This case was last updated from Los Angeles County Superior Courts on 06/09/2019 at 03:31:07 (UTC).

PETER FISCHL VS GREGORY R. ACOSTA, INC.

Case Summary

On 07/19/2016 PETER FISCHL filed a Property - Other Property Fraud lawsuit against GREGORY R ACOSTA, INC. This case was filed in Los Angeles County Superior Courts, Pomona Courthouse South located in Los Angeles, California. The Judges overseeing this case are OKI, DAN THOMAS and GLORIA WHITE-BROWN. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****8602

  • Filing Date:

    07/19/2016

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Property - Other Property Fraud

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Pomona Courthouse South

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

OKI, DAN THOMAS

GLORIA WHITE-BROWN

 

Party Details

Plaintiff

FISCHL PETER

Defendants

SECURITIES AMERICA INC.

PACIFIC LIFE INSURANCE COMPANY

KESTRA INVESTMENT SERVICES LLC

DIAMOND BAR EXECUTIVE BENEFIT PROGRAMS &

ACOSTA GREGORY

GREGORY R. ACOSTA INC.

DIAMOND BAR EXECUTIVE BENEFIT PROGRAMS & INSURANCE SERVICES INC.

ACOSTA GREGORY R.

Attorney/Law Firm Details

Plaintiff Attorneys

ZUSSMAN ESQ. MARC I.

ZUSSMAN MARC IRWIN

Defendant Attorneys

D'AMURA ESQ. RICHARD A.

EDGERTON III ESQ. SAMUEL Y.

LILLY ESQ. MATTHEW E.

EDGERTON SAMUEL YOUNGS III

LILLY MATTHEW EDWARD

D'AMURA RICHARD A.

 

Court Documents

Declaration

5/24/2019: Declaration

Unknown

8/17/2016: Unknown

Answer

8/26/2016: Answer

Unknown

9/14/2016: Unknown

Unknown

9/14/2016: Unknown

Case Management Statement

11/15/2016: Case Management Statement

Unknown

12/5/2016: Unknown

Minute Order

12/6/2016: Minute Order

Unknown

1/6/2017: Unknown

Unknown

1/6/2017: Unknown

Other -

1/6/2017: Other -

Notice of Ruling

1/11/2017: Notice of Ruling

Notice of Change of Address or Other Contact Information

1/11/2017: Notice of Change of Address or Other Contact Information

Unknown

2/21/2017: Unknown

Minute Order

11/8/2017: Minute Order

Notice of Case Reassignment and Order for Plaintiff to Give Notice

12/19/2018: Notice of Case Reassignment and Order for Plaintiff to Give Notice

Case Management Statement

4/10/2019: Case Management Statement

Minute Order

4/26/2019: Minute Order

41 More Documents Available

 

Docket Entries

  • 05/24/2019
  • Motion for Leave to File a Cross-Complaint; Filed by Pacific Life Insurance Company (Defendant)

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  • 05/24/2019
  • Declaration (DECLARATION OF MATTHEW); Filed by Pacific Life Insurance Company (Defendant)

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  • 04/26/2019
  • at 08:30 AM in Department J, Gloria White-Brown, Presiding; Status Conference (reArbitration as to Deft. Kestra) - Held

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  • 04/26/2019
  • Minute Order ( (Status Conference re: Arbitration as to Deft. Kestra)); Filed by Clerk

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  • 04/25/2019
  • at 08:30 AM in Department J, Gloria White-Brown, Presiding; Status Conference (reArbitration as to Deft. Kestra) - Not Held - Continued - Stipulation

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  • 04/10/2019
  • Case Management Statement; Filed by Peter Fischl (Plaintiff)

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  • 04/10/2019
  • Stipulation and Order (stipulation to continue CMC); Filed by Peter Fischl (Plaintiff)

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  • 04/02/2019
  • Notice of Change of Address or Other Contact Information; Filed by Marc Irwin Zussman (Attorney)

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  • 03/22/2019
  • Notice of Deposit - Jury; Filed by Peter Fischl (Plaintiff)

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  • 03/21/2019
  • Proof of Service (not Summons and Complaint); Filed by Peter Fischl (Plaintiff)

