Judge: Stuart M. Rice, Case: 21STCV20095, Date: 2024-12-20 Tentative Ruling
Case Number: 21STCV20095 Hearing Date: December 20, 2024 Dept: 1
Moving Party: Plaintiff
Jay Aliff
Responding Party: Defendant
California Fair Plan Association
Ruling: Motion
for class certification denied.
This
is a proposed class action. Plaintiff
Jay Aliff (Plaintiff) alleges that defendant California Fair Plan Association
(Defendant) issues property insurance policies whose fire coverage is
unlawfully restrictive with respect to claims for smoke damage. Plaintiff now moves to certify the following
class:
All persons or
entities insured under a Fair Plan policy initiated or renewed after July 1,
2017, which supplies BASIC PROPERTY INSURANCE, as defined in Insurance Code §
10091(c), who made claims, and whose claims Fair Plan
denied or partially denied in reliance in whole or in part on (a) the policy’s
definition of “direct physical loss” and/or (b) the policy’s “Smoke Damage” provision.
Procedural History
Plaintiff filed this action on May 27, 2021. On October 21, 2022, Defendant demurred to
and moved to strike portions of Plaintiff’s operative Second Amended Complaint
(the SAC), which the Court overruled on December 16, 2022. Specifically, Defendant demurred to
Plaintiff’s class allegations, and the Court expressed concern that Plaintiff
might face obstacles to obtaining class certification based on the cases of Basurco
v. 21st Century Ins. Co. (2003) 108 Cal.App.4th 110 (Basurco)
and Newell v. State Farm Gen. Ins. Co. (2004) 118 Cal.App.4th
1094 (Newell), in which similar claims based on earthquake coverage had
been found inappropriate for class treatment.
Nonetheless, the Court overruled that demurrer, holding that in light of
the strong judicial preference for deferring questions of class sufficiency to
class certification, this was a matter better addressed at a later stage. Plaintiff then requested dismissal of the
causes of action for breach of the insurance policy and bad faith, which the
Court entered on March 15, 2024. The
only remaining causes of action in the SAC are for declaratory relief and
unfair business practices (Bus. & Prof. Code § 17200 et seq.). This motion followed.
Legal Standards
California Code of
Civil Procedure Section 382 permits the Court to certify a class action when
the moving party shows the superiority of pursuing the representative action on
behalf of a sufficiently numerous and ascertainable class with a well-defined
community of interest. (See, e.g., Brinker Rest. Corp. v. Superior Court
(2012) 53 Cal.4th 1004, 1021 (Brinker).) The community of interest
requirement entails showing that: (1) predominant common questions of law or
fact exist; (2) the class representatives have claims or defenses typical of
absent class members; and (3) the class representatives and their counsel can
adequately represent the interests of the class. (Ibid.)
Because class certification requires that a “substantial benefit will
result both to the litigants and to the court[,]” the movant must also show
that a class action is “superior to other available methods for the fair and
efficient adjudication of the controversy.”
(Dean Witter Reynolds, Inc.
v. Superior Court (1989) 211
Cal.App.3d 758, 772-773.)
California courts
consider “pattern and practice evidence, statistical evidence, sampling
evidence, expert testimony, and other indicators of a defendant’s centralized
practices in order to evaluate whether common behavior towards similarly
situated plaintiffs makes class certification appropriate.” (Sav-On Drug Stores, Inc. v. Superior Court
(2004) 34 Cal.4th 319, 333 (Sav-On Drug).) The burden is on the party
seeking class certification to establish each of the class prerequisites
through substantial evidence. Id. at
327. When determining certification, the Court examines all presented evidence
“under the prism of [the] plaintiff’s theory of recovery.” (Dep’t of Fish & Game v. Superior Court
(2011) 197 Cal.App.4th 1323, 1349.)
