F I L E D
                                                     United States Court of Appeals
                                                             Tenth Circuit
                 UNITED STATES COURT OF APPEALS
                                                         December 14, 2005
                            TENTH CIRCUIT
                                                            Clerk of Court

LIBERTY MUTUAL INSURANCE
COMPANY, a Massachusetts
corporation; LIBERTY INSURANCE
CORPORATION, a Massachusetts                 No. 04-8053
corporation,                           (D.C. No. 02-CV-1035-D)
                                              (D. Wyo.)
     Plaintiffs-Counter-Defendants,

v.

CONTINENTAL INSURANCE
COMPANY, a New Hampshire
corporation; CNA INSURANCE
COMPANY, an Illinois corporation,

     Defendants.

           and

GEYSER PRODUCTS OF
WYOMING, L.L.C., a Wyoming
corporation; MICHAEL VANCE,

     Defendants-Counter-Claimants-
     Cross-Claimants - Appellants,

v.

AMERICAN NATIONAL FIRE
INSURANCE COMPANY, a New
York corporation,

     Defendant Cross-Defendant -
     Appellee,

           and
 7-UP BOTTLING COMPANY OF
 SAN FRANCISCO,

          Cross-Defendant.


                             ORDER AND JUDGMENT *


Before TACHA, Chief Judge, ANDERSON, and KELLY, Circuit Judges.


      Appellants Geyser Products of Wyoming, LLC and Michael Vance

(collectively, “Geyser”) appeal from the district court’s grant of summary

judgment in favor of Appellee American National Fire Insurance Company

(“American”) in a dispute turning on the scope of coverage of an American excess

umbrella policy. Geyser seeks recovery under a judgment entered against

American’s insured, Seven-Up Bottling Company of San Francisco (“7-Up”),

after a settlement of Geyser’s claims for violations of the Lanham Act and unfair

competition. We exercise jurisdiction under 28 U.S.C. § 1291, and affirm.



                                   Background

      This case arises from an underlying lawsuit between Geyser and 7-Up.

      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

                                       -2-
Geyser developed, manufactured and sold fruit-flavored water beverages. 7-Up

contacted Geyser in 1995 about doing business together. 3 Jt. App. at 811; 5 Jt.

App. at 1894-1895. Geyser and 7-Up entered into a Confidentiality Agreement,

protecting the parties’ formulas and methods, and a Franchise Agreement,

providing that 7-Up would manufacture and distribute Geyser products. 3 Jt.

App. at 811; 5 Jt. App. at 1902-1904.

      Within a year, the relationship between 7-Up and Geyser had deteriorated.

Roger Easley, 7-Up’s President, believed Geyser’s price increase for its

concentrates was unreasonable. Aplee. Supp. App. at 23 (70). Subsequently, 7-

Up developed “Aqua Ice,” its own brand of flavored water beverages. 6 Jt. App.

at 2350, 2376-2377, 2346-47; 1 Jt. App. at 108, 154-155. 7-Up ultimately

terminated its relationship with Geyser, 6 Jt. App. at 2449, and continued to

develop, market and sell Aqua Ice. 6 Jt. App. at 2454-2457; 1 Jt. App. at 111-

113, 154-55. 7-Up expected that its own brand would take sales away from

Geyser. Aplee. Supp. App. at 12 (97-99).

      Geyser filed suit against 7-Up in Wyoming state court in November 1998

(“Underlying Case”). 1 Geyser asserted claims for breach of contract, breach of


      1
        7-Up notified American of the lawsuit, by letter, on November 16, 2000.
Three months later, 7-Up requested that American defend the Underlying Case.
American declined because 7-Up’s primary policies potentially covered the loss.
7-Up never notified American of claims asserted by Mike and Debra Vance, the
Geyser founders, who were eventually added as plaintiffs. 7-Up never notified

                                        -3-
fiduciary duty, violation of the Lanham Act, unfair competition, breach of the

implied covenant of good faith and fair dealing and theft of trade secrets. 1 Jt.