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45 More Docket Entries
  • 08/30/2016
  • Rtn of Service of Summons & Compl; Filed by Peter Fischl (Plaintiff)

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  • 08/30/2016
  • Rtn of Service of Summons & Compl; Filed by Peter Fischl (Plaintiff)

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  • 08/30/2016
  • Rtn of Service of Summons & Compl; Filed by Peter Fischl (Plaintiff)

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  • 08/30/2016
  • Rtn of Service of Summons & Compl; Filed by Peter Fischl (Plaintiff)

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  • 08/26/2016
  • Answer; Filed by Pacific Life Insurance Company (Defendant)

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  • 08/17/2016
  • Rtn of Service of Summons & Compl; Filed by Peter Fischl (Plaintiff)

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  • 07/20/2016
  • Notice of Case Management Conference; Filed by Clerk

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  • 07/19/2016
  • Complaint; Filed by Peter Fischl (Plaintiff)

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  • 07/19/2016
  • Summons (on Complaint); Filed by Clerk

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  • 07/19/2016
  • Civil Case Cover Sheet; Filed by Peter Fischl (Plaintiff)

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Tentative Rulings

Case Number: KC068602    Hearing Date: September 18, 2020    Dept: J

HEARING DATE: Friday, September 18, 2020

NOTICE: OK[1]

RE: Fischl v. Gregory R. Acosta, Inc., et al. (KC068602)

______________________________________________________________________________

 

1. Defendant Pacific Life Insurance Company’s DEMURRER TO THIRD AMENDED

COMPLAINT

Responding Party: Plaintiff, Peter Fischl

2. Defendant Pacific Life Insurance Company’s MOTION TO STRIKE ALLEGATIONS FROM THIRD AMENDED COMPLAINT

Responding Party: Plaintiff, Peter Fischl

Tentative Ruling

1. Defendant Pacific Life Insurance Company’s Demurrer to Third Amended Complaint is SUSTAINED. The court will hear from counsel for Plaintiff as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.

2. Defendant Pacific Life Insurance Company’s Motion to Strike Allegations from Third Amended Complaint is DENIED as MOOT.

Background

Plaintiff Peter Fischl (“Plaintiff”) alleges that his broker misrepresented the nature of certain life insurance policies, annuities and mutual funds, which allegedly induced him to purchase the investments. Plaintiff claims the investments were not in the best interests of his financial portfolio.

On January 6, 2017, the court ordered Plaintiff’s claims against Kestra Investment Services, LLC (“Kestra”) to arbitration with the Financial Industry Regulatory Authority Dispute Resolution (“FINRA”) and stayed Plaintiff’s claims as against Kestra pending arbitration with FINRA. On March 4, 2019, Plaintiff dismissed Gregory R. Acosta, Inc. (“Acosta Inc.”), Diamond Bar Executive Benefit Programs & Insurance Services, Inc. (“DBEBP”), Kestra, Securities America, Inc. (“Securities”) and Gregory R. Acosta (“Acosta”), with prejudice.

On August 9, 2019, Pacific Life Insurance Company (“Pacific Life”) filed a cross-complaint, asserting causes of action against Acosta, Acosta Inc., DBEBP, Securities and Kestra for:

1. Contractual Indemnity

2. Equitable Indemnity

On May 4, 2020, Plaintiff filed a Third Amended Complaint (“TAC”), asserting causes of action against Acosta Inc., DBEBP, Kestra, Securities, Pacific Life, Acosta and Does 1-50 for:

1. Intentional Misrepresentation

2. Negligent Misrepresentation

3. Negligence

4. Unfair Competition (B&P 17200)

The Final Status Conference is set for September 25, 2020. Trial is set for October 6, 2020.

1. Demurrer to Third Amended Complaint

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; Code Civ. Proc., § 430.10(e).)

When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732.)

Discussion

Pacific Life demurs, per Code of Civil Procedure § 430.10, subsection (e), to the first through fourth causes of action in Plaintiff’s TAC, on the basis that they each fail to state facts sufficient to constitute causes of action.

