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■ Clark v. Superior Court of LA County , No. B212512

 Civil Code section 3345 (section 3345) authorizes the award of an enhanced remedy—up to three times greater than the amount of a fine, civil penalty “or any other remedy the purpose or effect of which is to punish or deter” that would otherwise be awarded—in actions by or on behalf of senior citizens or disabled persons seeking to “redress unfair or deceptive acts or practices or unfair methods of competition.”  Is this enhanced remedy available in a private action by senior citizens seeking restitution under California’s unfair competition law (Bus. & Prof. Code, § 17200 et seq.)? 

            The unambiguous language of section 3345 encompasses actions under the unfair competition law brought by or on behalf of senior citizens, even those initiated by private plaintiffs seeking only restitution.  Although section 3345 is limited to actions involving remedies intended to “punish or deter,” deterrence of illegal acts is both an important aim and a recognized effect of a restitution remedy under the unfair competition law.  (See, e.g., Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1148 (Korea Supply); Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267.) 

            Nonetheless, as both real party in interest and the amici curiae forcefully argue, because the enhanced remedy authorized by section 3345 is similar in many respects to an award of punitive damages, permitting a treble restitution recovery appears to contradict the well-established rule that private plaintiffs in actions under the unfair competition law “may not receive damages, much less treble damages . . . .”  (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone (1999) 20 Cal.4th 163, 179 (Cel-Tech).)  The legislative history of section 3345 is unhelpful on this point, neither indicating a clear intent to modify this accepted principle of unfair competition jurisprudence nor reflecting an understanding that the sweeping language in section 4 of Senate Bill No. 1157 (1987-1988 Reg. Sess.), which enacted section 3345, was to be given a restrictive interpretation.  Accordingly, we are left with the language of section 3345 itself, which on its face applies to senior citizens or disabled persons seeking restitution under the unfair competition law. 

            Because the trial court concluded section 3345 is inapplicable to private actions seeking restitution under the unfair competition law, we grant the petition for writ of mandate filed by James A. Clark, Orville R. Camien, Mary F. Simms-Schmidt and Carmen R. Armstrong on behalf of themselves and as representatives of a certified class of certain senior citizens and direct respondent Los Angeles Superior Court to vacate its order of November 14, 2008 granting National Western Life Insurance Company’s (National Western) motion for judgment on the pleadings and enter a new and different order denying that motion. 

FACTUAL AND PROCEDURAL BACKGROUND

            1.  The Certified Class Action

            This action, originally filed in September 2004 by Clark, a senior citizen, alleges National Western utilized deceptive business practices to induce the purchase of high-commission annuity contracts with large surrender penalties in violation of, among other things, the unfair competition law.  In December 2005 a third amended complaint was filed naming the petitioners as plaintiffs and including class action allegations.  The third amended complaint alleged violations of the unfair competition law, breach of contract, breach of the covenant of good faith and fair dealing and fraud and sought, in part, restitution of the improper surrender penalties and enhanced remedies for each cause of action under section 3345. 

            In February 2007 the trial court granted, in part, petitioner’s motion for class certification, certifying a class consisting of “[a]ll California residents who purchased National Western Life Insurance Company deferred annuities when they were age 65 or older” under specified certificate forms.  However, the court permitted the class to proceed only on the unfair competition claim.^[1]  The court also certified a subclass of approximately 36 class individuals who purchased annuities sold by Ezra Chapman and ruled the subclass could proceed against Chapman and National Western on both the fraud claim and the unfair competition claim.^[2]   

2.  National Western’s Motions for Judgment on the Pleadings and Summary Adjudication

            On July 15, 2008 National Western filed a motion for judgment on the pleadings, asserting section 3345’s enhanced, “treble damages” remedy was inapplicable to a private action under the unfair competition law.  On the same date, National Western filed a motion for summary adjudication presenting the identical argument.  In addition, the summary adjudication motion argued punitive damages were not available for the subclass’s fraud claim because plaintiffs could not establish that National Western had ratified Chapman’s conduct or had engaged in any behavior warranting the imposition of punitive damages. 

            On November 14, 2008 the court granted National Western’s motion for judgment on the pleadings without leave to amend, concluding section 3345 is inapplicable to a private action seeking restitution under the unfair competition law because “restitution, the only available remedy, does not have the purpose or effect of punishment or deterrence.”  The court denied National Western’s motion for summary adjudication, finding triable issues of material fact existed as to whether the subclass’s common law fraud claim warranted punitive damages. 

            3.  The Instant Petition

            On December 5, 2008 plaintiffs petitioned this court for a writ of mandate compelling the trial court to vacate its order granting the motion for judgment on the pleadings and to enter a new order denying the motion.  After requesting and receiving an informal opposition to the petition, on December 30, 2008 this court issued an order to show cause as to why the relief requested in the petition should not be granted.  On January 23, 2009 National Western filed its return, and on February 13, 2009 plaintiffs filed their reply.

■ Held:

Petition for writ of mandate directing Los Angeles Superior Court to vacate its order granting National Western Life Insurance Company’s motion for judgment on the pleadings is granted where the award of an enhanced remedy under Civil Code sec. 3345 is available in a private action by senior citizens seeking restitution under California's unfair competition law.
Clark v. Super. Ct. 5/21/09 -B212512-CA2/7
Clark v. Super. Ct. 5/21/09 -B212512-CA2/7-PDF

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