Opinion
B221989
09-26-2011
DANIEL M. HOLZMAN Plaintiff and Appellant, v. FARMERS INSURANCE EXCHANGE, Defendant and Respondent.
Law Offices of Gary S. Soter and Gary S. Soter; Law Offices of F. Edie Mermelstein and F. Edie Mermelstein for Plaintiff and Appellant. DLA Piper LLP, Jeffrey A. Rosenfeld, Nancy Nguyen Sims and Rachel E. K. Lowe for Defendant and 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. Nos. BC338075, BC366621)
APPEAL from an order of the Superior Court of Los Angeles County, Carl J. West, Judge. Affirmed.
Law Offices of Gary S. Soter and Gary S. Soter; Law Offices of F. Edie Mermelstein and F. Edie Mermelstein for Plaintiff and Appellant.
DLA Piper LLP, Jeffrey A. Rosenfeld, Nancy Nguyen Sims and Rachel E. K. Lowe for Defendant and Respondent.
INTRODUCTION
Plaintiff Daniel Holzman appeals an order denying his motion for class certification. Holzman sued his automobile insurance carrier, defendant Farmers Insurance Exchange (Farmers or FIE), after Farmers refused to pay the labor rate charged by a repair facility Holzman hired to repair his vehicle. He contends that Farmers's business practice of only paying the "predominant market labor rate" violates his insurance policy, the Insurance Code and applicable regulations. The trial court found that Holzman failed to show almost all of the required elements for class certification. We hold that the trial court did not abuse its discretion in denying Holzman's motion, and thus affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Events Leading to this Action
On November 14, 2005, Holzman drove his 1999 Porshe 911 Carrera 2 Cabriolet over a speed bump. Holzman heard something scraping on the bottom of the vehicle. Apparently the incident caused a leak in the oil pan. This in turn caused damage to the engine, requiring its replacement.
Holzman took his vehicle to Rusnak Pasadena (Rusnak), an authorized Porshe dealer. Rusnak provided Holzman with a repair estimate of $13,546.82, which incorporated a $135 per hour labor charge for mechanical work.
Holzman submitted an insurance claim to Farmers and requested that Farmers pay for the full cost of repairs, as estimated by Rusnak, less Holzman's deductible. Farmers advised Holzman in writing that it would pay for the "predominant market labor rate," and that if Holzman wished to use an automobile repair facility that charged more than that rate, Farmers "will not be responsible for the difference between the two labor rates."
According to Farmers, the predominant market labor rate in the relevant geographic area for mechanical work was $65 per hour. This rate was determined by taking a survey of automobile repair facilities in the area and identifying the mode, which in layman's terms is the most commonly occurring rate in the survey.
Holzman vociferously protested. He wanted his vehicle repaired at Rusnak and his insurance carrier to pay Rusnak's full rate. In response, Farmers agreed to pay a rate of $85 per hour. Holzman, an attorney, wrote a letter to Farmers on his firm's letterhead stating that if Farmers refused to pay the full rate requested by Rusnak, he would pay the difference and sue Farmers. Farmers refused. Holzman paid Rusnak the difference between $135 per hour and $85 per hour, which was approximately $1,400.
2. The Allegations in the Complaint
On February 21, 2007, Holzman filed the complaint in this action on his own behalf and on behalf of a putative class. The complaint alleged that Farmers engaged in the unfair business practice of limiting its payment of claims to the predominant market labor rate. It also alleged that Farmers "unfairly skews the survey data for its 'predominant rate' calculations to the disadvantage of owners of above average cost automobiles even though [Farmers] exacts a higher premium to insure those automobiles."
The complaint set forth causes of action for (1) declaratory and injunctive relief , (2) violations of Business and Professions Code section 17200 et seq., (3) violations of the Consumer Legal Remedies Act (CLRA), Civil Code section 1750 et seq., (4) breach of contract, and (5) breach of the implied covenant of good faith and fair dealing.
The complaint sought an injunction prohibiting Farmers's alleged unfair business practices and a judicial declaration that Farmers's "business practice of limiting coverage reimbursement to the predominant market labor rate calculated by [Farmers] is unfair, unlawful, deceitful and not permitted by the policy terms."
