Filed 2/28/20 Eisenberg v. Lara CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

JON B. EISENBERG, et al.,

Plaintiffs and Appellants,

v.

RICARDO LARA, as Insurance Commissioner, etc., et al.,

Defendants and Respondents.

A156224

(San Francisco County

Super. Ct. No. CGC-18-567790)

Plaintiffs Jon Eisenberg and Jeff Sengstack appeal from an order denying their motion for a preliminary injunction. They asserted nine causes of action in the operative pleading, and they contend the trial court incorrectly believed the first through third causes of action failed to state a claim. As to those three claims, plaintiffs’ appeal is moot because the trial court sustained a demurrer to those claims without leave to amend. As to the seventh through ninth causes of action, the appeal is moot because plaintiffs have voluntarily dismissed the claims. As to the sixth through eighth causes of action and to the extent the appeal may not be moot, the appeal fails because plaintiffs have not established the trial court abused its discretion in denying the preliminary injunction motion.

We dismiss the appeal in part and affirm the order.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs sued Dave Jones in his capacity as California Insurance Commissioner (Commissioner) and the California Department of Insurance (CDI) for alleged failure to enforce and follow the law in the face of alleged widespread violation of licensing and registration requirements by out-of-state adjusters following the 2017 wildfires.

Relevant Statutes

We begin with a brief description of the insurance laws at issue in plaintiffs’ lawsuit.

Licensing of Adjusters

Generally speaking, an insurance adjuster working in California is required to be licensed under the Insurance Adjuster Act. (Ins. Code, §§ 14000, 14020, subd. (a).) The licensing requirement, however, does not apply to a person who is employed exclusively and regularly in an employer-employee relationship by one employer (an insurer or licensed independent adjuster). (§ 14022, subd. (a)(1).) A licensee is required to file an initial list of its employees who are authorized to negotiate claim settlements and to inform the Commissioner of the name of any employee hired or terminated subsequent to the filing of the initial list. (Cal. Code Regs., tit. 10, § 2691.12.)

Registration of Nonlicensed Adjusters in Declared Emergencies

The licensing requirement also may be excused “[i]n the event of an emergency situation as declared by” the Commissioner. (§ 14022.5, subd. (a).) In such a declared emergency, section 14022.5 permits “claims arising out of the emergency, catastrophe, disaster, or other similar occurrence [to] be adjusted by a nonlicensed adjuster upon registration with the commissioner” when certain “requirements are met.” Among these requirements are that the “work performed by the nonlicensed adjuster is under the active direction, control, charge, or management of a licensed adjuster or an insurer authorized to do business in this state” and that the nonlicensed adjuster is registered with the Commissioner within 15 days from the date the nonlicensed adjuster begins adjusting claims in California. (§ 14022.5, subds. (a)(1) and (2) and (b).)

Cease-and-Desist Orders

Section 12921.8 provides that the Commissioner “may,” among other things, “[i]ssue a cease and desist order to a person who has acted in a capacity for which a license, registration, or certificate of authority from the commissioner was required but not possessed.” (§ 12921.8, subd. (a)(1).)

Action on Consumer Complaints

Section 12921.4, subdivision (a), provides that the Commissioner “shall, upon receipt of a written complaint with respect to the handling of an insurance claim or other obligation under a policy by an insurer or production agency, or alleged misconduct by an insurer or production agency, notify the complainant of the receipt of the complaint within 10 working days of receipt. Thereafter, the commissioner shall notify the complainant of the final action taken on his or her complaint within 30 days of the final action.”

Orders to Show Cause

Section 790.05 provides in part, “Whenever the commissioner shall have reason to believe that a person has been engaged or is engaging in this state in any unfair method of competition or any unfair or deceptive act or practice defined in Section 790.03, and that a proceeding by the commissioner in respect thereto would be to the interest of the public, he or she shall issue and serve upon that person an order to show cause containing a statement of the charges in that respect, a statement of that person’s potential liability under Section 790.035, and a notice of a hearing thereon to be held at a time and place fixed therein, which shall not be less than 30 days after the service thereof, for the purpose of determining whether the commissioner should issue an order to that person to, pay the penalty imposed by Section 790.035, and to cease and desist those methods, acts, or practices or any of them.”

