United States District Court, D. Maryland
UNWIRED SOLUTIONS, INC.
OHIO SECURITY INSURANCE CO.
Catherine C. Blake United States District Judge.
pending are cross motions for summary judgment arising in the
context of a dispute between Unwired Solutions, Inc., dba
Linq Services, Inc. (“Linq”) and Ohio Security
Insurance Company (“Ohio Security”). That dispute
centers on whether Ohio Security must defend Linq in an
underlying lawsuit, Sprint Solutions, Inc., et al. v.
Unwired Solutions, Inc., et al. Linq has moved for partial
summary judgment on the issue of whether Ohio Security has a
duty to defend Linq in the Sprint action. Ohio
Security and Ohio Casualty Insurance Company (“Ohio
Casualty”) have cross moved for summary judgment,
asking the court to find that neither Ohio Security nor Ohio
Casualty has a duty to defend in the Sprint action.
Ohio Security and Ohio Casualty (together, “Liberty
Mutual”) also ask this court to find that neither has a
duty to indemnify in the Sprint action. No oral
argument is necessary. See Local Rule 105.6 (D. Md.
2016). For the reasons set forth below, the court will deny
Linq's motion for summary judgment and grant Ohio
Security and Ohio Casualty's motion for summary judgment
on the duty to defend issue. The court will dismiss without
prejudice claims related to the duty to indemnify.
court assumes familiarity with the factual background of this
case. In brief, Sprint Solutions, Inc. and Sprint
Communications Company (“Sprint”) filed a
complaint for damages and injunctive relief against Linq and
individuals asserted to be Linq agents on September 30, 2015.
(Linq Mot. Partial Summ. J. Ex. 2, Sprint Compl. ¶¶
12-18, ECF No. 16-10). Sprint alleges that Linq and its
agents perpetrated a “Bulk Handset Trafficking Scheme,
” (id. ¶ 2), that took advantage of the
fact that Sprint sells phones to its customers for use on the
Sprint network at subsidized rates, (id. ¶ 25).
Sprint alleges that Linq, which provides services to Sprint
customers, gained control of Sprint customer accounts in
order to acquire subsidized Sprint phones for itself and sell
them at a profit. (Id. ¶¶ 43-44). Linq is
liable for, inter alia, tortious interference with
contract and federal trademark infringement, Sprint claims.
(Id. ¶¶ 69-214).
and Ohio Security dispute whether Ohio Security has a duty to
defend Linq in the underlying Sprint action. This
disagreement centers on three insurance policies that Ohio
Security issued to Linq, which were in effect from September
21, 2013, to September 21, 2016. (Liberty Mutual Cross Mot.
Summ. J. Mem. Law Exs. 2-4, ECF Nos. 32-3, 32-4, 32-5). Those
policies outline a duty to defend and indemnify in identical
language and provide that Ohio Security “will pay those
sums that the insured becomes legally obligated to pay as
damages because of . . . personal and advertising injury to
which this insurance applies.” The policies clarify
that “personal and advertising injury” includes
injury “arising out of” “oral or written
publication, in any manner, of material that slanders or
libels a person or organization or disparages a person's
or organization's goods, products, or services.”
They also state that Ohio Security “will have the right
and duty to defend the insured against any such
‘suit' seeking those damages.” (See,
e.g., Linq Mot. Partial Summ. J. Ex. 1, 42, 58, ECF No.
16-9). In addition to the “primary-level”
policies from Ohio Security, Linq obtained three
“umbrella-level” policies from Ohio Casualty.
(Liberty Mutual Cross Mot. Summ. J. Mem. Law Exs. 5-7, ECF
Nos. 32-6, 32-7, 32-8). The umbrella policies were in effect
for the same policy periods as the primary-level policies and
provided coverage for “personal and advertising
injury” to the same extent.
February 12, 2016, Linq filed a complaint against Ohio
Security, seeking a declaration that Ohio Security has a duty
to defend Linq in the Sprint action. (Linq Compl.,
ECF No. 1). On March 23, 2016, Linq moved for partial summary
judgment on its claim that Ohio Security has a duty to
defend. (Linq Mot. Partial Summ. J., ECF No. 16). Ohio
Security and Ohio Casualty filed a cross motion for summary
judgment on the duty to defend issue (which also served as
their response to Linq's motion for partial summary
judgment) on January 6, 2017. (Liberty Mutual Cross Mot.
Summ. J., ECF No. 31). That cross motion also requested that
the court enter a final declaratory judgment that neither
Ohio Security nor Ohio Casualty has a duty to defend or
indemnify Linq in the Sprint action. (Liberty Mutual
Cross Mot. Summ. J. Mem. Law 8, ECF No. 32). Linq filed a
consolidated response and reply on January 20, 2017. (Linq
Resp. in Opp'n & Reply, ECF No. 33). Liberty Mutual
filed a reply in support of its cross motion for summary
judgment on February 3, 2017. (Liberty Mutual Reply, ECF No.