The complaint alleged that the class consisted of Farmers's insureds "whose loss or losses were not fully paid or reimbursed because [Farmers] limited the payment to the so-called 'predominant market labor rate' in the county where the insured resides." It also stated that there were common questions of fact and law among the class members, including (1) whether Farmers's business practice of using the predominant market labor rate violated the terms of Farmers's standard form automobile policies and the Insurance Code; and (2) whether plaintiff and the class members are entitled to
(a) compensatory damages and, if so, the nature of such damages, (b) injunctive relief and, if so, the nature of the injunctive relief, and (c) punitive damages.
3. Farmers's Demurrer
On June 20, 2007, Farmers filed a demurrer to the complaint. The trial court sustained the demurrer with respect to Holzman's CLRA and unfair competition causes of action.
The procedural history of this demurrer is a bit convoluted. After Farmers filed its demurrer, the trial court deemed Holzman's case related to three other cases. On December 7, 2007, the trial court sustained Farmers's demurrer with respect to the third cause of action for violation of the CLRA but overruled the demurrer with respect to the remaining causes of action, including Holzman's cause of action for unfair competition. On February 8, 2008, the trial court sustained a demurrer in a related case to an unfair competition cause of action. In light of that ruling, the court issued an order setting a briefing schedule regarding whether it should reconsider its December 7, 2007, order. After the parties submitted additional briefs, on March 27, 2008, the court sustained Farmers's demurrer to Holzman's unfair competition cause of action.
4. Holzman's Motion for Class Certification and the Evidence
Supporting and Opposing the Motion
On March 30, 2009, Holzman filed a motion for class certification. The motion included a proposed definition for the class which was different than the one stated in the complaint. The trial court expressed concerns that the proposed class definition was not amenable to certification. In response, Holzman provided two alternative proposals for class definitions. The first alternative defined the class as follows: "All California residents who, at any time from February 21, 2003 through the date of this notice, insured their expensive to repair motor vehicle(s) with Fire Insurance Exchange (a Farmers Insurance Company); and (2) who made a covered auto insurance claim for motor vehicle repairs to Fire Insurance Exchange; and (3) who paid or incurred out of pocket costs in excess of the policy deductible to restore the insured expensive to repair motor vehicle to its condition before the loss."
The second alternative class definition was the same except that in lieu of "expensive to repair motor vehicle" the terms "luxury motor vehicle or high performance motor vehicle" were used. "Expensive to repair motor vehicle" and "luxury motor vehicle" and "high performance vehicle" meant the same thing and were defined as being one of several dozen makes and models ranging from a Maybach 62 S sedan with a manufacturer's suggested retail price (MSRP) of $448,500 to a Dodge Ram 3500 truck with a MSRP of $37,959.
In support of his motion Holzman filed, inter alia, the declarations of Gary S. Soter, Gene Rugroden and Christian Tregillis. Soter was Holzman's lawyer. He testified regarding the gravamen of the complaint, the ascertainability of class members, the exhibits in support of the motion and his own experience.
Rugroden was the manager and owner of Dell Auto Body Refinishing (Dell Auto Body) in Campbell, California. He stated in his declaration: "I am personally aware that hundreds of insureds have paid out of pocket repair costs to Dell Auto Body in excess of the deductible due to Farmers Insurance Exchange's predominant labor rate business practices."
Tregillis, a financial analyst, economist, accountant and statistician, provided expert testimony regarding Farmers's predominant market labor rate. Although Tregillis stated that he was not opining regarding the "reasonableness" of the rate, he was prepared to provide testimony so that the jury could determine that issue.
At his deposition Tregillis stated that he planned on doing a "statistical sampling" to determine how many Farmers's insureds were required to pay out-of-pocket expenses.
In opposition to the motion Farmers filed, inter alia, the declarations of Nancy T. Nguyen, John T. Resko, Sylvia Ting and John Gonzalez III. Nguyen was counsel for Farmers. She attached to her declaration portions of the transcripts of the depositions of Resko, Holzman, Rugroden and Tregillis.
Resko was a manager employed by Farmers. Resko stated that Farmers "adjusts claims on a case by case basis. This adjustment process may include consideration of the type of loss, degree of loss, whether a part can be repaired or requires replacement, and the repair facilities available to conduct the repair." He further stated: "FIE's negotiations with repair shops concerning insureds' claims also occur on a case by case basis. FIE may negotiate not only the labor rate with the repair shop, but also the time allotted to perform any necessary repairs, the need for additional repairs once further damage is discovered as the vehicle is taken apart for repairs, and whether repairs should be classified as mechanical or body."