The Plaintiffs

Sengstack has lived in Santa Rosa with his family since 2000. His home was totally destroyed by the 2017 Tubbs Fire.

Eisenberg lives in Sonoma County. In the weeks after the 2017 California wildfires in the area, he provided volunteer help by counseling fire victims on insurance coverage issues and how to negotiate settlements with their insurers. Over the course of several months, he helped his friend Sengstack negotiate a settlement with his insurance company.

The Operative Pleading

On July 10, 2018, plaintiffs filed their first amended petition for writ of mandate and complaint for injunctive and declaratory relief (first amended complaint), the operative pleading for purposes of this appeal.

Factual Allegations

On October 13, 2017, the Commissioner declared an emergency situation in respect to insurance claims arising from wildfires, and “[t]hereafter, hundreds of unlicensed out-of-state adjusters have come to California to adjust claims arising from the 2017 wildfires.” Plaintiffs alleged on information and belief that many or most of these unlicensed out-of-state adjusters were not registered pursuant to section 14022.5 and were not employees excused from the licensing requirement by section 14022.

On November 9, 2017, Eisenberg complained to Lucy Jabourian, Chief of CDI’s Consumer Services Division, that unlicensed out-of-state adjusters were misinforming fire survivors about their rights under California law.

On November 28, 2017, Sengstack filed a consumer complaint with the CDI asserting, among other things, that two named individual non-California licensed adjusters handling his insurance claim were in violation of the registration and active supervision requirements of section 14022.5. Plaintiffs alleged on information and belief that defendants have taken no final action on that aspect of Sengstack’s complaint.

On January 7, 2018, Eisenberg “complained to CDI about the independent adjusting companies’ ongoing deception [of listing independent contractors as employees and failing to register out-of-state adjusters] and asked CDI to take affirmative steps to enforce the registration and active supervision requirements.” Plaintiffs alleged on information and belief that the CDI has taken no final action on this complaint.

Claims and Relief Sought

The first amended complaint contained nine “cause[s] of action,” but plaintiffs generally asserted three theories of statutory violation by defendants, with a trio of claims for relief (each labeled a separate “cause of action”)—seeking a writ of mandate, an injunction, and a declaratory judgment—associated with each theory.

First Through Third: Cease-and-Desist Claims

Plaintiffs’ first theory was that defendants failed to perform their duty to address violations of licensing and registration requirements by failing to issue cease-and-desist orders under section 12921.8. The first cause of action was a petition for writ of mandate under Code of Civil Procedure section 1085 “to ensure compliance with California law” by defendants. The second cause of action sought an injunction to “enjoin” defendants “from an illegal expenditure and waste of funds in failing and refusing to address violations of the licensing requirements of . . . section 14020 and the registration and active supervision requirements of . . . section 14022.5 via the enforcement provisions of . . . section 12921.8.” The third cause of action sought a declaratory judgment that defendants “have a duty to address, but have failed and refused to address, violations of the licensing requirements . . . and the registration and active supervision requirements . . . via the enforcement provisions of . . . section 12921.8.”

Fourth Through Sixth: Consumer Complaint Claims

The second theory was that defendants failed to perform their mandatory duty under section 12921.4 to take final action on consumer complaints within a reasonable period of time. The fourth cause of action was a petition for writ of mandate to ensure compliance with the law, the fifth cause of action sought an injunction, and the sixth cause of action was for declaratory relief.

Seventh Through Ninth: Order-to-Show-Cause Claims

The third theory was that defendants failed to perform their mandatory duty under section 790.05 to issue an order to show cause and notice of hearing where there is reason to believe a person had engaged in unfair competition or unfair acts or deceptive acts. The seventh cause of action sought a writ of mandate, the eighth an injunction, and the ninth a declaratory judgment.

