People v. Suh

Filed 6/17/19; Certified for publication 7/8/19 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
THE PEOPLE ex rel. ALLSTATE B280293
INSURANCE COMPANY et al.,
(Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. BC541476)
v.
CHRISTINE SUH et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Michael L. Stern, Judge. Affirmed.
Glenn A. Williams for Defendants and Appellants.
Knox Ricksen, Thomas E. Fraysse and Maisie C. Sokolove
for Plaintiffs and Respondents.
_________________________________________
INTRODUCTION
Allstate Insurance Company and several related companies
(collectively, Allstate) brought this action under Insurance Code
section 1871.7 (section 1871.7) on behalf of the People of the State
of California against Christine Suh, Christina Chang (Suh’s
mother), and others for insurance fraud in violation of Penal Code
section 550 (section 550), which makes it unlawful to submit false
or fraudulent claims to an insurance company. Allstate alleged
Suh set up sham law firms, then with Chang’s help procured
automobile insurance policyholders of Allstate as clients of the
sham law firms, submitted insurance claims on behalf of the
insureds, and absconded with settlement proceeds. The jurors
found in favor of Allstate and imposed over $6 million in civil
penalties.
Suh appeals from the ensuing judgment, arguing the trial
court should have stayed this action pending the resolution of a
criminal investigation of her conduct. Suh, joined by Chang, also
argues that the insurance claims they submitted to Allstate were
not fraudulent because, although the insureds were not actually
represented by attorneys, the information in the claims forms
was accurate. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Suh and Chang Commit Insurance Fraud, and
Allstate Files This Action
Suh was not an attorney and was not otherwise authorized
to represent Allstate’s insureds. She overcame that obstacle by
creating and, with help from Chang and others, operating eight
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sham law offices. Suh paid several individual attorneys a
monthly fee of $3,000 to use their names and state bar numbers.
Suh and Chang procured Allstate’s insureds as “clients,” filed 318
insurance claims on their behalf (not authorized by and without
the knowledge of the individual attorneys), and diverted
insurance proceeds to their personal use. Allstate would not have
released funds to the law firms had it known they were fake.
Allstate’s in-house investigator testified it was illegal to “deal
with third parties who are not lawyers purporting to represent
[insureds].” Allstate’s insurance fraud expert similarly testified
insurance companies “do not pay” claims “that are presented by
sham law firms.”
Allstate discovered Suh’s fraudulent scheme and filed this
action. Allstate alleged, not that the insurance claims contained
false or fraudulent statements about the insureds, but that
obtaining insurance proceeds by posing as law firms was
insurance fraud in violation of applicable provisions of the Penal
and Insurance Codes. Allstate sought civil penalties and
assessments and an injunction under the unfair competition law.
B. The Trial Court Denies Suh’s Ex Parte Application To
Stay This Action
Two weeks before the scheduled trial date, and four months
before the trial actually commenced, Suh filed an ex parte
application to stay this action indefinitely. Counsel for Suh had
recently learned the district attorney was investigating Suh’s
participation in the insurance fraud scheme. Citing her Fifth
Amendment privilege against self-incrimination, Suh argued:
“Clearly, any discovery sought by plaintiffs in this matter, or
testimony offered by [Suh] in her defense at trial, would
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necessarily require [Suh] to answer questions related to the very
documents and events that would form the basis of a criminal
prosecution for insurance fraud.” During a brief hearing on the
application, counsel for Allstate observed that Suh was “one of
two ringleaders in this case” and “a central witness” and that, if
the court were to issue a stay, the stay should apply only to
discovery. The trial court denied the ex parte application.
C. The Jury Finds for Allstate
The jury found that Suh committed one or more violations
of section 550 in connection with 313 insurance claims and
imposed $2.3 million in civil penalties and $2.8 million in
assessments against her. The jurors found Chang committed one
or more violations of section 550 in connection with 241 insurance
claims and imposed $1.2 million in civil penalties against her.
The trial court enjoined Suh and Chang from engaging in
insurance-related activities and awarded Allstate its attorneys’
fees and costs.