At his deposition Resko testified: "Every claim is taken on a case-by-case basis. We look at each car as a unique situation. If the repair shop that the vehicle owner has chosen has a labor rate that's higher than the predominant labor rate, we go into negotiations with the repair facility. [¶] If there's a substantiated reason to pay higher than the predominant labor rate for some unique scenario, the adjustor has the authority to negotiate a higher rate. That authority can vary, but they will go into direct negotiations with the body shop."
Ting was a manger of Farmers's computer system. She stated that there was no way to search FIE's computer system for out-of-pocket payments made by insureds to third parties. She further stated that in 2008 there were approximately 36,373 first-party automobile claims under FIE's policies which involved repairs of vehicles.
Gonzalez was an expert witness with training in economics and statistical analysis. He opined that Tregillis's analysis and conclusions were erroneous.
5. The Trial Court's Order Denying Holzman's Motion for Class Certification
On December 14, 2009, the trial court issued a 27-page order denying Holzman's motion. The trial court rejected Holzman's motion on many grounds. It found that there was "no sufficient evidence" regarding numerosity of the proposed class. It also found that "Alternative Class Definition No. 2 is ascertainable, as defined, only upon review of individual claims files." The court stated: "The problem is that in order to provide notice to this class, the Court would of necessity be required to define the class in a manner that would require notice to a significant number of Farmers' insureds who would not be members of the class. [¶] Accordingly, the Court determines that the class, as proposed by Plaintiff, is not ascertainable." Likewise, the court stated that it could not find Holzman's claims "are typical under the class definition as originally proposed, or under the alternative class definition."
The trial court devoted much of its order to the issue of whether there were common issues of fact and law that could be resolved if the class were certified. It concluded: "[T]he weight of the evidence before the Court demonstrates that there are highly individualized issues present in this litigation which far outnumber any common questions of fact or law."
In reaching this conclusion, the trial court reviewed Newell v. State Farm General Ins. Co. (2004) 118 Cal.App.4th 1094 (Newell) and Basurco v. 21st Century Ins. Co. (2003) 108 Cal.App.4th 110 (Basurco), which we shall review post. The trial court stated: "[T]he Court will have to conduct numerous trials on a number of issues. . . . [T]he Court would have to conduct individualized analysis among class members to determine whether they are members of the class. Conceptually, the alternative class definitions still include persons who may have voluntarily paid over the deductible to restore their vehicles to pre-loss condition. The Court would have to determine whether individuals voluntarily paid over their deductibles."
The trial court further stated: "Under Newell and Basurco, the Court would also be required to individually assess each automobile and its condition in order to determine whether FIE's use of the 'mode' as a means of formulating the auto labor rate survey resulted in out-of-pocket costs to the class members owning the 'expensive to repair' motor vehicles, 'luxury motor vehicles,' or 'high performance vehicles.' To do this, the Court will have to examine the adjustment of each individual claim. The Court cannot assume that FIE's estimate was improper under the law - it will have to examine the condition of each vehicle before the loss."
Additionally, the trial court stated: "Defendant's evidence shows that there is great variance in the way claims are adjusted. Mr. Resko testifies that FIE takes every claim on a case-by-case basis, and FIE looks at each care as a 'unique situation.'
Significantly, Resko states that '[i]f the repair shop that the vehicle owner has chosen has a labor rate that's higher than the predominant labor rate, [FIE] [goes] into negotiations with the repair facility.' Resko claims that [t]he adjustor has the authority to negotiate a higher rate. That authority can vary, but they will go into direct negotiations with the body shop.' FIE also negotiates the hours need [sic] to perform the repairs, the need for additional repairs once further damage is discovered as the vehicle is taken apart, and whether repairs should be classified as mechanical or body." (Fns. omitted.)
The trial court cited Tregillis's deposition testimony at length. For example, the trial court stated: "The testimony of Plaintiff's own expert, Mr. Tregillis, also indicates why individual issues predominant. The following interaction occurred during his deposition:
"Q. Okay. So in order to understand whether or not somebody, the insured, was being treated in a way that would force him to come out of pocket unfairly or inappropriately you would have to look at a variety of factors, isn't that correct, other than just the mode or the number which represents the mean or the average, correct?
"A. I agree.
"Q. So you would have to look at the type of repair, correct? "A. Sure." (Fn. and italics omitted.)
From this and other testimony, the trial court stated that "Mr. Tregillis himself appears to acknowledge that while the Surveys cause individuals in some circumstances to pay out of pocket, the Surveys in other circumstances would not force individuals to pay out of pocket. This again would require individualized assessments as to whether the Survey method forces individuals to pay out of pocket."
