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General Casualty Co. of Illinois v. Four Seasons Greetings12/28/2004
In this consolidated appeal, appellant Four Seasons Greetings, LLC (Four Seasons) challenges the district court's determination that the duty of respondent General Casualty Company (GCC) to defend Four Seasons in an underlying copyright-infringement action terminated on May 22, 2003, arguing that an offer of settlement is not a dismissal of damages with finality. GCC challenges the district court's determination that GCC had a duty to defend before May 22, 2003, arguing that there was no causal connection between the alleged copyright infringement and any advertising activity by Four Seasons. GCC also challenges the district court's award of attorney fees and the expenses of a court-appointed referee, contending that the work billed by Four Seasons' attorneys was duplicative and billed at too high a rate. Because we conclude that GCC did have a duty to defend Four Seasons in the underlying action, but that the district court erred in its determination of the termination date of that duty, we affirm in part, reverse in part, and remand.
FACTS
I. The Underlying Action
Four Seasons, an Illinois limited-liability company, manufactures and sells preformatted and personalized greeting cards. Taylor Corporation (Taylor) is a Minnesota corporation that produces and sells stationery and greeting cards. In July 2001, Taylor filed suit in the United States District Court for the District of Minnesota (federal court) alleging copyright infringement by Four Seasons regarding three of Taylor's greeting-card designs. Specifically, Taylor alleged that "Four Seasons has infringed the copyright in [Taylor's] Works by copying, manufacturing, producing, publishing, selling, promoting and/or advertising, in the United States, greeting cards bearing designs . . . substantially similar to [Taylor's] Works." One month later, this complaint was amended to allege copyright infringement against Four Seasons with respect to three additional greeting-card designs. The complaint sought both a permanent injunction against Four Seasons and money damages.
In October 2001, the federal court issued a preliminary injunction against Four Seasons. But this injunction was later stayed pending appeal to the Eighth Circuit Court of Appeals. In January 2003, the Eighth Circuit affirmed the federal court's issuance of the preliminary injunction. Taylor Corp. v. Four Seasons Greetings, LLC, 315 F.3d 1039 (8th Cir. 2003).
On April 1, 2003, Taylor offered to settle the underlying action upon payment by Four Seasons of approximately $73,000 and an agreement to a permanent injunction. Four Seasons rejected this offer. On May 22, 2003, Taylor made a second settlement offer, proposing a permanent injunction, but foregoing any claim for damages and offering to file a second amended complaint relinquishing its damages claims. Taylor's proposal stated:
Taylor Corporation will promptly dismiss this action with prejudice upon Four Seasons' agreement to be bound by a Stipulated Order of Permanent Injunction addressing all six (6) of the designs in dispute.
Taylor Corporation has concluded that it will not pursue its claim for money damages in this case. If you would like us to formalize the withdrawal of the damages claims by amending the Complaint, please advise. A copy of the proposed Second Amended Complaint is enclosed for your review.
The proposed second amended complaint contained the same allegations of infringement as the amended complaint, but sought only injunctive relief and dropped Taylor's demand for a jury trial. On May 29, Four Seasons rejected this offer, stating:
n the eve of trial, Taylor has suddenly decided to abandon it
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