Merits

Doctrine of Truthful Pleading

Plaintiff, in his original complaint filed July 19, 2016, asserted that he hired Acosta and Acosta’s affiliated companies, Gregory Inc., Diamond Inc. and Securities America as his financial advisors in 2008. (Complaint, ¶14.) Plaintiff alleged that, at some point around March 2011, Acosta terminated his relationship with Securities America, started a new relationship with Kestra and continued providing his services via Kestra. (Id., ¶15.) Plaintiff referred to Acosta, Acosta Inc., DBEBP, Securities and Kestra collectively as the “Advisor Defendants” and alleged that at all relevant times, the Advisor Defendants maintained control and acted as custodians of all of Plaintiff’s investments and related accounts.” (Id., ¶19.) Plaintiff alleged that, in or about May 2008, the Advisor Defendants recommended that he purchase two life insurance policies and three annuities issued by Pacific Life, and to invest in a mutual fund also managed by Pacific Life the “Alleged Unsuitable Investments”). (Id., ¶¶22, 23, 25 and 31.) Plaintiff alleged that the Alleged Unsuitable Investments were unsuitable for him and were not in his best interests. (Id., ¶¶24, 28 and 32.) Plaintiff alleged that Advisor Defendants fraudulently led Plaintiff to invest in the Alleged Unsuitable Investments for the sole purpose of generating large commissions and fees paid by Pacific Life to the Advisor Defendants. (Id., ¶¶26-28 and 33.) Plaintiff further alleged that Advisor Defendants inappropriately serviced the investments in an unsuitable manner through the use of inter-account transactions, causing further damage to Plaintiff. (Id., ¶¶34-37 and 43.) Plaintiff alleged that the Advisor Defendants’ alleged misconduct could be vicariously imputed to Pacific Life on an agency theory (Id., ¶¶46, 52, 55; see also ¶6 [“Pacific Life was ACOSTA’s employer, principal, and/or control person”]) and that Pacific Life “aided and abetted” Acosta’s breach of fiduciary duty (Id., ¶65.) Although Plaintiff alleged that “Pacific Life issued [life insurance policies] even though Plaintiff’s application clearly showed that his annual income was insufficient to cover the large premiums, and they were unsuitable according to Plaintiff’s needs” (Id., ¶23) and that “Pacific Life never issued a warning to Plaintiff or informed him of the inappropriateness or unsuitable nature of such regular large withdrawals from a front end load mutual fund” (Id., ¶29), Plaintiff failed to tie these allegations to his alleged damages.

On January 6, 2017, the court ordered Plaintiff’s claims against Kestra to arbitration with FINRA and stayed Plaintiff’s claims as against Kestra pending arbitration with FINRA. On March 4, 2019, Plaintiff dismissed the Advisor Defendants with prejudice. On September 10, 2019, Plaintiff filed his First Amended Complaint (“FAC”); on December 6, 2019, Plaintiff filed his Second Amended Complaint (“SAC”). The FAC and SAC were both filed pursuant to stipulations/orders. Although the FAC and SAC both claimed to assert claims against Pacific Life based solely on its alleged direct conduct, Plaintiff continued to allege that Acosta defrauded him and sought to hold Pacific Life vicariously liable for Acosta’s conduct. For instance, Plaintiff alleged that “[a]t all relevant times, PACIFIC LIFE was ACOSTA’s employer, principal, and/or control person and ACOSTA was a representative, agent, employee and acting in concert and with the approval and under the oversight and supervision of PACIFIC LIFE.” (FAC, ¶3; see also FAC and SAC ¶2 [“at all relevant times, ACOSTA was a licensed agent, representative and sales person of PACIFIC LIFE”]; SAC, ¶3 [“[a]t all relevant times, ACOSTA was a representative of PACIFIC LIFE and acted in concert and with the approval and under the oversight and supervision of PACIFIC LIFE”]; SAC, ¶15 [“[i]n or about May 2008, Plaintiff’s sister introduced ACOSTA, as an agent, representative and sales person of PACIFIC LIFE, to Plaintiff”].) Plaintiff then repeated his allegations previously alleged in the complaint that the Advisor Defendants—and only the Advisor Defendants—convinced him to invest in the Alleged Unsuitable Investments based on misrepresentations that they were suitable for him and that the transactions were in his best interest when, in fact, the Advisor Defendants were solely motivated to maximize their profits at Plaintiff’s expense. (FAC, ¶¶17-44; SAC, ¶¶23-25, 30-32, 35 and 39-47.) As to loss causation, Plaintiff alleged that the Advisor Defendants were the source of his damages:

