Case Name: Rita Bhayani, et al. vs. The JAM Limited Partnership, et al.
Case No.: 1-10-CV-167490

This is a class action for violation of Civil Code section 1950.5, which governs the collection and use of security deposits in residential leases. The named plaintiffs Rita and Sachin Bhayani, Santosh Patankar, and Dhanunjay and Usha Vallamdas (“Plaintiffs”) allege that they are either naturalized American citizens of Indian descent or legal permanent residents of the U.S. who are citizens of India and were former tenants at Remington Grove Apartments (“RGA”) who did not receive an accurate move-out inspection, an accurate and prompt accounting of security deposit deductions and alleged damages, and all or a portion of their security deposits to which they were entitled under the law.

Plaintiffs sue defendants JAM Limited Partnership (“JAM LP”) and its general partner Stephen J. Pavlina, Jr. (“Mr. Pavlina”), SV JAM, L.P. (“SV JAM”), and PAV-JAM L.L.C. (“PAV-JAM”) (collectively “Defendants”) as individuals and entities with ownership interests in RGA. Plaintiffs allege that Defendants failed to conduct accurate inspections and reports of those inspections for tenants preparing to move out as required by law, failed to provide security deposit dispositions to former tenants promptly as required by law, imposed charges and security deposit deductions for normal wear and tear and damages not caused by the tenant, retaliated against tenants who exercised their rights under Civil Code section 1950.5, refused to refund security deposits and charged additional money based on false and fraudulent reasons and intimidated tenants and former tenants by filing or threatening to file frivolous and groundless lawsuits in connection with the return of security deposits. Plaintiffs further allege that Defendants have engaged in a pattern, practice or policy of discriminating against tenants and former tenants of Indian national origin. The Complaint asserts seven causes of action under: (1) Civil Code section 1950.5; (2) Business and Professions Code section 17200 et seq.; (3) fraud; (4) unjust enrichment; (5) the Federal Fair Housing Act (“FHA”); (6) the California Fair Employment and Housing Act (“FEHA”); and (7) the Unruh Civil Rights Act.

Trial began on March 17, 2014. The case was submitted to the jury on April 10, 2014, and on April 15, 2014, the jury returned a unanimous verdict, finding that Defendants violated Civil Code section 1950.5 and were guilty of fraud. The jury found no violation of the Fair Housing Act, California Fair Employment and Housing Act, and Unruh Civil Rights Act, or breach of contract as to the named Plaintiffs. The jury awarded compensatory damages of $173,171 in connection with the section 1950.5 and fraud claims. The jury further found that Defendants’ violation of section 1950.5 was in bad faith and awarded the Class additional damages of $346,342.

On April 16, 2013, the jury awarded the Class $1,566,393.90 in punitive damages.

Defendants now move for partial judgment notwithstanding the verdict.

Plaintiffs move for judgment on the second cause of action under Business and Professions Code section 17200 and the fourth cause of action for unjust enrichment, and for injunctive relief, declaratory relief, and pre-judgment interest on the jury’s verdict.

I. Defendants’ Motion for Partial Judgment Notwithstanding the Verdict

A. Legal Standards

“The court, before the expiration of its power to rule on a motion for a new trial, either of its own motion, after five days’ notice, or on motion of a party against whom a verdict has been rendered, shall render judgment in favor of the aggrieved party notwithstanding the verdict whenever a motion for a directed verdict for the aggrieved party should have been granted had a previous motion been made.” (Cal. Code Civ. Proc., § 629.)

“The trial judge’s power to grant a judgment notwithstanding the verdict is identical to his power to grant a directed verdict. [Citations.] The trial judge cannot weigh the evidence [citation], or judge the credibility of witnesses. [Citation.] If the evidence is conflicting or if several reasonable inferences may be drawn, the motion for judgment notwithstanding the verdict should be denied. [Citations.] ‘A motion for judgment notwithstanding the verdict of a jury may properly be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence to support the verdict. If there is any substantial evidence, or reasonable inferences to be drawn therefrom, in support of the verdict, the motion should be denied.’ [Citation.]” (Hauter v. Zogarts (1975) 14 Cal.3d 104, 110.)

“[A] trial court may grant a motion for judgment notwithstanding the verdict on some but not all issues or causes of action in a case.” (Beavers v. Allstate Ins. Co. (1990) 225 Cal.App.3d 310, 332.) A court may grant a partial motion for judgment notwithstanding the verdict on a punitive damages award if the evidence is legally insufficient to support the causes of action that justified punitive damages. (Id. at p. 314.)

