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Glenmark Pharmaceuticals, Inc., USA v. Franklin Mutual Insurance Co.


December 12, 2008


On appeal from Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-3114-06.

Per curiam.


Argued September 15, 2008

Before Judges Reisner, Sapp-Peterson, and Alvarez.

Plaintiff, Glenmark Pharmaceuticals, Inc., USA, appeals from the July 23, 2007 order granting summary judgment to defendant, Franklin Mutual Insurance Company, and dismissing plaintiff's declaratory judgment action. For the reasons that follow, we affirm.

Defendant issued a one-year casualty and general liability policy to plaintiff on March 29, 2005. Section 1 of Part IIB of the policy states that the insurer will defend actions against the insured arising from "bodily injury, property damage, and personal/advertising injury." Section 11 of Part IIB states that the supplemental coverage includes: "Advertising injury arising out of an offense committed in the course of advertising goods, products, or services of your business/operations covered here." Paragraph 6 of Section 11, however, exempts: "Injury arising out of breach of contract, other than misappropriation of advertising ideas under an implied contract." The Section 11 glossary defines "advertising injury" as follows:

Advertising injury means solely the following:

1. Infringement of copyright, slogan, or title.

2. Misappropriation of advertising ideas or style of doing business.

3. Oral or written publication of material that: slanders or libels a person or organization; disparages a person's or organization's goods, products, or services.

4. Oral or written publication of material that violates a person's right of privacy.

In December 2005, Breckenridge Pharmaceutical, Inc. brought an action against plaintiff in Florida, seeking compensatory damages, and alleging that plaintiff breached a confidentiality agreement that the two companies had entered into prior to discussions regarding the development, manufacture and sale of a particular product. Starting in November 2004, plaintiff and Breckenridge entered into negotiations regarding the manufacture of a generic drug related to hormone replacement therapy, which had not previously been part of plaintiff's inventory. Discussions commenced only after plaintiff and Breckenridge entered into a written confidentiality agreement at Breckenridge's insistence. Ultimately, no meeting of the minds occurred.

Approximately a year later, plaintiff contracted with another company, Andapharm, LLC, to market and sell a similar product. When Breckenridge learned of plaintiff's agreement with Andapharm, it filed the Florida lawsuit, which named Andapharm as a defendant as well. Breckenridge had also entered into negotiations as to the same drug, subject to a written confidentiality agreement, with Andapharm. Breckenridge's suit against plaintiff was ultimately dismissed.

On April 17, 2006, plaintiff filed this complaint, asserting that defendant wrongfully failed to defend plaintiff in the Florida lawsuit. Plaintiff sought reimbursement from defendant for the costs of its defense to the suit, which totaled $625,395.94. Plaintiff and defendant filed various summary judgment motions, the final round of which was decided by the motion judge by way of a written opinion dated July 23, 2007. The judge granted defendant's motion because he concluded that every claim that Breckenridge made against plaintiff in the Florida proceeding arose out of the alleged breach of the parties' written confidentiality agreement, and was therefore excluded by the specific terms of the policy.

In Breckenridge's amended complaint, the company alleged breach of contract as well as misappropriation of trade secrets, conspiracy, and tortious interference with a business relationship. Accordingly, plaintiff contends that the motion court erred in its award of summary judgment because Breckenridge's claims stemmed from more than just plaintiff's alleged breach of the confidentiality agreement. We do not agree.

Pursuant to Rule 4:46-2, a court may only grant summary judgment if after viewing the evidence in the light most favorable to the non-moving party, it finds no genuine issue of material fact. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). An appellate court reviews a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46. Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007).

The motion court's analysis began, as it must, with a comparison of the policy language and Breckenridge's allegations. See Info. Spectrum, Inc. v. Hartford, 364 N.J. Super. 54, 59 (App. Div. 2003), aff'd o.b., 182 N.J. 34 (2004); Tradesoft Techs., Inc. v. Franklin Mut. Ins. Co., 329 N.J. Super. 137, 142 (App. Div. 2000). When language contained in a liability policy corresponds to the allegations of a complaint, "the duty to defend [the insured] arises, irrespective of the claim's actual merit." Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 173 (1992).

After the requisite comparison of the complaint to the policy language, the motion judge concluded that all of the claims were excluded because they arose solely from the alleged breach of the confidentiality agreement and, hence, defendant was entitled to summary judgment. The judge found, viewing the evidence in the light most favorable to plaintiff, that as a matter of law defendant was entitled to summary judgment. We concur.

All of Breckenridge's claims, had they been proven, would have been engendered by conduct in violation of the explicit terms of the confidentiality agreement. Only after the agreement was signed did plaintiff even acquire any meaningful information about Breckenridge's product.

Furthermore, no actual advertising activity causing injury to Breckenridge was alleged in the complaint. Defendant is obligated to extend coverage only when the injury results from "an offense committed in the course of advertising." Tradesoft, supra, 329 N.J. Super. at 152. The harm alleged must be causally linked to the advertisement, not the purported misappropriation. Info. Spectrum, supra, 364 N.J. Super. at 67. Breckenridge's Florida complaint sought damages for harm resulting exclusively from the breach of the contract, and from the appropriation of information that plaintiff obtained solely as a result of Breckenridge's reliance on the confidentiality agreement.

Plaintiff contends that, at a minimum, the misappropriation count of the complaint is covered by the policy. Our independent review of the record establishes, however, that Breckenridge's allegations of misappropriation do not include, as required by the definition of advertising injury in the Section 11 glossary of the policy, "[m]isappropriation of advertising ideas or style of doing business." If no misappropriation of advertising ideas or style of doing business was alleged, there can be no coverage.

Moreover, plaintiff cannot establish that the alleged misappropriation fell within any of the other three categories of covered advertising injury enumerated in Section 11 of the policy: copyright, slogan or title infringement, defamation, or invasion of privacy. Simply stated, there was no claim that the injury was inflicted in the course of advertising.

Because Breckenridge's suit addressed solely conduct in violation of the written confidentiality agreement, the exclusion applies. Additionally, plaintiff cannot establish that any advertising activities were the source of the harm alleged by Breckenridge. The harm must be caused by an advertising act itself and not by the underlying claimed misappropriation. Info. Spectrum, supra, 182 N.J. at 38. Accordingly, we affirm.



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