Judge: Theresa M. Traber, Case: 21STCV05412, Date: 2023-02-23 Tentative Ruling

Case Number: 21STCV05412    Hearing Date: February 23, 2023    Dept: 47

Tentative Ruling

 

Judge Theresa M. Traber, Department 47

 

 

HEARING DATE:     February 23, 2023                             TRIAL DATE:  NOT SET

                                                          

CASE:                         Jennifer Gerard, et al. v. John Haubrich, Jr., et al.

 

CASE NO.:                 21STCV05412

 

 

MOTION FOR SUMMARY ADJUDICATION

 

MOVING PARTY:               Plaintiffs Jennifer Gerard and Gerard Cosmetics, Inc.

 

RESPONDING PARTY(S): Defendants Travelers Casualty and Surety Company of America; Pettit Kohn Ingrassia Lutz & Dolin, Tom Ingrassia, and Tristan Mullis; John Haubrich, Jr., John L. Barber, Armine Antonyan, and Lewis Brisbois Bisgaard & Smith, LLP

 

PROOF OF SERVICE:

 

CASE HISTORY:

 

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

           

            This is an action for declaratory and injunctive relief against a liability insurer and the attorneys retained by the insurer to defendant Plaintiffs in an underlying employment discrimination lawsuit.

 

Plaintiffs move for summary adjudication on the issues of duty to apprise of the right to independent counsel and on the issues of damages for the reasonable fees incurred by independent counsel, pursuant to Code of Civil Procedure section 2860(c).

 

TENTATIVE RULING:

 

Plaintiffs’ motion for summary adjudication is DENIED.

 

DISCUSSION:

 

Plaintiffs move for summary adjudication on the issues of duty to apprise of the right to independent counsel and on the issues of damages for the reasonable fees incurred by independent counsel, pursuant to Code of Civil Procedure section 2860(c).

 

Requests for Judicial Notice

 

            Each of the Defendants requests that the Court take judicial notice of numerous documents. However, as the Court does not rely on these documents in reaching its ruling, these requests are DENIED. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [“[J]udicial notice . . . is always confined to those matters which are relevant to the issue at hand.”].) 

 

Evidentiary Objections

 

            Each of the Defendants raises numerous evidentiary objections to the evidence submitted by Plaintiffs. However, as the evidence to which the Defendants object is not relevant to the Court’s ruling, the Court declines to rule on those objections. (Code Civ. Proc. § 437c(q).)

 

Legal Standard

 

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party can show evidentiary support for a pleading or claim and, if not, to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Code of Civil Procedure Section 437c(c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)  “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-82.)

 

As to each claim as framed by the complaint, the plaintiff moving for summary judgment must satisfy the initial burden of proof by presenting proving each element of a cause of action. (Code Civ Proc. § 437c(p)(1).) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.) Once the plaintiff has met that burden, the burden shifts to the defendant to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. (Code Civ. Proc. § 437c(p)(1).) To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

 

Analysis

 

            Plaintiffs argue that Defendants had an obligation to disclose to Plaintiffs the right to independent counsel, and that Defendants are obligated to cover the costs incurred by Plaintiffs to defend themselves in a third-party liability dispute. In support of these contentions, Plaintiffs raise essentially the same arguments that the Court has now twice rejected.

 

            Plaintiffs contend that Defendants breached California Rules of Professional Conduct Rule 1.7 and the principles outlined in San Diego Navy Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358. (Complaint ¶¶ 1, 97.) Specifically, Plaintiffs contend that the Travelers Defendants engaged in the unfair and unlawful practice of hiring the LBBS and Pettit Defendants, who Plaintiffs contend have breached and continue to avoid their ethical duty as “lawyers hired by the insurer ... to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its right to deny coverage.” (Id. at 375.) This ruling was grounded on the Cumis Court’s view that the lawyer tapped by the insurer to represent the insured under a reservation of rights may be representing two conflicting interest and, thus, must secure the written consent to do so from both the insured and the insurer. (Id. at p. 374.)

 

Plaintiffs appear to have trouble taking “no” for an answer, as Plaintiffs raise substantially the same argument that was raised in their previous Motion for Summary Adjudication, which the Court rejected in totality.

 

(a) If the provisions of a policy of insurance impose a duty to defend upon an insurer and a conflict of interest arises which creates a duty on the part of the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to represent the insured unless, at the time the insured is informed that a possible conflict may arise or does exist, the insured expressly waives, in writing, the right to independent counsel. An insurance contract may contain a provision which sets forth the method of selecting that counsel consistent with this section.

 

(b) For purposes of this section, a conflict of interest does not exist as to allegations or facts in the litigation for which the insurer denies coverage; however, when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim, a conflict of interest may exist. No conflict of interest shall be deemed to exist as to allegations of punitive damages or be deemed to exist solely because an insured is sued for an amount in excess of the insurance policy limits.

 

(Civ. Code § 2860(a)-(b) [emphasis added].) As stated in the Court’s previous rulings, the statute fails to codify or even acknowledge any aspect of the Cumis ruling that concerns ethical duties imposed on insurance defense counsel. Further, several appellate courts have held broadly that the Cumis case has been “superseded” by Civil Code section 2860 and, thus, should no longer be relied upon as good law. (See United Enterprises, Inc. v. Superior Ct. (2010) 183 Cal. App. 4th 1004, 1010; Derivi Constr. & Architecture, Inc. v. Wong (2004) 118 Cal. App. 4th 1268, 1276 FN 1.)

