U.S. Supreme Court, Kousisis v. United States, Docket No. 23-909

Wire Fraud and Conspiracy to Commit the Same (18 U. S. C. §§1343, 1349)

 

Fraudulent-Inducement Theory

 

Circuit Split

 

 

 

 

The Government charged Alpha and Kousisis with wire fraud, asserting that they had fraudulently induced PennDOT to award them the painting contracts. See 18 U. S. C. §1343. Under the fraudulent-inducement theory, a defendant commits federal fraud whenever he uses a material misstatement to trick a victim into a contract that requires handing over her money or property—regardless of whether the fraudster, who often provides something in return, seeks to cause the victim net pecuniary loss. We must decide whether this theory is consistent with §1343, which reaches only those schemes that target traditional money or property interests. See Ciminelli v. United States, 598 U. S. 306, 316 (2023). It is, so we affirm.

 

The circuits are divided over the validity of a federal fraud conviction when the defendant did not seek to cause the victim net pecuniary loss. Several circuits, now including the Third, hold that such convictions may stand. See, e.g., id., at 240–244; United States v. Leahy, 464 F. 3d 773, 787–789 (CA7 2006); United States v. Granberry, 908 F. 2d 278, 280 (CA8 1990); United States v. Richter, 796 F. 3d 1173, 1192 (CA10 2015). Others disagree. See, e.g., United States v. Shellef, 507 F. 3d 82, 108–109 (CA2 2007); United States v. Sadlar, 750 F. 3d 585, 590–592 (CA6 2014); United States v. Bruchhausen, 977 F. 2d 464, 467–468 (CA9 1992); United States v. Takhalov, 827 F. 3d 1307, 1312–1314 (CA11 2016); United States v. Guertin, 67 F. 4th 445, 450–452 (CADC 2023). We granted certiorari to resolve the split. 602 U. S. ___ (2024).

 

(…) The money-or-property requirement lies at the heart of this dispute. Although the lower courts once interpreted the phrase “money or property” as something of a catchall, we recently reiterated that the federal fraud statutes reach only “traditional property interests.” Ciminelli, 598 U. S., at 316. Schemes that target the exercise of the Government’s regulatory power, for example, do not count. See Kelly, 590 U. S., at 400; see also Cleveland v. United States, 531 U. S. 12, 23–24 (2000). Nor do schemes that seek to deprive another of “intangible interests unconnected to property.” Ciminelli, 598 U. S., at 315; see also McNally, 483 U. S., at 356. And in all cases, because money or property must be an object of the defendant’s fraud, the traditional property interest at issue “must play more than some bit part in a scheme.” Kelly, 590 U. S., at 402. Obtaining the victim’s money or property must have been the “aim,” not an “incidental byproduct,” of the defendant’s fraud. Id., at 402, 404.

 

 

 

 

(U.S. Supreme Court, May 22, 2025, Kousisis v. United States, Docket No. 23-909, J. Barrett)

U.S. Supreme Court, Kousisis v. United States, Docket No. 23-909

Fraud

 

Rescission of Contract

 

Common Law

 

 

 

When Congress uses a term with origins in the common law, we generally presume that the term “‘brings the old soil with it.’” Sekhar v. United States, 570 U. S. 729, 733 (2013). As petitioners note, we have long interpreted the statutory term “fraud” (and its variations) this way—that is, by reference to its common-law pedigree. See Neder v. United States, 527 U. S. 1, 21–22 (1999); Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U. S. 176, 187 (2016) (“The term ‘fraudulent’ is a paradigmatic example of a statutory term that incorporates the common-law meaning of fraud”).

 

This old-soil principle applies, however, only to the extent that a common-law term has “‘accumulated a settled meaning.’” Neder, 527 U. S., at 21; Kemp v. United States, 596 U. S. 528, 539 (2022). So to show that economic loss is necessary to securing a federal fraud conviction, Alpha and Kousisis must show that such loss was “widely accepted” as a component of common-law fraud. Morissette v. United States, 342 U. S. 246, 263 (1952). They cannot.

 

At common law, “fraud” was a term with expansive reach. Rather than settle on a single form of liability, courts recognized at least three, and the particular elements and remedies turned on the nature of the plaintiff ’s alleged injury. To appreciate how the three forms differed, it may help to consider a variation of the facts here. Imagine that PennDOT discovered petitioners’ scheme soon after Alpha and Kousisis had begun work on the Girard Point and 30th Street projects. In such a circumstance, law and equity provided at least three avenues for relief: PennDOT could (1) seek to rescind the contracts; (2) refer the matter for indictment under the crime of false pretenses; or (3) bring a tort action against the fraudsters for the damages incurred. If PennDOT had wanted to rescind the fraud-infected contracts, most courts would historically have permitted it to do so even without a showing of economic loss. To obtain a rescission, PennDOT would have needed to establish only that it had “received property of a different character or condition than it was promised” (“although of equal value”) or, more relevant here, that the transaction had “proved to be less advantageous than as represented” (“although there was no actual loss”). W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts §110, p. 766 (5th ed. 1984) (Prosser & Keeton). Put differently, many courts would have awarded the equitable remedy of rescission simply because Alpha and Kousisis had tricked PennDOT into a bargain materially different from the one they had promised. See Hirschman v. Healy, 162 Minn. 328, 331, 202 N. W. 734, 735 (1925) (“It is to be noted that it was not indispensable to prove damages in dollars and cents to have cancellation or rescission of the contract and note for misrepresentations”); Williams v. Kerr, 152 Pa. 560, 565, 25 A. 618, 619 (1893); Spreckels v. Gorrill, 152 Cal. 383, 391, 92 P. 1011, 1015 (1907). To borrow a summary from Black (of Black’s Law Dictionary fame) many “decisions repudiated altogether a rule requiring a showing of actual damage.” 1 H. Black, Rescission of Contracts and Cancellation of Written Instruments §112, p. 314 (1916).