¿ “At all relevant times, ACOSTA and the ACOSTA affiliates maintained control and acted as custodians of all of Plaintiffs investments and related accounts;” (FAC, ¶25; SAC, ¶22)

¿ “In or about May 2008, based upon oral and written representations made by ACOSTA and the ACOSTA affiliates, Plaintiff surrendered the Old Policies and purchased Defendant PACIFIC LIFE’S Variable Life Insurance policy number CP65655090 . . .;” (FAC, ¶27; SAC, ¶24)

¿ “In or about July 2008, based on oral and written representations made by ACOSTA and the ACOSTA Affiliates, Plaintiff purchased another one of Defendant PACIFIC LIFE’s Variable Life Insurance policy number V51651660 . . .;” (FAC, ¶28; SAC, ¶25)

¿ Also in or about July 2008, ACOSTA and the ACOSTA affiliates recommended and caused Plaintiff to purchase $130,000 of PACIFIC LIFE Mutual Fund . . .;” (FAC, ¶32; SAC, ¶29)

¿ “Lastly, from June to December 2008, ACOSTA and the ACOSTA affiliates also recommended and caused Plaintiff to purchase five separate annuities;” (FAC, ¶38; SAC, ¶35)

¿ “ACOSTA and the ACOSTA affiliates, engaged in various inappropriate and unsuitable interaccount transactions;” (FAC, ¶43; SAC, ¶40)

¿ “In sum, ACOSTA and the ACOSTA affiliates, from May 2008 to June 2015, invested over $800,000 of Plaintiffs entire retirement savings in two unsuitable life insurance policies, five annuities, and one mutual fund;” (FAC, ¶45; SAC, ¶42)

¿ “The misrepresentations and concealments by ACOSTA, The ACOSTA affiliates, and the other defendants, including those named as DOES 1 through 50, directly, legally, and proximately caused Plaintiff to hire the services of PACIFIC LIFE, ACOSTA, the ACOSTA affiliates and the other defendants, including those named DOES 1 through 50, surrender, alter, and purchase numerous investments, and suffer lost opportunities, penalties, fees, and damages. By reason of the fraud, Plaintiff has been damaged in a sum to be established according to proof at trial but no less than $1,0000,000;” (FAC, ¶64)

¿ “The misrepresentations and concealments directly, legally, and proximately caused Plaintiff to hire the services of PACIFIC LIFE, ACOSTA, the ACOSTA affiliates and the other defendants, including those named as DOES 1 through 50, surrender, alter, and purchase numerous investments, and suffer lost opportunities, penalties, fees and damages. By reason of the fraud, Plaintiff has been damaged in a sum to be established according to proof at trial but no less than $1,000,000, with a damage set-off for the amount received from the Acosta Affiliates for the FINRA matter;” (SAC, ¶59)

¿ “The ACOSTA affiliates’ breach directly, legally, and proximately caused Plaintiff to suffer unsuitable investments, lost opportunities, penalties, fees, and damages to be established according to proof at trial but no less than $1,000,000 . . . ” (FAC, ¶83; SAC, ¶74.)

Plaintiff’s TAC contains the following prefatory language: Plaintiff “hereby files his Third Amended Complaint against PACIFIC LIFE Insurance Company (‘PAC LIFE’) for its direct role in causing the damages suffered by him both through its direct conduct in marketing, underwriting and other direct acts that constituted improper and illegal sales of unsuitable life insurance and annuities, improper replacing or viable and affordable life insurance policies with unsuitable and unaffordable life insurance policies to Plaintiff and others. . . Although agents including Gregory R. Acosta, Inc. (‘Gregory’) Diamond Bar Executive Benefit Programs &Insurance Services, Inc., Kestra Investment Services, LLC (‘KESTRA’), Securities America, Inc. (‘SECURITIES AMERICA’) and Gregory R. Acosta (‘ACOSTA’) (Hereafter, known as the Acosta Affiliates) initiated the sales of the products and had responsibility for their own actions, PAC LIFE designed the products, and approved the sales, which necessarily required a determination that those sales were not unsuitable; PAC LIFE alone issued the policies, and in order to sell these policies, it alone designed an illegal marketing scheme which directly and intentionally misrepresented the suitability of the products and encouraged its agents to do the same. PAC LIFE also encouraged and permitted improper replacements of existing policies (known as ‘twisting’), an unlawful business practice specifically prohibited by statute, contrary to established norms in the industry, and that practice caused significant damage to Plaintiff and others. PAC LIFE also knowingly retained the benefits and profits from those improper

