Opinion
No. CV 00-10029 CBM(Rcx)
June 29, 2001
The matters before the Court, the Honorable Consuelo B. Marshall, United States District Judge presiding, are (1) Plaintiffs Motion for Summary Judgment, (2) Defendant's Motion for Summary Judgment or, in the Alternative, for Partial Summary Judgment of Issues, (3) Plaintiffs Evidentiary Objections to the Admissibility of Mrs. Feldman's Testimony and Tape Recordings of Plaintiffs Conversations with Mrs. Feldman, (4) Defendant's Evidentiary Objections and (5) Plaintiffs Request for Judicial Notice. Counsel appeared before the Court on June 11, 2001. Upon consideration of the arguments presented, the Court (1) denies Plaintiffs Motion for Summary Judgment, (2) grants Defendant's Motion for Summary Judgment, (3) overrules Plaintiffs evidentiary objections, (4) sustains in part, overrules in part Defendant's evidentiary objections and (5) grants Plaintiffs Request for Judicial Notice.
JURISDICTION
This action is before the Court pursuant to 28 U.S.C. § 1332.
PROCEDURAL HISTORY
Plaintiff Marc Feldman filed this action against Defendants Allstate Insurance Company and Ms. Vicki Weed in Los Angeles Superior Court on July 13, 2000. The Complaint sets forth claims for (1) Breach of the Implied Covenant of Good Faith and Fair Dealing and (2) Declaratory Relief. The gravamen of Plaintiffs Complaint is that Defendant Allstate denied Plaintiffs burglary claim under his homeowner's policy in bad faith. Defendant Allstate removed this action to federal court on September 18, 2000, on the basis of diversity jurisdiction.
The Court granted the parties' stipulation to dismiss Ms. Weed with prejudice on May 23, 2001. The parties remaining in the lawsuit are Plaintiff and Defendant Allstate Insurance.
Plaintiff filed a Motion for Summary Judgment on April 27, 2001. Plaintiff argues there is no material factual dispute that Defendant breached the insurance policy and that Plaintiff is entitled to judgment and punitive damages. Defendant filed an Opposition and Objections to Plaintiffs Evidence on May 7, 2001. Plaintiff filed a Reply on May 10, 2001.
Defendant filed a Motion for Summary Judgment or in the alternative, for Partial Summary Judgment on April 30, 2001. Defendant seeks judgment on Plaintiffs declaratory relief and bad faith breach of implied covenant of good faith and fair dealing claims. Plaintiff filed an Opposition, Objections to Defendant's Evidence and a Request for Judicial Notice on May 7, 2001. Defendant filed a Reply and Objections to Plaintiffs Evidence on May 14, 2001.
BACKGROUND
The following facts are undisputed:
Plaintiff purchased an Allstate Deluxe Plus Homeowner's Policy, Policy No. 3515037790266 (the "Policy") from Defendant in July 1998. The insureds under the Policy were Plaintiff and his former wife, Lauren Feldman. The Policy insured the Feldmans' residence and personal property from July 30, 1998 through July 30, 1999. The Policy had a $500 deductible, with a $200 limit for cash losses.
Mrs. Feldman has remarried and has assumed the name of Mrs. Lauren Trevino.
The Policy states that, in event of property loss, the insured "must . . . give [Allstate] all accounting records, bills, invoices and other vouchers, or certified copies, which [Allstate] may reasonably request to examine." Policy at 21 (Wayne Beaudoin Decl., Ex. A). The Policy also states that Defendant Allstate "may cancel this policy for. . . material misrepresentation, fraud or concealment of material fact in presenting a claim, or violation of any of the policy terms." Policy at 6. The Policy further provides that Defendant Allstate does "not cover any loss or occurrence in which any insured person has concealed or misrepresented any material fact or circumstance." Policy at 6.
Plaintiffs residence was burglarized on February 22, 1999. Plaintiff telephoned Mrs. Feldman on February 22, 1999, after discovery of the burglary. Mrs. Feldman taped their conversation without informing Plaintiff. Plaintiff reported the burglary to the LAPD and stated that a black leather jacket, a Tommy Hilfiger brand ski jacket, five paintings, a 2.4 karat diamond ring in a platinum setting, $1,500 in cash and a driveway remote control were stolen from the residence. Plaintiff estimated that the collective value of the five paintings was $22,000.
The parties dispute the content of Plaintiffs February 22, 1999 conversation with Mrs. Feldman. Plaintiff objects to the admission of the tape on the grounds that the recording violated California Penal Code § 632.
