De La Torre vs. Tippett Moorhead & Haden

“A fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is bound to act with the utmost good faith for the benefit of the other party.” (Gilman v. Dalby (2009) 176 Cal.App.4th 606, 613.)

The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach. (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405.)

Defendants contend the insurer-insured relationship is not a fiduciary relationship, and the cause of action for breach of fiduciary duty, regardless of its labeling in the complaint, amounted to professional negligence because the insurance broker failed to “execute its obligations as an insurance broker.” (Hydro-Mill, supra, 115 Cal.App.4th at 1159, 1160.) Therefore, Plaintiff cannot state a claim for breach of fiduciary duty against Defendants.

In Opposition, Plaintiff again argues Defendants took on specialized duties beyond the mere procurement of insurance, acting as broker and also acting as financial advisors who provided financial consultation integral to Plaintiff’s insurance decisions, (FAC, ¶¶ 29, 30.) The investment adviser/client relationship is one such relationship giving rise to a fiduciary duty as a matter of law. (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 140.)

Corporations Code § 25009(a) defines “investment advisor” as “any person who, for compensation, engages in the business of advising others, either directly or through

publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as a part of a regular business, publishes analyses or reports concerning securities.”

The FAC alleges Defendants sold highly sophisticated and complex insurance and securities products to consumers. They also advised, recommended and assisted Plaintiff with using loan proceeds to invest in a securities portfolio with a modeled return on investment sufficient to pay for the insurance premiums. (FAC, ¶¶ 9, 24.) Defendants performed financial modeling, predicted return on investments, and facilitated Plaintiff s investment in said securities. (FAC, ¶¶ 25, 26.)

Such allegations are sufficient to support a finding that Defendants were acting as investment advisors within the meaning of Corporations Code section 25009. (See Hasso, supra, 227 Cal.App.4th at 141-145.)

Accordingly, the demurrer to the second cause of action is OVERRULED.

Fifth Cause of Action – Unfair Competition

The Unfair Competition Law (UCL), Business and Professions Code section 17200 et seq., prohibits unfair competition, including unlawful, unfair or fraudulent business acts. (Cel-Tech Comm., Inc. v. Los Angeles Cellular Tele. Co. (1999) 20 Cal.4th 163, 180.) “A UCL action is an equitable action by means of which a plaintiff may recover money or property obtained from the plaintiff or persons represented by the plaintiff through unfair or unlawful business practices. It is not an all-purpose substitute for a tort or contract action.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173.)

In ruling on the prior demurrer, the court found that Plaintiff had alleged an unfair business or fraudulent business practice but had not alleged facts identifying any money paid to the Defendants that constitute

restitution, such as commissions. (ROA 39.) Plaintiff “cured” this defect by adding the allegation that he paid Defendants a commission. (FAC, ¶ 51.)

Defendants argue that, by law, a commission on an insurance policy is paid by the insurance company to the agent pursuant to the contract between them. (Ins. Code § 769.1.) The insured does not pay the commission. But that contract is not before the court and it is unknown whether the commission was paid by the insurance company or not. Plaintiff alleges he paid Defendants a commission. This is sufficient for purposes of alleging an UCL claim.

Accordingly, the demurrer to the fifth cause of action is OVERRULED.

MOTION TO STRIKE

Defendants Tippett Moorhead & Haden, Michael Moorhead and Daniel Church’s Motion to Strike Portions of the First Amended Complaint is DENIED.

Defendants move to strike the following allegations from the FAC:

(1) Plaintiff’s claim for restitution against Defendants in connection with the fifth cause of action for Violation of Unfair Competition Law, Business and Professions Code § 17200, et seq. at paragraph ¶ 52 of the FAC. (2) Prayer of Relief No. 2 seeking “compensatory and restitution damages in amount exceeding $2 million.” (3) Prayer of Relief No. 4 seeking “declaratory and/or injunctive relief.” (4) Prayer of Relief No. 5 seeking “Restitution damages according to proof.”

In light of the court’s ruling that Plaintiff has stated a claim for unfair competition, the motion to strike is DENIED.

Moving Parties shall give notice.