Sacramento Superior Court Tentative Rulings | Legal News

2018-00247432-CU-FR

Steven Hattendorf vs. Kaneski Assoc. Financial

Nature of Proceeding: Motion to Strike

Filed By: Russell, Thomas

Defendants Kaneski Associates Financial Insurance Services and Estate of Steven R. Kaneski (collectively “Defendants”) motion to strike portions of Plaintiffs Steven Hattendorf’s and Brandy Hattendorf’s (collectively “Plaintiffs”) complaint is DENIED.

Analysis

Defendants’ motion is rife with deficiencies that necessitate denial of the motion.

Defendants’ notice of motion and motion requests an order striking 12 different portions of Plaintiffs’ complaint. The motion was made on grounds that these allegations were not drawn or filed in conformity with the law of this state, a court rule, or an order of the court. (Code Civ. Proc. § 436(b).) However, both Defendants’ moving memorandum of points and authorities and its reply fail to present a single argument as to how any of these factual allegations fail to conform with the laws of this state, a court rule, or an order of the court.

Further, on their face, the language identified by Defendants to be stricken are factual allegations that are properly pled. The first eleven items identified are factual allegations concerning representations and actions taken by Defendants. The twelfth item is a factual allegation that Defendants are fiduciaries. While Defendants may contest the veracity of the allegations, nothing indicates Plaintiffs failed to comply with the law, court rules, and court orders in making these allegations.

The Court notes that rather than addressing the actual the language identified in the notice of motion and motion, Defendants’ memorandum raises arguments concerning Plaintiffs’ request for attorney’s fees, punitive damages and treble damages. Plaintiffs have objected to the deficiency of the notice concerning these arguments. Plaintiffs cite to Luri v. Greenwald (2003) 107 Cal.App.4th 1119, 1125, for the general rule that a trial court may only consider the grounds stated in the notice of motion. In a footnote of its reply, Defendants note that the Court in Luri, also stated that an omission in the notice may be overlooked if the supporting papers make clear the grounds for the relief sought.

Here, the Court finds the notice and moving papers are substantially deficient and chooses not to overlook these substantial defects. This is not a situation where the notice of motion merely fails to specify the grounds of relief. Here, the notice seeks entirely different relief (the striking of 12 itemized factual allegations) than that sought in the memorandum.

In addition, Defendants also failed to comply with the specific requirements for a motion to strike. Cal. Rules of Court, rule 3.1322 requires that a notion of motion for a motion to strike identify the portions of the pleading to be stricken, except where the motion is to strike an entire paragraph, cause of action, count, or defense. Here, Defendants’ notice of motion does not identify which paragraphs of the complaint contain requests for attorney’s fees, punitive damages and treble damages. Further, this defect is not entirely cured in the moving papers. For example, Defendants seek to strike Plaintiffs’ request for treble damages under Penal Code § 496 and Code of Civ. Proc. § 1029.8, but do not identify where in the complaint Plaintiffs made this request.

Tangentially, the Court notes that its tentative ruling on Defendants’ concurrent demurrer is to sustain the demurrer, in part, with leave to amend. If this tentative ruling is adopted, it will address some of the issues raised by Defendants that were not properly noticed. Potential amendments to the complaint may also impact the issues raised in this motion and render them moot.

The motion to strike is DENIED

Item 7 2018-00247432-CU-FR

Steven Hattendorf vs. Kaneski Assoc. Financial

Nature of Proceeding: Hearing on Demurrer

Filed By: Fickel, Connie M.

The demurrer of Defendants Kaneski Associates Financial Insurance Services and Estate of Steven R. Kaneski (“the Estate”) (collectively “Defendants”) to Plaintiffs Steven Hattendorf’s and Brandy Hattendorf’s (collectively “Plaintiffs”) complaint is OVERRULED in part and SUSTAINED in part.

Request for Judicial Notice

Defendants’ request for judicial notice is DENIED.

Before acting upon a request for judicial notice, the court must be assured the document or record is a true and correct copy. (People v. Preslie (1977) 70 Cal.App.3d 486, 494). “Accordingly, when a party desires the [trial] court to take judicial notice of a document or record . . . the parties should furnish the [trial] court with a copy of such document or record certified by its custodian. (Id. at p. 495; See also Ross v. Creel Printing & Publishing Co. (2002) 100 Cal.App.4th 736, 743 [declining to take judicial notice of a complaint filed in Nevada because it was not certified and there was no subpoena from a Nevada court to assure authenticity.])

