2014-00167677-CU-BC

Maleehai Rodriguez vs. Confie Seguros Insurance Services

Nature of Proceeding: Motion to Strike Portions of Second Amended Complaint

Filed By: Michelman, Sanford L.

Defendants Confie Seguros Insurance Services and Sacramento Auto Insurance Center, Inc.’s motion to strike portions of Plaintiffs Maleehai and Bertha Rodriguez’s second amended complaint (“SAC”) is ruled upon as follows.

Defendants move to strike Plaintiffs’ request for attorneys’ fees and punitive damages.

Defendants’ request for judicial notice is granted to the same extent it was granted in connection with Defendants’ demurrer.

The motion is denied as to the request for attorneys’ fees. While no statute or contract supporting an attorney fee award is alleged, Plaintiffs argue in opposition that they would be entitled to fees pursuant to CCP § 1021.5 if they prevail. A “prevailing plaintiff may seek attorney fees as a private attorney general under Code of Civil Procedure section 1021.5.” (Zhang v. Superior Court (2013) 57 Cal.4th 364, 371, fn.4.) Regardless of the merits of Plaintiff’s’ claims, the Court declines to strike the request for fees. CCP § 1021.5, which provides for an award of fees under the private attorney general doctrine states that fees may be awarded upon motion “to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important public right affecting the public interest.” (CCP § 1021.5.) While Defendants argue that Plaintiff’s claims will not meet CCP § 1021.5’s standards, whether or not a particular action has resulted in the enforcement of an important public right is not properly determined until the litigation has concluded. The Court will not make that determination on the motion to strike.

Further, there is no requirement that a request for attorneys’ fee under CCP § 1021.5 be plead with any specificity much less be pled at all. “There is no requirement that the intent to seek attorney fees under section 1021.5 must be pleaded in the underlying action…Such fees are not part of the underlying cause of action, but are incidents to the cause and are properly awarded after entry of a…judgment…” ( Snatchko v. Westfield, LLC (2010) 187 Cal.App.4th 469, 497 [citations omitted] [emphasis in original].) Thus it is error for a trial court to strike a prayer for attorney fees based on a failure to adequately plead their basis. (Id.) Granting Defendants’ motion to strike the request for fees would be erroneous.

The motion to strike punitive damages is granted as none of Plaintiffs’ three causes of action (declaratory relief, unjust enrichment, B&P § 17200) support an award of actual damages, much less intentional tort. “In California, as at common law, actual damages are an absolute predicate for an award of exemplary or punitive damages.” ( Kizer v. County of San Mateo (1991) 53 Cal.3d 139, 147.) “[N]o claim for compensatory or punitive damages can be recovered in a [UCL] action.” (Zhang v. Superior Court (2011) 57 Cal.4th 364, 376.) Plaintiffs do not address this dispositive authority. The Court need not address the additional argument that there are no facts alleged to support an award of punitive damages given the above.

As a result, the motion to strike is denied as to the request for attorneys’ fees and granted as to the request for punitive damages.

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

Item 8 2014-00167677-CU-BC

Maleehai Rodriguez vs. Confie Seguros Insurance Services

Nature of Proceeding: Hearing on Demurrer to Second Amended Complaint

Filed By: Michelman, Sanford L.

Defendants Confie Seguros Insurance Services and Sacramento Auto Insurance Center, Inc.’s demurrer to Plaintiffs Maleehai and Bertha Rodriguez’s second amended complaint (“SAC”) is ruled upon as follows.

In this putative class action, Plaintiffs allege that Defendants, insurance brokers, have violated fiduciary duties by charging excess broker fees and improperly writing new policies in order to charge additional and unjustified broker fees. Plaintiffs contend that Defendants have a practice of churning unnecessary broker fees by misrepresenting the nature of existing policies to induce customers to purchase new policies. Plaintiffs purport to represent “[a]ll California residents who used Cost-U-Less’ brokerage services to obtain or modify their automobile insurance policy, from August 13, 2010 to present and from who Defendant Brokers solicited payment of broker fees for any of the following services: (1) adding or removing a driver; (2) adding or removing a vehicle; (3) renewing an insurance policy.” (SAC ¶ 3.) Plaintiffs allege causes of action for declaratory relief, unjust enrichment, and violations of Business & Professions Code § 17200.

