Villanueva v. Fidelity Nat. Title Co.

Filed 9/7/18

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

MANNY VILLANUEVA et al. H041870, H042504

(Santa Clara County

Plaintiffs and Appellants, Super. Ct. No. 1-10-CV173356)

v.

FIDELITY NATIONAL TITLE

COMPANY,

Defendant and Appellant.

In their first appeal (case No. H041870), both plaintiff Manny Villanueva,

individually and as class representative, and defendant Fidelity National Title Company

(Fidelity) appeal from a judgment following a bench trial in this class action lawsuit

alleging violations of the Unfair Competition Law (UCL) (Bus. & Prof. Code, §§ 17200

et seq.). Villanueva and the class (jointly Plaintiffs) allege Fidelity, an underwritten title

company that handled Plaintiffs’ escrow accounts, engaged in unlawful conduct under the

UCL when it charged overnight mail delivery fees, courier fees, and document

preparation or “draw deed” fees that were not listed in its schedule of rates filed with the

Department of Insurance in violation of Insurance Code provisions governing the

business of title insurance (Ins. Code, §§ 12401–12410.10, 12414.27).1 Fidelity argues,

among other things, that this lawsuit is barred by the statutory immunity in

section 12414.26 for matters related to ratemaking. The trial court rejected Fidelity’s

immunity claim based on section 12414.26. It found that Fidelity’s charges for overnight

1

All undesignated statutory references are to the Insurance Code.

mail and courier services and some of the draw deed fees were unlawful because they

were not included in Fidelity’s rate schedules. The court granted Plaintiffs injunctive

relief under the UCL, but denied their restitution claims.

On appeal, Plaintiffs contend the trial court erred in failing to award them

restitution under the UCL and by granting judgment on the pleadings on their breach of

fiduciary duty claim. In its appeal, Fidelity argues the trial court lacked subject matter

jurisdiction over this action because section 12414.26 confers exclusive original

jurisdiction over ratemaking on the Insurance Commissioner and this case involves

ratemaking. Plaintiffs respond that Fidelity waived its immunity defense by limiting it to

certain claims below. Fidelity also argues the named class representative lacked

standing. Fidelity contends that under the statutory scheme it was required to file rates

only for services it provided and not for services provided by third parties. It argues

other allegedly unlawful charges were authorized by the Insurance Code and the trial

court erred by enjoining past acts that are not likely to be repeated.

We will conclude Fidelity’s immunity defense (§ 12414.26) is not subject to the

forfeiture doctrine because it implicates the court’s subject matter jurisdiction. We will

also hold that this civil action is barred by the immunity in section 12414.26 and is

subject to the exclusive original jurisdiction of the Insurance Commissioner because it

challenges Fidelity’s ratemaking-related activity. We will therefore reverse the

judgment.

In their second appeal (case No. H042504), Plaintiffs challenge the trial court’s

post-judgment order denying their motion for attorney fees under the private attorney

general attorney fees doctrine (Code Civ. Proc., § 1021.5). In that same appeal, Fidelity

challenges the trial court’s order awarding costs to Plaintiffs and granting Plaintiffs’

motion to tax Fidelity’s costs.

Since we conclude this civil action is barred by statutory immunity (§ 12414.26),

Plaintiffs are no longer the prevailing party and are therefore not entitled to an award of

2

attorney fees. We will therefore affirm the trial court’s order denying Plaintiffs’ motion

for attorney fees. In light of our conclusion on the merits, we will also reverse the trial

court’s order awarding Plaintiffs their costs, direct the court to enter a new order

awarding costs to Fidelity, and remand to the trial court to determine the amount of the

costs award.

FACTS AND PROCEDURAL HISTORY

I. State Regulation of Title Insurance; Fidelity’s Role

The California Insurance Commissioner has general regulatory authority over the

business of title insurance. (Ins. Code, § 12340 et seq.; Cal. Code Regs., tit. 10,

§§ 2355.1-2355.5.) The “[b]usiness of title insurance,” as defined in the Insurance Code,

includes in relevant part: “The performance by a title insurer, an underwritten title

company or a controlled escrow company of any service in conjunction with the issuance

or contemplated issuance of a title policy including but not limited to the handling of any

escrow, settlement or closing in connection therewith; or the doing of or proposing to do

any business, which is in substance the equivalent of any of the above.) (§ 12340.3,

subd. (c); italics added.) The Insurance Code also defines “ ‘[t]itle insurer,’ ”

“ ‘underwritten title company,’ ” and “ ‘[c]ontrolled escrow company.’ ” (§§ 12340.4,

12340.5, 12340.6.) We will discuss the statutory regulatory scheme in greater detail in

the “Discussion” portion of this opinion. Because the State of California regulates the

business of title insurance, California title insurers are subject to very little regulation by

the federal government. (Greenwald & Asimow, Cal. Practice Guide: Real Property

Transactions (The Rutter Group 2017) ¶¶ 3:61, pp. 3-17 to 3-18 (Greenwald), citing 15

USC App. §§ 1011-1015 [McCarran-Ferguson Insurance Regulation Act] & Commander

Leasing Co. v. Transamerica Title Ins. Co. (10th Cir. 1973) 477 F.2d 77, 83, 89 [title

3

insurance companies are exempt from federal anti-trust laws when their business is

regulated by the state where the alleged violation occurred].)

Fidelity is a subsidiary of Fidelity National Financial (FNF), which operates

Fidelity and its other subsidiaries through the Fidelity National Title Group (FNTG).

Fidelity has been licensed by the California Department of Insurance (DOI) to transact

business as an underwritten title company since at least January 1996 in 21 California

counties. Prior to that, beginning in November 1978, it was licensed as an underwritten

title company to do business in Los Angeles County. The Insurance Code defines an

underwritten title company as “any corporation engaged in the business of preparing title

searches, title examinations, title reports, certificates or abstracts of title upon the basis of

which a title insurer writes title policies.” (§ 12340.5.) Fidelity is underwritten by

Fidelity National Title Insurance Company (sometimes FNTIC).

The Insurance Code requires title insurers, underwritten title companies, and

controlled escrow companies to file their “schedules of rates, all regularly issued forms of

title policies to which such rates apply, and every modification thereof which [they]

propose[] to use in this state” with the Insurance Commissioner and to “establish basic

classifications of coverages and services to be used as the basis for determining rates.”

(§§ 12401.1, 12401.2.) In this litigation, Villanueva alleges—on behalf of himself and a

class of similarly situated persons—that Fidelity violated the Insurance Code when it

charged for certain services that were not listed on its schedule of rates filed with the

Insurance Commissioner.

II. Facts Regarding the Named Plaintiff’s Escrow

The named plaintiff is Manny Villanueva. In 2006, Villanueva and his wife Sonia

Villanueva refinanced the mortgage on their home in Santa Clara County. The refinance

loan was arranged by mortgage broker UMG Mortgage. UMG Mortgage arranged for

FNTIC to provided title insurance and for Fidelity to provide escrow services. Sonia

4

Villanueva was the sole borrower. She is not a party to this action. Although

Mr. Villanueva was not a party to the loan agreement, he did sign the escrow instructions.

(Hereafter, we shall refer to Manny Villanueva using the singular “Villanueva,” to Sonia

Villanueva by her complete name, to Manny and Sonia Villanueva jointly as “the

Villanuevas.”)

Among other things, the refinance transaction involved: (1) obtaining a new loan

from First Federal Bank of California (First Federal); (2) paying off a first mortgage with

Countrywide Home Loans, (3) paying off a second mortgage with Chase Home Finance,

and (4) paying various fees, which left (5) a balance of $116,238.69 that was paid to the

Villanuevas.

The Villanuevas incurred several expenses in connection with refinancing their

mortgage, including payments to the new lender (First Federal), the mortgage broker, the

homeowners’ insurance carrier, the title insurer (FNTIC), escrow fees to Fidelity, and

other fees. Fidelity charged the Villanuevas a base rate of $250 to handle their escrow.

In addition to the base rate, Fidelity charged certain fees that are the subjects of this

lawsuit, including a document preparation fee ($75), a “Draw Deed” fee ($50), an

overnight delivery fee ($11.20), and a courier fee ($15).2 Fidelity also charged other fees

that are not at issue in this case. In addition, Fidelity gave the Villanuevas a $20 discount

on escrow fees pursuant to the terms of a 2002 stipulated judgment in People v. Fidelity

National Title Insurance Co., Sacramento County Superior Court Case No. 99AS02793.3

2

Fidelity charged both a $75 document preparation fee and a $50 “Draw

Deed” fee to prepare a single grant deed. This was apparently due to human error

that was discovered during the litigation. Fidelity offered to refund the overcharge

plus interest. Plaintiffs do not allege any unlawful business practices based on

double charging for services.

3

In People v. Fidelity National Title Insurance Co., the California Attorney

General and others sued Fidelity and other companies in the business of title insurance

for alleged violations of the Unclaimed Property Act and the UCL occurring between

May 1995 and October 2002. The alleged illegal conduct included, among other things,

5

This litigation concerns the legality of amounts paid for delivery services and the

“draw deed” fee. In their escrow instructions, the Villanuevas “authorize[d] and

instruct[ed] [Fidelity] to charge each party to the escrow for their respective Federal

Express, special mail handling/courier and/or incoming/outgoing wire transfer fees” and

to “select special mail/delivery or courier service to be used.” In the estimated closing

statement, which was part of the escrow instructions, Fidelity estimated the escrow

charges would include $30 for overnight delivery and $30 for “Outside Courier/Special

Messenger.”

The Villanuevas’ escrow closed on May 31, 2006. Fidelity arranged for three

deliveries to be made while the transaction was in escrow. The first delivery was via

overnight mail by California Overnight from the Fidelity office in Milpitas to First

Federal Bank in Los Angeles on May 23, 2006 (eight days before close of escrow). The

Villanuevas’ final escrow closing statement on the HUD-1 form4 dated May 31, 2016,

charging improper fees for services the defendants never intended to perform and

charging fees that greatly exceeded the actual cost of the service, including fees for

delivery services.

The terms of the stipulated judgment included an injunction permanently enjoining

the defendants from, among other things, “[b]illing or collecting from title insurance or

escrow customers an amount that exceeds the actual cost to defendants of services

provided by third parties in connection with defendants’ performance of escrow and title

services, such as overnight mail, courier, and notary services, unless (1) such practice is

permitted by state and federal law and (2) defendants clearly and conspicuously disclose

that they have marked-up [sic] the third party charge.” The stipulated judgment also

provided for restitution, including cash payments to former customers and up to

$26 million in the form of $20 discounts on future transactions to certain eligible

customers.

4

The federal Real Estate Settlement Procedures Act of 1974 (RESPA) (12 U.S.C.

§ 2601 et seq.) and Regulation X to the Real Estate Settlement Procedures Act (24 C.F.R.

§ 3500.1 et seq. (1999)) (Regulation X) “regulate[] the settlement process for certain

residential real estate loan transactions throughout the nation that involve federally

related mortgage loans. RESPA and Regulation X require certain disclosures be made to

borrowers by lenders both at the time of application for a loan and at the time of closing

of the loan, including disclosure of charges that the borrower will have to pay for

6

lists a fee of $11.20 for this delivery. Five days after closing, California Overnight billed

Fidelity $4.60 for this delivery.

The second delivery was via overnight mail by Federal Express (FedEx) from the

Fidelity office in Milpitas, California to Chase Home Finance in Columbus, Ohio on

May 31, 2006 (at close of escrow). FedEx charged Fidelity a “[c]ourtesy [r]ate” of $5.75

for this delivery. Fidelity did not include a separate charge for the FedEx delivery on the

Villanuevas’ final escrow closing statement on the HUD-1 form.

The third delivery was made by First Courier (also referred to as Tri-Valley

Courier) from the Fidelity office in Milpitas to mortgage broker UMG Mortgage in

Milpitas at close of escrow on May 31, 2006. First Courier charged $15 for this delivery.

It was listed as $15 for “Outside courier/Special Messenger” on the Villanuevas’ final

escrow closing statement.

