P. ex rel. Fire Ins. Exchange v. Amidon CA2/3

Filed 5/23/16 P. ex rel. Fire Ins. Exchange v. Amidon CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
PEOPLE OF THE STATE OF B258556
CALIFORNIA, ex rel. FIRE INSURANCE
EXCHANGE, et al., (Los Angeles County
Super. Ct. No. BC444827)
Plaintiffs and Respondents,
v.
ROBERT B. AMIDON et al.,
Defendants and Appellants.
APPEAL from orders of the Superior Court of Los Angeles County,
William Highberger, Judge. Affirmed.
Robert B. Amidon, A Law Corporation and Robert B. Amidon, in pro. per., for
Defendant and Appellant Robert B. Amidon.
Myers, Widders, Gibson, Jones & Feingold and Dennis Neil Jones for Defendant
and Appellant Robert B. Amidon, A Law Corporation.
Manning & Kass, Ellrod, Ramirez, Trester, Dennis B. Kass and Scott Wm.
Davenport for Plaintiffs and Respondents.
_________________________
In this insurance fraud action, respondents Fire Insurance Exchange and Mid-
Century Insurance Company (collectively, Farmers)1 allege that attorney Robert Amidon
and his law corporation (collectively, Amidon) and others solicited Farmers’ insureds to
submit inflated and/or sham “smoke and ash” claims to Farmers following wildfires in
2007, 2008, and 2009. Amidon demurred and moved to strike the complaint on a variety
of grounds, including that Farmers failed to comply with the prefiling requirements of
Civil Code section 1714.10 (section 1714.10). Section 1714.10 requires a party to seek
court permission before filing a cause of action “against an attorney for civil conspiracy
with his or her client arising from any attempt to contest or compromise a claim or
dispute, and which is based upon the attorney’s representation of the client.” (§ 1714.10,
subd. (a).)
The trial court overruled the demurrers and denied the motions to strike, and
Amidon appealed. We affirm.
Although interlocutory orders generally are not appealable, 1714.10, subdivision
(d) provides that an order made under section 1714.10 “shall be appealable as a final
judgment in a civil action.” As a result, the orders overruling the demurrers and denying
the motions to strike are appealable insofar as they raise matters related to section
1714.10.
On the merits, the trial court properly concluded that the complaint is not subject
to section 1714.10 because its allegations bring it within the terms of the statutory
exceptions of section 1714.10, subdivision (c). Accordingly, the prefiling requirements
of section 1714.10, subdivision (a) did not apply, and the trial court did not err in
overruling the demurrers and denying the motions to strike on that ground.
1
Fire Insurance Exchange and Mid Century Insurance Company are wholly owned
subsidiaries of Farmers Insurance Exchange. We therefore refer to them collectively as
“Farmers.”
2
FACTUAL AND PROCEDURAL BACKGROUND
I.
The Insurance Fraud Complaint
Farmers filed this action on September 2, 2010, and filed the operative first
amended complaint (complaint) on October 12, 2010. The complaint alleges that
Amidon and others engaged in an insurance fraud scheme in the wake of wildfires in
2007, 2008, and 2009. Specifically, Amidon and others agreed that Glenn Sims and his
company, GC Consulting (GCC), would “locate and sign up Farmers[’] insureds to retain
[Amidon] to submit ‘smoke and ash’ claims to Farmers.” Sims “commissioned padded
repair and restoration estimates,” which were submitted to Farmers through Amidon.
Amidon “knew that GCC and Sims obtained clients for [Amidon] through an unlawful
capping scheme[2]” and that Sims “had a practice of preparing inflated and outright sham
repair and restoration estimates, which [Amidon] would then submit to Farmers for
payment.” Amidon, Sims, and the insureds then split the insurance proceeds. By such
conduct, Amidon and others “knowingly present[ed] or caus[ed] to be presented false and
fraudulent insurance claims for repayment of alleged fire and ash damage as covered
under the applicable Farmers policies.” Plaintiffs alleged this conduct gave rise to two
causes of action against Amidon for violation of the Insurance Fraud Prevention Act,
Insurance Code section 1871.7.3
2
The complaint alleges that “capping” is the “unlawful solicitation of insurance
claims.”
3
The complaint also alleged three causes of action against Amidon for unfair
business practices in violation of Business and Professions Code section 17200 et seq.,
and causes of action against Glenn Sims, GCC, and attorney Neil Anapol, among others.