App. at 115-130. Geyser alleged in its amended complaint that 7-Up engaged in

conduct to “[i]ntentionally destroy the market for Geyser Products in the Northern

California territory”; that “7-Up intentionally ‘killed’ the market for Geyser

Products”; that “[t]he actions taken by 7-Up were with the intent to economically

harm [Geyser] and in their own self-interest with reckless disregard to the

economic interests of [Geyser]”; and that “7-Up’s conduct in misappropriating the

Geyser Products trade secrets was willful and intentional.” 1 Jt. App. at 125, 127,

128. Conspicuously absent from the complaint are allegations of negligence.

      The parties attended mediation. Geyser and 7-Up settled the Underlying

Case in June 2002. 3 Jt. App. at 812. Pursuant to the Settlement and Release

Agreement (“Settlement”) 7-Up stipulated as to liability for Lanham Act and

unfair competition claims, with 7-Up acknowledging “that it acted negligently”

and was therefore liable. 1 Jt. App. at 136-37, 153-57; 5 Jt. App. 2038. Under

the Settlement, the parties agreed to have a trial on damages. 1 Jt. App. at 137-

38. 7-Up agreed that it would “not seek to introduce evidence, testimony [sic] at

such hearings other than to assert the terms” of the Settlement, “nor will it oppose

related motions.” 

Geyser agreed not to execute upon any judgment



American of any mediation.

                                         -4-
against 7-Up, and 7-Up agreed to assign all rights and claims under its insurance

policies to Geyser. 1 Jt. App. at 138-39; 3 Jt. App. at 812-813. The agreed-to

damages trial ensued and the Wyoming state court entered judgment against 7-Up

for over $28 million. 1 Jt. App. at 159-160.

      Geyser began its efforts to recover against 7-Up’s insurers and reached

settlement with CNA, holder of the relevant primary policy (“Primary Policy”).

Per the settlement, CNA paid Geyser $750,000 of its $1,000,000 policy limit.

Geyser informed American that this settlement exhausted the underlying insurance

and triggered American’s excess coverage. American denied coverage.

      Geyser filed suit against American in federal district court. The parties

filed cross-motions for summary judgment. The district court granted summary

judgment in favor of American, and denied Geyer’s motion for summary

judgment. Specifically, the court concluded that (1) 7-Up’s actions were

conscious and deliberate (not accidental), and therefore were outside the scope of

the policy and did not trigger coverage, and (2) Geyser did not exhaust the

Primary Policy because it settled with CNA for an amount below the policy limits.



      The district court held that 7-Up’s actions did not fall within the

“occurrence” language of the American policy. The “Coverage” section of the

policy provides:


                                        -5-
      [American] will pay those sums in excess of ‘underlying insurance’
      or the retained limit that the ‘Insured’ becomes legally obligated to
      pay as damages because of ‘injury’ caused by an “occurrence” to
      which this policy applies.

2 Jt. App. at 636.

      “Injury” includes “Advertising Injury.” 

      “Advertising Injury” means injury arising out of . . .
      [m]isappropriation of advertising ideas or style of doing business. 

an accident . . . which occur[s] during the policy
      period which unexpectedly and unintentionally results in “injury.”
      

      In holding that 7-Up’s actions were outside the scope of the “Occurrence”

provision, the district court rejected Geyser’s argument that 7-Up acted

“negligently,” instead concluding that 7-Up made “deliberate and conscious

decision[s].” 8 Jt. App. at 3153. The district court viewed the former as “nothing

more than a square peg in a round hole” and “a collusive effort to avoid a

potentially costly lawsuit by classifying 7-Up’s conduct in such a way as to

trigger coverage under a very large excess policy.” 8 Jt. App. at 3160 (internal

quotations omitted).

      In this appeal, Geyser argues that the district court erred (1) by not

applying the doctrine of functional exhaustion, (2) by not holding that American’s

“occurrence” provisions were void as illusory, ambiguous and internally

inconsistent, and (3) by holding that 7-Up engaged in intentional acts excluded


                                         -6-
under the policy. In addition, Geyser seeks certification on the questions of (1)

whether California would follow functional exhaustion, (2) whether the American

policy is ambiguous and illusory, and (3) whether the policy provides coverage

for negligent advertising injury. American opposes the motion.

                                     Discussion

      As an initial matter, we will deny the motion to certify. The Tenth Circuit

permits certification when state law allows. Cal. R. 29.8 provides that the

California Supreme Court may grant certification if, on request of a Court of

Appeals, “the decision could determine the outcome of a matter pending in the

requested court” and “there is no controlling precedent.” Certification may be

warranted when the questions of law are “[n]ovel” and “unsettled.” Copier v.

Smith & Wesson Co., 

, 839 (10th Cir. 1998) (internal citations and

quotations omitted). As explained below, neither the functional exhaustion

question nor the coverage for negligent acts is outcome determinative, and thus

both are inappropriate for certification. See Cal. R. 29.8. California precedent

provides sufficient guidance on whether the American policy is illusory.

Moreover, we generally do not “certify questions to a state supreme court when

the requesting party seeks certification only after having received an adverse

decision from the district court.” Enfield v. A.B. Chance Co., 

,

1255 (2000) (internal citations and quotations omitted).


