Opinion
2d Crim. No. B231308
11-17-2011
SCOTT MEISTERLIN, et al., Plaintiffs and Appellants, v. CALIFORNIA LAND TITLE ASSOCIATION, Defendant and Respondent.
Law Offices of H. William Servey; H. William Survey, for Appellants. Gordon & Rees; Gary J. Lorch and Paulette J. Lorch, for Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. CV100088)
(San Luis Obispo County)
Scott and Julie Meisterlin appeal from the judgment entered after the trial court sustained, without leave to amend, the demurrer of respondent California Land Title Association (CLTA) to their complaint for violation of the Cartwright Act (Bus. & Prof. Code, §§ 16700, et seq.), false advertising (§ 17500), and unfair competition. (§ 17200.) We affirm.
All statutory references are to the Business & Professions Code unless otherwise stated.
2 The statute provides that "Every advisory organization shall adopt bylaws or rules and regulations which will . . . (c) Prohibit any act or agreement by which any person or entity is restrained from lawfully engaging in the business of title insurance in this state . . . ." (Ins. Code, § 12402.1, subd. (c).)
The Allegations of the Complaint
Because this is an appeal from a judgment entered after the trial court sustained CLTA's demurrer without leave to amend, we summarize the allegations of the complaint, accepting their truth, as we must, for the limited purpose of reviewing the trial court's ruling. (See, e.g., Kasky v. Nike Inc. (2002) 27 Cal.4th 939, 946.) Appellants' complaint alleges that, in December 2001, they bought a title insurance policy for their Morro Bay home from First American Title Insurance Company (First American). The First American policy did not identify or exclude from coverage any easements on the property. In particular, First American did not identify an easement pursuant to which the City of Morro Bay maintained a water main running almost directly beneath the foundation of appellants' house.
In July 2006, the water main burst, causing substantial damage to appellants' house. The City denied compensation for appellants' damages. First American initially agreed to compensate appellants for their actual losses. But then, according to the complaint, First American, which is not a party to this appeal, has refused to compensate them for losses such as their attorney fees, by refusing to represent them in litigation against the City, and by under-valuing the property based on an inaccurate appraisal.
The complaint alleges that CLTA is a trade association representing title insurers in California. First American is a member of CLTA. CLTA is "involved in promoting the title-insurance industry, taking part in the regulation of the title insurance industry, drafting of title insurance policy forms, developing standards for the title insurance industry, standardizing policy provisions and forms, and promoting and increasing the public's awareness of the value and purpose of title insurance." CLTA advertises title insurance to the public "through various mediums, including the internet." Advertising on CLTA's website represents that title insurance will " 'make sure' " the home buyer's " 'rights and interests to the property are clear[,]' " that the home buyer's interests " 'are protected to the maximum degree[,]' " and that any " 'valid claim' " against the home buyer's property will be " 'borne by the title company and that the odds of a claim being filed are slim indeed.' " Appellants allege First American's conduct was inconsistent with these claims and that CLTA's advertising was, therefore, false and misleading.
Appellants allege that they acquired the title insurance policy in reliance on these representations being true. Had they "been accurately informed of how [First American] interpreted the insurance policy and its obligations toward [appellants] as its insured if a claim arose, [appellants] would not have acquired said policy." Appellants further allege that CLTA, First American and the other members of CLTA constitute a trust within the meaning of the Cartwright Act. CLTA and its members act together to "misrepresent what the title industry is actually selling to the public via title insurance policies by misrepresenting the value and purpose of title insurance so as to both create greater public demand for title insurance than is warranted and to enable [First American] and other member companies to charge for services that in fact are not being offered." This wrongful conduct damaged appellants "in an amount according to proof at the time of trial."
Appellants also allege that the statements on CLTA's website constituted false advertising in violation of section 17500. They allege that they "have suffered injury in fact and [have] lost money as a result of the violations alleged above in this complaint, in that [appellants] purchased a policy of title insurance and thereafter [First American and CLTA] did not perform as advertised." Finally, appellants allege that CLTA's advertising constitutes unfair competition in violation of section 17200.
