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October 8, 2018

Lit Alerts—October 2018

A Publication of the Litigation Practice Group

Insurance: Massachusetts Supreme Court Rules Insurers Had Duty to Defend Claims for "Advertising Injury"

The Massachusetts Supreme Judicial Court recently reversed a lower court's decision holding that two insurance firms were not required to pay for the defense of their insured, Vibram USA, Inc. (Vibram), in a civil suit relating to Vibram's use of the name "Bikila" to advertise running shoes.

In the underlying litigation, the heirs of Abebe Bikila, a famous marathon runner, sought damages for Vibram's unauthorized use of the Bikila name. Vibram tendered its defense to its insurers. The insurers argued that the claims in the underlying litigation were not covered by the relevant insurance policies, but agreed to defend Vibram under a reservation of rights. They subsequently sued Vibram, seeking a declaration that they were under no duty to defend.

Under both policies, the insurers would only be required to defend if the court found that the Bikila heirs sought to recover for losses arising from an "advertising injury." Both policies defined "advertising injury" as "the use of another's advertising idea in [the insured's] advertisement," but did not define "advertising idea." The insurers argued that "advertising idea" should be construed narrowly to require a showing that the alleged "advertising idea" was used to market a particular product or service in the manner of a trademark.

The Supreme Judicial Court rejected the insurers' narrow construction, citing to numerous decisions from other jurisdictions giving similar language broader meaning. The court explained that the Bikila heirs' use of "Bikila" to promote historical and educational events, as well as operating a sporting goods store named after Bikila, met this broad standard because it "created a connection between the family name . . . and desirable qualities . . . to attract customers to their running-related commercial ventures." The court remanded for entry of summary judgment declaring that the insurers were obligated to pay Vibram's reasonable costs for defending the underlying action.

Discovery: Eastern District of Pennsylvania Clarifies How the Attorney-Client Privilege Applies to Corporations

The U.S. District Court for the Eastern District of Pennsylvania has provided an in-depth analysis of how the attorney-client privilege applies to corporations, upon reviewing 50 documents submitted in camera by both parties in SodexoMAGIC v. Drexel University. The court found both parties had exceeded the permissible bounds for asserting the attorney-client privilege in most of the documents provided for review.

The court first made clear that while communications between in-house counsel and the corporate client are protected to the same extent as communications between the corporation and outside counsel, the privilege should be narrowly construed. The court then assessed all 50 documents submitted for in camera review. Ultimately, it held that "the mere giving of attorney-client advice in a general way does not protect[ ] as privileged all documents that business people generate to follow up on that advice." The court explained that it will respect an assertion of privilege to a portion of an email chain if it is clear that a follow-up email is quoting a communication by the client to the lawyer or the lawyer's response. As a result, the court permitted redaction of the legal advice and follow-up. In such an email scenario, however, "the privilege does not carry forward to every 'downstream' communication resulting from, or even following up on, or relying on, the client's request for the advice or the lawyer's advice." Rather, in those circumstances, the parties should redact the privileged portions of the email chain as opposed to withholding production of non-privileged "downstream" documents.

Finally, the court also ruled that under Pennsylvania law, a draft contract, even one drafted with attorney input, is not automatically protected as privileged. Instead, it is only privileged if the party asserting the attorney-client privilege meets its burden to show that the draft was prepared to obtain legal advice or contains language the client considered but decided against including in the final version.

© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.