Motion for Preliminary Injunction

On August 6, 2018, plaintiffs filed a motion for preliminary injunction, seeking “a Preliminary Injunction prohibiting Respondents/Defendants from violating the mandatory duty provisions of . . . sections 790.05 [issuing an order to show cause where the Commissioner has reason to believe a person engaged in unfair acts] and 12921.4 [final action on consumer complaints] and from disregarding the adjuster licensing and registration/supervision requirements of . . . sections 14020 [licensing] and 14022.5 [registration of nonlicensed adjusters during an emergency].” Declarations from each plaintiff supported the motion, with many documents attached to Eisenberg’s declaration.

Eisenberg declared the following. He assisted about two dozen victims of the Tubbs Fire with their insurance claims and estimated that at least 75 percent of the homeowners he counseled had received incorrect information from their adjusters. In assisting Sengstack with his claim, Eisenberg dealt with adjusters Jansen, Branham, O’Malley, and Mahrle. Jansen and Branham told Sengstack they were independent contractors. O’Malley, Jansen, and Branham each gave Sengstack wrong information about what he was entitled to. Eisenberg learned from news articles that “as many as 10,000-20,000 catastrophe adjusters work nationwide as independent contractors for hundreds of adjusting companies.” Eisenberg attached to his declaration pages he printed from the websites of various independent adjusting companies, including Worley Catastrophe Services, which indicated that the companies hire temporary or seasonal adjusters to work as independent contractors. When Eisenberg complained to Jabourian at the CDI in November 2017, he asked her whether Jansen and Branham were registered pursuant to section 14022.5. Jabourian said they both were exempt because they were employees, and Jansen was an employee of Worley Catastrophe Services.

Sengstack declared that, after the fire destroyed his home, he negotiated a settlement “at policy limits” with his insurer with the assistance of Eisenberg. This process involved dealing with about 10 different adjusters. These “adjusters took unreasonable positions and made multiple assertions that Eisenberg helped [Sengstack] understand were contrary to California insurance law,” and the adjusters lied about Sengstack’s policy provisions and offered much less than what was owed.

Defendants opposed the motion for preliminary injunction. First, they argued plaintiffs were not entitled to a preliminary injunction because mandate provided an adequate remedy at law. Second, they argued plaintiffs were seeking mandatory injunctive relief and plaintiffs could not meet their burdens of establishing (1) a “clear” right to the requested relief, and (2) a significant showing of irreparable injury to plaintiffs absent a preliminary injunction.

Demurrer

On September 5, 2018, defendants filed a demurrer to the first amended complaint.

Order Denying Plaintiffs’ Motion for Preliminary Injunction

On October 25, 2018, the trial court (Honorable Andrew Y.S. Cheng) denied plaintiffs’ motion for preliminary injunction. The court explained, “Plaintiffs remedy is to pursue a writ of mandate for non-performance of a mandatory legal duty,” citing Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 442. The court then gave a second reason for denying the motion: “Further, plaintiffs have not met their burden to obtain a mandatory preliminary injunction against defendant[s],” citing Davenport v. Blue Cross of California (1997) 52 Cal.App.4th 435, 446 (Davenport), and Tahoe Keys Property Owners’ Assn. v. State Water Resources Control Bd. (1994) 23 Cal.App.4th 1459, 1471.

Order on the Demurrer

The same day it denied plaintiffs’ motion for preliminary injunction, the trial court ruled on defendants’ demurrer. The court sustained the demurrer without leave to amend as to the first, second, and third causes of action (the cease-and-desist claims) and with leave to amend as to the remaining six causes of action (the consumer complaint and order-to-show-cause claims).

