This is an action alleging violations of the unfair competition law (UCL; Bus. & Prof. Code,
Respondents sued appellants in 2004 claiming they violated certain provisions of the Insurance Code in connection with the sale of such insurance
Appellants contend (1) the trial court erred as a matter of law in its liability findings because (a) at least part of the restitution awarded respondents was for insurance legally placed by appellants with an "admitted" carrier, and (b) respondents failed to establish injury in fact and/or loss of money as a result of any unfair business practice; (2) the trial court's restitution award is not supported by substantial evidence; and (3) as to B&B only, the trial court erred in refusing to grant its motion for nonsuit because there was no evidence that Edmondson, the broker primarily involved in the sale of marine insurance to respondents, was employed by B&B, that B&B was in an agency relationship with the other appellants and that B&B did anything wrong in connection with respondents' UCL claim.
As we explain, respondents are not entitled to restitution of premiums and/or commissions for admitted coverage because that insurance was lawfully placed by appellants. Respondents also are not entitled to restitution of premiums paid for nonadmitted coverage because there is undisputed evidence in the record that appellants fulfilled their duty as brokers and transferred all premiums paid by respondents to the nonadmitted insurers that issued the valid and enforceable marine policies.
However, respondents may be entitled to a return of the commissions/broker fees appellants received when placing marine insurance with a nonadmitted carrier. We say may because on remand the trial court must decide the threshold issue of whether respondents released their claim to recover such commissions/fees in the instant action in settlement of a related action with appellants. Depending on the outcome of that issue, respondents' entitlement to restitution of commissions/broker fees they paid appellants for placement of coverage with a nonadmitted carrier is limited, as we discuss, by the four-year statute of limitations in section 17208.
Finally, we conclude the trial court erred in denying B&B's motion for nonsuit.
In connection with respondents' cross-appeal, the trial court acted well within its discretion when, shortly before trial and the five-year cutoff to
M&F and C&F at all times relevant in this case owned tuna seiners that fished in American Samoa. Edmondson first started working as a broker selling marine insurance in 1963. Edmondson was initially introduced to respondents in 1996 in connection with the placement of marine insurance. During the period Edmondson placed marine insurance for respondents, she was employed by at least three different entities, each of which was named as a defendant in the case.
From 1996 to 2003, Edmondson placed at least
With limited exceptions, an insurer seeking to transact insurance business in California must be "admitted" for that purpose.
In light of the marketplace, marine insurance coverage is underwritten by a mixture of admitted and nonadmitted carriers. The marine insurance Edmondson placed for respondents was consistent with this model. As one of respondents' experts testified in his deposition that was read into the record at trial, the marketplace for marine insurance "is very restricted" and thus if a broker obtains "some admitted [coverage], that's sort of a miracle."
From the perspective of the surplus lines broker, one difference between admitted and nonadmitted marine insurance is the licensing required for a broker to sell such coverage. To sell marine insurance by admitted carriers in California, a broker must possess a property/casualty insurance license. Edmondson possessed the requisite license to sell admitted coverage in California.
Relevant to the instant case, to sell marine insurance in California issued by nonadmitted carriers a broker also must have a special lines' surplus lines license. (See Ins. Code, § 1760.5, discussed post.) However, neither Edmondson nor the brokerage firms where she worked possessed such a license during most times relevant in this case.
For years during the relevant time period, Edmondson placed without incident marine insurance for respondents with both admitted and nonadmitted carriers. M&F and C&F each had claims that were paid by both admitted and nonadmitted carriers while Edmondson acted as their broker. In addition,
In 1997 Edmondson brokered on behalf of C&F a P&I policy (No. 97/09012) issued by FAI, an Australian company (FAI). The following year, Edmondson placed a P&I policy (No. 98/05066/01) issued by FAI for M&F. Although FAI was a nonadmitted carrier in California, it was on a list of acceptable nonadmitted carriers—called LESLI, an acronym for "List of Eligible Surplus Lines Insurers"—maintained by the Surplus Line Advisory Association, an organization that performs certain duties delegated to it by the Insurance Commissioner.