Plaintiff notified Defendant of the burglary on February 23, 1999. Defendant Allstate requested on February 25, 1999, that Plaintiff submit proof of loss on the claim. Mr. Feldman told Defendant that he did not personally purchase the paintings and referred Defendant to Mrs. Feldman to determine the value of the stolen paintings. Plaintiff telephoned Mrs. Feldman on March 10, 1999 to discuss the value of the stolen paintings. Mrs. Feldman taped the conversation without informing Plaintiff. Plaintiff stated, in a "Sworn Statement in Proof of Loss" on April 1, 1999 that the stolen items, excluding the diamond ring, was valued at $24,900. Plaintiff also estimated the value of the stolen items to be $24,900 during an examination under oath on June 1, 1999.
The parties disagree on the contents of the conversation. Plaintiff objects to the admissibility of the tape recording of his March 10, 1999 conversation with Mrs. Feldman.
Mrs. Feldman submitted to an Examination under Oath on August 19, 1999. Mrs. Feldman testified that Mr. Feldman attempted to enlist her in a plan to defraud Defendant regarding the value of the paintings. Mrs. Feldman stated that two of the stolen paintings were worth about $1000 each and the three remaining paintings were worth between $50-$500 each. Mrs. Feldman testified that the black leather jacket and ski jacket were worth $150 and $75, respectively. She also produced the tape recordings of her telephone conversations with Plaintiff.
Defendant Allstate notified Plaintiff on August 30, 1999 that his claim was denied for failure to provide proof of loss and for making material misrepresentations regarding the value of the paintings.
DISCUSSION
I. Evidentiary Objections
A. Plaintiff's Evidentiary Objections
Plaintiff objects to the admissibility of the tape recordings of Plaintiffs February 22, 1999 and March 10, 1999 telephone conversations with Mrs. Feldman and the transcripts of such conversations. Plaintiff further objects to the admissibility of Mrs. Feldman's Examination under Oath.
1. Admissibility of the Tape Recordings
Plaintiff argues that Mrs. Feldman secretly taped their conversations in violation of Section 632 of the California Penal Code.
The California Privacy Act makes it illegal for any person to intentionally record a confidential communication without the consent of all parties to the communication" CAL. PENAL CODE § 632(a). A communication is not confidential if the parties "may reasonably expect that the communication may be overheard or recorded." CAL. PENAL CODE § 632(c). "[N]o evidence obtained as a result of... recording a confidential communication in violation of [the California Privacy Act] shall be admissible in any judicial, administrative, legislative or other proceeding." CAL. PENAL CODE § 632(d).
However, federal courts have admitted into evidence recorded communications, even though illegal under state law, if the recording is legal under federal law. See, United States v. Daniel. 667 F.2d 783, 784 (9th Cir. 1982); United States v. Adams, 694 F.2d 200, 201 (9th Cir. 1982). The federal Omnibus Crime Control and Safe Streets Act ("OCCSSA") prohibits the intentional recording of confidential communications. See 18 U.S.C. § 2511 (1)(a). OCCSSA states that "[i]t shall not be unlawful... for a person not acting under color of law to intercept a wire, oral, or electronic communication where such person is a party to the communication . . . unless such communication is intercepted for the purpose of committing any criminal or tortious act." 18 U.S.C. § 2511 (2)(d); accord Roberts v. Americable Int'l, Inc., 883 F. Supp. 499, 503 (E.D. Cal. 1995) (admitting recorded conversation into evidence under OCCSSA although such recording illegal under California Privacy Act).
Plaintiff argues that the recording of his conversations with Mrs. Feldman violated the California Privacy Act. Plaintiff telephoned Mrs. Feldman shortly after discovering that his home had been burglarized on February 22, 1999. Defendant argues that Plaintiff could not have reasonably expected the communication to be confidential since Plaintiff was aware that, pursuant to a November 12, 1997 Stipulated Temporary Restraining Order ("TRO") in divorce proceedings in Los Angeles Superior Court, the parties were permitted to record conversations between themselves. However, the TRO expired on May 4, 1998. Feldman Decl. ¶ 8.
Defendant further argues that Mrs. Feldman's recording of her telephone conversations with Plaintiff was permissible under OCCSSA. Mrs. Feldman, as a party to the conversations, was not prohibited from recording them under federal law. Plaintiff has produced no evidence (and has made no allegation) that Mrs. Feldman recorded the calls for an illegal purpose. The Ninth Circuit has permitted the admission of recorded communications when such recordings were legally made under federal law — even though the recordings were illegal under state law. See United States v. Adams., 694 F.2d 200, 201 (9th Cir. 1982). Plaintiffs motion papers do not address the effect of OCCSSA on the admissibility of the tape recorded conversations.
