A Housing Discrimination Claim The United States Initiated Against A Landlord Was Not A Suit For “Wrongful Eviction”

Federal Insurance Company v. Steadfast Insurance Company
(Cal. Ct. of App., 2d Dist.), filed September 24, 2012

KEY FACTS

The United States brought an action against property owners for discrimination under the Fair Housing Act. The United States alleged the owners and “their agents and/or employees [had] engaged in a pattern or practice of discrimination on the basis of race, national origin, and familial status in connection with the rental of dwellings owned by [some of the defendants] in violation of the Fair Housing Act.” It sought to enjoin the alleged discriminatory conduct and other interference with the exercise of rights under the Fair Housing Act, monetary damages for those who suffered discrimination, and civil penalties.

The property owners tendered the action to their primary insurance carriers, Steadfast Insurance Company and Liberty Surplus Insurance Corporation, and to their excess and umbrella insurance carrier, Federal Insurance Company.

Steadfast and Liberty insured against claims for “wrongful eviction,” “wrongful entry,” and “invasion of the right of private occupancy.” Federal insured against those claims and it specifically covered discrimination.

At times, Steadfast and Federal provided a defense for the property owners.

Federal sought a determination that it had no duty to defend and sought reimbursement from Steadfast and Liberty for defense fees and costs it had paid. Steadfast sought reimbursement from Federal and Liberty for the defense fees and costs it paid.

Federal filed a summary judgment motion. It asserted that the United States’ contentions, that the owners created a hostile environment for some of their tenants, amounted to a claim of constructive eviction, falling under the coverages for wrongful eviction, wrongful entry, and invasion of the right of private occupancy in the Steadfast and Liberty policies. Federal argued that as an excess insurer, it had no duty to defend.

The trial court granted summary judgment and summary adjudication against Federal.

HOLDING & REASONING

The Court of Appeal affirmed. It held that only Federal had a duty to defend because it issued the only insurance policy that covered discrimination claims. Neither Steadfast nor Liberty had a duty to defend because their policies did not cover the claims in the underlying action.

In determining whether an insurer has a duty to defend under the terms of its policy, courts look both to the allegations in the complaint and to the extrinsic facts known to the insurer that suggest that a claim might be covered. The duty to defend exists when a third-party complaint can fairly be amended to state a covered liability based on the facts alleged, reasonably inferable, or otherwise known. If, as a matter of law, however, there is no potential for coverage based on the allegations in the complaint or the extrinsic facts known to the insurer, then there is no duty to defend.

The court rejected Liberty’s argument that its policy did not apply because the owners’ liability was based on intentional acts of discrimination. It reasoned that the owners could have been vicariously liable for acts of their agents and employees and that such liability might not have been the result of intentional acts by the owners themselves.

The court rejected Federal’s argument that the complaint and discovery in the underlying action implicate personal injury coverage for wrongful eviction, wrongful entry, and invasion of the right of private occupancy under the Steadfast and Liberty policies. That argument was based on two premises. The first was that the claims in the underlying action arose in the context of a landlord-tenant relationship and that the gist of the alleged misconduct was that the defendants interfered with the tenants’ use and enjoyment of their property interests through the defendants’ discrimination. The second was that discovery showed that the vast majority of aggrieved persons in the underlying action moved out of the defendants’ properties.

The court rejected this reasoning:

The United States’ jurisdiction under 42 U.S.C. section 3614(a) is the enforcement of the anti-discrimination provisions of the Fair Housing Act. That jurisdiction does not extend to landlord-tenant disputes in the form of wrongful eviction, wrongful entry, or invasion of the right of private occupancy that are not based on housing discrimination under the Fair Housing Act. Although the discrimination alleged in the [underlying] action may have been based in part on acts that might involve wrongful evictions, wrongful entries, or invasions of the right of private occupancy, the gravamen of the action itself solely was for housing discrimination under the Fair Housing Act. The [underlying] action cannot be construed as asserting common law theories of wrongful eviction, wrongful entry, or invasion of the right of private occupancy. Only the tenant can claim wrongful eviction, wrongful entry, or invasion of the right of private occupancy.

The court noted that even if a claim by a tenant or potential tenant might potentially be covered under the Steadfast and Liberty policies, the United States had no right of occupancy and was not a victim of any violation of property rights. It stated:

That a nonparty alleged victim of housing discrimination could have brought a separate common law action against the [underlying] defendants based on the factual allegations in the [underlying] complaint that might have been covered under the Steadfast and Liberty policies does not establish potential coverage under those policies for the Fair Housing Act discrimination allegations in the [underlying] action brought by the United States to enforce a federal statute concerning “a pattern or practice” of housing discrimination.

ANALYSIS

This decision offers a careful analysis of duty to defend principles as related to “personal injury.”

Other Cases Of Interest

A Party That Prevails By Showing The Court Lacks Jurisdiction May Be Entitled To Prevailing Party Attorney Fees

Kandy Kiss of California, Inc. v. Tex-Ellent, Inc.
(Cal. Ct. of App., 2d Dist.), filed September 21, 2012

Tex-Ellent, Inc. does business as Paramount Textiles. It provided a sample of fabric to Kandy Kiss for consideration for use in Kandy Kiss’ clothing line. The purchase order included a provision whereby Paramount would indemnify Kandy Kiss in the event of any claim and would pay attorney’s fees in the event of litigation.