DISCUSSION
A. The Trial Court Did Not Abuse Its Discretion in
Denying Suh’s Ex Parte Application for a Stay
Suh argues the trial court erred in denying her ex parte
application to stay this action until “the risk of criminal
prosecution [was] eliminated.” She argues the trial court’s ruling
“forced [her] to have to choose between asserting her Fifth
Amendment privilege and risking substantial monetary jeopardy
in the civil action on one hand, and waiving her Fifth
Amendment privilege and subjecting herself to criminal jeopardy
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on the other hand.” She asserts that “this case should be
remanded back to the trial court and stayed for a retrial pending
completion of the criminal matter.” We review a trial court’s
ruling on a request for a stay for abuse of discretion. (People ex
rel. Harris v. Rizzo (2013) 214 Cal. App. 4th 921, 951; Bains v.
Moores (2009) 172 Cal. App. 4th 445, 480.)
Suh made her request for a stay, not in a regularly noticed
motion, but in an ex parte application. A court will not grant ex
parte relief “in any but the plainest and most certain of cases.”
(Consolidated Const. Co. v. Pacific E. Ry. Co. (1920) 184 Cal. 244,
246; see 6 Witkin, Cal. Procedure (5th ed. 2008) Proceedings
Without Trial, § 58 [“[a]n ex parte application for relief, being an
exception to the general requirement of notice to other parties
. . . , is permitted only in limited circumstances”].) For this
reason, the rules governing ex parte applications in civil cases
require that “[a]n applicant . . . make an affirmative factual
showing . . . of irreparable harm, immediate danger, or any other
statutory basis for granting relief ex parte.” (Cal. Rules of Court,
rule 3.1202(c); see Webb v. Webb (2017) 12 Cal.App.5th 876, 879.)
A trial court should deny an ex parte application absent the
requisite showing. (See Ferraro v. Camarlinghi (2008) 161
Cal. App. 4th 509, 523, 551, fn. 30 [counsel obtained an ex parte
order “without apparent justification” where the application “set
forth no basis for a finding of good cause to dispense with
proceeding by noticed motion”]; Weil & Brown, Cal. Practice
Guide: Civil Procedure Before Trial (The Rutter Group 2015)
¶ 9:346 [“don’t ask a judge for an ex parte order unless it is clear
that such relief is proper”].) We review a trial court’s ruling on
an ex parte application for abuse of discretion. (See
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Contemporary Services Corp. v. Staff Pro Inc. (2007) 152
Cal. App. 4th 1043, 1060-1061.)
The trial court here acted well within its discretion in
denying Suh’s application. Suh did not make a showing of
irreparable harm, immediate danger, or any other basis for
ex parte relief. (See Denton v. City and County of San Francisco
(2017) 16 Cal.App.5th 779, 793 [trial court erred in granting “an
ex parte application unsupported by evidence of irreparable
harm”]; Datig v. Dove Books, Inc. (1999) 73 Cal. App. 4th 964, 977
[trial court erred in granting an ex parte application where
“defense counsel failed to make an affirmative factual
showing . . . of the irreparable harm, immediate danger, or any
other statutory basis upon which he sought ex parte relief”]; cf.
Nakamura v. Parker (2007) 156 Cal. App. 4th 327, 337 [trial court
abused its discretion in denying an ex parte application for a
temporary protective order where the applicant presented
evidence of “a substantial risk that ‘great or irreparable injury’
would result to [the applicant] before the matter [could] be heard
on notice”].) Suh did not argue that, without a stay, there would
be any risk of self-incrimination within the 16 court days before
the court could hear a motion on regular notice. (See Code Civ.
Proc., § 1005, subd. (b).) She did file her application 13 days
before a tentative trial date, but the record reflects that the court
and the parties anticipated the trial would be continued. Suh did
not argue in the trial court, and does not argue on appeal, that
she expected the trial to begin before the court could hear her
motion on regular notice or before some pretrial or court
proceeding that might require her to testify or otherwise
incriminate herself. In fact, even though the trial subsequently
was continued and did not begin until four months after Suh’s ex
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parte application, Suh never filed a motion to stay, and she does
not point to anything in the record indicating she ever raised the
issue again.