Sales. Despite the fact that Plaintiff and other customers negatively impacted by these policies had no direct contact with PAC LIFE employees themselves, PAC LIFE nevertheless had direct responsibilities to Plaintiff and other customers, including but not limited to the obligation not to sell unsuitable products and the obligation not to unnecessarily replace existing life insurance, obligations which PAC LIFE ignored and disdained, and in so doing, failed in its direct responsibilities to its customers, without which none of the previously asserted improper actions of the Acosta Affiliates, nefarious though they were, could possibly have taken place . . . Plaintiff has released Gregory R. Acosta, Inc., Diamond Bar Executive Benefit Programs & Insurance Services, Inc., Kestra Investment Services, LLC, Securities America, I.C, and Gregory Acosta (collectively referred to as the ‘Acosta Affiliates’) from all claims and dismissed them from this action with prejudice. . . Plaintiff has also given a limited release to Defendant PAC LIFE and its affiliates from all claims based upon vicarious liability for the bad acts and omissions of the Acosta Affiliates . . . The claims and causes of action against Defendant PAC LIFE contained herein are not based on the previously released claims, they are not based on vicarious liability for the acts of its agents, they are not based on conspiracy with its agents or acts in concert with them, they are not based on aiding and abetting the acts or others, but rather, they are based on PAC LIFE’ s own violations of its direct responsibilities to Plaintiff and others, its own conduct and the extent to which Plaintiff’s damages were caused by that conduct.” (TAC, 1:26-3:12 and 3:24-4:2.)

Pacific Life urges that “[a] plaintiff may not avoid a demurrer by pleading facts or positions in an amended complaint that contradict the facts pleaded in the original complaint or by suppressing facts which provide the pleaded facts false.” (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877.) Under the doctrine of truthful pleading, “[t]he courts . . . will not close their eyes to situations where a complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts that are judicially noticed.” (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.) The court determines that there is no violation of the doctrine of truthful pleading. Plaintiff has not pled any inconsistent factual allegations.

First and Second Causes of Action (i.e., Intentional and Negligent Misrepresentation, Respectively)

“The essential allegations of an action for fraud are a misrepresentation, knowledge of its falsity, intent to defraud, justifiable reliance, and resulting damage.” (Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109.) “Fraud must be pleaded with specificity . . . [t]o withstand a demurrer, the facts constituting every element of the fraud must be alleged with particularity, and the claim cannot be salvaged by references to the general policy favoring the liberal construction of pleadings.” (Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782 [emphasis in original].) “This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 (emphasis in original), quoting Hills Trans. Co. v. Southwest (1968) 266 Cal.App.2d 702, 707.)

“The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

“The elements of negligent misrepresentation are (1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.) Likewise, “[e]ach element in a cause of action for. . . negligent misrepresentation must be factually and specifically alleged.” (Cadlo v. Owens-Illinois, Inc. (2004) 125 C.A.4th 513, 519 [citation omitted].)

Plaintiff, however, concedes that he had no contact whatsoever with Pacific Life and has identified no representations made to him by Pacific Life. (TAC, 2:21-22 [“Plaintiff and other customers negatively impacted by these policies had no direct contact with PAC LIFE employees themselves. . .”].) It follows, then, that Plaintiff did not rely on any misrepresentation by Pacific Life in purchasing the Alleged Unsuitable Investments. Pacific Life’s demurrer to the first and second causes of action is sustained.

Third Cause of Action (i.e., Negligence)

“The elements of any negligence cause of action are duty, breach of duty, proximate cause, and damages.” (Peredia v. HR Mobile Services, Inc. (2018) 25 Cal.App.5th 680, 687.)

