Filed 2/9/16 Razmco and Assocs. v. BB&T Ins. Services of California CA4/1
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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                    COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                  DIVISION ONE

                                           STATE OF CALIFORNIA



RAZMCO AND ASSOCIATES, INC. et al.,                                  D066296

         Plaintiffs and Respondents,

         v.                                                          (Super. Ct. No. 37-2010-00102178-
                                                                     CU-BT-CTL)
BB&T INSURANCE SERVICES OF
CALIFORNIA, INC. et al.,

         Defendants and Appellants.



         APPEAL from a judgment of the Superior Court of San Diego County, Randa

Trapp, Judge. Reversed.



         Duane Morris, Russell W. Roten, Katherine L. Nichols, Paul J. Killion and

Kathryn T.K. Schultz for Defendants and Appellants.

         Cummins & White, Larry M. Arnold and Melody S. Mosley for Plaintiffs and

Respondents.
       Defendants and appellants BB&T Insurance Services of California, Inc., aka

BB&T-John Burnham (collectively BB&T) and at all times relevant its agent/employee,

Masoud Shahri (Shahri) (sometimes collectively defendants), appeal a jury verdict of

about $140,000 in compensatory and $600,000 in punitive damages in favor of plaintiffs

and respondents Razmco & Associates, Inc., dba Nova Insurance Services (collectively

Nova) and its principal, Bahman Bitaraf (Bitaraf) (sometimes collectively plaintiffs), on

plaintiffs' cause of action for intentional interference with prospective economic

advantage (IIPEA).

       Defendants raise a series of contentions on appeal, including the trial court

prejudicially erred in instructing the jury it consider the alleged violation of a third party

insurer's private "tenets," which were adopted merely as guidelines to prevent a handful

of independent insurance brokers/agents from gaining a competitive advantage over one

another, in determining whether defendants engaged in independently wrongful conduct

as required in an IIPEA cause of action.

       As we explain, we conclude the court erred in ruling the insurer's tenets could be

used as the basis to establish independently wrongful conduct for purposes of this tort.

We further conclude there is no other basis in the record to establish this element. We

thus reverse the judgment in favor of plaintiffs and order the trial court to enter judgment

in favor of defendants.




                                               2
                     FACTUAL AND PROCEDURAL SUMMARY

       Bitaraf was an experienced taxi driver and road supervisor who in 1988 became a

licensed insurance broker. Bitaraf, as noted, at all times relevant was the owner of Nova.

He specialized in writing commercial transportation insurance.

       At issue in this case was the placement of automobile liability insurance for the

large taxi cab fleets of United Independent Taxi Drivers, Inc. (UITD) and San Gabriel

Transit, Inc. (SGT). Typically, taxi companies like UITD and SGT needed insurance for

automobile liability; general liability; accidental insurance, which Bitaraf described as

being similar to worker's compensation for drivers; and comprehensive and collision.

Bitaraf began writing insurance for SGT in 1989. Between 2002 and 2007, Bitaraf also

wrote automobile liability coverage insurance for UITD.

       Plaintiffs' operative complaint1 alleged that defendant BB&T was also in the

business of providing commercial transportation insurance and was a direct competitor of

plaintiffs; that neither plaintiffs nor BB&T provided "insurance to their clientele directly,

but rather through broker agreements between their clientele and various insurance

providers"; that both plaintiffs and BB&T generally offered "insurance from common

insurance providers, subject to those insurance providers' premium rates for commercial

1       The record shows the court granted summary adjudication in favor of defendants
on plaintiffs' causes of action for intentional and negligent interference with existing
economic relationships. The court also separately granted without leave to amend
defendants' motion for judgment on the pleadings on plaintiffs' cause of action for
negligent interference with prospective economic relationships. Neither ruling is at issue
in this appeal. At trial, plaintiffs had two remaining causes of action against defendants:
IIPEA and unfair competition (Bus. & Prof. Code, § 17200 et seq.; hereafter UCL or
Act).
                                              3
vehicles garaged in different geographic locations and various discounts allowed for

among other things, mounted cameras"; and that because of the "relatively small number

of insurance brokers dealing in the public livery insurance business [i.e., commonly

known as the commercial transportation business], [d]efendants . . . were aware at all

times relevant . . . of [p]laintiffs' existing and prospective economic relationships with

various taxi cab companies subject to this lawsuit."

       Plaintiffs' operative complaint alleged that in 1999, plaintiffs entered into a

"Producer Agreement" with American Business Insurance Services, Inc.—an authorized

agent of Mercury Insurance Company—and related entities (Mercury). Pursuant to the

terms of that agreement, plaintiffs placed coverage for large taxi cab fleets, including, as

relevant here, SGT.

       In 2005, plaintiffs entered into a "Consultant Agreement" with Ken Spiker

Associates, Inc., another authorized agent of Mercury. The complaint alleged that as a

producer through Ken Spiker Associates, Inc., plaintiffs placed coverage with Mercury

for other large taxi fleets, including, as relevant here, UITD.