The trial court noted: "Mr. Tregillis also testified that reasonableness of the adjustment was a fact-specific inquiry, as evidenced by the following interaction:
"Q. So whether a shop is willing to come down, whether the insurance company comes up in price, those are all individualized factors, right?
"A. Yes."
With respect to Holzman's revised class definitions, the trial court stated: "The revised proposed class definitions do nothing to alleviate the highly individualized determinations which would be necessary to address the claims on a classwide basis. The Court still would be required to make individualized determinations as to whether each putative class member paid out-of-pocket because the vehicle could not be reasonably restored to its pre-loss condition for the labor rate Defendant agreed to pay. The fact [that] there are several vehicles referenced in the class definition, with different makes and models, compounds the problem of requiring highly individualized treatment, in the Court's estimation."
The trial court concluded its discussion of whether there were common issues of fact or law with this statement: "In sum, the weight of the evidence before the Court demonstrates that common issues of fact or law do not predominate. . . . Even assuming that reliance on the mode is improper, pursuant to Newell and Basurco, the Court would be required to examine the individual circumstances surrounding each claim to determine whether there was out-of-pocket loss in the first instance. This also applies with respect to the first cause of action for injunctive and declaratory relief, since the Court cannot assume, based on the evidence before it, the use of the mode in calculating the labor rate was unlawful."
Finally, the trial court discussed whether a class action would be "superior" to individual lawsuits. The court concluded: "[G]iven the Court's determination that common issues do not predominate over the highly individualized assessments required to determine whether there is liability, the class mechanism is not superior."
Holzman filed a timely appeal of the trial court's order denying its motion for class certification. The order is appealable. (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.)
CONTENTIONS
Holzman argues that the trial court abused its discretion in denying his motion for class certification. He contends that the trial court misapplied the law, made incorrect assumptions about the facts, and abused its discretion in sustaining certain evidentiary objections asserted by Farmers. In addition, Holzman contends that the trial court erroneously sustained Farmers's demurrer to his unfair competition cause of action.
DISCUSSION
1. Standard of Review
" 'Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. . . .' " (Basurco, supra, 108 Cal.App.4th at p. 117.) We thus review the trial court's order denying Holzman's motion for class certification for abuse of discretion. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326 (Sav-On).) " 'The abuse of discretion standard is not a unified standard; the deference it calls for varies according to the aspect of a trial court's ruling under review. The trial court's findings of fact are reviewed for substantial evidence, its conclusions of law are reviewed de novo, and its application of the law to the facts is reversible only if arbitrary and capricious.' " (Cellphone Termination Fee Cases (2009) 180 Cal.App.4th 1110, 1118.)
In determining whether the trial court abused its discretion, we may only consider the reasons stated by the trial court in its ruling. (Knapp v. AT&T Wireless Services, Inc. (2011) 195 Cal.App.4th 932, 939 (Knapp).) We will affirm the ruling if any of the stated reasons was valid and sufficient. (Ibid.)
With respect to the trial court's factual findings, we draw inferences from the evidence in favor of the order. (Knapp, supra, 195 Cal.App.4th at p. 941; Sav-On, supra, 34 Cal.4th at p. 328.) We will also imply any findings necessary to support the trial court's order, so long as any such implied findings are themselves supported by substantial evidence. (Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1287-1288.)
2. Statutory, Regulatory and Contractual Basis of Holzman's Claims
"[W]e view the question of certification as essentially a procedural one that does not ask whether an action is legally or factually meritorious." (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 439-440 (Linder).) Nonetheless, in order to provide context for our discussion of certification issues, a brief overview of the legal, regulatory and contractual basis of Holzman's claims is helpful.
a. Prevailing Auto Body Labor Rate
Holzman's claims are all based on Farmers's use of a "predominant market labor rate," which Farmers derives from surveys of automobile repair shops in various geographic areas in California. In this state an insurer may, but is not required to, conduct an "auto body labor rate survey" to determine the "prevailing auto body rate"in a specific geographic area. When Farmers refers to a "predominant market labor rate" it means a "prevailing auto body rate."
"An 'auto body repair labor rate survey' is any gathering of information from auto body repair shops regarding what auto body repair labor rate the repair shops charge to determine and set a specified prevailing auto body repair rate in a specific geographic area." (Cal. Code Regs., tit. 10, § 2698.91, subd. (a).)
