Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-02868/USCOURTS-casd-3_14-cv-02868-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332in Diversity-Insurance Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SENTRY INSURANCE A MUTUAL 

COMPANY, a Wisconsin

corporation,

Plaintiff,

Case No. 14-cv-2868-BAS-WVG

ORDER DENYING 

DEFENDANT’S MOTION TO 

DISMISS AND REQUEST FOR 

STAY

v.

PROVIDE COMMERCE, INC., a 

Delaware corporation; and DOES1-

100,

Defendants.

I. INTRODUCTION

On December 4, 2014, Plaintiff Sentry Insurance (“Sentry”) filed a Complaint 

for declaratory relief against Provide Commerce, Inc. (“Provide”). (ECF No. 1.) In 

the Complaint, Sentry asked the court to find that, under the insurance policies issued 

by Sentry to Provide, “Sentry has no obligation to defend or indemnify Provide” in a 

lawsuit filed by Edible Arrangements, LLC in Connecticut state court for trademark 

infringement. (Id.)

On July 16, 2015, this Court dismissed the Complaint without prejudice for 

failure to allege all the essential elements for diversity jurisdiction. (ECF No. 13.) 

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The Court gave Sentry 14 days to refile an amended complaint. (Id.) On July 31, 

2015, Sentry filed its First Amended Complaint (“FAC”) (ECF No. 14.) 

Provide now moves to dismiss and/or stay action on the FAC. (ECF No. 15.) 

Sentry has filed a Response to this Motion (ECF No. 16) and Sentry has replied (ECF 

No. 17.) The Court finds this motion suitable for determination on the papers 

submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the reasons listed 

below, the Court DENIES Provide’s Motion to Dismiss and/or Stay.

II. STATEMENT OF FACTS

Edible Arrangements, LLC filed a lawsuit in Connecticut court against Provide 

alleging Provide infringed its trademarks with the intent of misleading and confusing 

the public about its association with Edible Arrangements.1(FAC ¶30.) 

Edible Arrangements filed six causes of action for: (1) trademark infringement, 

(2) false designation of origin or sponsorship and unfair competition, (3) trademark 

dilution, (4) common law trademark infringement, (5) unfair competition and 

deceptive trade practices in violation of the Connecticut unfair trade practices act and 

(6) violation of the anticybersquatting consumer protection act. (FAC ¶31.)

Provide tendered defense of the lawsuit to Sentry. Sentry accepted the tender 

subject to a reservation of rights and then filed this declaratory relief action, seeking 

determination from the court that it has no duty to defend or duty to indemnify 

Provide in the Edible Arrangements lawsuit. (FAC ¶¶38–40.) Sentry has also filed a 

second cause of action for equitable reimbursement of costs and fees paid in the 

Edible Arrangements lawsuit. (FAC ¶¶46–52.)

Specifically, in the FAC, Sentry seeks a court determination that six provisions 

or exclusions in the insurance policies at issue excuse Sentry from any duty to defend 

or indemnify. The provisions allegedly indicate Sentry has no duty to defend or 

indemnify Provide for any personal and advertising injury arising out of: 

 

1 Although the FAC makes reference to a copy of the Edible Arrangements lawsuit attached as 

Exhibit A, there are no exhibits attached to the FAC.

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(1) Exclusion 2(i)—“the infringement of copyright, patent, trademark, trade 

secret or other intellectual property rights” (FAC ¶10);

(2) Exclusion 2(l)—“the unauthorized use of another’s name or product in 

[Provide’s] email address, domain name, or metatag, or any other similar tactics to 

mislead another’s potential customers” (FAC ¶11);

(3) Exclusion 2(a)—“caused by or at the direction or with the consent or 

acquiescence of [Provide] with the knowledge that the act would violate the rights of 

another and would inflict personal and advertising injury” (FAC ¶12);

(4) Exclusion 2(b)—“oral or written publication of material, if done by or at 

the direction of [Provide] with knowledge of falsity” (FAC ¶14);

(5) Exclusion 2(c)—“oral or written publication of material whose first 

publication took place before the beginning of the policy period” (FAC ¶14);

(6) Provision for Material in Violation of Statute—“an action or inaction or 

omission that violates or is alleged to violate: (a) the TCPA, (b) the CAN-SPAM Act 

of 2003, (c) “Any [other] statute, ordinance or regulation . . . that prohibits or limits 

the sending, transmitting, communicating or distribution of material or information.”

(FAC ¶15.)

III. LEGAL STANDARD

“Because standing and ripeness pertain to federal courts’ subject matter 

jurisdiction, they are properly raised in a Rule 12(b)(1) motion to dismiss.” Chandler 

v. State Farm Mut. Auto Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010); see also St. 

Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989) (“[M]otions raising issue of 

ripeness are treated as brought under Rule 12(b)(1) even if improperly identified by 

the moving party (or the opposing party) as brought under Rule 12(b)(6).”). 

A motion to dismiss for lack of subject matter jurisdiction may either attack 

the allegations of the complaint or may be made as a “speaking motion” attacking the 

existence of subject matter jurisdiction in fact. Thornhill Pub. Co., Inc. v. Gen. Tel. 

& Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979); see also St. Clair, 880 F.2d at 201 

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(“Unlike a Rule 12(b)(6) motion, a Rule 12(b)(1) motion can attack the substance of 

a complaint’s jurisdictional allegations despite their formal sufficiency and in doing 

so rely on affidavits or any other evidence properly before the court.”) In a Rule 

12(b)(1) speaking motion, there is no presumptive truthfulness to Plaintiff’s 

allegations in the Complaint and a Plaintiff has the burden of proof to show 

jurisdiction does exist so the court can evaluate the existence of subject matter 

jurisdiction for itself. Thornhill, 594 F.2d at 633; see also St. Clair, 880 F.3d at 201 

(If ripeness is attacked with affidavits or other evidence, “[i]t then becomes necessary 

for the party opposing the motion to present affidavits or any other evidence 

necessary to satisfy the burden of establishing that the court, in fact, possesses subject 

matter jurisdiction.”) However, a jurisdictional issue intertwined with the merits of 

the underlying cause of action may need to be deferred for the final decision on the 

merits. St. Clair, 880 F.2d at 202. 

IV. DISCUSSION

Provide argues the FAC should be dismissed because (1) it was filed one-day 

late; (2) the issue is not yet ripe; and (3) the Doe defendants destroy diversity. 

Alternatively, Provide argues the case should be stayed until the lawsuit with Edible 

Arrangements is resolved. The Court addresses each argument below.

A. Missed Deadline For Filing the FAC

This Court dismissed the original Complaint without prejudice and ordered 

Sentry to file any amended Complaint within 14 days. (ECF No. 13.) Sentry, instead, 

filed its FAC within 15 days. (ECF No. 14.) Provide argues this merits dismissal of 

the FAC. 

“Procedure is a means to an end, not an end in itself—the handmaid rather than 

the mistress of justice.” Ahanchian v. Xenon Pictures, Inc., 624 F.3d 1253, 1254-55 

(9th Cir. 2010) (quoting Charles E. Clark, History Systems and Functions of 

Pleading, 11 Va. L. Rev. 517, 542 (1925)). Under the Federal Rules of Civil 

Procedure, “[w]hen an act . . . must be done within a specified time, the court may, 

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for good cause extend the time . . . on motion made after the time has expired if the 

party failed to act because of excusable neglect.” Fed. R. Civ. P. 6(b). This rule is “to 

be liberally construed to effectuate the general purpose of seeing that cases are tried 

on the merits.” Ahanchian, 624 F.3d at 1258-59. “‘Good cause’ is a non-rigorous 

standard that has been construed broadly across procedural and statutory contexts.” 

Id. at 1259. “Excusable neglect” should include consideration of equitable factors 

such as: (1) the length of the delay, (2) the degree of prejudice to opposing party by 

the delay, (3) the reason for the delay, and (4) whether the movant has acted in good 

faith. Id. at 1262.

In this case, Sentry failed to move for late filing of the FAC, which would have 

been the better practice. Instead, in its Response, it argues that it is now seeking relief 

under Rule 60 of the Federal Rules of Civil Procedure, which provides relief from a 

final judgment. The order granting the Motion to Dismiss and giving Sentry 14 days 

to file an amended complaint was not a final judgment, order or proceeding. Instead, 

this Court will construe Sentry’s Response as a motion to extend the time in the order 

pursuant to Rule 6(b).

Sentry explains the email it received from the Court dismissing the Complaint 

omitted the due date for the amended Complaint, and counsel was unable to access 

the electronic record at the time. (Declaration of Todd R. Haas, ECF No. 16-1 (“Todd 

Dec.”) ¶¶ 4-6.) When he was able to access the order, the due date was inadvertently 

calendared based on the date the order was accessed, as opposed to when the order 

was actually issued. (Todd Dec. ¶6.) The Court finds this meets the non-rigorous 

“good cause” standard. Furthermore, notably absent from Provide’s Motion to 

Dismiss is any mention of prejudice it will face from this one-day oversight. The 

Court has considered the proffered reasons for the oversight and finds Provide did 

not act in bad faith. Therefore, the Court finds Sentry has made a sufficient showing 

of excusable neglect, and the FAC should not be dismissed on this ground.

