Preview
IAN FRASER-Tl-IOMSON (BAR NO. 73526) EEEED
Ix)
ROBERT GEIIBARDT
CESARI. WERNER AND
(BAR NO. 48965)
MORIARTY
JAMMATEO mum
75 Southgate Avenue
Lu
Daly City. CA 94015
'SEP 15 2017
Telephone: (650) 991-5 I26
43
Facsimile: (650) 991-5134
iit@cwrnlaw. com
rgebhardt@cwmlaw. com
6082-5MIO
Attorneys for Defendant,
MERCURY CASUALTY COMPANY
\DW‘JCNU‘I
Authorities
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA &
llIllllllllllllllllillllllllllIll
Points
IN AND FOR THE COUNTY OF SAN MATEO.
of
02601
UNLIMITED CIVIL JURISDICTION
CIV-Memorandum
116558
6—
MPA
DONNA MARIE MESCHI, an individual. No. 16ClV02607 H '
JUNIOR EDDY JOSEPH, an individual,
VINCENT ANDREW MESCHI, an MEMORANDUM OF POINTS AND
individual, and CAROLE GIANFERMO, AUTHORITIES IN SUPPORT OF
guardian ad litem for DOMINIQUE MOTION FOR JUDGMENT ON THE
'
CI‘IESERE JOSEPH, an individual, on behalf I’LEADINGS
ol’ themselves and a class of similarly situated
persons, ASSIGNED T0 HONORABLE JUDGE
SWOPE, DEPARTMENT 23, FOR ALL
PURPOSES
Plaintiffs, DATE FILED: November 29, 2016
vs. TRIAL DATE: TBD
MERCURY CASUALTY COMPANY a DATE: October 23. 2017
corporation, et al.. TIME: TBD
DEPT; 23
Defendants. BY FAX
I. INTRODUCTION
Plaintiffs herein seek to represent two separate classes of claimants. This
Motion for Judgment on the Pleadings establishes that, based solely on the complaint, there is
no well-defined community ol’ interest among the putative class members. Rather than
establishing class action procedure as a superior way of resolving these disputes, plaintiffs
complaint demonstrates that proceeding under the class action aegis would lead to chaos.
-1-
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR JUDGMENT ON
THE PLEADINGS
r—
II. PROCEDURE
I») A Motion for Judgment on the Pleadings has the same function as a general
b4 demurrer but is made after the time for demurrer has expired. The rules governing demurrers
43 apply. California Code of Civil Procedure Sec. 438. With statutory exceptions not applicable
'
kl] here. a motion for judgment on the pleadings may be made by a defendant at any time. CCP
Sec. 438; Stoops vistbbmzs‘i, 100 Cal. App. 41" 644. 650 (2002).
O
Such a motion may be made
\J
on the ground the complaint, or any cause of action therein, does not state facts sufficient to
00
constitute a cause of action. CCP Sec. 438(c).
Demurrers or motions for’judgment on: the pleadings are properly granted
\D
where from the face of the complaint there is no reasonable possibility plaintiffs could
O
establish
——n._.
a community of interest among potential class members, and that individual issues
.....
predominate over common legal or factual issues. Newt!” v State Farm Gen. Ins. (10., 118
I\)
u—
‘Cal. App. 4m l094 (2004) Schermer v Tatum, Cal. App. 4:]:
245 912, 926—3l (2016). It is well
o---‘
W
settled that a trialcourt is authorized to “weed out" legally meritless class action suits prior to
4}
—n
certification by demurrer or pretrial motion. Under v 7hrifly Oil Co, 23 Cal. 4"I 429, 440
{)1
-—a
(2000).
Ci
~—
III . Standards for Maintaining Class Actions
‘4
5—.
The following paraphrases the court’s analysis of class action requirements in
00
Newe/l vSIaIe Farm Gen. Co, 4m l l00—l l0]
—-4
Ins. 118 Cal. App. l094, (2004).
h.
\O Class actions are authorized under CC!" Sec. 382. Certification of a class is a
0
[U procedural hurdle the proponent of the class must meet to establish both an aseertainable
[U
h“ class and a well-defined community of interest among the class members. The community of
interest
is.) ix) requirement involves three factors: predominant common issues of law and'fact,
class representatives with claims typical of the class, and class representatives who can
adequately represent the class. These requirements mean that each class member must not be
required to individually litigate numerous questions to determine his right to recover
following a class judgment. The issues which may be jointly tried must be sufficiently
numerous and substantial to make the class action advantageous for both the courts and the
litigants. Since the class action has a potential to create injustice, trial courts, in the “weeding
'
-2-
MEMORANDUM or norms AND AUTHORITIES [N SUPPORT OF MOTION FOR JUDGMENT on
THE PLEADINGS
out” process, must carefully weigh benefits and burdens and should only allow maintenance
[Q ofa class action where substantial benefits accrue to both litigants and the court.