Second Amended Complaint

On November 5, 2018, plaintiffs filed a second amended complaint, which contained 12 causes of action. The first through sixth causes of action in the new complaint corresponded to the seventh through ninth causes of action asserted in the first amended complaint, that is, the order-to-show-cause claims. The seventh through twelfth causes of action in the second amended complaint corresponded to the fourth through sixth causes of action in the first amended complaint (consumer complaint claims). (The second amended complaint did not contain cease-and-desist claims because the demurrer as to those claims had been sustained without leave to amend.)

Appeal and Post-Appeal Activity

On December 24, 2018, plaintiffs filed a notice of appeal of the order denying the motion for preliminary injunction.

SB 240

On October 3, 2019, Senate Bill No. 240 (SB 240) was signed into law effective immediately. (SB 240 (2019-2020 Reg. Sess.) Stats. 2019, ch. 502, § 12.) According to the Legislative Counsel’s Digest, the law requires the CDI “to annually prepare and deliver to every Insurance Adjuster Act licensee a notice describing the most significant California laws pertaining to property policies, as well as a handbook for adjusting in California that includes information relevant to evaluating damage caused by an emergency.” (Legis. Counsel’s Dig., SB 240 (2019-2020 Reg. Sess.); see § 14046.)

SB 240 also amended sections 14022 and 14022.5, so that the CDI “shall not be required to investigate whether a person is employed exclusively and regularly by one employer pursuant to” section 14022, and the CDI “shall not be required to investigate the employment or contractor status of a person registered pursuant to” section 14022.5. (§§ 14022, subd. (a)(3), added by Stats. 2019, ch. 502, § 3; 14022.5, subd. (e), added by Stats. 2019, ch. 502, § 4.) According to plaintiffs, SB 240 was a “codification of [their own] settlement proposal” in this case, which proposal defendants did not respond to. Eisenberg states, “A salient feature of the [plaintiffs’] proposed settlement was for [defendants] to (1) create and implement a vehicle for training of unlicensed out-of-state adjusters on pertinent provisions of California insurance law, and (2) require adjusters to provide claimants with a copy of [defendants’] periodically updated summary of important California insurance laws pertaining to mass disasters.”

Motion to Dismiss Appeal

On October 15, 2019, defendants moved to dismiss this appeal on the ground SB 240 rendered the appeal moot. They argue the new law “clarifies that CDI has neither a duty nor an obligation to determine whether an emergency adjuster is in fact an employee or an independent contractor,” and “As a result, the injunction appellants seek is unavailable as a matter of law, and the appeal is moot.”

Plaintiffs Voluntarily Dismiss Certain Claims

By letter dated December 6, 2019, defendants informed this court that plaintiffs had requested dismissal of the first through sixth causes of action of their second amended complaint, and dismissal was entered November 13, 2019. The dismissed claims (the order-to-show-cause claims) correspond to the seventh through ninth causes of action in the first amended complaint (which is the operative pleading for this appeal).

Defendants assert plaintiffs’ voluntary dismissal of these claims is an additional reason plaintiffs’ appeal should be dismissed as moot. We consider the motion to dismiss the appeal with the merits.

DISCUSSION

A. Plaintiffs’ Contentions

This is an appeal from the trial court’s order denying the plaintiffs’ motion for a preliminary injunction, which is made appealable by Code of Civil Procedure section 904.1, subdivision (a)(6). This is not an appeal from the court’s ruling on the demurrer to the first amended complaint, which is not appealable. (Berri v. Superior Court (1955) 43 Cal.2d 856, 860; Code Civ. Proc., § 904.1.)

Plaintiffs assert, “This appeal challenges Judge Cheng’s order denying a preliminary injunction. The appeal pertains to three causes of action in the first amended petition and complaint, in which Eisenberg and Sengstack contended that CDI had abused its discretion in refusing to enforce certain discretionary provisions of the Insurance Code addressing the licensing and registration of insurance adjusters. As to those three causes of action, Judge Cheng sustained CDI’s demurrer without leave to amend because he concluded that the discretionary nature of those statutory provisions put them beyond the writ of mandate’s reach [i.e, the first through third causes of action—the cease-and-desist claims]. [¶] This was error. The law is well settled that mandate lies to correct a public agency’s abuse of discretion that is contrary to the public interest.” (Italics added.) In other words, despite the nonappealability of the court’s ruling on the demurrer, plaintiffs attempt to reargue the merits of the demurrer in this appeal.