" 'Prevailing auto body rate' means the rate determined and set by an insurer as a result of conducting an auto body labor rate survey of auto body repair shops in a particular geographic area and used by the insurer as a basis for determining the cost to settle automobile collision, physical damage, and liability claims for auto body repairs." (Cal. Code Regs., tit. 10, § 2698.91, subd. (b).)
If the insurer conducts an auto body labor rate survey, the insurer must report the results to the Department of Insurance. (Ins. Code, § 758, subd. (c).) The results must include certain information regarding the survey. To our knowledge, however, there is no California law or regulation that specifies the method by which auto body repair labor rate surveys shall be conducted.
"Any labor rate survey results reported to the Department of Insurance pursuant to Insurance Code section 758 shall including the following: [¶] (1) The name of each auto body repair shop surveyed in the labor rate survey; [¶] (2) The address of each auto body repair shop surveyed in the labor rate survey; [¶] (3) The total number of shops surveyed in the labor rate survey; [¶] (4) The prevailing rate established by the insurer for each geographic area surveyed; [¶] (5) A description of the specific geographic area covered by the prevailing labor rate reported; [¶] (6) A description of the formula or method the insurer used to calculate or determine the specific prevailing auto body rate reported for each specific geographic area." (Cal. Code Regs., tit. 10, § 2698.91, subd. (c).)
b. Fair Claims Practices
Insurance Code section 758.5 provides that no insurer shall require an automobile be repaired at a specific repair facility. (Ins. Code, § 758.5, subd. (a).) It also states no insurer shall suggest or recommend that an automobile be repaired at a specific facility unless the insurer provides specified disclosures to the claimant. (Ins. Code, § 758.5, sub. (b).) In addition, the statute states: "If the claimant elects to have the vehicle repaired at the shop of his or her choice, the insurer shall not limit or discount the reasonable repair costs based on charges that would have been incurred had the vehicle been repaired by the insurer's chosen shop." (Ins. Code, § 758.5, subd. (d)(2).)
"Claimant" is defined as "a first-party claimant or insured, or a third-party claimant who asserts a right of recovery for automotive repairs under an insurance policy." (Ins. Code, § 758.5, subd. (e).)
The insurer's conduct is also prescribed by regulation. The insurer must "cause the damaged vehicle to be restored to its condition prior to the loss at no additional cost to the claimant other than as stated in the policy or as otherwise allowed by law." (Cal. Code Regs., tit. 10, § 2695.8, subd. (f)(2).) It must also "reasonably adjust any written estimates prepared by the repair shop of the claimant's choice . . . ." (Cal. Code Regs., tit. 10, § 2695.8, subd. (f)(3).)
Holzman contends that by refusing to pay a labor rate higher than the predominant market labor rate, Farmers is unlawfully forcing insureds to pay out-of-pocket expenses not required by their policy if they wish to repair their vehicle at a shop of their choice. He further contends that by using the predominant rate and forcing insureds to pay out-of-pocket costs, Farmers is failing to pay for the "reasonable" costs of repair, evading its obligation to restore the claimant's vehicle to its pre-loss condition at "no additional cost to the claimant other than as stated in the policy or as otherwise allowed by law," and breaching its duty to "reasonably adjust" written estimates prepared by repair shops of the claimant's choice.
c. The Insurance Policy
Holzman had collision coverage under his insurance policy with Farmers. The policy provides that Farmers "will pay for loss to your [Holzman's] insured car caused by collision less any applicable deductibles." It further provides that Farmers's "limits of liability for loss shall not exceed . . . [¶] [t]he amount which it would cost to repair or replace damaged . . . property with other of like kind and quality . . . ." Holzman contends that Farmers breached these provisions, as well as the implied covenant of good faith and fair dealing, by refusing to pay the labor rate charged by Rusnak and forcing Holzman to incur $1,400 in out-of-pocket charges. He further claims that by refusing to pay in excess of the predominant market labor rate, Farmers has caused all class members to incur similar damages.
3. The Trial Court Did Not Abuse Its Discretion In Denying Holzman's Motion for Class Certification
Class actions are authorized by statute "when the question is one of common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . ." (Code Civ. Proc., § 382.)
There are two broad requirements for class certification. "The first is existence of an ascertainable class, and the second is a well-defined community of interest in the questions of law and fact involved." (Vasquez v. Superior Court (1971) 4 Cal.3d 800, 809 (Vasquez).)