Farmers voluntarily dismissed the section 17200 claims on June 9, 2014. Sims and the
other defendants are not parties to this appeal.
3
II.
Amidon’s Demurrers and Motions to Strike
Amidon demurred to the complaint. He urged that Farmers failed to obtain court
permission to file the complaint as required by section 1714.10, subdivision (a); the fraud
causes of action were not pled with the requisite particularity; the complaint did not
adequately plead a fiduciary relationship, reliance, or damages; and the 2007 and 2008
claims were barred by the statute of limitations.
Amidon also moved to strike portions of the complaint. He urged, among other
things, that the request for attorney fees was unauthorized by statute; the conspiracy
allegations should be stricken because “several defendants cannot conspire as a matter of
law with the companies named in the complaint;” Farmers failed to obtain court
permission to file the complaint as required by section 1714.10, subdivision (a); the
complaint “impairs the contractual obligations between the policyholder and the insurer;”
Farmers failed to file the complaint under seal; the complaint did not adequately plead a
fiduciary relationship, reliance, or damages; Farmers was not an “original source” within
the meaning of Insurance Code, section 1871.7, subdivision (h)(2); and the 2007 and
2008 claims were barred by the statute of limitations.
On July 3, 2014, the court overruled the demurrers and denied Amidon’s motions
to strike “for reasons cited in Opposition.”
On August 22, 2014, Amidon filed a notice of appeal from the “judgment or order
in this case” entered on July 3, 2014. In a subsequent filing in this court, Amidon
represented that he was appealing the order overruling the demurrers and denying the
motions to strike.4
4
On March 8, 2016, pursuant to Government Code section 68081, we asked the
parties to submit supplemental letter briefs on the following issues:
(1) Is Civil Code section 1714.10, subdivision (d), the sole statutory basis for
appeal of these orders? If not, what additional statutory grounds for appeal exist, and
how do they apply in the present case?
4
DISCUSSION
I.
Appealability
We begin with the issue of appealability. Ordinarily, an order overruling a
demurrer is not directly appealable, but may be reviewed only by petition for writ of
mandate or after entry of a final judgment. (Audio Visual Services Group, Inc. v.
Superior Court (2015) 233 Cal. App. 4th 481, 488; Casterson v. Superior Court (2002)
101 Cal. App. 4th 177, 182.) The same is true of an order denying a motion to strike:
“ ‘ “Generally speaking, under the one final judgment rule, interlocutory or interim orders
are not appealable, but are only ‘reviewable on appeal’ from the final judgment.”
[Citations.] “ ‘The theory behind the rule is that piecemeal disposition and multiple
appeals in a single action are oppressive and costly, and review of intermediate rulings
should await the final disposition of the case. ” ’ [Citation.]” (Comerica Bank v.
Howsam (2012) 208 Cal. App. 4th 790, 821-822.)
(2) What is the scope of appellate review under Civil Code section 1714.10,
subdivision (d)? Specifically, may the Court review all matters raised in the demurrers
and motions to strike, or is its review limited to “issues related to section 1714.10”
(Evans v. Pillsbury, Madison & Sutro (1998) 65 Cal. App. 4th 599, 604, fn. 4, italics
added) (See also Klotz v. Milbank, Tweed, Hadley & McCloy (2015) 238 Cal. App. 4th
1339, 1349 (Klotz) [when an appeal based on section 1714.10, subdivision (d) follows an
order overruling a demurrer, “our review is limited to whether the trial court properly
denied defendants’ demurrer to plaintiffs’ causes on the basis that such claims asserted
claims for conspiracy between an attorney and the attorney’s client”]; Rickley v.
Goodfriend (2013) 212 Cal. App. 4th 1136, 1148, fn. 1 [defendants’ pleading challenge
was cognizable on appeal pursuant to section 1714.10, subdivision (d) to the extent it
challenged plaintiffs’ conspiracy claims, but defendants “cannot challenge that portion of
the order permitting plaintiffs to add . . . new causes of action [for breach of fiduciary
duty, negligence, and accounting.”].)
We received supplemental letter briefs from both parties on these issues and have
considered them in connection with this opinion. We have also considered the numerous
letter briefs filed by the parties on other issues during the pendency of this appeal.
