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Netscape Communications Corporation et al v. Federal Insurance Company et al - Document No. 21

Netscape Communications Corporation et al v. Federal Insurance Company et al - Document No. 21

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Published by Justia.com
ORDER by Judge James Ware granting 9 Motion to Dismiss, granting 11 Motion to Dismiss (jwlc1, COURT STAFF) (Filed on 2/22/2006) 5:2006cv00198 California Northern District Court
ORDER by Judge James Ware granting 9 Motion to Dismiss, granting 11 Motion to Dismiss (jwlc1, COURT STAFF) (Filed on 2/22/2006) 5:2006cv00198 California Northern District Court

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Published by: Justia.com on Apr 23, 2008
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UnitedState
sDistrictCo
urt
FortheNorth
ernDistrict
ofCaliforni
a
123456789

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

UnitedState
sDistrictCo
urt
FortheNorth
ernDistrict
ofCaliforni
a

NOT FOR CITATION
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION

Netscape Communications Corporation et

al.,
Plaintiff(s),
v.

Federal Insurance Company et al.,
Defendant(s).
/
NO. C 06-00198 JW

ORDER GRANTING DEFENDANTS\u2019
MOTIONS TO DISMISS; GRANTING
PLAINTIFFS LEAVE TO AMEND;
DENYING DEFENDANTS\u2019 MOTION
FOR A MORE DEFINITE STATEMENT

I. INTRODUCTION

Netscape Communications Corporation and America Online, Inc. (\u201cPlaintiffs\u201d) bring suit
against Federal Insurance Company, St. Paul Mercury Insurance Company, Executive Risk
Specialty Insurance Company (\u201cDefendants\u201d) alleging common law breach of contract, common law
tortious breach of the covenant of good faith and fair dealing, and unfair business practices under
Cal. Bus. & Prof. Code \u00a7 17200. Presently before this court are (1) Defendant St. Paul Mercury
Insurance Company\u2019s motion to dismiss Plaintiffs\u2019 ninth cause of action, namely unfair business
practices, motion to strike prayer, or alternatively, motion for a more definite statement; (2)
Defendants Federal Insurance Company\u2019s and Executive Risk Specialty Insurance Company\u2019s
motion to dismiss; and Defendants Federal Insurance Company\u2019s and Executive Risk Specialty
Insurance Company\u2019s joinder in St. Paul Mercury Insurance Company\u2019s motion to dismiss.
Plaintiff, in turn, moves for leave to amend if the Court grants Defendants\u2019 motions. The motions

Case 5:06-cv-00198-JW Document 21
Filed 02/22/2006 Page 1 of 9
Netscape Communications Corporation et al v. Federal Insurance Company et al
Doc. 21
Dockets.Justia.com
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were noticed for hearing on February 27, 2006. The Court finds it appropriate to take the motions under submission for decision without oral argument pursuant to Civil Local Rule 7-1(b). For the reasons set forth below, this court GRANTS Defendants\u2019 motions to dismiss, DENIES Defendants\u2019 motion for a more definite statement, and GRANTS Plaintiffs\u2019 motion for leave to amend.

II. BACKGROUND

In 2000, four civil actions were filed against Plaintiffs for alleged interceptions of
consumers\u2019 private electronic communications (hereinafter, \u201cunderlying actions\u201d). (Complaint at \u00b6
15.) The plaintiffs in those suits argued that two of Plaintiffs\u2019 products acted in concert to
surreptitiously collect personal and private information in violation of the Electronic
Communications and Privacy Act, and the Computer Fraud and Abuse Act. (Complaint at \u00b6 16.)
Plaintiffs allege they promptly notified their respective insurers, Defendants in the instant action, of
the claims in order to trigger defense and indemnity obligations. (Complaint at \u00b6 18.) As to
Defendant Federal Insurance, Plaintiffs believe their first-party and third-party liability insurance
provided them with coverage from liability for \u201cpersonal injuries\u201d such as those alleged in the
underlying actions. (Complaint at \u00b6 22.) Issued under the \u201cElectronics Insurance Program,\u201d the
policy ran from April 1998 to April 30, 1999. As to Defendant St. Paul Mercury, Plaintiffs believe
their policy covered them from liability for \u201cpersonal injuries\u201d such as those alleged in the
underlying actions. Issued as a technology commercial general liability policy, it ran from April 1,
1999 to April 1, 2000. As to Defendant Executive Risk, Plaintiffs believe their policy covered the
underlying actions because it covered \u201cMedia Activities,\u201d defined as \u201call matter ... on the World
Wide Web ... accessible via \u201cwww.aol.com.\u201d (Complaint at \u00b6 28.) This policy ran from April 1,
1999 to April 1, 2000.

Defendants denied coverage and did not pay any benefits. Plaintiffs allege they were forced
to defend and resolve the suits with their own resources, at the cost of $ 4,273,064 in attorneys\u2019 fees.
The four underlying actions eventually settled at the cost of $100,000. (Complaint at \u00b6 33.)
Plaintiffs also anticipate an additional $1,340,113,86 to resolve an appeal. Id. Based on the

Case 5:06-cv-00198-JW Document 21
Filed 02/22/2006 Page 2 of 9
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3

forgoing, Plaintiffs seek compensatory and punitive damages, costs of suit, and prejudgment and
post-judgment interest. Additionally, Plaintiffs seek to enjoin Defendants from committing the
alleged unfair business practice of \u201cautomatically denying all claims that implicate their \u2018personal
injury\u2019 and/or \u2018Media Activities\u2019 coverages when privacy allegations are asserted against insureds.\u201d
(Complaint at \u00b6 78.) Lastly, Plaintiffs seek an \u201corder directing Defendants to disgorge to the public
all funds and profits acquired by means of any act or practice described herein which is found by the
Court to be unlawful, unfair or fraudulent within the meaning of that statute.\u201d (Complaint at \u00b680.)

Defendants make three arguments and one argument in the alternative. First, Defendants
contend that Plaintiffs have improperly labeled their claim under the unfair competition act,
California Business & Professions Code \u00a7 17200, instead of under the Uniform Insurance Practices
Act \u00a7 790.03 (\u201cUIPA\u201d), which bars certain types of private actions against insurers. Second,
Defendants contend that the \u00a7 17200 claim is legally deficient because Plaintiffs have failed to
allege that they have no other adequate remedies. Third, Defendants contend that Plaintiffs
improperly seek non-restitutionary disgorgement. In the alternative, Defendants request that the
Court require Plaintiffs to provide a more definite statement of the facts supporting the claim.

III. STANDARDS
A.
Motion to Dismiss

Under Rule 12(b)(6), a plaintiff's claims or entire complaint may be dismissed by the court
for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). See, e.g.,
Jack Russell Terrier Network of N. Cal. v. Am. Kennel Club, 407 F.3d 1027, 1032 (9th Cir. 2005)
(affirming district court's partial Rule 12(b)(6) dismissal). A Rule 12(b)(6) motion tests the legal
sufficiency of the claims stated in the complaint. The court must decide whether the facts alleged, if
true, would entitle plaintiff to some form of legal remedy. Unless the answer is unequivocally in the
negative, the motion must be denied. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); De La Cruz v.
Tormey (9th Cir. 1978). In resolving a Rule 12(b)(6) motion, the court must (1) construe the
complaint in the light most favorable to the plaintiff, (2) accept all well-pleaded factual allegations

Case 5:06-cv-00198-JW Document 21
Filed 02/22/2006 Page 3 of 9

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