B. Discussion

Defendants argue the jury’s fraud damages award is not supported by the law or the substantial evidence at trial. Defendants argue the jury confused the damage calculation for fraud with the damage calculation under California Civil Code section 1950.5, the latter of which provides for the return of the entire security deposit. Defendants submit that no Plaintiff or class member testified that he/she relied on Defendants’ representations as an inducement to enter into the lease and provide their security deposit. Defendants argue that even if there was substantial evidence to prove detrimental reliance on the misrepresentations, the damage proximately caused thereby is limited to compensation commensurate with the injury, and here, only 58 of the 401 class members did not receive a security deposit refund within 21 days. For these class members, Defendants argue their injury is the lost use of their security deposit from the twenty-second day after move-out to the day they actually received their refund checks, and the appropriate compensation would be the legal rate of interest on their money for that period of time, which totals less than $10,000.

Defendants argue the punitive damages award should be set aside as constitutionally excessive. Defendants argue that under guiding U.S. Supreme Court and California case law, the conduct at issue was not reprehensible because (1) the harm to class members was merely economic; (2) there was no evidence to support a finding that Defendants disregarded the health or safety of the class members; (3) the former tenants affected by Defendants’ conduct were not financially vulnerable; (4) 343 of the 401 class members received a refund check from Defendants with an itemized security deposit disposition within 21 days of their move-out; (5) Defendants’ conduct was not repeated conduct; and (6) Defendants’ conduct was unintentional. Defendants further argue the punitive damages award should be set aside because the ratio between the award and the actual harm to Plaintiffs is unreasonably high (9 times the fraud damages), and the California Legislature has already determined the appropriate maximum penalty for a landlord’s wrongful handling of security deposits to be the civil penalties under Civil Code section 1950.5 (e.g., twice the amount of the security deposit for bad faith claims).

Plaintiffs argue that a motion for judgment notwithstanding the verdict is an improper procedural mechanism to reduce damages. Plaintiffs further argue that even if a motion for judgment notwithstanding the verdict is permitted, there is substantial evidence to support the jury’s award of fraud damages and its finding of reliance. Regarding the punitive damages award, Plaintiffs argue (1) a motion for judgment notwithstanding the verdict to reduce punitive damages is procedurally improper; (2) the award is not excessive because (a) reprehensibility is supported by the fact that the conduct involved repeated actions and intentional deceit; (b) the ratio between actual and punitive damages is in the single digits; and (c) statutory damages under section 1950.5 do not limit the amount of punitive damages for fraud because section 1950.5 does not provide penalties for fraud.

1. Use of Motion for Judgment Notwithstanding the Verdict to Challenge Damages Awards

Plaintiffs argue that Defendants cannot use a motion for judgment notwithstanding the verdict to reduce a jury’s damage award. “When a jury returns its verdict, the trial judge determines whether that verdict as to liability is supported by substantial evidence; if it is not, he may, on his own motion, grant judgment notwithstanding the verdict. (Code Civ. Proc., § 629.) The court, however, cannot grant judgment notwithstanding the verdict merely upon the ground that damages were excessive or inadequate. That issue must be raised by a motion for new trial (Code Civ. Proc., § 657), and absent exceptional circumstances [citation] the trial court cannot grant a new trial on its own motion.” (Schroeder v. Auto Driveaway Co. (1974) 11 Cal.3d 908, 919.)

In Teitel v. First Los Angeles Bank (1991) 231 Cal.App.3d 1593, the Court of Appeal reversed a judgment notwithstanding the verdict that reduced the defendant’s punitive damages award, holding that “the legislative system as enacted makes it plain that damages, except those which may be determined as a matter of law, are to be fixed by the trier of fact and, if erroneous in amount, subject to the reduction or new trial procedure specified in Code of Civil Procedure section 662.5, subdivision (b). . . . We have concluded that the trial court erred in employing the device of a judgment notwithstanding the verdict to reduce the amount of punitive damages. We decline to substitute our judgment regarding the appropriate amount of punitive damages.” (Teitel, supra, 231 Cal.App.3d at pp. 1605-1606.)

Plaintiffs are correct to point out that Defendants’ partial motion for judgment notwithstanding the verdict seeks to reduce the amount of fraud and punitive damages. However, in doing so, Defendants’ motion challenges the fraud verdict as not supported by substantial evidence of detrimental reliance by Plaintiffs and the Class, which essentially challenges the sufficiency of the entire fraud cause of action. Because the punitive damages award is based on the jury’s finding of malice in connection with the fraud claim, a judgment notwithstanding the verdict in favor of Defendants on Plaintiffs’ fraud claim would eliminate the basis for punitive damages. This is not the same as reducing the damages awards based on the Court’s own reweighing of evidence.

