The Court of Appeal, Second Appellate District, affirmed the trial court's order sustaining Hartford's demurrer to Oglio Entertainment's First Amended Complaint for breach of contract and breach of the covenant of good faith and fair dealing. The Court of Appeal held the underlying complaint asserted Oglio copied the Plaintiff's product when Oglio hired musicians to record musical acts similar to those performed by Plaintiff. The act of selling a copied product does not constitute a covered offense under the Hartford policy for copying an advertising idea or style of advertisement. The trial court did not abuse its discretion in sustaining Hartford's demurrer without leave to amend because Oglio could not change the facts alleged in the underlying complaint.
Underlying plaintiff Mark Davis recorded and performed music under the stage name "Richard Cheese," a comedy character created by Davis who performs "lounge" style versions of popular rock, hip-hop and pop songs. Davis entered into a recording and distribution agreement with Oglio. After Davis recorded his first album, "Lounge Against the Machine," with Oglio, Oglio sought to have Davis record a second album of lounge versions of Ozzy Osbourne songs, but Oglio offered an advance payment below the amount called for in the agreement. Davis refused. Oglio hired two other musicians to perform "lounge style" versions of popular songs, and released two albums, "The Diary of a Loungeman" by "Bud E. Luv" and "Sub-Urban" by "Jaymz Bee & The Deep Lounge Coalition" (the "Competing Albums"). Oglio sold the Competing Albums on its website.
Davis sued Oglio for breach of contract, violation of Davis's right of publicity, and intentional interference with prospective economic advantage, and breach of the covenant of good faith and fair dealing. Davis alleged "[b]oth the names of the competing artists and the titles of the Competing Albums were obviously intended by Oglio to attract fans of Richard Cheese's lounge-style versions of songs and to capitalize on [Davis's] celebrity." Davis alleged Olgio's actions diverted sales from Davis, reduced his ability to negotiate with Oglio, and reduced the value of Davis's good will and professional name.
Oglio tendered the suit to Hartford under a policy that affords coverage for "Personal and Advertising Injury." The policy defines "Advertising injury" as injury arising out of "[c]opying, in your 'advertisement,' a person's or organization's 'advertising idea' or style of 'advertisement.'" "Advertisement" is defined as "the widespread public dissemination of information or images that has the purpose of inducing the sale of goods, products or services through" radio, [or] television ? as well as the Internet ?." The policy provides that "advertisement" does not include the design, printed material, or any images or information contained in or on the package or labeling of any goods or products ?." "Advertising idea" means "any idea for an advertisement."
Hartford denied the tender. Oglio sued Hartford for breach of contract and breach of the covenant of good faith and fair dealing. Hartford moved for judgment on the pleadings and the trial court granted the motion, concluding Davis's claims fell within the scope of the policy, but certain exclusions applied. The trial court granted Oglio leave to amend. Hartford demurred to the Second Amended Complaint arguing that "stealing someone's product idea does not become an 'advertising injury' just because the insured advertises the stolen product." The trial court sustained the demurrer without leave to amend.
The Court of Appeal affirmed. The Davis complaint alleged Olglio hired musicians to copy Davis's product by creating similar lounge-style recordings of popular songs. The allegations do not amount to an allegation that Oglio copied Davis's advertising idea or style of advertisement. Oglio later sold the Competing Albums but the complaint does not include a description of any advertisement used by Oglio, nor any allegation that Oglio copied an advertisement used by Davis. The Court of Appeal stated the distinction was especially clear because the policy defines advertisement as the widespread dissemination of information or images for the purpose of selling a product, and the complaint alleged that Oglio copied Davis's product. Even if Davis's professional name appeared on the packaging of his products, the policy provides that advertisement does not include printed material, or information contained in packaging or labeling of a product.
The Court of Appeal observed that in another case involving an alleged misappropriation of the "look and feel" of marketing material, Hartford had not disputed that the allegations constituted an "advertisement" under the policy. See Australia Unlimited v. Hartford Cas. Ins. Co. (2008) 147 Wn.App. 758.
Finally, the trial court did not abuse its discretion by denying Oglio leave to amend because coverage turns on the allegations in the underlying complaint and Oglio cannot alter them.
This opinion is not final. It may be withdrawn from publication, modified on rehearing, or review may be granted by the California Supreme Court. These events would render the opinion unavailable for use as legal authority.
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