Source: http://updates.mwbllp.com/2016_09_11_archive.html
Timestamp: 2019-04-19 22:48:03+00:00

Document:
The Court of Appeal of the State of California, Third Appellate District, recently held that an order denying interim attorney fees under Cal. Civil Code § 2924.12, which is part of the California Homeowner Bill of Rights, is not an appealable order.
The plaintiff borrower obtained a mortgage loan, which was subsequently modified, but the plaintiff defaulted on the modified loan also. The defendant mortgagee recorded its notice of default. The plaintiff borrower requested another modification but did not submit the required documentation. The property was set for foreclosure sale.
The plaintiff borrower filed a complaint against the defendant mortgagee alleging a violation of the California Homeowner Bill of Rights (CHOBR) as the mortgagee supposedly recorded its notice of notice of sale while a loan modification was pending. The plaintiff presented evidence that indicated the defendant issued the notice of trustee's sale before it issued any determination of the plaintiff's eligibility of a loan modification.
The plaintiff also applied for a temporary restraining order, which the trial court granted. The plaintiff then applied for a preliminary injunction to enjoin the sale of the property. The trial court granted the injunction as it found the plaintiff borrower met his burden to demonstrate a likelihood of success on the merits and he would suffer great injury if his property was sold at the foreclosure sale. The injunction was to remain in place until the defendant corrected and remedied the allegations.
As the preliminary injunction was in place, the plaintiff moved for attorney fees as the prevailing party. The trial court denied the request for interim attorney fees and the plaintiff appealed the order.
On appeal, the mortgagee argued the trial court's order denying the borrower's motion for interim attorney fees under the CHOBR was not an appealable order.
As you may recall, under California's 'one final judgment' rule, a judgment that fails to dispose of all the causes of action pending between the parties is generally not appealable. A final judgment terminates the litigation between the parties on the merits of the case and leaves nothing to be done but to enforce by execution what has been determined. A recognized exception to the 'one final judgment' rule is that an interim order is appealable if: (1) the order is collateral to the subject matter of the litigation, (2) the order is final as to the collateral matter, and (3) the order directs the payment of money by the appellant or the performance of an act by or against appellant.
Here, the Appellate Court noted that the plaintiff's notice of appeal was filed before a final judgment, and that a trial on the merits might show that the preliminary injunction was improper.
The Appellate Court also found that the trial court's order denying interim attorney fees is also not appealable as a collateral order. The Appellate Court noted that the trial court's order did not direct the payment of any money, nor did it compel an act by or against the plaintiff. Instead, the Appellate Court noted, the trial court's order merely represents a denial of attorney's fees that is not appealable as a collateral order.
The Appellate Court rejected the plaintiff's reliance on Moore v. Shaw (2004) 116 Cal.App.4th 182. The Court noted that, in Doe v. Luster (2006) 145 Cal.App.4th 139, the same appellate court that rendered the decision in Moore v. Shaw "considered its earlier decision in Moore and held Moore should not be construed to allow an appeal from an interim attorney fee award." The Appellate Court noted that Moore did not address the issue of whether an order denying the request for attorney fees was appealable, and thus was not applicable to the case at hand.
The Court also rejected the plaintiff's reliance on Baharian-Mehr v. Smith (2010) 189 Cal.App.4th 265. The Appellate Court noted that "Baharian–Mehr did not consider whether an attorney fee order is appealable by itself. (Ibid.) Thus, Baharian–Mehr does not undermine our conclusion that the order denying interim attorney fees in this case does not constitute an appealable order.".
The County Court of the Twelfth Judicial Circuit Court for Monroe County Florida recently held that a debt buyer could not use the original creditor's credit card statements to try to collect on the underlying debts, as the debt buyer failed to present evidence that it independent verified the accuracy of the credit card statements. A copy of the opinion is attached.
