THE PEOPLE ex rel. JOHN GARAMENDI, as Insurance Commissioner, etc., Plaintiff and Respondent, v. AMERICAN AUTOPLAN, INC., et al., Defendants and Appellants.
No. B070317
Second Dist., Div. Five.
Nov. 24, 1993.
20 Cal. App. 4th 760
[Opinion certified for partial publication.*]
Rosner & Goodman and Dennis Neil Jones for Defendants and Appellants.
Daniel E. Lungren, Attorney General, Edmond B. Mamer and Richard W. Bakke, Deputy Attorneys General, for Plaintiff and Respondent.
OPINION
GRIGNON, J.—Defendants and appellants American Autoplan, Inc., Nicholas Neu and Bruce Virga appeal from an order of the Los Angeles Superior Court issuing a preliminary injunction requested by plaintiff and respondent State of California, acting through the Insurance Commissioner, John Garamendi (the Commissioner). Appellants sought declaratory relief in Riverside Superior Court in connection with a cease-and-desist order of the Commissioner. Thereafter, the Commissioner sought injunctive relief in the Los Angeles Superior Court in connection with the same cease-and-desist order. The Commissioner‘s application for a preliminary injunction was granted by the Los Angeles Superior Court. Appellants contend the Los Angeles Superior Court was without jurisdiction to issue the preliminary injunction under the rule of exclusive concurrent jurisdiction. Alternatively, they argue that the injunction was not properly issued on the merits.
In the published portion of this opinion (pt. I), we discuss the rule of exclusive concurrent jurisdiction. We conclude the rule of exclusive concurrent jurisdiction is a judicial rule of priority or preference and is not
FACTS AND PROCEDURAL BACKGROUND
In 1986, Neu and Michael Gershuney were officers of a Delaware corporation, Automobile Maintenance Contracts, Inc. (AMC), engaged in the business of selling automobile repair contracts. By 1987, AMC had sold approximately 8,000 automobile repair contracts in Southern California. After an assistant commissioner for the California Department of Insurance opined that the automobile repair contracts were contracts of insurance, Neu and Gershuney moved to Northern California and operated a similar business called American Maintenance Contracts, Inc. (AMC-2).
On May 18, 1988, the Commissioner filed suit in Los Angeles Superior Court (case No. 680646) against Neu, AMC, Gershuney and others. The Commissioner requested an injunction arguing that AMC, Neu and Gershuney were violating the insurance laws by transacting an insurance business without first being admitted as an insurer in California and without obtaining a certificate to that effect; acting as an agent for a nonadmitted insurer; advertising for a nonadmitted insurer; and aiding a nonadmitted insurer to transact business in California. (
Consumers learned of the program through radio advertisements, from the lienholder on their vehicles or from their insurance agents or brokers. Many purchasers never received copies of the agreements. The program included two contracts: the automobile repair contract and a standard automobile liability insurance policy accompanied by a modified dual interest policy. Consumers paid an annual rate for the program which included the annual management fee for the automobile repair contract and the insurance premium. The premium for the insurance policy was sent by American Autoplan to Atlas Indemnity and Insurance Company, Ltd. The program covered loss to vehicles for comprehensive perils, such as fire, theft, earthquake, windstorm, rising water and vandalism and collision. American Autoplan also is a group policy holder of an automobile liability policy for its consumers.
Under the automobile repair contract, American Autoplan is appointed by the consumer as the consumer‘s exclusive manager and attorney-in-fact for all matters relating to repair of the consumer‘s automobile and as the exclusive repairer of the automobile. The contract requires the consumer to have repair work done at American Autoplan‘s Riverside repair facility. Consumers pay an annual management fee for the automobile repair contract which is similar to an insurance premium. Consumers also pay a service fee for each repair. The service fee is similar to an insurance deductible and is selected from three options, $250, $500, or $1,000. The service fee bears the same relation to the management fee as a deductible bears to a premium, i.e., the higher the service fee the lower the management fee.
