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Marksmen, Inc. v. Interbrand Corp.

June 28, 2010

MARKSMEN, INC., PLAINTIFF,
v.
INTERBRAND CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

This lawsuit concerns a dispute over the interpretation of an express indemnity provision within a commercial services contract governed by California law. Plaintiff Marksmen, Inc. ("Marksmen") alleges that defendant Interbrand Corporation ("Interbrand") has breached their contract by failing to indemnify Marksmen for costs incurred defending a fraud lawsuit in Texas in 2008-09 (the "Texas Litigation"). On March 11, 2010, Interbrand moved to dismiss the complaint on the theory that it has no duty to pay defense costs incurred by Marksmen in any litigation in which Marksmen is accused of fraud. For the following reasons, Interbrand's motion is denied.

BACKGROUND

The following facts, taken from Marksmen's January 12, 2010 complaint (the "Complaint") and documents annexed thereto, are assumed to be true for the purposes of this motion. Additional undisputed facts are drawn from court records in the Texas Litigation.

The plaintiff-indemnitee, Marksmen, is a professional agent engaged in the business of acquiring intellectual property rights, including domain names and trademarks, for its clients. The defendant-indemnitor, Interbrand, is a consultancy engaged in the business of creating and promoting brand identities for its corporate clients. Interbrand was retained by a corporate client to assist with naming and branding a new healthcare entity. Interbrand developed the name "Covidien" for this new entity, and it sought to acquire the Internet domain name Covidien.com (the "Domain Name") for its use. At that time, the Domain Name was owned by Arisma Group, LLC ("Arisma").

In December 2006, Marksmen and Interbrand entered into an Acquisition Services Agreement (the "Agreement") by which Interbrand engaged Marksmen to acquire the Domain Name.*fn1

Marksmen then set out to purchase the Domain Name from Arisma in accordance with the terms of the Agreement. On January 4, 2007, an agreement was finalized between the president of Arisma and a Marksmen employee, the latter acting under a pseudonym, whereby Arisma would sell the Domain Name to Marksmen for $13,000 (the "Sale Contract"). The sale was effected on January 22, 2007. Several days later, Arisma's president learned that the ultimate user of the Domain Name would be Interbrand's client, the new healthcare entity Covidien.

In January 2008, Arisma filed suit in Texas state court. The lawsuit was subsequently removed to the United States District Court for the Northern District of Texas (the "Texas Court") in July 2008.*fn2 On December 24, 2008, Arisma filed its third amended complaint in the Texas Litigation, adding Marksmen and Interbrand as defendants and asserting claims of fraudulent inducement, fraudulent misrepresentation, fraud by non-disclosure, and in the alternative for negligent misrepresentation. Arisma sought rescission of the Sale Contract, court costs, and attorney's fees.

Marksmen alleges that, upon learning of the Texas Litigation, Marksmen "timely notified" Interbrand of the claims against it and demanded that Interbrand defend Marksmen pursuant to the Agreement. The Agreement included an indemnification provision providing that Client [Interbrand] agrees to indemnify and hold harmless Marksmen . . . from and against any and all losses, claims, damages, liabilities, and expenses, joint and several (which shall include, but not be limited to, counsel fees and any and all litigation expenses) to which [Marksmen] may become subject arising out of Marksmen's activities under this Agreement. (Emphasis added). On May 6, 2008, Interbrand's general counsel advised Marksmen that Interbrand would "fulfill [its] obligations as outlined in the [Agreement]" and requested that Marksmen "[p]lease forward [him] all pertinent information." Thereafter, however, Interbrand refused to reimburse Marksmen for the attorneys' fees and expenses incurred by Marksmen in the Texas Litigation.

Plaintiff filed this lawsuit on January 12, 2010.*fn3 Marksmen seeks to recover its attorney's fees and expenses incurred during the Texas Litigation as well as its attorney's fees and expenses from this enforcement action. Interbrand moved to dismiss on March 11; Marksmen opposed on April 12; and the motion became fully submitted with Interbrand's reply on April 23.

DISCUSSION

"Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a 'short and plain statement of the claim showing that the pleader is entitled to relief.'" Ashcroft v. Iqbal, 556 U.S. __, 129 S.Ct. 1937, 1949 (2009). This rule "does not require 'detailed factual allegations,'" id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)), but "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Id. (quoting Twombly, 550 U.S. at 555).

A trial court considering a Rule 12(b)(6) motion "accepts all well-pleaded allegations in the complaint as true, drawing all reasonable inferences in the plaintiff's favor." Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, 595 F.3d 86, 91 (2d Cir. 2010). To survive dismissal, "a complaint must allege a plausible set of facts sufficient 'to raise a right to relief above the speculative level.'" Id. (quoting Twombly, 550 U.S. at 555). Applying the plausibility standard is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950.

"In determining the adequacy of the complaint, the court may consider any written instrument attached to the complaint as an exhibit or incorporated in the complaint by reference, as well as documents upon which the complaint relies and which are integral to the complaint." Subaru Distribs. Corp. v. Subaru of Am., Inc., 425 F.3d 119, 122 (2d Cir. 2005) ("Subaru"); see also Chapman v. N.Y. State Div. for Youth, 546 F.3d 230, 234 (2d Cir. 2008). The court is "not obliged to accept the allegations of the complaint as to how to construe such ...


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