B. Ripeness

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Provide moves to dismiss pursuant to Rule 12(b)(1) arguing that the case is not 

ripe. First, Provide argues the case is not ripe because it seeks to adjudicate Sentry’s 

duty to indemnify, an event that has not yet occurred. Second, Provide argues the 

second cause of action for equitable reimbursement should be dismissed, both 

because Sentry has not paid any amounts and because it is not clear how much Sentry 

might pay in the future. 

“The central concern of the ripeness inquiry is whether the case involves 

uncertain or contingent events that may not occur as anticipated or indeed may not 

occur at all.” Chandler v. State Farm, 598 F.3d at 1122-23. The duty to defend arises 

when there is a potential for indemnity and may exist even when coverage is in doubt 

and ultimately does not develop. Armstrong World Indus. v. Aetna Casualty & Surety 

Co., 45 Cal.App.4th 1, 107 (1996). The duty to indemnify, on the other hand, arises 

when underlying liability is established. Id. Thus, in a declaratory relief action held 

before the insured’s liability has been established, the trial court may not determine 

the amount of the insured’s indemnity; instead, “it must limit its declaration to 

whether the claim is covered by the policy.” Id. at 108.

In order to be entitled to equitable reimbursement of defense costs, as requested 

in Count Two, the insurer must prove: (1) the insurer immediately defended the suit 

against the insured in its entirety; (2) the insurer paid attorney fees and expenses to 

defend claims not even potentially covered; and (3) the insurer expressly reserved its 

right to seek reimbursement for fees and expenses paid to defendant claims not even 

potentially covered. Buss v. Superior Court, 16 Cal.4th 35, 47-50 (1997). 

Turning first to the declaratory relief action for indemnification, the Court 

agrees that the issue of how much is owed is not ripe for adjudication. However, to 

the extent Sentry is asking whether the claim is covered by the policy, and whether 

Sentry has a duty to defend under the policy, the case is ripe and in need of 

adjudication. 

With respect to the cause of action for equitable reimbursement, Provide would 

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in essence have this Court find on a Motion to Dismiss that Sentry cannot prove the 

elements of the cause of action alleged. Provide attaches a Declaration from Paul A. 

Hilding detailing invoices that have been sent to Sentry and are, as of yet, unpaid. 

(ECF No. 15-2.) Thus, argues Provide, Sentry cannot prove the first two elements of 

immediately defending the suit in its entirety and paying fees and expenses not even 

potentially covered. This issue is so intertwined with the merits of the underlying 

cause of action that it will need to be deferred for a trial on the merits. 

C. Doe Defendants and Diversity

“Federal courts being courts of limited jurisdiction, the presumption is that it 

is without jurisdiction unless the contrary affirmatively appears.” Fifty Assoc. v. 

Prudential Ins. Co. of Am., 446 F.2d 1187, 1190 (9th Cir. 1970). Inclusion of Doe 

defendants destroys the existence of diversity jurisdiction because the court cannot 

determine the citizenship of any of these Doe defendants. Garter-Bare Co. v. 

Munsingwear, Inc., 650 F.2d 975, 981 (9th Cir. 1980).

Sentry alleges 100 Doe defendants who have an interest in Sentry’s insurance 

policies, “the exact nature of which is unknown to Sentry.” (FAC ¶3.) Sentry also 

alleges these Doe defendants are necessary parties under Rules 19 (required joinder) 

and 20 (permissive joinder) of the Federal Rules of Civil Procedure. (FAC ¶4.) 

Recognizing this may destroy the allegations of diversity jurisdiction, Sentry now 

asks this Court to strike all references to the fictitious defendants and to allow the 

case to proceed between Sentry and Provide. Provide responds that Sentry claims 

these parties are necessary parties and, therefore, should not be dismissed.

The Doe defendants are fictitious defendants “the exact nature of which is 

unknown to Sentry.” Neither Sentry nor Provide makes reference to any specific 

interests or parties, and, therefore, the allegation that these parties are necessary is 

frivolous. See Shermoen v. United States, 982 F.2d 1312, 1317 (9th Cir. 1992) (the 

district court is not “required to find a party necessary based on patently frivolous 

claims made by that party.”) Although the court could dismiss this complaint once 

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again for lack of diversity jurisdiction and allow Sentry to amend the complaint, no 

purpose is served by this delay. The Court grants Sentry’s request to strike all 

references to the fictitious defendants. Once the Doe defendants are stricken, the 

allegations of diversity jurisdiction are sufficient. 

D. Provide’s Request to Stay

Although initially the determination of a duty to defend is made by comparing 

the allegations in the complaint with the terms of the policy, “facts extrinsic to the 

complaint [can] also give rise to a duty to defend when they reveal a possibility that 

the claim may be covered by the policy.” Montrose Chem. Corp. v. Superior Court, 

6 Cal.4th 287, 295 (1993) (“Montrose I”). A stay of a declaratory relief action until 

the third party suit is resolved may, therefore, be necessary if coverage turns on 

extrinsic facts to be litigated in the third party suit. Id. at 301. The classic example of 

this stay requirement is when a third party sues for negligence and the insurance 

company seeks to argue the third party was harmed by an intentional act of its insured.