When Kandy Kiss decided to use the fabric, Paramount directed it to buy the fabric directly from the manufacturer.

Kandy Kiss, Paramount and others were sued for copyright infringement in federal court and lost.

Kandy Kiss then sued Paramount in state court for indemnity. Paramount moved to dismiss the case. It argued that since the case was based on federal copyright law, only the federal court had jurisdiction. The trial court agreed and granted Paramount’s motion. Paramount then sought an award of attorney’s fees as the prevailing party. The trial court awarded Paramount its attorney’s fees.

Kandy Kiss appealed the fee award. However, rather than appealing the order dismissing its action, Kandy Kiss filed a new action in federal court.

Paramount moved for summary judgment in the federal court. It argued that it had no contract with Kandy Kiss and therefore had no contractual duty to indemnify it. The court agreed and dismissed Kandy Kiss’ second lawsuit. It then denied Paramount’s request for attorney’s fees.

As to Kandy Kiss’ appeal of the fee award in the state court case, the Court of Appeal affirmed. Although the trial court had determined it did not have jurisdiction over the dispute, that did not mean it did not have jurisdiction to award attorney’s fees to the prevailing party. It also ruled that because Paramount obtained a dismissal of the action against it, it was the prevailing party.

The court rejected Kandy Kiss’ argument that because the federal court had determined that there was no contract and that as a result Paramount was not entitled to attorney’s fees for prevailing in the federal lawsuit, Paramount should not be able to recover attorney’s fees in the state lawsuit. The court noted that Kandy Kiss raised this argument by way of a request for judicial notice in its appeal rather than by seeking leave to file supplemental briefing. The court held since this deprived Paramount of the opportunity to respond to the argument.

In the state trial court, Kandy Kiss had asserted that there was a contract under which it was entitled to indemnity and attorney’s fees. The court ruled that it could not later “reverse field” when its goals had changed.

The court also ruled that Paramount was entitled to its attorney’s fees for resisting Kandy Kiss’ appeal.

Equitable Subrogation Was Appropriate When Deeds Of Trust Securing Loans Were Recorded In The Wrong Order

JP Morgan Chase Bank, N.A. v. Banc of America Practice Solutions, Inc.
(Cal. Ct. of App., 4th Dist.), filed September 27, 2012

JP Morgan Chase Bank made a loan to Jon and Julie Siems to pay off their first and second deeds of trust on their residence. Chase intended its loan to be secured by a new first deed of trust.

Jon Siems also sought a business loan from Sky Bank, Banc of America Practice Solutions, Inc.’s predecessor in interest, at about the same time. Chase did not know about this loan.

The Sky Bank loan was primarily secured by the personal property assets of Jon Siems’s medical practice. However, it was also to be secured by a deed of trust on the Siemses’ real property, as the Siemses guaranteed the business loan. Sky Bank, knowing the real property was already secured by first and second deeds of trust that were in place before the Siemses applied for the Chase loan and the medical corporation applied for the Sky Bank loan, anticipated its loan would be secured by a third deed of trust on the property.

When the Chase and Sky Bank loans were funded, Sky Bank obtained and filed a deed of trust before Chase. This placed the Chase deed of trust in second position and rendered it much less secure.

Chase sought and obtained an order in the superior court placing its deed of trust ahead of Sky Bank’s deed of trust. It relied on principles of equitable subrogation. The trial court granted that order.

The Court of Appeal affirmed. It ruled that the case was an appropriate case for invocation of equitable subrogation. Chase sought to pay off the first and second deeds of trust and substitute its deed of trust in a position of primacy. Sky Bank sought to secure its loan with a deed of trust subordinate to the two other deeds that Chase paid off. Application of equitable subrogation did not prejudice Sky Bank. Rather, it put both parties exactly where each anticipated being in making their respective loans.

Inadequacies In The Opposition To A Summary Judgment Motion Warranted Granting The Motion

Batarse v. Service Employees International Union Local 1000
(Cal. Ct. of App., 5th Dist.), filed September 4, 2012

Ray Batarse worked for Service Employees International Union Local 1000 (“SEIU”). SEIU fired Batarse, ostensibly because of, among other things, misrepresentations he made in applying for the job.

Batarse sued SEIU for racial and gender discrimination, retaliation, negligent supervision and retention, and wrongful termination in violation of public policy.

SEIU moved for summary judgment. Batarse filed a memorandum of points and authorities in opposition to the motion, along with several declarations and an opposition to SEIU’s separate statement of undisputed material facts. The opposition to the separate statement indicated almost all of SEIU’s facts were undisputed. In response to some fact statements, Batarse indicated the fact was disputed, but failed to identify any evidence supporting the existence of a dispute. Only a few of Batarse’s responses to SEIU’s factual statements indicated the fact was disputed and cited supporting evidence. Further, Batarse did not file a separate statement of additional material facts in an attempt to show that a triable issue of fact existed regarding whether SEIU’s asserted legitimate reason for terminating his employment was actually a pretext for discrimination. Batarse’s memorandum of points and authorities, however, included facts and citations to supporting evidence that were not included in his opposition to SEIU’s separate statement.