III. Fidelity’s Rate Filings

The evidence at trial included several the rate manuals (also described as “rate

schedules” or “rate filings”) that Fidelity filed with the DOI with effective dates between

May 2006 and August 2013. The schedule of rates governing the Villanuevas’

transaction is set forth in Fidelity’s rate manual entitled “Escrow Fees and Charges for

the State of California,” effective May 22, 2006. The escrow rate tables in the rate

manual are organized by counties. According to the manual, “[f]or escrows involving the

refinancing of an existing deed of trust on a one-to-four [sic] family residence,” in Santa

Clara County, the charge shall be $250 on transactions up to and including $1 million.

settlement services such as credit reports, appraisal fees, recording fees, wire transfer

fees, and other loan related services.” (Washington Mutual Bank v. Superior Court

(1999) 75 Cal.App.4th 773, 776.) RESPA requires lenders throughout the nation to use a

standard uniform settlement statement form at the time of settlement, or closing, which is

known as the “HUD-1 form.” (Id. at p. 776, 779.)

7

The schedule provided that “[f]or the purpose of this section only, ‘Refinance Escrow

Services’ shall include the following services: (a) ordering demands and making payoffs

on up to two (2) previous loans by either check or wire transfer; (b) disburse balance of

proceeds, by either check or wire transfer, to up to 4 payees; and (c) company-performed

in office document signing of one set of loan documents; and (d) standard in-house

courier services. Refinance Escrow services do not include notary fees, . . . recording

fees, transfer tax or other governmental fees or charges.” The schedule also lists nine

“Refinance Related Services,” which are described as charges “[i]n excess of escrow

services included in the above[-]referenced paragraphs” The nine services listed include

“Document Preparation” at $75 per document, but not delivery or courier services by

outside vendors like FedEx, California Overnight, or First Courier. The Villanuevas did

not review Fidelity’s rate manual at any time during the escrow process. Villanueva

alleges in the operative complaint, on information and belief, “that no individual

consumer has ever visited the [DOI] archive to check the . . . escrow rate prior to the

close of their real estate transaction. Instead, like Plaintiff they would trust title and

escrow professionals to charge them the correct rates.”

IV. Pretrial Procedural History

Villanueva’s class action complaint alleges Fidelity engaged in unlawful conduct

by charging him and others for delivery services and draw deed fees that were not listed

on Fidelity’s rate filings with the Insurance Commissioner. Villanueva’s original

complaint, filed in May 2010, contained causes of action for violations of the Unfair

Competitor Law (UCL) (Bus. & Prof. Code, § 17200 et seq.), fraud, negligent

misrepresentation, negligence, unjust enrichment, money had and received, and breach of

fiduciary duty. It also contained a prayer for punitive damages. The named defendants

included Fidelity (the escrow company), FNTIC (the title insurer), and Fidelity National

Title Company of California (FNTC-CA) (hereafter jointly “Defendants”).

8

Defendants filed demurrers to the original and the first amended complaints. The

papers in support of and opposing both demurrers, as well as the orders on the demurrers,

are not in the record. According to the statement of decision after trial, the trial court

sustained the demurrers to the causes of action for fraud, negligence, and negligent

misrepresentation in the original complaint with leave to amend. Villanueva elected not

to amend his cause of action for negligence and did not include that claim in his first

amended complaint. As for the demurrer to the first amended complaint, the trial court

sustained the demurrers to the causes of action for fraud and negligent misrepresentation

with leave to amend and overruled the demurrers to the other causes of action.

Villanueva elected not to amend the complaint.

Defendants filed their answer in December 2011. In 2012, Villanueva dismissed

the action without prejudice as to FNTC-CA and FNTIC, which left Fidelity as the only

named defendant.

In February 2013, the Court certified a class of “ ‘[a]ll persons for whom [Fidelity]

performed residential escrow services in a transaction that occurred in California, and

who were charged for courier, overnight, messenger, or other delivery services and/or

draw deed fees in connection with that transaction, during the period May 28, 2006

through September 30, 2012.’ ” For ease of reference, we shall sometimes refer to the

overnight mail, messenger, courier, and other delivery services jointly as “delivery

services.”

In July 2013, the court granted Fidelity’s motion for summary adjudication of the

punitive damages claim, but denied summary adjudication of other issues and denied

summary judgment. Plaintiffs do not challenge that order on appeal.

In September 2013, Fidelity filed a motion for judgment on the pleadings

challenging Plaintiffs’ common law claims for unjust enrichment, money had and

received, and breach of fiduciary duty, but not the UCL claim. The trial court granted the

motion with leave to amend. Plaintiffs elected not to amend their complaint. On appeal,

9

Plaintiffs challenge the trial court’s order granting judgment on the pleadings on the

breach of fiduciary duty claim only.

In February 2014, the court denied Fidelity’s separate motion for judgment on the

pleadings on the UCL claim. When the case went to trial, the only remaining cause of

action was the UCL claim (Bus. & Prof. Code, § 17200 et seq.). The court conducted a

bench trial in the complex litigation department over 16 days in April, May, and

June 2014.

V. Evidence Presented and Theories of Liability Argued at Trial

At trial, Plaintiffs argued two alternate theories of liability related to alleged

unlawful charges for delivery services. They sought injunctive relief and requested

approximately $13.1 million in restitution for third party delivery services. Plaintiffs also

alleged Fidelity’s “ ‘draw deed’ ” fees were unlawful and sought approximately $10.7 in

restitution for the draw deed fees.5 A subset of the class sought $1.8 million in restitution

for draw deed fees on an alternative theory of liability.

A. Delivery Theory No. 1

Plaintiffs’ Delivery Theory No. 1—which the trial court and the parties also

described as the “ ‘unfiled rate’ claim”—posited that the charges for delivery services

provided by third parties were unlawful because Fidelity was required to file its rates for

third party delivery services with the DOI and those rates were not included in Fidelity’s

rate filings. Fidelity contended the Insurance Code does not require it to file rates for

“[p]ass [t]hrough” delivery fees that it collects from its customers and passes through to

third party delivery service providers. Fidelity argued that the Insurance Code requires it

5

Plaintiffs sought the following amounts in restitution in their closing argument:

“For delivery fees, $13,115,370 without interest. $17,914,082 with interest. For draw

deed fees: $10,670,982 without interest. $14,176,895 with interest.”

10

to file rates only for services “it performs” (§ 12340.7) and that it was not required to file

rates for delivery services performed by others.

Plaintiffs disputed Fidelity’s characterization of the delivery fees as “[p]ass-

[t]hroughs” based on agreements between certain delivery services and a Fidelity affiliate

under which “escrow customers receive[d] discounted delivery rates” and the delivery

companies paid the Fidelity affiliate “marketing fees.” They argued that the Insurance

Code required Fidelity to include a statement in its rate filings (for example “as charged

by vendor”) that would provide notice that such fees would be collected.

B. Delivery Theory No. 2

Alternatively, Plaintiffs’ Delivery Theory No. 2—also described as the “ ‘double

charge’ claim”—asserted that the charges for delivery services were unlawful because

they were part of the services included in Fidelity’s base rate—which the parties also

refer to as a “bundled rate”—and that by charging both the base rate and separate fees for

delivery, Fidelity billed its customers twice for the same service. Fidelity disagreed with

Plaintiffs’ interpretation of the language in its rate filings that Plaintiffs relied on as the

basis for Delivery Theory No. 2.

C. Draw Deed Theory

A subset of plaintiffs—which the trial court referred to as the “ ‘Draw Deed

Plaintiffs’ ”—argued that Fidelity could not charge its filed rate for “ ‘document

preparation’ ” for preparing a deed if the customers’ HUD-1 closing statement described

the service as “ ‘draw deed’ ” instead of “ ‘document preparation.’ ” Plaintiffs sought

restitution of approximately $10.7 million under this theory. We shall hereafter refer to

this claim as the General Draw Deed Theory.

Plaintiffs asserted an alternative theory of liability with regard to a subset of the

Draw Deed Plaintiffs whose escrows involved real estate sale transactions (as opposed to

11

refinance transactions) between May 28, 2006 and February 2, 2008—which the trial

court referred to as the “ ‘Gap Period Plaintiffs.’ ” The Gap Period Plaintiffs contended

that Fidelity’s rate filings during that period did not include a rate for “ ‘document

preparation’ ” for real estate sales transactions. They argued that Fidelity’s failure to

have filed a rate for document preparation for sales transactions made their charges for

drawing a deed unlawful even if Fidelity’s filed rate for “ ‘document preparation’ ”

authorized draw deed charges in other instances. The Gap Period Plaintiffs sought

approximately $1.8 million in restitution.6

VI. Motion for Nonsuit; Statement of Decision

After Plaintiffs’ opening statement, Fidelity made three motions for nonsuit, one

of which was based on its statutory immunity defense (§ 12414.26). The trial court

denied each of the motions.

The court issued its final statement of decision in November 2014. The court

concluded that the delivery services were made in connection with Fidelity’s handling of

the class members’ escrows. It found that delivery of escrow funds and documents was a

“necessary” and “integral” part of an escrow holder’s function, even if accomplished by

using third party delivery services. The court reasoned that the delivery fees were

expenses Fidelity incurred to carry out “a core part of” its function as escrow holder, that

Fidelity—and not the class members—contracted with the delivery companies and was

obligated to pay them, that the delivery fees were not “ ‘pass-through’ ” charges and were

therefore charges by Fidelity. Construing section 12414.27, the court found the statute

was not ambiguous and that its plain language broadly prohibits Fidelity from charging

for any service that does not match its rate filings, including delivery services. The court

6

For the Gap Period, Plaintiffs sought draw deed fees of $1,800,973 without

interest and $2,696,986 with interest.

12

held that the legislative history of the statutory scheme, the purpose of the statutory

scheme, and the DOI’s interpretation of the statute all supported its conclusions.

On Plaintiffs’ Delivery Theory No. 1, the court found that Fidelity violated

section 12414.27 by charging for delivery services because its rate filings did not include

a rate for such service or a general statement that the rate would be that charged by a third

party delivery service. In light of its conclusion, the court did not reach the merits of

Delivery Theory No. 2.

Regarding the General Draw Deed Theory, the court rejected Plaintiffs’ assertion

that drawing a deed was different from document preparation. The court found that

statistical evidence presented at trial substantiated Fidelity’s testimony that its regular

practice was to charge the document preparation rate, regardless of whether the service

was labelled as “ ‘document preparation’ ” or “ ‘draw deed’ ” on the HUD-1 form. The

court found that Fidelity’s rate filings during the Gap Period (May 28, 2006, to

February 2, 2008) “for sale/resale transactions (as contrasted with refinance transactions)

did not include a rate for either . . . drawing a deed or document preparation” and that

during that time, “Fidelity charged $1,800,973 in draw deed fees. [(Fns. omitted.)]”

The court rejected Fidelity’s assertion that those fees were “unusual services” within the

meaning of section 12401.8. The court held “that charging for drawing a deed was

unlawful during the Gap Period,” but that Fidelity “did not violate the law by charging

for the service of drawing a deed outside the Gap Period.”

The court found that in the Villanuevas’ transaction, “due to human error, Fidelity

inadvertently listed two charges for preparing the Grant Deed, instead of one, and at

different rates”—the $75 document preparation fee and the $50 draw deed fee. The court

noted that “Fidelity sought to refund the mistaken second charge per company policy

[(fn. omitted.)]” and found “no evidence that such an individualized error occurred in any

other class transaction.” It found that charging $50 for document preparation in the

Villanuevas’ case, when the filed rate was $75, was “atypical of the class.”

13

The court also rejected Fidelity’s statutory immunity claim under section 12414.26

and found that the statute did not immunize Fidelity from suit based on its unlawful

charges.