- The annual management fee may be applied at American Autoplan‘s option to the cost of repair;
- The consumer pays American Autoplan the applicable service fee;
- The consumer assigns to American Autoplan third party recoveries up to the amount of the cost of repair;
- If the sum of the management fee, the service fee and third party recovery does not equal the cost of repair, the consumer agrees to pay the annual management fee for up to three years;
- American Autoplan is reimbursed for any excess cost by the proceeds of the companion insurance policy;
- If the companion insurance policy fails to reimburse American Autoplan for any excess costs, American Autoplan has the right to demand the excess from the consumer. However, in practice, consumers were not charged for such excess repair costs; and
- Any amounts received by American Autoplan in excess of the repair costs are retained by American Autoplan.
American Autoplan has sold tens of thousands of contracts to California residents since 1989, generating millions of dollars. The Commissioner received over 100 complaints from American Autoplan‘s contract holders for: shoddy repairs; lengthy delays in making repairs; and substantial delays in making settlements and in paying refunds when contracts were cancelled.4
On May 7, 1992, the Commissioner issued a cease and desist order directing appellants to cease and desist from doing any act which violated
On June 4, 1992, American Autoplan and Neu filed a declaratory relief action against the Commissioner in the Riverside Superior Court. Virga was
On June 15, 1992, the Commissioner filed this action in the Los Angeles Superior Court, a three-count complaint seeking an injunction against appellants. The complaint charged appellants with transacting an insurance business without securing proper authority from the Commissioner in violation of
The Commissioner contemporaneously filed an ex parte application for a temporary restraining order and an order to show cause re preliminary injunction. Appellants opposed the request for a temporary restraining order. In opposing the request, appellants contended they had not violated the insurance laws and argued that, under the rule of “exclusive concurrent jurisdiction,” the Los Angeles Superior Court lacked jurisdiction to issue such an order because an action in the Riverside Superior Court was pending which involved the same matter. Appellants suggested the Los Angeles action should be stayed or transferred to Riverside. However, appellants did not bring a separate motion for stay or transfer of the Los Angeles action or file any separate pleading containing their request for affirmative relief.
DISCUSSION
I
Exclusive Concurrent Jurisdiction
Appellants contend a trial court has no jurisdiction to issue a preliminary injunction where the applicability of the rule of exclusive concurrent jurisdiction is established in opposition to a request for preliminary injunction. We disagree. As we will discuss, the rule of exclusive concurrent jurisdiction is a judicial rule of priority or preference and does not divest a court, which otherwise has jurisdiction of an action, of jurisdiction. The rule of exclusive concurrent jurisdiction is similar to an affirmative defense and the remedy for its applicability is a stay of the second action. Prior to an appropriate pleading requesting such a stay, the trial court in the second action properly exercises its jurisdiction.
“Under the rule of exclusive concurrent jurisdiction, ‘when two [California] superior courts have concurrent jurisdiction over the subject matter and all parties involved in litigation, the first to assume jurisdiction has exclusive and continuing jurisdiction over the subject matter and all
The rule of exclusive concurrent jurisdiction is similar to the common law plea in abatement now codified at
“Although the rule of exclusive concurrent jurisdiction is similar in effect to the statutory plea in abatement, it has been interpreted and applied more expansively, and therefore may apply where the narrow grounds required for a statutory plea [in] abatement do not exist. [Citation.] Unlike the statutory plea [in] abatement, the rule of exclusive concurrent jurisdiction does not require absolute identity of parties, causes of action or remedies sought in the initial and subsequent actions. [Citations.] If the court exercising original jurisdiction has the power to bring before it all the necessary parties, the fact that the parties in the second action are not identical does not preclude application of the rule. Moreover, the remedies sought in the separate actions need not be precisely the same so long as the court exercising original jurisdiction has the power to litigate all the issues and grant all the relief to which any of the parties might be entitled under the pleadings.” (Plant Insulation Co. v. Fibreboard Corp., supra, 224 Cal.App.3d at p. 788.)