Defendants’ request for judicial notice is granted as to the existence of the SAC in addition to Plaintiffs’ notice of errata including exhibits A and B which were referred to in the SAC but not attached. The Court notes Plaintiffs’ objection to the request for judicial notice to the extent that Defendants ask the Court to take judicial notice of anything more than the existence of the exhibits. Exhibits A and B are the broker contracts Plaintiffs allegedly entered into with Defendants and as to which they allege there is a controversy whether the contracts allowed Defendants to rewrite policies and charge certain fees. The Court simply takes judicial notice of the existence of the documents and does not take judicial notice of any proffered meaning of the documents by Defendants. “Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.) Indeed, when, “judicial notice is taken of a document, however, the truthfulness and proper interpretation of the document are disputable.” ((StorMedia, Inc. v. Superior Court (1999) 20 Cal.4th 449, 457, fn.9.)

First Cause of Action (Declaratory Relief)

Defendants’ demurrer is sustained with leave to amend for failure to state facts sufficient to constitute a cause of action. Generally, a party may obtain declaratory relief with respect to the rights and duties of the

parties to a written contract if there is an actual controversy as to such rights and duties. (§ 1060.) However, a court may properly refuse to grant declaratory relief if such relief “is not necessary or proper at the time under all the circumstances.” (§

1061.) Defendants argue that the declaratory relief cause of action fails because there is no actual controversy, and that it is identical to the other causes of action.
“The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject.” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 79 [emphasis in original].) “Obviously, the requirement cannot be met in such a bootstrapping manner; ‘a request for declaratory relief will not create a cause of action that otherwise does not exist.’” (Id. at 80 [citations omitted].) Defendants argue first that there is no actual controversy because Plaintiffs have not alleged that the insurance policies they obtained from Defendants are in effect and thus that the parties have any ongoing contractual or other relationship.

Integral to the analysis, there must be a controversy. Declaratory relief operates prospectively, serving to set controversies at rest. If there is a controversy which calls for a declaration of rights, it is no objection that past wrongs are also to be redressed; but there is no basis for declaratory relief where only past wrongs are involved. Hence, where there is an accrued cause of action for an actual
breach of contract or other wrongful act, declaratory relief may be denied. Baldwin v. Marina City Properties, Inc. (1978) 79 Cal. App. 3d 393, 407. Plaintiff is not entitled to declaratory relief absent an independent viable claim. Lane v. Vitek Real Estate Indus. Group, 713 F. Supp. 2d 1092, 1101 (E.D. Cal. 2010); see also Phipps v. Wells Fargo Bank, N.A., 2011 U.S. Dist. LEXIS 10550 at *50-51 (E.D. Cal. Jan. 27, 2011). “Whether a claim presents an ‘actual controversy’ within the meaning of [CCP] section 1060 is a question of law….” (Environ’l Defense Proj. of Sierra County v. County of

Sierra (2008) 159 Cal.App.4th 877, 885.)

As pointed out by Plaintiffs in opposition, a “general demurrer is usually not an appropriate method for testing the merits of a declaratory relief action, because the plaintiff is entitled to a declaration of rights even if it is adverse to the plaintiff’s interest.” (Qualified Patients Ass’n v. City of Anaheim (2010) 187 Cal.App.4th 734, 751.) “Sustaining a demurrer when the complaint reveals such a controversy constitutes error.” (Otay Land Co. v. Royal Indem. Co. (2008) 169 Cal.App.4th 556, 562.) While it may be inappropriate to address the merits of the declaratory relief cause of action on a demurrer, it is appropriate to determine whether there is an actual controversy, because absent any controversy, there is no basis for declaratory relief.

Here Defendants are correct that the named Plaintiffs have not alleged that any policies they obtained from Defendants are in effect or that there is some ongoing contractual or other relationship between the parties. Plaintiffs essentially concede as much in opposition when they argue that the proposed putative class necessarily includes individuals who are in contract with Defendants. They do not contend that they have alleged that they themselves are currently in contract with Defendants or that they have any current relationship with them. Declaratory relief is prospective only and not a means to redress past wrongs. (County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 607-608.) At most, as to themselves, Plaintiffs have only alleged that Defendants committed past wrongs in charging unnecessary fees, etc. As to Plaintiffs, there is no current justiciable controversy alleged over which the Court could declare any prospective rights and the first cause of action is deficient as pled.

As a result, the demurrer to the first cause of action is sustained with leave to amend.

Given the above, the Court need not consider the additional arguments in support of the demurrer to the first cause of action or in opposition to the demurrer.

Second Cause of Action (Unjust Enrichment)

Defendants’ demurrer is overruled.