Edmondson first learned she needed such a license in late March 2003, during a deposition in another case. Until that time, Edmondson generally had been relying on her employer to do her "licensing investigation" and satisfy all licensing requirements in various states where she placed coverage, including in California. Edmondson on her own obtained a special lines' surplus lines license in mid-September 2003 and Edmondson's employer paid the premium on the surety bond—about $100—that was a condition for licensure.
In 1998, Jaoa Virrissimo, a seaman working on the seiner owned by C&F, was injured while lifting salt bags. At about the same time, John Alves was injured while working on a seiner owned by M&F when his foot got caught in a fishing net. Both seamen made claims against the FAI policies, and both of those claims were paid by FAI for about three years. However, in March 2001, FAI became insolvent and payments on both claims stopped.
The errors and omissions carrier for B&B Washington, Philadelphia Indemnity Insurance Company (PIIC), settled the Virrissimo professional negligence action by paying C&F $895,000 for a partial release of all claims. In return for the payment, C&F agreed to release all of its "claims, causes of action and damages, alleged in [the Virrissimo professional negligence action], including the claim for return of the premium for policy No. 97/09012 . . . ." Allegedly carved out of the partial release were any claims made in the instant action.
Alves also sued M&F, which in turn settled with him after Alves's claim caused the seiner owned by M&F to be "arrested" in American Samoa as security pursuant to the Jones Act (46 U.S.C. Appen. § 688). At the time of its arrest, the vessel was fully provisioned and ready to go to sea.
M&F initially sued, among others, the carrier, Lloyds Underwriters (Lloyds), that had issued port risk coverage for the vessel after it had been arrested and placed under the care of a substitute custodian.
C&F paid $87,993 in premiums and $8,799 in commissions for the FAI policy that partially covered the Virrissimo claim. In contrast, C&F paid $783,556 in premiums and $120,693 in commissions for all of the admitted coverage, and $972,009 in premiums and $113,747 in commissions for nonadmitted coverage, procured through Edmondson and appellants, for a total of $1,755,565 in premiums and $234,440 in commissions.
M&F paid $85,000 in premiums and $8,500 in commissions for the FAI policy that covered in part the Alves claim and $23,700 in premiums and $2,370 in commissions for the Lloyds port risk coverage. M&F paid $845,664 in premiums and $126,808 in commissions for all of the admitted coverage, and $914,292 in premiums and $112,617 in commissions for nonadmitted coverage placed by appellants, for a total of $1,759,956 in premiums and $239,425 in commissions.
Respondents sued appellants in March 2004. Respondents in their complaint asserted a section 17200 claim on their own behalf and on behalf of all others similarly situated based on appellants' alleged violations of various provisions of the Insurance Code, and asserted causes of action for negligence per se and declaratory relief. Respondents subsequently dismissed their negligence per se cause of action.
At trial, respondents' accounting expert opined C&F was entitled to $3,134,584 and M&F to $1,992,063, or a total of $5,126,647, in restitution. This amount was comprised of all premiums and commissions respondents paid for the 153 (or more) policies of both nonadmitted and admitted coverage appellants had placed for them from 1996 to 2003.
After 11 days of trial, the court issued its tentative decision finding appellants liable for unfair business practices under section 17200. The trial court initially awarded respondents $3.5 million in restitution without dividing the award between C&F and M&F. After appellants objected to the lump-sum award and various other findings made by the trial court, the court issued its statement of decision (SOD), entered judgment and adopted the allocation of the $3.5 million restitution award suggested by respondents, which was based on the relative proportion of the total premiums each paid during the relevant time period. As a result, the court awarded C&F
Appellants claim the trial court erred as a matter of law in awarding restitution to respondents because respondents were not entitled to an award based on premiums and/or commissions paid for insurance lawfully placed and because the award was not supported by the law or the evidence.