Moreover, to the extent Defendants challenge the punitive damages award as constitutionally excessive, this is different from finding that a jury’s award is unreasonable based on the facts. (See Gober v. Ralphs Grocery Co. (2006) 137 Cal.App.4th 204, 212 [distinguishing Teitel].) “[I]n deciding the constitutional maximum, a court does not decide whether the verdict is unreasonable based on the facts; rather, it examines the punitive damages award to determine whether it is constitutionally excessive and, if so, may adjust it to the maximum amount permitted by the Constitution. This determination does not implicate the [] Plaintiffs’ right to have a jury decide their punitive damages claims. [Citation].” (Id. at p. 214.)

Thus, Defendants are permitted to bring a motion for judgment notwithstanding the verdict to challenge whether there was substantial evidence to support an essential element of the fraud claim and to challenge the punitive damages award as constitutionally excessive.

2. Fraud Damages

Plaintiffs argue that they submitted substantial evidence (lease agreements, documents and forms provided to tenants containing important information about the parties’ rights and responsibilities) from which the jury could reasonably conclude that Defendants intended for class members to rely on these documents. Plaintiffs argue that the lease documents and forms, by their very nature, reasonably induced reliance.
Plaintiffs argue that the trial evidence showed that Defendants falsely blamed a third-party vendor for having to mail “estimated” security deposit dispositions, and that Defendants provided 88 class members with fake carpet invoices. Plaintiffs argue the jury could reasonably conclude that the reason Defendants did not tell the truth about the security deposit delays was that tenants would demand their entire deposits back, take legal action, or post negative reviews of RGA on the Internet. Plaintiffs argue that these acts of lulling the class members into inaction constitute actionable fraud and support the jury’s fraud verdict. Plaintiffs further point out that Defendants do not dispute the jury’s findings that Defendants made false representations of important facts to the class members with knowledge that the representations were false, and with the intent that class members rely on those false representations.

In their reply brief, Defendants contend that they do dispute the jury’s finding of intentional misrepresentations, only not in this motion. For purposes of this motion, then, it should be presumed that there was substantial evidence to support the jury’s finding that Defendants made misrepresentations to the Class. Plaintiffs cite Vasquez v. Superior Court (1971) 4 Cal.3d 800 for the position that in a class action, if the court finds that material misrepresentations were made to the class, an inference of reliance would arise to the entire class.

Vasquez involved a demurrer to a class action complaint against a seller of freezers and the assignees of the sales contracts. The Court of Appeal reversed the sustaining of the demurrer, finding that the class action for fraud could lie against the seller and the assignees. On the issue of whether issues common to the putative class would predominate, the Vasquez court discussed the substantive law of fraud, including the element of reliance:

The rule in this state and elsewhere is that it is not necessary to show reliance upon false representations by direct evidence. “The fact of reliance upon alleged false representations may be inferred from the circumstances attending the transaction which oftentimes afford much stronger and more satisfactory evidence of the inducement which prompted the party defrauded to enter into the contract than his direct testimony to the same effect.” [Citations.]

Williston speaks in terms of a presumption: “Where representations have been made in regard to a material matter and action has been taken, in the absence of evidence showing the contrary, it will be presumed that the representations were relied on.” [Citation.] This rule is in accord with the Restatement. [Citation.] Whether an inference (as held in Hunter v. McKenzie[ (1925)] 197 Cal. 176, 185) or a presumption (as described by Williston and the Restatement) of reliance arises upon proof of a material false representation we need not determine in this case. It is sufficient for our present purposes to hold that if the trial court finds material misrepresentations were made to the class members, at least an inference of reliance would arise as to the entire class. Defendants may, of course, introduce evidence in rebuttal.

(Vasquez, supra, 4 Cal.3d at p. 814.) The Vasquez court continued in a footnote:

The requirement that reliance must be justified in order to support recovery may also be shown on a class basis. If the court finds that a reasonable man would have relied upon the alleged misrepresentations, an inference of justifiable reliance by each class member would arise. It should be noted in this connection that a misrepresentation may be the basis of fraud if it was a substantial factor in inducing the plaintiff to act and that it need not be the sole cause of damage. [Citation.] Plaintiffs suggest that individual proof of reliance may be dispensed with if, as they assert, fraud may be presumed from the alleged unconscionable price of the freezers. We need not discuss the merit of this theory since we conclude that if the trial court finds that the alleged misrepresentations were material, it could find an inference or rebuttable presumption of reliance by each class member without his direct testimony.