       The complaint alleged that when Mercury implemented its public livery coverage,

it established guidelines or "basic tenets" that it expected brokers and agents to follow,

including, as relevant here: "Mercury will offer the same quote, given equal

documentation, to a prospect not currently a Mercury policyholder. The company will

not allow the agent/broker a competitive advantage over another Mercury producer by

relinquishing commission for a reduced rate over another Mercury quote" (hereafter the


                                              4
commissions tenet); and "Mercury will not condone special monetary, gift or favors

incentivizing arrangements outside of the premium quote to attract the business in

competition with another Mercury [a]gent/[b]roker. Discovery of any of these types of

incentives by the Company will be grounds for discipline which may include termination

of the [agency] contract" (hereafter the incentives tenet). (Original emphasis omitted.)

       The operative complaint further alleged that insurance providers' premium rates

are "generally determined by the location in which the commercial vehicles are kept or

'garaged' in the normal course of business"; that the premium rates for vehicles garaged in

the City or County of Los Angeles were typically higher than the rates for vehicles

garaged in the City of Palm Springs or San Bernardino County; and that Shahri, on behalf

of himself and BB&T, "misrepresented to existing clients [i.e., SGT] and potential new

clients of BB&T . . . that he could offer them insurance policies for their commercial

vehicles fleets garaged in the City of Los Angeles and/or Los Angeles County at the same

rate as for those commercial vehicles fleets garaged in Palm Springs and/or San

Bernardino County."

       The operative complaint alleged Shahri also misrepresented to Mercury "where the

clients' vehicles were actually garaged (e.g., Palm Springs or Riverside instead of Los

Angeles) in order to get a lower premium rate quote from the insurance provider than the

actual garaging location would have obtained, and then offered that rate to the client [i.e.,

SGT] or potential client. Based on these false pretenses, [d]efendants were able to




                                              5
acquire more business from existing clients than they normally would have, as well as

acquire business from new clients that they had not previously serviced."

       In addition to other material misrepresentations made by Shahri, the operative

complaint alleged that defendants paid " 'kickbacks' of insurance premiums and/or

subsidizing the insurance premiums paid by the large taxi cab fleets"; that they paid

"substantial sums of money (a.k.a. bribes) to large taxi cab fleets, disguised as 'Risk

Management Incentives,' anniversary gifts or other 'authorized' discounts"; and that they

offered loans to large taxi cab fleets at below market interest rates among other allegedly

improper payments.

       The record shows Bitaraf on behalf of Nova and Shahri on behalf of BB&T

separately made presentations to the UITD board during its August 2007 meeting in an

attempt to obtain UITD's insurance business for the next policy period. The operative

complaint alleged Mercury, in response to a complaint by plaintiffs and others in the "fall

of 2007," conducted an internal investigation and concluded its authorized agent Shahri,

on behalf of BB&T, had not engaged in any wrongdoing in connection with his August

2007 presentation to the UITD board. As such, plaintiffs alleged they reasonably relied

on Mercury's conclusion, as Mercury was in a superior position than plaintiffs to conduct

an investigation and plaintiffs "had no reason to disbelieve" Mercury's findings and

conclusions as a result of that investigation.

       However, the record shows that "[i]n or around January 2011," plaintiffs "further

heard through rumor" that defendants had engaged in misconduct during the August 2007


                                                 6
UITD board meeting. The operative complaint alleged that plaintiffs sought to conduct

discovery to obtain the records of UITD, but that defendants consistently objected to this

discovery and that it was not until the "spring of 2012[ ] when Nova learned through

formal [sic] the eventual production of the audio recordings of UITD's [August 2007]

board meetings that contrary to representations made by BB&T, Shahri and [d]efendants

. . . during Mercury's investigation, . . . [defendants] had in fact made material

misrepresentations and engaged in wrongful conduct and unfair business practices to

obtain the [UITD] account. Shahri is recorded in these minutes as stating among other

things: [¶] [']. . . In addition to all the services that I offered, sometime ago I received a

letter from UITD for celebration of your 30th anniversary, you guys were looking for

sponsors, a lot of people talk, I put my money where my mouth is . . . Mercury has a

funny way of saying . . . we cannot contribute toward the policy, but nobody in this

country can tell me that . . . I cannot contribute money, that is my right . . . The check is

already here. A lot of people talk, I walk the talk. What I can put on the table . . . I can

put lines of credit . . . and all sorts of banking . . . your credit cards will be cheaper. . . . I

have to put a lot of things on the table not just insurance.['] "




                                                 7
                                       DISCUSSION

       A. Mercury's "Tenets" Do Not Constitute a "Determinable Legal Standard"

       1. Additional Background

       Before trial and in response to defendants' motion to strike, the trial court ruled

that Mercury's tenets could be used as a basis to establish wrongful conduct separate and

apart from the interference itself for purposes of an IIPEA cause of action.