 

 

 

(U.S. Supreme Court, May 22, 2025, Kousisis v. United States, Docket No. 23-909, J. Barrett)

 

Rhode Island Supreme Court, Vermont Mutual Insurance Comp. v. New England Property Services Group, LLC, Docket No. 2023-335

Subject Matter Jurisdiction

 

Jurisdiction

 

Rhode Island Law

 

 

 

(…) We first turn our attention to NEPSG’s argument as to subject matter jurisdiction. This Court has long acknowledged that a “challenge to subject matter jurisdiction may not be waived by any party and may be raised at any time in the proceedings.” E.T. Investments, LLC v. Riley, 262 A.3d 673, 676 (R.I. 2021) (quoting Federal National Mortgage Association v. Malinou, 101 A.3d 860, 866 (R.I. 2014)). We would note at the outset that it is our view that in actuality NEPSG is not genuinely contesting the Superior Court’s jurisdiction over this matter. It is clear that the Superior Court had jurisdiction under G.L. 1956 § 8-2-14 and the Arbitration Act. Rather, NEPSG is actually questioning the nature of the appraisal process and, more specifically, whether it should be considered arbitration. Thus, it appears to us that NEPSG is questioning the authority of the Superior Court to decide this particular issue and not the court’s jurisdiction as such. Simply put, NEPSG is contending that the Superior Court improperly exercised its jurisdiction. See Cronan v. Cronan, 307 A.3d 183, 191 (R.I. 2024) (“This Court has noted* * * that the term subject-matter jurisdiction is often misused; when properly used, it refers only to a court’s power to hear and to decide a particular case, and not to whether a court, having the power to adjudicate, should exercise that power.”) (internal quotation marks, brackets, and deletion omitted); see also Pollard v. Acer Group, 870 A.2d 429, 433 (R.I. 2005) (“The term ‘lack of jurisdiction over the subject matter’ means quite simply that a given court lacks judicial power to decide a particular controversy.”).

 

 

 

(Rhode Island Supreme Court, Vermont Mutual Insurance Comp. v. New England Property Services Group, LLC, March 20, 2025, Docket No. 2023-335-Appeal)

 

 

 

Rhode Island Supreme Court, Vermont Mutual Insurance Comp. v. New England Property Services Group, LLC, Docket No. 2023-335

Statute of Frauds

 

Arbitration Process

 

Right to Waive

 

Rhode Island Law

 

 

 

There are some instances where parties are free to contract in ways that effectively waive protective provisions that are contained within a relevant civil statute. For example, under some circumstances, competent parties might be deemed to have waived the protective provisions of the Statute of Frauds if they did so knowingly and voluntarily. Nevertheless, there are some public policies that are so important that statutes relating to those policies should be understood to preclude the right to waive a protective statutory provision. One of those overarching public policies is the need to maintain the integrity of the alternative dispute resolution process as well as the public’s appreciation of that integrity. We are of the same mind as our predecessors on this Court, who expressly noted that they were “cognizant of the need for public confidence and integrity in the arbitration process.” Grabbert, 590 A.2d at 92. This Court has encouraged parties to “contract to use arbitration as an expeditious and informal means of private dispute resolution, thereby avoiding litigation in the courts.” Id. And we are keenly aware that the existence of evident partiality undermines these crucial aspects of arbitration. Id. (“Any impropriety that undermines public confidence in and the integrity of the arbitration process detracts from its legitimacy as an alternative method of private dispute resolution.”).

 

 

 

 

 

(Rhode Island Supreme Court, Vermont Mutual Insurance Comp. v. New England Property Services Group, LLC, March 20, 2025, Docket No. 2023-335-Appeal)

 

Rhode Island Supreme Court, Vermont Mutual Insurance Comp. v. New England Property Services Group, LLC, Docket No. 2023-335

Appraisal

 

Arbitration

 

Partiality

 

Petition to Vacate the Appraisal Award

 

Assignment of Insurance Claim

 

Insurance Law

 

Rhode Island Law

 

 

 

The plaintiff, Vermont Mutual Insurance Company (Vermont Mutual), appeals from a July 27, 2023 Superior Court order denying its petition to vacate an appraisal award and granting the cross-petition of the defendant, New England Property Services Group, LLC (NEPSG), to confirm said appraisal award. Vermont Mutual contends on appeal that the hearing justice erred in failing to vacate the award because, in its view, there was evident partiality on the part of the defendant’s appraiser. For the reasons set forth in this opinion, we vacate the order of the Superior Court, and we remand this case for further proceedings consistent with this opinion.

 

 

Vermont Mutual received a claim by or on behalf of Ms. St. Vil for windstorm damage to the Rumford property that was alleged to have occurred on December 25, 2020.

 

 

At some point, Ms. St. Vil executed an assignment of her insurance claim to NEPSG in exchange for its work on the property.

 

 

Significantly, Mr. Ceceri is the sole owner and operator of NEPSG.

 

 

On April 13, 2022, counsel for NEPSG directed correspondence to Vermont Mutual, indicating that NEPSG “demanded appraisal concerning the underlying claim.” The Vermont Mutual insurance policy at issue provides that, in the event an insured demands an appraisal of the loss, each party will choose “a competent appraiser within 20 days after receiving a written request from the other,” and it also provides that “the two appraisers will choose an umpire.” The policy further requires that the appraisers separately “set the amount of loss.” If the appraisers do not agree as to the amount, they are to submit their differences to the umpire, and a “decision agreed to by any two will set the amount of loss.” According to Vermont Mutual, Mr. Ceceri was named as the appraiser on behalf of NEPSG despite “his clear and undisputed financial interest in the outcome of the appraisal.” In its petition to vacate the appraisal award, Vermont Mutual asserted that it had objected to Mr. Ceceri acting as an appraiser because he was not “disinterested;” however, Vermont Mutual further asserted that it had “agreed to go forward with the appraisal and reserved any and all rights to dispute the award.” The appraisal ultimately went forward with Mr. Ceceri serving as the appraiser for NEPSG, Vincent Cicci serving as the appraiser for Vermont Mutual, and Felix Carlone serving as the appraisal umpire. According to an exhibit attached to NEPSG’s cross-petition, Mr. Ceceri’s appraisal was $207,053.11, while Mr. Cicci’s appraisal was $67,645.99. The final award appraised the loss at $144,855.37. (With interest, the total amount of the award was $185,797.02.) The “Agreement Award” indicates that Mr. Ceceri and Mr. Carlone signed the award, but Mr. Cicci did not sign on behalf of Vermont Mutual.