(Id., at p. 814, fn. 9.)

Defendants argue that Vasquez is inapplicable because it was decided for purposes of certifying a class action, and Plaintiffs seek to apply Vasquez one step further by using an inference alone to prove the relevance prong of their fraud claim at trial. However, Vasquez involved a demurrer to the fraud claim, and the portions quoted above were discussions of substantive law and secondary authorities on the elements of fraud. A motion for judgment notwithstanding the verdict may consider the “reasonable inferences to be drawn” from the evidence to support the verdict. (See Hauter, supra, 14 Cal.3d at p. 110.) Here, Vasquez holds that reliance can be inferred on a class-wide basis based on the same material misrepresentations having been made to the Class.

Defendants cite Mirkin v. Wasserman (1993) 5 Cal.4th 1082 for the position that such an inference of reliance cannot be supported. In Mirkin, the court held that Vasquez and another case (Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355) “do not support an argument for presuming reliance on the part of persons who never read or heard the alleged misrepresentations, such as plaintiffs in the case before us.” (Mirkin, supra, 5 Cal.5th at p. 1094, italics added.) Here however, Defendants do not challenge the jury’s finding that Defendants made misrepresentations to the Class. Thus, for purposes of this motion, Vasquez is on-point, and Mirkin is not.

Because there is substantial evidence to support an inference of the Class’s reliance on Defendants’ misrepresentations, the motion for partial judgment notwithstanding the verdict is DENIED as to the fraud claim. Defendants’ remaining challenge to the amount of fraud damages is improper on a motion for judgment notwithstanding the verdict. (See Schroeder, supra, 11 Cal.3d at p. 919.) Because the jury’s finding of malice is based on Defendants’ fraud, this claim provides a basis for punitive damages.

However, Defendants can still challenge punitive damages award as constitutionally excessive, as discussed below.

3. Punitive Damages

The seminal case on federal constitutional checks on state-court judgments awarding punitive damages is State Farm Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408 (“State Farm”).

“In a series of decisions culminating in State Farm, supra, 538 U.S. 408, the United States Supreme Court has determined that the due process clause of the Fourteenth Amendment to the United States Constitution places limits on state courts’ awards of punitive damages, limits appellate courts are required to enforce in their review of jury awards. [Citations.] The imposition of ‘grossly excessive or arbitrary’ awards is constitutionally prohibited, for due process entitles a tortfeasor to ‘“fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.”’ [Citation.]” (Simon v. San Paolo U.S. Holding Co. (2005) 35 Cal.4th 1159, 1171.)

“[C]ourts reviewing punitive damages [are instructed] to consider three guideposts: (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.” (State Farm, supra, 538 U.S. at pp. 416-417.)

a. Reprehensibility

To determine the reprehensibility of Defendants’ conduct, the Court must consider whether: “the harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident. [Citation.] The existence of any one of these factors weighing in favor of a plaintiff may not be sufficient to sustain a punitive damages award; and the absence of all of them renders any award suspect. It should be presumed a plaintiff has been made whole for his injuries by compensatory damages, so punitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence. [Citation.]” (State Farm, supra, 538 U.S. at p. 419.)

Here, Defendants’ acts caused only economic harm and did not involve disregard of the Class members’ health or safety. Plaintiffs do not argue that they and the Class were financially vulnerable targets of Defendants’ conduct.

However Defendants do not contend on this motion that the jury’s findings of malice, oppression and fraud are not supported by substantial evidence. Thus, there is at least one factor of reprehensibility present here: the harm was the result of intentional malice, trickery, or deceit. Defendants cite Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197 for the position that whether the conduct is the result of intentional conduct is “of little value” in assessing a California punitive damages award, and therefore, the intentional malice factor is “inapposite.” However, Major’s “of little value” comment was simply to note that in California, intent, willfulness or conscious disregard are already requisites for punitive damage awards, as opposed to “accidentally harmful conduct [which] cannot provide the basis for punitive damages[.]” (Id. at p. 1223.) This comment cannot be used to argue that an unchallenged jury finding of intentional malice is somehow “inapposite” to the analysis so as to somehow militate against supporting the punitive damages award.

There was also evidence at trial that Defendants “cut and pasted” the same language into every estimated security deposit disposition with knowledge the representations were not true, and sent at least 88 class members false invoices to support deductions. This was substantial evidence to support a finding that the conduct involved repeated actions.