       The author of the tenets and Mercury's head of agent relations, Richard Wolak,

testified at trial that shortly after the August 2007 board meeting he investigated

complaints by Bitaraf and others that Shahri had improperly given checks to UITD.

Wolak then found Shahri had done nothing wrong.

       After UITD voted to purchase automobile liability insurance through BB&T,

Mercury again received complaints about Shahri and how defendants had violated

Mercury's tenets in connection with Shahri's pitch to the UITD board. Wolak reopened

the investigation.

       Wolak testified that he wrote the tenets. At least with respect to UITD, as noted

plaintiffs in large part relied on defendants' violation of the commissions and incentives

tenets to show defendants' conduct was independently wrongful. Wolak testified that, at

all times relevant, a "small club of agents and brokers," perhaps about five or six, were in

the business of placing commercial transportation insurance in Southern California and

that offering commercial transportation insurance was then a new venture for Mercury.




                                              8
       Wolak further testified he used the word "tenet," and specifically avoided the word

"rule," because "my [i.e., Wolak's] whole purpose here was to create, like, a gentleman's

agreement, something like a guideline. Not a strict and hard[-]fast law, but I wanted to

give it some meaning. So I used the words that you [sic] thought would bring some

strength to it and hopefully everyone could adhere to."

       He testified that if the tenets were violated, Mercury "didn't promote any remedy"

and instead, "would take under advisement whatever the violation would be"; that the

tenets were not binding but rather were "just suggestions"; that he "absolutely" did not

intend the tenets to have "any legal effect," or to use them to set up some sort of "legal

structure"; that he never used the tenets to take any disciplinary action against a "single

person"; that the purpose of the tenets was "to keep the Mercury agents from fighting

with each other while [Mercury] tried to get [its commercial transportation insurance]

business off the ground"; and that he unilaterally withdrew the tenets in March 2008.

       As noted, Wolak further investigated whether any of the tenets were violated by

Shahri in connection with the August 2007 board meeting after Wolak received new

complaints in October 2007. Wolak again determined there was no such violation, a

conclusion he reiterated at trial. In fact, at trial Wolak testified that, when Shahri offered

through BB&T (which was owned by a bank) to provide UITD various additional

services, including cheaper credit cards and lines of credit, Shahri was merely engaging

in healthy competition where one independent agent/broker was seeking to "get a

competitive advantage over another Mercury agent[/broker]."


                                              9
       Specifically, Wolak testified Shahri was not "rebating money. He's creating a

better price as far as the insurance product is concerned. This is something in the

banking business, whatever other things that a brokerage has to offer. That is what

they're offering. This has nothing to do with the -- playing with the rates and

commissions to overcome the competition."

       When asked if offering such services violated the incentives tenet, Wolak testified,

"Again, going back to this: This is a guideline. Gifts mean[] tickets to the Super Bowl,

not things that they can do in terms of what brokers do: adding products and services to a

client's repertoire to help them better cover their business."

       With respect to the anniversary "gift," Wolak testified when he initially

investigated the matter some numbers regarding the amount of the "gift" were "bantered

about," but he then did not have specific knowledge about what Shahri had offered the

UITD board. Nonetheless, he found nothing wrong with making such a "gift," noting:

"Again, the guidelines were for the surreptitious payment, meaning that -- we're going to

sneak this money to you under the table or however they're going to do it -- give you a

rebate, and that's how we're going to get money back to you because I can't do it any

other way. But it's common for contributions to be made to a fund -- anniversary fund

that paid for their -- they can solicit that from any broker. They can solicit the taxicab

people and say, Hey, all you four brokers in the business, would you like to contribute to

our anniversary fund?"




                                              10
       With respect to the 30th anniversary "gift," the record shows BB&T conducted an

internal audit and learned in May or June 2007 that UITD initially was owed about

$161,000 in refunds on prior UITD polices placed by BB&T and issued by one or more

liability insurers that had gone into liquidation. Shahri testified that in mid-July 2007,

before the UITD board meeting, he delivered a refund check in this amount to the

president of UITD, as also reflected by an accompanying cover letter drafted by Shahri

explaining the audit and how the majority of the refund was due to the insolvency of

Insurance Co. of New York. The letter stated the return of such funds was "perfect

timing for your 30th anniversary celebration."

       The record shows a further audit by BB&T uncovered an additional $13,000 and

change in refund owing as returned premium. Shahri again met with, and delivered a

check in this amount to, the president of UITD before Shahri's August 2007 presentation.

According to Shahri, the president of UITD stated during these meetings that a portion of

the money refunded by BB&T would be used to cover the costs of a party celebrating

UITD's anniversary and to purchase and install cameras in certain vehicles, which would

result in lower premiums.

       The record also shows both before and during his August 2007 presentation to the

board, Shahri told UITD it was entitled to a 5 percent renewal discount from Mercury, a

statement which turned out to be incorrect. As discussed in more detail post, plaintiffs

rely on this statement among others to show Shahri made material misrepresentations




                                             11
during his August 2007 presentation in order to gain an unfair competitive advantage

over plaintiffs.