 

 

In due course, Vermont Mutual filed a petition to vacate the appraisal award, noting that, pursuant to G.L.1956 chapter 3 of title 10 (the Arbitration Act), the Superior Court has “jurisdiction to vacate, modify, or correct an award.” Vermont Mutual asserted that, as a result of what it alleged to be Mr. Ceceri’s evident partiality, the appraisal award should have been vacated in accordance with §10-3-12. NEPSG then filed its response and cross-petition to confirm the appraisal award, in which it admitted that the Superior Court had jurisdiction pursuant to the Arbitration Act and requested that the court grant its cross-petition “and order that the appraisal award issued in this matter be confirmed pursuant to” the Arbitration Act.

 

(General Laws 1956 § 10-3-12(2) provides in pertinent part that a court “must make an order vacating the award upon the application of any party to the arbitration” in the event of “evident partiality or corruption on the part of the arbitrators, or either of them.” (Emphasis added.) (Fn. 2)).

 

 

On appeal, Vermont Mutual contends that, in denying its petition to vacate the appraisal award and granting NEPSG’s cross-petition, the hearing justice erred “by failing to apply the relevant standard in determining whether the appraisal award should have been vacated pursuant to * * * § 10-3-12(2) due to the presence of evident partiality on the part of Mr. Ceceri.”

 

 

Section10-3-11 of the Arbitration Act provides that a party to arbitration “may apply to the court for an order confirming the award” within one year after the award is made. The court must vacate an award if one of the circumstances listed in §10-3-12 is present. In view of the fact that the General Assembly has authorized the Superior Court to either confirm or vacate an award, it logically follows that the Superior Court has subject matter jurisdiction over petitions filed pursuant to the Arbitration Act. In the instant case, this Court is left with no doubt that the Superior Court had jurisdiction over Vermont Mutual’s petition to vacate the award and NEPSG’s cross-petition to confirm the award; and we are also of the view that the court acted properly in exercising its jurisdictional power. See Pollard, 870 A.2d at 433.

 

 

Having established that the Superior Court had subject matter jurisdiction over this case, we next proceed to address whether the appraisal process in this case can be equated with arbitration.

 

 

Turning to the specific language of the appraisal provision in Vermont Mutual’s policy, which sets forth its appraisal procedure, we are of the opinion that the process at issue in the instant case can be equated with arbitration. Vermont Mutual’s policy includes the following pertinent language: “If you and we fail to agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the ‘residence premises’ is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.” This language can reasonably be interpreted as providing for a dispute resolution process that, for all intents and purposes, is an arbitration. Significantly, the policy appraisal language at issue here comes tantalizingly close to mirroring the policy appraisal language at issue in Waradzin as well as the policy appraisal language at issue in the Grady case. See Waradzin, 570 A.2d at 649-50; Grady, 27 R.I. at 436-37, 63 A. at 173.

 

 

(…) We are not persuaded by the argument that the absence of the term “disinterested” from Vermont Mutual’s policy somehow materially differentiates it from the appraisal processes that this Court in Waradzin and Grady has held to be an arbitration.

 

 

(…) We hold that the appraisal procedure outlined in Vermont Mutual’s policy can be equated with arbitration and that the Arbitration Act is therefore applicable.

 

 

(…) While we have acknowledged that arbitrators are not expected to be totally impartial or disinterested and that there is an expectation that party-appointed arbitrators will serve as nonneutrals, flagrant partiality serves to undermine the integrity of the arbitration process. See Aetna Casualty & Surety Company v. Grabbert, 590 A.2d 88, 92-95 (R.I. 1991).

 

 

Pursuant to § 10-3-12(2), a court must vacate an award upon the application of any party to the arbitration “where there was evident partiality or corruption on the part of the arbitrators, or either of them.”  This Court has acknowledged that evident partiality “will be found ‘where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration.’”Grabbert, 590 A.2d at 96 (quoting Morelite Construction Corp. v. New York City District Council Carpenters Benefit Funds, 748 F.2d 79, 84 (2d Cir. 1984)). In Grabbert, this Court established a two-step test for determining whether there is evident partiality on the part of a party-appointed appraiser. First, a party seeking to vacate an award must establish an improper interest on the part of the appraiser. Grabbert, 590 A.2d at 92. Secondly, there must be a “causal nexus” between the party-appointed appraiser’s conduct and the appraisal award. Id. In Grabbert, the arbitrator appointed by the insured was working on a contingent fee basis (ten percent of the ultimate award would be his fee), which this Court stated “gave him a direct financial interest in the award that was absolutely improper * * *.” Grabbert, 590 A.2d at 90, 92. Nonetheless, this Court went on to state that the defendant had “failed to demonstrate the required causal nexus between the party-appointed arbitrator’s improper conduct and the award ultimately decided upon.” Id. at 96. In arriving at that conclusion, this Court emphasized inter alia that the award in that case “was a unanimous decision of three experienced arbitrators.” Id.

