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NATIONAL CAS. CO. v. JORDACHE ENTERPRISES

January 7, 1994

NATIONAL CASUALTY COMPANY, Plaintiff,
v.
JORDACHE ENTERPRISES, INC., GREATER TEXAS FINISHING CORPORATION, GOLDEN TRADE S.R.L., GITANO GROUP, INC., BUGLE BOY INDUSTRIES, INC., RIO SPORTSWEAR, INC., AND BONJOUR INTERNATIONAL LTD., INC., Defendants.



The opinion of the court was delivered by: JOHN M. CANNELLA

 CANNELLA, D.J.:

 Defendant's motion to stay this action is denied. Defendant's motion to dismiss plaintiff's complaint with respect to each of the other named defendants is denied.

 BACKGROUND

 This is a declaratory judgment action based on diversity jurisdiction in which plaintiff National Casualty Company ["National"] requests this Court's adjudication as to its rights and obligations with respect to the defendants under a general liability insurance policy that plaintiff issued. Among other matters, plaintiff seeks a declaration from this Court that it is not contractually obligated to pay for the legal defense of its insured under the insurance policy in question in a specific patent-infringement suit that is also before this Court in a separate action. Defendant Jordache Enterprises, Inc. ["Jordache"] now moves to stay the instant declaratory judgment action pending the resolution of a California state-court proceeding. In this state-court action--which itself has been stayed pending the outcome of the action before this Court--Jordache and Ditto Apparel of California, Inc. ["Ditto"] allege that National breached the same insurance contract that is the subject of the instant action by refusing to defend Jordache in the aforementioned patent-infringement suit. *fn1" Defendant Jordache also moves to dismiss plaintiff's complaint with respect to each of the other named defendants to the instant action. For the reasons stated herein, Jordache's motion is denied in its entirety.

 As set forth in plaintiff's complaint, and supplemented by other matters of public record, the procedural history of this case is as follows. Plaintiff National alleges that it issued a general liability insurance policy to defendant Jordache, identified as policy # GL 052956, providing insurance coverage of limited scope to Jordache for the period beginning November 17, 1989 and ending November 17, 1990. Plaintiff alleges that the dollar limitation on coverage under this policy was $ 1,000,000 for each occurrence, with $ 1,000,000 also serving as the aggregate dollar limitation on coverage in the event that more than one claim was attributable to a single occurrence. *fn2"

 In October 1990, a federal patent-infringement suit, entitled Golden Trade S.R.L. and Greater Texas Finishing Corporation v. Jordache Enterprises, Inc., Gitano Group, Inc., Bugle Boy Industries, Inc., Rio Sportswear, Inc., and Bonjour International Ltd.; Inc.; 90 Civ. 6292 (JMC) (S.D.N.Y.) was filed in this Court ["the Golden Trade action"]. *fn3" In the Golden Trade action, Golden Trade S.R.L. ["Golden Trade"] alleges that it is the owner by assignment of United States patent # 4,740,213 ["the 213 patent"] and that this patent was duly issued, in compliance with law, by the United States Patent and Trademark Office on April 26, 1988. Greater Texas Finishing Corporation ["Greater Texas"] alleges that it is the exclusive licensee of the 213 patent. Golden Trade and Greater Texas further allege in their first amended complaint that certain methods of producing a random-faded effect on garments and other cloth products were protected by the 213 patent, and that Jordache, Gitano Group, Inc. ["Gitano"], Bugle Boy Industries, Inc. ["Bugle Boy"], Rio Sportswear, Inc. ["Rio"], and Bonjour International Ltd., Inc. ["Bonjour"] were infringing upon this patent. Golden Trade and Greater Texas request as relief a permanent injunction enjoining the named defendants from using, manufacturing, or selling any product that infringes the 213 patent. Greater Texas also seeks monetary damages, including treble damages for willful infringement of the 213 patent, and both plaintiffs seek an award of attorney's fees. See Plaintiff's Affirmation in Opposition to Jordache's Motion, Exh. B.

 On or about January 2, 1991, Golden Trade and Greater Texas also filed a complaint with the United States International Trade Commission ["the ITC Complaint"] requesting (i) an investigation into alleged unfair methods of competition and unlawful acts pertaining to the importation of certain acid-washed denim garments, (ii) a permanent exclusion order forbidding the importation for sale within the United States of certain acid-washed denim garments, and (iii) a cease-and-desist order with respect to future sales and processing of certain acid-washed denim garments. See id. Exh. C.

 Returning to the instant declaratory judgment action, plaintiff National alleges that by letter dated November 14, 1990, it agreed to provide the legal defense of Jordache in the Golden Trade action under a reservation of rights. National also alleges that by letter dated July 25, 1991, it disclaimed any coverage under the insurance policy in question for claims arising in connection with the ITC complaint.

 As to defendant Jordache, plaintiff National seeks a declaration from this Court that plaintiff is not contractually obligated to defend, to indemnify, to insure or to pay any judgments entered against Jordache in the Golden Trade action or for any matters relating to the ITC Complaint. National also requests a declaration from this Court allowing National to recover all costs and disbursements expended in defending the Golden Trade action. As to defendants Golden Trade, Greater Texas, Gitano, Bugle Boy, Rio and Bonjour--each of whom are non-parties to the insurance policy in question--National seeks this Court's declaration that plaintiff is not obligated to indemnify or to provide coverage to these defendants under said insurance policy.

 Subsequently, on September 4, 1991, National filed the instant declaratory judgment action in this Court. *fn4"

 Sometime after September 4, 1991, National filed in California Superior Court a motion to stay the California state-court action. This motion to stay was granted, pending resolution of the instant action before this Court, by California Superior Court Judge Paul Boland. See id. Exh. H (copy of reporter's transcript, Jan. 15, 1992). The parties to the instant action have not brought to this Court's attention any subsequent appellate decision reversing the California order of stay.

 Defendant Jordache, acting severally from the other defendants to the instant action, now brings this motion to stay or to dismiss the instant action and offers several arguments in support of its application. First, Jordache argues that a stay of the instant action is required under a first-to-file rule because the California state-court action was filed before the instant action. Second, Jordache contends that California offers the more convenient forum for the resolution of this controversy. Third, Jordache argues that a stay of the instant action in favor of the California action is appropriate because the instant action is not as comprehensive as the California action insofar as Ditto is not a named defendant to the instant action. Ditto, meanwhile, is a plaintiff to the California action. Fourth, ...


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