Thus, two factors support the reprehensibility of Defendants’ conduct.

b. Disparity Between Actual Harm and Punitive Damages Award

As Defendants point out, the $1,566,363.90 punitive damages award is approximately 9 times the fraud damages award. Defendants argue the economic harm to the Class is small per class member, and this, combined with the low degree of reprehensible conduct, makes the multiplier of 9 outside the realm of constitutionally permissible punishment.

In Simon, supra, 35 Cal.4th at p. 1182, the California Supreme Court elaborated on State Farm’s discussion of ratios in assessing punitive damage awards:

We understand the [U.S. Supreme] court’s statement in State Farm that ‘few awards’ significantly exceeding a single-digit ratio will satisfy due process to establish a type of presumption: ratios between the punitive damages award and the plaintiff’s actual or potential compensatory damages significantly greater than 9 or 10 to 1 are suspect and, absent special justification (by, for example, extreme reprehensibility or unusually small, hard-to-detect or hard-to-measure compensatory damages), cannot survive appellate scrutiny under the due process clause. As stated in Williams v. ConAgra Poultry Company (8th Cir. 2004) 378 F.3d 790, 799, a ratio significantly greater than single digits ‘alerts the court[] to the need for special justification.’ [Citations.]

Multipliers less than nine or 10 are not, however, presumptively valid under State Farm. Especially when the compensatory damages are substantial or already contain a punitive element, lesser ratios ‘can reach the outermost limit of the due process guarantee.’ [Citation.] But we do not agree with the court in Diamond Woodworks, Inc. v. Argonaut Insurance Company (2003) 109 Cal.App.4th 1020, 1057 [135 Cal. Rptr. 2d 736], that ‘in the usual case’ the high court’s decisions establish an ‘outer constitutional limit’ of approximately four times the compensatory damages. Reviewing the history of double, triple and quadruple damages, the court in State Farm warned that ‘these ratios are not binding,’ but only ‘instructive.’ [Citation.] Moreover, their instruction, what ‘[t]hey demonstrate,’ is simply that ‘[s]ingle digit multipliers are more likely to comport with due process’ than ratios of 500 to 1, as in BMW, or 145 to 1, as in State Farm. [Citation.]

(Simon, supra, 35 Cal.4th at pp. 1182-1183, italics in original.)

Here, the 9:1 ratio of punitive to compensatory damages is not “significantly greater” than a single-digit ratio, but remains in the single digits. Thus, the award is not immediately suspect and requiring special justification (e.g., extreme reprehensibility or unusually small compensatory damages). Although the 9:1 ratio is also not presumptively valid, as Plaintiffs point out, the compensatory damage award will result in a payment of only $431.85 per class member according to Defendants’ calculations. The evidence does not clearly support the inference that this compensatory damage award includes a punitive component.

c. Difference Between Punitive Damages Award and Comparable Civil Penalties

The third State Farm guidepost regarding the difference between the punitive damages award and comparable civil penalties is about notice to the defendant. “The fundamental question is whether [the defendant] had reasonable notice that its tortious [conduct] could result in such a large punitive award.” (Continental Trend Resources v. Oxy USA (10th Cir. 1996) 101 F.3d 634, 640.)

“The third guidepost is less useful in [cases] where plaintiff prevailed only on a cause of action involving ‘common law tort duties that do not lend themselves to a comparison with statutory penalties’ [citation], than in a case where the tort duty closely parallels a statutory duty for breach of which a penalty is provided.” (Simon, supra, 35 Cal.4th at pp. 1183-1184.)

Defendants point out that the misrepresentations all stem from Defendants’ obligations under Civil Code section 1950.5, and section 1950.5 subdivision (l)’s double damages provision demonstrates the appropriate maximum penalty for a landlord’s bad faith handling of security deposits. Plaintiffs argue that section 1950.5 cannot be used as a comparator because it does not provide civil penalties for fraud. However, Plaintiffs do not discuss the bad faith provision in section 1950.5 subdivision (l). Defendants’ misrepresentations were made in connection with the rental agreement regarding security deposits, and in connection with the estimated security deposit dispositions. Arguably, this deceitful conduct “lend[s itself] to a comparison with” or “closely parallels” statutory bad faith violations of section 1950.5. Thus, Defendants make a colorable argument under the third State Farm guidepost that the 9:1 ratio is excessive when compared to the 2:1 ratio for civil penalties in cases of bad faith violations of section 1950.5.