 

 

In McGinity v. Pawtucket Mutual Insurance Co., 899 A.2d 504 (R.I. 2006), this Court was again faced with the question of whether an arbitration award should be vacated due to the existence of evident partiality. McGinity, 899 A.2d at 505. This Court determined that the failure on the part of the arbitrator to disclose to the opposing party and to the other two arbitrators his position as an attorney for the defendant satisfied the first step of the test articulated in Grabbert. Id. at 507. In addressing the question of causal nexus, this Court in McGinity pointed out that, unlike the award in Grabbert, the award at issue in the case then on appeal was not unanimous. Id. at 508. The Court also noted that the “plaintiff’s party-appointed arbitrator not only declined to agree with the other two arbitrators, but also arrived at a drastically different amount as evidenced by his minority opinion.” Id. The Court further emphasized that the “fact that the neutral arbitrator voted for the arbitration award does not disprove a causal nexus between the *  *  * arbitrator’s relationship to defendant and the arbitration award that two of the panel members reached.” Id. The Court in McGinity ultimately held that an attorney-client relationship between the arbitrator and the insurer was sufficient to supply the causal nexus between the improper conduct and the award. Id. In the instant case, it is quite evident that Mr. Ceceri had a direct financial interest in the award. Mr. Ceceri is the sole owner and operator of NEPSG as well as the assignee of Ms. St. Vil’s insurance claim. Therefore, NEPSG in this case acted as its own appraiser with the entire appraisal award ultimately being payable to Mr. Ceceri. In other words, Mr. Ceceri stood to benefit solely on the basis of his being the party-appointed appraiser, thereby standing to exclusively benefit from the award. To that end, NEPSG’s emphasis on the fact that Vermont Mutual continued to partake in the appraisal process in spite of the disclosure of Mr. Ceceri as NEPSG’s appraiser is unavailing. In its petition to vacate the appraisal award, Vermont Mutual asserted that it objected to Mr. Ceceri acting as an appraiser because he was not “disinterested.” These largely undisputed facts establish an improper interest on the part of Mr. Ceceri, and the first step of the test articulated in Grabbert has therefore been satisfied.

 

 

As for the second step of the Grabbert test, it is quite clear that there was a causal nexus between Mr. Ceceri’s conduct and the final appraisal award. As was the case in McGinity, the award at issue here was not unanimous. In the instant case, Mr. Ceceri’s appraisal was $207,053.11, while Mr. Cicci’s appraisal was $67,645.99. The final award appraised the loss at $144,855.37, exclusive of interest.

 

 

It is clear from these numbers that Mr. Ceceri and Mr. Cicci arrived at drastically different amounts. We do not believe it to beat all irrational to suggest that Mr. Ceceri’s inflated amount was potentially motivated by his direct financial interest in the award. Moreover, the “Agreement Award” indicates that Mr. Ceceri and Mr. Carlone signed the award, whereas Mr. Cicci declined to sign on behalf of the insurer. In our view, these uncontroverted facts thus establish a causal nexus similar to the one identified in McGinity. See McGinity, 899 A.2d at 508. Accordingly, we hold that the award should have been vacated due to the presence of evident partiality and that the hearing justice erred in failing to conduct this necessary analysis. See generally Morelite Construction Corp., 748 F.2d at 85.

 

 

Bearing in mind the authorities that we have cited and our convictions about the integrity of the alternative dispute resolution process, we have concluded that the appraisal award at issue in this case must be vacated due to the evident partiality of the appraiser for NEPSG.

 

 

We vacate the order of the Superior Court, and we remand this case to that tribunal with the direction that it order a new appraisal.

 

 

 

(Rhode Island Supreme Court, Vermont Mutual Insurance Comp. v. New England Property Services Group, LLC, March 20, 2025, Docket No. 2023-335-Appeal)

California Court of Appeal, Ng v. Super. Ct., Docket G064257M

Medical Malpractice

 

Survival Claim

 

Wrongful Death Claim

 

Personal Injury

 

Noneconomic Damages

 

Motion to Strike

 

Motion for Leave to Amend

 

Writ of Prohibition

 

Writ of Mandate

 

California Law

 

 

 

In this case for medical malpractice and wrongful death, plaintiff Joely Ng (Ng) and defendant Los Alamitos Medical Center, Inc. (the Medical Center), dispute whether recent amendments to the cap on noneconomic damages (Civ. Code, § 3333.2) under the Medical Injury Compensation Reform Act of 1975 (MICRA) and to the availability of noneconomic damages in survival actions (Code Civ. Proc., § 377.34) permit Ng to recover noneconomic damages under one or two MICRA caps. In this petition, Ng seeks a writ of prohibition or mandate directing respondent court to vacate its May 24, 2024, order granting the Medical Center’s motion to strike portions of Ng’s complaint that allege her entitlement to seek two MICRA caps. We conclude Ng’s claims are subject to two separate MICRA caps. Accordingly, we grant the petition and direct the court to vacate its order and enter a new and different order denying the motion.

 

 

(…) The complaint alleges two causes of action against all defendants: (1) wrongful death, in Ng’s individual capacity; and (2) medical malpractice, in Ng’s capacity as successor in interest to the Decedent (the survival claim). In addition to economic damages, Ng sought noneconomic damages for each claim: (1) for the wrongful death claim, damages for the loss of the Decedent’s love, companionship, comfort, care, assistance, protection, affection, society, and moral support, up to the cap allowed in Civil Code section 3333.2; and (2) for the survival claim, damages for the Decedent’s pre-death pain and suffering, up to the cap allowed in Code of Civil Procedure section 377.34, subdivision (b).

 

 

Objecting to Ng’s request for two separate caps for noneconomic damages, the Medical Center filed a motion to strike the following language from the complaint (at paragraph 20 and repeated verbatim in the prayer): “This is separate, apart, and in addition to the general damages sought by Kenneth Ng’s widow in the first cause of action. (See Keys v. Alta Bates Summit Medical Center (2015) 235 Cal.App.4th 484, 488; Atkins v. Strayhorn (1990) 223 Cal.App.3d 1380.)” Although the Medical Center agrees that Ng is entitled to seek noneconomic damages for both claims, it contends those damages are subject to one MICRA cap. In other words, the Medical Center interprets the relevant statutes as prohibiting Ng from recovering two separate noneconomic damages caps, one for each claim.

