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Bridge Metal Industries, L.L.C., Joseph Messa and Blaise v. the Travelers Indemnity

September 7, 2011

BRIDGE METAL INDUSTRIES, L.L.C., JOSEPH MESSA AND BLAISE FREDELLA, PLAINTIFFS,
v.
THE TRAVELERS INDEMNITY COMPANY, DEFENDANT.



The opinion of the court was delivered by: Kenneth M. Karas, District Judge:

OPINION AND ORDER

Plaintiffs Bridge Metal Industries, L.L.C. ("Bridge Metal"), Joseph Messa ("Messa"), and Blaise Fredella ("Fredella") (collectively, "Plaintiffs")*fn1 bring this action against The Travelers Indemnity Company ("Defendant"), seeking a declaratory judgment that Defendant is required to reimburse Plaintiffs for the costs and expenses they incurred in defending two lawsuits, National Lighting Company, Inc. v. Bridge Metal Industries, L.L.C., No. 08-CV-3150 (S.D.N.Y. 2008) (the "NY Action") and National Lighting Company, Inc. v. Bridge Metal Industries, L.L.C., No. ESX-C-000173-09 (N.J. Super. Ct. Ch. Div. 2009) (the "NJ Action"). Plaintiffs claim that Defendant was obligated to defend them in these lawsuits under the Commercial General Liability insurance policy Defendant issued to Bridge Metal (the "Policy"), while Defendant maintains that no such defense was required under the terms of the Policy. Defendant has moved to dismiss or, in the alternative, for summary judgment. Plaintiffs, in turn, have cross-moved for summary judgment. For the reasons stated herein, Plaintiffs' motion is granted and Defendant's motion is denied.

I. Background

A. Factual Background

1. The Lawsuits Between Bridge and National Lighting Company, Inc.

Plaintiffs assert that Defendant was required to defend them in two underlying lawsuits in which they were sued by National Lighting Company, Inc. ("National"), a New Jersey corporation. It is necessary to examine the allegations in these underlying lawsuits to determine whether Defendant had a duty to defend Plaintiffs. The Court makes no finding regarding the truth of National's allegations.

a. The NY Action

National filed a complaint against Bridge Metal, Messa, Fredella, and a number of other companies and individuals on March 28, 2008, in the United States District Court for the Southern District of New York. (Certification of Dennis T. Smith ("Smith Cert.") Ex. A.)*fn2

National manufactures and designs fluorescent lighting fixtures for installation in commercial offices, educational facilities, and government buildings. (Id. ¶ 18.) According to National, its fixtures are "inherently distinctive" from those of its competitors and "carry a trade dress recognized by its customers, end users and others in the lighting industry as exceptionally aesthetic, superior in quality, and easy to assemble." (Id. ¶¶ 25-26.) In fact, National claimed that it "has developed a trade dress with a total image so distinct that a quick examination . . . will cause its customers, potential customers and those involved in the selection and purchasing of lighting fixtures for commercial use to instantly recognize the origin of its product as National's." (Id. ¶ 27.)

Bridge Metal began to manufacture and assemble lighting fixtures exclusively for National in July 2005 and, pursuant to a confidentiality agreement, National provided Bridge Metal with confidential information to enable Bridge Metal to manufacture National's products. (Id. ¶¶ 20, 33.) National also considered a potential merger with Bridge Metal but decided against it; according to National, Bridge Metal was then obligated to destroy or return the confidential information. (Id. ¶¶ 36-37.) However, National alleged that in late 2007, it learned that instead Bridge Metal: was using the information to "manufacture, market, and sell products apparently identical to National's" (id. ¶ 38); "had created National-like fixtures, virtual clones of the National product line, which were being marketed to the public in [Bridge Metal's] showroom" (id. ¶ 39); was "telling the potential clientele . . . [that Bridge Metal] could manufacture fixtures just like National's for a less expensive price" (id. ¶ 40); and was "marketing to National's very same clientele these unlawfully manufactured lighting fixtures," (id. ¶ 48). National further alleged that Bridge Metal helped create other entities, including one called Picasso, "to handle the marketing of the lighting fixtures cloned from the National Product line." (Id. ¶ 41.) According to National, Bridge Metal's lighting fixtures "are so similar in appearance to National's and infringe on National's distinct trade dress such that there is a substantial likelihood the general consuming public will be confused as to the identity and origin of [Bridge Metal's] fixtures." (Id. ¶ 49.) In this vein, National claimed that Bridge Metal was trying to "falsely advertise and deceptively palm off their products so as to confuse and deceive the public about the true origin of the fixtures." (Id. ¶ 52.) National alleged that Bridge Metal's conduct was "intentional, willful, wanton, malicious, oppressive, and reckless." (Id. ¶ 53.)