" 'As to the ascertainability question, its purpose is " 'to give notice to putative class members as to whom the judgment in the action will be res judicata.' [Citation.] 'Class members are "ascertainable" where they may be readily identified without unreasonable expense or time by reference to official records. [Citation.]' " [Citation.] In determining whether a class is ascertainable, the trial court examines the class definition, the size of the class and the means of identifying class members. [Citation.]' " (Bomersheim v. Los Angeles Gay & Lesbian Center (2010) 184 Cal.App.4th 1471, 1480 (Bomersheim).
" 'The community of interest requirement [for class certification] embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.' " (Lockheed Martin Corp. (2003) 29 Cal.4th 1096, 1104.) It is the plaintiff's burden to establish the requisite community of interest. (Ibid.) In order to meet that burden, the plaintiff must show that questions of law or fact common to the class predominate over the questions affecting the individual members. (Ibid.)
"Questions of fact and law are 'predominant' if the factual and legal issues 'common to the class as a whole [are] sufficient in importance so that their adjudication on a class basis will benefit both the litigants and the court.' " (Bomersheim, supra, 184 Cal.App.4th at p. 1481, citing Vasquez, supra, 4 Cal.3d at p. 811.) " '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.' [Citation.] '[A] class action cannot be maintained where each member's right to recover depends on facts peculiar to his case . . . .' " (Basurco, supra, 108 Cal.App.4th at p. 118.)
"A class action also must be the superior means of resolving the litigation, for both the parties and the court." (Newell, supra, 118 Cal.App.4th at p. 1101.) The court determines this question by considering, among other things, whether the class size is sufficiently numerous. Because we hold the trial court did not abuse its discretion with respect to its determination that common questions of fact and law were not predominant, we do not reach the issues of ascertainability, typicality, adequacy of representation, superiority or numerosity.
" 'Generally, a class suit is appropriate "when numerous parties suffer injury of insufficient size to warrant individual action and when denial of class relief would result in unjust advantage to the wrongdoer." ' " (Newell, supra, 118 Cal.App.4th at p. 1101.)
11 Tregillis stated: "The systemic underpayment on behalf of claimant insureds, with insureds being charged the difference, varies by the nature of the market and labor rate distribution. This can be observed and calculated using the underlying survey data and other date likely kept in the accounting records at Farmers in the normal course of business. For example, the accounting records at companies typically include a general ledger, electronic check register, or similar report which shows the names of the repair shops paid by the insurance company in a given region and time period, as well as the amounts paid to these shops."
a. Common Questions of Fact and Law Are Not Predominant
In Basurco, the plaintiffs sought to certify a class of homeowners who were denied insurance benefits by their carrier in the wake of the 1994 Northridge earthquake. The applicable insurance policies contained a one-year limitation period in which to bring a lawsuit. The plaintiffs alleged that the insurance carrier "improperly calculated the one-year period from the date of the earthquake instead of the date on which the property damage became appreciable." (Basurco, supra, 108 Cal.App.4th at p. 113.)
The Court of Appeal affirmed a trial court order denying class certification on the grounds that common questions of law and fact did not predominate over individual issues and that class action would not be superior to individual lawsuits. (Basurco, supra, 108 Cal.App.4th at p. 113.) With respect to commonality, the court did not deny there was a common mixed question of law and fact that needed to be adjudicated for each putative class member, namely whether the member's claim was procedurally barred by the one-year limitation period contained in the policy. Nonetheless, the court reasoned that even if the insurance carrier improperly denied the claims of all class members on procedural grounds, each class member would still be required to prove the substantive merits of their respective claims. Because that question involved an individual, case-by-case analysis, the court held that common questions of law and fact did not predominate. (See id. at pp. 118-120.)
Newell also involved plaintiffs who were denied benefits by their homeowner's insurance carriers in the aftermath of Northridge earthquake. The complaint alleged that the putative class consisted of insureds who had their claims denied because of one or more improper claims practices. The court, however, held that even if the insurance carriers "adopted improper claims practices to adjust Northridge earthquake claims, each putative class member still could recover for breach of contract and bad faith only by proving his or her individual claim was wrongfully denied, in whole or in part, and the insurer's action in doing so was unreasonable. [Citation.] Thus, 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. [Citation.] In such cases, class treatment is unwarranted." (Newell, supra, 118 Cal.App.4th at p. 1103.)
