Wireless Buybacks, LLC v. Hanover Am. Ins. Co.

223 F.Supp.3d 443

WIRELESS BUYBACKS, LLC

v.HANOVER AMERICAN INS. CO.

Civil No. CCB–16–0328

United States District Court, D. Maryland.

Signed December 8, 2016

Andrew Janquitto, Mudd Harrison and Burch LLP, Towson, MD, David A. Gauntlett, Gauntlett & Associates, Irvine, CA, for Wireless Buybacks, LLC.

Julie Furst Maloney, Steven E. Leder, Leder & Hale, PC, Towson, MD, for Hanover American Ins. Co.

MEMORANDUM

Catherine C. Blake, United States District Judge

Now pending are several motions that arose in the context of a dispute between Wireless Buybacks, LLC ("Wireless") and Hanover American Insurance Company ("Hanover") over whether Hanover has a duty to defend Wireless in an underlying lawsuit. The parties have filed cross motions for partial summary judgment. Hanover also has filed a motion to stay summary judgment briefing, and Wireless has filed a request for judicial notice. No oral argument is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons set forth below, the court will grant Hanover's motion for partial summary judgment and deny Wireless's motion for partial summary judgment. The court will deny Wireless's request for judicial notice and will deny as moot Hanover's motion to stay summary judgment briefing.

BACKGROUND

On February 23, 2013, Sprint Nextel Corporation and Sprint Communications Company, L.P. ("Sprint") filed a lawsuit against Wireless and other defendants. (Sprint Compl. Ex. 2, ECF No. 1–2). That lawsuit, Sprint Nextel Corp., et al. v. Simple Cell, Inc., et al. ("Sprint suit"),¹ alleges that Wireless and other defendants engaged in unlawful business practices involving, inter alia , the unauthorized acquisition and resale of Sprint phones. (Id. ¶ 2). In essence, Sprint alleges that Wireless unlawfully acquired Sprint phones, "unlocked" them so they could function on non–Sprint wireless networks, and resold the phones overseas. (Id. ¶¶ 1–11). The Sprint suit includes 16 counts; according to Wireless, the most pertinent for present purposes are unfair competition; tortious interference with business relationships and prospective advantage; common law fraud; fraudulent misrepresentation; trafficking in computer passwords, 18 U.S.C. § 1030(a)(6) ; unauthorized access, 18 U.S.C. § 1030(a)(5)(C) ; unauthorized access with intent to defraud, 18 U.S.C. § 1030(a)(4) ; federal common law trademark infringement and false advertising under the Lanham Act; and conversion. (Wireless Compl. ¶ 17).

On February 4, 2016, Wireless filed a complaint for declaratory relief against Hanover, its general liability insurer, based on Hanover's failure to acknowledge a duty to defend Wireless and three individuals in the Sprint suit. (Wireless Compl. ¶ 21). At issue is undisputed policy language providing that Hanover had a duty to defend Wireless against any lawsuit seeking damages due to "personal and advertising injury." (Id. Ex. 1, 66, ECF No. 1–1). "Personal and advertising injury" includes "injury arising out of" "[o]ral 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." (Id. Ex. 1, 82). The relevant policies also include a variety of exclusions from the coverage. (See Hanover Mot. Partial Summ. J. 20–28).

Hanover filed its Answer on March 23, 2016. In that filing, it also counterclaimed for declaratory judgment and other relief against Wireless Buybacks LLC, Wireless Buybacks Holdings, LLC, three individuals, and Sprint, seeking a declaration that it has no duty to defend or indemnify in connection with the Sprint suit. (Hanover Answer & Countercl. 11–27, ECF No. 13). Wireless moved to dismiss Hanover's counterclaims against Sprint only on April 5, 2016. (Wireless Mot. Dismiss, ECF No. 19). Hanover responded, (Resp. in Opp'n Mot. Dismiss Countercl. & Reply, Mot. to Stay Summ. J. Br., ECF No. 20), and Wireless replied, (Reply, Mot. to Dismiss Countercl., ECF No. 31). Hanover then agreed to voluntarily dismiss its counterclaims against Sprint on the condition that Sprint agree to be bound by the court's entry of declaratory judgment regarding the existence of insurance coverage in the Sprint suit, including the duty to defend and/or indemnify. (Notice of Dismissal 1–2, ECF No. 33). The court approved that dismissal. (Order, Docket Entry No. 34). The non–Sprint counter-defendants answered Hanover's counterclaims on May 6, 2016. (Wireless Answer, ECF No. 32).