The Trial Court's Ruling
The trial court sustained CLTA's demurrer without leave to amend. It found that appellants failed to state a cause of action for violation of the Cartwright Act because appellants failed to allege facts showing that CLTA and First American created a trust for the purpose of restraining trade or that the trust actually restrained trade in title insurance. Appellants also failed to allege facts showing how CLTA's advertising was related to the terms of their First American insurance policy or to their decision to buy that policy. Finally, appellants did not allege facts showing how the advertising promoted a restraint on trade or how any alleged restraint on trade caused their damages.
The trial court concluded that appellants had failed to allege a cause of action for false advertising because "the complaint simply alleges that [First American] did not perform its claims handling obligations in a manner consistent with the advertising promulgated by CLTA." In addition, appellants failed to allege how CLTA's advertising would be deceptive or misleading to a reasonable consumer. Finally, appellants' cause of action for unfair competition, which relied on the same factual allegations as the false advertising cause of action, failed for the same reason.
Standard of Review
We independently review the judgment to determine whether, as a matter of law, the complaint states a cause of action against CLTA. (Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1115.) "We not only treat the demurrer as admitting all material facts properly pleaded, but also 'give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.' " (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38, quoting Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Although we accept as true properly pleaded allegations of fact, we do not assume the truth of "contentions, deductions or conclusions of fact or law." (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.) We will affirm the judgment or order of dismissal "if any one of the grounds for demurrer raised by the defendant is well taken and disposes of the complaint." (Id.)
Discussion
The Cartwright Act (§ 16720)
Appellants contend their complaint states a cause of action for violation of the Cartwright Act (§ 16720) because it alleges that CLTA and First American formed a trust to standardize the provisions of title insurance policies and advertise them in a misleading way. This allegedly causes the public to believe that the policies provide more coverage than they do.
Like the federal antitrust statute, the Sherman Act, the Cartwright Act "prohibits conspiracies that unreasonably restrain trade." (SC Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 84.) Section 16720 defines a "trust" as "a combination of capital, skill or acts by two or more persons for any of the following purposes: [¶] (a) To create or carry out restrictions in trade or commerce." Section 16726 provides that, "Except as provided in this chapter, every trust is unlawful, against public policy and void." Insurance is "commerce" within the meaning of section 16720. (Smith v. State Farm Mutual Automobile Ins. Co., supra, 93 Cal.App.4th at p. 722.)
To state a cause of action for violation of the Cartwright Act, the plaintiff" ' "must allege (1) the formation and operation of the conspiracy, (2) the wrongful act or acts done pursuant thereto, and (3) the damage resulting from such act or acts.(Quelimane Co. v. Stewart Title Guaranty Co., supra, 19 Cal.4th at p. 47.) General allegations of agreement may be sufficient " 'providing the unlawful acts or civil wrongs are otherwise sufficiently alleged.' " (Id., quoting Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 316.) The plaintiff may not, however, merely restate the statutory elements of a Cartwright Act violation. (Smith v. State Farm Mutual Automobile Ins. Co., supra, 93 Cal.App.4th at p. 722.) To state a cause of action, "the plaintiff must allege in its complaint certain facts in addition to the elements of the alleged unlawful act so that the defendant can understand the nature of the alleged wrong and discovery is not merely a blind 'fishing expedition' for some unknown wrongful acts." (Cellular Plus, Inc. v. Superior Court (1993) 14 Cal.App.4th 1224, 1236.)
An agreement among businesses is prohibited by section 16720 "only if restraint of trade in the commodity is the purpose of the agreement." (Smith v. State Farm Mutual Automobile Ins. Co., supra, 93 Cal.App.4th at p. 722.) A cause of action for violation of the Cartwright Act " 'must allege both a purpose to restrain trade and injury to the business of the plaintiff traceable to actions in furtherance of that purpose.' " (Id., quoting Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 119.)
The complaint here alleges that CLTA is a trade organization that promotes title insurance and drafts standardized title insurance policy forms. First American is a member of CLTA. First American made a number of representations to appellants concerning the coverage they were purchasing and its claims procedures. Its handling of appellants' claim contradicted those representations. Appellants relied on First American's representations in acquiring the title insurance policy. Had they known the representations were false, appellants would not have acquired the policy. Appellants also allege that, "CLTA along with [First American] and other members of CLTA constitute a trust within the meaning of Business and Professions Code section 16720. [First American] and CLTA, which is a trade organization representing the entire title industry in California, misrepresent what the title industry is actually selling to the public via title insurance policies by misrepresenting the value and purpose of title insurance so as to both crease greater public demand for title insurance than is warranted and to enable [First American] and other member companies to charge for services that in fact are not being offered."