Suh argues “the logical solution would have been the one
suggested in Pacers[, Inc. v. Superior Court (1984) 162
Cal. App. 3d 686 (Pacers)]: ‘An order staying discovery until
expiration of the criminal statute of limitations [to] allow [the
plaintiffs] to prepare their lawsuit while alleviating [the
defendants’] difficult choice between defending either the civil or
criminal case.’” Pacers is distinguishable. The defendants in
Pacers filed a noticed motion, not an ex parte application. (Id. at
p. 688.) Moreover, the defendants in Pacers presented evidence
there was a real possibility the prosecuting agency would file
criminal charges: The United States Attorney had unsuccessfully
sought a grand jury indictment but was maintaining an “‘open
file’” on assault and battery charges against the defendants. (Id.
at p. 687.) Here, although there was some evidence of a criminal
investigation at some point, there was no evidence that it was
ongoing. In addition, unlike Suh, the defendants in Pacers did
not seek to stay the entire action indefinitely. They sought to
postpone their depositions to a date after the criminal statute of
limitations had run. (Id. at p. 688.) Finally, the Pacers court
held the trial court should have weighed “the parties’ competing
interests with a view toward accommodating the interests of both
parties, if possible.” (Id. at p. 690.) Had Suh filed a noticed
motion, the trial court would have had an opportunity to weigh
the parties’ interests and make an informed decision on “the
particular circumstances and competing interests involved.”
(People ex rel. Harris v. Rizzo, supra, 214 Cal.App.4th at p. 952;
see Bains v. Moores, supra, 172 Cal.App.4th at p. 483; Fuller v.
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Superior Court (2001) 87 Cal. App. 4th 299, 306.) By not filing a
noticed motion for a stay, Suh failed to give the trial court an
opportunity to conduct the analysis the court in Pacers was able
to conduct.
B. Suh and Chang Committed Insurance Fraud in
Violation of Section 550
“The business of insurance involves many transactions that
have the potential for abuse and illegal activities,” and
“[a]utomobile insurance fraud is the biggest and fastest growing
segment of insurance fraud . . . .” (Ins. Code, § 1871, subds. (a),
(b).) The Insurance Frauds Prevention Act (Ins. Code, § 1871 et
seq.) addresses this problem by creating civil liability for
violating several insurance fraud provisions of the Penal Code,
including section 550. Section 1871.7, subdivision (b), provides:
“Every person who violates any provision of . . . Section . . . 550
. . . of the Penal Code shall be subject, in addition to any other
penalties that may be prescribed by law, to a civil penalty of not
less than five thousand dollars ($5,000) nor more than ten
thousand dollars ($10,000), plus an assessment of not more than
three times the amount of each claim for compensation . . . . The
penalty prescribed in this paragraph shall be assessed for each
fraudulent claim presented to an insurance company by a
defendant and not for each violation.”
Allstate brought this action under section 1871.1,
subdivision (e)(1), which authorizes insurers to bring fraud
actions under the Act. (See People ex rel. Allstate Ins. Co. v.
Weitzman (2003) 107 Cal. App. 4th 534, 546.) After a six-day trial,
the jury imposed civil penalties on Suh and Chang for violating
section 550, subdivisions (a)(1), (b)(1), (b)(2), and (b)(3). Section
550, subdivision (a)(1), provides “[i]t is unlawful . . . to aid, abet,
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solicit, or conspire with any person” to “[k]nowingly present or
cause to be presented any false or fraudulent [insurance]
claim . . . .” Section 550, subdivision (b), makes it unlawful, in
connection with an insurance claim, to “knowingly assist or
conspire with any person to do, any of the following: [¶] (1)
Present or cause to be presented any written or oral statement
. . . knowing that the statement contains any false or misleading
information concerning any material fact. [¶] (2) Prepare or
make any written or oral statement . . . knowing that the
statement contains any false or misleading information
concerning any material fact. [¶] (3) Conceal, or knowingly fail
to disclose the occurrence of, an event that affects any person’s
initial or continued right or entitlement to any insurance benefit
or payment . . . .”