Plaintiff has failed to allege any facts supporting the element of duty. Pacific Life’s demurrer to the third cause of action is sustained.

Fourth Cause of Action (i.e., Unfair Competition (B&P 17200))

 

When the underlying legal claim fails, so too will a derivative Unfair Competition Law claim. (AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923.) Pacific Life’s demurrer to the fourth cause of action is sustained.

2. Motion to Strike Third Amended Complaint

Based upon the ruling made on the demurrer, the motion to strike is denied as moot.


[1] The demurrer and motion to strike were filed and mail-served on June 9, 2020. On June 11, 2020, a “Notice of Continuance Due to COVID-19 State of Emergency Declarations” was filed, in which the court, on its own motion, scheduled the demurrer and motion to strike for hearing on July 13, 2020 at 10:00 a.m.; notice was given to all counsel. On June 29, 2020, a “Stipulation and Order Re: Continuing the Hearing on Defendant Pacific Life Insurance Company’s Demurrer to Plaintiff’s Third Amended Complaint and Motion to Strike” was filed, in which the July 13, 2020 hearing date was rescheduled to August 4, 2020. On July 8, 2020, moving party filed and mail-served a “Notice of Continued Hearing Date Re Pacific Life Insurance Company’s Demurrer to Third Amended Complaint and Motion to Strike,” advising therein that the August 4, 2020 hearing had been continued to September 18, 2020 at 10:00 a.m.

Case Number: KC068602    Hearing Date: March 13, 2020    Dept: J

HEARING DATE: Friday, March 13, 2020

NOTICE: Motion #1:OK[1]

Motion #2: OK

RE: Fischl v. Gregory R. Acosta, Inc., et al. (KC068602)

______________________________________________________________________________

 

1. Defendant Pacific Life Insurance Company’s DEMURRER TO SECOND AMENDED

COMPLAINT

Responding Party: Plaintiff, Peter Fischl

2. Cross-Defendants Kestra Investment Services, LLC’s, Gregory R. Acosta, Inc.’s, Diamond Bar Executive Benefit Programs & Insurance Services, Inc.’s and Gregory R. Acosta’s MOTION FOR JUDGMENT ON THE PLEADINGS [i.e., as to Pacific Life’s Cross-Complaint] [joined by Securities America, Inc.]

Responding Party: Cross-Complainant, Pacific Life Insurance Company

Tentative Ruling

1. Defendant Pacific Life Insurance Company’s Demurrer to Second Amended Complaint is SUSTAINED. The court will hear from counsel for Plaintiff as to whether leave to amend is requested, and as to which cause(s) of action, and will require an offer of proof if so.

2. Defendants Kestra Investment Services, LLC’s, Gregory R. Acosta, Inc.’s, Diamond Bar Executive Benefit Programs & Insurance Services, Inc.’s and Gregory R. Acosta’s Motion for Judgment on the Pleadings [i.e., as to Pacific Life’s Cross-Complaint] is DENIED as untimely.

Background

Plaintiff Peter Fischl (“Plaintiff”) alleges that his broker misrepresented the nature of certain life insurance policies, annuities and mutual funds, which allegedly induced him to purchase the investments. Plaintiff claims the investments were not in the best interests of his financial portfolio.

On January 6, 2017, the court ordered Plaintiff’s claims against Kestra Investment Services, LLC (“Kestra”) to arbitration with the Financial Industry Regulatory Authority Dispute Resolution (“FINRA”) and stayed Plaintiff’s claims as against Kestra pending arbitration with FINRA. On March 4, 2019, Plaintiff dismissed Gregory R. Acosta, Inc. (“Acosta Inc.”), Diamond Bar Executive Benefit Programs & Insurance Services, Inc. (“DBEBP”), Kestra, Securities America, Inc. (“Securities”) and Gregory R. Acosta (“Acosta”), with prejudice.