       In any event, the record shows UITD was not entitled to a 5 percent renewal

discount because UITD was going into its third year with Mercury, whereas the renewal

discount only applied after three years for renewing customers like UITD. Shahri

testified he misread a Mercury worksheet when he offered the 5 percent renewal

discount, which Wolak agreed was an "easy" mistake to make because the renewal

discount actually began in year four of the renewal, although the Mercury worksheet

suggested the discount was available in year "3." The record shows BB&T subsequently

made up the difference in the down payment of the policy and covered the loss by

submitting a claim on its separate errors and omissions policy.

       After receipt of the checks, the record shows there is a conflict in the evidence

regarding whether the UITD board conducted its own investigation regarding the

propriety of the checks, inasmuch as Bitaraf had subsequently complained to the UITD

board during a second presentation held on September 4, 2007 that the checks from

BB&T were "going to be a problem." The testimony shows the money initially was

placed in a trust account. One board member testified UITD did not conduct any form of

investigation regarding the two checks, including determining whether the checks were a

premium refund or a gift. Instead, according to this board member, UITD just blindly

accepted the checks, although this member did recall a company attorney met with the

board regarding the checks.


                                             12
       However, another board member in attendance at the August and September 2007

presentations by Shahri testified the board consulted its corporate attorney, who

concluded there was no problem with the two checks because, after investigation, it was

determined they were merely "premium refund[s]," and, thus, it was "[UITD's] money."

       2. Guiding Principles

       The elements of an IIPEA claim are: " ' " '(1) an economic relationship between

the plaintiff and some third party, with the probability of future economic benefit to the

plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part

of the defendant designed to disrupt the relationship; (4) actual disruption of the

relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the

defendant.' [Citations.]" [Citation.]' " (Winchester Mystery House, LLC v. Global

Asylum, Inc. (2012) 210 Cal.App.4th 579, 596.)

       Particularly relevant to the case at issue, the interference also must amount to

"independently actionable conduct." (Korea Supply Co. v. Lockheed Martin Corp.

(2003) 29 Cal.4th 1134, 1159 (Korea Supply).) For an act to be sufficiently

independently wrongful, it must be "unlawful, that is, if it is proscribed by some

constitutional, statutory, regulatory, common law, or other determinable legal standard."

(Ibid., fn. omitted & italics added.) Accordingly, the alleged interference must have been

"wrongful by some legal measure other than the fact of interference itself." (Della Penna

v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393.)




                                             13
        "The independently wrongful act [for purposes of IIPEA] must be the act of

interference itself, but such act must itself be independently wrongful. That is, '[a]

plaintiff need not allege the interference and a second act independent of the interference.

Instead, a plaintiff must plead and prove that the conduct alleged to constitute the

interference was independently wrongful, i.e., unlawful for reasons other than that it

interfered with a prospective economic advantage. [Citations.]' (Stevenson Real Estate

Services, Inc. v. CB Richard Ellis Real Estate Services, Inc. (2006) 138 Cal.App.4th

1215, 1224 [(Stevenson)].)

        "It is the plaintiff's burden to plead and prove that the defendant's conduct is

independently wrongful in order to recover. The fact that the defendant's conduct was

independently wrongful is an element of the cause of action itself. (Bed, Bath & Beyond

of La Jolla, Inc. v. La Jolla Village Square Venture Partners (1997) 52 Cal.App.4th 867,

881.)

        "The question has arisen as to whether, in order to be actionable as interference

with prospective economic advantage, the interfering act must be independently wrongful

as to the plaintiff. It need not be. There is 'no sound reason for requiring that a

defendant's wrongful actions must be directed towards the plaintiff seeking to recover for

this tort. The interfering party is liable to the interfered-with party [even] "when the

independently tortious means the interfering party uses are independently tortious only as

to a third party." ' (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at p.




                                              14
1163.)" (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404-

1405, fn. omitted.)

       The Stevenson case informs our analysis on this issue. There, the plaintiff sued the

defendants for IIPEA after the plaintiff " 'expended hundreds of hours of time' "

identifying rental properties at the request of a third party. (Stevenson, supra, 138

Cal.App.4th at p. 1218.) Ultimately, the plaintiff located a suitable property for the third

party and provided the third party with "substantial information" regarding that particular

property. (Ibid.) After the plaintiff commenced negotiations for the lease of the

property, the third party demanded defendant Insignia negotiate the lease on its behalf.

Plaintiff in response informed Insignia that its conduct violated the Rules of Professional

Conduct of the American Industrial Real Estate Association (Association), which applied

to the property because it was listed for lease with Association member defendant CB

Richard Ellis, the successor-in-interest to Insignia. (Id. at pp. 1218-1219.) Eventually,

the third party leased the property for 66 months, and Insignia, rather than the plaintiff,

received a 3 percent commission. (Id. at p. 1219.)