Plaintiffs further urge this court to “adjudicate additional issues for the trial court’s guidance on remand.” It is unnecessary to resolve these “additional issues” to dispose of this appeal, and we decline to consider them.

B. The Appeal is Moot as to the First Through Third Causes of Action

According to plaintiffs themselves, their appeal is from the order denying their motion for a preliminary injunction as to the first through third causes of action (the cease-and-desist claims). As we have seen, however, the trial court sustained a demurrer to these claims without leave to amend, which means the appeal is moot. (See Korean American Legal Advocacy Foundation v. City of Los Angeles (1994) 23 Cal.App.4th 376, 399 [where the trial court sustained a demurrer without leave to amend as to “ ‘the only cause of action which might have supported a preliminary injunction [in plaintiffs’ favor], [their] appeal from the denial of a preliminary injunction [was dismissed as] moot’ ”]; MaJor v. Miraverde Homeowners Assn. (1992) 7 Cal.App.4th 618, 623 (MaJor) [same].)

In MaJor, the plaintiff brought a claim under the Unruh Civil Rights Act and sought a preliminary injunction. The trial court denied the preliminary injunction motion, and the plaintiff appealed. While her appeal was pending, the trial court sustained a demurrer to her Unruh Act claim without leave to amend. As a result of the court’s ruling on the demurrer, the appeal of the denial of a preliminary injunction became moot. (MaJor, supra, 7 Cal.App.4th at p. 623.)

The Court of Appeal explained: “A preliminary injunction is an interim remedy designed to maintain the status quo pending a decision on the merits. [Citation.] It is not, in itself, a cause of action. Thus, a cause of action must exist before injunctive relief may be granted. [Citation.] Accordingly, where the complaint fails to state a cause of action an order granting a preliminary injunction must be reversed. [Citation.]

“An appeal from an order denying a preliminary injunction does not deprive the trial court of jurisdiction to proceed to try the case on the merits. [Citation.] If the court can try the case on the merits then a fortiori it can determine the case has no merit by sustaining a demurrer without leave to amend. In the present case, the trial court having sustained a demurrer without leave to amend to the only cause of action which might have supported a preliminary injunction in favor of [the plaintiff], her appeal from the denial of a preliminary injunction is moot.” (MaJor, supra, 7 Cal.App.4th at p. 623.)

Likewise, in this case, the trial court’s order sustaining defendants’ demurrer to the first through third causes of action without leave to amend rendered this appeal moot. There is no relief available to plaintiffs in this appeal. Potentially, plaintiffs may appeal the ruling on the demurrer when there is a final judgment in this case. (See Jennings v. Marralle (1994) 8 Cal.4th 121, 128 [“an order sustaining a demurrer . . . is generally reviewable on appeal from the final judgment in the action”].)

C. The Appeal is Moot as to the Seventh Through Ninth Causes of Action

Plaintiffs voluntarily dismissed their order-to-show-cause claims. Since these claims no longer exist, no injunctive relief may be granted. (MaJor, supra, 7 Cal.App.4th at p. 623.) To the extent plaintiffs appeal the denial of their preliminary injunction motion as to the seventh through ninth causes of action (the order-to-show-cause claims), the subsequent dismissal of the claims renders the appeal moot. Accordingly, we grant defendants’ motion to dismiss the appeal in part.

D. Plaintiffs Fail to Show Reversible Error

To the extent the appeal is not moot and/or concerns the denial of preliminary injunctive relief as to the fourth through sixth causes of action (the consumer complaint claims), plaintiffs have failed to show the trial court abused its discretion in denying the motion.