 

 

Respondent court granted the motion. The court reasoned that because “the wrongful death claim is not separate and distinct from a medical negligence claim, it cannot be . . . subject to a separate MICRA cap.” The court, however, “noted that while the MICRA cap affects the final judgment, it does not have any impact on the jury’s verdict itself or the amount determined to be plaintiff’s actual noneconomic losses.” Although the court denied leave to amend, it did so “without prejudice to plaintiff bringing a motion for leave to amend to assert the two claims as separate and distinct for purposes of the MICRA cap, should plaintiff discover and allege facts that support a finding the wrongful death claim is separate and distinct from the medical negligence claim.”

 

 

A trial court may “strike out any irrelevant, false, or improper matter inserted in any pleading” and “all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (§ 436, subds. (a), (b).) Generally, we review a ruling on a motion to strike for abuse of discretion. (Cal-Western Business Services, Inc. v. Corning Capital Group (2013) 221 Cal.App.4th 304, 309.) But where, as here, the ruling concerns “the proper interpretation of a statute, and its application to undisputed facts,” it is a question of law which we review de novo. (Ibid.)

 

 

At issue here is whether the recent amendment to Code of Civil Procedure section 377.34, which authorizes a decedent’s personal representative or successor in interest to recover noneconomic damages, means a plaintiff can seek two MICRA cap awards (one for himself or herself and one for the decedent) under Civil Code section 3333.2. We conclude it does. Because a wrongful death claim and a survival claim—even when premised on the same alleged medical malpractice—are separate and distinct claims, a plaintiff suing for both claims can seek to recover two MICRA caps.

 

 

Ng’s action, filed in 2023, is subject to the recent amendments to these statutes. As relevant here, effective January 1, 2022, subdivision (b) was added to section 377.34 of the Code of Civil Procedure to allow for the recovery of damages for a decedent’s “pain, suffering, or disfigurement” in survival actions “filed on or after January 1, 2022, and before January 1, 2026.” (Stats. 2021, ch. 448, § 1.) It also provided that “nothing in this section alters Section 3333.2 of the Civil Code.” (Code Civ. Proc., § 377.34, subd. (e).) Effective January 1, 2023, Civil Code section 3333.2 was amended to, among other things, increase the $250,000 cap on noneconomic damages. (Id., § 3333.2, subds. (a)–(c) [$350,000 in medical malpractice cases not involving wrongful death, $500,000 in wrongful death cases, with annual increases]; Stats. 2022, ch. 17, § 3.) These amendments raised the question of whether a survival claim was subject to a separate MICRA cap.

 

 

A survival claim (§ 377.30) is “a separate and distinct cause of action which belonged to the decedent before death but, by statute, survives that event. [Citation.] The survival statutes do not create a cause of action. Rather, ‘they merely prevent the abatement of the cause of action of the injured person, and provide for its enforcement by or against the personal representative of the deceased.’” (Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1264 (Quiroz).) In contrast, a wrongful death claim (§ 377.60) compensates the heirs of the decedent “for the loss of companionship and for other losses suffered as a result of the decedent’s death.” (Quiroz, supra, 140 Cal.App.4th at p. 1263.) Such “damages . . . are in the nature of compensation for personal injury to the heir” and “include (1) the loss of the decedent’s financial support, services, training and advice, and (2) the pecuniary value of the decedent’s society and companionship.” (Id. at p. 1264.) “Unlike some jurisdictions wherein wrongful death actions are derivative,” California’s wrongful death statute “‘creates a new cause of action in favor of the heirs as beneficiaries, based upon their own independent pecuniary injury suffered by loss of a relative, and distinct from any the deceased might have maintained had he survived.’” (Horwich v. Superior Court (1999) 21 Cal.4th 272, 283.)

 

 

Crucially, a wrongful death claim may not include any damages recoverable as part of a survival claim, and the claims may be tried separately. (§ 377.61; Wilson v. John Crane, Inc. (2000) 81 Cal.App.4th 847, 861.) For these reasons, we conclude respondent court erred in finding the claims were “not separate and distinct” and subject to one MICRA cap.

 

 

DISPOSITION

The petition is granted. Let a peremptory writ of mandate issue, directing the trial court to vacate its May 24, 2024, order granting the Medical Center’s motion to strike and to issue a new and different order denying the motion. Petitioner to recover costs of this proceeding. (Cal. Rules of Court, rule 8.493(a)(1)(A).)

 

 

 

 

 

(California Court of Appeal, Feb 20, 2025, Ng v. Super. Ct., Docket G064257M, Certified for Publication)

California Court of Appeal, Ng v. Super. Ct., Docket No. G064257M

Demurrer

 

Verified Answer

 

California Law

 

 

 

 

(…) Because the Medical Center’s “response is not a demurrer or verified answer, it does not constitute a ‘return’ and does not effectively deny any of the allegations in the petition.” (Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 372, fn. 5, disapproved on other grounds by ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 196, fn. 8.) Thus, as against the Medical Center, “all facts pleaded in the petition are accepted as true. [Citation.] That consequence, however, has little, if any, significance in this proceeding, which involves an issue of statutory interpretation . . . .” (Caliber Bodyworks, Inc., at p. 373, fn. 5.) (Fn. 2).

 

 

 

(California Court of Appeal, Feb. 20, 2025, Ng v. Super. Ct., Docket No. G064257M, Certified for Publication)

 

California Court of Appeal, Gharibian v. Wawanesa Gen. Ins. Co., Docket No. B325859

Insurance Law

 

Payments to Plaintiffs

 

Admission of Liability

California Law

 

 

 

The fact that Wawanesa made payments to plaintiffs even though there was no coverage is irrelevant. (See, e.g., State Farm Fire & Casualty Co. v. Superior Court (1988) 206 Cal.App.3d 1428, 1431 [“Because insurance companies often adjust claims for reasons entirely unrelated to their merits, [the insurance company’s] decision to pay money to the [insureds] may not be construed either as an admission of liability or as the substantive equivalent of accepting its obligations under the policy”].)