       A key issue in Stevenson was whether "a trade association's written rules are

sufficient to constitute a 'determinable legal standard,' as required by Korea Supply,

supra, 29 Cal.4th at page 1159." (Stevenson, supra, 138 Cal.App.4th at p. 1222.) In

analyzing this issue, the Stevenson court noted as follows: "No California case has

addressed this issue. Several states that require or permit a showing of wrongful conduct

for intentional interference with prospective economic advantage permit a cause of action


                                             15
based upon a violation of established industry, trade or professional rules or standards."

(Ibid., fn. omitted.)

       Although the Stevenson court recognized that reliance on "industry, trade or

professional rules or standards" to support an interference claim was "not without

criticism" (Stevenson, supra, 138 Cal.App.4th at p. 1223), it nonetheless concluded that

"a violation of well-defined, established rules or standards of a trade, association or

profession may constitute the type of wrongful conduct that will support a cause of action

for intentional interference with prospective economic advantage. The conclusion is

based primarily upon the language used in Korea Supply. The California Supreme Court

held an act was 'independently wrongful if it is unlawful, that is, if it is proscribed by

some constitutional, statutory, regulatory, common law, or other determinable legal

standard.' (Korea Supply, supra, 29 Cal.4th at p. 1159, fn. omitted.) The specified

sources—constitution, statute, regulation and common law—account for virtually all

sources of legal restrictions imposed upon a party's conduct. 'Other determinable legal

standard' necessarily refers to some other source of limitations upon behavior by which

conduct could be assessed. Given the prevailing rule in other states, . . . in an action

between competitors, who are bound by well-defined, established rules or standards of a

trade, association or profession, those rules may constitute 'a determinable legal standard'

within the scope of Korea Supply. If particular rules or standards unduly restrict free

competition, it may be inappropriate to permit a plaintiff to base an interference with

prospective economic advantage upon them.


                                              16
       "Korea Supply also required, however, that the defendant's conduct amount to

'independently actionable conduct.' (Korea Supply, supra, 29 Cal.4th at p. 1159.) This

necessarily requires that the rules or standards provide for, or give rise to, a sanction or

means of enforcement for a violation of the particular rule or standard that allegedly

makes the defendant's conduct wrongful. Seldom are the rules or standards of

associations, trades and professions likely to give rise to legal causes of action. However,

internal remedies available within the association, such as a right of arbitration between

the aggrieved members, should suffice to establish 'independently actionable conduct.' "

(Stevenson, supra, 138 Cal.App.4th at pp. 1223-1224.)

       In reaching its decision, the court in Stevenson, supra, 138 Cal.App.4th at page

1222, distinguished this court's opinion in Gemini Aluminum Corp. v. California Custom

Shapes, Inc. (2002) 95 Cal.App.4th 1249 (Gemini), which also informs our decision in

this case. In Gemini, the plaintiff subcontracted with the defendant to "power coat"

aluminum parts in connection with a contract between the plaintiff and a third-party

manufacturer. After a dispute arose between the plaintiff and the defendant in connection

with the subcontract, a principal of the defendant instructed one of his salespersons to

" 'go get the [third party's] business.' " (Id. at p. 1254.) The plaintiff sued the defendant

for IIPEA among other causes of action after the defendant was successful in providing

the third party the same services/materials previously provided by the plaintiff.

       In affirming the judgment in favor of the defendant, this court in Gemini

concluded opinion testimony proffered by the plaintiff to the effect that that it would be


                                              17
" 'unethical,' 'really bad business' or not 'customary in the industry' " for the defendant "to

solicit the account of a company with which [the plaintiff] was [then] doing business"

was insufficient to establish independently wrongful conduct for purposes of IIPEA.

(Gemini, supra, 95 Cal.App.4th at pp. 1257-1258.) In so concluding, this court noted that

relying on opinions applying a "nebulous 'industry standards' test . . . would create

uncertainty and chill, not maximize, competition." (Id. at p. 1258.)

       As noted, Stevenson distinguished Gemini from its facts, concluding: "Unlike the

opinion testimony relied upon by the plaintiff in Gemini, the Association's Rules are

written and presumably made available to all Association members. The Rules therefore

cannot be deemed nebulous. Any Association member and anyone with access to the

Rules could easily refer to the written rules to discover what the Rules permitted,

required and prohibited. The Rules therefore do not implicate the concerns regarding

uncertainty and chilling competition expressed by the court in Gemini." (Stevenson,

supra, 138 Cal.App.4th at p. 1222.)

       3. Analysis

       We independently conclude Mercury's tenets do not constitute a "determinable

legal standard" as required by our Supreme Court. (See Korea Supply, supra, 29 Cal.4th

at p. 1159.) Indeed, as noted by their author Wolak, the tenets were not intended to be

"rules" but rather a "gentlemen's agreement" between Mercury and its independent

agents/brokers; they applied only to a handful of agents/brokers then placing commercial

transportation insurance with Mercury, which was seeking to enter the commercial


                                              18
transportation market; they were enforced rarely if ever by Mercury; and they were

ambiguous regarding what Mercury permitted, required, and prohibited, including with

respect to incentives and/or refunds, as aptly demonstrated by Wolak's testimony in this

case.

