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Mendocino Wine Group, LLC v. QBE Americas, Inc.

United States District Court, N.D. California

August 5, 2016

MENDOCINO WINE GROUP, LLC, Plaintiff,
v.
QBE AMERICAS, INC., et al., Defendants.

          ORDER GRANTING MOTION TO DISMISS RE: DKT. NO. 10

          HAYWOOD S. GILLIAM, JR. United States District Judge

         Pending before the Court is Unigard Insurance Company and QBE Americas, Inc.’s motion to dismiss Plaintiff Mendocino Wine Group, LLC’s complaint, or in the alternative, to dismiss QBE Americas, Inc. and to strike Plaintiff’s request for punitive damages. Dkt. No. 10 (“Mot.”). For the reasons articulated below, Defendants’ motion to dismiss Plaintiff’s complaint is GRANTED WITH LEAVE TO AMEND.[1]

         I. BACKGROUND

         A. The Underlying Lawsuit

         This insurance coverage dispute arises from Dolan v. Mendocino Wine Group, LLC, No. C 13-04114-JCS (the “Underlying Action”), filed on January 25, 2013, against Plaintiff in the U.S. District Court for the Northern District of California. Dkt. No. 4-1 (“Compl.”), Attachment A. The following facts were alleged in the Underlying Action’s second amended complaint:

         In March 2004, Dolan and the Thornhill family formed Mendocino Wine Group (“MWG”), and Dolan began serving as president of MWG. Compl., Attachment C (“Dolan SAC”) ¶¶ 1, 20. Dolan is a “fourth generation winemaker with a long and well-respected history in the wine industry, ” who has achieved a level of notoriety such that “members of the industry and consumers view any trademark used in connection with wine that incorporates ‘Dolan, ’ either separately or in combination with ‘Paul, ’ as uniquely associated with Dolan.” Id. ¶¶ 10, 17. Shortly after the formation of MWG, Dolan agreed to permit MWG to develop wine using Dolan’s name as a trademark, so long as Dolan “was able to control the nature and quality of wine that would be sold under his name.” Id. ¶ 21.

         MWG began selling wine under the Paul Dolan trademark, but in January 2012, Dolan was “ousted” from MWG. Id. ¶ 31. Dolan “never intended that his name, or any other aspect of his persona, could be used by MWG forever, ” and in October 2012, Dolan revoked his consent for MWG to use his name in connection with any Dolan trademark. Id. ¶¶ 29, 35. Despite this revocation, “MWG [] continued to distribute and sell wine under the Paul Dolan trademark, and [] continued to use Dolan’s name to market, advertise and promote MWG’s products.” Id. ¶ 36. MWG’s continued use of the Dolan trademark violated Dolan’s right of publicity and “cause[d] damage to Dolan because it directly conflict[ed] with Dolan’s ability to use his name in connection with wine and wine-related products and services, and because it falsely suggest[ed] that the goods distributed and sold by MWG [were] connected with Dolan.” Id. ¶¶ 40, 41.

         Based on the aforementioned allegations, Dolan brought an action against Plaintiff for the following claims: (1) a declaration that MWG could no longer use the Paul Dolan trademark; (2) unfair competition in violation of the Lanham Act; (3) violation of the common law right of publicity; (4) violation of the statutory right of publicity under California Civil Code § 3344; and (5) cancellation of the Dolan trademark registration. Id.

         B. The Instant Action

         i. The Unigard Policy

         Plaintiff alleges that at all relevant times, it was insured by a Commercial General Liability Insurance Policy issued by Defendant Unigard, and administered, directed, managed and/or otherwise overseen by QBE and/or Does 1-50 (the “Unigard Policy”). Dkt. No. 10-1; Compl. ¶ 17.

         Under Coverage B, “Personal and Advertising Injury Liability, ” the Unigard Policy states:

We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal and advertising injury” to which this insurance does not apply…

Unigard Policy at 7 ¶ 1. Thereafter, the Unigard Policy defines “personal and advertising injury” as “[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” and “[o]ral or written publication, in any manner, of material that violates a person’s right of privacy.” Id. at 18 ¶ 14(d), (e).

         Under the Coverage B Exclusions, “[t]he insurance does not apply to . . . I. Infringment of Copyright, Patent, Trademark Or Trade Secret” defined as:

“Personal and advertising injury” arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your “advertisement.”
However, the exclusion does not apply to infringement, in your “advertisement, ” of copyright, ...

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