                                        -7-
      We review the district court’s grant of summary judgment de novo and we

apply the same standard the district court applied. E.g. Roberts v. Printup, 

, 1214 (10th Cir. 2005). Summary judgment is appropriate where the

“pleadings, depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show there is no genuine issue of any material

fact.” Fed. R. Civ. P. 56(c). We draw all reasonable inferences in favor of the

non-moving party. Sierra Club v. El Paso Gold Mines, Inc., 

, 1146

(10th Cir. 2005). California state law applies. We review the district court’s

determinations of state law de novo. 

. Because we hold

against Geyser on its other two grounds presented in this appeal, it is unnecessary

to decide whether California would follow the doctrine of “functional

exhaustion.”

      Geyser argues that the American policy is internally inconsistent, and is

therefore ambiguous and illusory. Interpretation of an insurance policy is a

question of law. Uhrich v. State Farm Fire & Cas. Co., 

,

137 (Cal. Ct. App. 2003); Waller v. Truck Ins. Exchange, Inc., 

, 627

(Cal. 1995). Like any other contract, we must give effect to the mutual intention

of the parties at the time they entered into the agreement. 

; Mez Indus. Inc. v. Pac. Nat’l Ins. Co., 

, 729-30 (Cal. Ct.

App. 1999). The court looks to the plain language of the contract and its ordinary


                                         -8-
meaning. 

policy term is subject to more than one objectively

reasonable interpretation, as a whole and in light of the circumstances of the case,

a provision is ambiguous and should be construed against the insurer. Mez

.

      Here, Geyser argues that the American policy is ambiguous and

inconsistent because certain offenses which constitute “injury” under the policy

involve intentional and willful conduct (e.g. slander, libel), yet covered

occurrences under the policy must be accidental or unintentional. Aplt. Br. at 33.

As such, Geyser argues that this policy must be construed against the insured. A

policy is only ambiguous if it is subject to more than one reasonable

interpretation, from the standpoint of the insured at the time of contract. 

. California Insurance Code § 533, which by statute must be read

into all insurance policies, J.C. Penney Cas. Ins. Co. v. M.K., 

, 694

(Cal. 1991), renders Geyser’s purported interpretation objectively unreasonable. 2

      Section 533 prohibits insurance coverage for any “willful act.” Downey

Venture v. LMI Ins. Co., 

, 154 & n.31 (Cal. Ct. App. 1998);

California Cas. Management Co. v. Martocchio, 

, 280 (Cal.

Ct. App. 1992). Parties cannot contract around § 533. Downey, 

        California Insurance Code § 533 provides: “An insurer is not liable for a
loss caused by the wilful act of the insured; but he is not exonerated by the
negligence of the insured, or of the insured’s agents or others.”

                                         -9-
at 154. Section 533 defines a willful act as “an act deliberately done for the

express purpose of causing damage or intentionally performed with knowledge

that damage is highly probable or substantially certain to result.” 

(quoting Shell Oil Co. v. Winterthur Swiss Ins. Co., 

, 742

(Cal. App. 1993)) (emphasis in original).

      Geyser’s argument that “7-Up did not and could not have intended the harm

. . . from its misappropriation,” Aplt. Reply Br. at 18, is unpersuasive. The test

for “expected damage” is whether the insured knew or believed its conduct was

substantially certain or highly likely to result in the kind of damage. Shell 

. Because 7-Up’s actions were willful, § 533 precludes

coverage.

      Willful acts are intentional ones where the “harm is inherent in the act

itself.” 

(internal citations and quotations

omitted). The record reveals an intentional and purposeful design by 7-Up to

steal Geyser’s intellectual property and drive its products off the shelves. The

fact that the parties’ agreed that 7-Up would acknowledge it acted negligently is

unavailing. 3 At the “damages hearing,” Geyser’s counsel argued:


      3
        In Uhrich, the court determined that whether “negligence” or
“willfulness” was pleaded was irrelevant to the question of whether the acts were

. Pleaded allegations and extrinsic facts
against a backdrop of policy language define the scope of coverage. 

a stipulation that liability would be predicated on negligence does not vitiate

                                        - 10 -
•     “Seven-up decid[ed] that we’re going to create a knock off product, the
      heck with [Geyser]. That we have test marketed this product, we’ve seen
      how [] it works, we know how to make it. We’ve got your formulas, all of
      this . . . they can take this advertising, marketing and promotional
      information they gathered and use it . . . as they did to create the Aqua Ice
      product.” 6 Jt. App. at 2305.

•     “Seven-up goes and creates a knock off product using all of this
      information, taking the proprietorship knowledge, the marketing and the
      advertising . . . and they went out and violated the [Lanham Act] by
      copying the product and that’s what we have an admission of liability for.”
      