 

 

 

(California Court of Appeal, Feb. 7, 2025, Gharibian v. Wawanesa Gen. Ins. Co., Docket No. B325859, Certified for Publication)

 

 

 

California Court of Appeal, Gharibian v. Wawanesa Gen. Ins. Co., Docket No. B325859

Notice of Appeal

 

Motion for Summary Judgment

 

Judgment Actually Entered

 

Premature Notice of Appeal

 

California Law

 

 

 

Plaintiffs actually filed their notice of appeal prematurely—after Wawanesa’s motion for summary judgment had been granted but before judgment was actually entered. Given that judgment has since been entered, we deem plaintiffs’ premature notice of appeal to have been taken from the judgment. (Mukthar v. Latin American Security Service (2006) 139 Cal.App.4th 284, 288.) (Fn. 4).

 

 

 

(California Court of Appeal, Feb. 7, 2025, Gharibian v. Wawanesa Gen. Ins. Co., Docket No. B325859, Certified for Publication)

 

 

 

 

California Court of Appeal, Gharibian v. Wawanesa Gen. Ins. Co., Docket No. B325859

Triable Issue of Fact

 

California Law

 

 

 

It is well-settled that a party cannot create a triable issue of fact with a declaration that contradicts the declarant’s earlier deposition testimony. (Whitmire v. Ingersoll-Rand Co. (2010) 184 Cal.App.4th 1078, 1087; Visueta v. General Motors Corp. (1991) 234 Cal.App.3d 1609, 1613; Benavidez v. San Jose Police Dept. (1999) 71 Cal.App.4th 853, 860.)

 

 

 

(California Court of Appeal, Feb. 7, 2025, Gharibian v. Wawanesa Gen. Ins. Co., Docket No. B325859, Certified for Publication)

 

California Court of Appeal, Gharibian v. Wawanesa Gen. Ins. Co., Docket No. B325859

Insurance Law

 

Breach of Contract 

 

Breach of the Implied Covenant of Good Faith and Fair Dealing

 

Physical Loss

 

California Law

 

 

 

Following a wildfire near their home, plaintiffs and appellants Hovik Gharibian (Gharibian) and Caroline Minasian (Minasian) submitted a claim to their property insurer, defendant and respondent Wawanesa General Insurance Company (Wawanesa). Wawanesa ultimately paid plaintiffs more than $20,000 for professional cleaning services that they never used. Dissatisfied with the resolution of their claim, plaintiffs filed the instant lawsuit against Wawanesa for breach of contract and breach of the implied covenant of good faith and fair dealing. The trial court granted Wawanesa’s motion for summary judgment, and plaintiffs appeal. Because plaintiffs’ insurance policy did not provide coverage for the claimed loss, Wawanesa did not breach (and could not have breached) the insurance policy. Accordingly, we affirm.

 

 

Plaintiffs obtained a Wawanesa homeowner property insurance policy for their house in Granada Hills covering the period September 8, 2019, to September 8, 2020. In a section of the policy titled “Perils Insured Against,” the policy provides that Wawanesa will “insure against direct physical loss to property.” (Bolding & capitalization omitted.) The policy’s terms include a $2,000 deductible.

 

 

A nearby fire results in debris, but not burn damage, to plaintiffs’ house.

 

On October 10, 2019, the Saddle Ridge wildfire began in the foothills of northern Los Angeles County. The fire burned about half a mile away from plaintiffs’ property; plaintiffs’ property did not suffer any burn damage. Even though plaintiffs kept their doors and windows closed, debris still entered their home, with more debris falling outside their home and in their swimming pool. While there was the smell of wildfire smoke, it dissipated over time. In fact, Minasian testified that she could no longer smell the smoke by December 31, 2019, less than three months after the fire.

 

 

(…) By December 2019, plaintiffs were not aware of any visible wildfire debris that remained either outside or inside their home. Gharibian is not aware of anything at his property that was physically damaged.

 

 

The elements of a cause of action for breach of an insurance contract are (1) the contract, (2) the insured’s performance or excuse for nonperformance, (3) the insurer’s breach, and (4) resulting damages.  (Janney v. CSAA Ins. Exchange (2021) 70 Cal.App.5th 374, 390.) “‘“While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply.”  [Citations.]’” (Westoil Terminals Co., Inc. v. Industrial Indemnity Co. (2003) 110 Cal.App.4th 139, 145.) Thus, we “interpret insurance policy language ‘“in its ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage.’”’ [Citation.] We must also ‘interpret the language in context.’ [Citation.]” (Tustin Field Gas & Food, Inc. v. Mid-Century Ins. Co. (2017) 13 Cal.App.5th 220, 226.) “The insured has the initial burden of showing that a claim falls within the scope of coverage, and a court will not ‘“indulge in a forced construction of the policy’s insuring clause to bring a claim within the policy’s coverage.”’ [Citation.]” (Dua v. Stillwater Ins. Co. (2023) 91 Cal.App.5th 127, 136.)

 

 

Applying these legal principles, we readily conclude that the trial court did not err. In order to defeat Wawanesa’s motion, plaintiffs had to establish (or at least create a triable issue of fact) that their claim was covered by their insurance policy. Thus, they had to show that there was a “direct physical loss to property.”

