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NCAA Licenser Can Keep Insurance Suit in Georgia

ATLANTA (CN) - Insurers implicated in multiple class actions over the image rights of college athletes cannot intervene in a California lawsuit against Collegiate Licensing Co., the 11th Circuit ruled.

Collegiate Licensing, or CLC, is a trademark licensing and marketing agent for the National Collegiate Athletic Association and more than 200 colleges and universities. Its licensees sell NCAA football- and basketball-related video games that use licensed trademarks, logos and college colors.

Beginning in 2009, several class action lawsuits, most of which were filed in California, alleged that CLC, its licensee Electronic Arts Inc., and the NCAA had cheated student-athletes out of their right to profit from their own images and likenesses in video games and other materials.

CLC sought coverage from American Casualty Co. of Reading, Pa., and three other insurance companies, whose policies provided defense and indemnity coverage in lawsuits alleging "personal and advertising injury." It also sought coverage, as an additional insured, from National Union Fire Insurance Co., a company that insured Electronic Arts in California.

National Union filed an October 2011 federal complaint against Electronic Arts and CLC in California to determine its defense obligations in the underlying lawsuits.

After American Casualty and CLC's other direct insurers imposed restrictions that CLC viewed as unreasonable, CLC also filed suit in the Northern District of Georgia, seeking a declaration that the insurers were obligated to defend it in the California lawsuits.

The insurance companies sought to intervene in National Union's California action and to file intervention complaints, but CLC asked the Georgia district court to enjoin their intervention, arguing that its Georgia lawsuit had been filed first.

Before the Georgia court ruled on the issue, the Northern District of California allowed the insurers to intervene and to file intervention complaints, finding that they sought the same declaratory relief as National Union. The California court found the motions to intervene timely, because the lawsuit was still in its early stages, but it remained silent on the first-filed issue.

In December 2011, the Georgia district court enjoined the insurers' intervention and ordered them to dismiss their intervention complaints. The court found that CLC's lawsuit before it was filed first, because National Union's action, the earliest action from a chronological standpoint, did not overlap with CLC's Georgia lawsuit.

The insurers appealed, arguing that the Georgia court had erred in its application of the first-filed rule, and that it had abused its discretion in overruling the California court's order.

The 11th Circuit upheld the Georgia court's decision last week, finding that it was correct in ruling that CLC's lawsuit could be compared only with the insurers' intervention complaints, which came after the Georgia action. The intervention complaints involved the same parties, the same insurance policies and the same legal issues as CLC's Georgia lawsuit, whereas National Union's lawsuit did not, according to the March 21 ruling.

Though the California court correctly concluded that the insurers' claims shared certain legal issues with National Union's action, the two lawsuits involved different insurance companies and policies issued by brokers in different states, the three-judge panel found.

The appellate court rejected the insurance companies' argument that the first-filed rule applies only to new complaints filed in subsequent jurisdictions, and not to intervention complaints.

"A contrary rule would allow an end-run around the first-filed rule any time permissive intervention might be allowed in a different court," U.S. District Judge Mary Scriven, sitting by designation from Tampa, Fla., wrote for the court. "Certainly, it cannot be said that the Georgia district court committed legal error or abused its discretion when it declined to permit such a maneuver in the case before it."

The Georgia court had also properly rejected the anticipatory suit exception to the first-filed rule because CLC was justified in suing its primary insurers in Georgia, where it is headquartered, regardless of the National Union lawsuit.

Since none of the parties or known witnesses are California citizens, and many of the relevant documents are in Georgia, the Georgia court is also the most convenient forum, according to the ruling.

The insurers had argued that the Georgia district court had abused its discretion in overruling a sister court, because the California court had found their motions for intervention timely.

But the judges noted that the California court had never ruled on the first-filed issue.

There is no indication that the Georgia court tried to interfere with the jurisdiction of its sister court, which is "prohibited by black letter law," according to the ruling.

On the contrary, both district courts did their best to avoid infringing on each other's authority. The California court refrained from ruling on the first-filed issue, while the Georgia court directed its order to the insurers, not to its sister court, the ruling adds.

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