1. Preliminary Injunctions and Standard of Review

“The decision whether to issue a preliminary injunction requires the trial court to ‘ “evaluate two interrelated factors: (i) the likelihood that the party seeking the injunction will ultimately prevail on the merits of his [or her] claim, and (ii) the balance of harm presented, i.e., the comparative consequences of the issuance and nonissuance of the injunction.” ’ [Citation.] The court’s ruling is not an adjudication of ultimate rights, but balances the respective equities of the parties to determine whether ‘ “ ‘ “pending a trial on the merits, the defendant should or . . . should not be restrained from exercising the right claimed by him [or her].” ’ ” ’ [Citation.]

“Although the general purpose of this interim measure is to preserve the status quo pending a determination on the merits of the action, the court ‘also has the power to issue a preliminary injunction that “ ‘ “mandates an affirmative act that changes the status quo” ’ ” [citation], but should do so only in those “ ‘ “extreme cases where the right thereto is clearly established.” ’ ” ’ [Citation.]

“Ordinarily, the decision whether to grant a preliminary injunction is reviewed for an abuse of discretion, and factual findings underlying the court’s ruling are reviewed for substantial evidence. [Citation.] However, the appellate court will more closely scrutinize an injunction that changes the status quo.” (Brown v. Pacifica Foundation, Inc. (2019) 34 Cal.App.5th 915, 925 (Brown).) “A trial court will be found to have abused its discretion only when it has ‘ “exceeded the bounds of reason or contravened the uncontradicted evidence.” ’ ” (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69.)

“When a trial court denies an application for a preliminary injunction, it implicitly determines that the plaintiffs have failed to satisfy either or both of the ‘interim harm’ and ‘likelihood of prevailing on the merits’ factors. On appeal, the question becomes whether the trial court abused its discretion in ruling on both factors. Even if the appellate court finds that the trial court abused its discretion as to one of the factors, it nevertheless may affirm the trial court’s order if it finds no abuse of discretion as to the other. (Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286–287 (Cohen).)

An “ ‘order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown. This is not only a general principle of appellate practice but an ingredient of the constitutional doctrine of reversible error.’ ” (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) The burden rests with plaintiffs to show the trial court in this case committed reversible error. (Yu v. University of La Verne (2011) 196 Cal.App.4th 779, 787.)

2. Analysis

Plaintiffs assume the trial court denied the motion for preliminary injunction only because it determined (incorrectly in their view) that plaintiffs failed to state a claim as to the first three causes of action. But the trial court denied the preliminary injunction motion as to all nine of plaintiffs’ causes of action (not just the first through third causes of action as to which it sustained a demurrer without leave to amend), and one of the court’s reasons for denying the motion was that plaintiffs failed to meet their burden to obtain a mandatory preliminary injunction.

Thus, we presume the trial court found both that plaintiffs were unlikely to prevail on the merits and that they failed to show interim harm warranting mandatory preliminary injunctive relief. (Cohen, supra, 40 Cal.3d at pp. 286–287.) Because plaintiffs fail to challenge the court’s finding on interim harm, their appeal fails. (See id. at p. 287 [an appellate court may affirm a denial of a preliminary injunction if there is no abuse of discretion as to either of the factors].)

“If an appeal is pursued, the party asserting trial court error may not then rest on the bare assertion of error but must present argument and legal authority on each point raised. [Citation.] This latter rule is founded on the principle that an appealed judgment is presumed correct, and appellant bears the burden of overcoming the presumption of correctness. (Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 649–650.) Plaintiffs’ appeal fails because they have failed to overcome the presumption that the trial court correctly denied their motion for preliminary injunction.

DISPOSITION

The appeal is dismissed to the extent plaintiffs appeal the trial court’s order denying the motion for preliminary injunction as to the first through third and seventh through ninth causes of action in the first amended complaint. The order denying the motion for a preliminary injunction is affirmed.

 

_________________________

Miller, J.

We concur:

_________________________

Richman, Acting P.J.

_________________________

Stewart, J.

A156224, Eisenberg v. Lara