After several objections to the preliminary SOD, the trial court in the SOD
"[S]ection 17200 defines `unfair competition' in relevant part to mean `. . . any unlawful, unfair or fraudulent business act or practice . . . [.]'
"The [appellants] violated 17200 . . . when they unlawfully violated the various insurance code sections, some of which resulted in [respondents'] harm. Specifically, the [appellants] violated: (1) Insurance Code Section[] 1760.5, selling non-admitted coverage without a license, the appropriate special lines surplus lines license; (2) Insurance [C]ode section 382 for a failure to deliver the policies within 90 days; (3) Insurance Code section 1764.1, failure to deliver the disclosure statement; and (4) Insurance Code Section 1764.4 for failure to deliver the underwriter's signature authentication.
"The uncontroverted evidence from Ms. Edmondson was that she had no special lines' surplus lines license until September 12, 2003. There was
"There was testimony from Mr. Finete [(a shareholder of C&F)] and Mr. Ferriera [(the president of M&F)] that [appellants] never told them that they were selling M&F and C&F insurance coverage with a non-admitted carrier. [Appellants] didn't tell M&F and C&F anything about the California Insurance Guarantee Association and whether it would apply to any of the coverage Ms. Edmondson was placing on behalf of either plaintiff. Further, the [appellants] never discussed the fact that some of the insurers were not subject to the financial solvency regulations in California.
"There was also testimony from the [respondents] that had they been told the coverage was going to be placed with a non-admitted underwriter, they would have been willing to pay more for the coverage to avoid the inherent risk associated with non-admitted carriers.
"According to the testimony of Mr. Paulin [(an expert of respondents)], [respondents] suffered unpaid losses in excess of $10 million when the non-admitted underwriters failed to pay on the submitted claims. This included losses not paid by FAI Insurance Company of Australia and various Lloyds' and London Underwriters, of all three vessels, on various personal injury, hull and machinery, net and port risk claims. Mr. Paulin also testified that the non[-]admitted coverage was not worth the amount of the premiums paid for it by the [respondents].
"The Court finds that the [respondents] have met their burden and that there was a violation of [section] 17200, which resulted in injury in fact and loss caused by the [appellants'] unlawful acts—or practices."
The trial court next addressed whether restitution should be awarded for appellants' violation of section 17200:
"[Respondents] take the position that the [appellants] cannot be allowed to keep any of the premiums they acquired through the means of their unfair competition, since they obtained all of that business in violation of . . . section 17200. [Respondents] further claim that [appellants] not be allowed to `cherry
"[Appellants] take the position that if the Court finds in favor of the [respondents] that the amount of restitution should not exceed the amount of the commissions the [appellants] received. [Appellants] calculate that amount to be no more than $62,179 the total amount of the post[-]March 2000 commissions and $768,897 for all the commissions paid by . . . both [respondents] for the entire eight year time frame. (Testimony from Mr. Kaplan[.])
"The Court of Appeal in
"Based on the fact that the Court finds an agency relationship existed between the parties, the Court may look beyond the commission received. (See
"The [C]ourt has considered the totality of the evidence and weighed the equities addressed by the parties in their trial briefs and at the time of trial and concludes that the [appellants] should be required to pay [respondents] restitution for their violation of the UCL. However, the [C]ourt notes that the [respondents] elected to not rescind the contracts, thereby reaping a benefit by having viable coverage with the portions of the insurance coverage with the admitted carriers. Balancing the equities and considering the evidence the [C]ourt awards [respondents] the total amount of $3.5 million. M&F[] is entitled to $1,359,997 and C&F[] is entitled to $2,140,003. [Appellants] also
A trial court's construction of the relevant statutes, including the UCL and various provisions of the Insurance Code, is subject to our de novo review. (See Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1092 [61 Cal.Rptr.3d 716] (Daro); see also Reis v. Biggs Unified School Dist. (2005) 126 Cal.App.4th 809, 816 [24 Cal.Rptr.3d 393].) We review any factual determinations that bear upon the standing issue under the substantial evidence standard. (Daro, supra, at p. 1092; see also Taxpayers for Livable Communities v. City of Malibu (2005) 126 Cal.App.4th 1123, 1126 [24 Cal.Rptr.3d 493].)
