Bullseye Rest., Inc. v. James River Ins. Co.

387 F.Supp.3d 273

BULLSEYE RESTAURANT, INC., d/b/a the Scene, and Daniel Brennan, Plaintiffs,

v.JAMES RIVER INSURANCE COMPANY, Defendant.

17-CV-2996 (DRH)(GRB)

United States District Court, E.D. New York.

Signed May 8, 2019

For Plaintiff: John L. Juliano, P.C., 39 Doyle Court, East Northport, New York, 11731, By: Jonathan C. Juliano, Esq.

For Defendant: Wade Clark Mulcahy LLP, 180 Maiden Lane, Suite 901, New York, New York 10038, By: Christopher J. Soverow, Esq.

MEMORANDUM & ORDER

HURLEY, Senior District Judge:

Plaintiffs Bullseye Restaurant, Inc. d/b/a The Scene ("Bullseye") and Daniel Brennan ("Brennan") (collectively "Plaintiffs") commenced this action seeking a declaratory judgment that defendant James River Insurance Company ("Defendant" or "JRIC") is obligated to indemnify and defend it in connection with an action entitled Van Derham v. Bullseye Restaurant , E.D.N.Y. Civil Action No. 16-490 (the "Underlying Action"). Presently before the Court is Defendant's motion for summary judgment dismissing Plaintiffs' complaint and declaring that JRIC owes "no duty to provide coverage to the Plaintiffs or any other party^{[1 ]} with respect to [claims] asserted in the lawsuit" Van Derham v. Bullseye Rest. Inc. (E.D.N.Y. Civil Action No. 16-490) (the "Underlying Action"). (Bullseye's Notice of Motion (DE 18)). For the reasons set forth below, the motion is granted in part and denied in part.

BACKGROUND

The following facts are taken from the parties' 56.1 Statements and are undisputed unless otherwise noted.

I. History of Bullseye and Insurance Coverage By JRIC

Bullseye operates a bar restaurant that also functions as a "gentlemen's club" under the name "the Scene," which opened in 2001. Bullseye Media was the initial operating entity for the Scene. In 2010 Angelo Abbatiello ("Abbatiello") arranged for defendant Bullseye's incorporation and began operating the business, with Abbatiello owning all the stock. In 2014 Brennan became the owner of Bullseye and as such oversaw its business operations, including promotions, except for the period from approximately May 2015 through February or March 2016 when he took a leave of absence for personal reasons. During Brennan's leave of absence, Abbatiello assumed all of Brennan's responsibilities. When Bullseye's then current insurer went out of business, Abbatiello engaged the Robert S. Fede Insurance Agency to obtain coverage for Bullseye. (Pls.' 56.1 Resp. at ¶¶ 8-22.)

Thereafter, JRIC issued a Liquor Liability and Commercial General Liability to Bullseye under Policy Number 00067929-0 (the "Policy"), initially effective 8/3/2015 to 8/3/ 2016. However, JRIC, by notice dated September 28, 2015 and admittedly received by Bullseye, cancelled the Policy effective October 1, 2015 for nonpayment of premiums. (Pls.' 56.1 Resp. at ¶¶23-29.) The Court notes that while Plaintiffs dispute that the Policy period ended on October 1, 2015, they do not cite any record evidence in support thereof and do not dispute that JRIC cancelled the policy effective October 1, 2015. (See id. ¶¶ 26, 27). They merely assert that Bullseye paid "approximately $6375.00 representing "advance premium' for the policy and therefor at the very lease [sic] the [ ] policy was in effect for a portion of the time period" during which the acts giving rise to the claims in the Underlying Action occurred. (Pls.' Opp. Mem. at 2.)

II. The Underlying Action and History of the Claim

On February 1, 2016,² Katarina Van Derham ("Van Derham"), Cielo Jean Gibson ("Gibson"), Gabby Jean Saucedo ("Saucedo"), Mariana Davalos ("Davalos"), and Chantel Zales ("Zales") filed the Underlying Action as plaintiffs against Bullseye and Brennan. According to the complaint therein, the plaintiffs are famous models whose images Bullseye and Brennan used, without their consent or payment therefor, as part of Bulleye's promotions on social media, which images created the appearance that those plaintiffs either worked as dancers at the Scene or otherwise endorsed the business when in fact they neither worked at or endorsed the Scene. The complaint in the Underlying Action alleges the following causes of action: (1) False Endorsement under § 43 of the Lanham Ac, 28 U.S.C. § 1125 (a)(1); (2) invasion of privacy under N.Y. Civ. Rts. Law §§ 50 - 51 ; (3) deceptive trade practices under N.Y. Gen. Bus. Law § 349 ; (4) defamation and defamation per se; (5) negligence; (6) conversion; (7) unjust enrichment; and (8) quantum meruit. Attached to the complaint in the Underlying Action are the following promotions: (1) a Facebook post for the Scene allegedly depicting Van Derham, published on December 1-17, 2015; (2) a Facebook post published on December 14, 2015, allegedly featuring Gibson; (3) a Facebook post published on October 19, 2015, allegedly featuring Saucedo; (4) an image allegedly featuring Davalos, published on the Scene's webpage, undated, and on its Facebook page, published on September 9, 12, 13, and 14, 2015; and (5) a Facebook post published on October 7, 2015, allegedly featuring Zales. According to the docket in the Underlying Action, Bullseye and Brennan were served with process on March 3, 2016. (Pls.' 56.1 Resp. at ¶¶ 30-33; Van Derham v. Bullseye Restaurant Inc. , Civil Action No. 16-490 (E.D.N.Y.) at DE 6.)