National sued Bridge Metal, Messa, Fredella, and others, under Section 43(a) of the Lanham Act and New York state law, for trade dress infringement, trade dress dilution, reverse palming-off, false advertising and labeling, false designation of origin, unfair competition, breach of contract, breach of implied covenant of good faith and fair dealing, deceptive trade practices, unjust enrichment and imposition of constructive trust, and tortious interference with prospective economic relations. (Id. ¶¶ 55-92.) For each of its seventeen causes of action, National reasserted each of the factual allegations set forth in its complaint. In its demand for relief, National asked the court for a variety of remedies, including damages and to enjoin Bridge Metal from, inter alia, "[m]anufacturing, creating, designing, marketing, selling, advertising, producing, making, or otherwise using in any manner any lighting fixture not originating with National, that is likely to cause confusion, deception, or mistake or that dilutes or is likely to dilute the distinctive quality thereof; [or] . . . [e]ngaging in any other conduct that tends to falsely represent, or is likely to confuse, mislead, or deceive purchasers, [Bridge Metal's] customers, National's customers, and other members of the public to believe that [Bridge Metal's] products are connected with National . . . ." (Id. pp. 27-28.)

On March 4, 2009, the Honorable Naomi Buchwald dismissed National's federal claims with prejudice under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. (Smith Cert. Ex. B, at 2.) Judge Buchwald dismissed National's state law claims, without prejudice, to allow National to consider whether it wanted to continue to pursue these claims in a New York court, in light of a New York state law prohibiting a foreign corporation from maintaining an action in New York if it is doing business in New York without authority. (Id. at 20-22 (citing N.Y. Bus. Corp. Law § 1312).) National voluntarily dismissed its state law claims on March 31, 2009.

b. The NJ Action

After the NY Action was dismissed, National filed a complaint on June 25, 2009, against Bridge Metal, Messa, Fredella, and others, in New Jersey Superior Court, Chancery Division. (Smith Cert. Ex. C.) The complaint contained many of the same factual allegations as the complaint filed in the NY Action. National alleged that in the course of negotiations and pursuant to the written confidentiality agreement, National provided Bridge Metal with "highly-valuable intellectual property" including assembly drawings, wiring instructions, mounting details, actual fixture samples, specification sheets, computer generated images, hands-on training seminars, emails, and sourcing information. (Id. ¶ 21.) National claims that after negotiations regarding the potential merger ended, Bridge Metal was "immediately obligated under . . . the Agreement to either destroy all originals and copies of Confidential Information or return it all to National." (Id. ¶ 24.) According to National, it later discovered that Bridge Metal and others "had purloined and stolen for their own use and benefit National's technical know-how, drawings and other intellectual property specifically covered by the Agreement in order to manufacture, engineer, promote, market, advertise and sell fixtures that had been cloned from National's product line under the Picasso name" (id. ¶ 31), and that "[v]irtual clones of the National product line were being marketed to the public in [Bridge Metal's] showroom," (id. ¶ 32).

In its complaint in the NJ Action, National asserted claims against Bridge Metal, Messa, Fredella, and others, under New Jersey state law, for breach of contract, breach of implied covenant of good faith and fair dealing, conversion, misappropriation, tortious interference with contract, tortious interference with business relations or economic advantage, unfair competition, common law fraud, civil conspiracy, and constructive trust. (Id. ¶¶ 39-99.) With respect to the conversion cause of action, National alleged that Bridge Metal and the other defendants "converted National's property by misappropriating it for their own use and failing to return it after termination of their relationship with National" and that the conversion was "willful and wanton." (Id. ¶¶ 49-50.) For each cause of action, National reasserted each factual allegation set forth in its complaint. In connection with each cause of action, National requested, inter alia, that the court award damages and enjoin Bridge Metal from "[m]anufacturing, creating, designing, marketing, selling, advertising, producing, making, or otherwise using in any manner any lighting fixture not originating with National, that is likely to cause confusion, deception, or mistake or that dilutes or is likely to dilute the distinctive quality thereof." (Id. ¶¶ 39-99.)

On June 30, 2010, the court dismissed the NJ Action against Bridge Metal, Fredella, and Messa for lack of personal jurisdiction. (Smith Cert. Ex. D.)

2. The Policy

The Policy is identified as No. I-680-5390W931-IND-07 and covered the period from October 19, 2007 through October 19, 2008. (Pls.' Rule 56.1 Statement of Material Facts ¶ 1.) The provisions at issue involve coverage for advertising injury and property damage.

a. Advertising Injury

The applicable language regarding advertising injury is as follows: We will pay those sums that the insured becomes legally obligated to pay as damages because of . . . 'advertising ...


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