        As such, we conclude the tenets were not "well-defined, established rules or

standards" on which to base an IIPEA claim (see Stevenson, supra, 138 Cal.App.4th at p.

1223, italics added) but rather were "nebulous" guidelines that "would create uncertainty"

(see Gemini, supra, 95 Cal.App.4th at p. 1259).

        However, even if the tenets constituted a "determinable legal standard" for

purposes of an IIPEA cause of action, we conclude they nonetheless unduly restricted

free competition. (See Stevenson, supra, 138 Cal.App.4th at p. 1223; see also Gemini,

supra, 95 Cal.App.4th at p. 1258.) Indeed, our own independent research suggests it is

not unlawful for an agent/broker to obtain a competitive advantage by offering

incentives, including reducing his or her commission or offering rebates, when placing

insurance.2 Although former Insurance Code section 7513 prohibited "unlawful rebates"


2      We note Insurance Code section 750 prohibits offering any "rebate, refund,
commission, or other consideration . . . as compensation or inducement" in connection
with the "processing, presenting, or negotiating claims, including claims under policies of
insurance." (Italics added.) This statute has no application to the case at bar, which does
not involve an insurance claim.

3      Insurance Code former section 751 provided: "An insurer, or an insurance agent,
broker, or solicitor, personally or otherwise, shall not offer or pay, directly or indirectly,
as an inducement to enter into an insurance contract, any valuable consideration which is
not clearly specified, promised or provided for in the policy, or application for the
insurance, and any such consideration not appearing in the policy is an unlawful rebate."
                                              19
in connection with the procurement of insurance, this anti-rebating statute was repealed

in 1988 by the passage of Proposition 103. (Repealed by Initiative Measure (Prop. 103,

approved Nov. 8, 1988, § 7).)

       As such, it appears Mercury's incentives tenet, which as noted prohibited

"incentivizing arrangements outside of the premium quote to attract . . . business," was an

invalid restraint on competition. (See Antitrust Guidelines for the Insurance Industry

(Cal. Dept. of Justice, 1990) at p. 59 (Antitrust Guidelines) [noting the "repeal of the anti-

rebating statute necessarily affects the antitrust context by giving legal recognition to the

entrepreneurial freedom of agents to compete by reducing their commissions" and further

noting "coercive arrangements [by insurers] to prohibit agents from granting or

advertising rebates are unlawful"].)

       We reach the same conclusion with respect to the commissions tenet. As noted,

that tenet provided: "The company [Mercury] will not allow the agent/broker a

competitive advantage over another Mercury producer by relinquishing commission for a

reduced rate over another Mercury quote." Again, after repeal of the anti-rebating statute

in 1988, an agent/broker may properly exercise his or her "entrepreneurial freedom" and

compete for business by "relinquishing" commission in order to offset premiums. (See

Antitrust Guidelines, at p. 59.)

       In sum, we independently conclude Mercury's tenets cannot be used as a

"determinable legal standard" for purposes of plaintiffs' IIPEA claim. The tenets were

not rules, much less "well-defined" rules (see Stevenson, supra, 138 Cal.App.4th at p.


                                             20
1223), but were rather merely guidelines that were intended by their drafter to be a

"gentlemen's agreement" between Mercury and a few independent agents/brokers to

discourage infighting when competing for business.

       However, even if such tenets constituted a "determinable legal standard," we

further conclude it would be "inappropriate to permit a plaintiff to base an interference

with prospective economic advantage upon them" (see Stevenson, supra, 138

Cal.App.4th at p. 1223) because, at a minimum, they unduly restricted lawful competition

among agents/brokers when placing insurance. (See Antitrust Guidelines, at p. 59.)

       B. Other Bases to Establish a "Determinable Legal Standard"

       1. The UCL Claim

       Plaintiffs contend that even if Mercury's tenets do not constitute a "determinable

legal standard" for purposes of their IIPEA cause of action, they nonetheless established

this element of the tort based on the jury's finding that defendants committed an "unfair,

fraudulent or unlawful business practice in regard to either the [UITD] or the [SGT]

accounts."

       a. Additional Background

       The record shows that with respect to plaintiffs' UCL claim, the jury was

instructed as follows:

       "Question No. 1: Did Defendants commit an unfair, fraudulent or unlawful

business practice in regard to either the [UITD] or the [SGT] accounts?"




                                            21
       Because the jury answered this question "yes," they were instructed to go to

Question No. 2, which asked:

       "Question No. 2: Did Defendants give rebates, give up commissions, provide

unearned discounts or credits to either [UITD] or [SGT] that were not given to other taxi

cab companies purchasing insurance on like terms and conditions?"