 

 

“Under California law, direct physical loss or damage to property requires a distinct, demonstrable, physical alteration to property. The physical alteration need not be visible to the naked eye, nor must it be structural, but it must result in some injury to or impairment of the property as property.” (Another Planet Entertainment, LLC v. Vigilant Ins. Co. (2024) 15 Cal.5th 1106, 1117 (Another Planet).) Here there is no evidence of any “direct physical loss to [plaintiffs’] property.” The wildfire debris did not “alter the property itself in a lasting and persistent manner.” (Another Planet, supra, 15 Cal.5th at p. 1149.) Rather, all evidence indicates that the debris was “easily cleaned or removed from the property.” (Another Planet, supra, 15 Cal.5th at p. 1140.) Such debris does not constitute “direct physical loss to property.” (Ibid.)

 

 

Armstrong World Industries, Inc. v. Aetna Casualty & Surety Co. (1996) 45 Cal.App.4th 1, cited by plaintiffs, is readily distinguishable. Armstrong dealt with third party liability coverage, which is “‘wholly different’” than first party property damage coverage. (United Talent Agency v. Vigilant Ins. Co. (2022) 77 Cal.App.5th 821, 837.) Thus, Armstrong is not persuasive precedent in the instant context. (Inns-by-the-Sea v. California Mutual Ins. Co. (2021) 71 Cal.App.5th 688, 701, fn. 16.)

 

 

Urging us to reverse, plaintiffs direct us to Mr. Benjamin’s deposition testimony that “ash can create physical damage to a structure,” and ash was detected at plaintiffs’ property. But plaintiffs ignore Mr. Benjamin’s qualification that ash only causes physical damage to property when it becomes wet, and no such damage existed on plaintiffs’ property.

 

 

In light of our conclusion that Wawanesa did not breach (and could not have breached) its insurance policy because plaintiffs did not have a covered claim, all remaining arguments raised by the parties are moot. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36 [without coverage there can be no liability for bad faith on the part of the insurer]; McLaughlin v. National Union Fire Ins. Co. (1994) 23 Cal.App.4th 1132, 1164 [no independent cause of action for punitive damages].)

 

 

 

 

(California Court of Appeal, Feb. 7, 2025, Gharibian v. Wawanesa Gen. Ins. Co., Docket No. B325859, Certified for Publication)

Delaware Supreme Court, In re Alexion Pharmaceuticals, Inc. Insurance Appeals, Docket No. 154, 2024 / 157, 2024

Insurance Law

 

Contract Interpretation

 

“Meaningful Linkage” Standard

 

Notice of Circumstances

 

 

 

In claims-made insurance programs, the notice of circumstances benefits the insured. See Restatement of the L. of Liab. Ins. § 33 (Am. L. Inst. 2019) (explaining that a “notice of circumstances” clause “provides policyholders the option to secure coverage under an existing claims-made policy for a legal action that may be brought in the future”).

 

 

In this insurance coverage dispute, the issue on appeal is whether a Securities and Exchange Commission investigation, disclosed to its insurers by Alexion Pharmaceuticals, Inc., is related to a later securities class action brought against the company and others. If related, the securities class action is covered by Alexion’s first insurance tower. If not, it is covered by the second tower. Applying the “meaningful linkage” standard, the Superior Court found that the two were unrelated and placed the securities class action coverage in the second insurance tower. We find, however, that the securities class action – in the words of the policy – arose out of the circumstances disclosed by Alexion to its first tower insurers. Coverage should have been placed in the first tower.

 

 

The facts are largely undisputed. Alexion Pharmaceuticals, Inc. develops therapies for people living with rare disorders. Alexion was insured under two claims-made director and officer (“D&O”) liability insurance programs covering different periods. The first program provided $85 million of coverage for claims made between June 27, 2014 and June 27, 2015 (“Tower 1”). The second program provided $105 million of coverage for claims made between June 27, 2015 and June 27, 2017 (“Tower 2”). The two towers consist largely of the same insurers located in the same coverage layers. Both towers are structured as ABC directors and officers policies covering securities claims against the company. Each tower is composed of a primary policy and follow-form excess policies.

 

 

(ABC policies contain three insuring agreements. Side A covers directors’ and officers’ liability not indemnified by the company. Side B reimburses the company for indemnifying its directors and officers. Side C covers securities claims against the company. See A54 (Chubb Tower 2 Policy at 1); see also A158 (Chubb Tower 1 Policy at 1).) (Fn. 2).

 

 

Both towers also contain the following relevant provisions (“Limit of Liability Provision” and “Notice Provision,” respectively):

 

 

(…)

 

 

NOTICE (…): If, during a Policy Period or, if elected, the Extended Reporting Period, the Insureds first become aware of facts or circumstances which may reasonably give rise to a future Claim covered under this Policy, and if the Insureds give written notice to the Insurer during the Policy Period or, if elected, the Extended Reporting Period, of the identity of the potential claimants; a description of the anticipated Wrongful Act allegations; the identity of the Insureds allegedly involved; the circumstances by which the Insureds first became aware of the facts  or circumstances; the consequences which have resulted or may result;  and the nature of the potential monetary damages and non-monetary relief; then any Claim which arises out of such Wrongful Act shall be deemed to have been first made at the time such written notice was received by the Insurer. No coverage is provided for fees, expenses and other costs incurred prior to the time such Wrongful Act results in a Claim.

 

 

On June 18, 2015, Alexion sent its Tower 1 insurers a notice (“2015 Notice”) disclosing Alexion’s receipt of the SEC Subpoena.

 

 

On December 29, 2016 – during the Tower 2 coverage period – Alexion stockholders filed a federal securities class action in the District of Connecticut (“Securities Class Action”). The stockholders alleged that Alexion and its directors and officers violated Sections 10(b) and 20(a) of the Exchange Act, as well as SEC Rule 10b-5. They cited a series of unethical and illegal sales and lobbying practices, including obtaining data from partner labs to identify potential customers, deploying extreme fear tactics to garner patients, and funding foreign organizations. They also alleged that, “despite Alexion’s efforts to cover up the Company’s misconduct, . . . the truth continued to slowly reveal itself” through partial disclosures.