As a threshold matter, appellants claim they cannot be liable for restitution under section 17200 for insurance lawfully placed between 1996 and 2003. We agree.
Our Supreme Court "previously found that the Legislature did not intend section 17203 to provide courts with unlimited equitable powers." (Korea
In reaching its decision in Korea Supply, the court looked to the language of section 17203 and the policy objectives underlying the statute and found it "clear that the equitable powers of a court are to be used to `prevent' practices that constitute unfair competition and to `restore to any person in interest' any money or property acquired through unfair practices. (§ 17203.) While the `prevent' prong of section 17203 suggests that the Legislature considered deterrence of unfair practices to be an important goal, the fact that attorney fees and damages, including punitive damages, are not available under the UCL is clear evidence that deterrence by means of monetary penalties is not the act's sole objective. A court cannot, under the equitable powers of section 17203, award whatever form of monetary relief it believes might deter unfair practices. The fact that the `restore' prong of section 17203 is the only reference to monetary penalties in this section indicates that the Legislature intended to limit [in individual private actions brought under the UCL] the available monetary remedies under the act." (Korea Supply, supra, 29 Cal.4th at pp. 1147-1148 & fn. 6.)
In addition, we reject the argument of respondents that because appellants sold respondents marine insurance from both admitted and nonadmitted carriers that somehow the "bundling" (a term coined by respondents) of such coverage by appellants turned what were otherwise lawful acts and practices into unlawful ones for purposes of the UCL.
Although respondents had the burden to establish which of appellants' placements of insurance violated the Insurance Code and was thus unlawful
Here, the trial court in the SOD did not specifically fix the $3.5 million restitution award in favor of respondents to any of the evidence at trial, but instead reached this figure after "[b]alancing the equities" and "consider[ing] the totality of the evidence," and after noting respondents suffered in excess of $10 million in losses and paid premiums and commissions for policies placed by appellants.
However, given the $3.5 million award was about 68 percent of all premiums (including commissions) paid by respondents (e.g., $3.5 million divided by $5,126,647), and given admitted coverage accounted for about 47 percent of all insurance premiums and commissions paid by respondents, it is clear the trial court's restitution award included some premiums and commissions respondents paid for admitted insurance coverage.
Appellants next argue respondents cannot satisfy the standing requirements to assert a claim under the UCL because respondents did not suffer injury in fact and/or loss of money or property caused by that injury.
When respondents filed this action in March 2004, the UCL's standing requirements for private individuals were more lenient. Previously, the UCL "authorized `any person acting for the interests of itself, its members or the general public' (former § 17204) to file a civil action for relief. Standing to bring such an action did not depend on a showing of injury or damage." (Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 228 [46 Cal.Rptr.3d 57, 138 P.3d 207] (Mervyn's).)
In the November 2004 General Election, the UCL was amended by Proposition 64 to prevent "uninjured private persons from suing for restitution on behalf of others. This is a consequence of section 17203 (as amended by Prop. 64, § 2), which provides that `[a]ny person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure . . . .'" (Mervyn's, supra, 39 Cal.4th at p. 232, fn. omitted.)
Proposition 64 "changed the standing requirements for a UCL claim to create a two-pronged test: A private person now has standing to assert a UCL claim only if he or she (1) `has suffered injury in fact,' and (2) `has lost money or property as a result of the unfair competition.' (Bus. & Prof. Code, § 17204; see Mervyn's, supra, 39 Cal.4th at p. 227.) Proposition 64 accomplished that change by amending Business and Professions Code section 17204, which prescribes who may sue to enforce the UCL, by deleting the language authorizing suits by any person acting on behalf of the general public and by replacing it with the phrase, `who has suffered injury in fact and has lost money or property as a result of the unfair competition.' (Bus. & Prof. Code, § 17204; see Mervyn's, supra, 39 Cal.4th at p. 228.)" (Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 852 [70 Cal.Rptr.3d 466].)