The request for judicial notice is denied. Defendants provide a declaration from their counsel indicating the documents provided are true and correct copies that counsel personally obtained from Defendant’s business records. Plaintiffs object to the request for judicial notice on grounds Defendants failed to provide proper authentication. An attorney declaration stating a document is a true and correct copy is not sufficient for proper authentication. (Claudio v. Regents of the University of California (2005) 134 Cal.App.4th 224, 244.) To authenticate documents as business records, evidence must be presented regarding the mode of preparation or other information indicative of trustworthiness. (Midland Funding LLC v. Romero (2016) 5 Cal.App.5th Supp. 1, 9; Code Civ. Proc. § 1271.) Defendant failed to provide evidence of trustworthiness sufficient to establish the documents are admissible under the business records exception to the hearsay rule.

Absent such evidence, the request for judicial notice must be denied.

Analysis

The function of a demurrer is to test the legal sufficiency of the pleading by raising questions of law. (Baldwin v. Zoradi (1981) 123 Cal.App.3d 275, 278). The Court is required to liberally construe the allegations in Plaintiffs’ favor. (Code Civ. Proc., § 452) A complaint survives a general demurrer insofar as it states, however inartfully, facts disclosing some right to relief. (Code Civ. Proc., § 45i2; Barquis v. Merchants Collection Assn. (1972) 7 Cal. 3d 94, 103). As noted in Reichert v. General Ins. Co. (1968) 68 Cal. 2d 822, 840-841, “While orderly procedure demands a reasonable enforcement of the rules of pleading, the basic principle of the code system in this state is that the administration of justice shall not be embarrassed by technicalities, strict rules of construction, or useless forms.”( Id. at 103 [citing Buxbom v. Smith, 23 Cal.2d 535, 542].)

Service on Estate

The demurrer on grounds of failure to serve the Estate is OVERRULED.

The Estate demurs on grounds Plaintiffs failed to comply with the requirements for service set forth in Probate Code § 550(a). The filing of a demurrer or a motion to strike constitutes a general appearance. (Code Civ. Proc. § 1014; Goodwine v.

Superior Court (1965) 63 Cal.2d 481, 484.) “A general appearance by a party is equivalent to personal service of summons on such a party.” (Code Civ. Proc. § 410.50.) Thus, by filing this demurrer, the Estate has appeared in the action and waived any defect in service. (Jarvis v. Jarvis (2019) 33 Cal.App.5th 113, 127.)

The Court will not address Defendants’ argument that if service is made, Plaintiffs’ recovery is limited to the amount of available insurance coverage. There is no request for relief in the notice of motion that is supported by this argument. Nor does the argument appear to be a proper basis for demurrer. (Code Civ. Proc. § 430.10.)

Fraud

The demurrer to the first cause of action for fraud is OVERRULED.

In support of their demurrer, Defendants identify numerous allegations made by Plaintiffs describing Defendants’ alleged misrepresentations. Defendants argue that some of these allegations are statements of opinion that cannot support a claim for fraud. Defendants argue Plaintiffs cannot have justifiably relied on the remaining misrepresentations because Plaintiffs were obligated to read the actual policies, which would have caused Plaintiffs to learn the truth.

In opposition, Plaintiffs contend that Defendants’ statements were not mere opinions, because Defendants made the statements while holding themselves out as experts ( Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 418; Ashburn v. AIG Financial Advisors, Inc. (2015) 234 Cal.App.4th 79, 100-102) and made the statements as deliberative assertions of fact, not merely as casual expressions of belief (B.L.M. v. Sabo & Deitsch (1997) 55 Cal.App.4th 370, 408.)

Defendants have failed to address all of the misrepresentations alleged by Plaintiffs. For example, Plaintiffs allege that Defendants, at their initial meeting, induced Plaintiffs to buy the initial policies by telling Plaintiffs that Kaneski would personally direct the way their premiums were invested and that Kaneski did not actually do so. (Complaint at ¶¶ 26 and 32-33.) This is not a statement of opinion. Further, Defendants do not argue that reading the policy would have informed Plaintiffs that this representation was not true. These allegations are sufficient to show where, when, why, by whom, to whom, and how Defendants misrepresented facts to Plaintiffs. Thus, they are sufficient to support a cause of action for purposes of a challenge to pleadings. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)

Breach of Fiduciary Duty

The demurrer to the second cause of action for breach of fiduciary duty is OVERRULED.

