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SEAGATE TECH. v. ST. PAUL FIRE & MARINE INS. CO.

May 15, 1998

SEAGATE TECHNOLOGY, INC., Plaintiff,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY and CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY, Defendants.



The opinion of the court was delivered by: JENSEN

ORDER

 On April 8, 1998, the Court heard argument on cross motions for summary judgment regarding St. Paul Fire and Marine Insurance Company's duty to defend. Dean A. Morehous, Jr. and Mary E. Wilcox appeared on behalf of plaintiff Seagate Technology, Inc; Stephen A. Scott and Dean A. Pappas appeared for defendant St. Paul Fire and Marine Ins. Co.. Having considered the arguments of counsel, the papers submitted, the applicable law, and the record in this case, the Court hereby GRANTS summary judgment for St. Paul and DENIES summary judgment for Seagate as to St. Paul's duty to defend.

 I. BACKGROUND

 A. Factual Background and Procedural History

 Seagate, a Delaware corporation with its principal place of business in California, manufactures disk drive storage devices for personal computers and small business machines. In June 1988, Amstrad, a United Kingdom corporation, began to purchase Seagate disk drives for its personal computers. In early 1989, Amstrad began selling PC 2386 personal computers into which the Seagate drives had been incorporated.

 On September 11, 1991, Amstrad sued Seagate in Superior Court of California, Santa Cruz County, alleging that the ST277R drives, purchased from Seagate and incorporated into Amstrad's PC 2386 computer, were defective. Amstrad filed an Amended Complaint in the California action on September 25, 1991. *fn1" Seagate answered the Amended Complaint and filed a cross-complaint against Amstrad. On April 13, 1992, the action was dismissed on forum non conveniens grounds. Amstrad refiled in the United Kingdom on December 11, 1992. Trial began on April 16, 1996 and concluded on July 31, 1996. On July 9, 1997 judgment was rendered in favor of Amstrad and against Seagate

 In September 1991, Seagate tendered its insurance coverage claim based on the Amstrad actions to CIGNA and St. Paul. By letter dated October 24, 1991, CIGNA denied coverage and expressly declined to provide Seagate with a defense against the Amstrad litigation. On June 4, 1992, St. Paul responded to Seagate's claim with a letter denying coverage of the Amstrad actions under its domestic and excess umbrella policies. Seagate further tendered its coverage claim on November 30, 1992. By letters dated March 2, 1993 and October 11, 1993, CIGNA and St. Paul, respectively, again denied coverage of the Amstrad actions.

 On June 7, 1994, Seagate brought the present action against St. Paul and CIGNA. Seagate's complaint brings causes of action for breach of contract and tortious bad faith based in part on St. Paul's refusal to defend Seagate in the Amstrad actions. On February 20, 1998, Seagate and St. Paul brought cross-motions for summary judgment regarding St. Paul's duty to defend. These motions are now before the Court.

 B. Legal Standards

 1. Cross-Motions for Summary Judgment

 The Federal Rules of Civil Procedure provide for summary adjudication when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(e).

 In a motion for summary judgment, "if the party moving for summary judgment meets its initial burden of identifying for the court those portions of the materials on file that it believes demonstrate the absence of any genuine issues of material fact," the burden of production then shifts so that "the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, 'specific facts showing that there is a genuine issue for trial.'" T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)); Kaiser Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d 1100, 1103-04 (9th Cir.), cert. denied, 479 U.S. 949, 93 L. Ed. 2d 384, 107 S. Ct. 435 (1986).

 On cross motions for summary judgment, the burdens faced by the opposing parties vary with the burden of proof they will face at trial. When the moving party will have the burden of proof at trial, "his showing must be sufficient for the court to hold that no reasonable trier of fact could find other than for the moving party." William W. Schwarzer, Summary Judgment Under the Federal Rules: Defining Genuine Issues of Material Fact, 99 EF.R.D.F 465, 487-488 (1984).

 In contrast, a moving party who will not have the burden of proof at trial need only point to the insufficiency of the other side's evidence, thereby shifting to the nonmoving party the burden of raising genuine issues of fact by substantial evidence. T.W. Electric, 809 F.2d at 630 citing Celotex, 477 U.S. at 323; Kaiser Cement, 793 F.2d at 1103-04.

 In judging evidence at the summary judgment stage, the Court does not make credibility determinations or weigh conflicting evidence, and draws all inferences in the light most favorable to the nonmoving party. T.W. Electric, 809 F.2d at 630-31 (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 89 L. Ed. 2d 538, ...


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