The SOD provides that appellants violated four Insurance Code sections but also vaguely concludes that only "some of [the violations] resulted in [respondents'] harm." (Italics added.) On closer reading, the SOD provides two separate violations of the Insurance Code "ultimately caused Plaintiffs' harm," namely appellants' placement of marine coverage from nonadmitted carriers without a special lines' surplus lines license (Ins. Code, § 1760.5
Moreover, as we have noted the SOD finds respondents "suffered unpaid losses in excess of $10 million when the non-admitted underwriters failed to
To the extent the trial court based respondents' $3.5 million restitution award on respondents' losses in excess of $10 million stemming from the claims of the seamen, we conclude that was error. The $10 million in losses arose when the two nonadmitted carriers, Lloyds and FAI, failed to pay or discontinued paying, respectively, on the submitted claims involving Virrissimo and Alves. Those damages are not recoverable in a UCL action. (See Korea Supply, supra, 29 Cal.4th at p. 1144 [a plaintiff may recover restitution under § 17200 but not damages].) Moreover, those damages were released by respondents in settlement of their respective professional negligence actions against appellants.
We also agree with appellants that respondents did not lose money or property for purposes of the UCL based on the "inherent risk" associated with nonadmitted carriers, as found by the trial court. We need not speculate here whether the "inherent risks" associated with coverage placed by nonadmitted carriers actually caused respondents to lose money or property for purposes of section 17204 because the record shows they did not. Indeed, the record shows only three of the policies placed by nonadmitted insurers did not fully cover claims submitted by respondents. Any damages from these three policies were released by respondents in their earlier settlements with appellants.
Finally, we also agree with appellants that respondents are not entitled to restitution of premiums paid for nonadmitted coverage because appellants could not be required to return something that did not belong to them and was the property of the insurer. (See Day v. AT & T Corp., supra, 63 Cal.App.4th at p. 340 [under the UCL the act of "restoring something to a victim of unfair competition includes two separate components," to wit:
We also perceive the policy objectives of the UCL, including deterring unfair competition (see Korea Supply, supra, 29 Cal.4th at pp. 1147-1148 & fn. 6), would in no way be furthered if appellants were required to return premiums they lawfully collected and held in trust on behalf of the nonadmitted carriers that issued the valid and enforceable coverage. (See Medina v. Safe-Guard Products, Internat., Inc., supra, 164 Cal.App.4th at p. 112 [contract of insurance is not rendered unenforceable merely because the insurer who issued it was not licensed to sell insurance in Cal.].)
There also is no finding in the SOD that appellants benefited from their collection and transfer of premiums, as opposed to the commissions/brokers fees (discussed post) paid by respondents for nonadmitted coverage. (Cf. Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1339-1342 [90 Cal.Rptr.3d 589] (Troyk) [defendants subject to claim of restitution for service charges paid directly by consumers to a third party because defendants received a benefit from the payment of such charges and because defendants and the third party acted as a single enterprise—as alter egos of each other—and thus any payment to the third party "should be treated as if paid to [defendants]"]; Shersher v. Superior Court (2007) 154 Cal.App.4th 1491, 1493 [65 Cal.Rptr.3d 634] [money paid to a third party retailer to purchase products of defendant based on the alleged false advertising of defendant subject to claim for restitution from defendant who benefited from the transaction].)
Appellants did, however, retain the commissions they earned from placement of the nonadmitted coverage. Appellants argue that any violation of either Insurance Code section 1760.5 or 1764.1 did not cause respondents' harm under the UCL.
As we noted ante, both respondents in settlement with appellants released "all claims, causes of action and damages" asserted in their respective professional negligence actions against appellants.
We conclude the releases signed by C&F in the Virrissimo professional negligence action and by M&F in the Alves professional negligence action are ambiguous on the issue of whether respondents intended at the time of execution (see Civ. Code, § 1636) to release the broker fees each paid appellants for nonadmitted coverage. Given our decision post to remand this case, we decline to decide this issue here.
