United States District Court, D. Oregon, Portland Division
OPINION AND ORDER
Honorable Paul Papak United States Magistrate Judge.
Hattenhauer Distributing Co. brings this action against
Defendant Nationwide Agribusiness Insurance Co., claiming
that Defendant breached its duties under a liability policy
when it refused to defend Plaintiff in a lawsuit brought by
Noble Roman's, Inc. (Noble Roman's) against
Plaintiff. Noble Roman's, Inc. v. Hattenhauer
Distributing Co., No, l:14-cv-01734-WTL-DML (S.D. Ind.)
(filed Oct. 23, 2014) (the Underlying Action). In the
Underlying Action, Noble Roman's claims that Plaintiff
breached a franchise agreement by under-reporting revenue
from sales of Noble Roman's products and by selling
inferior pizza under the Noble Roman's name.
parties now file cross-motions for partial summary
judgment on Plaintiffs duty to defend claim. For
the following reasons, I grant Defendant's motion for
partial summary judgment and deny Plaintiffs motion.
following facts are from Noble Roman's complaint (the
Complaint) in the Underlying Action. Stip. Facts, Ex. 3, 1-9,
ECF No. 17-3. Plaintiff operates a combination convenience
store and gas station in Goldendale, Washington, and a
similar business in Wasco, Oregon. Complaint ¶5. In
2005, Plaintiff signed a five-year franchise agreement with
Noble Roman's to sell Noble Roman's pizza at
Plaintiffs Oregon store. The parties renewed the franchise
agreement in 2011. In 2006, Plaintiff executed a ten-year
franchise agreement to sell Noble Roman's pizza at
Plaintiffs Washington store. Noble Roman's franchise
agreements required that Plaintiff use only approved
ingredients for pizza, including a proprietary cheese blend.
Complaint ¶ 18.
Roman's filed the Underlying Action in October 2014,
alleging that "from January 2011 until veiy recently,
[Plaintiffs] Oregon location had not been buying or using
Noble Roman's proprietary blend of cheese for its Noble
Roman's pizzas, and instead has been buying and using a
different cheese that did not conform to Noble Roman's
standards and specifications as required under the Franchise
Agreements." Complaint ¶ 25. Noble Roman's
alleged that "by selling inferior-quality pizza
containing cheese that was not Noble Roman's proprietary
pizza cheese to the public purportedly under the Noble
Roman's name, [Plaintiff] has damaged Noble Roman's
reputation and goodwill, engaged in unfair competition, and
breached the Franchise Agreements." Complaint ¶26,
Noble Roman's asserted that Plaintiff "trade[d]
unfairly upon Noble Roman's well-established goodwill and
reputation by confusing the public as to the origin of its
menu items, including the sale of non-conforming items at the
Oregon location since January 2011 while holding itself out
to the public as a vendor of Noble Roman's
products." Compl. ¶ 28. Noble Roman's alleged
that Plaintiff "has profited from its acts of unfair
competition by purchasing an inferior and cheaper pizza
cheese instead of the Noble Roman's proprietary blend of
cheese." Compl. ¶ 29.
that the district court in the Underlying Action recently
granted Plaintiffs motion for summary judgment as to Noble
Roman's federal unfair competition claim, concluding that
the claim was barred by laches. Noble Roman's, Inc.
v. Hattenhauer Distrib. Co., 2017 WL 747536, at *3-*4
(S.D, Ind. Feb. 27, 2017) (Noble Roman's). The
district court entered judgment after declining to exercise
supplemental jurisdiction over the parties' remaining
state law claims and counterclaims. Id. at *4;
Underlying Action, ECF No. 211 (judgment entered Feb. 27,
Motions for Summary Judgment
court must grant summary judgment when there are no genuine
issues of material fact and the moving party is entitled to
judgment as a matter of law. Fed, R. Civ. P. 56(c). If the
moving party shows that there are no genuine issues of
material fact, the nonmoving party must go beyond the
pleadings and designate facts showing an issue for trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986). The substantive law governing a claim or defense
determines which facts are material. See Moreland v. Las
Vegas Metro, Police Dep 't, 159 F.3d 365, 369 (9th
The Duty to Defend
interpretation of an insurance policy is a question of law
for the court. St. Petal Fire & Marine Ins. Co. v.
McCormick & Baxter Creosoting Co., 324 Or. 184, 192,
923 P.2d 1200, 1205 (1996). The insured has the initial
burden of showing coverage exists, and the insurer has the
burden of showing the policy excludes coverage. Employers
Ins. of Waitsau v. Tektronix, Inc., 211 Or.App. 485,
509, 156 P.3d 105, 119 (2007).
insurer has a duty to defend an action "if the complaint
filed against the insured 'could, without amendment,
impose liability for conduct covered by the
policy.'" U.S. Fid. & Guar. Co. v. Star
Techs., Inc.,935 F.Supp. 1110, 1113 (D. Or. 1996)
(quoting Ledford v. Gutoski,319 Or. 397, 399-400,
877 P.2d 80, 82 (1994)). The court, considering only the
allegations in the complaint, determines whether any of the
allegations could support a covered claim against the
insured. Id. "If the complaint is unclear or
ambiguous and may be reasonably interpreted to include an
incident within the coverage of the policy, the insurer has a
duty to defend." Id. (citing Oakridge Cmty.
Ambulance Serv., Inc. v. United States Fid. & Guar.
Co.,278 Or. 21, 24, 563 P.2d 164, 166 (1977)). The
insurer must defend if the claims "fall both within and
outside coverage of the policy." Id. (citing
Ferguson v. Birmingham Fire Ins. Co.,254 Or. 496,
507, 460 P.2d 342, 347 (1969)). ...