Bullseye and Brennan instituted a third party action against Neo Producttions Ltd., Michael DelRosso, Brian Gordon and Envato Pty. Ltd., the promoters and/or advertisers hired by Bullseye who it claims were responsible for construction of the advertising, and the management of Bullseye' website and social media posts. Del Rosso asserted as an affirmative defense that he did not produce the promotions at issue but purchased images from a vendor known as Envato Ltd. d/b/a PhotoDune.net ("Envato") and provided invoices as support. Although Bullseye had sued Envato in the Underlying Action, it stipulated to their dismissal without prejudice in or about November 2016; according to Plaintiffs they stipulated to the dismissal after "it was discovered that none of the images at issue in the [Underlying Action] were images held by and licensed to Envato." Subsequent to undertaking advertising efforts on behalf of Bullseye, Nuzzi, whom the parties agree was responsible for at least some of the promotion at issue in the Underlying Action, died. (Pls.' 56.1 Resp. at ¶77-80.)

Written notice of the Underlying Action was provided by Plaintiffs to JRC on November 1, 2016.³ JRIC acknowledged receipt of the claim on November 8, 2016 and asked Plaintiffs to provide any additional information. (Pls.' 56.1 Resp. at ¶¶ 34-35.)

III. JRIC Disclaims Coverage

On December 7, 2016, JRIC disclaimed coverage for the claims in the underlying Action.⁴ Citing various policy provision as support therefor, the disclaimer stated (1) it was denying coverage "for any claims arising from any promoting published either before or after the effective dates of the Policy;" (2) reserving "the right to deny coverage to the extent [its] rights were prejudiced by the late notice of claim provided by the Plaintiffs;" (3) denied coverage "based on the RECORDING AND DISTRIBUTION OF MATERIAL OR INFORMATION IN VIOLATION OF LAW EXCLUSION;" (4) denied coverage "based on the FIDUCIARY EXCLUSION;" (5) reserved the right to deny coverage to Brennan to the extent he did not qualify as an insured;"⁵ and (6) reserved the right to deny coverage based on the "Knowing Violation of Rights of Another" and "Materials Published with Knowledge of Falsity" exclusions.⁶ (Pls.' 56.1 Resp. at ¶¶38-46 (capitalization in original).)

IV. Bullseye's Advertising Practices and Records

Prior to his leave of absence, Brennan oversaw all promotions, including arranging for promotions of guest dancers, pursuant to a contact and with their permission, in newspapers. (Pls.' 56.1 Resp. at ¶16.)

During Brennan's leave of absence, Abbatiello oversaw promotions. Abbatiello hired Anthony Nuzzi (d/b/a/ Neo Productions, Ltd.), Del Rosso, and Gordon, whom he met through their patronage of Bullseye to prepare and place advertising and manage Bullseye's website and social media posts. Plaintiffs deny any knowledge that these advertisers were doing anything illegal or in violation of statute in connection with Bullseye's promotions or with use of images in those promotions. According to Abbatiello's deposition testimony neither Nuzzi nor Del Rosso provided advanced copies of promotion prior to publication; he could not recall if Gordon provided advance copies for approval prior to publication. (Pls.' 56.1 Resp. at ¶17, 53-57; Pls.' 56.1 Counterstatement at ¶ 2-4, 9-10.)

During discovery JRIC demanded copies of any and all communications between Bullseye or its representatives and any advertiser. In response Plaintiffs produced invoices and emails regarding the activities of DelRosso and Gordon, including at least one email sent directly to Abbatiello. Although Plaintiff produced these documents in discovery in this matter, they were originally produced by DelRosso in the Underlying Action as part of his initial disclosures pursuant to Fed. R. Civ. P. 26(a). After a search of their various email accounts, Plaintiffs did not find any emails from DelRosso, Gordon, or Nuzzi to Bullseye, Brennan or Abbatiello. No written communications between Bullseye or its representatives and Nuzzi were produced by Plaintiffs to JRIC; according to Plaintiffs they produced all the documents that were in their possession. (Pls.' 56.1 Resp. at ¶¶ 56-63.)

Bullseye and Brennan instituted a third party action against the promoters and/or advertisers hired by Bullseye who were responsible for construction of the advertising, and the management of Bullseye' website and social media posts. Del Rosso asserted as an affirmative defense that he did not produce the promotions at issue but purchased images from a vendor known as Envato Ltd. d/b/a PhotoDune.net ("Envato") and provided invoices as support. Although Bullseye had sued Envato in the Underlying Action, it...