“An order of abatement issues as a matter of right [i.e., mandatory] not as a matter of discretion [i.e., discretionary] where the conditions for its
Mandatory actions of the trial court should be raised by demurrer or answer; discretionary actions should be raised by appropriate motion. (Leadford v. Leadford, supra, 6 Cal.App.4th at p. 574.) Since the rule of exclusive concurrent jurisdiction and the statutory plea in abatement are mandatory and not discretionary judicial actions, these issues should be raised by demurrer where the issue appears on the face of the complaint and by answer where factual issues must be resolved. (Ibid.;
Appellate review of the issue may be sought by petition for writ of prohibition. (Lawyers Title Ins. Corp. v. Superior Court, supra, 151 Cal.App.3d 455; Padula v. Superior Court, supra, 235 Cal.App.2d 567; Figgs v. Superior Court, supra, 204 Cal.App.2d 231; Robinson v. Superior Court, supra, 203 Cal.App.2d 263; Cade v. Superior Court, supra, 191 Cal.App.2d 554; Myers v. Superior Court (1946) 75 Cal.App.2d 925 [172 P.2d 84]; Gorman v. Superior Court, supra, 23 Cal.App.2d 172; cf. DeBrincat v. Mogan (1934) 1 Cal.App.2d 7 [36 P.2d 245] [petition for writ of mandate].)
Trial court error in determining application of the rule of exclusive concurrent jurisdiction is reversible only where the error results in a miscarriage of justice or prejudice to the party asserting the rule. (
Stearns v. Los Angeles City School Dist., supra, 244 Cal.App.2d 696 directly addressed the issue of the validity of a trial court‘s actions after it erroneously failed to stay the matter under the doctrine of exclusive concurrent jurisdiction. Stearns involved a claim by a judgment creditor to property of the judgment debtor. A quiet title judgment was entered against the judgment creditor. In Stearns, the appellate court asked the following question: “Is it too late to lock the stable now that the horse has been stolen?” (Id. at p. 717.) Stearns discussed whether the quiet title judgment on appeal had led to an injustice: “It does, however, prompt inquiry to determine whether any purpose would be served by reversing the judgment entered in this case and remanding the case so that the litigation can proceed in an orderly
Stearns was based upon Collins v. Ramish, supra, 182 Cal. 360. Collins, a plea in abatement case, concerned a dispute over payment for tile and marble work. After a trial on the merits, the trial court found a prior action between the parties had been abandoned and was not pending. The trial court found for the plaintiff and awarded the plaintiff monetary damages. On appeal from the judgment, the defendant asserted the judgment had to be reversed and the matter dismissed because there was another action pending between the parties. The Supreme Court concluded that another action between the parties was technically pending on appeal, however, the appeal had apparently been abandoned. Even though the Supreme Court concluded there was another action pending between the same litigants, it held dismissal of the action on that ground was not warranted. “[R]egardless of this, we would not be warranted in giving a direction for dismissal or abatement of the action where it is clearly made to appear that the effect thereof would be to accomplish injustice.” (Collins v. Ramish, supra, 182 Cal. at p. 367.) The Supreme Court ordered reversal of the judgment and a new trial solely on the issue of another action pending and one other issue. It held that findings on other issues would stand in connection with a new judgment.
In Bank of America etc. Assn. v. Cohen, supra, 21 Cal.App.2d 510, on an appeal from a judgment on the merits after a denial of a plea in abatement by the trial court, the appellate court determined the plea had been waived. In addition, the appellate court held reversal was not required where no prejudice or miscarriage of justice resulted. The appellate court stated: “The defendants in this action do not contend at any place in the briefs that there has been a miscarriage of justice or that prejudice resulted to them from the ruling. If the court had sustained the plea in abatement it would have resulted merely in the continuance of the case, sending the witnesses home to come back again, expense and delay. The defendants do not point out to us anything so sacred about the filing-stamp on the back of a complaint that it would justify a reversal in this court after a trial on the merits in the superior court. The date mark is not a substantial difference and judgment on either complaint if once obtained will suffice. An appellant is entitled to assign for error only such proceedings in the trial court as injuriously affect him.” (Id. at pp. 512-513.)