With regard to remedies, the court found that although Plaintiffs had established

legal violations by Fidelity, they had failed to prove they were entitled to restitution. The

court reasoned that Plaintiffs “received the benefit of their bargain” and noted they did

not contend that the services were unwarranted, “unsatisfactory, or unfairly priced, and

all of the services and rates were disclosed up-front and agreed to by Plaintiffs.” The

court concluded that (1) Plaintiffs benefitted from Fidelity’s preparation of deeds and its

negotiation of low third party delivery service fees that were lower than those charged by

other escrow holders; (2) the fees were disclosed to and approved by Plaintiffs in their

estimated closing statements; (3) Plaintiffs failed to show economic injury as a result of

omissions from rate manuals they neither reviewed nor relied on; and (4) awarding

restitution would “put Plaintiffs in a better position than they expected to receive.”

Although it denied restitution, the court concluded that Plaintiffs were entitled to

injunctive relief. While Fidelity’s most recent rate filings included rates for delivery

services, the court found it was “appropriate to enjoin Fidelity from charging for the

service of delivery unless its rate filing includes the charge or a statement that the rate

will be the amount charged by the third party vendors for delivery fees.”

VII. Motions for Attorney Fees and Costs

In January 2015, Plaintiffs filed a motion for attorney fees under Code of Civil

Procedure section 1021.5, which codifies the private attorney general attorney fee

doctrine. (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1217-1218.) Plaintiff

14

sought $9,439,929 in attorney fees based on the work of nine lawyers in two different law

firms.7

Code of Civil Procedure section 1021.5 provides in relevant part: “Upon motion,

a court may award attorneys’ fees to a successful party against one or more opposing

parties in any action which has resulted in the enforcement of an important right affecting

the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, has

been conferred on the general public or a large class of persons, (b) the necessity and

financial burden of private enforcement, . . . , are such as to make the award appropriate,

and (c) such fees should not in the interest of justice be paid out of the recovery, if any.”

The trial court concluded that Plaintiffs were not entitled to attorney fees under Code of

Civil Procedure section 1021.5. The court reasoned that although the litigation involved

an important right affecting the public interest, Plaintiffs had not met their burden of

establishing the significant benefit element or that private enforcement was necessary or

that the necessity and financial burden of private enforcement were such as to make the

award appropriate. Thus, the court denied Plaintiffs’ motion for attorney fees.

In December 2014, both sides filed a memorandum of costs. Plaintiffs sought

$393,862.19 in costs and Fidelity claimed $197,839.41 in costs. Both parties filed

motions to tax the other side’s costs. The trial court concluded that since the only relief

Plaintiffs obtained was an injunction and they had not obtained any monetary relief, it

had discretion under Code of Civil Procedure section 1032, subdivision (a)(4) to

determine which party was the prevailing party, whether costs should be awarded, and in

what amount. The court concluded that Plaintiffs were the prevailing party and awarded

7

The attorneys billed at different rates ranging from $395 per hour to $800 per

hour depending on their experience. (After applying reductions and a multiplier, and

based on 11,284.65 hours billed, Plaintiffs’ attorney fees claim yields an average hourly

rate of $836.53 per hour.)

15

them the entire amount claimed as costs. Consequently, the court denied Fidelity’s

motion to tax Plaintiff’s costs and granted Plaintiffs’ motion to tax Fidelity’s costs.

PARTIES’ CONTENTIONS

Both sides appeal the judgment and the post-judgment order denying Plaintiffs’

motion for attorney fees and awarding costs to Plaintiffs. In their appeal on the merits,

Plaintiffs do not challenge the trial court’s ruling on Delivery Theory No. 2 or its ruling

regarding the Draw Deed charges outside the Gap Period. Only the rulings on Delivery

Theory No. 1 and the Draw Deed claims of the Gap Period Plaintiffs are at issue here.

Plaintiff contend the trial court erred in failing to award them restitution under the UCL

and by granting judgment on the pleadings on their breach of fiduciary duty claim. They

argue that if this court reverses as to restitution, the case should be remanded to the trial

court on the question of attorney fees.

In its appeal on the merits, Fidelity argues that the judgment must be reversed

because the trial court lacked subject matter jurisdiction for two independent reasons.

First, Fidelity contends it was immune from suit under section 12414.26, which it argues

consigns all issues regarding filed rates to the discretion of the Insurance Commissioner

and prohibits courts from second-guessing Fidelity’s filed rates. Second, Fidelity

contends Villanueva, the named class representative, lacked standing because he was not

the borrower and paid no fees related to his wife’s loan transaction.

Fidelity contends that even if the court had jurisdiction over the subject matter of

the action, the judgment on Delivery Theory No. 1 must be reversed because the trial

court misinterpreted and misapplied section 12414.27. Fidelity argues section 12414.27

required it to file rates for services it provided and did not require it to file rates for

delivery services provided by third parties. Fidelity contends the judgment on the claims

of the Gap Period Plaintiffs must be reversed because the charges were authorized as

16

excess charges by section 12401.8. It also asserts the trial court erred by enjoining past

acts that are not likely to be repeated.

As for the postjudgment order on attorney fees and costs, Plaintiffs appeal the trial

court’s order denying their motion for attorney fees. Fidelity challenges the court’s order

awarding costs to Plaintiff and granting Plaintiffs’ motion to tax Fidelity’s costs.

17

DISCUSSION8

I. Brief Introduction to Statutory Scheme Governing Title Insurance

The statutory scheme at issue in this appeal is found in division 2 of the Insurance

Code, which is entitled “Classes of Insurance.” We are concerned with part 6 of

division 2, which governs “Insurance Covering Land.” Part 6 is divided into three

chapters. Chapter 1 of part 6 contains the provisions regarding “Title Insurance.”

8

In reviewing this appeal, we noted two deficiencies in the parties’ briefs

regarding citations to the record. First, they neglected to support each and every

statement in their briefs concerning matters in the appellate record, whether factual or

procedural, with a citation to the record. (Cal. Rules of Court, rule 8.204(a)(1)(C); Myers

v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 745 (Myers); City of Lincoln v.

Barringer (2002) 102 Cal.App.4th 1211, 1239 (Barringer) [record citations in statement

of facts do not cure failure to include record citations in argument portion of brief].) This

allows the reviewing court to locate relevant portions of the record expeditiously.

(Myers, at p. 745.) It is especially important in a case such as this that has a very large

record (over 3,250 pages of appendices and 2,096 pages of reporter’s transcript in case

No. H041870 alone). When a brief fails to refer to the record in connection with the

points raised on appeal, the appellate court may treat those points as having been waived,

(Barringer, supra, 102 Cal.App.4th at p. 1239; Dietz v. Meisenheimer & Herron (2009)

177 Cal.App.4th 771, 799-801), ignore unsupported contentions, (Dominguez v.

Financial Indemnity Co. (2010) 183 Cal.App.4th 388, 392, fn. 2), or strike portions of the

brief entirely (Ojavan Investors, Inc. v. California Coastal Com. (1997) 54

Cal.App.4th 373, 391).

Second, Plaintiffs argue substantial evidence supports the trial court’s implied

finding that Fidelity’s charges were not made in accordance with its rate filings. Rather

than cite the evidence that supports the finding, Plaintiffs cite the court’s statement of

decision, which contains the court’s findings. The statement of decision is not evidence.

(See Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 178, fn.4 [citation to

the separate statement, rather than the evidence, in a summary judgment appeal is

inadequate; a separate statement is not evidence; assertions of fact in appellate briefs

“should be followed by a citation to the page(s) of the record containing the supporting

evidence”].)

We shall ignore statements in the briefs that are unsupported by appropriate record

citations or that improperly cite the statement of decision. Since we decide this case

based on questions of law and statutory interpretation, these deficiencies in the briefs are

not dispositive.

18

Chapter 1, is divided into 16 articles. Although we will discuss the entire statutory

scheme, we are concerned primarily with statutes in five of those articles: (1) article 1,

which contains pertinent definitions (§§ 12340 to 12342); (2) article 5.5, which is entitled

“Rate Filing and Regulation” (§§ 12401 to 12401.10); (3) article 5.7, which is entitled

“Advisory Organizations” (§§ 12402 to 12402.2); (4) article 6.7, entitled “Hearings,

Procedure, and Judicial Review” (§§ 12414.13 to 12414.19); and (5) article 6.9, entitled

“Examinations, Penalties, and Miscellaneous” (§§ 12414.20 to 12414.31). (Stats. 1973,

ch. 1130, pp. 2300, 2307, 2309, 2311, 2313.) For ease of reference, we shall refer to

chapter 1 of part 6 of division 2 of the Insurance Code, the statutory scheme governing

title insurance, as “Chapter 1” or “Chapter 1 (Title Insurance).”

Chapter 1 refers to three types of regulated entities in the business of title

insurance: title insurers, underwritten title companies, and controlled escrow companies;

(See e.g., §§ 12340.7, 12401.1, 12401.2, 12401.3, subd. (c), 12401.7, 12414.27; see also

§§ 12340.4 to 12340.6 [defining “title insurer,” “underwritten title company,” and

“ ‘[c]ontrolled escrow company’ ”].) We will refer to all three types of entities jointly as

“regulated title entities.” Since Fidelity is an underwritten title company and for ease of

reference, we will sometimes delete references to title insurers, controlled escrow

companies, and advisory organizations, as well as insurance coverages provided by title

insurers when describing the Insurance Code sections at issue.

II. General Principles Under the Unfair Competition Law

“The UCL prohibits, and provides civil remedies for, unfair competition, which it

defines as ‘any unlawful, unfair or fraudulent business act or practice.’ ([Bus. & Prof.

Code,] § 17200.) Its purpose ‘is to protect both consumers and competitors by promoting

fair competition in commercial markets for goods and services.’ (Kasky v. Nike, Inc.

(2002) 27 Cal.4th 939, 949, . . . .) In service of that purpose, the Legislature framed the

UCL’s substantive provisions in ‘ “broad, sweeping language” ’ [citations] and provided

19

‘courts with broad equitable powers to remedy violations’ [citation].” (Kwikset Corp. v.

Superior Court (2011) 51 Cal.4th 310, 320, citing Cel-Tech Communications, Inc. v. Los

Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 181 (Cel-Tech) and Bank of the

West v. Superior Court (1992) 2 Cal.4th 1254, 1266 [“The Legislature intended this

‘sweeping language’ to include ‘ “anything that can properly be called a business practice

and that at the same time is forbidden by law.” ’ ”].) The UCL “governs ‘anti-

competitive business practices’ as well as injuries to consumers, and has as a major

purpose ‘the preservation of fair business competition.’ ” (Cel-Tech, at p. 180.)

Because Business and Professions Code section 17200 is written in the

disjunctive, it establishes three types of unfair competition: acts or practices that are

(1) unlawful, or (2) unfair, or (3) fraudulent. (Cel-Tech, supra, 20 Cal.4th at p. 180.)

“ ‘ “In other words, a practice is prohibited as ‘unfair’ or ‘deceptive’ even if not

‘unlawful’ and vice versa.” ’ ” (Ibid.) Plaintiffs pleaded their UCL claim “under the

unlawful prong of the statute on behalf of approximately half a million people.”

As we have noted, “ ‘[u]nlawful business activity’ proscribed under [Business and

Professions Code] section 17200 includes ‘ “anything that can properly be called a

business practice and that at the same time is forbidden by law.” ’ [Citation.] . . . ‘[In]

essence, an action based on Business and Professions Code section 17200 to redress an

unlawful business practice “borrows” violations of other laws and treats these violations,

when committed pursuant to business activity, as unlawful practices independently

actionable under [Business and Professions Code] section 17200 et seq. and subject to the

distinct remedies provided thereunder.’ ” (Farmers Ins. Exchange v. Superior Court

(1998) 2 Cal.4th 377, 383.) The UCL claim in this case is based on alleged violations of

the Insurance Code provisions governing the business of title insurance.

In evaluating Plaintiffs’ UCL claims, we review questions of law and statutory

interpretation de novo. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th

415, 432.) We review the trial court’s resolution of disputed factual issues “for

20

substantial evidence, viewing the record in the light most favorable to the ruling.”.

(People ex rel. Lockyer v. Fremont Life Ins. Co. (2002) 104 Cal.App.4th 508, 514.)