The plaintiff debt buyer presented the sworn testimony of a senior legal specialist and records custodian for the debt servicing entity affiliated with the plaintiff. The records custodian testified as to the methods and processes employed by the plaintiff debt buyer when verifying debt that was purchased from a third party creditor. However, the Court noted that the plaintiff debt buyer was unable to testify whether the policies were implemented with regard to the account associated with this action.
The plaintiff debt buyer sought to introduce the original creditors business records, including a collection of credit card statements addressed to the defendant consumer, documents purporting to relate to the plaintiff debt buyer's purchase of the debt, and a series of letters addressed to the defendant consumer.
For the admissibility of the original creditor's business records, the plaintiff debt buyer relied on a number of rulings relating to the admissibility of prior servicer's records in mortgage foreclosure actions, including Sas v. Federal Nat l Mortgage Assoc., 65 So.3d 849 (Fla. 2d DCA 2015) citing WAMCO xxviii Ltd. V. Integrated Electronic Environments, Inc., 903 So.2d 230 (Fla. 2d DCA 2005) and Bank of N.Y. v. Calloway, 157 So.3d 1064 (Fla. 4th DCA 2015).
The Court here distinguished those cases because the custodian testified that she did not receive any ledger, account history or payment history from the predecessor of the debt buyer or its servicer. The Court concluded that the plaintiff debt buyer and its servicer could not have completed any independent verification of the accuracy of the credit card statements.
The Court also noted that the plaintiff debt buyer and its servicer did not have a copy of the consumer's cardholder agreement, and therefore could not establish the basis for any interest, late fees, or other charges.
Therefore, the Court held the credit card statements addressed to the defendant consumer were inadmissible.
The Court also excluded the documents purporting to relate to the plaintiff debt buyer's purchase of the debt. These documents, the Court noted, were redacted including as to identifying information that would connect the documents to the debt. Without that information, the Court found these documents to be irrelevant.
Lastly, the letters addressed to the defendant were sent by a third party vendor and not by the debt servicing entity. The court concluded the testimony provided by the plaintiff debt buyer was insufficient to establish that the defendant consumer did not object to any of the statements received.
Accordingly, the court entered judgment in favor of the defendant consumer and against the plaintiff debt buyer.
The U.S. Court of Appeals for the Third Circuit recently held that a businessowners insurance policy did not cover a class action judgment that arose out of unsolicited advertisement communications in violation of the federal Telephone Consumer Protection Act, 47 U.S.C. § 227("TCPA").
A business was solicited by an advertiser who claimed to have a fax advertising program that complied with the TCPA. The business allowed the advertiser to fax thousands of advertisements to potential customers on its behalf.
Six years later, a class action lawsuit was filed against the business, claiming that the advertisements violated the TCPA, which prohibits the "use [of] any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement ..."
In the class action, the class representative asserted that it had neither invited nor given the business permission to send the faxes, and that the unsolicited faxes had damaged the recipients by causing them to waste paper and toner in the printing process, lose the use of their fax machines when the advertisements were being received, and the faxes had also interrupted the class members' "privacy interest."
During the time that the unsolicited faxes were sent to the class members, the business was covered by a businessowners insurance policy (the "Policy"). The Policy obligated the insurer to "pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury', 'property damage', 'personal injury' or 'advertising injury' to which this insurance applies."
The insurer agreed to defend the business in the class action, but reserved its right to later challenge whether the sending of unsolicited faxes fell within the terms of the insurance policy's coverage.
One year later, the class action settled and the parties agreed to entry of judgment in favor of the class against the business for $2,000,000. The class also agreed to seek recovery of the judgment only from the insurer. The trial court entered an order and final judgment approving the settlement and entering the judgment against the business. In its order, the trial court specifically found that the business "did not willfully or knowingly violate the TCPA."
The insurer and the class representative each moved for summary judgment in the declaratory judgment action, and the trial court concluded that the sending of unsolicited faxes to the class members did not cause the sort of injury that fell within the Policy's definition of either "property damage" or "advertising injury." The trial court granted the insurer's motion for summary judgment and denied the class representative's cross-motion. The class representative appealed.