Based on the foregoing, the Court overrules Plaintiffs objections to the admission of the tape recordings of his February 22, 1999 and March 10, 1999 conversation with Mrs. Feldman.
2. Admissibility of Mrs. Feldman's Testimony
Plaintiff argues that evidence from Mrs. Feldman's Examination under Oath is inadmissible because such evidence violates Plaintiffs marital communication privilege.
Federal Rule of Evidence 501 provides that, in diversity cases, a person's right to exert a privilege is governed by state law. FED. R. EVID. 501; see also Star Editorial, Inc. v. United States District Court, 7 F.3d 856, 859 (9th Cir. 1993). Under California law, "a spouse... has a privilege during the marital relationship and afterwards . . . to prevent another from disclosing, a communication if he claims the privilege and the communication was made in confidence between him and the other spouse while they were husband and wife." CAL. EVID. CODE § 980. The privilege does not extend to communications made "to enable or aid anyone to commit or plan to commit a crime or fraud." CAL. EVID. CODE § 981.
Federal Rule of Evidence 501 states, in relevant part, that "civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness, person, government, State, or political subdivision thereof shall be determined in accordance with State law." FED. R. CIV. P. 501.
Plaintiff argues that his statements during his telephone conversations with Mrs. Feldman are inadmissible as privileged marital communications. In his March 10, 1999 conversation with Mrs. Feldman, Plaintiff repeatedly asked Mrs. Feldman to tell Allstate that she could not remember the value of the stolen paintings — even though Mrs. Feldman had told Plaintiff that the stolen paintings were worth far less than represented to Allstate. California's marital communication privilege does not protect Plaintiffs statements which were made to misrepresent the value of the paintings to Allstate. Plaintiff further argues that he has not waived his marital communications privilege. Plaintiffs argument erroneously presumes that the marital communications privilege applies.
Based on the foregoing, the Court finds that the marital communications privilege is inapplicable to Plaintiffs February 22 and March 10, 1999 telephone conversations with Mrs. Feldman.
B. Defendant's Evidentiary Objections
Defendant filed Objections on May 7, 2001, to Evidence Submitted in Support of Plaintiffs Motion for Summary Judgment. The Court sustains Defendant's Objections no. 1, 5-9, 12, 17, 21-24, 28 and 31-32. The Court sustains Defendant's Objection no. 15 as to the word "illegally" and overrules the remainder of Defendant's objection. The Court sustains Defendant's Objection no. 20 as to the phrase "depriving me of my right to assert my confidential marital privilege," but overrules the remainder of the objection. The Court sustains Defendant's Objection no. 29 as to the phrase "Mr. Feldman would have provided to Allstate prior to their denial of his claim, had they given him an opportunity to do so" and overrules the objection as to the phrase "wherein I provided Allstate with information effecting Lauren Feldman's credibility." The Court overrules Defendant's objections no. 2-4, 10, 11, 13, 14, 16, 18, 19, 25-27 and 30. Defendant filed Objections on May 14, 2001 to Evidence submitted in support of Plaintiffs Opposition to Defendant's Motion for Summary Judgment. The Court sustains Defendant's Objections no. 1, 5-9, 20, 24-27, 31, 33 and 36. The Court overrules Defendant's Objections no. 2-4, 10-12, 14-17, 19, 21, 22, 28-30, 32, 34, 35 and 37. The Court sustains Defendant's Objection no. 13 as to the word "illegally" and overrules the remainder of the objection. The Court sustains Defendant's Objection no. 18 as to the word "illegally" and overrules the remainder of the objection. The Court sustains Defendant's Objection no. 23 as to the phrase "depriving me of my right to assert my confidential privilege" and overrules the remainder of the objection.
II. Request for Judicial Notice
Plaintiff requests that the Court take judicial notice of Plaintiffs Complaint for Compensatory and Punitive Damages. The Court grants Plaintiffs Request for Judicial Notice.
III. Motions for Summary Judgment
Plaintiff and Defendant contend that there is no genuine dispute of material fact as to Plaintiffs breach of implied covenant and declaratory relief claims. Each argues that they are entitled to judgment as a matter of law.