Defendants argue that Plaintiffs cannot prevail on a claim for breach of fiduciary duty because Defendants were merely insurance agents/brokers. Defendants argue that insurance agents/brokers and financial advisors are not fiduciaries unless directly handling Plaintiffs’ money. (Mark Tanner Constr. v.Hub Internat. Ins. Servs. (2014) 224 Cal.App.4th 574, 586.) The court notes that while Mark Tanner Constr., supra, 224 Cal.App.4th 574 holds insurance brokers are not fiduciaries except when handling an insured’s money, nothing stated in the opinion indicates this rule applies to financial advisors.

(1984) 162 Cal.App.3d 441, 444-445.) “Ordinarily, an insurance agent assumes only those duties normally found in any agency relationship. This includes the obligation to use reasonable care, diligence, and judgment in procuring the insurance requested by the insured. (Jones v. Grewe (1987) 189 Cal.App.3d 950, 954.) A plaintiff may not pursue a cause of action for breach of fiduciary duty against an insurer or its agents unless the plaintiff alleges facts indicating the insurer or agent went beyond the ordinary arm’s-length business relationship by alleging facts showing the “insurers held themselves out as fiduciaries in such a way to justify [the insured’s] alleged extensive reliance on their ‘honest, integrity and fidelity” or to enhance their existing duties under their contracts.” (See Henry v. Associated Indem. Corp. (1990) 217 Cal.App.3d 1405, 1419.

Plaintiffs allege Stven Kaneski identified himself as a financial planner and advisor. (Complaint ¶¶ 22-23.) Plaintiffs allege they provided Defendants information concerning their assets, salaries, financial obligations and that Defendants offered financial advice. (Complaint at ¶ 24.) Defendants held themselves out as Defendant New York Life Insurance Co’s top financial advisor and represented Steven Kaneski would personally manage the investment of Plaintiffs’ premiums. (Complaint at ¶ 32.) Plaintiffs allege Defendants provided financial advice concerning the short sale of their home and the purchase of a new home. (Complaint ¶¶ 39-40 and 52-53.) These allegations are sufficient to support a claim that Defendants established a fiduciary relationship by accepting the confidences reposed in them by Plaintiffs, allowing them to obtain a superior position to exert influence over Plaintiffs. (See Gibson, supra, 162 Cal.app.3d at pp. 444-445.)

Professional Negligence

The demurrer to the third cause of action for professional negligence is OVERRULED.

Defendants argue that, as insurance agents, the only professional duty they owed to Plaintiffs was to procure insurance. Defendants argue Plaintiffs have not alleged facts showing Defendants failed in this duty. In making this argument, Defendants ignore the facts alleged throughout the complaint that Defendants are alleged to have provided services as financial advisors, not merely as insurance agents. Defendants do not cite any legal authority that a professional negligence cause of action is not available against a financial advisor.

UCL Claim

The demurer to the fourth cause of action for violation of the unfair competition law is OVERRULED.

Relying on Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1148, Defendants argue the only monetary relief available for a violation of Bus. & Prof. Code § 17200 is restitution. Defenadnts cite In re Tobacco Cases II (2015) 240 Cal.App.4th 779, 800-801, to argue that Plaintiffs can only receive restitution of money directly received by Defendants from Plaintiffs. Defendants overstate the law. The Court in In re Tobacco Cases II, supra, held that restitution in the UCL context can only be used to restore property the victim lost, but did not state the lost property had to be directly received from the victim. (Id. at 801.) Here, Plaintiffs have generally alleged they lost money paid as premiums as a result of the alleged unfair competition. Plaintiffs have further alleged that Defendants received a portion of those premiums in the form of commissions. (See e.g., Complaint at ¶ 30.) Such allegations are sufficient to withstand the demurrer.

Intentional Infliction of Emotional Distress

The demurrer to the fifth cause of action for intentional infliction of emotional distress is OVERRULED.

The elements of a cause of action for emotional distress are: 1) extreme and outrageous conduct by the defendant with the intention of causing or a reckless disregard of the probability of causing emotional distress, 2) severe emotional distress actually suffered by plaintiff, and 3) proximate causation of the distress by the conduct. (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050.)