 

 

On January 5, 2017, Alexion sent its Tower 2 insurers notice of the Securities Class Action (“2017 Notice”). Chubb, the primary insurer for both towers, initially accepted coverage for the Securities Class Action under Tower 2, but it laterreassigned coverage to Tower 1. Chubb justified the reassignment on the grounds that the Securities Class Action “arose from the circumstances and anticipated Wrongful Acts reported during the 2014–2015 Policy Period, as well as many of the same Wrongful Acts and Interrelated Wrongful Acts.” Chubb stated that the overlap included Alexion’s grant-making activities, its compliance with the FCPA, and its activities in Japan, Brazil, Turkey, and Russia.

 

 

On July 2, 2020, Alexion settled with the SEC for about $21.5 million (“SEC Settlement”). On September 12, 2023, Alexion settled the Securities Class Action for $125 million (“Securities Class Action Settlement”). Although the Securities Class Action Settlement exceeded  the coverage limits of each tower, Tower 2 provided $20 million more coverage than Tower 1. Thus, Alexion had an economic incentive to pursue coverage for the Securities Class Action under Tower 2. It demanded that the settlement be covered under Tower 2.

 

 

Alexion filed a coverage action in the Superior Court against Endurance, Hudson, Navigators, Old Republic, and Swiss Re. Alexion alleged that Endurance, Navigators, and Swiss Re (collectively, “Tower 2 Insurer Defendants”) breached their coverage contracts under the Tower 2 policies. Alexion also sought a declaratory judgment against these defendants that the Securities Class Action is a “claim” first made during the Tower 2 period. In the alternative, Alexion sought a declaratory judgment against Hudson and Old Republic that the Securities Class Action is a “claim” first made during the Tower 1 period.

 

 

Here, the policies’ relevant terms are unambiguous. Both towers contain a broad Notice Provision, which provides that “any Claim which arises out of any properly noticed Wrongful Act shall be deemed to have been first made at the time such written notice was received by the Insurer.” The Notice Provision is not limited to mature Claims like filed lawsuits. It includes a “notice of circumstances” where the insured can give notice when it “first becomes aware of facts or circumstances which may reasonably give rise to a future Claim” under the policy. In claims-made insurance programs, the notice of circumstances benefits the insured.  The insured can lock in existing insurance coverage for later related claims even though the facts and circumstances have yet to occur or might be somewhat different.

 

See Restatement of the L. of Liab. Ins. § 33 (Am. L. Inst. 2019) (explaining that a “notice of circumstances” clause “provides policyholders the option to secure coverage under an existing claims-made policy for a legal action that may be brought in the future”).

 

 

Under the Limit of Liability Provisions in both towers, “all Claims arising out of the same Wrongful Act and all Interrelated Wrongful Acts . . . shall be deemed to be one Claim . . . first made on the date the earliest of such Claims is first made . . .” In other words, all Claims arising out of a properly noticed Wrongful Act or Interrelated Wrongful Act are treated as a single Claim made on the earliest date the insurer received the insured’s written notice.

 

 

The parties do not dispute that Alexion’s 2015 Notice was proper under the Tower 1 policies. Rather, they dispute whether the Securities Class Action is a claim arising out of any Wrongful Acts or Interrelated Wrongful Acts disclosed by Alexion in the 2015 Notice. Tower 1’s Notice Provision language – “arises out of” – is undefined. Tower 2’s Prior Notice Exclusion language – “alleging,” “based upon,” “arising out of,” and attributable” – is also undefined. With no other textual evidence of the parties’ intent found in the policies, we interpret “arises out of,” and other  similar terms, as requiring some “meaningful linkage between the two conditions imposed in the contract.” Although these terms are “paradigmatically broad,” and we interpret them broadly, the linkage must be meaningful and not tangential. Thus, if the Securities Class Action is meaningfully linked to any Wrongful Act, including any Interrelated Wrongful Act, disclosed by Alexion in the 2015 Notice, the Securities Class Action is covered by Tower 1.

 

 

Upon de novo review, we find that the Securities Class Action is meaningfully linked to the wrongful acts disclosed in the 2015 Notice.  First, both involve the same alleged wrongdoing – Alexion’s grantmaking activities worldwide. The 2015 Notice disclosed that Alexion had received a SEC Subpoena “requesting information related to Alexion’s grant-making activities and compliance with the Foreign Corrupt Practices Act.” The 2015 Notice also disclosed that the SEC Subpoena sought information on Alexion’s activities, policies, and procedures worldwide, especially in Brazil, Japan, Russia, and Turkey.

 

 

Both the SEC investigation and the Securities Class Action involve the same underlying wrongful act – Alexion’s improper sales tactics worldwide, including its grantmaking efforts in Brazil and elsewhere.  Because both the SEC investigation and the Securities Class Action involve the same conduct, it does not matter whether the SEC and the stockholder plaintiffs are different parties, asserted different theories of liabilities, or sought different relief. It is the common underlying wrongful acts that control.

 

 

It is true that the SEC investigation and the Securities Class Action alleged non-identical time periods. But while not perfectly identical, they do meaningfully overlap.

 

 

Both investigations involved the same Wrongful Act – Alexion’s grantmaking activities. A meaningful linkage exists between the Securities Class Action and the SEC investigation as disclosed by Alexion in its 2015 Notice. Under the policies of both towers, the Securities Class Action claim is deemed to have been first made at the time the 2015 Notice was received by Chubb – during the Tower 1 coverage period. Therefore, coverage is under Tower 1. Applying the Prior Notice Exclusion provision of Tower 2, no coverage is available under Tower 2. The judgment of the Superior Court is reversed.

 

 

 

 

(Delaware Supreme Court, Feb. 4, 2025, In re Alexion Pharmaceuticals, Inc. Insurance Appeals, Docket No. 154, 2024 / 157, 2024)