Hartford Cas. Ins. Co. v. Vogue Int'l, LLC

HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff and Respondent, v. VOGUE INTERNATIONAL, LLC, et al., Defendants and Appellants.

A150921

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE

May 21, 2018

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Alameda County Super. Ct. No. RG14750377)

Vogue International, LLC and Todd Christopher International, Inc. (each doing business as Vogue International; collectively Vogue) were sued in a consumer class action for falsely advertising cosmetic products as "organic." (Golloher v. Todd Christopher International, Inc. (N.D.Cal. Case No. 3:12-cv-06002-RS); hereafter Golloher Action.) Vogue sought defense coverage for the suit from its insurer, Hartford Casualty Insurance Company (Hartford). Hartford denied a duty to defend or indemnify, and initiated this declaratory relief action in the Alameda County Superior Court. Vogue concurrently pursued a declaratory relief coverage action against Hartford in Florida, resulting in a judgment in favor of Hartford. Vogue appeals from a subsequent grant of summary judgment in the instant case in favor of Hartford, arguing the trial court erred by applying res judicata principles to the earlier Florida judgment, and by concluding the underlying Golloher Action does not involve, under California law, an alleged disparagement of others' goods that would trigger Hartford's duty to defend. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Hartford issued commercial general liability insurance policies to "Todd Christopher International DBA Vogue International" continuously between September 11, 2003, and March 1, 2009 (the Policies). In relevant part, the Policies provide: "[Hartford] will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal and advertising injury' to which this insurance applies. [Hartford] will have the right and duty to defend the insured against any 'suit' seeking those damages. However, [Hartford] will have no duty to defend the insured against any 'suit' seeking damages for 'personal and advertising injury' to which this insurance does not apply." The Policies enumerate certain covered " 'personal and advertising injury' " offenses, including "[o]ral, written, or electronic publication of material that . . . disparages a person's or organization's goods, products or services," subject to the Policies' terms, conditions, and exclusions.

One such exclusion is for " '[p]ersonal and advertising injury' arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your 'advertisement' " (Statement of Quality Exclusion). The Policies also exclude coverage for " '[p]ersonal and advertising injury' arising out of oral, written or electronic publication of material, if done by or at the direction of the insured with knowledge of its falsity" (Known Falsity Exclusion).

In October 2012, the Golloher Action was filed against Todd Christopher International, Inc., in Alameda County Superior Court, as a proposed consumer class action. The Golloher plaintiffs alleged Vogue's use of the terms "organic" and "Organix," in advertising its cosmetic products, falsely represented such products contained organic ingredients. In November 2012, Vogue tendered defense of the Golloher Action to Hartford. Hartford disclaimed a duty to defend the Golloher Action.

In August 2013, after the Golloher Action was removed to the U.S. District Court for the Northern District of California, a first amended complaint (the Golloher FAC) was filed. The Golloher FAC alleged that Vogue sold "cosmetic products" under the "Organix brand name" and "advertised, marketed, labeled, sold, and represented [theproducts] as organic, but [the products] are composed almost entirely from ingredients that are not organic." The Golloher FAC alleged that "Plaintiffs and all members of the Class have been subjected to the same wrongful conduct because they have purchased the Products which are labeled and sold as organic, but, in fact, are not. Plaintiffs and the other members of the Class have thus all overpaid for the Products." The Golloher plaintiffs sought preliminary and permanent injunctions, restitution, as well as "actual, punitive, treble, and/or statutory damages to Plaintiffs and each member of the Class." Vogue informed Hartford of the amendment and Hartford again disclaimed a duty to defend Vogue in connection with the Golloher FAC. In March 2014, the Golloher Action was resolved via settlement.