3‘») If the ability of each member of the class to recover
clearly depends on a separate set of facts applicable
only to him. then all of the policy considerations
U1 which justify class actions equally compel the dis-
missal of such inappropriate actions at the pleading
stage. Newell, supra at 1101.
IV. THE ALLEGED PUTA‘I'IVE CLASSES ARE UNMANAGEABLE AS A
MATTER OF LAW
OVDOOxl
A. Legal Discussion
l
Each of plaintiffs' efforts to Specify a class are based on defendant Mercury’s
alleged improprieties in indemnil’ying insureds for property losses. The claim is that all
members of the putative classes have been subjected to the same illegal claims handling
procedures as insureds under Mercury policies. However, this common allegation makes
proceeding as a class actions unmanageable and therefore improper.
Basureo v2/" 'em. Ins. Co. , 108 Cal. App. 4‘“ MO (2003) stemmed from
claims made following the Northridge earthquake. In sustaining the trialcourt’s refusal to
certify a class against an insurer who allegedly engaged in bad faith practices in paying
claims. the court said: “Class actions will not be permitted...where there are diverse factual
issues to be resolved, even though there may be many common questions of law... [A]class
action cannot be maintained where each member’s right to recover depends on facts peculiar
to his case. Basm'co supra at l 18.
In the complaint filed herein, plaintiffs allege the existence of two classes, or
more accurately, subclasses. The first constitutes Mercury policy holders who sustained
partial property loss and were indemnified by-Mercury after depreciation was taken. The
complaint is that Mercury applied an illegal depreciation measure; the depreciation, it is
alleged, should have been based on the actual physical depreciation of the individual item
’
Plaintiffs’ failure to allege identifiable classes is described in Section V of this brief.
-3-
MEMORANDUM Ol’ POINTS AND AUTHORITIES tN SUPPORT OF MOTION FOR JUDGMENT ON
THE PLEADINGS
that was partially lost. rather than astraight line depreciation measure that Mercury usedws all .
IQ in violation of California Insurance Code Sec. 205 l .( Paragraphs 9-12 of the Complaint)
The second class includes those Mercury property loss policy holders who
43.1.0
were allegedly victims of a practice claimed to be in violation of Cal. Ins. Code Sec. 2015.5.
As best we can determine, Mercury allegedly did not indemnify for property damage based
on the amount paid by the insured to replace the property; rather, Mercury allegedly
indemnified for the loss based on itsown calculation of what the replacement cost should
have been. (paragraphs 20-22 of the complaint).
The common denominator for each class is that after judgment, each class
member must prove entitlement to a certain amount of recovery. This brings the allegations
in this case outside of predominantly common issues of law and fact and into requirements of
individualized proofiand therefore outside the purview oi’class action suits.
The Northridge earthquake case of New?” 13.9mm Farm Gen. Ins. Co.,l 18
’Cal. App. 4‘" 1094(2004) is virtually identical to the issues before this court. The appellate
court affirmed the granting of a demurrer without leave to amend. Claims from that quake
were allegedly reduced or denied based on defendants’ depreciation reductions. id. at 1098.
The trial court’s ruling was upheld: though plaintiffs had claims typical of the proposed class
and they were adequately representative, the resolution of common questions would require
individualized determinations as to the defendants’ liability as to each putative class member.
Therefore, common questions did not predominate over individual issues, and a class action
was therefore not a superior method of resolving the dispute.
The Nowell court acknowledged that common issues of a pervasive scheme
and widespread use ot’bad faith practices by defendants were common questions of law and
fact. However, they did not predominate in that case. where each putative class member
would recover only by proving the amount of the claim which was wrongfully denied. id.
1103. The Nerve]! court held “. . .each putative class member’s potential recovery would
involve an individual assessment of his or her property, the damage sustained. and the actual
claims practices employed. in such cases, class treatment is unwarranted. id. See also
Brzsurcu v 2!” Century Ins. Co. l08 Cal. lApp. 411.