Defendants first argue that unjust enrichment is not a recognized cause of action. The Court is cognizant of the line of cases stating that unjust enrichment is not a stand alone cause of action, however, the instant cause of action is appropriately supported by allegations of an adequate underlying wrong which could support unjust enrichment as a remedy. (Cf. Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 794 [no separate cause of action] and Lectrodryer v. Seoul Bank (2000) 77 Cal.App.4th

723, 726 [recognizing cause of action].) As seen from the parties’ papers, there are numerous other cases demonstrating the split amongst the courts. It has been noted that Courts have observed “a split of authority in California as to whether a claim for unjust enrichment is recognized as an independent cause of action.” (Concorde Equity II, LLC v. Miller (N.D. Cal. 2010) 732 F. Supp. 2d 990, 1001.) California courts agree that ‘unjust enrichment’ is in effect, ‘the result of a failure to make restitution under circumstances where it is equitable to do so.’” (Concorde Equity II, LLC v. Miller
, 732 F. Supp. 2d 990, 1001 (N.D. Cal. 2010), quoting Melchior v. New Line Prods., Inc., (2003) 106 Cal. App. 4th 779, 793.) Unjust enrichment is synonymous with the term “restitution.” (Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1314.) As explained below, the instant cause of action is supported by allegations of an underlying wrong sufficient to support unjust enrichment as a remedy even if there is no stand alone claim for unjust enrichment. However, even the cases indicating that there is such a cause of action recognize that it must be premised on an underlying wrong. (Lectrodryer v. Seoul Bank (2000) 77 Cal.App.4th 723.)

The elements of an unjust enrichment claim are (1) receipt of a benefit by the defendant; and (2) the defendant’s unjust retention of the benefit at the expense of another. (Elder v. Pacific Bell Telephone Co. (2012) 205 Cal.App.4th 841, 857.) Plaintiffs have alleged that Defendants charged excessive broker fees and improperly wrote new policies in order to charge additional and unjustified broker fees. (SAC ¶

51.) Plaintiff allege that they paid the fees and that Defendants were unjustly enriched. (Id. ¶¶ 54, 55.)

Defendants argue that even if there is a stand alone claim for unjust enrichment the claim fails because Defendants are legally permitted to charge broker fees pursuant to 10 CCR § 2198.3(a) which does not cap any fees so long as the consumer has agreed to the fees in advance in writing after disclosure of all material facts. Defendants reason that as shown from the contracts attached to Plaintiffs’ errata to the SAC, the fees were disclosed in writing to Plaintiffs. Plaintiffs counter that despite the regulation, Defendants owe fiduciary duties are brokers to avoid conflicts of interest, self-dealing and excessive compensation. (Mark Tanner Construction v. Hub International Ins. Servs. (2014) 224 Cal.App.4th 574, 586.)

Here, even assuming that Defendants are correct with respect to the argument that an unjust enrichment claim cannot be premised on claims that they charged excessive fees, there are other allegations in the SAC that can support an unjust enrichment theory. To that end, Plaintiff Maleehai Rodriguez alleged that she was “persuaded” to purchase another policy well before her current policy expired which did not improve her position in any way and for which Defendants’ sole motivation was to inflate fees. (SAC ¶ 31.) Bertha Rodriguez alleged that she was told when she tried to renew her policy prior to the expiration of her policy that she could not do so at Defendants’ office but would receive a letter allowing her to do so. (SAC ¶ 33.) She then allegedly received a letter dated February 13, 2018, stating she could renew her policy if payment was received by February 11, two days prior to the date of the letter. (Id.) She alleged that she brought the letter to the office and was told that she could not renew her policy and instead had to purchase a new one resulting in payment of additional broker fees. (Id. ¶ 34.) Plaintiffs have alleged that Defendants engage in a course of conduct by which they misrepresent the nature and necessity of the broker fees charged. (Id. ¶ 35.) These allegations are sufficient to demonstrate an unjust enrichment claim.

Defendants also argue that there can be no unjust enrichment claim when the parties have an express contract. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1355; California Medical Assn. v. Aetna U.S. Healthcare of California, Inc. (2001) 94 Cal.App.4th 151, 172) These cases are inapposite. For example, Durell, involved a claim by an uninsured patient against a defendant where the defendant routinely granted discounts to patients covered by Medicare or private insurance. The Court noted that restitution may in fact be awarded even if there was an express contract where the contract was procured by fraud, or was unenforceable or ineffective for some reason. (Id. at 1370.) The Durell court specifically noted that the plaintiff did not allege that he paid in excess of the reasonable value for the services he received or that the services were not what he paid for them. (Id.) But here, while not specifically alleging that any contract was unenforceable, Plaintiffs are alleging that Defendants misrepresented the nature and necessity of fees, engaged in fraud in the underwriting process and that their policies were unnecessarily rewritten and that they were charged for fees that were not necessary and which should not have been charged. The general rule that there can be no claim for unjust enrichment where there is an express contract does not preclude the claim here, at least on this pleading motion. The cases cited in reply holding that there can be no claim for unjust enrichment resulting in an implied-in-fact contract where there exists a valid express contract covering the same matter and the plaintiff has not alleged the express contract is void or rescinded to proceed with its quasi-contractual claim do not change the result. (E.g., Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 203.) There, the plaintiff sought to recover on a contract and also on an unjust enrichment claim in which it re-alleged the existence of the contract. But here, Plaintiffs have not re-alleged the existence of a valid contract in the unjust enrichment claim and indeed there has yet been no determination that a valid contract covered the parties’ relationship such that it could be said that the cause of action here is barred at the pleading stage.

