Petitioner bank sought a writ of mandate challenging an order from respondent Superior Court of the City and County of San Francisco (California), which overruled the bank’s demurrer to a class action complaint brought by real party in interest trust beneficiaries.
The beneficiaries alleged that the bank made misrepresentations and omissions occurring contemporaneously with the security transaction of investing the trust’s assets into proprietary and nonproprietary mutual funds. The court held that because the bank’s alleged fraudulent conduct coincided with a security transaction, the case met the “in connection with” requirement for the application of the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. § 78bb(f), thus precluding a state class action complaint. The court stated that SLUSA applied expansively to actions brought by holders in addition to purchasers and sellers of securities. Moreover, case law interpreted the “in connection with” language of SLUSA broadly to apply to actions alleging breaches of fiduciary duties in the context of trustee-beneficiary relationships. The “in connection with” requirement was met even though the beneficiaries had no investment authority. Finding SLUSA preclusion did not displace an area of law traditionally reserved to the states. The court noted that it would be appropriate to allow amendment of the complaint to exclude allegations triggering SLUSA preclusion. Parties’ civil litigation lawyer appeal.
The court granted the petition and issued a peremptory writ directing the trial court to vacate the order that had overruled the demurrer and to issue a new and different order sustaining the demurrer with leave to amend.
Plaintiff, an assignee of a hospital’s claims under the Hospital Lien Act (HLA), Civ. Code, §§ 3045.1-3054.6, sued defendant, the automobile insurer of a patient who was injured in a collision, asserting claims for negligence, breach of fiduciary duty, and unfair business practices. The Superior Court of San Bernardino County, California, sustained the insurer’s demurrer and dismissed the complaint. The assignee appealed.
After learning that the insurer had paid out $ 50,000 to the patient under the uninsured motorist coverage in her automobile insurance policy, the assignee brought claims against the insurer based on the notion that the insurer had not made a statutorily required payment under the HLA. The court of appeal held that the HLA was inapplicable. The insurer was the patient’s first party insurer. The assignee failed to file a notice of lien either with the third party tortfeasor or the tortfeasor’s insurance carrier, if any. The HLA was inapplicable to first party insurance claims, and thus the notice to the insurer was ineffective to bring into being a lien under the HLA. The insurer was not obligated to honor or respond to the notice of the assignee’s purported HLA lien. All three stated causes of action—negligence, breach of fiduciary duty, and unfair business practices—were predicated on the applicability of the HLA and the efficacy of the notice to create an HLA lien. Because the HLA did not apply, the gravamen of each stated cause of action necessarily failed, and the inapplicability of the HLA rendered it impossible for the assignee to cure any pleading defects by amendment.
The court affirmed the judgment.