Defendants argue that, “[a]t best, the Complaint alleges that Kaneski made unkind statements.” The Court finds Plaintiffs alleged a lengthy list of behavior by Defendants that allegedly caused Plaintiffs’ financial difficulties and distress. For purposes of the pleadings, Plaintiffs allegations are sufficient.

Receipt and Possession of Stolen Property

The demurrer to the sixth cause of action is SUSTAINED with leave to amend.

Defendants argue Plaintiffs have failed to state a cause of action under Penal Code § 484 because Plaintiffs’ insurance premiums and investment funds were paid directly to New York Life Insurance Co., not Defendants. Plaintiffs argue that Defendants were directly involved in transferring the funds. None of the allegations cited by Plaintiffs in support of this argument indicate Defendants ever directly received money from Plaintiffs. At most, Plaintiffs have alleged that Defendants inidrectly received Plaintiffs’ money from New York Life Insurance Co. in the form of commissions. (See, e.g. Complaint at ¶ 30.)

In ruling on New York Life Insurance Co.’s demurrer, the Court found that Plaintiffs’ allegations were insufficient to support a claim against New York Life Insurance Co. under Penal Code § 496. By extension, the commissions received by Defendants cannot be considered stolen property for purposes of a claim under Penal Code § 496. (See Grouse River Outfitters Ltd. V. NetSuite, Inc. (N.D. Cal. 2016) 2016 U.S. Dist. LEXIS 141478 at 38-39, which held a claim that money obtained through fraud may constitute theft by false pretenses but does not support a claim under Penal Code § 496 based on receipt of stolen property.) As this is the first time a demurrer has been sustained to this cause of action, the court will grant leave to amend.

Statute of Limitations

“In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred.” (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.)

Defendants argue Plaintiffs’ causes of action are subject to a two, three or four-year statute of limitations. (Moving Memorandum at pp. 31:21 – 32:15.) Plaintiffs raise no argument in their opposition regarding the applicable statute of limitations. However, Plaintiffs argue that under Norgart v. Upjohn Co.(1999) 21 Cal.4th 383, 397 and Moreno v. Sanchez (2003) 106 Cal.App.4th 1415, 1424, the statutes of limitations did not begin to run until Plaintiff discovered Defendants wrongful conduct in 2017.

The parties dispute the application of the discovery rule to the facts of this case. Plaintiffs allege they discovered Kaneski’s misrepresentations in 2017 and that the statute of limitations did not begin until 2017. Relying on WA Southwest 2 LLC v. First American Title Ins. Co (2015) 240 Cal.App.4th 148, Defendants contend that Plaintiffs were given notice of the falsity of alleged misrepresentations, causing the statute of limitations to begin running, when Plaintiffs received the contract documents. Based on the request for judicial notice, Defendants argue Plaintiffs had such contract documents by 2006 for the insurance policies and 2010 for the annuities. Thus, Defendants argue Plaintiffs claims were time barred by 2014. Plaintiffs contend WA Southwest 2 LLC is inapplicable because Plaintiffs were relying on statements by Kaneski as a fiduciary and that this case, unlike WA Southwest 2 LLC, involves a pattern of repeated sales of multiple products and continuous representations.

The court need not decide the respective merits of these arguments. In WA Southwest 2 LLC v. First American Title Ins. Co, supra, 240 Cal.App.4th at p. 151, the parties stipulated to the authenticity of the operative documents. Here, there is no such stipulation. Defendant’s request for judicial notice was denied so the court may not consider whether the contract documents provided Plaintiff sufficient notice to lead to the discovery of the alleged injuries. The Court is limited to the allegations in the complaint, which allege Plaintiffs did not discover the misrepresentations until 2017.

Conclusion

The court sustains the demurrer as to the sixth cause of action and overrules the

demurrer as to all other causes of action. Plaintiffs may file and serve an amended complaint no later than October 3, 2019. Defendants shall file and serve their response within 30 days thereafter, 35 days if the amended complaint is served by mail as modified by the CCP § 430.41 extension if necessary.

The minute order is effective immediately. No formal order pursuant to CRC 3.1312 or other notice is required.

Item 8 2018-00247432-CU-FR

Steven Hattendorf vs. Kaneski Associates Financial

Nature of Proceeding: Hearing on Demurrer to Complaint

Filed By: Azarmi, Andrew

Defendants New York Life Insurance Co. and NYLife Securities , LLC’s (collectively “Defendants”) demurrer to Plaintiffs Steven Hattendorf and Brandy Hattendorf (collectively “Plaintiffs”) complaint is SUSTAINED in part and OVERRULED in part.