We begin with the jurisdictional questions raised by Fidelity’s appeal, including

the application of statutory immunity.

III. Fidelity’s Appeal in Case No. H041870: Statutory Immunity

Section 12414.26 provides: “No act done, action taken, or agreement made

pursuant to the authority conferred by Article 5.5 . . . of this chapter shall constitute a

violation of or grounds for prosecution or civil proceedings under any other law of this

state heretofore or hereafter enacted which does not specifically refer to insurance.”

Fidelity contends it is immune from suit under section 12414.26 and that the Insurance

Commissioner has exclusive original jurisdiction over all matters related to the making,

filing, and use of its rates. It argues this statutory immunity is broad and bars the entire

action.

Plaintiffs contend Fidelity has forfeited its immunity defense by limiting it to

Delivery Theory No. 2 and the General Draw Deed claims in the trial court. On the

merits of the immunity issue, Plaintiffs argue both the plain language of section 12414.26

and case law defeats Fidelity’s immunity argument. They contend the statutory

immunity does not extend to Fidelity’s conduct of charging for services that were not

included in its rate filings and that this action is not related to ratemaking activity.

A. Background

The trial court first addressed the immunity question in its ruling on Fidelity’s

motion for nonsuit following Plaintiffs’ opening statement. The court’s tentative ruling

on the motion for nonsuit, which it later adopted, stated: “Article 5.5 pertains to ‘Rate

Filing and Regulation.’ Acts done or taken pursuant to the authority conferred by Article

5.5 include filing a schedule of rates with the commissioner (§ 12401.1), establishing

21

basic classifications of coverages and services to be used as the basis for determining

rates (§ 12401.2), making and using rates subject to rate standards that require rates not to

be excessive, inadequate or unfairly discriminatory (§ 12401.3), and exchanging

information and experience data with insurance supervisory officials (§ 12401.4).” The

trial court limited its immunity analysis to Delivery Theory No. 2 and the Draw Deed

Theory. It reasoned that the conduct at issue under these theories was “charging of

unauthorized fees” and since the charges were not in the rate filings, Fidelity obtained no

authority from article 5.5 to charge those fees, and immunity did not apply. “Here

Plaintiff does not challenge [Fidelity’s] collection of fees ‘consistent with an approved

rate’; rather . . . fees beyond the approved rates.”

In its statement of decision, the trial court wrote: “[S]ection 12414.26 does not

immunize Fidelity from suit for its unlawful charges. Section 12414.26 confers

immunity for an ‘act done, action taken, or agreement made pursuant to the authority

conferred by Article 5.5 . . . .’ Section 12414.26 does not apply because Article 5.5 did

not authorize the unlawful charges. Nothing in Article 5.5 authorizes the charges for a

service other than in accordance with the rate filings.”

B. Waiver/Forfeiture

Plaintiffs contend Fidelity waived its immunity defense with regard to Delivery

Theory No. 1 because Fidelity’s motion for nonsuit expressly limited its immunity

defense to Delivery Theory No. 2 and the Draw Deed claims. Generally, trial court error

is waived by implication or deemed forfeited when the appellant fails to bring the alleged

error to the trial court’s attention by timely motion or objection. (Doers v. Golden Gate

Bridge, Highway & Transportation Dist. (1979) 23 Cal.3d 180, 184-185, fn. 1; In re

Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 826.)

Fidelity responds that it did not forfeit its immunity defense as to any of Plaintiffs’

theories of liability. It argues that although its written motion for nonsuit briefed the

22

immunity defense as to only Delivery Theory No. 2 and the Draw Deed claims, at the

oral argument on the motion, Fidelity’s counsel argued that immunity applied to all of

Plaintiffs’ claims. Alternatively, Fidelity argues that since the immunity affects the trial

court’s subject matter jurisdiction, the issue has not been waived or forfeited. We shall

not address Fidelity’s first point because its second point resolves the forfeiture question.

In the absence of subject matter jurisdiction, a court has no power to hear or

determine a case. (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 196.)

The existence of subject matter jurisdiction is a question of law, which we review de

novo. (Robbins v. Foothill Nissan (1994) 22 Cal.App.4th 1769, 1774.) Issues affecting

the trial court’s subject matter jurisdiction are never forfeited and can be asserted for the

first time on appeal, at any stage of the appellate process. (Consolidated Theatres, Inc. v.

Theatrical Stage Employees Union, Local 16 (1968) 69 Cal.2d 713, 721 (Consolidated

Theatres) [whether action arising out of labor dispute was within exclusive jurisdiction of

NLRB]; San Joaquin County Human Services Agency v. Marcus W. (2010) 185

Cal.App.4th 182, 187-188 [“lack of fundamental jurisdiction is not subject to the

forfeiture doctrine”]; In re Marriage of Oddino (1997) 16 Cal.4th 67, 73 [issue of subject

matter jurisdiction raised for first time in petition for review “must be addressed”].)

The questions whether the immunity in section 12414.26 bars this civil action and

whether the case is subject to the exclusive original jurisdiction of the Insurance

Commissioner are analogous to the issue presented in Consolidated Theatres, supra, 69

Cal.2d 713. Since this question implicates the court’s subject matter jurisdiction, it may

be raised at any time, even for the first time on appeal. We therefore conclude Fidelity

has not forfeited its claims on appeal regarding its immunity defense. In light of our

conclusion, we shall not address the question whether the argument below preserved the

issue.

23

C. Standard of Review

Whether this action is barred by the statutory immunity in section 12414.26 and

the interpretation of the statutory scheme in Chapter 1 (Title Insurance) is a question of

law, which we review de novo. (People ex rel. Lockyer v. Shamrock Foods Co., supra,

24 Cal.4th at p. 432.) Application of the interpreted statute to undisputed facts is also a

question of law subject to our independent review. (International Engine Parts, Inc. v.

Fedderson & Co. (1995) 9 Cal.4th 606, 611.)

D. Rules of Statutory Construction

“In construing a statute, our fundamental task is to ascertain the Legislature’s

intent so as to effectuate the purpose of the statute. [Citation.] We begin with the

language of the statute, giving the words their usual and ordinary meaning. [Citation.]

The language must be construed ‘in the context of the statute as a whole and the overall

statutory scheme, and we give “significance to every word, phrase, sentence, and part of

an act in pursuance of the legislative purpose.” ’ [Citation.] In other words, ‘ “we do not

construe statutes in isolation, but rather read every statute ‘with reference to the entire

scheme of law of which it is part so that the whole may be harmonized and retain

effectiveness.’ [Citation.]” ’ [Citation.] If the statutory terms are ambiguous, we may

examine extrinsic sources, including the ostensible objects to be achieved and the

legislative history. [Citation.] In such circumstances, we choose the construction that

comports most closely with the Legislature’s apparent intent, endeavoring to promote

rather than defeat the statute’s general purpose, and avoiding a construction that would

lead to absurd consequences. [Citation.]” (Smith v. Superior Court (2006) 39 Cal.4th 77,

83 (Smith).)

24

E. Statutory Scheme Governing Regulated Title Entities

The California Supreme Court has observed that “in some instances, an action

may not lie under the UCL because another statutory scheme provides the exclusive

means for resolving disputes.” (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1126

(Loeffler).) As examples of such statutory schemes, the Loeffler court cited the exclusive

remedy provision of the workers’ compensation law and two statutory schemes in the

Insurance Code involving insolvent insurers and casualty insurance rates. (Id. at pp.

1126-1127, citing Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24

Cal.4th 800, 811–812 [workers compensation exclusive remedy, Lab. Code §§ 3201 et

seq.] and State of California v. Altus Finance (2005) 36 Cal.4th 1284, 1291 (Altus)

[restitution remedy under UCL barred by § 1037 in cases involving insolvent insurers]

and MacKay v. Superior Court (2010) 188 Cal.App.4th 1427, 1434, 1441–1443

(MacKay) [immunity under § 1860.1; statutory administrative process is exclusive means

of challenging auto insurance rates that the DOI has approved].) Citing Altus, the

Supreme Court explained that section 1037 gives the Insurance Commissioner exclusive

authority to bring a civil action when an insurer is insolvent and held that “the Attorney

General may not bring a UCL action for restitution that ‘trespasses directly on the core

function of the [Insurance] Commissioner.’ ” (Loeffler, at pp. 1126-1127.) Citing

MacKay, the court stated that “a UCL action will not lie to challenge an insurance rate

previously approved by the [Department] of Insurance.” (Ibid.) The question presented

here is whether the statutory immunity in Chapter 1 (§ 12414.26) bars this action

challenging the use rates for which there have been no rate filings; rates that have neither

been approved nor accepted by the Insurance Commissioner.

Fidelity argues the section 12414.26 immunity is broad and that a “review of

Article 5.5 shows that it encompasses all conduct Fidelity performs in conducting the

25

business of title insurance,” including “the making and use of the rate filings and the

agreements to pay fees” (italics added). Fidelity interprets the immunity too broadly.

The Insurance Code contains a comprehensive scheme for the regulation and

enforcement of entities and persons engaged in the business of title insurance. (See

summary at 12 Witkin, Summary of Cal. Law (11th ed. 2107) Real Property, § 367, pp.

423-424.) Excluding the definitions in article 1, Chapter 1 (Title Insurance) is divided

into 15 articles that regulate various aspects of the business of title insurance. Under

Chapter 1, title insurers must maintain financial stability (§§ 12350 to 12388 [arts. 2, 3,

and 3.5]) and underwritten title companies must furnish quarterly financial statements to

the Insurance Commissioner (§ 12389.4 [art. 3.7]). Rates and commissions are regulated

for all regulated title entities (§§ 12401 et seq. [art. 5.5 “Rate Filing and Regulation] and

§§ 12404 et seq. [art. 6 “Rebates and Commissions”]) and rebates and discounts are

prohibited (§ 12405). Rate schedules must be filed with the Insurance Commissioner,

posted in the regulated title entity’s place of business, and made available to the public

(§ 12401.9 [art. 5.5]). Under article 6 of Chapter 1, regulated title entities are subject to

the disciplinary authority of the Insurance Commissioner with regard to rebates and

commissions (§§ 12410, 12411). The statutory scheme also regulates advisory

organizations9 (§ 12402 et seq. [art. 5.7]) and marketing representatives who work for

regulated title entities (§ 12418 et seq. [art. 8]), as well as the deposit or collection of

9

An “ ‘[a]dvisory organization’ ” is a “person or entity (other than a title insurer,

underwritten title company, or controlled escrow company) which recommends or

prepares policy forms or endorsements, or procedural manuals (but not including the

making of rates, rating plans, or rating systems), or which collects and furnishes to its

members or insurance supervisory officials loss and expense statistics or other statistical

information and data relating to the business of title insurance and who otherwise acts in

an advisory, as distinguished from a ratemaking, capacity. No duly authorized attorney at

law acting in the usual course of his profession nor any entity engaging in the above

activity on a nationwide basis shall be deemed to be an advisory organization.”

(§ 12340.8.)

26

items connected with an escrow, the disbursement of funds from escrow accounts, and

interest on escrow fund deposits (§§ 12413.1, 12413.2, and 12413.5 [art. 6]). It requires

regulated title entities to submit business plans (§§ 12396 et seq. [art. 4.5]) and to pay

annual renewal fees (§§ 12415 et seq. [art. 7]) to cover the costs of administering and

enforcing the statutory scheme.

Although the statutory scheme regulates a broad range of activity in the business

of title insurance, the section 12414.26 immunity by its own terms is expressly limited to

“ ‘act[s] done, action[s] taken, or agreement[s] made pursuant to the authority conferred

by Article 5.5 . . . or Article 5.7 . . . of’ ” Chapter 1. “Article 5.5 applies only to rate

regulation, article 5.7 only to advisory organizations which supply data related to rate

making.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 44-45, fn.

omitted (Quelimane).) As our summary in the previous paragraph illustrates, Chapter 1

regulates several aspects of the business of title insurance that are unrelated to rate

making and advisory organizations. We therefore reject the assertion that immunity

applies to “all conduct Fidelity performs in conducting the business of tile insurance.”

