United States District Court, C.D. California
SEI Y. KIM, Plaintiff,
TRUCK INSURANCE EXCHANGE and PEERLESS INSURANCE COMPANY, Defendants.
ORDER re: DEFENDANT PEERLESS INSURANCE CO.'S MOTION FOR SUMMARY JUDGMENT 
RONALD S.W. LEW, District Judge.
Before the Court is Defendant Peerless Insurance Co.'s("Peerless" or "Defendant") Motion for Summary Judgment. The Court, having considered all arguments presented to the Court, NOW FINDS AND RULES AS FOLLOWS:
The Court GRANTS Defendant's Motion for Summary Judgment.
I. FACTUAL BACKGROUND
Sei Y. Kim ("Sei Kim" or "Plaintiff") is a citizen of the Republic of Korea, with his primary residence in Anyang-si, Kyonggi-do, Reublic of Korea. First Amended Complaint ("FAC") ¶ 1. Defendant Truck Insurance Exchange("Truck"), an insurance company, is a business incorporated in California, with its principal place of business located at 4680 Wilshire Boulevard, Los Angeles, CA 90010. FAC ¶ 2. Defendant Peerless Insurance Company ("Peerless") is incorporated in New Hampshire, with its principal place of business at 62 Maple Avenue, Keene, New Hampshire 03431. FAC ¶ 3. Truck and Peerless (collectively, "Defendants") are qualified insurers in the State of California. FAC ¶¶ 2-3.
Cyclone USA, Inc. ("Cyclone"), now called Tornado Air Management Systems, Inc., purchased an insurance policy from Truck, Policy No. 29-9412 30 43, "effective from May 5, 1999 to May 5, 2000, and from May 5, 2001 to May 5, 2002." FAC ¶¶ 5, 10. For terms and conditions of the insurance policy, see Ex. B; FAC 11.
Cyclone also purchased an insurance policy from Peerless, Policy No. CBP9592516, "effective May 9, 2002 to May 9, 2003, and May 9, 2003 to May 9, 2004." FAC ¶ 17. For terms and conditions of the insurance policy, see Ex. C; FAC ¶ 18.
On February 11, 2003, Cyclone filed a Complaint in the United States District Court for the Central District of California, CV 03-0992 AJW, against Sei Kim. FAC ¶ 24. Sei Kim filed an Answer and Counterclaims alleging "(1) Trademark Infringement, (2) Unfair Competition Under 15 U.S.C. § 1125, (3) Declaratory Relief Under 28 U.S.C. § 2201, (4) Unfair Competition Under California Business & Professions Code § 17200, (5) Breach of Fiduciary Duty, (6) Intentional Interference With Contract, and (7) Breach of Contract." FAC ¶ 25. In his Answer and Counterclaims to Cyclone's Third Amended Complaint, in the underlying action, Sei Kim "alleged that Cyclone impermissibly marked its un-patented Tornado III fuel saving devices as patented in violation of 35 U.S.C. § 292." FAC ¶ 27.
Peerless agreed to defend Cyclone and Jay Kim, Cyclone's President, and retained the firm Ropers, Majeski, Kohn & Bentley ("RMKB") as panel counsel. FAC ¶ 29. Truck also agreed to defend Cyclone and Jay Kim in the underlying action pursuant to the Truck Policy. FAC ¶ 31.
On December 15, 2004, Truck filed a Complaint for Declaratory Relief in the Superior Court of California, County of Los Angeles, case number BC325973... against Cyclone, Jay Kim, Sei [Kim], and Peerless. FAC ¶ 34. Truck asserted "that Truck had no obligation to Defend or indemnify Cyclone or Jay Kim... because the underlying claim was not even potentially covered under the Truck Policy." Id . After Truck's Motion for Summary Judgment was denied, Truck filed a Request for Dismissal in the Declaratory Judgment Action; as a result, the Clerk entered the dismissal on August 28, 2006. FAC ¶¶ 38-39. On October 24, 2006, Truck appealed the Declaratory Judgment Action; however, on November 15, 2006, Truck filed a Notice of Abandonment of Appeal. FAC ¶¶ 40-41.
On November 8, 2007, in the underlying action, the trial court "found Cyclone liable under 35 U.S.C. § 292(a) for falsely marking 82, 500 un-patented Tornado III fuel saving devices as patented." FAC ¶ 46. The trial court found that Jay Kim, on behalf of Cyclone, "directed the manufacturer to label the Tornado III as patented, even though neither Jay Kim, nor Cyclone owned a patent for the Tornado III." Id .; see Memorandum of Decision, Ex. O . The trial court ordered Cyclone to pay $500 in damages. FAC ¶ 47.
On January 2, 2008, Peerless sent a letter to Cyclone and Jay Kim denying coverages for the damages awarded by the trial court. FAC ¶ 48.
On March 31, 2010, the trial court entered a final judgment in favor of Cyclone against Sei Kim in the amount of $1, 048, 976 after offset. FAC ¶ 50. Sei Kim appealed to the Ninth Circuit of Appeals for the sole purpose of challenging the trial court's calculation of damages for the False Patent Marking Claim. FAC ¶ 51. Peerless appointed panel counsel RMKB, and on behalf of Cyclone, requested the Ninth Circuit to affirm the trial court's findings. FAC ¶ 52. On September 16, 2011, while under appeal, President Obama signed the America Invents Act, ("AIA") into law, which amended, among others, 35 U.S.C. § 292. FAC ¶ 53. The new law applied to all cases that were pending, such as the appeal in the underlying case. Id . As a result, on December 15, 2011, the Ninth Circuit vacated the trial court's award and "remanded the matter to the Trial Court for a calculation of Cyclone's liabilities under the newly amended 35 U.S.C. § 292(b)." FAC ¶ 54.
On December 29, 2011, Peerless notified Cyclone that it was withdrawing its provided defense, and that damages resulting from false patent marking were not covered in Cyclone's insurance policy. FAC ¶ 55. On March 7, 2012, the Trial Court granted Truck-provided independent counsel[s] motion to withdraw as counsel for Cyclone and Jay Kim. FAC ¶ 59. Likewise, on March 8, 2012, the trial court granted ...