•     “[Seven-Up has] admitted that they consciously and deliberately made the
      decision, a business decision to go forward and take this information and
      knock off their own product and they could obviously not have two of the
      same product on the shelves at the same time.” 

•     “[T]his wasn’t a decision by accident or by negligence, this was a decision
      that was deliberate and conscious, made as a business decision to create,
      market and advertise the product that became Aqua Ice.” 

decision, consciously and deliberately made by 7-Up to utilize its
      intellectual property, caused a loss of revenue stream (sic) very clearly and
      everything that flowed from it.” 

•     “[W]hen you have some of this deliberate and conscious conduct where we
      have a decision that we’re gonna dump Vance and Geyser and even though
      we promised we would not palm off, we’re gonna go do it and we’re going
      to unfairly compete from all this great information that’s been provided to
      us. And that’s what they went out and did. If this isn’t a case for enhanced
      damages . . . there isn’t one. . . . The same deliberate conduct in the tenth
      circuit is also a basis for award of attorney fees.” 

      When counsel for 7-Up argued that the stipulation admitted negligent




evidence of intentional, willful conduct.

                                        - 11 -
conduct and objected to Geyser counsel’s continuous representation otherwise,

Geyser’s counsel attempted to “clarify”: “I know what the stipulation said and

the order about negligently [sic], but my point was that a [business] decision had

to be made . . . it was a business decision, it was a deliberate and conscious

decision that was made that they would terminate the agreement with Geyser and

start selling, manufacturing, promotion, Aqua Ice.” 6 Jt. App. at 2332-33.

Although counsel all the while disclaimed a suggestion of intentional conduct,

claiming it was merely a “business” decision, counsel’s statements are telling.

      We find it disingenuous to argue now that arguments of Geyser’s counsel

are no indication of what 7-Up expected or intended; and to seemingly argue now

that an admission by 7-Up concerning intent to injure with precise monetary

amounts would be required. This ignores the reality of the situation–having

bought its peace, one would hardly expect 7-Up to provide such evidence.

Besides, as the assignee of 7-Up’s claim, the burden is on Geyser. 

.

      California law holds that judicial admissions are binding. Uhrich, 135 Cal.

Rptr. 2d at 141. These statements by Geyser were more than belief– “they were

assertions intended to induce the court to grant” a particular money judgment in

the underlying case. See 

“statements based on the evidence

known to [Geyser and its counsel], not simply a subjective belief about [7-Up’s]


                                        - 12 -
motive.” 

factual contention that the conduct involved is mere

negligence is inconsistent with the intentional and willful conduct emphasized at

the damages trial, which resulted in a money judgment akin to a blank check. See

Johnson v. Lindon City Corp., 

, 1070 (10th Cir. 2005) (discussing

judicial estoppel); 

.

      Mr. Vance, Geyser principal, also took the position that 7-Up acted

willfully, under the definition of § 533:

•     “During American’s policy period 7-Up commenced development of its
      Aqua Ice product and took action to injure Geyser, and thereby Vance, by
      stopping its distribution of Geyser products as required and emptying its
      distributor’s shelves to make room for Aqua Ice.” 6 Jt. App. at 2167
      (emphasis added).
•     “[7-Up employee] Endow stated that 7-Up had replaced Geyser with
      another brand name and that the Geyser brand has been ‘killed.’” 

“Mr. Endow’s comment to me (Mike Vance) was that they killed our
      brand on purpose and quit distributing it. . . . So they cannibalized our
      brand and put in the other brand.” 

•     “Generally, when 7-Up decided to misappropriate Geyser’s product,
      damages started to accrue as Geyser products were removed from shelves,
      distribution slowed and was stopped and support for the products
      disappeared. Geyser’s damages directly relate to Vance’s personal
      damages.” 

•     7-Up used “bad faith in execution of the agreement, and basically walking
      on us as a very little person, a little company that is trying to exist.” 

7-Up used Geyser’s quality and control manual– “the information
      that was gleaned from our formulations showed them how to engineer their
      own [product] that was so similar that it’s disgusting to me.” 

These statements confirm the obvious: 7-Up’s conduct was a willful attempt to


                                            - 13 -
drive Geyser out of business and increase 7-Up’s profits from the sale of a copied

product. Vance was an 85% shareholder of Geyser. 

Vance’s

damages were the natural outgrowth of the damages to Geyser. Where the

“defendant’s act was both intentional and wrongful and the harm caused was

inherent in or predictably resulted from the act,” the act is willful and § 533 bars

coverage. 