5
Notwithstanding these general principles of appealability, Amidon contends the
orders overruling the demurrers and denying the motions to strike are appealable pursuant
to section 1714.10, which provides:5
“(a) No cause of action against an attorney for a civil conspiracy with his or her
client arising from any attempt to contest or compromise a claim or dispute, and which is
based upon the attorney’s representation of the client, shall be included in a complaint or
other pleading unless the court enters an order allowing the pleading that includes the
claim for civil conspiracy to be filed after the court determines that the party seeking to
file the pleading has established that there is a reasonable probability that the party will
prevail in the action. The court may allow the filing of a pleading claiming liability
based upon such a civil conspiracy following the filing of a verified petition therefor
accompanied by the proposed pleading and supporting affidavits stating the facts upon
which the liability is based. . . .
“(b) Failure to obtain a court order where required by subdivision (a) shall be a
defense to any action for civil conspiracy filed in violation thereof. The defense shall be
raised by the attorney charged with civil conspiracy upon that attorney’s first appearance
by demurrer, motion to strike, or such other motion or application as may be appropriate.
Failure to timely raise the defense shall constitute a waiver thereof.
5
Amidon also contends that the orders are appealable pursuant to Code of Civil
Procedure section 904.1, subdivision (a)(6), which he describes as applying to “the
dissolving of an injunction (mandatory stay) pursuant to the rule of exclusive concurrent
jurisdiction.” Although Amidon is correct that an order “granting or dissolving an
injunction” is appealable, we are not aware that the trial court has granted or dissolved
any injunction in this case—and in any event, Amidon repeatedly has represented to the
court that this appeal is limited to the order overruling the demurrers and denying the
motions to strike, to which section 904.1, subdivision (a)(6) manifestly does not apply.
We similarly reject Amidon’s contention that the orders are appealable because “[s]ubject
matter jurisdiction may be raised for the first time on appeal.” Although Amidon is
correct that subject matter jurisdiction may be raised for the first time on appeal, the
alleged absence of subject matter jurisdiction does not render an order appealable. The
existence or nonexistence of subject matter jurisdiction may be considered by a reviewing
court only in the context of an appealable order or judgment.
6
“(c) This section shall not apply to a cause of action against an attorney for a
civil conspiracy with his or her client, where (1) the attorney has an independent legal
duty to the plaintiff, or (2) the attorney’s acts go beyond the performance of a
professional duty to serve the client and involve a conspiracy to violate a legal duty in
furtherance of the attorney’s financial gain.
“(d) This section establishes a special proceeding of a civil nature. Any order
made under subdivision (a), (b), or (c) which determines the rights of a petitioner or an
attorney against whom a pleading has been or is proposed to be filed, shall be
appealable as a final judgment in a civil action.” (Italics added.)
We find that the trial court’s orders overruling Amidon’s demurrers and denying
his motions to strike based on section 1714.10 are appealable. As the quotation above
indicates, section 1714.10, subdivision (d) permits a direct appeal from “[a]ny order
made under subdivision (a), (b), or (c) which determines the rights of a petitioner or an
attorney against whom a pleading has been or is proposed to be filed.” (Italics added.)
Courts have applied this broad language to find a variety of orders raising section
1714.10 issues appealable, including orders on demurrers and motions to strike. (E.g.,
Klotz, supra, 238 Cal.App.4th at pp. 1348-1349 [“defendants may appeal the trial court’s
order on their demurrer finding that plaintiffs need not comply with section 1714.10”];
Evans v. Pillsbury, Madison & Sutro, supra, 65 Cal.App.4th at p. 602 [“Appeal [from
order on demurrer] is authorized . . . because the cause of action alleged a civil
conspiracy among [attorneys and clients] and is therefore governed by section
1714.10.”]; Stueve v. Berger Kahn (2013) 222 Cal. App. 4th 327 [order on motion to
strike]; see also Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005)
131 Cal. App. 4th 802, 818-819 [order on amended pleading]; Rickley v. Goodfriend,
supra, 212 Cal.App.4th at pp. 1148-1149, fn. 1 [same].) Thus, Amidon may appeal the
trial court’s orders on the demurrers and motions to strike.6
6
Farmers urges that section 1714.10, subdivision (d) is inapplicable to this case
because “a plain reading of the First Amended Complaint demonstrates that [Farmers
has] not alleged a cause of action for civil conspiracy, in general, or any conspiracy with
7
Our conclusion that the orders are appealable does not mean that the scope of our
review necessarily extends to all issues raised in the demurrers and motions to dismiss, as
Amidon contends. Instead, the scope of our review is limited to matters related to
section 1714.10. As the court explained in Klotz, supra, 238 Cal.App.4th at p. 1349,
when an appeal follows an order overruling a demurrer, “our review is limited to whether
the trial court properly [overruled] defendants’ demurrer to plaintiffs’ causes on the basis
that such claims asserted claims for conspiracy between an attorney and the attorney’s
client.” Other issues raised in the trial court on demurrer are not cognizable on appeal
because “an order overruling a demurrer . . . does not constitute an appealable order.”
