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U.S. Fid. & Guar. Co. v. Ashley Reed Trading, Inc.

United States District Court, S.D. New York

August 20, 2014

UNITED STATES FIDELITY & GUARANTY COMPANY, Plaintiff,
v.
ASHLEY REED TRADING, INC., JAMES RESSLER, SCOTT RESSLER, FENDI ADELE S.R.L., FENDI S.R.L., FENDI NORTH AMERICA, INC., BURLINGTON COAT FACTORY WAREHOUSE CORP. and COHOES FASHIONS, INC., Defendants

Page 272

August 20, 2014, Filed

For United States Fidelity And Guaranty Company, Plaintiff: Robert Jeremiah Tracy, LEAD ATTORNEY, Stefanie Robin Munsky, Clifton Budd & DeMaria, LLP, New York, N.Y. USA.

James Ressler, Defendant, Pro se, New York, N.Y. USA.

For James Ressler, Defendant: Michele A. Daitz, Flowers & O'brien, LLC, Hoboken, N.J. USA.

For Scott Ressler, Defendant: Lawrence Figowe Morrison, The Morrison Law Offices, P.C., New York, N.Y. USA.

For Fendi Adele S.R.I., Fendi S.R.L., Fendi North America, Inc., Defendants: Richard L. Mattiaccio, Squire Patton Boggs (U.S.) L.L.P. (NYC), New York, N.Y. USA.

For Burlington Coat Factory Warehouse Corp., Cohoes Fashions, Inc., Intervenor Defendants: Peter Nathan Kessler, LEAD ATTORNEY, Spector, Gadon & Rosen P.C. (nyc), New York, N.Y. USA; David B. Picker, Spector Gadon & Rosen, P.C. (PA), Philadelphia, PA USA; George M. Vinci, Jr, PRO HAC VICE, Spector Gadon & Rosen, P.c., New York, N.Y. USA.

For Fendi S.R.L., Fendi Adele S.R.I., Fendi North America, Inc., Counter Claimants: Richard L. Mattiaccio, Squire Patton Boggs (U.S.) L.L.P. (NYC), New York, N.Y. USA.

For United States Fidelity And Guaranty Company, Counter Defendant: Robert Jeremiah Tracy, LEAD ATTORNEY, Gregory Stephen Spicer, Stefanie Robin Munsky, Clifton Budd & DeMaria, LLP, New York, N.Y. USA.

For Scott Ressler, Counter Claimant: Lawrence Figowe Morrison, The Morrison Law Offices, P.C., New York, N.Y. USA.

For James Ressler, Counter Claimant: Michele A. Daitz, Flowers & O'brien, LLC, Hoboken, N.J. USA.

For United States Fidelity And Guaranty Company, Counter Defendant: Robert Jeremiah Tracy, LEAD ATTORNEY, Stefanie Robin Munsky, Clifton Budd & DeMaria, LLP, New York, N.Y. USA.

For Cohoes Fashions, Inc., Burlington Coat Factory Warehouse Corp., Counter Claimants: Peter Nathan Kessler, LEAD ATTORNEY, Spector, Gadon & Rosen P.C. (nyc), New York, N.Y. USA; George M. Vinci, Jr, PRO HAC VICE, Spector Gadon & Rosen, P.c., New York, N.Y. USA.

RICHARD M. BERMAN, United States District Judge.

OPINION

Page 273

DECISION & ORDER

I. Introduction

On July 12, 2011, Plaintiff United States Fidelity and Guaranty Company (" USF& G" ) filed a complaint against Defendants Ashley Reed Inc. (" Ashley Reed" ), Scott Ressler, James Ressler (collectively, the " Ashley Reed Defendants" ), Fendi Adele, S.r.l., Fendi S.r.l., and Fendi North America, Inc. (collectively, " Fendi" ), seeking a declaratory judgment that three liability insurance policies issued by USF& G to Ashley Reed between 2003 and 2006 (the " Insurance Policies" or " Policies" ) do not obligate USF& G to indemnify the Ashley Reed Defendants for the judgment entered by this Court against them on April 26, 2013 in the action entitled Fendi Adele, S.r.l., et al. v. Ashley Reed Trading Inc., et al. No. 06-CV-0243 (the " Fendi Action" ). (See Compl., dated July 12, 2011.)[1]

On September 28, 2011, and October 20, 2011, respectively, the Ashley Reed Defendants (and Fendi) filed counterclaims seeking indemnification under the Policies for the judgment in the Fendi Action. (See Answer and Counterclaims, dated September 28, 2011 (Dkt. # 17); Amended Answer and Counterclaims, dated October 20, 2011 (Dkt. # 28).) Defendant James Ressler also asserted a counterclaim seeking damages for USF& G's alleged bad faith refusal to settle the Fendi Action. (See Amended Answer and Counterclaims, dated July 23, 2013 (Dkt. # 84).)