The trial court correctly concluded that these allegations fail to state a cause of action for violation of the Cartwright Act. First, the complaint does not allege that CLTA or First American formed a trust for the purpose of restraining trade in title insurance policies. (Smith v. State Farm Mutual Automobile Ins. Co., supra, 93 Cal.App.4th at p. 722.) Instead, it alleges that CLTA exists for precisely the opposite purpose: to promote the purchase of title insurance policies.
Similarly, the complaint does not allege that CLTA and First American engage in "unlawful acts" to restrain trade. (Cellular Plus, Inc. v. Superior Court, supra, 14 Cal.App.4th at p. 1236.) Instead, appellants allege that CLTA created and promoted the use of standardized forms for title insurance policies. But the creation of standardized insurance forms is not unlawful. Insurance Code section 12340.8 authorizes an advisory organization, such as CLTA, to "recommend[] or prepare[] policy forms or endorsements" for title insurers. In addition, there is no allegation that the trust prevented its members from offering title insurance on different terms than those provided in the standard CLTA forms. Any such practice would arguably violate Insurance Code section 12402.1, subdivision (c).
Finally, as the trial court correctly noted, the complaint fails adequately to allege that appellants suffered damage caused by any unlawful act in restraint of trade. No facts are alleged showing that CLTA's promotional statements influenced appellants' decision to buy the First American policy. In fact, appellants fail to allege that they ever saw CLTA's website before they purchased the First American policy and the promotional materials attached to their complaint as exhibits were posted in February 2010, more than eight years after appellants purchased the policy.
In sum, appellants failed to plead facts supporting the necessary elements of a cause of action for violation of the Cartwright Act. The trial court properly sustained CLTA's demurrer.
False Advertising (§ 17500)
Appellants' cause of action for false advertising in violation of section 17500 alleges that First American and CLTA advertised title insurance to the public beginning in 2001 and continuing to the present. The advertisements were misleading for the reasons we have already summarized. Appellants allege that they "have suffered injury in fact and [have] lost money as a result of the violations alleged in this complaint, in that [appellants] purchased a policy of title insurance and thereafter [respondents] did not perform as advertised."
The trial court concluded that the complaint fails to allege a cause of action for false advertising because it alleges only that First American "did not perform its claims handling obligations in a manner consistent with the advertising promulgated by CLTA." We agree. Appellants have not alleged facts showing that they ever saw CLTA's allegedly false advertisements before they purchased the First American policy, nor have appellants alleged that CLTA's advertising caused them to buy the First American policy. Appellants also failed to allege that CLTA had any form of control over First American's conduct in handling their claim. As a result, appellants fail to allege that their economic losses were caused by CLTA's advertising, an essential element of a cause of action under the False Advertising Law.
Section 17500 prohibits the use of advertising that is false or misleading to a reasonable consumer. (La Vie v. Procter & Gamble Co. (2003) 105 Cal.App.4th 496, 506-507.) To state a cause of action under this statute, the plaintiff must allege that he or she " 'has suffered injury in fact and has lost money or property as a result" of the false advertising. (§ 17535.) Thus, to comply with section 17535, "a party must now (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim." (Kwikset Corp. v. Superior Court (2001) 51 Cal.4th 310, 322.) A person who never saw the allegedly false advertisement or who rejected the offer made in it lacks standing to pursue a claim for false advertising. (Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1259 [plaintiffs who rejected offer lacked standing]; Sevidal v. Target Corp. (2010) 189 Cal.App.4th 905, 928 [plaintiffs not exposed to allegedly false advertisement lacked standing].)
Appellants allege that they bought their title insurance policy from First American in December 2001. Before they bought the policy, First American told appellants that they were purchasing "an extended coverage 'Eagle' insurance policy" and represented that it would provide "the same or greater coverage" as the policies described in CLTA's advertising. First American's conduct in handling appellants' claim was inconsistent with the representations made in CLTA's advertising. "In reliance upon the above representations asserted by defendants as being true, [appellants] acquired the INSURANCE POLICY. Had [appellants] been accurately informed of how [First American] interpreted the INSURANCE POLICY and its obligations toward [appellants] as its insured if a claim arose, [appellants] would not have acquired said policy." Appellants further allege that they suffered "injury in fact and [have] lost money as a result of the violations alleged above in this complaint, in that [appellants] purchased a policy of title insurance and thereafter [respondents] did not perform as advertised."