Citing Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191, 1213, Plaintiffs argue the California Supreme Court approved of the Court of Appeal’s conclusion that the amount set for civil penalties under the Lemon Law (double damages for willful violations) did not limit the amount of punitive damages for fraud. However, the cited portion of Johnson is taken from the Supreme Court’s conclusion and remand order in which the high court focused on the deficiencies in the Court of Appeal’s State Farm analysis:

Regarding the ratio guidepost, the court [of appeal] merely observed that ‘a higher ratio of punitive to compensatory damages’ was constitutional here because the compensatory damages were strictly economic. Concerning the comparable-penalties guidepost, the lower court held only that the specification in the Lemon Law of a maximum twice-damages civil penalty for willful violations (§ 1794, subd. (c)) did not so limit punitive damages for fraudulent misrepresentation. In short, the Court of Appeal’s discussion of the last two State Farm/BMW guideposts lacks a justification for restricting punitive damages to three times the compensatory award.

(Johnson, supra, 35 Cal.4th at p. 1213.) Because there is no substantive discussion in Johnson in which the Supreme Court approves of the Court of Appeal’s holding on the Lemon Law, Johnson does not provide any real guidance in this case or to landlords generally for purposes of reasonable notice.

Without comparable case law in which similar punitive damages ratios were awarded beyond the 2:1 penalty ratio of section 1950.5 subdivision (l), it is difficult to say whether Defendants had reasonable notice that their tortious conduct could result in a 9:1 punitive damages award. Landlords in Defendants’ position might conclude that the most exposure they could have is 2:1 under section 1950.5 subdivision (l). On the other hand, one could make the case that Defendants’ conduct goes beyond a bad faith violation of the statutory duty. Section 1950.5 subdivision (l) pertains to a “bad faith claim or retention by a landlord or the landlord’s successors in interest of the security or any portion thereof in violation of this section, or the bad faith demand of replacement security in violation of subdivision (j)[.]” Here, one might argue the evidence of misrepresentations by Defendants goes beyond a “bad faith claim or retention…of the security” or “bad faith demand of replacement security”, since there was evidence of affirmative misrepresentations and falsified documents such as receipts and invoices.

The Court requests further briefing from the parties on the following issues: (1) whether there are comparable cases under section 1950.5 awarding punitive damages beyond the statutory 2:1 ratio for bad faith violations; and (2) whether the trial evidence shows that Defendants’ tortious conduct does not “closely parallel” a statutory breach of section 1950.5. The briefs may not exceed 8 pages in length and must be filed and served by 4:00 p.m. on June 20, 2014. The matter is CONTINUED to Friday, June 27, 2014 at 9:00 a.m. in Department 1. All aspects of the tentative ruling may be addressed at the continued hearing.

II. Plaintiffs’ Motion for Judgment

Plaintiffs move for judgment that Defendants violated Business and Professions Code section 17200 (the “Unfair Competition Law” or “UCL”). Plaintiffs also move for a judgment of injunctive relief to ensure that Defendants take steps to end their unlawful practices and policies. Plaintiffs seek a declaratory judgment that Defendants have been unjustly enriched by their unlawful acts. Finally, Plaintiffs seek statutory interest on the verdict at a rate of seven percent (7%) from the date each tenant moved out to the date of the Phase I verdict based on the data from Defendants’ tenant files (Trial Exh. 126).

Defendants argue that Plaintiffs fail to prove liability under the UCL because the jury did not specifically find that the named Plaintiffs had UCL standing or that there was a causal connection between Defendants’ unlawful policies and practices and the named Plaintiffs’ economic harm. Defendants further argue the UCL judgment is improper because Plaintiffs have failed to provide evidence of actual reliance on the misrepresentations, resulting in economic harm. Defendants argue Plaintiffs are not entitled to the requested injunctive relief because they failed to provide evidence that the unlawful conduct is ongoing or likely to recur. According to Defendants, the evidence in the record indicates a significant decrease in waiting time for final dispositions from 2009 to 2012. Defendants further argue the requested injunction is unreasonable because the law does not mandate that CAA approved forms be used for security deposit dispositions or that security deposits be held in separate trust accounts, and Plaintiffs seek to require Defendants to make records available for scrutiny by Plaintiffs’ counsel for an unlimited period of time.

Defendants argue Plaintiffs are not entitled to declaratory relief for unjust enrichment because unjust enrichment is not a cause of action, and the jury has already awarded damages to the Class to compensate them for their security deposits that were wrongfully and fraudulently retained by Defendants.

Defendants argue Plaintiffs are not entitled to prejudgment interest because damages were not capable of being made certain before trial for purposes of Civil Code section 3287 subdivision (a).