Rule of Civil Procedure 56(a) provides that summary judgment
should be granted “if the movant shows that there is no
genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a) (emphases added). “A dispute is
genuine if ‘a reasonable jury could return a verdict
for the nonmoving party.'” Libertarian
Party of Va. v. Judd, 718 F.3d 308, 313 (4th
Cir. 2013) (quoting Dulaney v. Packaging Corp. of
Am., 673 F.3d 323, 330 (4th Cir. 2012)). “A fact
is material if it ‘might affect the outcome of the suit
under the governing law.'” Id. (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). Accordingly, “the mere existence of
some alleged factual dispute between the parties
will not defeat an otherwise properly supported motion for
summary judgment[.]” Anderson, 477 U.S. at
247-48. The court must view the evidence in the light most
favorable to the nonmoving party, Tolan v. Cotton,
134 S.Ct. 1861, 1866 (2014) (per curiam), and draw all
reasonable inferences in that party's favor, Scott v.
Harris, 550 U.S. 372, 378 (2007) (citations omitted);
see also Jacobs v. N.C. Admin. Office of the
Courts, 780 F.3d 562, 568-69 (4th Cir. 2015). At the
same time, the court must “prevent factually
unsupported claims and defenses from proceeding to
trial.” Bouchat v. Balt. Ravens Football Club,
Inc., 346 F.3d 514, 526 (4th Cir. 2003) (quoting
Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir.
Cross Motions for Partial Summary Judgment
cross motions for partial summary judgment raise issues
similar to those already decided by this court when facing
cross motions for partial summary judgment in another case,
Wireless Buybacks, LLC v. Hanover American Ins. Co.,
1:16-cv-0328-CCB. As explained in that case, the first issue
is whether the underlying complaint in the Sprint
action may trigger a duty to defend even though Sprint did
not specifically identify the tort of product disparagement
as a cause of action. In Maryland, whether a duty to defend
exists depends on both the alleged facts and the causes of
action contained in the underlying complaint; the inquiry
focuses on substance, not labels. Here, as in Wireless
Buybacks, the relevant inquiry is whether the underlying
lawsuit alleges or implies that Sprint suffered an injury
that arose out of the publication of disparaging material by
Linq - regardless of how Sprint labeled its counts. See
Walk v. Hartford Cas. Ins. Co., 382 Md. 1, 18 (2004);
see also Sheets v. Brethren Mut. Ins. Co., 342 Md.
634, 641 (1996) (duty to defend exists if underlying
complaint “alleges action” that is potentially
covered); All Class Const., LLC v. Mut. Ben.
Ins. Co., 3 F.Supp.3d 409, 420 (D. Md. 2014) (courts
must look beyond headings for the counts alleged in the
underlying suit to determine whether a duty to defend
exists). Accordingly, the court will proceed with its
examination of the insurance policies and the substance of
the underlying claims to determine whether those claims
allege that Linq published material that disparaged
Sprint's “goods, products or services.”
Maryland, an insurance company has a duty to defend its
insured “for all claims that are potentially covered
under the policy.” Walk, 382 Md. at 15. That
is, “[e]ven if a tort plaintiff does not allege facts
which clearly bring the claim within or without the policy
coverage, the insurer still must defend if there is a
potentiality that the claim could be covered by the
policy.” Brohawn v. Transamerica Ins. Co., 276
Md. 396, 408 (1975). When determining if a duty to defend
exists, the court follows a two-part inquiry. First, it
examines the coverage and defenses under the terms and
requirements of the insurance policy. Second, it asks whether
the allegations in the underlying suit “potentially
bring the . . . claim within the policy's
coverage.” St. Paul Fire & Mar. Ins. Co. v.
Pryseski, 292 Md. 187, 193 (1981). Here, the issue is
whether the allegations in the Sprint suit
potentially fall within the scope and limitations of coverage
for “personal and advertising injury.” See
Walk, 382 Md. at 13.
defined by the policies, “personal and advertising
injury” includes injury “arising out of”
“oral or written publication, in any manner, of
material that slanders or libels a person or organization or
disparages a person's or organization's goods,
products, or services.” There is no allegation in the
Sprint action that Linq published material that
“disparages” Sprint - even if the court
interprets the verb “disparage” broadly to mean
“to speak of or treat slightingly” or “to
depreciate by indirect means.” (See Linq Mot.
Partial Summ. J. Mem. Law 26-28, ECF No. 16-1) (urging court
to interpret “disparage” broadly and suggesting
various definitions). Despite Linq's assertions to the
contrary, it is not enough for the Sprint action to
claim that 1) Linq promotes its services on its website, and
those services have the effect of damaging Sprint's
reputation, or 2) Linq perpetrates a scheme that harms
Sprint, and Linq co-conspirators made statements to advance
that scheme. (Id. 19, 36-37). A mere allegation of
reputational harm does not establish disparagement. See
All Class Const, 3 F.Supp.3d at 420-21; Hartford
Cas. Ins. Co. v. Swift Distribution, Inc., 326 P.3d 253,
“implicit disparagement” claims are also
unconvincing. According to Linq, for instance, the underlying
complaint alleges that Linq falsely portrayed its phones as
equivalent to those sold by Sprint, which implicitly
disparaged Sprint. (Linq Mot. Partial Summ. J. Mem. Law
32-33). Some courts have found disparagement based on false
equivalence where the insured allegedly made false or
misleading statements claiming its products were equivalent
to those of a competitor. See JAR Labs. LLC v. Great Am.
E & S Ins. Co., 945 F.Supp.2d 937, 943-45 (N.D. Ill.
2013); see also McNeilab, Inc. v. Am. Home
Prods. Corp., 848 F.2d 34, 38 (2d Cir. 1988) (“A
misleading comparison to a specific competing product
necessarily diminishes that product's value in the minds
of the ...