High 5 Sportswear, Inc. v. H5G, LLC, 3:15-cv-00401

Background

Selective Insurance issued a commercial policy to H5G, LLC covering June 4, 2015–June 4, 2016, with enumerated personal and advertising injury coverage and multiple exclusions.
High 5 Sportswear, Inc. sued H5G for trademark infringement, deceptive trade practices, and unfair competition on November 6, 2015.
H5G tendered defense and indemnity to Selective; Selective investigated and denied duty to defend based on policy terms and exclusions.
Selective notified H5G it would dispute coverage and sought to intervene or bring a declaratory action; it then moved to stay High 5’s liability and damages claims against H5G pending resolution of the duty-to-defend issue.
High 5 opposed the stay, arguing prejudice from continued alleged infringement, and contended Wisconsin practice does not bind this federal court.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the court should stay the underlying liability and damages claims pending resolution of Selective’s duty-to-defend dispute	Stay would prejudice High 5 by permitting ongoing infringement and delay resolution of its claims	Wisconsin practice favors insurer intervention and a stay to resolve coverage before liability; Selective seeks a limited stay to adjudicate duty to defend	Denied — court exercised discretion to refuse a stay and allow parallel proceedings
Whether Wisconsin practice requiring stays is binding on this federal court	Wisconsin practice cannot bind the federal court; stay would be prejudicial	Insurer urged the court to follow Wisconsin authorities and stay the case	Court held Wisconsin practice is not binding and is not typically followed by federal courts here
Whether focused discovery and an early coverage motion can resolve the coverage issue quickly enough to avoid a stay	High 5 argued prejudice and need to proceed on merits discovery	Selective proposed limited stay and early summary judgment on duty to defend	Court concluded simultaneous, targeted discovery and an early coverage motion are preferable; stay not required
Whether the movant met the heavy Landis burden to show hardship justifying a stay	High 5 argued movant failed to show clear hardship and that a stay would harm plaintiff and public	Selective argued limited stay would not prejudice High 5 and would promote efficient resolution of coverage	Held that Selective did not carry the burden; stay would cause unjustified prejudice and delay

Key Cases Cited

Landis v. North American Co., 299 U.S. 248 (U.S. 1936) (stay standard: movant must show clear case of hardship and that delay will not harm others)
Ohio Environmental Council v. United States Dist. Court, 565 F.2d 393 (6th Cir. 1977) (district court has discretionary power to stay proceedings to manage docket and conserve resources)
In re Airline Pilots Ass’n v. Miller, 523 U.S. 866 (U.S. 1998) (discusses factors district courts consider when managing cases and stays)
Newhouse v. Citizens Security Mut. Ins. Co., 501 N.W.2d 1 (Wis. 1993) (Wisconsin practice: insurer may intervene and seek a stay to resolve duty-to-defend)
Fire Ins. Exchange v. Basten, 549 N.W.2d 690 (Wis. 1996) (Wisconsin precedent addressing insurer duties and appropriate procedure when duty to defend is disputed)
Radke v. Fireman’s Fund Ins. Co., 577 N.W.2d 366 (Wis. Ct. App. 1998) (Wisconsin appellate guidance on insurer intervention and stays in coverage disputes)