A. UCL

“Under the UCL, ‘[a]n unlawful business practice or act is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law.’ Virtually any law can serve as the predicate for a Business and Professions Code section 17200 action; it may be civil or criminal, federal, state or municipal, statutory, regulatory, or court-made. It is not necessary that the predicate law provide for private civil enforcement. . . . [Business and Professions Code s]ection 17200 “borrows” violations of other laws and treats them as unlawful practices independently actionable under section 17200 et seq.” (Gafcon, Inc. v. Ponsor & Assocs. (2002) 98 Cal.App.4th 1388, 1425 fn. 15 [internal quotation marks, brackets, and citations omitted].) Regarding UCL standing, Business and Professions Code section 17204 provides that a private individual bringing a UCL claim must have “suffered injury in fact and [have] lost money or property as a result of such unfair competition.”

Here, Defendants’ violation of Civil Code section 1950.5 and misrepresentations in connection with security deposit dispositions support a judgment for unlawful business practices. Class members’ payment of money in the form of security deposits, wrongfully retained by Defendants, constitutes “injury in fact” for purposes of UCL standing. There is sufficient causation in that Plaintiffs and the Class were injured by the very security deposit practices that serve as the predicate for Plaintiffs’ UCL claim.

Thus, Plaintiffs are entitled to a judgment on their second cause of action for violation of the UCL against Defendants.

B. Injunctive Relief

“Any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” (Cal. Bus. & Prof. Code, § 17203.)

Plaintiffs’ Proposed Statement of Decision contains the following injunctive relief orders:

 That Mr. Pavlina and any agent or employee providing any services to any defendant in connection with the collection, accounting, deduction, withholding or return of tenant security deposits (“covered agents or employees”) attend, on an annual basis for period of five years, at least one training, provided by California Apartment Association (CAA), National Apartment Association, Tenants Together, or the Institute of Real Estate Management;

 That each defendant, including their covered agents and employees, immediately cease and desist from any of the unlawful practices founded by the jury;

 That each defendant, including their covered agents and employees, adopt and follow the practices, policies, guidance and procedures published by CAA governing security deposits and shall only use CAA approved forms in connection with their handling of security deposits;

 That each defendant, including their covered agents and employees, maintain security deposits in a separate trust account;

 That each defendant provide each covered employee or agent with a copy of the Court’s injunction and obtain the covered employee or agent’s written acknowledgment that he or she has read a copy of the injunction;

 That each defendant to maintain records showing compliance with the terms of the injunction and that each defendant shall, upon written notice, make those records reasonable available for inspection by class counsel or any local, state or federal agency; and

 That each defendant file a statement with the Court within thirty days of the anniversary date of entry of the injunction a written statement, which reads: “I, [insert name], on behalf of [myself or defendant entity] hereby certify that [I or defendant entity], [my or its] employees and agents have complied with the provisions of the injunction entered in Bhayani et al. v. JAM LP et al, Case Number 1-09-CV-159244, during the period between [date] and [date].”

“To qualify for a permanent injunction, the plaintiff must prove (1) the elements of a cause of action involving the wrongful act sought to be enjoined…; and (2) the grounds for equitable relief. [Citation.]” (San Diego Unified Port Dist. v. Gallagher (1998) 62 Cal.App.4th 501, 503.) “‘An injunction cannot issue in a vacuum based on the proponents’ fears about something that may happen in the future. It must be supported by actual evidence that there is a realistic prospect that the party enjoined intends to engage in the prohibited activity. [Citations.]’ [Citation.]” (Nelson v. Pearson Ford Co. (2010) 186 Cal.App.4th 983, 1020.)

Here, Plaintiffs’ motion for a judgment of injunctive relief points to the fact that Defendants could have adopted subsequent remedial measures during the pendency of this litigation, but chose not to. However, a hard-fought lawsuit and adverse judgment awarding Plaintiffs substantial damages may have a strong deterrent effect. Moreover, Defendants cite to trial evidence suggesting that the waiting time for final dispositions has decreased significantly since 2009. Plaintiffs cite no countervailing evidence demonstrating a realistic prospect that Defendants intends to engage in the prohibited activity so as to justify a permanent injunction. Furthermore, Defendants’ point is well-taken that the proposed injunction is overly broad in ordering a separate trust account where there is no cited evidence showing a wrongful act in how security deposits were maintained.

Because Plaintiffs fail to show a realistic prospect that Defendants intend to engage in the same wrongful conduct, the motion for a judgment of injunctive relief is DENIED.

C. Unjust Enrichment

California appellate courts are not clearly in accord on whether unjust enrichment is an independent “cause of action” or simply a remedy. “Although some California courts have suggested the existence of a separate cause of action for unjust enrichment [citation], this court has recently held that ‘“[t]here is no cause of action in California for unjust enrichment.” [Citations.]’ Unjust enrichment is synonymous with restitution. [Citation.]’ [Citation.]” (Levine v. Blue Shield of Cal. (2010) 189 Cal.App.4th 1117, 1138; see Lectrodryer v. SeoulBank (2000) 77 Cal.App.4th 723, 726 [discussing elements of a “claim” for unjust enrichment].)