Request for Judicial Notice

Defendants’ request for judicial notice is DENIED in part and GRANTED in part.

As to Exhibits A-Q, the request for judicial notice is denied. Defendants provide a declaration from counsel indicating the documents provided are true and correct copies that counsel personally obtained from Defendants’ business records. Plaintiffs object to the request for judicial notice on grounds Defendants failed to provide proper authentication. An attorney declaration stating a document is a true and correct copy is not sufficient for proper authentication. (Claudio v. Regents of the University of California (2005) 134 Cal.App.4th 224, 244.) To authenticate documents as business records, evidence must be presented regarding the mode of preparation or other information indicative of trustworthiness. (Midland Funding LLC v. Romero (2016) 5 Cal.App.5th Supp. 1, 9; Code Civ. Proc. § 1271.) Defendants failed to provide evidence of trustworthiness sufficient to establish the documents are admissible under the business records exception to the hearsay rule. Absent such evidence, the request for judicial notice must be denied.

Plaintiffs’ objection to the request for judicial notice contains no arguments regarding the authenticity of exhibits R and S. The request for judicial notice of these documents is granted. While the Court can take judicial notice of the existence, content and authenticity of these public records it does not take judicial notice of the truth of factual matters asserted in those documents.” (Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, 1090.) However, when taking judicial notice of a legally operative document, the court may also take judicial notice of the facts that clearly derive from its legal effect. (Scott v. JPMorgan Chase Bank (2013) 214 Cal.App.4th 743, 754.)

Analysis

The function of a demurrer is to test the legal sufficiency of the pleading by raising questions of law. (Baldwin v. Zoradi (1981) 123 Cal.App.3d 275, 278). The Court is required to liberally construe the allegations in Plaintiffs’ favor. (Code Civ. Proc., § 452) A complaint survives a general demurrer insofar as it states, however inartfully, facts disclosing some right to relief. (Code Civ. Proc., § 452; Barquis v. Merchants Collection Assn. (1972) 7 Cal. 3d 94, 103.) As noted in Reichert v. General Ins. Co. (1968) 68 Cal. 2d 822, 840-841 “While orderly procedure demands a reasonable enforcement of the rules of pleading, the basic principle of the code system in this state is that the administration of justice shall not be embarrassed by technicalities, strict rules of construction, or useless forms.”(Id. at 103 [citing Buxbom v. Smith, 23 Cal.2d 535, 542].)

Statute of Limitations

The demurrer based on the statute of limitations is OVERRULED.

Defendants argue that Plaintiffs’ causes of action are subject to a two, three or four-year statute of limitations. (Moving Memorandum at p. 7, n. 4.) Plaintiffs raise no argument in their opposition regarding the applicable statute of limitations.

The parties dispute the application of the discovery rule to the facts of this case. Plaintiffs allege they discovered Kaneski’s misrepresentations in 2017 and that the statute of limitations did not begin until 2017. Relying on WA Southwest 2 LLC v. First American Title Ins. Co (2015) 240 Cal.App.4th 148, Defendants contend that Plaintiffs were given notice of the falsity of alleged misrepresentations, causing the statute of limitations to begin running, when Plaintiffs received the contract documents. Based on the request for judicial notice, Defendants argue Plaintiffs had such contract documents by 2006 for the insurance policies and 2010 for the annuities. Thus, Defendants argue Plaintiffs’ claims were time-barred by 2014. Plaintiffs contend WA

Southwest 2 LLC is inapplicable because Plaintiffs were relying on statements by Kaneski as a fiduciary and that this case, unlike WA Southwest 2 LLC, involves a pattern of repeated sales of multiple products and continuous representations.

The court need not decide the respective merits of these arguments. In WA Southwest 2 LLC v. First American Title Ins. Co, supra, 240 Cal.App.4th at p. 151, the parties stipulated to the authenticity of the operative documents. Here, there is no such stipulation. Defendants’ request for judicial notice was denied so the court may not consider whether the contract documents provided Plaintiffs sufficient notice to lead to the discovery of the alleged injuries. The Court is limited to the allegations in the complaint, which allege Plaintiffs did not discover the misrepresentations until 2017.