Appellants next argue the trial court erred when it ruled the "delayed discovery rule" applies to UCL claims. Both parties agree the applicable statute of limitations for a section 17200 et seq. claim is found in section 17208. This statute provides in part: "Any action to enforce any cause of action pursuant to this chapter shall be commenced within four years after the cause of action accrued."
Respondents in the instant case filed their lawsuit on March 10, 2004. Applying the four-year limitations period, appellants argued below and in this proceeding that restitution for any violation of the UCL before March 10, 2000, is time-barred. The trial court, however, found the statute of limitations
Although resolution of a statute of limitations defense typically is a question of fact, when the facts are susceptible of only one legitimate inference a reviewing court may determine the issue as a matter of law. (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112 [245 Cal.Rptr. 658, 751 P.2d 923]; see also Snapp, supra, 96 Cal.App.4th at pp. 889-890.) We independently review the propriety of the court's ruling. (Frankel v. Kizer (1993) 21 Cal.App.4th 743, 749 [26 Cal.Rptr.2d 268].)
We conclude the delayed discovery rule does not apply to respondents' UCL claim because that claim, as we have now determined, is premised on appellants' violation of Insurance Code section 1764.1.
Appellant B&B, the parent company of B&B Washington, argues the trial court erred in denying its motion for nonsuit because there was no evidence that Edmondson was employed by B&B, that B&B was in an agency relationship with the other appellants and that B&B did anything wrong in connection with respondents' UCL claim.
In "support" of these findings, respondents in their brief argue B&B was involved in any agency relationship because there was "no evidence that parent B&B, Inc., was not an agent of its wholly owned subsidiaries or the underwriters . . . [n]or was there any evidence that any of the [appellants] were not willing participants[] in the illegal sale of coverage into California as a single enterprise." (Italics added.)
Respondents, however, have it backwards; it was not appellants' burden to proffer evidence to show there was no agency relationship between B&B and B&B Washington or the other appellants, or that B&B was not a willing participant in the unlawful conduct, but rather it was respondents' burden to establish such findings based on the evidence. (See J. M. Wildman, Inc. v. Stults (1959) 176 Cal.App.2d 670, 674 [1 Cal.Rptr. 651].) Respondents provide no factual support in their brief for the trial court's findings, and we decline to read the voluminous record in search of such evidence, if it even exists. (See Mansell v. Board of Administration (1994) 30 Cal.App.4th 539, 545 [35 Cal.Rptr.2d 574] ["We are not required to search the record to ascertain whether it contains support for [respondents'] contentions."]; Troensegaard v. Silvercrest Industries, Inc. (1985) 175 Cal.App.3d 218, 229 [220 Cal.Rptr. 712] [when no record references are made, a court of review may treat a point or issue as waived].)
Perhaps acknowledging, albeit tacitly, that there is no evidence of an agency relationship between B&B and the remaining appellants, respondents in reliance on Troyk, supra, 171 Cal.App.4th 1305 argue the trial court was entitled to "infer" appellants acted as a "single enterprise" in connection with respondents' UCL claim. We disagree with respondents' "reading" of Troyk, inasmuch as in that case there was an express finding that the various corporate entities acted as a single enterprise. (171 Cal.App.4th at p. 1342.) In the instant case, the trial court made no such finding, nor have respondents proffered any evidence to support such a finding.
We thus conclude the trial court should have granted B&B's motion for nonsuit.
In their cross-appeal, respondents claim the trial court erred when it denied their two motions for leave to amend their complaint to add additional parties to their action.
"The court may, in furtherance of justice, and on any terms as may be proper, allow a party to amend any pleading or proceeding by adding or striking out the name of any party . . . ." (Code Civ. Proc., § 473, subd. (a)(1).) "`Leave to amend a complaint is thus entrusted to the sound discretion of the trial court. ". . . The exercise of that discretion will not be disturbed on appeal absent a clear showing of abuse. More importantly, the discretion to be exercised is that of the trial court, not that of the reviewing court. Thus, even if the reviewing court might have ruled otherwise in the first instance, the trial court's order will . . . not be reversed unless, as a matter of law, it is not supported by the record."' [Citations.]" (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242 [46 Cal.Rptr.3d 66, 138 P.3d 214].)