The day after his opposition was filed, Batarse presented an ex parte application seeking to continue the hearing of the motion for summary judgment in order to permit him to conduct further discovery. SEIU opposed the application and the trial court denied it.

SEIU filed its reply to the opposition to its motion. It pointed out, among other things, that Batarse had not disputed sufficient facts in his separate statement to raise a triable issue of material fact.

The trial court granted SEIU’s motion based in large part on the deficiencies in Batarse’s separate statement.

The Court of Appeal affirmed.

Under Code of Civil Procedure section 437c, each disputed fact must be followed by a reference to supporting evidence and the failure to comply with this requirement may constitute a sufficient ground, in the court’s discretion, for granting the motion.

After evaluating the cases addressing separate statements, the court held that under the particular circumstances, the trial court did not abuse its discretion in basing its ruling on the inadequacy of Batarse’s separate statement.

The court also held that given what facts Batarse did admit, he would have lost the motion even if his separate statement did comply with the requirements for a separate statement.

An Order Denying An Anti-SLAPP Motion Made In A Limited Jurisdiction Case Is Not Appealable

Citibank N.A. v. Tabalon
(App. Div. LASC), filed September 28, 2012

Citibank brought a collections action against Alicia Tabalon in the Superior Court as a “limited jurisdiction” case. Tabalon responded with a cross-complaint against Citibank. Tabalon alleged Citibank’s collection practices violated the Rosenthal Fair Debt Collections Practices Act (Civ. Code, § 1788 et seq.).

Citibank moved to strike the cross-complaint under the anti-SLAPP statute, Civil Code section 425.16. It argued (1) the cross-complaint arose from protected speech and petitioning activity, and (2) Tabalon could not demonstrate a probability of prevailing on the merits of her claim. The trial court denied Citibank’s motion.

The Appellate Division of the Los Angeles Superior Court affirmed and dismissed Citibank’s appeal. It ruled that it did not have jurisdiction over Citibank’s appeal.

Appeals in limited jurisdiction cases are to the Appellate Division of the Superior Court. However, the Appellate Division of the Superior Court has appellate jurisdiction only over matters specified by statute. However, the statute conferring such jurisdiction does not include orders denying an anti-SLAPP motion. Therefore, an order denying such a motion is not appealable.

The Right To Travel, To Be Free From Unreasonable Seizures And To Due Process Do Not Preclude Police From Impounding An Unregistered Vehicle Being Driven By An Unlicensed Driver

Halajian v. D & B Towing
(Cal. Ct. of App., 5th Dist.), filed September 4, 2012

Barry Halajian was an electrical contractor who specialized in industrial construction. He described himself as a “free inhabitant of the California Republic” as indicated in the 1849 Constitution of the California Republic, section 4 of Article IV of the Constitution of the United States, and Article IV of the Articles of Confederation.

Halajian was stopped by police for driving his pickup truck without proper registration. He was also unlicensed. Halajian told the police that he had returned the vehicle registration and his driver’s license to the Department of Motor Vehicles because he realized that all licensing is for commercial use of the road and that he was not using it for commercial purposes.

The police called D & B Towing to impound Halajian’s truck.

D & B Towing would not release the truck until Halajian paid storage charges on it. Halajian paid the storage charges and received his truck.

Halajian sued D & B Towing for (1) wrongfully withholding his truck, for 38 days and (2) requiring him to pay $1,385 before releasing it. D & B Towing filed a demurrer, arguing that the pickup truck had been lawfully impounded by the sheriff’s department and lawfully towed and stored. D & B Towing also argued that, under California statute, Halajian had no right to immediate possession of the truck until he paid the fees required for its release.

The trial court sustained the demurrer without leave to amend based on its conclusion that the D & B Towing’s actions were legal and, therefore, Halajian was unable to state a claim for recovery.

Halajian appealed, arguing that the seizure of his truck violated his Fourth Amendment right to be free from unreasonable seizures, his constitutional right to travel and his right to due process. He also argued that the California Vehicle Code’s licensing and registration requirements were misapplied to him and his noncommercial use of the truck. Halajian asserted D & B Towing was responsible for knowing the law and, thus, should have recognized these violations of his rights and the resulting illegality of its possession of his truck.

The Court of Appeal affirmed. In the published portions of its opinion, they concluded that the sheriff’s department’s impounding of the truck did not violate Halajian’s right to travel, was not an unreasonable seizure, and did not misapply the Vehicle Code to his noncommercial use of the truck. In an unpublished portion, the court concluded that Halajian’s due process rights were not violated. Thus, D & B Towing’s possession of the truck did not continue a wrongful seizure or confiscation of the truck. In addition, D & B Towing stored and released the truck in accordance with applicable law. Consequently, D & B Towing committed no wrong and could not be held liable for damages.