F. The Authority Conferred by Article 5.5

As we have noted, section 12414.26 provides: “No act done, action taken, or

agreement made pursuant to the authority conferred by Article 5.5 . . . of this chapter

shall constitute a violation of or grounds for . . . civil proceedings . . . .” In determining

the scope of the section 12414.26 immunity, we next examine what is meant by “the

authority conferred by Article 5.5.” Since this case involves the rate filings of an

underwritten title company and not an advisory organization, we are not concerned with

the scope of article 5.7 (§§ 12402-12402.2), which concerns advisory organizations.

When enacted, article 5.5 of Chapter 1 was expressly entitled “Rate Filing and

Regulation.” (Stats. 1973, ch. 1130, p. 2307.) The purpose of article 5.5 “is to promote

the public welfare by regulating rates for the business of title insurance as herein

27

provided to the end that they shall not be excessive, inadequate or unfairly

discriminatory.” (§ 12401.) The provisions of article 5.5 (§§ 12401 to 12401.10) require

regulated title entities to establish “basic classifications of coverages and services to be

used as the basis for determining rates” (§ 12401.2) and to file their “schedules of

rates . . . and every modification thereof” that they propose to use in California with the

Insurance Commissioner (§ 12401.1).

Section 12401.1 provides in relevant part: “Every . . . underwritten title

company . . . shall file with the commissioner its schedules of rates, . . . and every

modification thereof which it proposes to use in this state. . . . Every filing shall set forth

its effective date, which shall be not earlier than the 30th day following its receipt by the

commissioner, and shall indicate the character and extent of the coverages and services

contemplated.”

Section 12401.3 contains detailed standards that “apply to the making and use of

rates” under article 5.5. It repeats the purpose of the statutory scheme that “[r]ates shall

not be excessive or inadequate, . . . nor shall they be unfairly discriminatory” and, among

other things, defines when a rate is “excessive” or “inadequate.” (§ 12401.3, subd. (a).)

Section 12401.4 permits the exchange of information between the commissioner, persons

and entities in the business of title insurance, and advisory organizations “to further

uniform administration of rate regulatory laws.” Section 12401.7 provides in pertinent

part: “No [regulated title entity] shall use any rate in the business of title insurance prior

to its effective date . . . .” Sections 12401.71 and 12401.8 set forth exceptions to

section12401.7. Section 12401.71 permits regulated title entities to “use a new rate prior

to 30 days after filing” if it results in a rate reduction and meets other requirements.

28

Section 12401.8 specifies the circumstances under which rates “in excess of those set

forth in a rate filing which has become effective” may be used.10

Unlike other types of insurance, title insurance rates need not be approved by the

insurance commissioner prior to their use. (See §§ 1861.01, subd. (c) [“insurance

rates . . . must be approved by the commissioner prior to their use.”], 1851 [the provisions

regarding rate approval “shall apply to all insurance on risks or on operations in this state,

except: [seven classes of insurance, including] “(d) Title insurance.”].)

Dwayne Buggage, who was an analyst in the DOI’s rate filing bureau for more

than 20 years, testified at trial. He explained that in regulating the business of title

insurance, the DOI accepts regulated title entities’ filed rates, but does not approve them.

As an analyst, he reviews the filings “to make sure that they make sense at least to

[him].” He looks for ambiguity in the rates, “to see if there’s more than one rate set for

one risk” and to “make sure that . . . the rates are not excessive or inadequate or

discriminatory,” which is consistent with the purposes of article 5.5. After he completes

his review and analysis, the rate filings are reviewed by his bureau chief. Rate filings

may be accepted or rejected by the DOI or withdrawn by the filer. If rejected, it is

usually because the filing is incomplete. If Buggage rejects a rate filing, he sends a letter

to the filer explaining the deficiency. The filer will either (1) address the deficiency and

resubmit the rate schedule or (2) request a hearing before an administrative law judge to

contest the DOI’s decision.

10

Section 12401.8 provides in relevant part that charges in excess of those set

forth in the rate filing may be made when the regulated title entity includes a statement in

its rate filing that “such charges may be made in the event . . . unusual services are

performed.” It also requires that the charges be “reasonably commensurate with . . . the

costs of the services performed” and that “each person or entity obligated to pay such

charges consents thereto in writing in advance.” (§ 12401.8.)

29

G. Case Law Interpreting Section 12414.26 and Analogous Immunity

Statutes

We turn next to the case law interpreting section 12414.26 and two analogous

immunity provisions in the Insurance Code.

The only published California case that discusses the immunity in section

12414.26 is Quelimane, supra, 19 Cal.4th 26. In Quelimane, the Supreme Court

considered whether Insurance Code provisions governing title insurance barred a civil

action, including claims under the UCL, by plaintiffs (landowners) who alleged they had

been harmed by a conspiracy among title insurers to refuse to sell title insurance on real

property in El Dorado County with a tax sale in the chain of title. (Id. at pp. 33, 43,

48-49.) The defendants in Quelimane, three title insurers, argued they were not subject to

the UCL based on the immunity in section 12414.26 and the language of

section 12414.29. (Id. at pp. 44-45, fn. omitted.) The court held “[t]he scope of these

sections is expressly limited to articles 5.5 and 5.7 of [the chapter that] governs title

insurance. Article 5.5 applies only to rate regulation, article 5.7 only to advisory

organizations which supply data related to ratemaking.” (Id. at pp. 44-45.) The court

rejected the insurers’ contention that section 12414.29 barred the plaintiffs’ UCL claim

and held that the Legislative purpose of section 12414.29 “was to preempt local

regulation, not to exempt title insurers from other state laws governing unfair business

practices.” (Id. at p. 45.) The Supreme Court faulted the Court of Appeal for failing to

“consider the restriction to ratemaking-related activities in . . . sections 12414.26 and

12414.29.” (Id. at p. 46.) The court held that “the Insurance Code does not displace the

UCL except as to title insurance company activities related to rate setting.” (Id. at p. 33.)

It concluded the complaint at issue sufficiently alleged concerted action in restraint of

trade that violated the Cartwright Act, and held that “a title insurer’s violation of the

Cartwright Act in conduct unrelated to rate fixing may be the predicate for a UCL

action.” (Id. at p. 51, italics added.) Since the case involved an alleged conspiracy to

30

refuse to sell title insurance on certain types of property, and not ratemaking activity, it

was not barred by the section 12414.26 immunity

Two federal district court cases have discussed the section 12414.26 immunity.

We find those cases persuasive. In Lyons v. First American Title Ins. Co. (N.D. Cal.

Dec. 22, 2009, No. C 09-4156 PJH) 2009 U.S. Dist. Lexis 119859 (Lyons), the court held

that a civil action against a title insurer alleging race discrimination based on the title

insurer’s use of different rates for persons with “ ‘non-prime’ ” or “ ‘sub-prime’ ”

mortgages from those with other types of mortgages actually took issue with two separate

refinance rates that had been filed and disclosed under article 5.5 and was therefore

barred by the section 12414.26 immunity. (Id. at pp. *3-*4, *17-*19.) The court in In re

Cal. Title Ins. Antitrust Litigation (N.D. Cal. Nov. 6, 2009, C 08-01341 JSW) 2009 U.S.

Dist. LEXIS 103407 held that a UCL claim based on alleged illegal rebates, kickbacks,

and commissions did not involve ratemaking and was therefore not barred by the section

12414.26 immunity.11

In State Compensation Insurance Fund v. Superior Court (2001) 24 Cal.4th 930

(SCIF), the California Supreme Court construed section 11758, an immunity provision

that is analogous to section 12414.26.12 The plaintiffs in that case, businesses that were

insured by SCIF, on behalf of themselves and other insureds, alleged that SCIF had

misallocated medical-legal expenses and misreported their financial information to the

11

The statutes prohibiting such conduct (§§ 12404, 12405) are in article 6 not

article 5.5 of Chapter 1 (Title Insurance).

12

Section 11758 provides: “No act done, action taken or agreement made

pursuant to the authority conferred by this article shall constitute a violation of or grounds

for prosecution or civil proceedings under any other law of this State heretofore or

hereafter enacted which does not specifically refer to insurance.” The article referred in

section 11758 is article 3 (Rating and Other Organizations) of chapter 3 (Regulation of

Business of Workers’ Compensation Insurance) of part 3 of division 2 of the Insurance

Code.

31

Workers’ Compensation Insurance Rating Bureau. As a result, the insureds’ experience

modifications were artificially inflated, which allowed SCIF to collect excessive

premiums from the insureds. (Id. at pp. 933-934, 936.) The parties disputed whether the

case involved ratemaking. (Id. at p. 936.) “While the question [was] close,” the Supreme

Court concluded that the plaintiff’s allegations related to SCIF’s misconduct before it

sent the data to the rating bureau and did not “challenge the method by which the rate or

premium charged was set, but rather the insurer’s misallocation of certain expenses,” and,

that section 11758 did not immunize SCIF from civil liability under those circumstances.

(Id. at pp. 932, 942, 944.)

The parties rely on cases that construe the immunity provision in section 1860.1,

which contains language similar to that of sections 12414.26 and 11758. Section 1860.1

provides: “No act done, action taken or agreement made pursuant to the authority

conferred by this chapter shall constitute a violation of or grounds for prosecution or civil

proceedings under any other law of this State heretofore or hereafter enacted which does

not specifically refer to insurance.” (Italics added.) The chapter referenced in section

1860.1 is chapter 9 (Rates and Rating and Other Organizations) of part 2 (The Business

of Insurance) of division 1 (General Rules Governing Insurance) of the Insurance Code

(hereafter, sometimes “Chapter 9”). Chapter 9 applies to “all insurance” except seven

classes of insurance that are expressly excluded in section 1851; notably, the exclusions

include title insurance. (§ 1851, subd. (d).) The section 1860.1 cases were decided after

the passage of Proposition 103, which made “ ‘ “numerous fundamental changes in the

regulation of automobile and other types of insurance.” ’ ” (Walker v. Allstate Indemnity

Co. (2000) 77 Cal.App.4th 750, 752 (Walker).)

The court in Walker considered a civil action by a putative class of auto insurance

customers against more than 70 auto insurers and the Insurance Commissioner alleging

four causes of action, including a UCL claim, based “on the insurers’ charging approved

rates alleged nevertheless to be ‘excessive.’ ” (Walker, supra, 77 Cal.App.4th at pp. 752-

32

753.) The court observed that “[h]istorically, [sections 1860.2 and 1860.2] have been

interpreted to provide exclusive original jurisdiction over issues related to ratemaking to

the commissioner. (See Chicago Title Ins. Co. v. Great Western Financial Corp. (1968)

69 Cal.2d 305, 323 . . . [‘a court is not the appropriate initial arbiter of factors involved in

insurance costs’]; [citation].” (Id. at p. 755.)

One issue in Walker was whether the changes “wrought” by Proposition 103

affected the immunity provision in section 1860.1. (Walker, supra, 77 Cal.App.4th at

pp. 755-756.) The court held that section 1860.1 barred the plaintiffs’ claims, stating: “If

section 1860.1 has any meaning whatsoever . . . , the section must bar claims based upon

an insurer’s charging a rate that has been approved by the commissioner . . . .” (Id. at

p. 756.) The court observed that under the statutory “scheme, the commissioner is

charged with setting rates after an extensive hearing process in which consumers and

interested parties are encouraged to participate. . . . When this process has run its course,

the insurers must charge the approved rate and cannot be held civilly liable for so doing.

[Citations.] A consumer or an interested party is, however, provided the opportunity to

petition the commissioner to review the continued use of any approved rate, i.e. obtain

prospective, not retrospective, relief. [Citations.] . . . [U]nder the statutory scheme . . . ,

the charging of an approved rate cannot be deemed ‘illegal’ or ‘unfair’ for purposes of

the [UCL] or, indeed, tortious.” (Id. at p. 756.) The court explained that section 1860.1

states that an “ ‘action taken . . . pursuant to the authority conferred by [Chapter 9]’ ”

cannot constitute grounds for civil proceedings, and reasoned that “[w]hatever else

[Chapter 9] does, it definitely confers authority upon the commissioner to approve rates.