On May 10, 2013, the Court permitted Burlington Coat Factory Warehouse Corp. and Cohoes Fashions, Inc. (collectively, " BCF", and, together with the Ashley Reed Defendants and Fendi, " Defendants" ) to intervene in this action as defendants and counterclaimants. (See Order, dated May 10, 2013 (Dkt. # 69.)) On May 17, 2013, BCF filed a counterclaim against USF& G seeking indemnification under the Policies for a judgment entered by United States District Judge Leonard B. Sand against the Ashley Reed Defendants on April 5, 2012 in an action entitled Fendi S.R.L. v. Burlington Coat Factory Warehouse Corp., No. 06-CV-0085 (LBS)(MHD) (the " BCF Action" ).[2]

On January 16, 2014, Defendants moved for summary judgment pursuant to Federal Rule of Civil Procedure 56, arguing, among other things, that: (1) the Insurance Policies should provide coverage for

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the judgments in the Fendi and BCF Actions because the Ashley Reed Defendants' acts of trademark infringement " clearly constitute 'advertising' as defined in the Policies," and " [t]he award of a trademark infringer's profits is an award of 'damages'" ; and (2) " [n]either the [Policies'] Knowledge of Falsity Exclusion nor the First Publication Exclusion excludes 'advertising injury' coverage under subparagraph (c) [of the Policies]." (Joint Mem. of Law in Supp, of Defs.' and Intervening Defs.' Mot. for Summ. J., dated Jan. 9, 2014 (" Defs. Mem." ), at 9-10, 23, 24-25.)

On February 10, 2014, USF& G filed an opposition and cross-motion for summary judgment, arguing, among other things, that: (1) the Insurance Policies' coverage for " advertising injury" does not apply to the judgments in the Fendi and BCF Actions because " no sums were awarded based on any Fendi injury arising from the [Ashley Reed] Defendants' advertising of the infringing goods" and because " the disgorgement of profits and the trebling thereof awarded in the [Fendi] Action does not constitute an award of 'damages' under the USF& G Policies" ; (2) the Policies' " known falsity" and " prior publication" exclusions apply " since it is undisputed that the [Ashley Reed] Defendants were willfully counterfeiting Fendi-branded goods" and were doing so " for years before the first USF& G Policy commenced" ; and (3) Defendant James Resslers counterclaim against USF& G should be dismissed because " nowhere in the record is there any suggestion that USF& G controlled how the [Fendi] Action was to be defended, chose what defenses to assert, or whether the [Ashley Reed] Defendants could settle the [A]ction," and because, " [u]nder New York law, it has been recognized that bad faith cannot be established when the insurer has an arguable basis for denying coverage." (Pl.'s Opp'n to Defs.' Mot. for Summ. J. and in support of Pl.'s Cross-Mot. for Summ. J., dated Feb. 4, 2014 (" Pl. Opp'n" ), at 5, 9, 20, 31-32 (quotations omitted).)

On February 27, 2014, Defendants filed a reply. (See Joint Reply Mem. of Law in Supp. of Defs.' and Intervening Defs.' Mot for Summ. J. and in Opposition to Pl.'s Cross-Mot., dated Feb. 21, 2014. (" Defs. Reply" ).) On March 12, 2014, USF& G filed a reply. (See Pl.'s Reply Mem. of Law in Supp. of Pl.'s Cross-Mot. for Summ. J., dated March 7, 2014 (" Pl. Reply" ).) Oral argument was held on July 30, 2014. (See Hr'g Tr., dated July 30, 2014.)

For the reasons set forth below, the Court denies Defendants' joint motion for summary judgment, and grants USF& G's cross-motion ...


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