Suh and Chang argue Allstate’s theory that the insurance
claims they submitted “were false or fraudulent was based solely
on the testimony that the claims submitted to it were submitted
by a [sic] ‘sham law firms.’ No evidence was presented that the
claims were ‘false or fraudulent’ in any other regard. There was
no allegation of staged accidents, nor any claim that injuries were
inflated or that treatment was not provided.” According to Suh
and Chang, because Allstate did not submit evidence the
insurance claims contained false or fraudulent statements, Suh
and Chang did not violate section 550 or submit “fraudulent
claims” within the meaning of section 1871.7, subdivision (b).
Suh and Chang read the insurance fraud statutes too
narrowly. Unlawful conduct under section 550 does not require a
misstatement of fact in the insurance claim. Section 550 requires
only that a person knowingly (1) present a claim that is false or
fraudulent in some respect, (2) present, prepare, or make a
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statement containing false or misleading information about a
material fact, or (3) conceal an event that affects a person’s right
or entitlement to insurance benefits. An insurance claim is
fraudulent under section 550 and section 1871.7, subdivision (b),
when it is “characterized in any way by deceit.” (State ex rel.
Wilson v. Superior Court (2014) 227 Cal. App. 4th 579, 601.)
“California law uses the words ‘fraud’ and ‘deceit’
interchangeably,” and a “claim is ‘fraudulent’ [within the
meaning of section 1871.7, subdivision (b)] if it is characterized
by deceit, dishonesty, or trickery, perpetrated to gain some unfair
or dishonest advantage. [Citation.] This broad definition . . . is
consistent . . . with [section 1871.1,] subdivision (b)’s
incorporation of the violations in . . . section 550, which
encompass deceits shown by ‘false or fraudulent’ claims [citation],
and statements that are ‘false or misleading.’” (Wilson, at
p. 600.)
Suh and Chang perpetrated a deceitful insurance scheme
designed to acquire insurance proceeds illegally for personal gain.
Suh and Chang deceived Allstate into believing the attorneys
whose names they were using actually and lawfully represented
its insureds. (See Cal. Code Regs., tit. 10, § 2695.2(c) [only
attorneys, family members, adjusters, or other persons
authorized by law may represent insureds].) In their
communications with Allstate, Suh and Chang misrepresented
that attorneys represented the insureds. They concealed the fact
they were masquerading as attorneys when they filed the
insurance claims. And the misrepresentations were material:
Allstate would not have released settlement proceeds to Suh or
Chang or their sham law firms had Allstate known the truth.
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The conduct of Suh and Chang constituted insurance fraud under
section 550 and section 1871.7.1
DISPOSITION
The judgment is affirmed. Allstate is to recover its costs on
appeal.
SEGAL, J.
We concur:
ZELON, Acting P. J. FEUER, J.
1 Allstate also alleged Suh violated section 1871.7,
subdivision (a), which makes it unlawful “to knowingly employ
runners, cappers, steerers, or other persons . . . to procure clients
. . . to . . . obtain services or benefits under a contract of insurance
. . . .” Because the jury found Suh committed multiple violations
of section 550 to support the imposition of the penalties and
assessments, we do not reach the issue whether she also violated
section 1871.7, subdivision (a). Suh does not argue the jury found
her liable for capping (§ 1871.7, subd. (a)) and not insurance
fraud (§ 550) regarding any of the 313 fraudulent insurance
claims.
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Filed 7/8/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
THE PEOPLE ex rel. ALLSTATE B280293
INSURANCE COMPANY et al.,
(Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. BC541476)
v.
ORDER CERTIFYING
CHRISTINE SUH et al., OPINION FOR PUBLICATION
(NO CHANGE IN JUDGMENT)
Defendants and Appellants.
THE COURT:
The opinion in this case filed June 17, 2019 was not
certified for publication. Because the opinion meets the
standards for publication specified in California Rules of Court,
rule 8.1105(c), the non-parties’ requests for publication under
California Rules of Court, rule 8.1120(a), are granted.
IT IS HEREBY CERTIFIED that the opinion meets the
standards for publication specified in California Rules of Court,
rule 8.1105(c); and
ORDERED that the words “Not to be Published in the
Official Reports” appearing on page 1 of the opinion be deleted
and the opinion be published in the Official Reports.
ZELON, Acting P.J. SEGAL, J. FEUER, J.
2