United States District Court, D. South Dakota, Western Division
JEFFREY L. VIKEN CHIEF JUDGE
Rushmore Photo & Gift, Inc., JRE, Inc., Carol Niemann, Paul
A. Niemann and Brian M. Niemann (jointly the “RPG
Defendants”) filed a motion to dismiss count I, count
II and paragraphs 68(a), (b), (c), (d), (e), (g) and (k) of
count III of plaintiff's complaint pursuant to Federal
Rules of Civil Procedure 12(b)(5) and (6). (Docket 7).
Plaintiff resists defendants' motion. (Docket 19). For
the reasons stated below, defendants' motion is granted.
purposes of resolving the RPG Defendants' motion, the
facts alleged in the complaint are accepted as true.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(“To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.' ”) (citing Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).
Milbank Insurance Company (“Milbank”) filed a
complaint against the RPG Defendants on August 22, 2017.
(Docket 1). The complaint asserts the court has diversity of
citizenship jurisdiction pursuant to 28 U.S.C. §
1332(a). Id. ¶ 18. The complaint
seeks a “declaratory judgment, brought pursuant to 28
U.S.C. §§ 2201 & 2202, for the purpose of
determining the rights and legal obligations under insurance
policies issued by Milbank to the RPG Defendants.”
(Docket 1 ¶ 1). Plaintiff alleges “[t]he Milbank
Policies do not apply to claims for trademark infringement,
intentional violations of the known rights of another, and
injunctive relief.” Id. ¶ 2. Milbank
states that “[o]n June 22, 2011, Sturgis Motorcycle
Rally, Inc. (“SMRI”), filed suit against the RPG
Defendants alleging trademark infringement relating to the
Sturgis Motorcycle Rally in Sturgis, South Dakota.”
Id. ¶ 3. See Sturgis Motorcycle Rally, Inc.
v. Rushmore Photo & Gifts, Inc., et al., Civ. 11-5042
(D.S.D. 2011) (the “SMRI Lawsuit”). The complaint
alleges that “Milbank agreed to defend the RPG
Defendants, subject to a reservation of rights that the
Milbank Policies do not provide coverage for trademark
violations, intentional violations of the known rights of
another, or claims for injunctive relief.” (Docket 1
April 24, 2012, SMRI filed an Amended Complaint alleging the
same causes of action as its original Complaint, but adding
Wal-Mart as a defendant.” (Docket 1 ¶ 40)
(referencing Civ. 11-5052, Docket 52). “Without
consulting Milbank, Rushmore agreed to defend and indemnify
Wal-Mart relative to the [SMRI] Lawsuit.” Id.
¶ 43. “Until its decision to amicably withdraw[ ]
from the RPG Defendants' defense, Milbank was also paying
for [RPG Defendants' attorneys] defense of Wal-Mart
subject to a reservation of rights.” Id.
¶ 45. “Milbank now seeks a ruling that Milbank has
no duty to defend the RPG Defendants in the [SMRI]
[L]awsuit.” Id. ¶ 10.
seeks a declaratory judgment that “the Trademark
Exclusion bars coverage for the [SMRI] Lawsuit in its
entirety.” Id. ¶ 60. Count II seeks a
declaratory judgment that “the Intentional and/or
Willful Conduct Exclusion bars coverage for the [SMRI]
Lawsuit in its entirety.” Id. ¶ 66. Count
III seeks a declaratory judgment “that Milbank has no
duty to provide coverage, or is entitled to recover certain
amounts spent in connection with the [SMRI] Lawsuit, based on
[certain] grounds . . . .” Id. ¶ 68.
Relevant to the RPG Defendants' motion, the complaint
alleged that Milbank had no duty to:
1. defend claims for “personal and advertising
injury” where such injury arises from publications or
distributions of infringing material that occurred prior to
the inception of any Milbank Policy. Id. ¶
2. defend claims for any liability or potential liability
which the RPG Defendants knew of, and did not disclose to
Milbank, prior to the inception of any Milbank Policy.
Id. ¶ 68(b).
3. defend claims for “personal and advertising
injury” arising out of oral or written publication of
material, if done by or at the direction of the RPG
Defendants with knowledge of its falsity. Id. ¶
4. defend claims for “personal and advertising
injury” arising out of the failure of goods, products
or services to conform with any statement of quality or
performance made in the RPG Defendants'
“advertisement.” Id. ¶ 68(d).
5. defend claims that do not seek damages, or claims that . .
. seek solely injunctive or equitable relief. Id.
6. pay defense costs that are not reasonable and necessary,
or are otherwise unrelated to a covered claim. ...