The UCL provides for restitution of any money or property which may have been acquired by means of unfair competition. (See Cal. Bus. & Prof. Code, § 17203.) Here, the jury’s finding of liability against Defendants for fraud and violation of Civil Code section 1950.5 supports UCL liability, which entitles Plaintiffs to the remedy of restitution. However, Defendants’ point is well-taken that Plaintiffs are not entitled to a declaratory judgment of unjust enrichment, since there is no corresponding cause of action in the operative Complaint.

Plaintiffs’ motion for judgment is GRANTED IN PART as to finding that Defendants must pay restitution under the UCL. The motion for a declaratory judgment of unjust enrichment is DENIED.

D. Prejudgment Interest

Pursuant to Civil Code section 3287 subdivision (a), Plaintiffs seek $57,446.07 in prejudgment interest on behalf of the Class based on first cause of action for violation of Civil Code section 1950.5. Plaintiffs calculated prejudgment interest at 7% per annum based on the time period between the date each Class member was owed a refund and the date of the jury’s verdict (April 15, 2014).

California Civil Code section 3287 allows recovery of prejudgment interest on damages. Under subdivision (a), “[a] person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt.” (Cal. Civ. Code, § 3287, subd. (a).)

The test for determining “certainty” is whether the defendant actually knows the amount owed or could have computed the amount from reasonably available information. (Children’s Hosp. & Med. Ctr. v. Bonta (2002) 97 Cal.App.4th 740, 774; Wisper Corp. v. California Commerce Bank (1996) 49 Cal.App.4th 948, 960.) “Damages are deemed certain or capable of being made certain within the provisions of subdivision (a) of section 3287 where there is essentially no dispute between the parties concerning the basis of computation of damages if any are recoverable but where their dispute centers on the issue of liability giving rise to damage. [Citations.]” (Esgro Central, Inc. v. General Insurance Co. of America (1971) 20 Cal.App.3d 1054, 1060.) “Thus, where the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate. [Citation.]” (Wisper Corp. v. Cal. Commerce Bank (1996) 49 Cal.App.4th 948, 960.)

Defendants argue that the damage awards could not have been calculated without the jury’s verdict because they returned varying amounts to 401 class members in accordance with security deposit dispositions that were specific to each Class member, and they had no means of computing further amounts due to Class members until a jury decided whether certain policies and practices were unlawful, and if so, whether such policies and practices caused damage.

Plaintiffs submit the declaration of Ryan Wheeler, a legal assistant at Plaintiffs’ counsel’s firm. Mr. Wheeler states that in connection with this motion, he used a computer spreadsheet program to calculate the number of days between the verdict and the 21-day statutory deadline for the return of each Class member’s security deposit based on Trial Exhibit 126 and created a column for this in the spreadsheet; then, he created a column entitled “77.18% of Final Charge for Repairs and Cleaning”, basing the percentage on the jury’s award of $173,171.00 in compensatory damages, which was 77.18% of the sum of the “Final Charge for Repairs and Cleaning” ($224,379.41), which was included in Trial Exhibits 126 and 128; then, he created a column entitled “Simple Interest on Money Owed Tenant”, entering a formula to calculate interest on the principal amount based on a 7% per annum interest rate.

Defendants argue that Plaintiffs offer no explanation on how the 77.18% figure discussed in Mr. Wheeler’s declaration was certain or capable of being made certain before the jury’s verdict. However, the fact that the jury ended up awarding compensatory damages in an amount that was different from the total amount of security deposits does not decide the issue of whether damages were certain or known without a judicial determination. The dispute in this lawsuit was not over the manner of computing the balance of security deposits owed; rather the dispute revolved around whether Defendants’ security deposit practices violated the law and whether Defendants made misrepresentations to the Class members. In this context, the amount of security deposits owed to vacating tenants by the twenty-first day after they vacated was knowable based on information reasonably available to Defendants.

Defendants do not challenge Plaintiffs’ use of a seven percent interest rate. (See Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1585-1586 [constitutional rate of 7 percent where no legislative act specifies rate of prejudgment interest].)

Thus, Plaintiffs shall be awarded pre-judgment interest in the amount of $57,446.07.

Plaintiffs shall submit a revised proposed Statement of Decision and proposed Judgment that conforms to the rulings in this Order within 30 days.