On August 9, 2019, Pacific Life Insurance Company (“Pacific Life”) filed a cross-complaint, asserting causes of action against Acosta, Acosta Inc., DBEBP, Securities and Kestra for:

  1. Contractual Indemnity

  2. Equitable Indemnity

    On December 6, 2019, Plaintiff filed a Second Amended Complaint (“SAC”), asserting causes of action against Acosta Inc., DBEBP, Kestra, Securities, Pacific Life, Acosta and Does 1-50 for:

  1. Intentional Misrepresentation

  2. Negligent Misrepresentation

  3. Breach of Fiduciary Duty

  4. Negligence

  5. Financial Abuse of an Elder

  6. Violation of Unfair Competition Law

  7. Violation of Penal Code Section 496(c)

    A Status Conference is set for May 7, 2020. The Final Status Conference if set for September 25, 2020. Trial is set for October 6, 2020.

    1. Demurrer to Second Amended Complaint

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (CCP §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).)

Discussion

Pacific Life demurs, per CCP § 430.10(e), to the first through seventh causes of action in Plaintiff’s SAC, on the basis that they each fail to state facts sufficient to constitute causes of action.

November 5, 2018 General Order

Pursuant to the November 5, 2018 General Order Re Mandatory Electronic Filing for Civil, litigants are required to provide printed courtesy copies of, inter alia, pleadings and motions (including attachments such as declarations and exhibits) of 26 pages or more, pleadings and motions that include points and authorities and demurrers. Here, the court did not receive a courtesy copy of the papers filed by the parties. Counsel is admonished. Counsel is instructed to comply with the court’s general order in future filings.

Merits

Plaintiff’s SAC contains the following prefatory language: Plaintiff “hereby files his second amended complaint against Pacific Life Insurance Company (‘PACIFIC LIFE’) for causing, contributing to, and compounding the damages suffered by Plaintiff both through its direct conduct and in aiding, abetting, and conspiring with Gregory R. Acosta, Inc. (‘GREGORY INC.’), Diamond Bar Executive Benefit Programs & Insurance Services, Inc., Kestra Investment Services, LLC (‘KESTRA’), Securities America, Inc. (‘SECURITIES AMERICA’) and Gregory R. Acosta (‘ACOSTA’). Hereafter, known as the Acosta Affiliates. Plaintiff has released [the Acosta Affiliates] . . . from all claims and dismissed them from this action with prejudice . . . Plaintiff has also released Defendant Pacific Life, and its affiliates, from all claims based upon vicariously [sic] liability for the bad acts and omissions of material facts of the Acosta Affiliates. Pacific Life’s liability in the SAC is not based on agency, but rather on PACIFIC LIFE’s direct conduct, including but not limited to defective underwriting and misleading marketing of its life insurance policies. The allegations in the SAC are that Defendant Pacific Life caused, contributed to, or compounded the damages suffered by Plaintiff both through their direct conduct and/or aiding, abetting, or conspiring with the Acosta Affiliates . . .” (SAC, 1:22-2:15 [emphasis added].)

Plaintiff, however, subsequently appears to hold Pacific Life vicariously liable for Plaintiff’s damages based on alleged misconduct by Acosta. See, e.g., ¶2 (“at all relevant times, ACOSTA was a licensed agent, representative and sales person of PACIFIC LIFE”); ¶3 (“[a]t all relevant times, ACOSTA was a representative of PACIFIC LIFE and acted in concert and with the approval and under the oversight and supervision of PACIFIC LIFE”); ¶15 (“In or about May 2008, Plaintiff’s sister introduced Acosta, as an agent, representative and sales person of Pacific Life, to Plaintiff”); ¶51 (“ACOSTA and the ACOSTA affiliates made each of the above misrepresentations under the authority to speak for PACIFIC LIFE”); ¶67 (“PACIFIC LIFE is liable for the conduct of ACOSTA and the ACOSTA affiliates and the other defendants . . .”); ¶74 (“The ACOSTA affiliates’ breach directly, legally, and proximately caused Plaintiff to suffer unsuitable investments, lost opportunities, penalties, fees, and damages to be established according to proof at trial but no less than $1,000,00 . . .”); ¶88 (“PACIFIC LIFE, by accepting and retaining the benefits that resulted from the transactions effected by ACOSTA, and the ACOSTA affiliates, is jointly liable with ACOSTA and the ACOSTA affiliates for the damages suffered by Plaintiff”). Plaintiff also alleges that the Acosta Affiliates, “[a]t all relevant times,” “maintained control and acted as custodians of all of Plaintiff’s investments and related accounts” (Id., ¶22) and alleges that his sole dealings were with Acosta, not Pacific Life (Id., ¶¶23-25,30-32, 35, 39-41, 42-47.) Plaintiff does not allege that he had any direct dealings with Pacific Life; in fact, Plaintiff concedes that “Plaintiff may have alleged that his sole dealings were with Acosta . . .” (Opposition, 4:13.)

