Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_08-cv-00555/USCOURTS-cand-5_08-cv-00555-11/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Other Contract

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NO. C 08-0555 RS 

ORDER

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United 

States District 

Court

For the Northern District of California 

*E-Filed 07/20/2010* 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

MICHELLE T. WAHL, 

 Plaintiff, 

 v. 

AMERICAN SECURITY INSURANCE 

CO., et al., 

 Defendants. 

____________________________________/

No. C 08-0555 RS 

ORDER DENYING MOTION FOR 

LEAVE TO FILE MOTION FOR 

RECONSIDERATION; DENYING 

REQUEST FOR CERTIFICATION 

FOR INTERLOCUTORY APPEAL; 

DENYING MOTION FOR 

CLARIFICATION; DENYING 

PLAINTIFF’S REQUEST TO 

SUPPLEMENT PAPERS IN 

OPPOSITION 

I. INTRODUCTION 

On May 10, 2010, this Court granted in part and denied in part defendant American Security 

Insurance Company’s (“ASIC”) motion for judgment on the pleadings. The sole claim to survive 

defendant’s motion was plaintiff’s claim that ASIC’s conduct constituted an unfair business practice 

as contemplated by California’s Unfair Competition Law (“UCL”). The Order then granted 

plaintiff’s motion for class certification of the UCL unfairness claim. Four motions are now before 

the Court. First, ASIC requests that the Court reconsider the May 10 Order. In the alternative, it 

asks that the Court certify for interlocutory appeal the question of the applicability of the UCL to the 

conduct alleged. Finally, the defendant seeks clarification of the class notification procedure 

Case 5:08-cv-00555-RS Document 147 Filed 07/20/10 Page 1 of 7
NO. C 08-0555 RS 

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outlined in the May 10 Order. Defendant’s requests are denied. Moreover, because this Order 

denies defendant’s request to alter the class notification procedure, plaintiff’s request to supplement 

her papers filed in opposition is also denied. 

II. DISCUSSION 

A. Motion for Reconsideration

The Local Civil Rules of the Northern District of California provide that “[b]efore the entry 

of a judgment adjudicating all of the claims and the rights and liabilities of all the parties in a case” 

any party may request leave to file a motion for reconsideration of an interlocutory order. N.D. Cal., 

Civil L.R. 7-9(a). ASIC seeks permission to file a motion for reconsideration of this Court’s Order 

of May 10, 2010. That Order granted ASIC’s motion for judgment on the pleadings as to all of 

Wahl’s claims, save her allegation that ASIC committed an “unfair” business practice in violation of 

California’s UCL. It is the survival of this single claim that ASIC contests. Reconsideration 

generally is appropriate, among several other recognized scenarios, in light of a “manifest failure by 

the Court to consider material facts or dispositive legal arguments which were presented to the 

Court before such interlocutory order.” N.D. Cal., Civil L.R. 7-9(b)(3). 

ASIC argues the Court failed explicitly to reject purportedly dispositive legal defenses raised 

in ASIC’s papers. Namely, ASIC disagrees that the forced placed insurance policy at issue here was 

actually its business practice. It insists the lending bank, EMC, instituted the policy and 

characterizes its involvement as the mere provision of a service to the bank. ASIC also insists the 

Order failed to consider its argument that forced placed insurance is potentially a “legal” business 

practice in California if it is contemplated in a deed of trust. The May 10 Order did find that ASIC’s 

role was sufficient to impose liability and did agree with Wahl that, at least as alleged, the particular 

version of forced placed insurance at issue in this case could constitute an unfair business practice. 

As the Order stated, “The FAC alleges that, upon the expiration of Wahl’s Farmers Policy, ASIC, in 

cooperation with EMC, cancelled the Farmer’s Policy’s LLPE and substituted its own [Forced 

Placed Insurance]—a practice which, although within the bounds of the Deed of Trust, was 

singularly disadvantageous to Wahl and unsupported by any apparent reason other than the fact that 

Case 5:08-cv-00555-RS Document 147 Filed 07/20/10 Page 2 of 7
NO. C 08-0555 RS 

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ASIC and EMC both stood to benefit financially from the immediate placement of FPI.” Wahl v. 

Am. Sec. Ins. Co., No. 08-0555, 2010 WL 1881126, at *7 (N.D. Cal. May 10, 2010). While ASIC 

clearly disagrees with the Order’s outcome, ASIC’s insistence that dispositive claims were not 

considered is unfounded. 