NO (2003); Hicks v Kaufiuan & Broad
-4- ‘
MEMORANDUM or POINTS AND AUTHORITIES m SUPPORT or MOTION Edit iuot‘imenr on
THE PLEADINGS
”-4
Home Corp” 89 Cal. App. 4‘“ 908, 923-24 (200l)(based on the need for ‘individualized
[Q proof’ for each putative class member to come forward to prove specific damage to the
home, and that such damage was caused by foundational cracks and not something else,
‘commonality of facts is lost and the action splits into more pieces than the allegedly
defective foundation’-
The above cited cases are merely following the law that has been established
for some time.
oomummau
In City QfScm Jose v Superior (Sour!s 12 Cal 3d 447 (1974) plaintiffs sought to
recover diminution of property values for a,class of home owners situated under the flight
pattern of the San Jose Airport. In denying class certification, the Supreme Court stated the
class action scheme is incompatible with the “fundamental maxim that each parcel of land is
unique” id at 462. The plaintiff in the San Jose case, as here, has the burden of proving to
the court that substantial benefits to litigantsand the court will accrue by certifying a class;
whether a class action is appropriatehurns on the existence and extent of common legal and
factual questions. “[E}ach class member must not be required to individually litigate
numerous and substantial questions to determine his right to recover following the class
judgment....” id at 460.
To be sure, the necessity that some degree of individual damage proof is
ultimately required for the class members to recover is not the sole determining factor in-the ,
certification process; rather. only where individual issues predominate over common
questions do the nature of the damage claims become difficult to manage and the complexity
of the damage claims swallows up the value of proceeding as a certified class. For example,
the Supreme Court in Saw-0n Drug Stores v Superior court, 34 Cal 4"h 319 (2004)held that
individualized issues do not per se render class certification inappropriate so long as such
issues may be el’leetively managed. The case involved a claim workers were this-designated
as exempt employees; the Court urged the court to implement innovative procedural tools to
certify a manageable class, while permitting defendants to register opposition.
Bomemheim v Lox Angela's Gay d} Lesbian Center, l843 Cal. App. 4th 147!
(2010), illustrates the point the Supreme Court was trying to make in Saw-0n Drugs. There
an ineffective antidote to syphilis was administered; those who received the improper drug
-5.
”"
MEMORANDUM or norms AND AUTHORITIES IN summer or MOTION roe JUDGMENT ON
‘rns meanness
had to return to the clinic forproper treatment; no one contracted the disease as a result of the
Ix.)
improper treatment. The trialcourt refused to certify the class because, although there were
common issues as to duty and causation, individualized proof was required on damages. The
appellate court reversed. lt held the necessity for class members to establish damages in that
case did not mean individual fact questions predominated. “Individual issues do not render
class certification inappropriate so long as such issues may effectively be managed.” 184
Cal.App. 4‘“ at 1487. The individual issues considered in Bomersheim are minimal and were
susceptible to effective management; the complexity and nature of those damage claims pales
in comparison to the complicated issues that faced the putative class members in Newell, and
which would face the putative class members here if the classes plaintiffs describe were ever
certified.
B.Argument
The premise upon which plaintiffs’ firstclass is based destroys it.Plaintiffs
claim that in depreciating property Mercury used a straight line method; what it should have
done, according to plaintiffs, is measured depreciation based on the actual condition of
property, rather than straight line depreciation based on the age of the property.(complaint.
paragraphs 9-12)
If plaintiffs were to succeed with a class certification, then each partially
destroyed structure would have to be examined for the wear and tear it experienced before it
had been replaced. So too the contents of the structure would have to be evaluated as they
existed be bra they were repaired. rebuilt or replaced.
The court in Basurco, supra. noted the claims involving the putative class
required three types of experts to plaintiffs’ home to determine the merits of the policy
holders’ claim, showing that the extent and existence of damage there had to be detemtined
on a case-by~case basis, which resulted in the court‘s determination that the individual issues
predominated and that a class action was not the superior was of resolving the claims.
Here we are faced with the same issues which caused the Basurco and News”
courts to refuse class certification. Going back to the point where the loss to the structure or
itscontents occurred in order to determine itscondition before it was repaired, replaced or
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MEMORANDUM OF POINTS AND AUTHORITIES lN SUPPOR'l’OF MOTION FOR JUDGMENT ON
THE PLEADINGS
rebuilt would create a logistical nightmare. Assuming a condition of the structure or its
[9 contents can be determined prior to the time it was destroyed or damaged, a depreciation
unique to each destroyed or damaged item isrequired to be applied. according to plaintiffs
43b.)
class scenario.
U- As stated in Newcll,supm, it is not enough for plaintiff to allege a pervasive
scheme of illegal and bad faith activity. Even where that is proven, a class certification will
be denied where. as here. the potential recovery involves an individual assessment of
COOOVO‘t
property and the damage sustained.Z
The same problems mentioned immediately above infect plaintit'fs’ second
putative class. Although the proposed terms of the class are a littlemurky. it appears
plaintiffs complain that Mercury paid less than what the insured paid out to repair, replace or
rebuild damaged property. This class claim will also require evaluation of the realty or
personalty after it has been repaired. replaced or rebuilt. The value of the item at the time of
the loss-and before repair or replacement» would have to be determined. It would
necessitate an evaluation whether each class member’s repair or replacement payment was
reasonable.
