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Sterngold Dental, LLC v. HDI Global Insurance Co.

United States Court of Appeals, First Circuit

July 2, 2019

STERNGOLD DENTAL, LLC, Plaintiff, Appellant,
v.
HDI GLOBAL INSURANCE COMPANY, Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. George A. O'Toole, Jr., U.S. District Judge]

          Sean T. O'Leary, with whom O'Leary Murphy, LLC was on brief, for appellant.

          Joseph K. Scully, with whom Day Pitney LLP was on brief, for appellee.

          Before Howard, Chief Judge, Torruella and Selya, Circuit Judges.

          SELYA, CIRCUIT JUDGE

         This appeal gives us an opportunity to sink our teeth into a sophisticated insurance coverage question: we must construe the scope of the so-called intellectual property exclusion (IP exclusion) to the personal and advertising injury coverage under a standard commercial general liability policy (the Policy) issued by defendant-appellee HDI Global Insurance Company (HDI) to plaintiff-appellant Sterngold Dental, LLC (Sterngold). Concluding, as we do, that Sterngold's arguments lack bite, we affirm the district court's dismissal of Sterngold's action for failure to state a claim upon which relief can be granted.

         I. BACKGROUND

         The relevant facts are undisputed. Sterngold manufactures and sells dental products. To safeguard its business operations, Sterngold purchased the Policy (which covered Sterngold's commercial activities during the calendar year 2016).

         In pertinent part, the Policy obligated HDI to defend and indemnify Sterngold against claims arising out of "personal and advertising injury." Withal, coverage for such injuries was subject to certain exclusions. A specific exclusion - the IP exclusion - pretermitted coverage for personal and advertising injury "arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights." The case at hand turns on the applicability vel non of this exclusion.

         The circumstances that sparked this litigation can be succinctly summarized. In May of 2016, Intra-Lock International, Inc. (Intra-Lock), a competitor in the market for dental products, sued Sterngold in the United States District Court for the Southern District of Florida. Count 3 of its complaint alleged, inter alia, that Sterngold infringed Intra-Lock's registered OSSEAN trademark - a trademark denoting a component of its osseointegrative dental implant coating product - by using nearly identical marks, OSSEO and OSSEOs, for a nearly identical product.[1] Sterngold asked HDI to defend the suit and provide indemnification pursuant to the Policy. HDI refused Sterngold's request, denying coverage under the Policy. When Sterngold reiterated its demand for defense and indemnification, HDI again demurred.

         Sterngold proceeded to settle the Intra-Lock suit. At that point, it made a third attempt to engage HDI. This time around, Sterngold asserted that the Policy required that HDI reimburse Sterngold for the settlement amount. Once again, HDI turned a deaf ear to Sterngold's entreaties.

         Invoking diversity jurisdiction, see 28 U.S.C. § 1332(a), Sterngold repaired to the United States District Court for the District of Massachusetts. Pertinently, its complaint against HDI alleged that the latter had breached its duty to defend and indemnify Sterngold against Intra-Lock's claim. HDI responded by moving to dismiss the complaint. See Fed.R.Civ.P. 12(b)(6). Sterngold objected, but the district court granted HDI's motion, holding that, under the Policy, HDI had no duty either to defend or indemnify Sterngold in the Intra-Lock suit. See Sterngold Dental, LLC v. HDI Global Ins. Co., No. 17-11735, 2018 WL 4696744, at *4 (D. Mass. Sept. 29, 2018). This timely appeal followed.

         II. ANALYSIS

         We review a district court's dismissal for failure to state a claim de novo. See Artuso v. Vertex Pharm., Inc., 637 F.3d 1, 5 (1st Cir. 2011). "In conducting that review, we accept as true all well-pleaded facts set forth in the complaint and draw all reasonable inferences therefrom in the pleader's favor." Id. "When . . . a complaint's factual allegations are expressly linked to - and admittedly dependent upon - a document (the authenticity of which is not challenged), that document effectively merges into the pleadings and the trial court can review it in deciding a motion to ...


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