(Id. at p. 1349; see also Rickley v. Goodfriend, supra, 212 Cal.App.4th at p. 1148, fn. 1
[defendants’ pleading challenge was cognizable to the extent it challenged plaintiffs’
conspiracy claims pursuant to section 1714.10, but defendants “cannot challenge that
portion of the order permitting plaintiffs to add . . . new causes of action [for breach of
fiduciary duty, negligence, and accounting].”]; Evans v. Pillsbury, Madison & Sutro,
supra, 65 Cal.App.4th at p. 604, fn. 4 [“subdivision (d) does not authorize review of
matters apart from issues related to section 1714.10.”].)
Guided by the above, we conclude that the scope of our review is limited to
whether any of plaintiffs’ causes of action alleges a claim described by section 1714.10.
We therefore do not address the myriad other issues Amidon attempts to raise on appeal.7
a client, in particular. . . . Given that no cause of action for civil conspiracy exists, Civil
Code § 1714.10 is inapplicable and there is no basis for appellate jurisdiction.” This
contention goes to the merits of the section 1714.10 motions—i.e., whether Farmers was
required to seek court permission to file its complaint pursuant to section 1714.10—not to
the appealability of the resulting orders.
7
For the same reasons, we also deny Amidon’s motions for summary reversal (filed
September 22, 2015 and October 8, 2015) and application for issuance of limited
remittitur and remand (filed October 15, 2015).
8
II.
The Complaint Does Not Allege Claims
Described By Section 1714.10
A. Overview and Standard of Review
“As is plain from the face of the statute, ‘[s]ection 1714.10 prohibits the
unauthorized filing of an action for . . . civil conspiracy against an attorney based on
conduct arising from the representation of a client that is in connection with any attempt
to contest or compromise a claim or dispute.’ (Berg & Berg Enterprises, LLC v.
Sherwood Partners, Inc., supra, 131 Cal.App.4th at p. 815.) ‘Applying section 1714.10
thus requires the court to initially determine whether the pleading falls either within the
coverage of the statute or, instead, within one of its stated exceptions.’ (Berg & Berg
Enterprises, LLC v. Sherwood Partners, Inc., supra, 131 Cal.App.4th at p. 818.) Once it
is determined that the pleading falls within the coverage of subdivision (a) of section
1714.10, the next step is to ascertain whether the pleaded claims fall within either of the
exceptions set forth in subdivision (c) of the statute. (Berg & Berg Enterprises, LLC v.
Sherwood Partners, Inc., supra, 131 Cal.App.4th at p. 824.)” (Stueve v. Berger Kahn,
supra, 222 Cal.App.4th at p. 331.)
“The Legislature originally enacted section 1714.10 in 1988 in response to
Wolfrich Corp. v. United Services Automobile Assn. (1983) 149 Cal. App. 3d 1206
(Wolfrich), in which the Court of Appeal had held that although attorneys representing an
insurance company, who were not themselves engaged in the business of insurance, could
not be sued for violating Insurance Code section 790.03, subdivision (h)(5)[8], they could
be liable for conspiring with their client to do so. (Pavicich v. Santucci (2000)
85 Cal. App. 4th 382, 390 (Pavicich).) The legislative impetus for the enactment was
8
Insurance Code section 790.03 defines “unfair methods of competition and unfair
and deceptive acts or practices in the business of insurance” to include the following:
“(h) Knowingly committing or performing with such frequency as to indicate a general
business practice any of the following unfair claims settlement practices: . . . (5) Not
attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in
which liability has become reasonably clear.”
9
concern about the use of frivolous conspiracy claims that were brought as a tactical ploy
against attorneys and their clients and that were designed to disrupt the attorney-client
relationship. . . .” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc., supra,
131 Cal.App.4th at p. 816.) Subsequently, the statute was amended to limit the section’s
application to attorney-client conspiracy actions that arise from any attempt to contest or
compromise a claim or dispute. (Ibid.)