Whatever common questions are alleged to exist here, one thing stands out:
each class member would have a right to recover that would be dependent on the facts
peculiar to his particular case; any utility of maintaining a class action would be thereby
cmasculated.
V. INADEQUATE CLASS DESCRIPTION
Defendant Mercury requests that this court grant its Motion for Judgment on
the pleading, and that the case be dismissed; A solid basis for doing so is set forth in the
argument above. Additionally, no proper class is described in the complaint.
Plaintiffs rely on Cal. Ins. Code Sec. 2015 in structuring itsfirst class. it only
relates to tire losses. it isunclear whether this putative class is intended to extend to property
loss claims other than those covered by fire policiesi
3
An additional complication would arise ifthere are other insurers involved in a particular
loss, as envisioned in the quotedmaterial at page 6, line 3~5 of the complaint}
MEMORANDUM OF 'POlNTS AND AUTi—lORlTlES lN SUPPORT OF MOTlON FOR JUDGMENT ON
THE PLEADINGS
The aforementioned statute is correctly quoted in the complaint, in that it
h.)
states an insurer may deduct “physical depreciation based on [the property’s] condition at the
time of the injury...” Later in the complaint, at paragraph 10, the word “actual” is inserted
43-h.)
into the statutory description; the depreciation must be based on the “actual” condition of the
U) destroyed or damaged object. Without the addition of the word “actual,” there isnothing in
the statute that prohibits straight line depreciation; it is a depreciation based on the property’s
condition at the time of loss.
.
ODOONC‘ The subclass fails based on the very statute on which plaintiffs rely. In
paragraph 1l of the complaint plaintiffs claim that physical depreciation should include only
wear and tear, and “does not include spreading the cost of an object over its useful life.” But
the statute on which plaintiffs rely seems to belie this class foundation. The lastsentence Of
lns. Code Sec. 2051(b)(2) is not quoted in the complaint: it permits depreciation of objects in
a partially destroyed structure, but only to components that are normally subject to repair and
replacement “during the useful life of the structure." The statute appears to authorize
depreciation of objects in a structure subject to a partial loss based on the useful life of the
.
structure in which the components are contained.
Plaintiffs herein do not adequately describe the second class either. Itis based
on Cal. Ins. Code sec. 2051.5. This statute relates to open policies that require payment of the
replacement cost ‘for a loss. By its quoted terms, the measure of indemnity is the amount it
would cost the insured to replace the thing lost or policy limits, whichever is less, and
without depreciation.
Plaintiffs then quote Mercury’s policies.(complaint, paragraph 20) The
policies quoted in the complaint do not demonstrate a violation of any legal mandate. Rather,
the statute specifically allows Mercury to pay a loss as set forth in the quoted policy.
Plaintiffs seek to establish a class of Mercury policy holders who were victims of Mercury’s
allegedly illegal claims handling policies. But the statutory standard does not demonstrate
that the terms of Mercury’s policies, quoted in paragraph 20 of the complaint, are not
compliant with the statute.
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MEMORANDUM OF POlNTS AND AUTHORITIES INSUI’PORT OF MOTION FOR JUDGMENT ON
THE PLEADINGS
is.)
Finally, Sec. 2051.5 only applies to insurance policies that require the insured to repair.
rebuild or replace damaged property in order to collect the full replacement cost. Is this
subclass restricted to only such policies? If this action is allowed to proceed on a class basis.
this should be clarified.
VI.
DQNIQUI-Rb)
ALL CAUSES OF ACTION FAIL
Plaintiffs seek recovery for Unfair Business Practices, Declaratory Relief,
Breach of Contract, and Breach of the Covenant of Good Faith and Fair Dealing. Plaintiffs .
seek a readjustment and restitution for the amount of benefits Mercury allegedly failed to
pay. Individualized assessments would be necessary to prove each claim. These causes of
action on behalf of the putative class members fail for the same reasons the class status fails:
each individual must present evidence to support his or her entitlement to more payment
under the individual policy. Newell. supra at 1103-04; Caro v Proctor & Gamble, 18 Cal.
App. 4‘“ 644,668-69 (I993).
VII. CONCLUSION
‘
Plaintiffs' complaint reveals there isno community of interest possible which
would justify the maintenance of a class action. The community of interest requirement is not
satisfied if every member of the alleged class would be required to litigate numerous
questions determining his individual right for damage to unique structures and contents, in
order‘to recover following a class judgment. City q/‘LS'an Jose, supra. Defendant Mercury
<
requests that this motion be granted, and the complaint be dismissed.
