Case Number: BC579390 Hearing Date: August 31, 2018 Dept: 7

[TENTATIVE] ORDER RE: PLAINTIFF’S MOTION TO SET ASIDE DISMISSAL AND ORDER DETERMINING GOOD FAITH SETTLEMENT; MOTION IS DENIED

On April 21, 2015, Plaintiff Fatemeh Kermani (“Plaintiff”) filed this action against Defendants Best Way Transportation (“Best West”) and Los Angeles ORT College (collectively, “Defendants”) for motor vehicle and general negligence relating to injuries sustained on July 31, 2014. Plaintiff alleged that she was exiting her school service vehicle owned by Defendants when she fell down, sustaining serious bodily injury. On November 19, 2015, Plaintiff filed amendments to the compliant, naming Karine Osmanyan (“Osmanyan”) and Daniel Shubaralyan (“Shubaralyan”) as Doe 1 and Doe 2, respectively.

Best West failed to file an Answer and default was entered against it. Osmanyan and Shubaralyan sought settlement for their maximum individual policy limits through National General. (Declaration of Dimitriy Aristov, ¶ 5.) Neither defendants nor their attorneys disclosed the existence of a commercial insurance policy. (Aristov Decl., ¶ 6.) Defense counsel affirmatively represented that Defendants’ carrier was paying its policy limit, that the policy limits were exhausted, and that the parties should settle. (Aristov Decl., ¶¶ 7, 8; Exh. B.) Defendants attempted to add Best West as part of the settlement, but Plaintiff refused to dismiss Best West and intended to proceed with default judgment against it as a separate entity. (Aristov Decl., ¶¶ 9, 10.) The parties entered into a settlement and the court signed the proposed order finding a good faith settlement on May 17, 2017.

Plaintiff only agreed to dismiss Osmanyan and Shubaralyan based on the representation that their insurance policies were exhausted and that Best West was a separate entity against whom she could pursue default judgment. However, it was discovered at Shubaralyan’s deposition that a commercial insurance policy exists and that Osmanyan is a dba of Best West.

Plaintiff claims she was fraudulently induced to enter into settlement based on Defendants: (1) failing or intentionally omitting to disclose to their commercial insurance carrier which vehicle was used on the date of the accident, prohibiting its carrier from making a proper coverage decision; (2) failing to disclose to Plaintiff’s counsel that there was a commercial policy for Best West as a dba of Karine Osmanyan; (3) fraudulently claiming that Osmanyan only had an individual insurance policy with National General; and (4) representing that Best West was a separate entity and allowing default to be entered against it.

Plaintiff seeks to set aside the partial dismissal entered against Osmanyan and Shubaralyan and to set aside the order determining good faith settlement.

“Where a civil judgment is procured by extrinsic fraud, the normal remedy is to seek equitable relief from the judgment, not to sue in tort.” (Rubenstein v. Rubenstein (2000) 81 Cal.App.4th 1131, 1147.) “Fraud is extrinsic where the defrauded party was deprived of the opportunity to present his or her claim or defense to the court, that is, where he or she was kept in ignorance or in some other manner, other than from his or her own conduct, fraudulently prevented from fully participating in the proceeding. [Citation.]” (Home Ins. Co. v. Zurich Ins. Co. (2002) 96 Cal.App.4th 17, 26-27.) “Any fraud is intrinsic if a party has been given notice of the action and has not been prevented from participating therein, that is, if he or she had the opportunity to present his or her case and to protect himself or herself from any mistake or fraud of his or her adversary, but unreasonably neglected to do so.” (Id. at p. 27.) If the moving party was guilty of negligence in failing to prevent the fraud or failed to take advantage of liberal discovery policies to fully investigate his or her claim, any fraud is intrinsic fraud. (Ibid.) Generally, the introduction of perjured testimony, false documents, or the concealment of material evidence is considered intrinsic fraud. (Ibid.)

The Home Ins. Co. case is instructive. There, the insurer’s attorney misrepresented the policy limits to be $15,000.00, when they were actually $500,000.00. The injured party’s attorney conducted no discovery and settled the suit for $15,000.00, but later sought to set aside the release on grounds of extrinsic fraud. However, the court held the fraud was intrinsic because a “reasonable investigation and use of discovery would have disclosed the true extent of insurance coverage.” (Home Ins. Co., supra, 96 Cal.App.4th at p. 27.)

Similarly, here, Plaintiff’s counsel argues Defendants and their counsel fraudulently misrepresented that their insurance policies had been exhausted and failed to disclose that Best West was a dba of Osmanyan. Osmanyans’s and Shubaralyan’s verified discovery responses failed to identify the commercial insurance policy. There were also documented difficulties in compelling defendants to appear for their depositions, based on the prior motions to compel defendant’s depositions. However, it is clear that Plaintiff’s counsel relied on defense counsel’s representation that the “carrier is paying policy limits” and “the policy is therefore exhausted” (Exh. B), rather than to wait for verified responses to written discovery or to wait for depositions to be conducted. While it is clear Osmanyan and Shubaralyan avoided and delayed appearing for their depositions, Plaintiff did not seek orders compelling their appearances and agreed to the settlement knowing minimal discovery had been conducted and their depositions had not been taken. Accordingly, the fraud alleged is intrinsic rather than extrinsic.

“Extrinsic fraud involves the excusable neglect of a party. [Citation.] When this neglect results in an unjust judgment, without a fair adversary hearing, and the basis for equitable relief is present, this is extrinsic mistake.” (Heyman v. Franchise Mortgage Acceptance Corp. (2003) 107 Cal.App.4th 921, 926.) Intrinsic fraud is not a valid ground for setting aside a judgment when a party has unreasonably neglected to protect himself from any mistake or fraud of his adversary. (Ibid.) Here, when Plaintiff’s new counsel substituted onto the case, he unreasonably neglected to protect himself from any mistake or fraud by agreeing to settle this action for “policy limits” without first confirming policy limits through the discovery process. The existence of this commercial insurance policy was discovered during the deposition of Shubaralyan and confirmed by defense counsel. Where Plaintiff’s counsel agreed to settle this action before taking Shubaralyan’s and Osmanyan’s depositions, the fraud was intrinsic. Therefore, there are no equitable grounds to set aside dismissal and the order determining good faith settlement.

The hearing on this Motion was continued from July 26, 2018, based on Plaintiff’s counsel’s representation that there was additional evidence regarding the ex-defendants’ discovery responses. Although Plaintiff submits the verified discovery responses of Osmanyan and Shubaralyan wherein only their personal insurance polices are identified, Plaintiff fails to show that this fraud is extrinsic rather than intrinsic.

Further, Plaintiff failed to meet her burden of showing dismissal was the result of mistake, inadvertence, surprise, or excusable neglect such that the Court may set aside dismissal under Code of Civil Procedure section 473, subdivision (b). Plaintiff only argues that she was fraudulently induced to enter into the settlement. However, Plaintiff has not cited any authority showing her choice to settle this action based on the information known to her at the time can be characterized as excusable neglect. Case law is clear that reliance on falsified evidence or perjured testimony is intrinsic fraud and it is equally clear that intrinsic fraud is not grounds for equitable relief.

The Motion to set aside is DENIED.

Moving party to give notice.