In this case, we need not determine whether the trial court erred in determining that the policy considerations behind the rule of exclusive
In opposition to the Commissioner‘s requests for a temporary restraining order and a preliminary injunction, appellants argued that exclusive concurrent jurisdiction resided in the Riverside Superior Court. The other opposition arguments were primarily on the merits of the preliminary injunction. Appellants did not file a demurrer or answer raising the issue of exclusive concurrent jurisdiction. Nor did they make a motion to transfer, stay or dismiss the action. Appellants merely raised the issue in papers opposing the preliminary injunction.
Appellants suggest that since they raised the issue at the first opportunity and in light of the need for an expeditious response to the Commissioner‘s request for a preliminary injunction, it is not appropriate to require their pleadings to have been in any particular form. Appellants argue that such a result would exalt form over substance. We disagree.
The rule of exclusive concurrent jurisdiction is not a defense to a request for a preliminary injunction. Exclusive concurrent jurisdiction is a judicial rule of policy which mandates that the second action be stayed upon the filing of an appropriate pleading. Prior to the filing of such an appropriate pleading, the trial court in the second action retains jurisdiction to act. Opposition to a request for a preliminary injunction is not such an appropriate pleading. A trial court may not stay or dismiss an action in connection with a hearing on a preliminary injunction; it is without power to grant such relief. (Paul v. Allied Dairymen, Inc. (1962) 209 Cal.App.2d 112, 122-123 [25 Cal.Rptr. 595].) Accordingly, even if the applicability of the rule of exclusive concurrent jurisdiction was established in the opposition to the preliminary injunction, the trial court did not have the power to grant appellants affirmative relief in the form of a transfer or stay and did not err in issuing the preliminary injunction.
Nor does the peculiar procedural posture of this case require a different result. Here, the trial court rejected the Commissioner‘s request for
In addition, we conclude that any error of the trial court in determining the applicability of the rule of exclusive concurrent jurisdiction does not require reversal of the order granting the application for preliminary injunction. Appellants have failed to demonstrate any injustice or prejudice to them arising out of the asserted error.
After the Los Angeles Superior Court issued the preliminary injunction, appellants successfully moved to have the Los Angeles case transferred to Riverside. The Riverside Superior Court, which appellants contend has priority, will be handling the case in the future. The Riverside Superior Court has not issued a conflicting preliminary injunction, nor has it denied a request for a preliminary injunction. Indeed, it does not appear that the Riverside Superior Court has taken any action in its case. Accordingly, no injustice or prejudice will flow from the issuance of the preliminary injunction by the Los Angeles Superior Court.
Thus, it is appropriate for us to turn to the merits of the injunction.
II
The Merits of the Preliminary Injunction*
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*See footnote, ante, page 760.
The order issuing a preliminary injunction is affirmed. Appellants shall bear respondent‘s costs on appeal.
Turner, P. J., concurred.
ARMSTRONG, J.—I concur in the judgment:
I am of the view that the appellants properly raised the exclusive concurrent jurisdiction issue in the trial court, and that the trial court met the issue head on. The trial court correctly recognized that the rule of exclusive concurrent jurisdiction is a policy rule designed to prevent unseemly conflicts between courts and to protect litigants from the expense and harassment of multiple litigation. Because it is a policy rule, the application of the rule in a given case depends upon the balancing of countervailing policies. (Childs v. Eltinge (1973) 29 Cal.App.3d 843, 854 [105 Cal.Rptr. 864].) The record establishes that this case is an exceptional case involving important issues of public policy relating to the regulation of insurance, the prompt enforcement of the California insurance laws by the commissioner and the protection of the public from those engaged in the unauthorized transaction of insurance business. In view of these strong countervailing policies, the trial court concluded that the exclusive concurrent jurisdiction rule should not be applied in this case at this stage of the proceedings to defeat the injunctive relief to which the commissioner is clearly entitled. I agree and would affirm the jurisdictional ruling on that ground.