DATED: September 15. 2017 CESAR! iERNE . ND MORIARTY
[AN FRASER—THOMSON
ROBERT GEl-IBARDT
Attorneys for Defendant
MERCURY CASUALTY COMPANY
4
-9-
MEMORANDUM OF POINTS AND AUTHORITIES lN SUPi’OR‘T OF MOTION FOR JUDGMENT ON
THE PLEADINGS
Preview
IAN FRASER-Tl-IOMSON (BAR NO. 73526) EEEED Ix) ROBERT GEIIBARDT CESARI. WERNER AND (BAR NO. 48965) MORIARTY JAMMATEO mum 75 Southgate Avenue Lu Daly City. CA 94015 'SEP 15 2017 Telephone: (650) 991-5 I26 43 Facsimile: (650) 991-5134 iit@cwrnlaw. com rgebhardt@cwmlaw. com 6082-5MIO Attorneys for Defendant, MERCURY CASUALTY COMPANY \DW‘JCNU‘I Authorities IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA & llIllllllllllllllllillllllllllIll Points IN AND FOR THE COUNTY OF SAN MATEO. of 02601 UNLIMITED CIVIL JURISDICTION CIV-Memorandum 116558 6— MPA DONNA MARIE MESCHI, an individual. No. 16ClV02607 H ' JUNIOR EDDY JOSEPH, an individual, VINCENT ANDREW MESCHI, an MEMORANDUM OF POINTS AND individual, and CAROLE GIANFERMO, AUTHORITIES IN SUPPORT OF guardian ad litem for DOMINIQUE MOTION FOR JUDGMENT ON THE ' CI‘IESERE JOSEPH, an individual, on behalf I’LEADINGS ol’ themselves and a class of similarly situated persons, ASSIGNED T0 HONORABLE JUDGE SWOPE, DEPARTMENT 23, FOR ALL PURPOSES Plaintiffs, DATE FILED: November 29, 2016 vs. TRIAL DATE: TBD MERCURY CASUALTY COMPANY a DATE: October 23. 2017 corporation, et al.. TIME: TBD DEPT; 23 Defendants. BY FAX I. INTRODUCTION Plaintiffs herein seek to represent two separate classes of claimants. This Motion for Judgment on the Pleadings establishes that, based solely on the complaint, there is no well-defined community ol’ interest among the putative class members. Rather than establishing class action procedure as a superior way of resolving these disputes, plaintiffs complaint demonstrates that proceeding under the class action aegis would lead to chaos. -1- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR JUDGMENT ON THE PLEADINGS r— II. PROCEDURE I») A Motion for Judgment on the Pleadings has the same function as a general b4 demurrer but is made after the time for demurrer has expired. The rules governing demurrers 43 apply. California Code of Civil Procedure Sec. 438. With statutory exceptions not applicable ' kl] here. a motion for judgment on the pleadings may be made by a defendant at any time. CCP Sec. 438; Stoops vistbbmzs‘i, 100 Cal. App. 41" 644. 650 (2002). O Such a motion may be made \J on the ground the complaint, or any cause of action therein, does not state facts sufficient to 00 constitute a cause of action. CCP Sec. 438(c). Demurrers or motions for’judgment on: the pleadings are properly granted \D where from the face of the complaint there is no reasonable possibility plaintiffs could O establish ——n._. a community of interest among potential class members, and that individual issues ..... predominate over common legal or factual issues. Newt!” v State Farm Gen. Ins. (10., 118 I\) u— ‘Cal. App. 4m l094 (2004) Schermer v Tatum, Cal. App. 4:]: 245 912, 926—3l (2016). It is well o---‘ W settled that a trialcourt is authorized to “weed out" legally meritless class action suits prior to 4} —n certification by demurrer or pretrial motion. Under v 7hrifly Oil Co, 23 Cal. 4"I 429, 440 {)1 -—a (2000). Ci ~— III . Standards for Maintaining Class Actions ‘4 5—. The following paraphrases the court’s analysis of class action requirements in 00 Newe/l vSIaIe Farm Gen. Co, 4m l l00—l l0] —-4 Ins. 118 Cal. App. l094, (2004). h. \O Class actions are authorized under CC!" Sec. 382. Certification of a class is a 0 [U procedural hurdle the proponent of the class must meet to establish both an aseertainable [U h“ class and a well-defined community of interest among the class members. The community of interest is.) ix) requirement involves three factors: predominant common issues of law and'fact, class representatives with claims typical of the class, and class representatives who can adequately represent the class. These requirements mean that each class member must not be required to individually litigate numerous questions to determine his right to recover following a class judgment. The issues which may be jointly tried must be sufficiently numerous and substantial to make the class action advantageous for both the courts and the litigants. Since the class action has a potential to create injustice, trial courts, in the “weeding ' -2- MEMORANDUM or norms AND AUTHORITIES [N SUPPORT OF MOTION FOR JUDGMENT on THE PLEADINGS out” process, must carefully weigh benefits and burdens and should only allow maintenance [Q ofa class action where substantial benefits accrue to both litigants and the court. 