ASIC also argues this Court committed clear error when it relied on section 790.03(c) of the 

California Insurance Code. The Order did note that Wahl could “tether” her UCL claim to a 

legislative policy evinced there declaring “coercion” in the insurance context “unfair.” The Order 

noted that Wahl had alleged facts sufficient to support her unfair practices claim under either the 

traditional balancing test, as espoused in South Bay, or because her claim was in the alternative 

“tethered” to a legislatively declared policy. See South Bay Chevrolet v. General Motors 

Acceptance Corp., 72 Cal. App. 4th 861, 866-87 (1999); Cel-Tech Commc’ns., Inc. v. Los Angeles 

Cellular Tel. Co., 20 Cal. 4th 163, 185 (1999). In its request for reconsideration, ASIC suggests the 

Court erroneously relied on section 790.03. ASIC argues this provision was designed to apply to 

coercion in the antitrust context, but not to “coercive” behavior directed toward a consumer like 

Wahl. Even crediting ASIC’s narrow interpretation of that provision, the May 10 Order explicitly 

recognized that Wahl adequately alleged a claim under the alternative traditional balancing test. 

As the May 10 Order explained, California courts historically subjected a plaintiff’s UCL 

unfairness claim to a balancing test. Under that test, determining whether a business practice is 

unfair “involves an examination of [that practice’s] impact on its alleged victim, balanced against 

the reasons, justifications and motives of the alleged wrongdoer. In brief, the court . . . weigh[s] the 

utility of the defendant’s conduct against the gravity of the harm to the alleged victims.” Motors, 

Inc. v. Times Mirror Co., 102 Cal. App. 3d 735, 740 (1980). See also People v. Casa Blanca 

Convalescent Homes Inc., 159 Cal. App. 3d 509, 530 (1984) (relaying that a practice is unfair in 

California where it “offends an established public policy or when the practice is immoral, unethical, 

oppressive, unscrupulous or substantially injurious to consumers”). South Bay further noted that, in 

general, the “unfairness prong has been used to enjoin deceptive or sharp practices” but “does not 

give the courts a general license to review the fairness of contracts.” 72 Cal. App. 4th at 887 

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(internal quotation marks and citations omitted). In Cel-Tech, of course, the California Supreme 

Court rejected that test, at least in the context of alleged anticompetitive conduct. 20 Cal. App. 4th 

at 185. Cel-Tech held that in a claim brought by a competitor, “any finding of unfairness . . . [must] 

be tethered to some legislatively declared policy.” 20 Cal. 4th 163, 185 (1999). 

Because Cel-Tech expressly limited its holding to competitor lawsuits, the appropriate test to 

determine whether a practice is “unfair” in a consumer case under California law is uncertain. See 

Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 735 (9th Cir. 2007) (“California’s unfair 

competition law, as it applies to consumer suits, is currently in flux”); compare Smith v. State Farm 

Mutual Automobile Ins. Co., 93 Cal. App. 4th 700, 720 n.23 (2001) (“[W]e are not to read Cel-Tech

as suggesting that such a restrictive definition of ‘unfair’ should be applied in the case of an alleged 

consumer injury . . . .”) with Scripps Clinic v. Superior Court, 108 Cal. App. 4th 917, 940 (2003) 

(requiring, under Cel-Tech, that any UCL claim be tethered to a legislatively declared policy). In 

Lozano, the Ninth Circuit upheld a district court’s adoption of the balancing test in the consumer 

context. As the Court explained there, “Because adopting one standard does not necessitate 

rejection of the other, we hold that, no matter the status of Cel-Tech, the district court did not apply 

the wrong legal standard by relying on the balancing test from South Bay.” Lozano, 504 F.3d at 

736. “In the absence of further clarification by the California Supreme Court,” the Court continued, 

“we endorse the district court’s approach to the law as if it still contained a balancing test.” Id. See 

also Cel-Tech, 20 Cal.4th at 187 n.12 (“This case involves an action by a competitor alleging 

anticompetitive practices. Our discussion and this test are limited to that context.”). 

Any arguments in derogation of the applicability of section 790.03, then, would not change 

the outcome of the May 10 Order and these arguments do not present a basis for reconsideration. 

ASIC’s motion must therefore be denied. 