Id.

“By contrast, when the coverage question is logically unrelated to the issues 

of consequence in the underlying case, the declarative relief action may properly 

proceed to judgment.” Id.; see also Great Am. Ins. Co. v. Superior Court, 178 Cal. 

App.4th 221, 235-36 (2009) (“If the factual issues to be resolved in the declaratory 

relief action overlap . . . the trial court must stay the declaratory relief action. . . . If, 

[however], there is no such factual overlap and the declaratory relief action can be 

resolved on legal issues or factual issues unrelated to the issues in the underlying 

action, the question as to whether to stay the declaratory relief action is a matter 

entrusted to the trial court’s discretion.”) (emphasis original). The Court must look 

at: (1) what issues are outstanding in the lawsuit, (2) which defenses to coverage are 

being raised, and what facts need to be determined to reach these defenses, and (3) 

any other potential prejudice to proceeding. Montrose Chem. Corp. v Superior Court, 

25 Cal.App.4th 902, 908 (1994) (“Montrose II”).

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There are no easy answers in these kinds of cases. See Montrose II, 25 

Cal.App.4th at 909. The prejudice from allowing a case to proceed could include the 

concern that: (1) the insurance company might join forces with the plaintiffs in the 

third party suit to defeat coverage, (2) the insured may be required to conduct a twofront war both against the plaintiff in the underlying lawsuit and its insurance 

company, and (3) the resolution of the coverage question could create collateral 

estoppel or an inconsistent ruling in the underlying lawsuit. Id. at 910. However, the 

Court must consider prejudice both to the insured as well as the insurance company. 

Id.; see also Great Am. Ins. Co. at 236-37 (“the court must also consider possible 

prejudice to the insurer that may be caused by staying the declaratory relief action. . 

. . If the insurer is correct and, in fact, it has no further duty to defend, it may 

nevertheless be required to keep paying defense costs indefinitely while the 

declaratory relief action is stayed.”) “For this reason, the trial court should not hesitate 

to fashion orders which attempt to balance these conflicting concerns. For example, 

the possibility of severance should be explored.” Montrose II, 25 Cal.App.4th at 908.

Provide requests that this case be stayed until the Edible Arrangements 

litigation is completed. The Court agrees with Sentry that the request is premature. 

Sentry does not object to a stay of the issue of duty to indemnify and instead asks that 

it be allowed to file a motion for summary judgment on the application of two of the 

exclusions in the policies to its duty to defend. Specifically, Sentry seeks to move 

forward on what it claims is a purely legal question as to whether the IP Exclusion or 

the Use of Another’s Name Exclusion bar coverage in the underlying case. (Response 

at 18.)

At this point, it does not appear that the specific question being raised by such 

a summary judgment motion will overlap with the issues in the underlying litigation. 

At the motion for summary judgment on the duty to defend, the issue before the court 

will be whether there is any potential for coverage under the policies. See Armstrong, 

45 Cal.App.4th at 107. Sentry will have the burden of proving that the two exclusions 

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are applicable. Atl. Mut. Ins. Co. v. J. Lamb, Inc., 100 Cal.App.4th 1017, 1034 (2002). 

Provide, as it does in its Reply to this motion, will argue there is a potential for 

coverage because the exclusions only apply to actual infringement and actual 

unauthorized use of name or product. Therefore, argues Provide, there is a potential 

for coverage because there could be a finding in the Edible Arrangements case that 

there was no actual infringement and no actual unauthorized use. This argument is a 

purely legal argument interpreting the provisions of the policies and can be resolved 

by this Court without reference to the underlying lawsuit. Furthermore, the concerns 

of Provide engaging in a two-front war are minimized by allowing a motion for 

summary judgment with this narrow a scope to proceed.

At this time, the Court declines to issue a stay. However, the denial is without 

prejudice. If, once Provide files its summary judgment motion, Sentry believes 

response or the Court’s ruling would somehow prejudice it in the underlying lawsuit, 

it may renew the request for a stay at that time. It may well be that the case will be 

stayed at some point in the future if the motion for summary judgment on the limited 

grounds requested by Sentry is denied.

V. CONCLUSION

For the foregoing reasons, Provide’s Motion to Dismiss (ECF No. 15) is 

DENIED. Furthermore, its Request to Stay is DENIED WITHOUT PREJUDICE. 

At the request of Sentry, all references to the Doe Defendants are STRICKEN.

IT IS SO ORDERED.

DATED: March 30, 2016

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