The holding and reasoning of Basurco and Newell apply here. Farmers's practice of using the predominant market labor rate does not cause a member of the putative class to incur damages unless he or she is forced to pay out-of-pocket expenses that are not required by the insurance policy. Whether an insured incurs out-of-pocket expenses requires an individualized, case-by-case analysis. In some cases, Farmers negotiates a rate higher than the predominant market labor rate. The court must determine for each individual whether Farmers agreed to a higher labor rate and, if so, whether that rate was reasonable, or whether it was still so low that it violates the insurance policy, Insurance Code and/or applicable regulations. Accordingly, as in Basurco and Newell, even if Farmers's use of the predominant market labor rate were an improper claims practice, class certification is unwarranted because common questions of fact and law are not predominant.
The same is true with respect to Holzman's claim for declaratory and injunctive relief. Farmers's use of the predominant market labor rate cannot be unlawful or a violation of the insurance policy unless it forces the insured to incur out-of-pocket expenses (apart from what is required by the policy) or coerces the insured to repair his or her vehicle at a repair facility chosen by Farmers in order to avoid doing so. Thus the court must still determine whether a particular insured incurred unwarranted out-of- pocket expenses as a result of Farmers's use of the predominant market labor rate, which is an individualized, case-by-case analysis.
Holzman disputes the trial court's factual findings that Farmers handles its claims on a case-by-case basis and that Farmers sometimes negotiates labor rates. There was substantial evidence, however, to support the trial court's findings. This evidence consisted primarily of the testimony of John Resko in both his deposition and his declaration. Moreover, Holzman admits that Farmers agreed to pay more than the predominant market labor rate in response to his own insurance claim. This by itself is substantial evidence that Farmers negotiates labor rates and does not always limit its payments to the predominant market labor rate.
Holzman's reliance on Lebrilla v. Farmers Group, Inc. (2004) 119 Cal.App.4th 1070 (Lebrilla) is misplaced. There, the issue was whether the insurer's use of parts manufactured by companies other than the original equipment manufacturer (OEM) were of "like kind and quality" within the meaning of the insurance policy. (Id. at pp. 10721073.) We agree with the trial court that in this case, unlike Lebrilla, the court "would be required to delve much deeper than analyzing whether a finite set of non-OEM parts were of a like kind and quality as OEM parts. Here, the [c]ourt . . . would be required to examine the adjustment of each individual claim in order to determine whether Defendant has incurred liability."
In sum, we hold that the trial court did not abuse its discretion in concluding that common questions of fact and law did not predominate over questions involving individual members of the putative class. The trial court therefore acted within its discretion in denying Holzman's motion for class certification.
b. The Trial Court Did Not Deny Holzman's Motion On the Ground That Holzman's Underlying Causes of Action Were Without Merit
Holzman argues that the trial court improperly decided the merits of his causes of action when it adjudicated his motion for class certification. We disagree. The trial court did not, for example, find that Holzman failed to state a viable claim for breach of contract or breach of the implied covenant of good faith and fair dealing.
Holzman also contends that the trial court improperly assumed the allegations in his complaint were not meritorious. The trial court, however, was not required to accept the truth of Holzman's allegations. Instead, it was required to make factual findings, which we must defer to if they are supported by substantial evidence. (Sav-On, supra, 34 Cal.4th at p. 334 [questions about weight and sufficiency of evidence, and inferences drawn from conflicting testimony, " 'are matters for the trial court to resolve' "].)
In Caro v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, for example, the plaintiff sought to certify a class of people who were defrauded into purchasing the defendant's "Citrus Hill" products based on false representations that the products were fresh orange juice. With respect to the issue of whether the plaintiff's claims were typical, the plaintiff argued that the trial court "improperly intruded into the lawsuit's merits" by making certain factual findings regarding the "sophistication" of the plaintiff. (Id. at p. 663.) The Court of Appeal, however, rejected that argument and held that the trial court's findings were supported by substantial evidence. (Id. at p. 664.)
Likewise, in this case, the trial court made factual findings regarding the element of commonality which were supported by substantial evidence. This is not the same thing as deciding the merits of Holzman's causes of action, and was not improper.