3‘») If the ability of each member of the class to recover clearly depends on a separate set of facts applicable only to him. then all of the policy considerations U1 which justify class actions equally compel the dis- missal of such inappropriate actions at the pleading stage. Newell, supra at 1101. IV. THE ALLEGED PUTA‘I'IVE CLASSES ARE UNMANAGEABLE AS A MATTER OF LAW OVDOOxl A. Legal Discussion l Each of plaintiffs' efforts to Specify a class are based on defendant Mercury’s alleged improprieties in indemnil’ying insureds for property losses. The claim is that all members of the putative classes have been subjected to the same illegal claims handling procedures as insureds under Mercury policies. However, this common allegation makes proceeding as a class actions unmanageable and therefore improper. Basureo v2/" 'em. Ins. Co. , 108 Cal. App. 4‘“ MO (2003) stemmed from claims made following the Northridge earthquake. In sustaining the trialcourt’s refusal to certify a class against an insurer who allegedly engaged in bad faith practices in paying claims. the court said: “Class actions will not be permitted...where there are diverse factual issues to be resolved, even though there may be many common questions of law... [A]class action cannot be maintained where each member’s right to recover depends on facts peculiar to his case. Basm'co supra at l 18. In the complaint filed herein, plaintiffs allege the existence of two classes, or more accurately, subclasses. The first constitutes Mercury policy holders who sustained partial property loss and were indemnified by-Mercury after depreciation was taken. The complaint is that Mercury applied an illegal depreciation measure; the depreciation, it is alleged, should have been based on the actual physical depreciation of the individual item ’ Plaintiffs’ failure to allege identifiable classes is described in Section V of this brief. -3- MEMORANDUM Ol’ POINTS AND AUTHORITIES tN SUPPORT OF MOTION FOR JUDGMENT ON THE PLEADINGS that was partially lost. rather than astraight line depreciation measure that Mercury usedws all . IQ in violation of California Insurance Code Sec. 205 l .( Paragraphs 9-12 of the Complaint) The second class includes those Mercury property loss policy holders who 43.1.0 were allegedly victims of a practice claimed to be in violation of Cal. Ins. Code Sec. 2015.5. As best we can determine, Mercury allegedly did not indemnify for property damage based on the amount paid by the insured to replace the property; rather, Mercury allegedly indemnified for the loss based on itsown calculation of what the replacement cost should have been. (paragraphs 20-22 of the complaint). The common denominator for each class is that after judgment, each class member must prove entitlement to a certain amount of recovery. This brings the allegations in this case outside of predominantly common issues of law and fact and into requirements of individualized proofiand therefore outside the purview oi’class action suits. The Northridge earthquake case of New?” 13.9mm Farm Gen. Ins. Co.,l 18 ’Cal. App. 4‘" 1094(2004) is virtually identical to the issues before this court. The appellate court affirmed the granting of a demurrer without leave to amend. Claims from that quake were allegedly reduced or denied based on defendants’ depreciation reductions. id. at 1098. The trial court’s ruling was upheld: though plaintiffs had claims typical of the proposed class and they were adequately representative, the resolution of common questions would require individualized determinations as to the defendants’ liability as to each putative class member. Therefore, common questions did not predominate over individual issues, and a class action was therefore not a superior method of resolving the dispute. The Nowell court acknowledged that common issues of a pervasive scheme and widespread use ot’bad faith practices by defendants were common questions of law and fact. However, they did not predominate in that case. where each putative class member would recover only by proving the amount of the claim which was wrongfully denied. id. 1103. The Nerve]! court held “. . .each putative class member’s potential recovery would involve an individual assessment of his or her property, the damage sustained. and the actual claims practices employed. in such cases, class treatment is unwarranted. id. See also Brzsurcu v 2!” Century Ins. Co. l08 Cal. lApp. 411. NO (2003); Hicks v Kaufiuan & Broad -4- ‘ MEMORANDUM or POINTS AND AUTHORITIES m SUPPORT or MOTION Edit iuot‘imenr on THE PLEADINGS ”-4 Home Corp” 89 Cal. App. 4‘“ 908, 923-24 (200l)(based on the need for ‘individualized [Q proof’ for each putative class member to come forward to prove specific damage to the home, and that such damage was caused by foundational cracks and not something else, ‘commonality of facts is lost and the action splits into more pieces than the allegedly defective foundation’- The above cited cases are merely following the law that has been established for some time. oomummau In City QfScm Jose v Superior (Sour!s 12 Cal 3d 447 (1974) plaintiffs sought to recover diminution of property values for a,class of home owners situated under the flight pattern of the San Jose Airport. In denying class certification, the Supreme Court stated the class action scheme is incompatible with the “fundamental maxim that each parcel of land is unique” id at 462. The plaintiff in the San Jose case, as here, has the burden of proving to the court that substantial benefits to litigantsand the court will accrue by certifying a class; whether a class action is appropriatehurns on the existence and extent