Moreover, an insurer’s action of collecting premiums consistent with an approved rate is

certainly done pursuant to the authority conferred on the commissioner by [Chapter 9].”

(Id. at pp. 756–757.) Thus, the court concluded the plaintiffs’ civil action challenging the

approved rates was barred by sections 1860.1 and 1860.2. (Id. at pp. 754, 760.)

33

In Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, a policyholder

sued his automobile insurer under the UCL alleging the insurer improperly used his lack

of prior insurance as a criterion to determine insurability, the amount of his premium, and

eligibility for two discounts. The court held the UCL action was not barred because it did

not involve a challenge to approved rates but instead involved how the components of the

insurer’s class plan were applied to the public. (Id. at pp. 991-993.)

The plaintiff in Krumme v. Mercury Ins. Co. (2004) 123 Cal.App.4th 924, 928,

936 (Krumme), filed a UCL action challenging the practice of three related insurers of

selling auto and other personal lines of insurance through brokers who were actually the

insurers’ agents but charged broker fees. The plaintiff complained that the broker fees

were not disclosed to the DOI or in the insurers’ comparative premium rate advertising

and alleged that since the insurers’ rates failed to disclose that they would be charged

broker fees, the premiums appeared deceptively low. (Id. at p. 932.) The defendants

argued that if the allegedly illegal broker fees were part of the premium it charged, the

matter came within the Insurance Commissioner’s plenary authority over rates and

premiums. The appellate court concluded the case did not involve ratemaking, since the

plaintiff alleged the insurers violated provisions of the Insurance Code regulating brokers

and engaged in false advertising. (Id. at pp. 936-937.)

The court in Krumme explained: “The elaborate statutory and administrative

process for setting rates has ‘been interpreted to provide exclusive original jurisdiction

over issues related to ratemaking to the commissioner.’ ([Walker], supra, 77 Cal.App.4th

750, 755.) The Insurance Code does not, however, displace the UCL ‘except as to . . .

activities related to rate setting.’ (Quelimane[, supra,] 19 Cal.4th 26, . . . ; see [Walker],

at p. 759.) . . . ‘A judicial act constitutes rate regulation only if its principal purpose and

direct effect are to control rates. . . . In general, a claim that directly challenges a rate and

seeks a remedy to limit or control the rate prospectively or retrospectively is an attempt to

regulate rates,’ but ‘a claim that directly challenges some other activity, such as false

34

advertising . . . is not rate regulation.’ [Citation.] A claim predicated on a violation of

the Insurance Code not related to ratemaking may thus be framed as a claim under the

UCL. [Citation.]” (Krumme, supra, 123 Cal.App.4th at pp. 936-937.)

The plaintiffs in MacKay, brought a class action lawsuit alleging violations of the

UCL against 21st Century Insurance. They alleged they paid increased premiums due to

a lack of prior insurance and that the defendant used two impermissible factors to

determine auto insurance rates that were based on the lack of prior insurance: accident

verification and persistency. (MacKay, supra, 188 Cal.App.4th at pp. 1433-1434.) The

parties in MacKay disputed whether accident verification had been approved by the DOI

as a rating factor. (Id. at pp. 1435-1436.) The court reviewed the history of the rate

filings and a DOI enforcement action against the insurer and held that accident

verification had been approved by the DOI as a rating factor in that case. (Id. at

pp. 1436-1439.) The court concluded that the DOI’s prior approval of the rating factor

precluded a civil action challenging it, the UCL claim was barred by the immunity in

section 1860.1, and the “statutory provisions for an administrative process (and judicial

review thereof) were the exclusive means of challenging an approved rate.” (Id. at

pp. 1432, 1449-1451.)

In summary, the cases hold that the immunity provisions in the Insurance Code

(§§ 1860.1, 11758, 12414.26) barred civil actions that challenged as excessive auto

insurance rates that had been approved by the Insurance Commissioner (Walker, supra,

77 Cal.App.4th 756-757), the use of rating factors that had been approved by the

Insurance Commissioner to set auto insurance rates (MacKay, supra, 188 Cal.App.4th

1449-1451), and a race discrimination case that was actually a challenge to title insurance

rates that had been accepted by the Insurance Commissioner (Lyons, supra, 2009 U.S.

Dist. Lexis 119859, *15). On the other hand, statutory immunity did not bar civil actions

that were unrelated to rate making, including actions based on an alleged conspiracy to

refuse to provide title insurance (Quelimane, supra, 19 Cal.4th 44-46, 51); false

35

advertising (Krumme, supra, 123 Cal.App.4th at pp. 936-937); misallocating medical-

legal expenses in reports submitted to the WCIRB (SCIF, supra, 24 Cal.4th 932, 942,

944); violating statutes that regulate insurance brokers (Krumme, at p. 936-937); and

charging illegal rebates, kickbacks, and commissions (In re Cal. Title Ins. Antitrust

Litigation, supra, 2009 U.S. Dist. LEXIS 103407).

H. Analysis

Quelimane instructs that the immunity applies to “ratemaking-related activities”;

we must therefore determine whether the conduct at issue here is “related to ratemaking.”

(Quelimane, supra, 19 Cal.4th at p. 46.) As the cases illustrate, whether the action is

barred by statutory immunity turns on the wrong alleged.

In our view, this case is more like the cases that involved activities related to

ratemaking than those that did not. Plaintiffs do not allege a conspiracy to refuse to

provide title insurance (Quelimane, supra, 19 Cal.4th 44-46, 51); false advertising

(Krumme, supra, 123 Cal.App.4th at pp. 936-937); misallocating or misrepresenting

information in a report to an advisory agency (SCIF, supra, 24 Cal.4th 932, 942, 944);

violating statutes that regulate insurance brokers or title insurance representatives

(Krumme, at p. 936-937; § 12418 et seq.); charging illegal rebates, kickbacks, or

commissions (In re Cal. Title Ins. Antitrust Litigation, supra, 2009 U.S. Dist. LEXIS

103407; §§ 12404-12411). Nor does the complaint allege any violations of the statutes

governing Fidelity’s actual handling of the escrow (§§ 12413.1-12413.5)—which are not

in article 5.5—as opposed to the rates charged for its services.

Applying section 12414.26 to the different theories of liability asserted at trial aids

the analysis. Plaintiffs’ Delivery Theory No. 2 and the General Draw Deed Theory

challenged the language of Fidelity’s filed rates. Under Delivery Theory No. 2, Plaintiffs

argued that Fidelity’s base rate for escrow services set forth in the filing included the cost

of delivery services and that by charging for delivery services in addition to the base rate,

36

Fidelity was billing them twice. The general Draw Deed Theory argued that drawing a

deed was not the same as “document preparation” for which there was a filed rate. These

theories required the court to interpret Fidelity’s rate filings to determine whether they

encompassed the charges at issue. This was a challenge to the rates as filed by Fidelity.

Since these theories challenged the “basic classifications of . . . services [Fidelity

established] to be used as the basis for determining rates” (§ 12401.2) and the rate

schedules Fidelity filed with the Insurance Commissioner (§ 12401.1), they involved acts

done “pursuant to the authority conferred by Article 5.5” (§ 12414.26) and are subject to

the immunity. Thus, we disagree with the trial court’s conclusion that the

section 12414.26 immunity did not apply to Delivery Theory No. 2 and the General Draw

Deed Theory. (As noted, Plaintiffs have elected not to pursue their claims under either of

these theories on appeal.)

The more difficult question is whether the immunity applies to Plaintiffs’ Delivery

Theory No. 1 and the Draw Deed Theory of the Gap Period Plaintiffs. The gravamen of

these claims is that Fidelity charged for delivery services and some draw deed services

that it did not include in its rate filings and that were therefore not accepted by the

Insurance Commissioner. Alternatively, the claim may be framed as Fidelity’s failure to

include in its rate filings amounts it charged for third party delivery services and some

draw deed fees. Broadly speaking, these claims appear to be related to Fidelity’ rate-

making activities.

Furthermore, the primary legal issue under Delivery Theory No. 1 is whether

Fidelity was required to file a rate for delivery services performed by third party vendors.

The trial court concluded it was and Fidelity challenges that finding on appeal. Generally

speaking, the question whether a regulated title entity is required to include the cost of

services performed by third parties in its rate filings appears to be related to ratemaking

activity.

37

We conclude Plaintiffs’ challenge to charges or rates that were not listed in

Fidelity’s rate filings fall within the authority conferred by article 5.5. The statues in

article 5.5 directed Fidelity to establish basic classifications of services to use as the basis

for determining its rates (§ 12401.2), to file its scheduled of rates with the Insurance

Commissioner (§ 12401.1), to indicate the character and extent of the services

contemplated in its rate filings (§ 12401.1), and prohibited Fidelity from using any rate

“prior to its effective date nor prior to the filing with respect to such rate having been

publicly displayed and made readily available to the public for a period of no less than

30 days . . . ” (§ 12401.7). Fidelity failed to establish rates for third party delivery

services and document preparation for sales escrows during the Gap Period (§ 12401.2).

And although Fidelity filed rate schedules with the Insurance Commissioner throughout

the class period, its rate filings failed to indicate the character and extent of all the

services contemplated (§ 12401.1). Fidelity also used rates or charges prior to any

effective date established by a rate filing in violation of section 12401.7. Thus, Fidelity

failed to comply with sections 12401.1, 12410.2, and 12401.7, all of which are in article

5.5 of Chapter 1. In our view, this conduct constitutes “act[s] done . . . pursuant to the

authority conferred by Article 5.5” (§ 12414.26). Thus, the claims under Delivery

Theory No. 1 and the Draw Deed claims of the Gap Period Plaintiffs are also barred by

the section 12414.26 immunity.

I. Statutory Scheme Governing Insurance Commissioner’s Exclusive

Original Jurisdiction Over Rate Making-related Activity

In construing section 12414.26, we examine the statutory language in “the context

of the statute as a whole . . . with reference to the entire scheme of law of which it is part

so that the whole may be harmonized and retain effectiveness.” (Smith, supra, 39 Cal.4th

at p. 83.) Our conclusion on the immunity question is strengthened by reviewing the

statutes governing the Insurance Commissioner’s exclusive original jurisdiction over the

38

business of title insurance and section 12304.7, which defines the term “rates” as used in

Chapter 1.

The statutes governing the Insurance Commissioner’s exclusive original

jurisdiction over the business of title insurance are found in article 6.7 of Chapter 1,

which is entitled “Hearings, Procedure, and Judicial Review.” (§§ 12414.13-12414.19;

Stats. 1973, ch. 1130, p. 2311.) Article 6.7 contains procedures for complaints against

regulated title entities regarding their rates and the entity’s compliance with article 5.5.

The statutory scheme provides for three levels of review: (1) informal review of the

complaint by the regulated entity itself, (2) followed by a complaint to and possible

hearing before the Insurance Commissioner, (3) followed by judicial review in the courts.

(§§ 12414.13-12414.19.)

More specifically, the statutory scheme provides that “[a]ny person aggrieved by

any rate charged, rating plan or rating system followed or adopted by a [regulated title

entity] may request such person or entity to review the manner in which the rate, plan,

system, or rule has been applied . . . .” (§ 12414.13, italics added.) If the regulated title

entity refuses to review that matter or fails to grant the relief requested, “[a]ny person

aggrieved by the action . . . may file a written complaint and request for hearing” with the

Insurance Commissioner. (§ 12414.13.) Section 12414.13 sets forth reasons, both

discretionary and mandatory, for the commissioner to deny a hearing.13 “Otherwise, and

if [the commissioner] finds that the complaint charges a violation of Article 5.5 . . . and

that the complainant would be aggrieved if the violation is proved, [the commissioner]

shall proceed as provided in Section 12414.14.” (§ 12414.13.)

13

Section 12414.13 provides that “[i]f the commissioner has information

concerning a similar complaint he may deny the hearing. If he believes that probable

cause for the complaint does not exist or that the complaint is not made in good faith he

shall deny the hearing.”