When weighing the
evidence, the Court does not evaluate the merits of the asserted claims. (Linder v. Thrifty Oil Co. (2000) 23
Cal.4th 429, 439-440.) Rather, the primary question on certification is
“whether the theory of recovery advanced by the proponents of certification is,
as an analytical matter, likely to prove amenable to class treatment.” (Sav-On Drugs, supra, 34 Cal.4th
at 327.) Nevertheless, “when the merits of the claim are enmeshed with class
action requirements, the trial court must consider evidence bearing on the
factual elements necessary to determine whether to certify the class.” (Bartold v. Glendale Fed. Bank (2000) 81
Cal.App.4th 816, 829; see also Brinker, supra, 53 Cal.4th at
1023-1024 [“In many instances, whether class certification is appropriate or
inappropriate may be determined irrespective of which party is correct. In such
circumstances, it is not an abuse of discretion to postpone resolution of the
disputed issue.”])
Request
for Judicial Notice
Defendant’s
Request
Defendant
requests judicial notice of an order entered May 1, 2024 in Mapel v.
California FAIR Plan Association, Santa Cruz Case No. 22CV00631. This is a court record subject to judicial
notice under Evid. Code § 452(d), and the Court grants judicial notice
of it.
Plaintiff’s
Request
Plaintiff
requests judicial notice of the following:
A.
The Second Amended Complaint in this matter. This is a court record under Evid. Code §
452(d) and the Court grants judicial notice of it.
B.
The California Department of Insurance’s Market Conduct
Examination of California FAIR Plan Association, adopted May 25, 2022. This evidences official acts of an executive
department of the State of California subject to judicial notice under Evid.
Code § 452(c), and the Court grants judicial notice of it, although not for
the truth of its contents.
C.
A letter from the General Counsel of the Department of
Insurance to Defendant dated January 4, 2021.
This evidences an official act of an executive department of the State
of California, and the Court grants judicial notice of it, although not for
the truth of its contents.
Discussion
Given the arguments
raised by the parties, the Court will address the class certification
requirements of adequacy and superiority first.
I.
Adequacy
II.
Superiority
of Class Treatment
Defendant contends that Plaintiff is an
inadequate class representative, because he has dismissed his claims for
damages and request for restitution, and if he obtains class certification, a
judgment on those claims will foreclose class members from seeking their own
suits for damages. Defendant’s argument
is grounded in the “primary rights” doctrine, which bears discussion.
Under the “primary right” theory of pleading, “a ‘cause of
action’ is comprised of a ‘primary right’ of the plaintiff, a corresponding
‘primary duty’ of the defendant, and a wrongful act by the defendant
constituting a breach of that duty.” (Crowley
v. Katleman (1994) 8 Cal.4th 666, 681 (Crowley).) The primary right “must therefore be
distinguished from the legal theory on which liability for
that injury is premised: ‘Even where there are multiple legal theories upon
which recovery might be predicated, one injury gives rise to only one
claim for relief.’ [Citation.]” (Id., at 681-682.)
The primary right theory has a fairly narrow
field of application. It is invoked most often when a plaintiff attempts to
divide a primary right and enforce it in two suits. The theory prevents this
result by either of two means: (1) if the first suit is still pending when the
second is filed, the defendant in the second suit may plead that fact in
abatement [citations]; or (2) if the first suit has terminated in a
judgment on the merits adverse to the plaintiff, the defendant in the second
suit may set up that judgment as a bar under the principles of res
judicata [citation]. The latter application of the primary right theory
appears to be most common: numerous cases hold that when there is only one
primary right an adverse judgment in the first suit is a bar even though the
second suit is based on a different theory [citation] or seeks a different
remedy [citation].
(Crowley, supra, 8 Cal.4th
at 682.)
Plaintiff’s entire SAC, including the
dismissed causes of action, is premised on the same invasion of a primary
right: Defendant’s reliance on allegedly invalid provisions of its property
insurance policy to deny insurance claims.
Irrespective of whether that conduct is characterized as an unfair
business practice under the Unfair Competition Law (UCL, Bus. & Prof. Code
§ 17200 et seq.), or a breach of the policy itself, or of the implied covenant
of good faith and fair dealing inherent in that policy, and irrespective of
what remedy Plaintiff seeks for that conduct (damages, restitution, injunction,
declaratory relief), it is but a single primary right under the Crowley approach.