of common legal and factual questions. “[E}ach class member must not be required to individually litigate numerous and substantial questions to determine his right to recover following the class judgment....” id at 460. To be sure, the necessity that some degree of individual damage proof is ultimately required for the class members to recover is not the sole determining factor in-the , certification process; rather. only where individual issues predominate over common questions do the nature of the damage claims become difficult to manage and the complexity of the damage claims swallows up the value of proceeding as a certified class. For example, the Supreme Court in Saw-0n Drug Stores v Superior court, 34 Cal 4"h 319 (2004)held that individualized issues do not per se render class certification inappropriate so long as such issues may be el’leetively managed. The case involved a claim workers were this-designated as exempt employees; the Court urged the court to implement innovative procedural tools to certify a manageable class, while permitting defendants to register opposition. Bomemheim v Lox Angela's Gay d} Lesbian Center, l843 Cal. App. 4th 147! (2010), illustrates the point the Supreme Court was trying to make in Saw-0n Drugs. There an ineffective antidote to syphilis was administered; those who received the improper drug -5. ”" MEMORANDUM or norms AND AUTHORITIES IN summer or MOTION roe JUDGMENT ON ‘rns meanness had to return to the clinic forproper treatment; no one contracted the disease as a result of the Ix.) improper treatment. The trialcourt refused to certify the class because, although there were common issues as to duty and causation, individualized proof was required on damages. The appellate court reversed. lt held the necessity for class members to establish damages in that case did not mean individual fact questions predominated. “Individual issues do not render class certification inappropriate so long as such issues may effectively be managed.” 184 Cal.App. 4‘“ at 1487. The individual issues considered in Bomersheim are minimal and were susceptible to effective management; the complexity and nature of those damage claims pales in comparison to the complicated issues that faced the putative class members in Newell, and which would face the putative class members here if the classes plaintiffs describe were ever certified. B.Argument The premise upon which plaintiffs’ firstclass is based destroys it.Plaintiffs claim that in depreciating property Mercury used a straight line method; what it should have done, according to plaintiffs, is measured depreciation based on the actual condition of property, rather than straight line depreciation based on the age of the property.(complaint. paragraphs 9-12) If plaintiffs were to succeed with a class certification, then each partially destroyed structure would have to be examined for the wear and tear it experienced before it had been replaced. So too the contents of the structure would have to be evaluated as they existed be bra they were repaired. rebuilt or replaced. The court in Basurco, supra. noted the claims involving the putative class required three types of experts to plaintiffs’ home to determine the merits of the policy holders’ claim, showing that the extent and existence of damage there had to be detemtined on a case-by~case basis, which resulted in the court‘s determination that the individual issues predominated and that a class action was not the superior was of resolving the claims. Here we are faced with the same issues which caused the Basurco and News” courts to refuse class certification. Going back to the point where the loss to the structure or itscontents occurred in order to determine itscondition before it was repaired, replaced or -6- MEMORANDUM OF POINTS AND AUTHORITIES lN SUPPOR'l’OF MOTION FOR JUDGMENT ON THE PLEADINGS rebuilt would create a logistical nightmare. Assuming a condition of the structure or its [9 contents can be determined prior to the time it was destroyed or damaged, a depreciation unique to each destroyed or damaged item isrequired to be applied. according to plaintiffs 43b.) class scenario. U- As stated in Newcll,supm, it is not enough for plaintiff to allege a pervasive scheme of illegal and bad faith activity. Even where that is proven, a class certification will be denied where. as here. the potential recovery involves an individual assessment of COOOVO‘t property and the damage sustained.Z The same problems mentioned immediately above infect plaintit'fs’ second putative class. Although the proposed terms of the class are a littlemurky. it appears plaintiffs complain that Mercury paid less than what the insured paid out to repair, replace or rebuild damaged property. This class claim will also require evaluation of the realty or personalty after it has been repaired. replaced or rebuilt. The value of the item at the time of the loss-and before repair or replacement» would have to be determined. It would necessitate an evaluation whether each class member’s repair or replacement payment was reasonable. Whatever common questions are alleged to exist here, one thing