As we noted ante, respondents filed their "representative action"
Here, respondents moved in July 2008 to amend their complaint to add, among other changes, 166 new parties to their existing section 17200 cause of action, split roughly between new plaintiffs and so-called "nominal defendants." Respondents in their motion claimed any delay by them in moving to amend was directly attributable both to the lengthy delay by appellants in producing documents in written and electronic format, which delay resulted in sanctions against appellants of about $166,400,
In opposing the motion to amend, appellants argued respondents waited more than a year after they obtained the necessary information from appellants to move to add the 166 new parties and that if the motion was granted, they would be substantially prejudiced because trial was just four months away and appellants needed to depose each of the new proposed plaintiffs and conduct other discovery from them.
The trial court in September 2008 denied respondents' motion to amend. In so doing, the trial court found that "[g]iven the rapidly approaching trial date and potential five year problem [(based on the cutoff to bring a case to trial, as provided in Code of Civil Procedure section 583.310)], the Court finds such amendment not proper at this time." The trial court's ruling was without prejudice to the prospective new parties "bringing their own complaints against [appellants], if proper."
In mid-December 2008 respondents filed a second motion for leave to amend, this time under the guise of a "motion in limine to amend complaint to conform to proof." In this second motion, respondents sought permission to add anywhere between 44 and 54 new plaintiffs to their section 17200 claim. Appellants again opposed that motion and filed an opposing motion seeking to bar the introduction of evidence at trial of any UCL claims asserted by respondents in their "representative" capacity.
With trial of the case scheduled to start on January 30, 2009, the trial court on January 22, 2009, denied respondents' second motion to add additional plaintiffs and granted appellants' motion precluding respondents from pursuing representative claims under the UCL. In its ruling, the trial court noted respondents appear to have conceded that their action "does not meet the requirement under [section] 17203 of being able to comply with [Code of Civil Procedure section] 382, the class action statute."
We conclude the trial court properly exercised its discretion when it denied respondents' motions to amend to add additional parties in this action. The record shows the trial court considered the timing of the motions and whether appellants would be prejudiced if respondents were allowed to amend. In denying the motions, the trial court noted the proposed new plaintiffs could file a separate action and pursue their claims in that action, as opposed to adding new parties to the current action where the trial date was rapidly approaching as was the mandatory five-year cutoff for the case to be tried. (See Code Civ. Proc., § 583.310 ["[a]n action shall be brought to trial within five years after the action is commenced against the defendant."]; id., § 583.360, subd. (a) [if an action is not brought to trial within five years after it was commenced, it must be "dismissed"].)
Although the parties blame each other for the timing of respondents' two motions to amend, the trial court was in the best position to weigh the relative merits of the motions and ultimately decide whether to grant or deny amendment.
The record provides ample support for the trial court's finding that allowing respondents to add dozens of new parties to their action at that stage of the proceeding would have been "extremely prejudicial" to appellants. It shows that respondents were seeking restitution from appellants for premiums and commissions from at least 153 policies of insurance placed by appellants over a seven-or eight-year period; that each of the new proposed plaintiffs that respondents sought to add to the lawsuit would have been pursuing his or her own separate claim for restitution over a similar period of time based on policies placed by appellants, inasmuch as respondents did not attempt to certify a class action asserting such claims; that if added to the lawsuit, appellants would have had the right to depose each of these additional plaintiffs and conduct other discovery to determine whether the policies
Based on this record, we conclude the trial court's decision to deny respondents' motions to amend was reasonable and not an abuse of discretion, much less a "manifest or gross abuse of discretion" that is necessary for reversal. (Arthur L. Sachs, Inc. v. City of Oceanside (1984) 151 Cal.App.3d 315, 319 [198 Cal.Rptr. 483], italics omitted; see Nelson v. Specialty Records, Inc. (1970) 11 Cal.App.3d 126, 139 [89 Cal.Rptr. 540] [denial of leave to amend is proper when the proposed amendment "may require further investigation or discovery procedures"].)