On appeal, the class representative first argued that the trial court did not have jurisdiction to hear the case. The insurer had brought its declaratory relief action under the Declaratory Judgment Act, 28 U.S.C. § 2201 ("DJA").
As you may recall, the DJA does not itself create an independent basis for federal jurisdiction, but instead provides a remedy for controversies otherwise properly within the court's subject matter jurisdiction. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950). Declaratory judgment actions do not directly involve the award of monetary damages, but "it is well established that the amount in controversy [in such actions] is measured by the value of the object of the litigation." Hunt v. Wash. State Apple Advert. Comm'n, 432 U.S. 333, 347 (1977).
In bringing its declaratory judgment action, the insurer had invoked diversity jurisdiction, which requires that the parties must be completely diverse, meaning that "no plaintiff can be a citizen of the same state as any of the defendants," and that that the "matter in controversy exceeds the sum or value of $75,000." 28 U.S.C. § 1332.
However, although the business and the class representative were ultimately fighting over the insurer's obligation to pay a $2,000,000 judgment against the business, that judgment was based on the settlement of the underlying class action lawsuit in which the individual claims of each class member fell well below the $75,000 amount-in-controversy threshold.
The insurer disagreed, arguing that the case was only between it and its insured - the business. The insurer argued that in coverage litigation commenced by an insurer, the focus is on the amount the insurer will owe to its insured or the value of its coverage obligation.
According to Sadowski, the "insurer [had] not aggregated multiple parties' claims. From its perspective there was only one claim – by its insured, for the sum of defense and indemnity costs." The Seventh Circuit thus held that "the anti-aggregation rule does not apply ... just because the unitary controversy between these parties reflects the sum of many smaller controversies."
The Third Circuit adopted the Sadowski reasoning. Viewing this case from the perspective of the insurer at the time of filing of the declaratory judgment complaint, the Court held that the insurer's quarrel was with the business regarding its indemnity obligation under the Policy. According to the Court, the only "amount in controversy" that the insurer was then concerned with was its total indemnity and defense obligation. Thus, the Court held that insurer's dispute was thus with its insured, not the class, and its overall liability was not legally certain to fall below the jurisdictional minimum.
The ultimate question was whether the sending of the faxes fell under the Policy's definition of either "property damage" or "advertising injury," as a matter of state law.
First, however, the Court of Appeal had to determine which state's law to apply. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000).
Because the Policy did not contain a choice-of-law provision, the Court of Appeals had to apply the choice of law rules of the forum state to determine which state's substantive law applied. Kruzits v. Okuma Mach. Tool, Inc., 40 F.3d 52, 55 (3d Cir. 1994). As in all applications of state law, the Court's task was to predict how the state Supreme Court would rule if it were deciding the case. Norfolk S. Ry. Co. v. Basell USA Inc., 512 F.3d 86, 91-92 (3d Cir. 2008).
The class representative, however, argued that Arizona law should apply, emphasizing the many connections between the Policy and that state – i.e., the business was based and incorporated there; the underwriting file on the Policy indicates that the insurance quote was by an agency based in Arizona; the application for insurance was submitted to the insurer's branch in Arizona and reviewed by an underwriter there; and the decision to insure the business was made entirely within the Mesa, Arizona branch. Essentially, the class representative argued that Arizona law should apply because that is where the insurance contract was formed.
Before 1964, Pennsylvania courts applied the law of the place where the contract was formed ("lex loci contractus"). That stood in contrast to the rule in tort cases, which required application of the law of the place where the injury occurred ("lex loci delicti"). In Griffith v. United Air Lines, Inc., the Pennsylvania Supreme Court abandoned the "lex loci delicti" rule for torts "in favor of a more flexible rule which permits analysis of the policies and interests underlying the particular issue before the court."
The Griffith court did not address whether its new flexible approach to choice-of-law questions would also apply to contract claims, thus also displacing the "lex loci contractus" rule. Nor had the Supreme Court of Pennsylvania ever addressed that issue.
