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U.S.A. NUTRASOURCE, INC. v. CNA INS. CO.

February 5, 2001

U.S.A. NUTRASOURCE, INC., ET AL., PLAINTIFF(S),
v.
CNA INSURANCE COMPANY, ET AL., DEFENDANT(S).



The opinion of the court was delivered by: Hamilton, U.S. District Judge.

  MEMORANDUM AND ORDER

Now before the court are the motions of defendant Columbia Casualty Company ("CCC") to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(4) and (5), to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6), and to strike. Having carefully reviewed the parties' papers and considered their arguments and the relevant legal authority, and good cause appearing, the court hereby rules as follows.

BACKGROUND

According to the complaint, the facts are generally as follows. Plaintiffs purchased a commercial general liability insurance policy from defendants for the period of March 1, 1999, through March 1, 2000. Said policy included liability coverage for claims arising from alleged advertising injuries, including trademark infringement, copyright infringement, misappropriation of style of doing business, etc.

On or about June 15, 1999, Amrion, Inc. ("Amrion") filed a complaint for trademark infringement, copyright infringement, and misappropriation of style of doing business, among other claims, in the United States District Court for the Northern District of California. Immediately thereafter, plaintiffs provided defendants a copy of the complaint filed in the Amrion action, as well as other extrinsic facts regarding the claim, and requested that defendants provide them with a defense and indemnification under the terms of their insurance policy.

On September 27, 1999, defendants advised plaintiffs that there was no potential coverage under the insurance policy. Accordingly, defendants refused to provide a defense or indemnity for plaintiffs with regard to the Amrion action. Thereafter, plaintiffs retained the law firm of Ropers, Majeski to represent their interests.

However, on February 8, 2000, defendants sent a letter to plaintiffs in which defendants changed their position, accepting their duty to defend and agreeing to pay Ropers, Majeski's prior fees and future fees in connection with the defense of the action.

Notwithstanding the representations made in the February 8, 2000, letter, defendants never paid for plaintiffs' defense costs and failed to actively participate in settlement negotiations for the case. Plaintiffs did, however, ultimately settle the case, sometime in October of 2000.

Around the same time that the Amrion action settled, plaintiffs filed the present action against defendants in state court, alleging (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) coverage by estoppel; (4) fraud; (5) negligent misrepresentation; and (6) declaratory relief. Thereafter, defendants removed the action to this court.

CCC now moves to dismiss the action and to strike plaintiff's claims for punitive damages. CCC also now moves to dismiss the action against CNA.

DISCUSSION

I. Motion to Dismiss Pursuant to Rules 12(b)(4) and 12(b)(5)

A. Legal Standard

Federal Rules of Civil Procedure 12(b)(4) and 12(b)(5) ("Rules 12 (b)(4) and 12(b)(5)") permit a defendant to challenge the form of summons and the method of service attempted by plaintiff, respectively.

B. CCC's Motion to Dismiss CNA Pursuant to Rules 12(b)(4) and 12(b)(5)

CCC contends that CNA is not a corporation, but rather is a federally registered service mark/tradename used for business and promotional purposes by CCC and other insuring entities. Accordingly, because plaintiffs' summons designated CNA as a corporate entity rather than a tradename, it is defective and dismissal is warranted.

Dismissals for defects in the form of summons are generally disfavored. Such defects are considered "technical" and hence are not a ground for dismissal unless the defendant demonstrates actual prejudice. See Chan v. Society ...


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