We review the complaint de novo to determine whether any allegations are within
the plain language of section 1714.10. (Klotz, supra, supra, 238 Cal.App.4th at p. 1349;
Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc., supra, 131 Cal.App.4th at
p. 822.)
B. The Complaint Alleges Conduct Within the Statutory Exceptions of
Subdivision (c)
As noted, section 1714.10 applies to causes of action “against an attorney for a
civil conspiracy with his or her client arising from any attempt to contest or compromise
a claim or dispute, and which is based upon the attorney’s representation of the client.”
(§ 1714.10, subd. (a).) It is not entirely clear from the face of the complaint whether
Farmers alleges Amidon’s clients (i.e., Farmers’ insureds) were complicit in the alleged
fraud scheme or, instead, were innocent pawns in that scheme. However, we need not
decide whether the allegations of the complaint are within the coverage of subdivision (a)
because, in any event, the complaint alleges conduct within the exceptions carved out by
subdivision (c).
Section 1714.10, subdivision (c) excludes from the statute’s coverage causes of
action against an attorney for a civil conspiracy with his or her client if (1) “the attorney
has an independent legal duty to the plaintiff,” or (2) “the attorney’s acts go beyond the
performance of a professional duty to serve the client and involve a conspiracy to violate
a legal duty in furtherance of the attorney’s financial gain.” Both exceptions apply here.
Independent legal duty: “It is well established that an attorney has an independent
legal duty to refrain from defrauding nonclients.” (Rickley v. Goodfriend, supra,
212 Cal.App.4th at p. 1151; Klotz, supra, 238 Cal.App.4th at p. 1351.) “ ‘ “Attorneys are
10
expected to stay within the bounds of law in representing their clients and advising about
an appropriate course of action.” ’ ” (Klotz, supra, 238 Cal.App.4th at p. 1351.) Thus,
for example, in Pavicich v. Santucci, supra, 85 Cal. App. 4th 382, the Court of Appeal
held that an investor’s claims against a limited partnership’s attorney and principals for
conspiring to conceal threats of litigation against the partnership were not subject to
section 1714.10 because the attorney had an independent duty to avoid making
affirmative misrepresentations to the investor. “This is not a situation where we are
required to apply the rule that a ‘duty to disclose a material fact normally arises only
where there exists a confidential relation between the parties or other special
circumstances require disclosure. . . .’ (Cicone v. URS Corp. (1986) 183 Cal. App. 3d 194,
201.) This is because of the principle that ‘where one does speak he must speak the
whole truth to the end that he does not conceal any facts which materially qualify those
stated. [Citation.] One who is asked for or volunteers information must be truthful, and
the telling of a half-truth calculated to deceive is fraud.’ [Citations.]” (Pavicich v.
Santucci, supra, 85 Cal.App.4th at p. 398.) Accordingly, “[plaintiff’s] conspiracy claims
against [attorney] meet the requirements of section 1714.10, subdivision (c), and
consequently meet the requirements for stating a cause of action against an attorney for
conspiring with his or her client.” (Id. at p. 396.)
The present case is analogous. Amidon had an independent legal duty to Farmers
not to commit insurance fraud. The allegations that Amidon conspired to violate that
duty bring the complaint within the exception of section 1714.10, subdivision (c)(1).
Acts beyond the performance of a professional duty to the client for the attorney’s
financial gain: The complaint alleges that Amidon knowingly participated in the
submission of false and fraudulent claims to Farmers on behalf of his clients. Such
alleged activities indisputably go beyond the performance of professional duties owed to
a client. We have already concluded that the conduct alleged violated a legal duty to
Farmers; further, the complaint alleges that Amidon engaged in such conduct in
furtherance of his own “financial gain and/or economic advantage to which [he] would
11
not otherwise have been entitled.” These allegations thus bring the complaint within the
exception of section 1714.10, subdivision (c)(2).
DISPOSITION
The July 3, 2014 orders overruling appellants’ demurrers on the ground of failing
to comply with Civil Code section 1714.10 and denying appellants’ motions to strike on
that ground are affirmed. Appellants’ motions for summary reversal (filed September 22,
2015 and October 8, 2015) and application for issuance of limited remittitur and remand
(filed October 15, 2015) are denied. Respondents’ request for sanctions is denied.
Respondents are awarded their appellate costs.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
EDMON, P. J.
We concur:
ALDRICH, J.
HOGUE, J.*
*
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
12