-56. The damages caused, even if not

explicitly intended, were inherent in 7-Up’s conduct. In Mez Industries, a case

involving patent infringement, the court found that “[o]bviously, damage would

flow in the form of a loss [to the plaintiff] and a gain to [the defendant] through

the sale of its products. Plainly, such a result would necessarily have to be

within [the defendant’s] knowledge . . . This is enough to satisfy the requirements

of section 533.” Mez 

(emphasis in original).

Similarly, 7-Up intentionally used Geyser’s confidential information to drive

Geyser’s products out of a specific market and use its own products as a

replacement. The damages to Geyser and the Vances were inherent in 7-Up’s

desire to “kill” Geyser products and replace them with Aqua Ice.

      The requisite intent and knowledge for § 533 can be established by

circumstantial evidence. Shell 

. The Stipulation As to

Liability Under Lanham Act and Unfair Competition Claims (“Stipulation”)

provides further evidence of willfulness:


                                         - 14 -
•     “7-Up determined that it would create, market, advertise and sell its own
      fruit flavored spring water.” 6 Jt. App. at 2158.

•     “During the term of its agreement with Geyser, and after receiving
      [confidential information, advertising and marketing materials for the
      Geyser product, pricing and consumer information], 7-Up began a process
      which led to the creation of 7-Up’s own fruit flavored spring water,
      ultimately named ‘Aqua Ice.’ 7-Up’s agreement with Geyser prohibited 7-
      Up from manufacturing, advertising or selling a fruit flavored water
      product in competition with Geyser. 7-Up determined that it would
      terminate its agreement with Geyser.” 

•     “Effective June 30, 1997, 7-Up terminated its Franchise Agreement with
      Geyser Products, Inc. Having received the [confidential information,
      advertising and marketing materials for the Geyser product, pricing and
      consumer information], 7-Up utilized a kickoff and promotion campaign
      similar to that it had used to introduce Geyser’s Products and proceeded to
      market, advertise, and sell Aqua Ice, in similar flavors to Geyser’s fruit
      flavored spring water, in a blue bottle with a sport top [like Geyser’s],
      within the same distribution territory it had previously distributed Geyser’s
      products. 7-Up began to develop its Aqua Ice products while the Franchise
      Agreement was still in effect with Geyser.” 

Geyser’s interrogatory responses also demonstrate willfulness.

•     “7-Up copied Geyser’s unique packaging and sales techniques by creating a
      deceptively similar and imitative fruit flavored spring water beverage–
      Aqua Ice– packaged in blue colored plastic bottle with a sport cap, in the
      same or very similar flavors which 7-Up attempted to pass off as Geyser’s
      products in the same market in which 7-Up previously sold Geyser
      products, and in which Geyser had created a niche.” 6 Jt. App. at 2189.

•     “During American’s policy period 7-Up commenced development of its
      Aqua Ice product and took action to injure Geyser by stopping its
      distribution of Geyser products . . . .” 

•     “Geyser learned that 7-Up had contacted Geyser’s beverage flavoring
      corporation, Universal Flavors, to obtain a match on the Geyser product
      line to enable 7-Up to make its own imitative flavored spring waters . . . [7-
      Up employee] Endow denied the improper contact had occurred and falsely

                                        - 15 -
      avowed that 7-Up did not intend to make its own flavored spring water.”
      

In this case, the circumstantial evidence is sufficient to infer knowledge and

intent on the part of 7-Up.

      Section 533 is subject to the rules of statutory, not contract interpretation.

E.g. 

. We must, therefore, construe § 533 to

give effect to its purpose. 

is to “discourage willful torts.” See

e.g., 

(citing Tomerlin v. Canadian Indemnity

Co., 

, 577-78 (Cal. 1964)); J.C. Penney Cas. Ins. 

. What 7-Up did was willful, and § 533 bars insurance coverage here. As

such, 7-Up could not have had any reasonable expectation of coverage for its

actions at the time of contract. In order for a contract to be ambiguous or

illusory, it must be subject to one or more objectively reasonable interpretations.

Mez 

. The insurance policy language here,

therefore, is unambiguous and not illusory.

      Geyser bears the burden of proving that 7-Up’s actions fall within the

policy’s definition of occurrence. 

. Specifically, Geyser

must establish that its injury was caused by an (1) accident that (2) unexpectedly

and unintentionally caused injury. For the reasons stated above, Geyser has failed

to meet that burden.

      AFFIRMED. The motion to certify is denied. The motion of Appellants’

                                        - 16 -
counsel to withdraw is granted.

                                  Entered for the Court


                                  Paul J. Kelly, Jr.
                                  Circuit Judge




                                  - 17 -