More recently, in Hammersmith v. TIG Insurance Co., 480 F.3d 220, 226-29 (3d Cir. 2007), the Third Circuit again concluded that Pennsylvania would apply Griffith's flexible approach to choice-of-law questions in contract cases, noting that in Budtel Associates, LP v. Continental Casualty Company, the Pennsylvania Superior Court had concluded that the Commonwealth's precedents mandated that it follow the Griffith rule in the contract law context.
The class representative argued that the previous "lex loci contractus" rule should control and that the Third Circuit should apply Arizona law. The Court rejected the class representative's arguments, noting that the class representative cited no intervening Pennsylvania authority that called the Court's prediction in Hammersmith into question. Accordingly, the Court applied Griffith's flexible choice-of-law analysis.
Under the Griffith approach, "the first step in a choice of law analysis under Pennsylvania law is to determine whether a conflict exists between the laws of the competing states." If there are no relevant differences between the laws of the two states, the court need not engage in further choice-of-law analysis, and may instead refer to the states' laws interchangeably.
According to the class representative, in Arizona, even clear and unambiguous boilerplate language is ineffective if it contravenes the insured's reasonable expectations.
The Third Circuit observed that the class representative was using the "reasonable expectation" test to conduct a fifty-state legal survey and to argue that Arizona's law must be whatever the prevailing legal theory was across the country since that prevailing law is inherently "reasonable."
The class representative argued that in order for the insurer to show that its policy interpretation was consistent with a reasonable insured's expectations, the insurer must demonstrate that the interpretation adopted explicitly or implicitly by courts nationwide is unreasonable.
The Third Circuit rejected the class representative's argument. To begin with, the Court did not agree with the class representative that there was a conflict, noting that both states gave dispositive weight to clear and unambiguous insurance contract language. But, even if a conflict had existed, the court held that the class representative failed to explain how or why using the "reasonable expectation" test would result in a conflict in the applicable substantive law.
Therefore, the Court rejected the class representative's argument, noting that the argument misstated the nature of the Court's inquiry. When sitting in diversity and conducting a choice-of-law analysis pursuant to Pennsylvania conflict principles, the Court's job is only to evaluate any conflict between the laws of Arizona and Pennsylvania.
The class representative, however, had failed to argue that those two states' laws were different in any way that actually changed the meaning of either of the relevant terms of the Policy: "property damage" or "advertising injury."
The Court noted that the class representative's argument was thus not only wrong on the law (the states' laws did not conflict in how they interpreted insurance contracts), but was also irrelevant because it failed to connect the purported conflict to the applicable law applicable.
The class representative's second alleged conflict was more tenable and related to the differing interpretations of Arizona and Pennsylvania courts as to the meaning of "property damage."
The Policy required that any covered "property damage" be caused by an "occurrence," which is defined as an "accident." The Policy did not define the term "accident," although it did exclude from coverage any property damage "expected or intended from the standpoint of the insured."
The class representative argued that the two states define an "accident" differently. It argued that the two states' laws conflicted over whether an insurance policy that covers "accidents" would extend to the "unintended consequences of intentional acts," in this instance, damage to a fax recipient from an intentionally sent fax.
The class representative argued that Pennsylvania law would result in such damages being excluded from coverage, whereas Arizona law would cover its claim as an "accident."
Once again, the Court rejected the class representative's argument, noting that under both Pennsylvania and Arizona law the claim would be excluded from coverage.
The Court relied on the Supreme Court of Pennsylvania case of Donegal Mutual Insurance Co. v. Baumhammers, 938 A.2d 286, 292 (Pa. 2007), where the Supreme Court of Pennsylvania said that when "accident" is undefined in an insurance policy, Pennsylvania courts should treat the term as "refer[ing] to an unexpected and undesirable event occurring unintentionally ...."