Finally, respondents claim the trial court erred in refusing to award them prejudgment interest after finding they were entitled to $3.5 million in restitution.
Briefly, respondents' motion for prejudgment interest was decided on December 11, 2009, after the SOD was issued and after the parties had each filed an appeal to the judgment. The trial court denied respondents' request, ruling: "[Respondents'] motion for prejudgment interest is denied as the Court does not believe prejudgment interest appropriate in this case."
Respondents filed a motion for new trial and/or new judgment in late December 2009 in connection with the trial court's denial of prejudgment interest. Respondents aggressively argued they were entitled to prejudgment interest as the prevailing parties because to conclude otherwise, as the trial court had done, would "condone the [appellants'] 13 year[s'] fraudulent withholding of [respondents'] $3.5 million" and allow appellants to keep $5.5 million they made in interest.
Respondents' reliance on Civil Code section 3288 is likewise misplaced. This statute applies to "an action for the breach of an obligation not arising from contract," such as a tort claim. (See Bullis v. Security Pac. Nat. Bank (1978) 21 Cal.3d 801, 814, fn. 16 [148 Cal.Rptr. 22, 582 P.2d 109] [under Civ. Code, § 3288, an award of prejudgment interest on a tort claim is committed to the sound discretion of the trial court].)
For many of the same reasons, we reject respondents' argument that Civil Code section 3302 authorizes them to recover prejudgment interest inasmuch as this statute governs damages available in a breach of contract action involving "breach of an obligation to pay money only . . . ." (See Korea Supply, supra, 29 Cal.4th at p. 1150 [actions under the UCL are not meant to be substitutes for tort or contract actions, but "[i]nstead [the UCL] provides an equitable means through which both public prosecutors and private individuals can bring suit to prevent unfair business practices and restore money or property to victims of these practices."].)
Respondents also rely on Probate Code section 16441 and Insurance Code section 1733 to support their statutory right to recover prejudgment interest.
Insurance Code section 1733 also does not apply to respondents' UCL claim because this statute requires persons who receive funds "as premium or return premium on or under any policy of insurance or undertaking of bail" to hold them "in his or her fiduciary capacity" and states that any person who diverts such funds shall be "guilty of theft and punishable for theft as provided by law." (Ins. Code, § 1733.)
Lastly, we reject respondents' argument that they are entitled to an award of prejudgment interest based on Code of Civil Procedure sections 1032 and 1033.5, subdivision (a)(14). Subdivision (a)(14) of Code of Civil Procedure section 1033.5 provides that an award of "costs" pursuant to Code of Civil Procedure section 1032 includes "Any other item that is required to be awarded to the prevailing party pursuant to statute as an incident to prevailing in the action at trial or on appeal." (Italics added.) Because respondents are not entitled to a statutory award of prejudgment interest in connection with their UCL claim, we conclude subdivision (a)(14) of Code of Civil Procedure section 1033.5 is inapplicable here.
For the benefit of the parties on remand, we conclude respondents' entitlement to prejudgment interest, if at all, is subject to the discretion of the trial court inasmuch as no statute or contract authorizes such recovery under the facts of this case. If on remand the trial court in the exercise of its discretion awards respondents' prejudgment interest, that award must be based on broker fees (but not premiums) paid by respondents for nonadmitted coverage on or after March 10, 2000, as we explained ante. Of course, respondents' entitlement to the return of broker fees also depends on whether one or both of them released such claims in their respective settlement agreements with appellants in connection with their professional negligence actions against these same appellants.
The judgment is reversed and the matter is remanded for further proceedings not inconsistent with this opinion. Appellants to recover their costs of appeal.
McDonald, J., and O'Rourke, J., concurred.