 

Plaintiffs’ arguments regarding Rule 1.7 are not well-taken, as the Court has already rejected this argument once before. As stated previously, there is nothing in the California Rules of Professional Conduct that explicitly require insurance defense counsel assigned to a case with a reservation of rights to investigate and analyze potential conflicts of interest and make written disclosures to both the insured and the insurer. Rule 1.7 of the California Rules of Professional Conduct provides, in relevant part:

 

(a) A lawyer shall not, without informed written consent from each client and compliance with paragraph (d), represent a client if the representation is directly adverse to another client in the same or a separate matter.

 

(b) A lawyer shall not, without informed written consent from each affected client and compliance with paragraph (d), represent a client if there is a significant risk the lawyer’s representation of the client will be materially limited by the lawyer’s responsibilities to or relationships with another client, a former client or a third person, or by the lawyer’s own interests.

 

Once again, while Plaintiffs rely on this ethical rule, among others, to advance their theory of the case, they fail to analyze the specific terms of the rule by explaining, for example, why an insurer’s reservation of rights should constitute “directly adverse” representation that requires written consent after providing advice to the client under Rule 1.4(a)(1); or alternatively, why a reservation of rights constitutes “a significant risk” that the lawyer’s representation “will be materially limited by the lawyer’s responsibilities to or relationships with another client,” thus requiring informed written consent from each affected client. The answers to these questions were not self-evident when the Court ruled on the motion for a Preliminary Injunction, and they are not self-evident now. Plaintiffs’ failure to address these issues for the second time is damning to their argument.

 

Further, as stated previously, the construction of Rule 1.7’s predecessor, Rule 3-310 of the former Rules of Professional Conduct, is not consistent with Plaintiffs’ argument. Rule 3-310(C) provided that an attorney “shall not, without the informed written consent of each client: [¶] (1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or [¶] (2) Accept or continue representation of more than one client in a matter in which the interests of the clients actually conflict; or [¶] (3) Represent a client in a matter and at the same time in a separate matter accept as a client a person or entity whose interest in the first matter is adverse to the client in the first matter.” The Court of Appeal in Centex Homes v. St.Paul Fire & Marine Ins. Co. (2018) 19 Cal. App. 5th 789, 800, noted that this professional rule post-dated the ruling in Cumis regarding a lawyer’s duties in being appointed by an insurance company to defend an insured. Taking account of the language of the more recent ethics rule, the Centex Court commented that “it is not clear that the prohibition ... on accepting representation of more than one client in a manner where their interests potentially conflict applies to the insurer-insured relationship.” (Id., at p. 800.)

 

The Court of Appeal in Centex also discussed a formal opinion of the California State Bar, Formal Opinion No. 1995-139, which addressed the issue of to whom an attorney owes duties when he or she acts as insurance defense counsel and is hired by an insurer to represent the insured. In that formal opinion, cited with approval by the appellate court, the State Bar Standing Committee on Professional Responsibility and Conduct explained that “while insurer is indeed a client in some respects—the ongoing relationship with the member, the payment of fees, etc.—it is a client whose rights under case law are clearly limited.” (Formal Opinion, at p. *4).

 

Discussing a lawyer’s ethical duties, the Committee continued:

 

Where a member complies with the mandates of this opinion to protect the interests of the insured, his or her additional compliance with rule 3-310 is not necessary for two reasons: First, given the unusual, perhaps unique, interrelationship of insurer, insured and counsel, the contract of insurance itself, drafted by the insurer for its own benefit, provides more than adequate disclosure under rule 3-310(B)(3) to the insurer. Second, the ‘potential conflict’ trigger of rule 3-310(C)(1) is never pulled because, as seen infra, when such a conflict manifests itself, case law resolves any potential conflict in that matter by mandating a resolution in favor of the represented insured and against the non-represented, non-party insurer. Put another way, case law instructs that ultimately, there can be no conflict between insurer and insured since, as discussed infra, the insured will always prevail where an issue is created between them. [Citation.] Thus, the notice to and waiver by the insured is superfluous.

 

(Id. at pp. *4-5, fn. omitted.) Based on this Formal Opinion and the wording of Rule 3-310, the Centex Court concluded that the written consent requirement of subsection (C)(1) did not apply to insured-insurer relationships and that, even if it did apply in some instances, it would only be triggered “when there is a reasonable likelihood an actual conflict will arise.” (Centex Homes, supra, at p. 801.)

 

The Court therefore concludes that the proper inquiry is whether, as stated in Civil Code section 2860(b), the outcome of the coverage issue could be controlled by counsel first retained by the Travelers Defendants.

 

Plaintiffs make no effort to show that any coverage issue could have been controlled by either the LBBS or Pettit Kohn Defendants. Instead, Plaintiffs merely argue that, because Plaintiffs were independently defended in a third-party liability action, the duty to defend attached such that Defendants are obligated to cover Plaintiffs’ fees and costs incurred, based on Plaintiffs’ application of the Cumis standard. This argument is not sufficient. As the Plaintiffs are the moving party, Plaintiffs bear the burden of showing that Defendants cannot prevail on this cause of action, and therefore that Plaintiffs are entitled to judgment as a matter of law. Plaintiffs have not done so and are therefore not entitled to summary adjudication.

 

CONCLUSION

 

Accordingly, Plaintiffs’ motion for summary adjudication is DENIED.

 

Plaintiffs to give notice, unless waived.

 

IT IS SO ORDERED.

 

Dated:   February 23, 2023                             ___________________________________

                                                                                    Theresa M. Traber

                                                                                    Judge of the Superior Court

 


            Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.