Economic Loss Doctrine

The demurrers to the fraud, professional negligence and intentional infliction of emotional distress causes of action based on the economic loss doctrine are OVERRULED.

“The economic loss rule requires a purchaser to recover in contract for purely economic loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken contractual promise.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) “[A] party alleging fraud or deceit in connection with a contract must establish tortious conduct independent of a breach of contract itself, that is, violation of some independent duty arising from tort law.” (Food Safety Net Servs. v. Eco Safe Sys. USA, Inc. (2012) 209 Cal.App.4th 1118, 1130.)

Relying on the above rule, Defendants argue Plaintiffs’ claims are barred by the economic loss doctrine. In support of this argument, Defendants state: “[t]hough they couch their claims around Kaneski’s alleged misrepresentations, at its core Plaintiffs’ complaint is that they are unhappy with the terms or performance of their insurance and annuity contracts.” (Moving Memorandum at p. 12:18-19.) For purposes of a demurrer, the Court accepts the facts alleged as true. (Alisail Sanitary Dist. v. Kennedy (1960) 180 Cal.App.2d 69, 73.) Thus, regardless of what the core of the claim may be, the court must accept as true the facts alleged. Plaintiffs allege Kaneski did not merely sell Plaintiffs disappointing insurance policies and annuities. Plaintiffs allege Kaneski offered services as a financial advisor, actually provided financial advice, and misrepresented terms of the contracts in order to induce Plaintiffs to purchase them. For purposes of the pleadings, the allegations are sufficient.

Fraud

The demurrer to the first cause of action for fraud is OVERRULED.

Citing to factual allegations in paragraphs 63 – 70 of the complaint, Defendants allege that Plaintiffs do not meet the standard set forth in Stansfield v. Starkey (1990) 220

Cal.App.3d 59, 73, for pleading facts that show the how, when, where, to whom and by what means misrepresentations were tendered. Defendants overlook paragraph 61 of the complaint, which incorporated by reference into the fraud cause of action all prior allegations. As noted in Plaintiffs’ opposition, the prior alleged facts set forth in detail Plaintiffs’ claim that Kaneski, as an agent of Defendants, made repeated misrepresentations over a lengthy period of time to induce Plaintiffs into procuring exorbitant amounts of insurance from Defendants. The allegations are pled with sufficient particularly to support a claim for fraud.

Breach of Fiduciary Duty

The demurrer to the second cause of action for breach of fiduciary duty is OVERRULED.

Defendants argue that Plaintiffs have failed to state a cause of action for breach of fiduciary duty because there is no fiduciary relationship between an insurer and an insured.

A fiduciary relationship ordinarily arises where a person voluntarily accepts a confidence reposed in his integrity, thereby obtaining a superior position to exert unique influence over the dependent party. (Gibson v. Gov’t Employees Ins. Co. (1984) 162 Cal.App.3d 441, 444-445.) “Ordinarily, an insurance agent assumes only those duties normally found in any agency relationship. This includes the obligation to use reasonable care, diligence, and judgment in procuring the insurance requested by the insured. (Jones v. Grewe (1987) 189 Cal.App.3d 950, 954.) A plaintiff may not pursue a cause of action for breach of fiduciary duty against an insurer or its agents unless the plaintiff demonstrates the insurer or agent went beyond the ordinary arm’s-length business relationship by alleging facts showing the “insurers held themselves out as fiduciaries in such a way to justify [the insured’s] alleged extensive reliance on their ‘honest, integrity and fidelity” or to enhance their existing duties under their contracts.” (See Henry v. Associated Indem. Corp. (1990) 217 Cal.App.3d 1405, 1419.)

Plaintiffs allege Kaneski identified himself as a financial planner and advisor. (Complaint ¶¶ 22-23.) Plaintiffs allege they provided Kaneski information concerning their assets, salaries, financial obligations and that Kaneski offered financial advice. (Complaint at ¶ 24.) Kaneski held himself out as Defendants’ top financial advisor and represented he would personally manage the investment of Plaintiffs’ premiums. (Complaint at ¶ 32.) Plaintiffs allege Kaneski provided financial advice concerning the short sale of their home and the purchase of a new home. (Complaint ¶¶ 39-40 and 52 -53.) These allegations are sufficient to support a claim that Kaneski, as an agent of Defendants, established a fiduciary relationship by accepting the confidences reposed in him by Plaintiffs, allowing him to obtain a superior position to exert influence over Plaintiffs. (See Gibson, supra, 162 Cal.app.3d at pp. 444-445.)