"[W]hen parties submit cross-motions for summary judgment, `[e]ach motion must be considered on its own merits." Fair Housing Council of Riverside County, Inc. v. Riverside Two, Case No. 99-55830, 249 F.3d 1132, 1135 (9th Cir. 2001). Summary judgment against a party is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to am material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c) (emphasis added). A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the nonmoving party will have the burden of proof at trial, the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party's case. Id. If the moving party meets its initial burden, the nonmoving party must then set forth, by affidavit or as otherwise provided in Rule 56, "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
In judging evidence at the summary judgment stage, the Court does not make credibility determinations or weigh conflicting evidence and draws all inferences in the light most favorable to the nonmoving party. T. W. Elec. Svc., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir. 1987). The evidence presented by the parties must be admissible. FED. R. CIV. P. 56(e). Conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment. See Thornhill Pub. Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979).
A. Implied Covenant of Good Faith Fair Dealing
Under California law, a covenant of good faith and fair dealing is implied in every insurance contract. Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 577 (1973). A plaintiff establishes a claim for breach of implied covenant by showing that benefits due under the insurance policy have been unreasonably or improperly withheld. Love v. Fire Ins. Exchange, 221 Cal.App.3d 1136, 1151 (1990). An insurer breaches its implied duty by unreasonably delaying to process an insured's claim or by failing to properly investigate a claim. Globe Indemnity Co. v. Superior Court, 6 Cal.App.4th 725, 731 (1992); Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 817 (1979). "[I]t is essential that an insurer fully inquire into possible bases that might support the insured's claim." Egan, 24 Cal.3d at 819; Downey Savings Loan Ass'n v. Ohio Casualty Ins. Co., 189 Cal.App.3d 1071, 1096 (1987). "Under California law, a bad faith claim can be dismissed on summary judgment if the defendant can show that there was a genuine dispute as to coverage." Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir. 2001).
An insured may recover tort remedies, including punitive damages, upon proof that an insurer breached its duty to act fairly and in good faith. Kransco v. American Empire Surplus Lines Ins. Co., 23 Cal.4th 390, 400 (2000); Delgado v. Heritage Life Ins. Co., 157 Cal.App.3d 262, 277 (1984).
It is undisputed that the Policy required Plaintiff to submit "all accounting records, bills, invoices and other vouchers. . . which Allstate may reasonably request" to verify the value of the insured goods. Plaintiffs Undisputed Facts ¶ 4. Furthermore, the Policy states Allstate does "not cover any loss or occurrence in which any insured person has concealed or misrepresented any material fact of circumstance." Policy at 6. Plaintiff told Allstate, in a Proof of Loss statement, that the stolen paintings were worth $22,000. Plaintiffs Undisputed Facts ¶ 11. Plaintiff, to this date, has provided no documentation supporting his estimate of the value of the stolen paintings. Plaintiff told Allstate that he did not purchase the paintings and that he did not have any firsthand knowledge of the value of the paintings. Plaintiffs Undisputed Facts ¶ 12. At Plaintiffs direction, Allstate spoke with Mrs. Feldman, who had purchased the artwork. Plaintiffs Undisputed Facts ¶ 8. Mrs. Feldman informed Allstate that, contrary to her husband's estimate, the paintings were worth only about $2500 in total. Plaintiffs Undisputed Facts ¶ 6. Mrs. Feldman also provided Allstate with tape recordings of conversations between her and Plaintiff, in which Plaintiff stated that he would "jack up" the price of the paintings on his insurance claim. (Allstate's Notice of Lodgement, Ex. 1 — Tape Recording of February 22, 1999 Conversation between Plaintiff and Mrs. Feldman). Plaintiff stated, in his March 10, 1999 conversation with Mrs. Feldman that he did not want her to tell Allstate that the value of the paintings was about $2000. (Allstate's Notice of Lodgement, Ex. 2 — Tape Recording of March 10, 1999 Conversation between Plaintiff and Mrs. Feldman).
There is no genuine factual dispute that Allstate's refusal to cover the loss of the stolen paintings was consistent with the terms of the Policy. Plaintiff has produced no evidence that Allstate's denial of coverage constituted a bad faith breach of the Policy.
Plaintiff argues that Allstate acted in bad faith by failing to investigate information which tended to support Plaintiffs insurance claim and by examining Mrs. Feldman under oath without informing him. Plaintiff argues that Allstate should not have relied upon Mrs. Feldman's statements because Plaintiff and Mrs. Feldman were in the midst of a contentious divorce. Plaintiffs reliance on Mariscal v. Old Republic Life Ins. Co., 42 Cal.App.4th 1617 (1966), is misplaced. In Mariscal, the California court stated that an insurer cannot solely seek out evidence which tends to support denial of a claim. Id. at 1623. The present case is distinguishable because it is undisputed that Allstate spoke with Mrs. Feldman and LAPD officers at Plaintiffs direction. Plaintiff directed Allstate towards the evidence that tended to support denial of his claim. Mariscal does not preclude Allstate from investigating evidence that supports denial of a claim.