Thus, appellants allege that CLTA published advertisements "on or before 2001 and continuing to the present time," that were false because, nearly six years later, First American handled their claim in a way that was inconsistent with CLTA's advertisements. Appellants do not allege that they purchased the First American policy as a result of statements made in CLTA's advertisements. In fact, appellants do not allege that they ever saw the CLTA advertisements before they bought their policy and the advertisements they have attached to the complaint as exhibits were disseminated in 2010, nearly eight years after appellants bought their insurance policy.
These allegations are not sufficient to state a cause of action under the False Advertising Law. Appellants are required to allege that they suffered economic injury as a result of the false advertising that is the gravamen of their claim. (Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at p. 322.) They make no such allegation. Appellants allege that CLTA's advertisements are false, but do not allege that they ever saw or relied on them. Instead, appellants allege that they relied on false representations made by First American before they purchased their insurance policy from First American. This is insufficient to state a cause of action against CLTA. The trial court properly sustained CLTA's demurrer.
Unfair Competition
Appellants rely on the same factual allegations in attempting to allege a cause of action for unfair competition in violation of section 17200. They fail for the same reason: appellants have alleged no facts demonstrating that they suffered economic injury caused by CLTA's unlawful, unfair or fraudulent business practices. (Id. at p. 320.) Although they allege that CLTA promoted the title insurance industry and the use of standardized insurance policy forms and provisions, appellants do not allege that they were ever exposed to CLTA's promotional materials or that they acted in reliance on those materials. Such an allegation is necessary to state a cause of action for unfair competition. (In re Tobacco II Cases (2009) 46 Cal.4th 298, 305-306.)
Refusal to Grant Leave to Amend
It is an abuse of discretion for the trial court to sustain a demurrer without leave to amend, "if there is a reasonable possibility the plaintiff can amend the complaint to allege any cause of action. [(Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967).] To prove such an abuse of discretion, however, the plaintiff must demonstrate how the complaint can be amended. (Ibid.) While such a showing can be made for the first time to the reviewing court (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386), it must be made." (Smith v. State Farm Mutual Automobile Ins. Co., supra, 93 Cal.App.4th 700, 711. See also Quelimane Co. v. Stewart Title Guaranty Co., supra, 19 Cal.4th at p. 39 [leave to amend must be granted if "there is a reasonable possibility that the defect can be cured by amendment"].)
Appellants here were properly denied leave to amend. In their opening brief, appellants offer to amend the complaint to allege that: (1) the "marketing plan" followed by CLTA, First American and the "title insurance trust" is not "responsive to consumer preferences[;]" (2) the title insurance industry uses "reverse competition," whereby title insurance is marketed to intermediaries such as real estate brokers and lenders, rather than directly to consumers; (3) title insurance is very profitable and insurers experience "unconscionably few losses[;]" (4) the trust formed by CLTA and First American acts to restrict the title insurance coverage available to homeowners by creating and using standard forms so that every insurer offers the same coverage and provides the same false advertising. These allegations will not cure the defects we have noted in the complaint.
Appellants' proposed amendments would allege more details about CLTA's creation and promotion of standardized title insurance policies and First American's adoption of those policies. They would still fail to state a cause of action under the Cartwright Act, however, because the creation and use of standardized insurance policy provisions is not unlawful. Nor would the proposed amendments cure the fatal defect that is common to all three purported causes of action: appellants have not offered to allege that they were exposed to, or influenced by CLTA's promotional materials or internet advertising. Thus, appellants' proposed amendments would not allege that they suffered damage caused by CLTA's anti-competitive or unfair business practices or false advertising. As a consequence, appellants cannot state a cause of action against CLTA and were properly denied leave to amend their complaint.
Conclusion
The judgment is affirmed. Costs to respondent.
NOT TO BE PUBLISHED.
YEGAN, Acting P.J. We concur:
COFFEE, J.
PERREN, J.
Dodie Harmon, Judge
Superior Court County of San Luis Obispo
Law Offices of H. William Servey; H. William Survey, for Appellants.
Gordon & Rees; Gary J. Lorch and Paulette J. Lorch, for Respondent.