Moreover, even assuming the existence of a valid express contract, a plaintiff is permitted to plead in the alternative and even make inconsistent allegations. (See, e.g., Adams v. Paul (1995) 11 Cal.4th 583, 601; Crowley v. Katleman (1994) 8 Cal.4th 666, 690-691; Rader Co. v. Stone (1986) 178 Cal.App.3d 10, 29; 4 Witkin, Cal. Procedure (3d ed. 1985) Pleading, § 356-358, pp. 411-414.

The demurrer is overruled.

Third Cause of Action (Violation of Bus. & Prof. Code § 17200)

Defendants’ demurrer is overruled.

Plaintiffs allege that Defendants’ practices of re-writing and underwriting their policies so that they can charge unnecessary and excessive broker fees are unfair and fraudulent. (SAC ¶¶ 64, 65.) As discussed above, they alleged that Defendants persuaded them to purchase a policy that did not improve their position solely to generate broker fees and that Defendant essentially precluded them from renewing a policy before it expired in order to get them to purchase a new policy and generate additional broker fees. These allegations are sufficient. A business practice is unfair when it “offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” (State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1104.) Unfairness under the UCL “is an equitable concept that cannot be mechanistically

determined under the relatively rigid legal rules applicable to the sustaining or overruling of a demurrer…‘the determination of whether a particular business practice is unfair necessarily involves an examination of its impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer….While this process is complicated enough after a hearing in which the
defendant has revealed the factors determining the utility of his conduct, it is really quite impossible if only the plaintiff has been heard from, as is the case when it is sought to decide the issue of unfairness [under the UCL on demurrer. Therefore-since the complaint is unlikely to reveal defendant’s justification-if that pleading states a prima facie case of harm, having its genesis in an apparently unfair business practice, the defendant should be made to present its side of the story. If, as will often be the case, the utility of the conduct clearly justifies the practice, no more than a simple motion for summary judgment would be called for.” (Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167.) “What constitutes ‘unfair completion” or “unfair or fraudulent business practice’ under any given set of circumstances is a question of fact.” (People v. McKale (1979) 25 Cal.3d 626, 635.) For pleading purposes, the allegations are sufficient to demonstrate a cause of action under the unfair prong. Liberally construed, Plaintiffs have alleged that they were persuaded to purchase new policies which were not in their best interest for the sole purpose of generating broker fees.

In addition, the allegations are sufficient under the fraudulent prong which merely requires a showing that members of the public are likely to be deceived. (Schnall, supra, 78 Cal.App.4th at 1167.) For example, Plaintiffs allege that when customers call to add or delete a vehicle from a policy or even make an address change, they are sold a new policy and charged new broker fees and that management has ignored or encouraged this fraud. (SAC ¶¶ 24, 25.) These allegations are sufficient.

Defendants’ argument that California law permits broker fees so long as disclosed does not change the result. The allegations here concern not simply the charging of fees but the manner in which they are charged, e.g. by persuading consumers to purchase new policies when the policy does not improve the consumer’s position and/or prevents the consumer from renewing a policy.

The Court need not address the arguments regarding the unlawful prong.

The demurrer is overruled.

Uncertainty

Defendants’ demurrer to the entire SAC on the basis of uncertainty is overruled.

Demurrers for uncertainty are disfavored and only sustained where the pleading is so muddled that the responding party cannot reasonably respond. The favored approach is to clarify any uncertainty or ambiguity through discovery. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) The SAC is not so uncertain that Defendants cannot respond. To the extent that Defendants desire additional details they can obtain such detail through discovery.

In sum, the demurrer is sustained with leave to amend as to the first cause of action and overruled as to the second and third causes of action.

Where leave was given, Plaintiffs may file and serve and amended complaint no later

than January 24, 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 as necessary.

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