Plaintiff contends that Allstate conducted a criminal background check on Plaintiff and refused to turn over copies of the recorded conversations to Plaintiff.
Plaintiff submitted evidence that he and Mrs. Feldman were legally separated since 1997, that Mrs. Feldman had accused Plaintiff of child molestation and that Mrs. Feldman had a history of alcohol abuse and fraudulent activity. Plaintiffs Uncontroverted Facts ¶ 30.
Plaintiff argues that Allstate acted in bad faith by not disclosing the existence of the tape recorded conversations, Mrs. Feldman's adverse statements regarding the value of the stolen paintings and Mrs. Feldman's conversations with LAPD Detective Nancy Nelson. Plaintiff relies on Delgado v. Heritage Life Ins. Co., 157 Cal.App.3d 262 (1984) for the proposition that Allstate was required to keep the insured informed of the status of his claim, including explaining the basis for denial. Delgado is inapplicable to the present case. It is undisputed that Allstate informed Plaintiff of the basis for its denial of his claim. Plaintiffs Undisputed Facts ¶ 23. Furthermore, when Plaintiff submitted information to Allstate regarding Plaintiffs contentious relationship with Mrs. Feldman, Allstate reopened the file on Plaintiffs claim. Plaintiffs Undisputed Facts ¶ 32. There is no evidence that Allstate was unresponsive to any inquiry by Plaintiff regarding the status of his claim.
Plaintiff argues that Allstate acted in bad faith by relying upon Plaintiffs "illegally" taped conversations with Mrs. Feldman in denying his claim. As discussed above, the taping of Plaintiff s conversation with Mrs. Feldman did not violate federal law. Furthermore, it is undisputed that Mrs. Feldman told Allstate that she was authorized by the LAPD to tape her conversations with her husband. Plaintiffs Undisputed Facts ¶ 14. Thus, even if Plaintiffs conversations were illegally taped, there is no evidence that Allstate was aware of such alleged illegality at the time Allstate received the tapes from Mrs. Feldman.
Plaintiff further argues that Allstate acted in bad faith by refusing to settle Plaintiffs claim. Plaintiff relies on Liberty Transport, Inc. v. Harry W. Gorst Co., 229 Cal.App.3d 417 (1991) for the proposition that an insurer has a duty to promptly pay and settle claims. However, in the present case, the Policy excludes coverage for any loss or occurrence in which the insured has made a material misrepresentation of fact. Policy at 6. Allstate was under no duty to settle Plaintiffs claims because there was a genuine dispute as to Allstate's duty to pay. See Guebara, 237 F.3d at 992. Based on the foregoing, the Court finds that there is no triable issue of fact as to Plaintiffs claim for breach of implied covenant of good faith and fair dealing and that Defendant is entitled to judgment as a matter of law.
B. Plaintiff's Claim for Declaratory Relief
Plaintiff seeks declaratory relief that he is entitled to indemnification for the stolen paintings under the Policy. Complaint ¶ 21. The Policy states that Allstate will not insure "any loss or occurrence in which any insured person has concealed or misrepresented any material fact or circumstance." Policy at 6. It is undisputed that Plaintiff misrepresented the value of the stolen items. Therefore, Plaintiff is not entitled to indemnification under the Policy.
The Court finds that no triable issues of fact exist as to Plaintiffs claim for declaratory relief and that Defendant is entitled to judgment as a matter of law.
CONCLUSION
Based on the foregoing, the Court DENIES Plaintiffs Motion for Summary Judgment. Defendant's Motion for Summary Judgment and Plaintiffs Request for Judicial Notice is GRANTED. The Court OVERRULES Plaintiffs Evidentiary Objections to Mrs. Feldman's testimony and the Tape Recorded Conversations between Plaintiff and Mr. Feldman. The Court SUSTAIN in part, OVERRULE in part Defendant's Evidentiary Objections.
SO ORDERED.
JUDGMENT
The matter before the Court, the Honorable Consuelo B. Marshall, United States District Judge presiding, is Defendant's Motion for Summary Judgment. In accordance with Federal Rule of Civil Procedure 58, and consistent with the Court's Order of June 29, 2001, granting Defendant's Motion for Summary Judgment, IT IS ORDERED AND ADJUDGED that judgment be entered in favor of Defendant Allstate Insurance Company. Each party shall bear its own costs..SO ORDERED.