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Date: 02-16-2023
Case Style:
Dexon Computer, Inc. v. Travelers Property Casualty Co. of America
Case Number: 0:21-cv-01498
Judge: Patrick J. Schiltz
Court: United States District Court for the District of Minnesota (Hennepin County)
Plaintiff's Attorney:
Defendant's Attorney: Charles E. Spevacek and Louise A. Behrendt
Description: Minneapolis, Minnesota insurance law lawyers represented Plaintiff, which sued Defendant on a bad faith breach of insurane contract claiming to have suffered more than $75,000 in damages as a direct result of Defendant's wrongful denial of its claim.
Plaintiff Dexon Computer, Inc. (“Dexon”) is a middleman. For more than 25 years, Dexon has acquired new and used computer equipment from thousands of suppliers (including Cisco, Hewlett Packard, Juniper, and Dell) and sold that equipment to thousands of customers. In July 2020, Cisco Systems, Inc. and Cisco Technology, Inc. (collectively “Cisco”) brought a trademark-infringement action against Dexon in the United States District Court for the Northern District of California (the “Cisco Action”).[1] In that action, Cisco alleged that, on roughly 35 occasions, Dexon sold
counterfeit products-that is, products that bore Cisco marks but that had not been manufactured by Cisco.
Dexon tendered the defense of the Cisco Action to Travelers Property Casualty Company of America (“Travelers”), which insured Dexon under a CyberFirst Liability Policy (the “CyberFirst Policy” or “Policy”). Travelers rejected the tender. In response, Dexon brought this lawsuit, seeking a declaration that Travelers has a duty to defend and indemnify Dexon in connection with the Cisco Action.
* * *
Travelers issued a CyberFirst Policy to Dexon in 2019, and the parties renewed the Policy in 2020. Compl. ¶ 10 [ECF No. 1]. The Policy covers “‘communications and media wrongful act[s]' alleged to have occurred on or after . . . May 18, 2019” (the “Retroactive Date”). Id. ¶ 11. The Policy's definition of “communications and media wrongful act[s]” expressly includes acts of trademark infringement. Id. ¶ 14.
The Policy includes a related-acts provision (sometimes known as a “deemer clause”), which is the focus of Travelers' motion to dismiss. The related-acts provision provides:
Each “communications and media wrongful act” in a series of “related” “communications and media wrongful acts” will be deemed to have been committed on the date the first “communications and media wrongful act” in that series is committed.
Under the Policy, then, a wrongful act (such as an act of trademark infringement) is not covered if either (1) the wrongful act occurred before the Retroactive Date (i.e., before May 18, 2019) or (2) the wrongful act occurred after the Retroactive Date but is “related” to a wrongful act that occurred before the Retroactive Date.
B. The Cisco Action
On July 22, 2020, Cisco sued Dexon for trademark infringement, unfair competition, and unjust enrichment. ECF No. 8-1. Cisco filed an amended complaint on March 19, 2021. ECF No. 8-2. As noted, Cisco alleges that, on roughly 35 occasions, Dexon sold counterfeit Cisco products-that is, products that bore Cisco marks but that had not been manufactured by Cisco (or with Cisco's authorization). Cisco Am. Compl. ¶¶ 23, 67. Cisco alleges that these acts of trademark infringement were part of “counterfeit trafficking schemes” in which Dexon engaged for more than 15 years. Id. ¶ 1. According to Cisco, Dexon has continually used “counterfeit Cisco trademarks . . . to dupe its customers into believing that the illicit Cisco-branded products and software licenses it was selling are genuine, when in fact they were not.” Id.
After being sued by Cisco, Dexon asked Travelers to defend and indemnify it under the CyberFirst Policy. Compl. ¶ 20. Travelers denied that it had any obligation to defend or indemnify, citing the related-acts provision. Specifically, Travelers argued that each and every act of trademark infringement alleged in the Cisco Action either occurred before the Retroactive Date or was “related” to an act of trademark infringement that occurred before the Retroactive Date. Id. ¶¶ 20-21. In reaching its conclusion, Travelers relied entirely on Cisco's allegation that Dexon's acts of infringement were part of longstanding “counterfeit trafficking schemes.”
Dexon brought this action against Travelers, seeking, inter alia, a declaration that Travelers must defend and indemnify it in connection with the Cisco Action. Travelers now moves to dismiss.
II. ANALYSIS
A. Standard of Review
In ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the court must accept as true all of the factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. Du Bois v. Bd. of Regents, 987 F.3d 1199, 1202 (8th Cir. 2021). Although the factual allegations in the complaint need not be pleaded in great detail, they must be sufficient to “raise a right to relief above the speculative level ....” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Ordinarily, if the parties present, and the court considers, matters outside of the pleadings, a Rule 12(b)(6) motion must be treated as a motion for summary judgment. Fed.R.Civ.P. 12(d). But the court may consider materials that are necessarily embraced by the complaint, as well as any exhibits attached to the complaint, without converting the motion into one for summary judgment. Zean v. Fairview Health Servs., 858 F.3d 520, 526 (8th Cir. 2017).
Here, the parties submitted several documents for the Court to consider in ruling on Travelers' motion to dismiss, including the original and amended complaints in the Cisco Action, Dexon's answer to the Cisco complaint, the CyberFirst Policy, and letters Dexon sent to Travelers regarding this coverage dispute. All of these documents were referred to, cited, or quoted in Dexon's complaint, and thus they are not matters outside the pleadings. Id. (“documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleadings” are nevertheless embraced by the complaint (quoting Ashanti v. City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir. 2012))).
Outcome: Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS HEREBY ORDERED THAT defendant's motion to dismiss [ECF No. 4] is DENIED with respect to Counts One and Two of the complaint and GRANTED with respect to Count Three of the complaint. Count Three is DISMISSED WITHOUT PREJUDICE.
TRANSMITTAL OF APPEAL LETTER TO U. S. COURT OF APPEALS, 8TH CIRCUIT, Re: Notice of Appeal to 8th Circuit 37 . (kt) (Entered: 02/16/2023)
Plaintiff's Experts:
Defendant's Experts:
Comments: