Travelers Property Casualty Company of America, a Connecticut corporation v. Kfx Medical Corporation, a California corporation

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA, a
Connecticut corporation,
Plaintiff - Appellee,
v.
KFX MEDICAL CORPORATION, a
California corporation,
Defendant - Appellant.
No. 13-17301
D.C. No. 3:13-cv-00710-JSW
MEMORANDUM*
Appeal from the United States District Court
for the Northern District of California
Jeffrey S. White, District Judge, Presiding
Argued and Submitted December 7, 2015
San Francisco, California
Before: O’SCANNLAIN, SILVERMAN, and BEA, Circuit Judges.
FILED
JAN 08 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

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Defendant-Appellant KFx Medical Corporation (“KFx”) appeals the district
court’s grant of partial summary judgment to Plaintiff-Appellee Travelers Property
Casualty Company of America (“Travelers”) on Travelers’ claims for declaratory
relief. The district court held Travelers had no duty to defend or indemnify KFx in
a patent dispute between KFx and Arthrex Incorporated (“Arthrex”) (the “KFx v.
Arthrex Litigation”) under an insurance policy that Travelers had issued to KFx
(the “Policy”).
We review these findings de novo. State Farm Fire & Cas. Co. v. Pickard,
849 F.2d 1220, 1221 (9th Cir. 1988).1 Because we agree that “there is no genuine
issue as to any material fact and [Travelers] is entitled to judgment as a matter of
law,” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986) (quoting Fed. R.
Civ. P. 56), we affirm. It is undisputed that Arthrex’s answer and counterclaims
(the “Arthrex Counterclaims”) did not allege any covered claim against KFx.2
Thus, the primary issue here is whether “the facts alleged, reasonably inferable, or
otherwise known” at the time of KFx’s tender of defense and indemnity to
1 In so doing, we apply California substantive law of contract interpretation. See
Stanford Ranch, Inc. v. Maryland Cas. Co., 89 F.3d 618, 624 (9th Cir. 1996).
2 It is undisputed that Arthrex’s Answer to KFx’s Complaint in the underlying KFx
v. Arthrex Litigation alleges only patent-related counterclaims for non-
infringement, invalidity, and unenforceability, and that such claims are not covered
under the Policy.
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Travelers reasonably suggest that the Arthrex Counterclaims might “fairly be
amended” to state a covered claim, thus giving rise to potential liability under the
Policy and a corresponding duty to defend. See Scottsdale Ins. Co. v. MV Transp.,
115 P.3d 460, 466 (Cal. 2005).
1. We find the possibility that the Arthrex Counterclaims might be
amended to state claims for abuse of process or product disparagement (thus giving
rise to potential liability) too speculative to trigger a duty to defend or to
indemnify. See Gunderson v. Fire Ins. Exch., 44 Cal. Rptr. 2d 272, 277 (Cal. Ct.
App. 1995) (Mere “speculat[ion] . . . about extraneous ‘facts’ regarding potential
liability or ways in which the third party claimant might amend its complaint at
some future date” does not create a duty to defend.). Neither finds any factual
basis in the Arthrex Counterclaims. See Microtec Research, Inc. v. Nationwide
Mut. Ins. Co., 40 F.3d 968, 971 (9th Cir. 1994). Arthrex’s boilerplate request for
injunctive relief against interference with its business relationship is not reasonably
read as accusing KFx of making improper extrajudicial threats where there is no
factual support for such an inference. Nor has KFx identified any court process
that Arthrex is supposedly accusing it of abusing—as would be required to support
a prima facie abuse of process claim. See Rusheen v. Cohen, 128 P.3d 713, 718
3
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(Cal. 2006).3 KFx’s product disparagement theory fails because KFx has offered
no evidence that Arthrex “distinctly aver[red] a disparaging publication . . . .”
Nichols v. Great Am. Ins. Cos., 215 Cal. Rptr. 416, 420–21 (Cal. Ct. App. 1985).
KFx’s citation to a press release that pre-dates the Arthrex Counterclaims by
several months (thus giving Arthrex ample opportunity to include a claim thereon
in its Counterclaims) does not create a potential for liability where Arthrex did not
reference that press release in the KFx v. Arthrex Litigation. See Microtec, 40 F.3d
at 971.
2. Second, there is no potential for coverage as a matter of law because
Arthrex sought only injunctive and declaratory relief, whereas the Policy covers
only claims for “damages.” Attorneys’ fees are not “damages” under California
law. See Cutler-Orosi Unified Sch. Dist. v. Tulare Cnty. Sch. Dist. Liab./Prop.
Self-Ins. Auth., 37 Cal. Rptr. 2d 106, 114–15 (Cal. Ct. App. 1994). Moreover,
Arthrex’s boilerplate request for “other and further relief, at law or in equity” does
not create a potential for damage liability where none of Arthrex’s enumerated
3 We note that the Policy purports to cover only “malicious prosecution”
claims—not claims for abuse of process. Nevertheless, we have previously held
that, as a matter of California law, the use of either term in an insurance policy
should be construed as incorporating the other. See Lunsford v. Am. Guar. & Liab.
Ins. Co., 18 F.3d 653, 655–56 (9th Cir. 1994). Thus, for purposes of this
disposition we assume coverage extended to claims of abuse of process, had they
been made.
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claims provide a basis for a damage recovery. See Atl. Mut. Ins. Co. v. J. Lamb,
Inc., 123 Cal. Rptr. 2d 256, 267 (Cal. Ct. App. 2002) (instructing courts to look to
the “nature of the claims made,” not to the relief requested (emphasis omitted)).
3. Third, even if—contrary to what we have held above—the Arthrex’s
counterclaims might be amended to state a covered claim, Travelers would still
have no duty to defend or indemnify because the Travelers Policy excludes from
coverage any claim “arising out of any actual or alleged infringement or violation
of . . . intellectual property rights or laws” (the “IP Exclusion”). KFx is arguing
that it disparaged Arthrex by wrongfully accusing it of patent infringement. KFx is
similarly arguing that Arthrex has accused it of abusing court processes by filing a
frivolous patent suit against Arthrex. Thus, both of these claims would “arise out
of” the underlying patent litigation, and would therefore fall squarely within the IP
Exclusion. Cf. e.g., Southgate Recreation & Park Dist. v. Cal. Ass’n for Park &
Rec. Ins., 130 Cal. Rptr. 2d 728, 733 (Cal. Ct. App. 2003).
For all the reasons set forth above, we find as a matter of law that Travelers
had no duty to defend or indemnify KFx in the KFx v. Arthrex Litigation. The
district court’s grant of partial summary judgment to Travelers is AFFIRMED. We
also GRANT Plaintiff-Appellee Travelers’ Motion for Judicial Notice dated April
5
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18, 2014, pursuant to Federal Rule of Evidence 201(b)(2). See Harris v. County of
Orange, 682 F.3d 1126, 1132 (9th Cir. 2012) (holding that federal court documents
are judicially noticeable).
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