Additionally, “[t]he essence of [a conspiracy] claim is that it is merely a mechanism for imposing vicarious liability; it is not itself a substantive basis for liability.” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823.) Courts similarly have referred to aiding and abetting as a form of vicarious liability See, e.g., Optional Capital, Inc. v. Akin Gump Strauss, Hauer & Feld LLP (2017) 18 Cal.App.5th 95, 101 (“Plaintiff sought to recover from Defendants on theories of vicarious liability (conspiracy and aiding and abetting)”); Doe I v. Cisco Systems, Inc. (N.D. Cal. 2014) 66 F.Supp.3d 1239, 1247.

Plaintiff’s allegations regarding fraudulent underwriting also fail. Plaintiff concedes that he had no dealings with Pacific Life, and does not allege that he relied on Pacific Life’s underwriting in purchasing the life insurance policies at issue or even that he was privy to such efforts; instead, Plaintiff alleges that he relied on Acosta’s alleged misrepresentations in purchasing the life insurance policies. Plaintiff’s citation to Insurance Code §§ 781 and 783.5 as “prohibit[ing] insurers from knowingly permitting an agent to make misrepresentations to induce a person to take out a new policy and allow an old policy to lapse” underscores that Plaintiff is falling back on his agency theory of liability; to the extent that this occurred, it was Acosta who did so, not Pacific Life.

The demurrer is SUSTAINED.

2. Motion for Judgment on the Pleadings

Legal Standard

The rules governing demurrers are generally applicable to a motion for judgment on the pleadings. (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999.) A motion by a defendant can be made on the grounds that “[t]he court has no jurisdiction of the subject of the cause of action alleged in the complaint,” or that “[t]he complaint does not state facts sufficient to constitute a cause of action against that defendant.” (CCP § 438(c)(1)(B)(i)&(ii).) The grounds for a motion for judgment on the pleadings “shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (CCP § 438(d).) As with a demurrer, the test is whether the complaint states any valid claim entitling plaintiff to relief.

Although a nonstatutory motion “may be made at any time either prior to the trial or at the trial itself” (Stoops v. Abbassi (2002) 100 Cal.App.4th 644, 650 [citation omitted]), a CCP § 438 motion cannot be made after entry of a pretrial conference order or 30 days before the initial trial date, whichever is later, unless the court otherwise permits. (CCP § 438(e).)

Discussion

Kestra, Acosta Inc., DBEBP and Acosta move the court, pursuant to CCP § 438, for judgment on the pleadings in their favor as to Pacific Life’s cross-complaint. The motion is joined by Securities.

November 5, 2018 General Order

Pursuant to the November 5, 2018 General Order Re Mandatory Electronic Filing for Civil, litigants are required to provide printed courtesy copies of, inter alia, pleadings and motions (including attachments such as declarations and exhibits) of 26 pages or more and pleadings and motions that include points and authorities. Here, the court did not receive a courtesy copy of the papers filed by the parties. Counsel is admonished. Counsel is instructed to comply with the court’s general order in future filings.

Analysis

The court DENIES the motion as untimely under CCP § 438(e). Although no pretrial conference order was entered, the original trial date in this action was October 3, 2017. Trial is currently set for October 6, 2020. Kestra, Acosta Inc., DBEBP and Acosta filed the motion pursuant to CCP § 438 only (See Motion 3:3 and reply, 1:22); accordingly, the lack of time limitations associated with a nonstatutory motion do not apply.


[1] Motion #1 was filed on January 3, 2020 and originally set for hearing on February 13, 2020. On January 9, 2020, moving party filed a “Notice of Rescheduled Hearing Date . . .,” advising therein that the hearing had been continued to March 13, 2020.