This raises significant problems for class
treatment, because a judgment in the action would be preclusive on class
members. (See Villacres v. ABM
Industries, Inc. (2010) 189 Cal.App.4th 562, 591-592 [judgment
in certified class action is preclusive on class members].) City of San Jose v. Superior Court (Lands
Unlimited) (1974) 12 Cal.3d 447 (City of San Jose) is
instructive. There, the plaintiffs sued
on behalf of a class of property owners under the flight pattern of San Jose
Airport, but sought only nuisance damages for diminution in value of their
property, exclusive of all other available damages. (Id. at 464.) The Court of Appeal reversed the Trial
Court’s grant of class certification, holding that the plaintiffs
inadequately represent the alleged class
because they fail to raise claims reasonably expected to be raised by the
members of the class and thus pursue a course which, even should the litigation
be resolved in favor of the class, would deprive class members of many elements
of damage.
[¶…¶]
It is clear under California law a party
cannot, as a general rule, split a single cause of action because the first
judgment bars recovery in a second suit on the same cause. [Citation.] As a
result, by seeking damages only for diminution in market value, plaintiffs
would effectually be waiving, on behalf of the hundreds of class members, any
possible recovery of potentially substantial damages—present or future. This
they may not do.
(Ibid.)
The Court’s ruling was grounded in the
fiduciary duty of the class representative to protect the interests of absent
class members:
To fulfill this fiduciary duty the
representative plaintiff must raise those claims ‘reasonably expected to be
raised by the members of the class.’ [Citation.] Clearly, under the facts
alleged here the members of the class would reasonably be expected to seek
recovery of damages beyond mere diminution in market values. Thus, by
certifying this class, the trial court sanctioned a clear violation of
plaintiffs' fiduciary duty.
(Ibid.)
Plaintiff’s class certification motion poses
the same danger. A class member would
expect to recover damages or other monetary relief for Defendant’s alleged
conduct, which deprived them of coverage for their losses. Plaintiff clearly recognizes this, as his
proposed certification purports to preserve class members’ ability to bring
individual claims. (See Plaintiff’s
Memorandum, pp. 22-23.) But for the
reasons discussed above, there is a very real possibility that class members
would be barred by res judicata if they sought to do so, under a primary rights
analysis.
Plaintiff’s reply brief contains no
discussion of the primary rights issue at all.
Rather, Plaintiff cites Lebrilla v. Farmers
Group, Inc. (2004) 119 Cal.App.4th 1070 (Lebrilla)
and Hicks v. Kaufman and Broad Home Corp. (2001) 89 Cal.App.4th
908 (Hicks) as supporting his adequacy.
Lebrilla is of no assistance.
There, the Court expressly held that the failure to assert additional
claims on behalf of the class was harmless, because the defendant “fail[ed] to
point out what the class would have to gain by this additional claim, in
addition to the ones already alleged.” (Lebrilla,
supra, 119 Cal.App.4th at 1089.)
“Unlike the case in City of San Jose, exclusion of the claim does not waive a crucial or unique category of
damages.” (Ibid.) That is the case here.
Hicks presents an interesting alternative, albeit a
seemingly untested one. In Hicks,
the plaintiffs sued a homebuilder and the manufacturer of a mesh used in
concrete foundation slabs which caused them to suffer larger and more damaging
cracks, but sought only repair or replacement costs, not consequential damages
for personal injury or property damage caused by the cracks. (Hicks, supra, 90 Cal.App.4th
at 912-913.) The Court of Appeal
reversed a denial of class certification on grounds not relevant here. (Id. at 913.) The manufacturer argued that the denial could
be sustained on independent grounds, namely that the plaintiffs were not
adequate representatives because they had failed to protect the interests of
class members who had suffered consequential damages. (Id. at 924-925.) Held the Court of Appeal:
In our view, it is premature to sound the
death knell for this class action based on inadequacy of representation.