       Because the record shows the jury again answered this question "yes," they were

instructed to go to Question No. 3, which asked:

       "Question No. 3: Did the payment of money, allowance for unearned credits or

discounts, or giving up of commissions have a tendency to destroy competition?"

       Because the jury also answered "yes" to this question, it was instructed to answer

Question No. 4, which provided:

       "Question No. 4: Was Defendants' conduct a substantial factor in causing

Plaintiffs' harm?"

       The jury again answered this question "yes" but found plaintiffs' "out-of-pocket

expenses . . . as a result of the unfair, fraudulent, or unlawful business practice" by

defendants was "$0.00." The record also shows the jury was given other instructions

regarding plaintiffs' UCL claim, including defining "business act or practice," "unfair,"

"fraudulent," and "unlawful" among others.

       b. Guiding Principles and Analysis

       The UCL defines " 'unfair competition' as 'any unlawful, unfair or fraudulent

business act or practice and unfair, deceptive, untrue or misleading advertising.' " (Zhang


                                              22
v. Superior Court (2013) 57 Cal.4th 364, 370.) A UCL action " 'is not an all-purpose

substitute for a tort or contract action.' [Citation.] Instead, the [A]ct provides an

equitable means through which both public prosecutors and private individuals can bring

suit to prevent unfair business practices and restore money or property to victims of these

practices. . . . [T]he 'overarching legislative concern [was] to provide a streamlined

procedure for the prevention of ongoing or threatened acts of unfair competition.' "

(Korea Supply, supra, 29 Cal.4th at p. 1150.) As a result, the remedies available to

private individuals for violation of the UCL are limited to restitution and injunctive relief.

(Id. at p. 1144.) Because the statute " 'is written in the disjunctive, it establishes three

varieties of unfair competition—acts or practices which are unlawful, or unfair, or

fraudulent.' " (Cel–Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.

(1999) 20 Cal.4th 163, 180 (Cel-Tech).)

       A business act or practice is "unfair" under the UCL when the conduct "threatens

an incipient violation of an antitrust law, or violates the policy or spirit of one of those

laws because its effects are comparable to or the same as a violation of the law, or

otherwise significantly threatens or harms competition." (Cel–Tech, supra, 20 Cal.4th at

p. 187, fn. omitted.) A business act or practice is "unlawful" when it violates a predicate

law. (Id. at p. 180; see also CADC/RAD Venture 2011-1 LLC v. Bradley (2015) 235

Cal.App.4th 775, 793 [noting the "standards applicable to a UCL unfairness claim are

something of a moving target"].)




                                               23
       "Finally, a fraudulent business act or practice is one in which members of the

public are likely to be deceived. [Citation.] Thus, in order to state a cause of action

based on a fraudulent business act or practice, the plaintiff must allege that consumers are

likely to be deceived by the defendant's conduct. (Committee on Children's Television,

Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211.)" (Prakashpalan v. Engstrom,

Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1134 (Prakashpalan).)

       Here, the special verdict required the jury in Question Nos. 2 and 3 to determine

whether defendants engaged in conduct that had a "tendency to destroy competition" as a

result of defendants' giving "rebates" or giving up "commissions . . . or other credits" to

UITD or SGT. Although the jury answered both questions "yes," as noted ante we

independently conclude that after repeal of Insurance Code former section 751 in 1988,

defendants' conduct as so described in Question Nos. 2 and 3 was not unlawful and, thus,

cannot be used as a basis to show unfair competition. (See Antitrust Guidelines, at p. 59.)

       That is, offering rebates or giving up commissions is not "unfair" within the

meaning of the UCL because such conduct does not "threaten[] an incipient violation of

an antitrust law, or violate[] the policy or spirit of one of those laws because its effects

are comparable to or the same as a violation of the law, or otherwise significantly

threaten[] or harm[] competition." (See Cel–Tech, supra, 20 Cal.4th at p. 187.) Rather,

as noted, such conduct actually encourages lawful competition.

       Such conduct, again as specifically described in Question Nos. 2 and 3, is also not

"unlawful" within the meaning of the UCL because it does not result in the "violation of


                                              24
another law" that can be used as a predicate under this prong. (See Smith v. State Farm

Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 718; see also Antitrust

Guidelines, at p. 59.) Nor is such conduct "fraudulent"; not only is there no evidence in

the record to support the finding that the public was likely to be deceived by defendants

offering UITD, SGT or both, a rebate of commissions but, as was the case with respect to

the "unfair" and "unlawful" prongs of the UCL, such conduct (as specifically described in

the special verdict form) is not unlawful or deceitful. (See Prakashpalan, supra, 223

Cal.App.4th at p. 1134.)

       In sum, we independently conclude that the conduct defined in Question Nos. 2

and 3 of the special verdict cannot be the basis for a finding of an "unfair," "unlawful" or

"fraudulent" act or practice under the UCL, as such conduct as a matter of law is not

"unlawful competition." As such, we further conclude this conduct cannot be the basis to

establish a "determinable legal standard" for the tort of IIPEA.

