DEAN D. PREGERSON, United States District Judge.
Presently before the court is Defendant Factory Mutual Insurance Company ("Factory Mutual")'s Motion to Dismiss. Having considered the submissions of the parties and heard oral argument, the court
Plaintiff DIRECTV distributes digital entertainment programming, primarily via satellite, to residential and commercial subscribers. DIRECTV satellite dishes pick up signals from satellites and transmit those signals to a DIRECTV Receiver (also known as a "set-top box" or "STB"), which in turn transmits the signals to the subscriber's television.
As of October 2011, DIRECTV contracted with four companies to manufacture and supply its STBs: (1) Technicolor Connected Home USA, LLC; (2) Pace Americas Inc.; (3) Samsung Electronics America, Inc.; and (4) Humax USA, Inc. These four STB manufacturers purchased the component parts and incorporated them into the finished STBs, placing the "DIRECTV" logo and trademark on the STBs they manufactured. The four STB manufacturers then sold the finished STBs to DIRECTV.
Some STBs include, as a component part, hard disk drives ("HDDs" or "hard drives"). In October 2011, all four of the STB manufacturers used HDDs made by one of two companies, Western Digital Technologies, Inc. ("Western Digital") and Seagate Technology LLC ("Seagate"). Western Digital also sold hard drives to Jabil Global Services, a third-party repair service provider that would fix defective STBs for DIRECTV.
DIRECTV categorizes the STB manufacturers as its "Tier 1" suppliers and Western Digital and Seagate as its "Tier 2" suppliers. Although DIRECTV shared pricing and technical specification requirements with Seagate and Western Digital and instructed its STB manufacturers to use only certain Seagate and Western Digital products, DIRECTV did not, during the relevant time periods, purchase any hard drives from Seagate or Western Digital or otherwise contract with either HDD manufacturer.
During the relevant time period, DIRECTV had a property insurance policy provided by Factory Mutual. The policy provided coverage for both property damage and time element, or business interruption, losses. A "contingent time element" provision of the policy extended coverage, including business interruption and extra expense coverage, beyond DIRECTV's own property to certain "contingent time element locations." The policy's definition of such locations included any location "of a direct supplier, contract manufacturer or contract service provider to [DIRECTV]."
In October 2011, monsoonal flooding in northern Thailand damaged two of Western Digital's hard drive manufacturing facilities located there. Although the flooding did not affect any of the four STB manufacturers' facilities, DIRECTV alleges that the damage to the Western Digital facilities reduced the supply of hard drives available for incorporation into DIRECTV's STBs. DIRECTV further claims that the resulting price increase in Western Digital HDDs, as well as the expense of obtaining substitute HDDs from Seagate, caused DIRECTV approximately $22 million in losses and extra expenses.
DIRECTV made a claim under the Factory Mutual policy for contingent time element losses. In December 2013, after a series of communications between the parties regarding DIRECTV's supply chain and relationship with Western Digital, Factory Mutual denied the claim on the basis that Western Digital is not DIRECTV's "direct supplier," and therefore does not fall within the ambit of the contingent time element location provision. DIRECTV's position is that, despite the lack of any contractual relationship between
Summary judgment is appropriate where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact.
Once the moving party meets its burden, the burden shifts to the nonmoving party opposing the motion, who must "set forth specific facts showing that there is a genuine issue for trial."
It is not the court's task "to scour the record in search of a genuine issue of triable fact."
The only question before the court is whether the terms "direct supplier, contract manufacturer or contract service provider" are applicable to the relationship between Western Digital and DIRECTV. Such policy interpretations are matters of law, amendable, in the absence of disputed material facts, to summary judgment.
Under these rules, "the mutual intention of the parties at the time the
DIRECTV argues first that the phrase "direct supplier" should be defined according to its usage in the "electronics supply chain industry" based on the context of the Policy and the parties' usage of the phrase. DIRECTV points to no evidence, however, that the parties intended "direct supplier" to have some technical or industry-specific definition, nor any usage of that phrase either within or outside the policy itself in a manner that would suggest a definition other than the ordinary and popular one. The policy does include specialized definitions of otherwise ordinary terms, including "location," "occurrence," "wind," "earth movement," "flood," "terrorism," "contamination," "normal," and "Great Britain," as well as definitions of less common phrases, such as "soft costs." The fact that "direct supplier," in contrast, is not defined anywhere in the policy suggests that the parties did not intend the term to carry any technical or specialized meaning.
Rather than identify evidence of definition or technical usage, DIRECTV contends that "insurers are presumed to know and be bound by the meaning of the terms used in their insureds' industries." (Opp. at 11-12.) The authorities that DIRECTV cites in support of this principle are of little help. In
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Absent any evidence that the parties intended "direct supplier" to have any technical, or industry-specific meaning, there is no reason to look beyond the ordinary meaning of the term. And without recourse to electronics supply industry jargon, any definition of "direct supplier" to mean "customer-controlled component supplier" would not be reasonable.
Despite DIRECTV's Herculean efforts to stitch together various dictionary definitions of "direct" and "supplier," no ordinary and popular meaning of "direct supplier" could possibly encompass its relationship with Western Digital. DIRECTV, by its own admission, "does not receive components directly." (Opp. at 16:6-7.) It did not have any contract with Western Digital, never paid Western Digital anything, and never received any freestanding Western Digital hard drives. Western Digital hard drives only flowed to DIRECTV as a component part of STB's manufactured or refurbished by third parties with whom DIRECTV did have a contractual relationship. Indeed, DIRECTV acknowledges that STB manufacturers were free, at least initially, to select either Seagate or Western Digital hard drives. (Opp. at 5.) Although DIRECTV contends that it retained some power to instruct STB manufacturers to switch HDD suppliers, the fact that such intervention might have been necessary to ensure that DIRECTV received any STBs containing Western Digital products further underscores the indirect supply relationship between Western Digital and DIRECTV. Nor is DIRECTV's current attempt to characterize its direct, Tier 1 suppliers of STBs as "assemblers" rather than "manufacturers" meaningful or persuasive. Simply put, the ordinary
For the reasons stated above, Defendant's Motion for Summary Judgment is GRANTED.
IT IS SO ORDERED.