[¶…¶]
There are several ways in which the trial
court could certify a class without waiving the right of class members with
property damage to recover for that damage. For example, the trial court could
limit the class issues to liability for breach of warranty vel non and allow
each class member to use that judgment as the basis for an individual action to
recover damages for the breach. Alternatively, the court could divide the class
into subclasses: those asserting only economic damages and those asserting economic
damages and property damage. …Another possibility is for the trial court to use
the class notice procedure to give those class members with property damage the
opportunity to opt out of the class. This was the solution adopted by the court
in Anthony when faced with the same argument raised by SI in the present case.
(Id. at 925-926, footnotes omitted.)
There is a notable distinction between this
case and Hicks, which is that every putative class member in this
case would have suffered monetary damages from the denial of their claim. A liability-only class has superficial
appeal, but the Court has been unable to find any example of this having actually
been done, even in cases more factually akin to the Hicks case. In Evans v. Lasco Bathware, Inc. (2009)
178 Cal.App.4th 1417, the Court of Appeal affirmed a Trial Court’s
refusal to certify a Hicks-style liability-only class, because the
plaintiffs at bar would still need to prove causation to show an entitlement to
relief. (Id. at 1435.) The Evans court specifically described
Hicks’ suggestion of a liability-only class as dicta. (Ibid.)
This brings the Court to superiority, a
related component of the certification analysis. Under these circumstances, it does not appear
that a class action would be superior to an individual action.
In deciding whether a class action would be
superior to individual lawsuits, “the court will usually consider [four
factors]: [¶] [ (1) ] The interest of each member in controlling his or her own
case personally; [¶] [ (2) ] The difficulties, if any, that are likely to be
encountered in managing a class action; [¶] [ (3) ] The nature and extent of
any litigation by individual class members already in progress involving the
same controversy; [and][¶] [ (4) ] The desirability of consolidating all claims
in a single action before a single court.”
(Basurco, supra, 108 Cal.App.4th
at 121, citing Weil & Brown, Cal. Practice Guide: Civil Procedure Before
Trial (The Rutter Group 2002).)
As held in Basurco and Newell, plaintiffs
in home insurance cases such as these have a “strong interest in controlling
their own cases[.]” (Basurco, supra, 108
Cal.App.4th at 121; accord Newell, supra, 118 Cal.App.4th
at 1104.) It is true that under a
liability-only Hicks approach, there would not be individualized proof
issues under the second factor. (See Basurco,
supra, 108 Cal.App.4th at 121 [“a class action would be
extremely difficult to manage because individual issues predominate over common
questions of law and fact.”]; Newell, supra, 118 Cal.App.4th
at 1105 [same].) But the third factor, seemingly
concerned with avoiding interference in “litigation by individual class members
already in progress involving the same controversy[,]” is even more threatened
by the preclusion issue described above.
If the mere superfluity of a class action in the face of individual
lawsuits is worthy of consideration (see Basurco, supra, 108 Cal.App.4th
at 121 [287 separate actions]), then the Court must take even more seriously
the potential preclusive effect of a class action on individual
litigation.
Finally, it is undesirable, and seemingly unnecessary,
to consolidate all claims in a single action.
There are no claims for money damages in this case, only injunctive and
declaratory relief. The declaration
Plaintiff seeks concerning Defendant’s policy would ostensibly be binding on
Defendant’s interpretation of its policy going forward, and the UCL empowers
the Court to “make such orders or judgments…as may be necessary to prevent the
use or employment by any person of any practice which constitutes unfair
competition[.]” (Bus. & Prof. Code §
17203.) Meanwhile, class certification
threatens preclusion of putative class members’ potential claims for damages as
discussed above. Indeed, it appears that
there are at least four individual cases currently pending in which putative class
members are seeking damages arising from Defendant’s policies. Class treatment would therefore add nothing,
and for absent class members, threaten everything.
For the foregoing reasons, the elements of
adequacy and superiority are both lacking and therefore the motion must be
denied.
III.
Ascertainability
IV.
Numerosity
V.
Existence of
Common Questions
VI.
Typicality
Although there are colorable arguments on
both sides as to the other requirements for class certification, the failure of
both the adequacy and superiority requirements renders it unnecessary for the
Court to address them. The Court will
instead deny the motion.
Conclusion
For the foregoing reasons, the motion for
class certification is denied. Defendant
to give notice.