39

Section 12414.14 provides that if the Insurance Commissioner has good cause to

believe a regulated title entity or “any rate, rating plan or rating system made or used by

any such person or entity does not comply with the requirements and standards of Article

5.5,” the commissioner shall give written notice of noncompliance and specify a

“reasonable time, . . . , in which such noncompliance may be corrected,” unless there is

good cause to believe such noncompliance is willful. (§ 12414.14, italics added.) If the

commissioner “has good cause to believe such noncompliance to be willful,” or if within

the period prescribed by the commissioner the regulated title entity does not correct the

noncompliance “or establish to the satisfaction of the commissioner that such specified

noncompliance does not exist, then the commissioner may hold a public hearing.”

(§ 12414.15.)

The statutory scheme sets forth the powers of the commissioner upon finding a

violation or finding the violation was willful or finding the regulated entity has not

complied with the commissioner’s orders in the matter. (§§ 12414.16–12414.18.) It also

provides for judicial review of any findings, rulings, or orders by the commissioner and

contains procedural rules governing such review. (§ 12414.19.)

In addition to reviewing complaints by aggrieved persons, the Insurance

Commissioner may investigate ratemaking activity on his or her own initiative. The

commissioner “may, . . . , make or cause to be made an examination of every” regulated

title entity “to ascertain whether such person or entity and every rate and rating system

used in the business of title insurance complies with the requirements and standards of

Article 5.5 (commencing with Section 12401) . . . .” (§ 12414.21, italics added; see also

Cal. Code Regs., tit. 10, § 2355.4.) The Insurance Commissioner may examine the

officers, managers, agents, and employees of regulated title entities under oath and order

the production of records, documents, statistics, data, and other information “to which

such examination relates.” (§ 12414.22, 12414.23; Cal. Code Regs., tit. 10, § 2355.4.)

40

The Insurance Code defines the term “ ‘rate’ ” or “ ‘rates’ ” as used in Chapter 1

as “the charge or charges, . . . , made to the public by [a regulated title entity], for all

services it performs in transacting the business of title insurance.”14 (§ 12340.7, italics

added.) By its express language, section 12414.13—which governs informal requests for

review and complaints and requests for hearing to the Insurance Commissioner—applies

to grievances based on “any rate charged” by a regulated title entity. The statute’s use of

the phrase “any rate charged” in addition to “rating plan or rating system” indicates it

applies to any charge, and not just rates or charges that are included in a rating plan or

rating system (i.e., schedule of rates) that has been accepted by the Insurance

Commissioner.

Section 12414.13 empowers the Insurance Commissioner to act when a

“complaint charges a violation of Article 5.5.” Similarly, section 12414.14 empowers the

Insurance Commissioner to act when “any rate, rating plan or rating system made or

used” by a regulated title entity does not comply with the requirements and standards of

Article 5.5” and section 12414.21 empowers the Insurance Commissioner to ascertain

whether “every rate and rating system” complies with article 5.5. (Italics added.) Thus,

the statutes governing administrative review of rates support the conclusion that the

14

Section 12340.7 provides: “Except as provided in Section 12401.8, and

excluding miscellaneous charges, “rate” or “rates” means the charge or charges, whether

denominated premium or otherwise, made to the public by a title insurer, an underwritten

title company or a controlled escrow company, for all services it performs in transacting

the business of title insurance. As used in this section miscellaneous charges means

conveyancing fees, notary fees, inspection fees, tax service contract fees and such other

fees as the commissioner by regulation may prescribe.” As we have noted, section

12401.8 states the circumstances under which a regulated title entity may charge amounts

in excess of its filed rates. This case does not involve conveyancing fees, notary fees,

inspection fees, or tax service contract fees, and the Insurance Commissioner has not

promulgated any regulations that expands the list of “miscellaneous charges” to include

delivery services or document preparation fees. (Cal. Code Regs., tit. 10, §§ 2355.1-

2355.5.)

41

Insurance Commissioner’s plenary authority over ratemaking extends to “any rate

charged” and “every rate” not just the rates set forth in a rate filing that has been accepted

by the Insurance Commissioner. Plaintiffs allege Fidelity failed to comply with article

5.5 by charging rates for services that were not listed in its rate filings and failing to

include rates for third party delivery services and some document preparation in its rate

filings. The statutes in article 6.7 of Chapter 1, particularly sections 12414.13, 12414.14,

and 12414.21, expressly provide that Plaintiffs’ claims fall within the exclusive original

jurisdiction of the Insurance Commissioner. Thus, article 6.7of Chapter 1 supports our

conclusion that this case is barred by the immunity in section 12414.26.

J. Effect of Section 12414.27 on Immunity Conferred by Section 12414.26

1. Language of Section 12414.27

Plaintiffs contend the conduct at issue here is expressly excluded from the section

12414.26 immunity for ratemaking-related activity by the language of section 12414.27.

Fidelity argues section 12414.27 does not limit the immunity.

Section 12414.27 provides: “Commencing 120 days following January 1, 1974,

no [regulated title entity] shall charge for any title policy or service in connection with

the business of title insurance, except in accordance with rate filings which have become

effective pursuant to Article 5.5 . . . or as otherwise authorized by such article; provided,

however, where a rate is on file with the commissioner and in effect immediately prior to

such date, such rate shall continue in effect until a new rate filing is thereafter made and

becomes effective in the manner provided in Article 5.5 . . . of this chapter.”

Plaintiffs argue section 12414.27 prohibits the conduct at issue in this case:

charging for services for which there has been no rate filing. Plaintiffs argue a violation

of section 12414.27 cannot be immunized by section 12414.26 because the section

12414.26 immunity applies to “act[s] done, action[s] taken, or agreement[s] made

42

pursuant to the authority conferred by Article 5.5” and section 12414.27 is in article 6.9,

not article 5.5. They argue that if the Legislature had intended to provide a broad

immunity that applies to any fees charged, even those for which no rate has been filed, it

would not have enacted section 12414.27 or placed it in article 6.9 to which the section

12414.26 immunity does not apply.

Fidelity advocates another interpretation and urges us to read section 12414.27 as

“the grace period or savings statute the Legislature intended.” Fidelity argues: “[h]aving

established new rate regulation in article 5.5, the Legislature needed an implementing

statute to govern when new requirements take effect, and what happens with rates already

on file under the old law.” It contends the Legislature drafted section 12414.27 as a

miscellaneous procedural statute and placed it in article 6.9 for that reason. Fidelity

argues the first clause in section 12414.27—which states “[c]ommencing 120 days

following January 1, 1974”—“expressly provides a grace period to adjust to the new law,

by postponing the operative date of Article 5.5’s rate regulation.” Fidelity adds that the

“second clause simply means that if title insurers were already using rates on file, they

did not have to re-file them under Article 5.5.”

Thus, the question presented is whether section 12414.27 is a prohibitory statute

that carves out an exception to the section 12414.26 immunity or an implementing statue

that establishes an operative date for the rate filing and regulatory scheme in article 5.5.

Section 12414.27 does contain prohibitory language. It states: “no [regulated title entity]

shall charge for any . . . service . . . , except in accordance with rate filings that have

become effective . . . .” Although the Legislature placed section 12414.27 directly after

the immunity provision in section 12414.26 and outside article 5.5, section 12414.27 does

not mention section 12414.26 or otherwise indicate an intent to modify the scope of the

immunity provided by section 12414.26.

The interpretation advanced by Plaintiffs does not take into account the first clause

of section 12414.27: the words “[c]ommencing 120 days following January 1, 1974.”

43

(§ 12414.27.) A brief review of the statute’s history helps illuminate the language of the

first clause. The statutory scheme at issue was enacted in 1973; it amended, repealed,

and added several provisions to the Insurance Code. (Stats. 1973, ch. 1130, pp. 2300-

2315.) The Legislation was signed by the Governor on October 2, 1973 and took effect

on January 1, 1974. (Stats. 1973, ch. 1130, p. 2300; Gov. Code, § 9600.) The timing of

the enactment supports the conclusion that the legislative intent behind section 12414.27

was to delay the operative date of the rate filing regulatory scheme in the new legislation.

In other words, although the statutory scheme took effect on January 1, 1974,

section 12414.27 provides that the rate filing and regulatory provisions of article 5.5

would not be operative until 120 days after the effective date of the new legislation.

“It has long been recognized that a statute may legally be framed to provide for an

effective date and an operative date. [Citations.] In the usual situation, the effective date

and the operative date are one and the same; however, the power to enact laws includes

the power to fix a future date on which the act will become operative. [Citation.]”

(Estate of Rountree (1983) 141 Cal.App.3d 976, 980.) “The Legislature may provide for

an operative date subsequent to the effective date of a statute to allow persons affected to

become acquainted with and implement its provisions, as well as to give lead time to the

governmental authorities to establish machinery for the operation of or implementation of

the new law.” (Id. at p. 980, fn. 3.)

2. Legislative History of Section 12414.27

The legislative history of section 12414.27 supports the conclusion that the

Legislature’s intent was to delay implementation of the new statutory scheme, not to limit

the immunity provision in section 12414.26. The statutes at issue were enacted by Senate

Bill No. 1293, which was introduced in May 1973 at the request of the California Land

44

Title Association. (Enrolled Bill Memo to Gov. for Sen. Bill No. 1293 (1993-1994 Reg.

Sess.)15 Sept. 30, 1973; Sen. Final Hist. (1973-1974 Reg. Sess.), p. 568.)

According to the Assembly Committee on Finance and Insurance analysis, the bill

proposed “to regulate the organization and rate making of title insurance companies,

underwritten title companies, and controlled escrow companies. It requires that the rates

be subject to the same tests [that were] applied to other types of insurance by the

MacBride-Grunsky Rating Law. This requires that the rates not be inadequate nor

excessive nor unfairly discriminatory. [¶] Rates, as established by the individual

companies or by rating organizations, would be filed with the Insurance Commissioner

who would have the right to review such rates. Procedures are provided for the review

of the rates and for administrative and judicial hearing if rates are found to be in

violation of the rating act. [¶] Under current statutory law, rates of title insurance

companies are not regulated. . . . [This bill] would subject future rating of title

insurance policies to review by the Insurance Commissioner and thus permit the use of

rating organizations which could be used to develop rates to be made available to the

members of the rating organization.” (Assem. Com. on Finance and Insurance, Analysis

of SB 1293, as amended Aug. 27, 1973, italics added.)

The bill was amended three times. (Assem. Amend. to SB 1293 Sept. 10, 1973,

p. 1.) When originally proposed, the legislation did not include either section 12414.26

or section 12414.27. (SB 1293 as introduced May 3, 1973, pp. 28-30.) Instead, the

original bill contained a Section 20, which provided: “The Legislature finds and declares

that the changes in the law affecting the business of title insurance made by this act

constitute a major departure from preexisting law and that compliance with this act will

require the formulation, adaptation and implementation of new regulatory and business

15

Hereafter, we shall use the shorthand reference “SB 1293” in place of the

phrase “Sen. Bill No. 1293 (1993-1994 Reg. Sess.)” in legal citations.

45

practices by the Insurance Commissioner and persons and entities engaged in the

business of title insurance in this state. In order to promote the public welfare and to

assure an orderly method of transition from the requirements of preexisting law to

compliance with the requirements of this act the Legislature hereby directs that the

provisions of this act be implemented in the following manner.” (SB 1293 as introduced

May 3, 1973, at p. 31.)16 Section 20 then set forth a proposed schedule of three staggered

operative dates for implementing the new legislation and specified which statutes would

become operative on each date. By the first date, the Insurance Commissioner was to

promulgate certain regulations and forms. By the second date, the newly regulated title

entities were to file their schedules of rates. (Ibid.)