The present case is distinguishable from Linder, which Holzman relies on heavily. In Linder, the plaintiff alleged that the defendant's surcharge of 4 cents per gallon of gasoline on customers using a credit card violated the Song-Beverly Credit Card Act of 1971. (Linder, supra, 23 Cal.4th at p. 434.) The trial court denied the plaintiff's motion to certify a class in part on the ground that Linder could not prevail, as a matter of law, on this cause of action. (Id. at p. 437.) The California Supreme Court held that this was error. The court stated: "[W]e are not convinced that certification should be conditioned upon a showing that class claims for relief are likely to prevail." (Id. at p. 443.) The trial court in this case did not impose such a condition. Unlike the trial court in Linder, the trial court here did not express an opinion regarding the merits of Holzman's causes of action. Rather, it reviewed the evidence and made factual findings relevant to whether this case should be deemed a class action. Nothing in Linder prohibits such findings.
c. The Trial Court's Rulings on Farmers's Evidentiary Objections Were Not Grounds for Reversal
Holzman argues that the order denying his motion for class certification should be reversed because the trial court erroneously sustained certain objections to evidence he presented in support of the motion. We review a trial court's ruling on the admissibility of evidence for abuse of discretion. (San Lorenzo Valley Community Advocates for Responsible Education v. San Lorenzo Valley Unified School Dist. (2006) 139 Cal.App.4th 1356, 1419.) A trial court does not abuse its discretion unless it acts in an arbitrary, capricious or patently absurd manner. (Ibid.)
An order or judgment cannot be reversed based on the erroneous admission of evidence unless the appellant shows that there was a miscarriage of justice. (Evid. Code, § 353, subd. (b); Cal. Const., art. VI, § 13.) "In civil cases, a miscarriage of justice should be declared only when the reviewing court, after an examination of the entire cause, including the evidence, is of the opinion that it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error." (Huffman v. Interstate Brands Corp. (2004) 121 Cal.App.4th 679, 692.)
Holzman claims that the trial court erroneously sustained objections to paragraph Nos. 3 and 4 of Soter's declaration. In paragraph Nos. 3 and 4 Soter described the gravamen of the complaint. Farmers objected on the grounds that the statements in these paragraphs consisted of improper legal conclusions and improper opinion and argument, were irrelevant, and that Soter did not have personal knowledge of the matter. Assuming without deciding that the trial court's decision to sustain these objections was erroneous, we cannot reverse the order because the decision was not prejudicial. The gravamen of Holzman's claim can easily be gleaned from the allegations in the complaint. Holzman did not meet his burden of showing it was reasonably probable the motion would have been granted had the trial court overruled these objections.
Holzman also argues that the trial court erroneously sustained Farmers's objections to Exhibit No. 14 to Soter's declaration. This exhibit consisted of a letter dated November 2, 1995, from the Department of Insurance to Eugene Crozat, the president of a repair facility not involved in this case. The trial court did not abuse its discretion by excluding this document because it is irrelevant. In any case, its exclusion was not prejudicial to Holzman.
Next, Holzman argues that the trial court erroneously sustained Farmers's objection to paragraph No.29 of Tregillis's declaration. There, Tregillis opined the "systemic underpayment on behalf of claimant insureds" could be observed and calculated by using data "likely" found in Farmers's records. This statement was based on Tregillis's improper speculation about the data in Farmers's records. Farmers's objection therefore is well taken.
Finally, Holzman contends that the trial court erroneously sustained Farmers's objections to paragraph Nos. 37 through 39 of Tregillis's declaration. These paragraphs concern "potential" problems with Farmers's surveys. Farmers asserted numerous objections. We do not reach the merits of these objections because even assuming they were erroneously sustained, Holzman suffered no prejudice. The trial court did not reject Tregillis's assertion that the surveys Farmers conducted were flawed or in any way base its order denying Holzman's motion for class certification on the merits of the surveys. Holzman thus did not meet his burden of showing that it was reasonably probable that the trial court would have granted his motion had it overruled Farmers's objections to paragraph Nos. 37 through 39.
4. Holzman Cannot Challenge the Trial Court's Order Sustaining Farmers's Demurrer to His Unlawful Competition Cause of Action in This Appeal
Holzman argues that the trial court's order sustaining Farmers's demurrer to the unfair competition cause of action in his complaint should be reversed. He did not, however, appeal from this order and, in any case, the order is not appealable. (Hill v. City of Long Beach (1995) 33 Cal.App.4th 1684, 1695.)
Holzman correctly argues that an order sustaining a demurrer may be reviewed upon the appeal of a final judgment. (Code Civ. Proc., § 472c.) The order denying Holzman's motion for class certification, however, was not a final judgment, albeit it was an appealable order. Holzman cites no authority, and we are not aware of any, that allows him to pursue a challenge to the court's order sustaining Farmers's demurrer in this appeal.
DISPOSITION
The order denying appellant Holzman's motion for class certification is affirmed. Respondent Farmers is awarded costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KITCHING, J.
We concur:
CROSKEY, Acting P. J.
ALDRICH, J.