FILED
NOT FOR PUBLICATION
JUN 19 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
DIRECTV, a Delaware corporation, No. 16-55313
Plaintiff-Appellant, D.C. No.
2:14-cv-08673-DDP-MAN
v.
FACTORY MUTUAL INSURANCE MEMORANDUM*
COMPANY, a Rhode Island corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Dean D. Pregerson, District Judge, Presiding
Argued and Submitted June 8, 2017
Pasadena, California
Before: GRABER and MURGUIA, Circuit Judges, and BOLTON,** District
Judge.
Defendant Factory Mutual Insurance Company promised to insure Plaintiff
DIRECTV against business interruptions stemming from certain events at
"contingent time element locations." The insurance policy’s definition of such
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Susan R. Bolton, United States District Judge for the
District of Arizona, sitting by designation.
locations included any location "of a direct supplier, contract manufacturer or
contract service provider to [DIRECTV]." The question in this case is whether
Western Digital, which manufactures hard drives that are used in DIRECTV’s set-
top boxes—but which does not have a contractual relationship with DIRECTV and
does not send its hard drives directly to DIRECTV to be integrated into the set-top
boxes—fits within the policy’s definition of a "direct supplier, contract
manufacturer or contract service provider to [DIRECTV]." If so, then the policy
might cover Plaintiff’s losses caused by monsoonal flooding in northern Thailand
that damaged two of Western Digital’s hard drive manufacturing facilities in 2011.
The district court granted summary judgment to Defendant; Plaintiff timely
appeals. Reviewing de novo, Orr v. Bank of Am., NT & SA, 285 F.3d 764, 772
(9th Cir. 2002), we reverse the district court’s judgment and remand for further
proceedings.
1. The plain and ordinary meaning of the phrase "direct supplier" does not
include Western Digital. The "meaning a layperson would ordinarily attach" to the
phrase "direct supplier," Waller v. Truck Ins. Exch., Inc., 900 P.2d 619, 627 (Cal.
1995), is a supplier that sends its goods or materials straight to the insured without
intervening processing. Because Western Digital’s hard drives are sent to third-
party set-top box manufacturers, which then assemble the set-top boxes and send
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them on to Plaintiff, Western Digital is not Plaintiff’s "direct supplier" under the
plain and ordinary meaning of that phrase.
2. Western Digital is not Plaintiff’s "contract manufacturer" or "contract
service provider" because it does not have a contract with Plaintiff.
3. In light of the extrinsic evidence of trade usage introduced by Plaintiff,
the phrase "direct supplier" is "reasonably susceptible" to the meaning urged by
Plaintiff. Wolf v. Superior Court, 8 Cal. Rptr. 3d 649, 655 (Ct. App. 2004). In
reaching that conclusion, we rely on a prediction that the Supreme Court of
California would hold that "[t]he law charges insurance companies with the duty of
informing themselves as to the usages of the particular business insured, and a
knowledge of such usage on the part of such company will be presumed." Globe
& Rutgers Fire Ins. Co. v. Ind. Reduction Co., 113 N.E. 425, 429 (Ind. App. 1916).
We base that prediction on the law of other jurisdictions, a leading insurance law
treatise, see 2 Couch on Insurance § 22:52 (3d ed. 2015), and the California Court
of Appeal’s decision in Geddes v. Tri-State Insurance Co., 70 Cal. Rptr. 183 (Ct.
App. 1968). See Astaire v. Best Film & Video Corp., 116 F.3d 1297, 1300 (9th
Cir. 1997) ("In the absence of a California Supreme Court decision, we must
predict how the California Supreme Court would decide [an] issue using
intermediate appellate court decisions, decisions from other jurisdictions, statutes,
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treatises and restatements as guidance."). Whether the phrase "direct supplier" was
intended in a trade usage sense and, if so, whether Western Digital falls within the
trade usage definition are questions of fact to be resolved by a jury. City of Hope
Nat’l Med. Ctr. v. Genentech, Inc., 181 P.3d 142, 156–57 (Cal. 2008).
4. We do not reach Plaintiff’s argument concerning the ambiguity of the
phrase "direct supplier." "A rule for construing contracts against the author is not
an alternative to construing the contract as the parties intended. It is to be applied
after the court has inquired into the intent of the parties, and then only if its
meaning remains uncertain." Bd. of Trade of S.F. v. Swiss Credit Bank, 597 F.2d
146, 149 (9th Cir. 1979) (emphasis added).
REVERSED and REMANDED.
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