Meanwhile, on March 22, 2016, Wireless moved for partial summary judgment on its claim that Hanover owed Wireless a duty to defend in the Sprint suit. (Wireless Mot. Partial Summ. J., ECF No. 12). Hanover moved to stay summary judgment briefing. (Mot. Stay Summ. J. Br., ECF No. 16). Wireless responded, (Resp. in Opp'n Mot. Stay Summ. J. Br., ECF No. 18), and Hanover replied, (Resp. in Opp'n Mot. Dismiss Countercl. & Reply, Mot. to Stay Summ. J. Br.). But before the court issued a ruling on Hanover's motion to stay summary judgment briefing, Hanover filed its own motion for partial summary judgment, which also served as its response to Wireless's motion for partial summary judgment. (Hanover Mot. Partial Summ. J., ECF No. 36). Wireless then responded, (Wireless Resp. in Opp'n Mot. Partial Summ. J., ECF No. 39), and Hanover replied, (Hanover Reply, Mot. Partial Summ. J., ECF No. 43).

Wireless then filed a motion requesting judicial notice of various documents in support of its motion for partial summary judgment and in opposition to Hanover's motion for partial summary judgment. (Request Judicial Notice, ECF No. 40). Hanover responded, (Resp. in Opp'n Request Judicial Notice, ECF No. 44), and Wireless replied, (Reply, Request Judicial Notice, ECF No. 45).

LEGAL STANDARD

Wireless brought this action seeking declaratory judgment pursuant to 28 U.S.C. § 2201. (Wireless Compl. ¶ 3). The court has jurisdiction over this action under 28 U.S.C. § 1332, and the parties agree that Maryland law applies. (Id. ; Hanover Answer & Countercl. 2).

Federal Rule of Civil Procedure 56(a) provides that summary judgment should be granted "if 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) (emphases added). "A dispute is genuine if ‘a reasonable jury could return a verdict for the nonmoving party.’ " Libertarian Party of Va. v. Judd , 718 F.3d 308, 313 (4th Cir. 2013) (quoting Dulaney v. Packaging Corp. of Am. , 673 F.3d 323, 330 (4th Cir. 2012) ). "A fact is material if it ‘might affect the outcome of the suit under the governing law.’ " Id. (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). Accordingly, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment[.]" Anderson , 477 U.S. at 247–48, 106 S.Ct. 2505. The court must view the evidence in the light most favorable to the nonmoving party, Tolan v. Cotton , ––– U.S. ––––, 134 S.Ct. 1861, 1866, 188 L.Ed.2d 895 (2014) (per curiam), and draw all reasonable inferences in that party's favor, Scott v. Harris , 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (citations omitted); see also Jacobs v. N.C. Admin. Office of the Courts , 780 F.3d 562, 568–69 (4th Cir. 2015). At the same time, the court must "prevent factually unsupported claims and defenses from proceeding to trial." Bouchat v. Balt. Ravens Football Club, Inc. , 346 F.3d 514, 526 (4th Cir. 2003) (quoting Drewitt v. Pratt , 999 F.2d 774, 778–79 (4th Cir. 1993) ).

ANALYSIS

A. Cross Motions for Partial Summary Judgment

The cross motions for partial summary judgment raise two issues. The first is whether the underlying complaint in the Sprint suit may trigger a duty to defend even though the tort of product disparagement is not specifically identified as a cause of action. If so, then the second question is whether the allegations in the underlying complaint here trigger the duty to defend.

I.

In Maryland, an insurance company has a duty to defend its insured "for all claims that are potentially covered under the policy." Walk v. Hartford Cas. Ins. Co. , 382 Md. 1, 15, 852 A.2d 98 (2004). "If the plaintiffs in the tort suits allege a claim covered by the policy, the insurer has a duty to defend." Brohawn v. Transamerica Ins. Co. , 276 Md. 396, 407, 347 A.2d 842 (1975). "Even if a tort plaintiff does not allege facts which clearly bring the claim within or without the policy coverage, the insurer still must defend if there is a potentiality that the claim could be covered by the policy." Id. at 408, 347 A.2d 842. "[A]ny doubt as to whether there is a potentiality of coverage under an insurance policy is to be resolved in favor of the insured." Chantel Assocs. v. Mount Vernon Fire Ins. Co. , 338 Md. 131, 145, 656 A.2d 779 (1995).

When determining if a duty to defend exists, the court follows a two-part inquiry. First, it examines the coverage and defenses under the terms and requirements of the insurance policy. Second, it asks whether the allegations in the underlying suit "potentially bring the...claim within the policy's coverage." St. Paul Fire & Mar. Ins. Co. v. Pryseski , 292 Md. 187, 193, 438 A.2d 282 (1981). Here, the issue is whether the allegations in the Sprint suit potentially fall within the scope and limitations of coverage for "personal and advertising injury." See Walk , 382 Md. at 13, 852 A.2d 98.

As an initial matter, Hanover appears to suggest that no duty to defend exists because the underlying complaint does not include the tort of product disparagement as a cause of action. According to Hanover, the insurance policies here "cover the tort of disparagement, not ‘claims which merely make reference to allegedly libelous or disparaging statement [sic] as factual background.’ " (Hanover Mot. Partial Summ. J. 8) (quoting American and Foreign Ins. Co. v. Church Schools in Diocese of Virginia ,...