stands out: each class member would have a right to recover that would be dependent on the facts peculiar to his particular case; any utility of maintaining a class action would be thereby cmasculated. V. INADEQUATE CLASS DESCRIPTION Defendant Mercury requests that this court grant its Motion for Judgment on the pleading, and that the case be dismissed; A solid basis for doing so is set forth in the argument above. Additionally, no proper class is described in the complaint. Plaintiffs rely on Cal. Ins. Code Sec. 2015 in structuring itsfirst class. it only relates to tire losses. it isunclear whether this putative class is intended to extend to property loss claims other than those covered by fire policiesi 3 An additional complication would arise ifthere are other insurers involved in a particular loss, as envisioned in the quotedmaterial at page 6, line 3~5 of the complaint} MEMORANDUM OF 'POlNTS AND AUTi—lORlTlES lN SUPPORT OF MOTlON FOR JUDGMENT ON THE PLEADINGS The aforementioned statute is correctly quoted in the complaint, in that it h.) states an insurer may deduct “physical depreciation based on [the property’s] condition at the time of the injury...” Later in the complaint, at paragraph 10, the word “actual” is inserted 43-h.) into the statutory description; the depreciation must be based on the “actual” condition of the U) destroyed or damaged object. Without the addition of the word “actual,” there isnothing in the statute that prohibits straight line depreciation; it is a depreciation based on the property’s condition at the time of loss. . ODOONC‘ The subclass fails based on the very statute on which plaintiffs rely. In paragraph 1l of the complaint plaintiffs claim that physical depreciation should include only wear and tear, and “does not include spreading the cost of an object over its useful life.” But the statute on which plaintiffs rely seems to belie this class foundation. The lastsentence Of lns. Code Sec. 2051(b)(2) is not quoted in the complaint: it permits depreciation of objects in a partially destroyed structure, but only to components that are normally subject to repair and replacement “during the useful life of the structure." The statute appears to authorize depreciation of objects in a structure subject to a partial loss based on the useful life of the . structure in which the components are contained. Plaintiffs herein do not adequately describe the second class either. Itis based on Cal. Ins. Code sec. 2051.5. This statute relates to open policies that require payment of the replacement cost ‘for a loss. By its quoted terms, the measure of indemnity is the amount it would cost the insured to replace the thing lost or policy limits, whichever is less, and without depreciation. Plaintiffs then quote Mercury’s policies.(complaint, paragraph 20) The policies quoted in the complaint do not demonstrate a violation of any legal mandate. Rather, the statute specifically allows Mercury to pay a loss as set forth in the quoted policy. Plaintiffs seek to establish a class of Mercury policy holders who were victims of Mercury’s allegedly illegal claims handling policies. But the statutory standard does not demonstrate that the terms of Mercury’s policies, quoted in paragraph 20 of the complaint, are not compliant with the statute. -3- MEMORANDUM OF POlNTS AND AUTHORITIES INSUI’PORT OF MOTION FOR JUDGMENT ON THE PLEADINGS is.) Finally, Sec. 2051.5 only applies to insurance policies that require the insured to repair. rebuild or replace damaged property in order to collect the full replacement cost. Is this subclass restricted to only such policies? If this action is allowed to proceed on a class basis. this should be clarified. VI. DQNIQUI-Rb) ALL CAUSES OF ACTION FAIL Plaintiffs seek recovery for Unfair Business Practices, Declaratory Relief, Breach of Contract, and Breach of the Covenant of Good Faith and Fair Dealing. Plaintiffs . seek a readjustment and restitution for the amount of benefits Mercury allegedly failed to pay. Individualized assessments would be necessary to prove each claim. These causes of action on behalf of the putative class members fail for the same reasons the class status fails: each individual must present evidence to support his or her entitlement to more payment under the individual policy. Newell. supra at 1103-04; Caro v Proctor & Gamble, 18 Cal. App. 4‘“ 644,668-69 (I993). VII. CONCLUSION ‘ Plaintiffs' complaint reveals there isno community of interest possible which would justify the maintenance of a class action. The community of interest requirement is not satisfied if every member of the alleged class would be required to litigate numerous questions determining his individual right for damage to unique structures and contents, in order‘to recover following a class judgment. City q/‘LS'an Jose, supra. Defendant Mercury < requests that this motion be granted, and the complaint be dismissed. DATED: September 15. 2017 CESAR! iERNE . ND MORIARTY [AN FRASER—THOMSON ROBERT GEl-IBARDT Attorneys for Defendant MERCURY CASUALTY COMPANY 4 -9- MEMORANDUM OF POINTS AND AUTHORITIES lN SUPi’OR‘T OF MOTION FOR JUDGMENT ON THE PLEADINGS