
negated by L&N’s allegations that GKS worked together with CCA and Central
Beer to force L&N out of the market.
3. Potential disparagement liability also does not arise from L&N’s Lanham
Act claim. This claim may theoretically cover conduct constituting disparagement.
Compare 15 U.S.C. § 1125(a), with Total Call Int’l, Inc. v. Peerless Ins. Co., 104
Cal. Rptr. 3d 319, 326 (Cal. Ct. App. 2010). However, L&N’s Lanham Act claim
does not expressly or impliedly allege disparagement. L&N alleged that “GKS’[s]
marketing and sales of beers brewed by CCA in Wisconsin falsely implies an
authority to sell those brands in Wisconsin, when in fact, [L&N] had the exclusive
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distribution rights in that state.” GKS’s allegation of potential disparagement
liability is not at all similar to GKS’s cited cases.1 L&N did not allege GKS said
anything about GKS’s rights, much less that GKS claimed to have the exclusive
right to distribute CCA beer in Wisconsin. See Burgett, Inc. v. Am. Zurich Ins. Co.,
830 F. Supp. 2d 953, 963 (E.D. Cal. 2011) (insured party falsely represented it was
the only holder of a particular trademark, implying that the third-party plaintiff did
not have rights to that trademark); E.piphany, Inc. v. St. Paul Fire & Marine Ins.
Co., 590 F. Supp. 2d 1244, 1249 (N.D. Cal. 2008) (insured party falsely stated that
it offered the only software of a particular kind, inflating its product reviews to the
detriment of competitors). Further, L&N alleged a false implication with respect to
GKS’s rights, not necessarily L&N’s products. See Travelers Prop. Cas. Co. of
Am. v. Charlotte Russe Holding, Inc., 144 Cal. Rptr. 3d 12, 20-21 (Cal. Ct. App.
2012) (false implication regarding third-party plaintiff’s products); Michael Taylor
Designs, Inc. v. Travelers Prop. Cas. Co. of Am., 761 F. Supp. 2d 904, 910-11
(N.D. Cal. 2011) (same).
GKS’s claim that marketing in L&N’s exclusive territory would disparage
L&N “as a liar” also fails. “Personal injury” under the policy at issue includes
1
Cases not applying California law and unpublished cases are unhelpful
here and are therefore not considered.
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injury arising from disparagement to “an organization’s goods, products, or
services,” not disparagement to the organization itself.
4. Moreover, even assuming that the SAC’s allegations give rise to potential
disparagement liability, the breach of contract exclusion would bar coverage. Any
disparaging statements GKS purportedly made allegedly culminated in CCA,
Central Beer, and/or GKS breaching their contracts with L&N. “[E]xamin[ing] the
conduct underlying [L&N’s] lawsuit, instead of the legal theories attached to the
conduct,” the injury here arose out of a breach of contract. See Medill, 49 Cal.
Rptr. 3d at 579 (internal quotation marks omitted).
AFFIRMED.
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