Baumhammers stood for the premise that even intention acts of third parties could still be a covered "accident." Baumhammers involved a killing spree perpetrated by the son of the insured. The estates of several of the victims sued both the son and his parents, alleging, among other claims, negligence on the part of the parents "in failing to take possession of [his] gun and/or alert law enforcement authorities or mental health care providers about [their son's] dangerous propensities." The parents sought coverage under their insurance, which covered claims for bodily injury caused by an "accident."
The Supreme Court of Pennsylvania held that, with respect to the insured parents, the shootings qualified as an "accident" under the policy, because "[t]he extraordinary shooting spree embarked upon by [the son] resulting in injuries to [the victims] cannot be said to be the natural and expected result of [his parent's] alleged acts of negligence." Thus, the injuries were caused by an event so unexpected, undersigned, and fortuitous as to qualify as accidental within the terms of the policy.
Here, by contrast, the Third Circuit noted that the class representative's claimed injury was the use of ink, toner, and time that was caused by the receipt of junk faxes, which were the natural and expected result of the intentional sending of faxes, a far cry from Pennsylvania's definition of an "accident."
The Court rejected the class representative's argument that Arizona law would cover its claim as an "accident," noting that Arizona law defines an "accident" much the same as Pennsylvania law, relying on Lennar Corp. v. Auto-Owners Ins. Co., 151 P.3d 538, 547 (Ariz. Ct. App. 2007), and Lennar Corp. v. Auto-Owners Ins. Co., 151 P.3d 538, 547 (Ariz. Ct. App. 2007).
Thus, the Court concluded that there was no conflict between Pennsylvania and Arizona law on the question of whether the damage to the class members was covered under the Policy's definition of "property damage," holding that under either states' law, there is no coverage because the alleged injury was not the result of an "accident." It was the foreseeable result of the intentional sending of faxes to the class recipients.
Finally, the class representative argued that coverage was available because the damage to class members from receipt of the junk faxes qualified as "advertising injury" under the Policy. Because the class representative did not contend that the Arizona definition of "advertising injury" differed from Pennsylvania, the Court looked solely to Pennsylvania law to answer that question.
The Court again rejected the class representative's argument, concluding that the claimed injury fell outside of the scope of the Policy's coverage.
The Policy defined "advertising injury" as, among other things: "Oral or written publication of material that violates a person's right of privacy." Although the Policy did not define the term "privacy," numerous state and federal courts have considered whether violations of the TCPA are covered by insurance policies that include similar or identical language to that at issue.
The Third Circuit relied on the Pennsylvania Superior Court case of Telecommunications Network Design v. Brethren Mutual Insurance Co. ("Brethren"), which divided "right of privacy" into two broad categories: the privacy interest in secrecy and the privacy interest in seclusion. Secrecy- based privacy rights protect private information, while seclusion-based privacy rights protect the right to be left alone.
Citing Melrose Hotel Co. v. St. Paul Fire & Marine Ins. Co., 432 F. Supp. 2d 488, 502 (E.D. Pa. 2006),aff'd, 503 F.3d 339 (3d Cir. 2007), the Court noted that the TCPA protects only the privacy interest in seclusion by shielding people from unsolicited messages. The content of the messages is immaterial under the TCPA.
The Court found, however, that the Policy's protection of the "right of privacy" was limited to a privacy interest the infringement of which depends upon the content of the advertisements: in other words, the privacy right to secrecy.
The Court, relying on the Pennsylvania Superior Court case of Telecommunications Network Design v. Brethren – a case involving the exact same questions: identical policy language; identical underlying TCPA violation, and identical claimed damages for that violation – in which the state court ruled that the Policy did not cover that injury, because the class representative's allegations in the class action did not relate to the content of the faxed advertisements. According to the state court in Brethren, the faxes caused the alleged damage because they were received without permission, not because of their content. At no point did the class representative allege that the unsolicited faxes included confidential or otherwise secret information about any of the class members.
Thus, the Third Circuit found that the class representative's claims were not covered under the Policy, and affirmed the judgment of the District Court.

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