B. Motion for Interlocutory Appeal

ASIC requests certification for interlocutory review of the May 10 Order, pursuant to 28 

U.S.C. section 1292(b), insofar as it relied on section 790.03 to deny the motion to dismiss Wahl’s 

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UCL claim. ASIC has not demonstrated that “exceptional circumstances” warrant immediate, 

interlocutory appeal and its motion should be denied. 

In the ordinary course, a party may seek review of a district court’s rulings only after the 

entry of final judgment. In re Cement Litig., 673 F.2d 1020, 1027 (9th Cir. 1982). A district court 

may under “exceptional” circumstances certify an order for interlocutory review pursuant to 28 

U.S.C. § 1292(b). Id. at 1026 (citing Coopers & Lybrand v. Livesay, 437 U.S. 463, 475 (1978)). 

Certification may be appropriate where: (1) the order involves a controlling question of law; (2) as 

to which there is substantial ground for difference of opinion; and (3) an immediate appeal from the 

order may materially advance the ultimate termination of the litigation. 28 U.S.C. § 1292(b). 

ASIC’s motion may be resolved under the first prong. ASIC disagrees that a consumer like 

Wahl may rely on California Insurance Code section 790.03’s policy against coercion to state an 

unfairness claim under the UCL. As explained above, however, the May 10 Order held that Wahl’s 

FAC stated a claim under either the traditional balancing test or the legislative policy test espoused 

in Cel-Tech. Accordingly, the applicability of section 790.03 to Wahl’s claim is not a controlling 

question of law. While it is true that the legal issue need not be dispositive to be “controlling,” its 

resolution must promise to alter materially the outcome of the litigation. Cement Litig., 673 F.2d at 

1026. ASIC has not made such a showing here and its motion will therefore be denied. 

C. Motion for Clarification

Finally, ASIC seeks clarification of the May 10 Order. A court may clarify its order for any 

reason. Properly understood, a request for clarification does not seek to “alter or amend the 

judgment” or require a “substantive change of mind by the court.” Bordallo v. Reyes, 763 F.2d 

1098, 1102 (9th Cir. 1985) (internal citation and quotation marks omitted). Instead, such a request 

“invite[s] interpretation, which trial courts are often asked to supply, for the guidance of the parties.” 

Id. ASIC suggests clarification is particularly appropriate where an order “omit[s] key procedures 

for its enforcement, or may lead to confusion or disagreement among the parties.” (Def.’s Mot. at 

3:14-16.) ASIC contends the May 10 Order failed to provide a specific procedure according to 

which plaintiff may obtain from defendants information necessary to facilitate class notification. 

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The May 10 Order held that certification was appropriate and instructed that “[n]otice shall 

be provided to the class via U.S. certified mail to the last known address reflected on defendant[’s] 

mailing records.” The Order further stated that ASIC shall cooperate with class counsel in preparing 

a computerized mailing list. What ASIC contends the Order failed to do, was to provide a detailed 

procedure by which defendants may release the names and addresses of class members without 

violating those members’ privacy rights. ASIC insists it cannot, consistent with the Insurance 

Information and Privacy Protection Act (“IIPPA”), Insurance Code section 791 et seq., distribute 

class member names or addresses without some special protection for insureds. The defendant 

proposes the following procedure: (1) ASIC will first notify all class members that their names and 

information may be released; (2) each class member must authorize in writing the release; (3) class 

notice will only be sent to those members who agree to the release of their names and addresses. 

Wahl vehemently disagrees that any clarification is necessary and, moreover, castigates 

ASIC’s proposal as an attempt inappropriately to winnow down the class. Although Wahl presents 

several arguments, the simplest is persuasive: the language of the statute itself provides that an 

insurance company may disclose personal or privileged information (including names and addresses 

of insureds) “[i]n response to a facially valid administrative or judicial order, including a search 

warrant or subpoena.” Cal. Ins. Code § 791.13(g). The May 10 Order instructs that notice shall be 

provided to class members pursuant to the “last known address reflected on defendants’ mailing 

records.” According to the plain language of the statute, then, defendants may release the limited 

information necessary to provide notice to the class without violating the statute’s terms. The 

motion for clarification and any request to modify or restrict the class notification procedure is 

therefore denied. 

IT IS SO ORDERED. 

Dated: 07/20/2010 

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RICHARD SEEBORG 

UNITED STATES DISTRICT JUDGE 

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