Professional Negligence

The demurrer to the third cause of action for professional negligence is OVERRULED.

Defendants argue that claims against an insurer must be based on bad faith, not professional negligence. In making this argument, Defendants ignore the facts alleged throughout the complaint that Defendants, through their agent Kaneski, are alleged to have provided services as financial advisors, not merely as insurers. Defendants do not cite any legal authority that a professional negligence cause of action is not available against a financial advisor.

UCL Claim

The demurer to the fourth cause of action for violation of the unfair competition law is OVERRULED.

Defendants argue that Plaintiffs have failed to provide any factual detail to put Defendants on notice what conduct forms the basis of the UCL claim. While Defendants reference paragraph 88 of the complaint, which incorporates the previously pled allegations, Defendants apparently failed to consider the incorporated facts. The previously pled facts allege detailed actions by Defendants’ agent Kaneski to induce Plaintiffs to purchase exorbitant and unnecessary amounts of Defendants’ insurance products.

Defendants also argue that Plaintiffs have failed to allege a basis for relief under the UCL. Defendants argue Plaintiffs have failed to identify any money paid that must be restored. Further, relying on Feitelberg v. Credit Suisse First Bos. LLC (2005) 134 Cal.App.4th 997, Defendants argue that injunctive relief is unavailable because Kaneski’s action have ceased. In their opposition, Plaintiffs contend they seek injunctive relief and restitution because Defendants continue to maintain possession of Plaintiffs’ wrongfully acquired savings. Liberally, construed, the complaint sufficiently alleges that Plaintiffs paid premiums and fees to Defendants that Defendants would not have received absent the alleged unfair competition. Plaintiffs contention that the premiums were rightfully obtained to provide life insurance is a factual question that cannot be resolved on demurrer.

Intentional Infliction of Emotional Distress

The demurrer to the fifth cause of action for intentional infliction of emotional distress is OVERRULED.

The elements of a cause of action for emotional distress are: 1) extreme and outrageous conduct by the defendant with the intention of causing or a reckless disregard of the probability of causing emotional distress, 2) severe emotional distress actually suffered by plaintiff, and 3) was proximate causation of the distress by the outrageous conduct. (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050.)

Relying on Hughes, supra, Defendants also claim Plaintiffs’ allegation that Kaneski “berated and belittled Plaintiffs” and that they suffered “humiliation and shame, emotional distress, anxiety and mental and physical pain and anguish” are insufficient to support a cause of action for intentional infliction of emotional distress. Again, Defendants ignore that Plaintiffs’ cause of action incorporates all previously pled facts. The previously pled facts demonstrate Plaintiffs’ claim is not merely based on emotional distress caused by belittlement. Rather, Plaintiffs allege a lengthy list of behavior by Defendants’ agent Kaneski that allegedly caused Plaintiffs’ financial difficulties and distress. For purposes of the pleadings, Plaintiffs allegations are sufficient.

Receipt and Possession of Stolen Property

The demurrer to the sixth cause of action is SUSTAINED with leave to amend.

In support of the sixth cause of action for violation of Penal Code § 496, Plaintiffs allege Defendants received property that had been stolen or obtained through theft by false pretenses. (Complaint ¶ 102.) None of the facts alleged in the complaint indicate Kaneski ever took money from Plaintiffs without their knowledge or permission. (Id.) The Court finds persuasive the authority cited by Defendants, Grouse River Outfitters Ltd. V. NetSuite, Inc. (N.D. Cal. 2016) 2016 U.S. Dist. LEXIS 141478 at 38-39, which held a claim that money obtained through fraud may constitute theft by false pretenses but does not support a claim under Penal Code § 496 based on receipt of stolen property. Plaintiffs cite no contrary legal authority.

As this is the first time a demurrer has been sustained to this cause of action, the court will grant leave to amend.

Conclusion

The court sustains the demurrer as to the sixth causes of action and overrules the demurrer as to all other causes of action. Where leave was given, Plaintiffs may file and serve an amended complaint no later than October 3, 2019. Defendants shall file and serve their response within 30 days thereafter, 35 days if the amended complaint is served by mail as modified by the CCP § 430.41 extension if necessary.

The minute order is effective immediately. No formal order pursuant to CRC 3.1312 or other notice is required.