Section 12414.27 was added to the bill by amendment in August 1973; the

language of the statute has not changed since then. (Assem. Amend. to SB 1293

Aug. 27, 1973, p. 22.) As we have noted, it provides: “Commencing 120 days following

January 1, 1974, no [regulated title entity] shall charge for any title policy or service in

connection with the business of title insurance, except in accordance with rate filings

which have become effective pursuant to Article 5.5 . . . or as otherwise authorized by

such article; provided, however, where a rate is on file with the commissioner and in

effect immediately prior to such date, such rate shall continue in effect until a new rate

filing is thereafter made and becomes effective in the manner provided in

Article 5.5 . . . .”

The August 1973 amendment also deleted Section 20, the uncodified provision

that described the need for an “orderly method of transition” and provided for staggered

operative dates. (Assem. Amend. to SB 1293 Aug. 27, 1973, pp. 36-37.) The Legislature

replaced the staggered schedule in Section 20 with a single, delayed operative date for

16

For ease of reference, we shall refer to his uncodified portion of the bill as

“Section 20.” References to “Section 20” in this opinion are not to section 20 of the

Insurance Code, which defines the term “commissioner” as used in that code.

46

rate filings and replaced the 60-day grace period in Section 20 with a 120-day grace

period after the legislation’s operative date for regulated entities to get their rates on file.

Rather than keep these provisions in an uncodified section of the bill, the Legislature

added a statute (§ 12414.27) that expressly set forth the delayed operative date for the

rate filing requirement and provided that after that date no regulated title entity shall

charge for any service except in accordance with its rate filings.

Prior to 1974, the DOI regulated title insurers and underwritten title companies

through licensing, setting minimum capital requirements, and reviewing audits. Title

insurers were required to file their rates with the DOI, but the DOI did not regulate their

rates. (Legis. Analyst, Analysis of SB 1293, Sept. 11, 1973, p. 1.) And there was no rate

filing requirement for underwritten title companies or controlled escrow companies.

This history supports the conclusion that the Legislature also intended by the language of

section 12414.27 to authorize title insurers to use the rates already on file with the

Insurance Commissioner after the new legislation took effect.17

We conclude, based on the language of the statute and this legislative history, that

the purpose of section 12414.27 was to establish a delayed operative date for regulated

title entities to prepare for the new statutory scheme and comply with the article 5.5 rate

filing requirements and not to carve out an exception to immunity for cases such as this.

17

Section 12414.26 was also added to the bill by the August 1973 amendment.

(Assem. Amend. to SB 1293 Aug. 27, 1973, p. 22.) When added, section 12414.26

provided that “no act done, action taken, or agreement made pursuant to the authority

conferred by this chapter shall constitute a violation of or grounds for prosecution or civil

proceedings . . . .” (Ibid.) Thus, when added to the bill, the section 12414.26 immunity

applied to the entire Chapter 1 and all aspects of the business of title insurance governed

by that chapter. When the bill was amended in September 1973, the phrase “the authority

conferred by this chapter” was changed to “the authority conferred by Article 5.5 . . . or

Article 5.7 . . . of this chapter.” (Assem. Amend. to SB 1293 Sept. 10, 1973, p. 22.) The

September 1973 amendment demonstrates the intent to limit the section 12414.26

immunity to ratemaking-related activity and advisory organizations.

47

Moreover, while section 12414.27 expressly prohibits charging for services

“except in accordance with rate filings which have become effective pursuant to

Article 5.5 . . . or as otherwise authorized by such article,” that same conduct is also

impliedly prohibited by the language of sections 12401.1, 12401.2, and 12401.7. As we

have observed, sections 12401.1 and 12401.2 required Fidelity to establish classifications

of services to be used as the basis for its rates, file its schedules of rates with the

Insurance Commissioner, and indicate in its rate filings the character and extent of the

services contemplated. (§§ 12401.1, 12401.2.) Section 12401.7 prohibited Fidelity from

using any rate prior to its effective date or prior to the rate filing with respect to that rate

having been publicly displayed and made readily available for 30 days prior to its

effective date. (§ 12401.7.) Here, Fidelity failed to establish classifications of services

for draw deed services for sales transactions during the Gap Period and for third party

delivery services. It also failed to indicate in its rate filings that it intended to charge for

those services and used rates before they were included in a rate filing. By charging for

such services, Fidelity has violated sections 12401.1, 12401.2, and 12401.7, which are in

article 5.5. Thus, its conduct was subject to the section 12414.26 immunity.

For these reasons, we conclude the section 12414.26 immunity applies to

Plaintiffs’ UCL claims and that the immunity bars this action. Plaintiffs “may not bring a

UCL action for restitution” or any other cause of action in a civil proceeding “that

‘trespasses directly on the core function of the [Insurance] Commissioner’ ” concerning

rate filing and regulation in the business of title insurance. (See Loeffler, supra, 58

Cal.4th at pp. 1126-1127.)

Plaintiffs are not left without a remedy. Article 6.7 of Chapter 1 describes the

procedures for bringing this matter before the Insurance Commissioner. In its order on

the attorney fees motion, the trial court observed that the Villanuevas did not present any

evidence of any “presuit efforts to contact governmental authorities concerning public

enforcement before filing a lawsuit.” The court added, “[I]t appears to be undisputed that

48

Plaintiff did not attempt to contact the [DOI] prior to initiating the lawsuit. Plaintiff

argues that no action had been taken by the [DOI] and the [DOI] could not have sought

restitution as Plaintiff did. The fact that the [DOI] did not take action prior to the filing

of Plaintiff’s lawsuit does not necessarily mean the [DOI] would not have taken action

had Plaintiff made such a request. Action by the [DOI] could have resulted in a much

more efficient resolution of the issues raised in this action.” Under article 6.7 of

Chapter 1, the Insurance Commissioner has exclusive original jurisdiction over Plaintiffs’

claims. That the Insurance Commissioner had not acted on his or her own initiative or

could not seek restitution is not relevant to the jurisdictional analysis.

In light of our conclusion on the immunity issue, we shall not address the parties’

other arguments in case No. H041870, except to note that immunity bars “civil

proceedings.” (§ 12414.26.) This includes Plaintiffs’ cause of action based on an alleged

breach of fiduciary duty.

IV. Appeals of Postjudgment Orders in Case No. H042504

Both parties appeal the postjudgment order on attorney fees and costs. Plaintiffs

contend the trial court erred when it denied their motion for attorney fees under Code of

Civil Procedure section 1021.5, the private attorney general attorney fees statute. Fidelity

argues the trial court erred when it awarded costs to Plaintiffs, denied Fidelity’s motion to

strike or tax Plaintiffs’ costs, and granted Plaintiffs’ motion to tax Fidelity’s costs in their

entirety.

A. Order Denying Plaintiffs’ Motion for Attorney Fees Under Code of Civil

Procedure Section 1021.5

“[A] party seeking an award of Code of Civil Procedure section 1021.5 attorney

fees must first be determined to be ‘a successful party.’ [Citation.] A necessary

prerequisite to recovery under the statute is the status of the prevailing party. [Citation.]

The terms ‘prevailing party’ and ‘successful party’ are synonymous. (Graham v.

49

DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 570 . . . .)” (Coalition for a Sustainable

Future in Yucaipa v. City of Yucaipa (2015) 238 Cal.App.4th 513, 521.) Since we

reverse the judgment, Plaintiffs are no longer a prevailing party and therefore cannot

recover attorney fees under Code of Civil Procedure section 1021.5. (Ibid.)

An order awarding attorney fees and costs “falls with a reversal of the judgment

on which it is based” and “must also be reversed.” (Merced County Taxpayers’ Ass’n v.

Cardella (1990) 218 Cal.App.3d 396, 402 (Merced County), citing Purdy v. Johnson

(1929) 100 Cal.App. 416, 421.) In this case, the trial court entered an order denying

Plaintiffs’ motion for attorney fees, reasoning that they had not met the requirements of

Code of Civil Procedure section 1021.5. Since the trial court denied Plaintiffs’ motion

for attorney fees, albeit for reasons unrelated to the reversal of the judgment, we will

affirm the order. “ ‘[W]e review the trial court’s order, not its reasoning, and affirm an

order if it is correct on any theory apparent from the record.’ ” (Wal-Mart Real Estate

Business Trust v. City Council of San Marcos (2005) 132 Cal.App.4th 614, 625, quoting

Blue Chip Enterprises, Inc. v. Brentwood Sav. & Loan Assn. (1977) 71 Cal.App.3d 706,

712.) In addition, the reversal of the judgment renders Plaintiffs’ challenge to the order

denying their motion for attorney fees moot. (Merced County, at pp. 401-402.)

Consequently, we will not address the parties’ arguments on the motion for attorney fees

further.

B. Order on Parties’ Motions to Tax Costs

Like orders awarding attorney fees, “[a]n order awarding costs falls with a reversal

of the judgment on which it is based.” (Merced County, supra, 218 Cal.App.3d at

p. 402.) Because we conclude that the judgment in favor of Plaintiffs must be reversed,

the order awarding them costs must also be reversed. (County of Humboldt v. McKee

(2008) 165 Cal.App.4th 1476, 1501, citing Merced County, at p. 402.)

50

Since we reverse the judgment and order the action dismissed, Fidelity is “a

defendant in whose favor a dismissal is entered” under Code of Civil Procedure

section 1032 and is therefore a prevailing party, “entitled as a matter of right to recover

costs” in this action. (Code Civ. Proc., § 1032, subds. (a)(4), (b).)

The record is incomplete regarding the litigation of the costs claims.18 However,

Plaintiffs’ appendix contains a copy of the superior court’s “On-line Document List,”

which serves as the register of actions. (Cal. Rules of Court, rules 8.124(b)(1)(A),

8.122(b)(1)(F) [appendix must contain all items required to be included in a clerk’s

transcript, including the “register of actions, if any”].) According to that list, Plaintiffs

filed a motion to tax Fidelity’s costs, Fidelity opposed the motion, and Plaintiffs filed a

reply. Since those papers are not in the record on appeal, we do not know what

arguments Plaintiffs raised below. More importantly, that motion was never adjudicated

on the merits in the trial court. The trial court concluded Plaintiffs were the prevailing

party and awarded costs to Plaintiffs. It also found Fidelity was not a prevailing party

and granted Plaintiffs’ motion to tax Fidelity’s costs on that ground. We will therefore

remand this matter to the trial court to rule in the first instance on Plaintiffs’ motion to tax

Fidelity’s costs and determine the amount of the costs award.

DISPOSITION

The judgment in case No. H041870 is reversed. The cause is remanded to the

superior court with directions to vacate the judgment and enter a new judgment

dismissing the action since it is barred by the section 12414.26 immunity.

The postjudgment order denying Plaintiffs’ motion for attorney fees in case

No. H042504 is affirmed. The postjudgment order denying Fidelity’s motion to tax

18

The only documents in the appendices regarding the parties’ costs claims are

the memoranda of costs and Plaintiffs’ opposition to Fidelity’s motion to strike or tax

their costs.

51

Plaintiffs’ costs, awarding Plaintiffs their costs of suit, and granting Plaintiffs’ motion to

tax Fidelity’s costs is reversed. The cause is remanded to the superior court with

directions to vacate its order awarding costs to Plaintiffs, to enter a new order awarding

Fidelity its costs of suit, and to conduct a hearing on Plaintiffs’ motion to tax Fidelity’s

costs.

The parties shall bear their own costs on appeal.

_________________________________

ELIA, J.

WE CONCUR:

_______________________________

PREMO, Acting P. J.

_______________________________

GROVER, J.

Villanueva v. Fidelity National Title Company

H041870, H042504

52

Trial Court: Santa Clara County Superior Court

Superior Court No.: 1-10-CV173356

Trial Judge: The Honorable Pete H. Kirwan

Attorneys for Plaintiffs and Appellants Chavez & Gertler

Manny Villanueva et al.:

Nance F. Becker

Mark A. Chavez

The Kick Law Firm

Taras Kick

Thomas Segal

Attorneys for Defendant and Appellant: Hahn Loeser & Park

Fidelity National Title Company:

Michael J. Gleason

Rupa G. Singh

Erica L. Calderas

Steven A. Goldfarb

Villanueva v. Fidelity National Title Company

H041870, H042504

53