In May 2014, Todd Christopher International Inc. filed suit against Hartford in the U.S. District Court for the Central District of California seeking a declaration that Hartford had a duty to defend it in a different third-party action (Vogue I). The Central District entered judgment in Hartford's favor, concluding Vogue had not met its burden to show a potential for coverage. Vogue appealed the Vogue I decision to the Ninth Circuit. While the Vogue I appeal was pending, Vogue International, LLC, filed a December 2014 complaint for declaratory judgment against Hartford in Florida (Florida Coverage Action), alleging Hartford had a duty to defend it in the Golloher Action. One day later, Hartford filed the instant action against Vogue (both Vogue International, LLC, and Todd Christopher International Inc.) in Alameda County, seeking declaratory relief (by 16 separate causes of action) regarding Hartford's duties to defend and indemnify Vogue in the Golloher Action.

On Vogue's motion, the Alameda County matter was stayed pending resolution of the Florida Coverage Action after the trial court concluded both matters presented identical issues and comity favored a stay. In its motion to stay the proceedings, Vogue argued that a coverage determination in the Florida Coverage Action would be preclusive in this case and specifically conceded the issues and parties in the Florida Coverage Action were identical. Vogue argued, "all issues raised [herein] can and will be resolvedby [the Florida Coverage Action]" and the Alameda County Superior Court "will be bound under collateral estoppel rules to honor Florida's judgment."

Meanwhile, Hartford and Vogue International, LLC, each moved for summary judgment in the Florida Coverage Action. Vogue International, LLC, sought a declaration in its favor on Hartford's duty to defend, relying primarily on two pleading allegations of the Golloher FAC. Specifically, Vogue International, LLC, directed the court's attention to the Golloher FAC's first cause of action, which alleged violations of consumer protection laws, including California's Consumers Legal Remedies Act (CLRA; Civ. Code, §§ 1750, 1770).¹ The Golloher plaintiffs alleged: "Each of the [referenced consumer protection laws] prohibits unfair and deceptive acts or practices in the conduct of trade or commerce . . . includ[ing] that which directly and indirectly injures the Plaintiffs and Class Members, by: [¶] . . . [¶] Disparaging the goods, products, or business of another by false or misleading representation of fact[.] . . . [¶] . . . [¶] Defendants have engaged and continue to engage in conduct that is likely to deceive members . . . of the Class, and that did, in fact, deceive Plaintiffs . . . includ[ing] but not limited to, misrepresenting that the Products are organic when, in fact, the Products are not composed predominantly of organic ingredients." (Italics added.) Vogue International, LLC, also focused on the following allegation: "Use of the Organix label calls into question other similar representations of products as organic, thereby denigrating the reputation of and eroding confidence in organic personal care products that comply with [the California Organic Products Act (Health & Saf. Code, § 111910, subd. (a))] as well as other regulatory provisions nationally." (Italics added.)

In June 2015, the Florida Circuit Court granted Hartford's motion for summary judgment, concluding Hartford had no duty to defend or indemnify Vogue International, LLC, with respect to the Golloher Action. The Florida Circuit Court relied on alternative grounds, first concluding that Vogue I was issue preclusive because it involved identicalparties and addressed the same issues.² The Florida Circuit Court also reached the merits, concluding Florida law applied to the coverage dispute, and explaining: "After a fair reading of the [Golloher FAC,] the Court cannot find an allegation of 'disparagement' sufficient to require coverage under the [Policies]. Clearly Vogue made no disparaging statements related to the Plaintiffs or competitors who brought the California suit. [¶] The substance of the California suit related to the quality and makeup of the subject product. The Court finds this would come within the [Statement of Quality Exclusion] set forth in the [Policies]. For the foregoing reasons, the Court does not find that [Hartford] is required to extend coverage to the Plaintiffs."

The Florida Circuit Court entered a declaratory judgment in Hartford's favor, stating, "Hartford owes no duty to defend or indemnify [Vogue International, LLC,] under the [Policies] . . . in connection with the [Golloher Action]." The Florida Court of Appeal affirmed that judgment in April 2016. The judgment in the Florida Coverage Action has now become final. (Fla. Rules App.Proc., rules 9.330(a), 9.120(b).)

Thereafter, the parties filed cross motions for summary judgment in the instant action. The Alameda County Superior Court denied Vogue's motion, but granted Hartford's motion for summary judgment. The court explained: "[T]he court agrees with Hartford that the Florida Judgment is entitled...