       Plaintiffs nonetheless contend that defendants' conduct of "[d]efrauding insurance

companies out of premiums, placing cabs in wrong zip codes and selling phony insurance

coverages" established the "unlawful" prong for purposes of the UCL because such

conduct separately violates various provisions of the Insurance Code. But, as noted ante,

the jury was specifically instructed with respect to the conduct that was deemed

actionable under the UCL claim, which did not include any alleged Insurance Code

violation.




                                             25
       In any event, we note from the record that plaintiffs did not allege in their

operative complaint, or argue in their opposition to defendants' motion to strike portions

of that complaint, that defendants' conduct violated Insurance Code sections 780,4 7815

and/or 790.03, subdivision (a)6 in order to show such conduct was "unlawful" under the



4      Insurance Code section 780 provides: "An insurer or officer or agent thereof, or an
insurance broker or solicitor shall not cause or permit to be issued, circulated or used, any
statement that is known, or should have been known, to be a misrepresentation of the
following: [¶] (a) The terms of a policy issued by the insurer or sought to be negotiated
by the person making or permitting the misrepresentation. [¶] (b) The benefits or
privileges promised thereunder. [¶] (c) The future dividends payable thereunder."

5      Section 781 of the Insurance Code provides: "(a) A person shall not make any
statement that is known, or should have been known, to be a misrepresentation (1) to any
other person for the purpose of inducing, or tending to induce, such other person either to
take out a policy of insurance, or to refuse to accept a policy issued upon an application
therefor and instead take out any policy in another insurer, or (2) to a policyholder in any
insurer for the purpose of inducing or tending to induce him or her to lapse, forfeit or
surrender his or her insurance therein. [¶] (b) A person shall not make any representation
or comparison of insurers or policies to an insured which is misleading, for the purpose of
inducing or tending to induce him or her to lapse, forfeit, change or surrender his or her
insurance, whether on a temporary or permanent plan."

6      Insurance Code section 790.03 defines "unfair methods of competition and unfair
and deceptive acts or practices" to include: "(a) Making, issuing, circulating, or causing
to be made, issued or circulated, any estimate, illustration, circular, or statement
misrepresenting the terms of any policy issued or to be issued or the benefits or
advantages promised thereby or the dividends or share of the surplus to be received
thereon, or making any false or misleading statement as to the dividends or share of
surplus previously paid on similar policies, or making any misleading representation or
any misrepresentation as to the financial condition of any insurer, or as to the legal
reserve system upon which any life insurer operates, or using any name or title of any
policy or class of policies misrepresenting the true nature thereof, or making any
misrepresentation to any policyholder insured in any company for the purpose of
inducing or tending to induce the policyholder to lapse, forfeit, or surrender his or her
insurance."

                                             26
UCL.7 " '[I]t is fundamental that a reviewing court will ordinarily not consider claims

made for the first time on appeal which could have been but were not presented to the

trial court.' Thus, 'we ignore arguments, authority, and facts not presented and litigated in

the trial court. Generally, issues raised for the first time on appeal which were not

litigated in the trial court are waived.' " (Newton v. Clemons (2003) 110 Cal.App.4th 1,

11, fns. omitted.)

       And, assuming without deciding defendants' conduct of "[d]efrauding insurance

companies out of premiums, placing cabs in wrong zip codes and selling phony insurance

coverages" violated Insurance Code sections 780, 781 and/or 790.03, subdivision (a), as

plaintiffs now claim, we nonetheless conclude such violations do not establish as a matter

of law unfair competition for purposes of the UCL. "[N]either the Insurance Code nor

regulations adopted under its authority provide a private right of action." (Rattan v.

United Servs. Auto. Ass'n (2000) 84 Cal.App.4th 715, 724.) As such, in order to state a

claim under the UCL based on an agent/broker's conduct, a plaintiff must allege

something more than a mere violation of the Insurance Code. (See Raisin Bargaining

Ass'n v. Hartford Cas. Ins. Co. (E.D. Cal. 2010) 715 F.Supp.2d 1079, 1091; see also

Maler v. Superior Court (1990) 220 Cal.App.3d 1592, 1598 [noting a plaintiff cannot

circumvent the ban on a private action for damages under Insurance Code section 790.03


7      We note that in connection with the UCL claim, the special verdict also did not
require the jury to specify which of the "three varieties" of unfair competition defendants'
conduct violated (see Cel–Tech, supra, 20 Cal.4th at p. 180), as the special verdict merely
asked whether defendants committed "an unfair, fraudulent or unlawful business
practice." (Italics added.)
                                             27
"by bootstrapping an alleged violation [of that statute] onto [the UCL] so as to state a

cause of action [under a different provision of the Insurance Code]"].) Thus, even

assuming defendants violated one or more of these (or other) provisions of the Insurance

Code, we conclude such violations do not establish as a matter of law unlawfulness under

the UCL.

       2. Intentional Misrepresentation

       Although plaintiffs' operative complaint did not assert a cause of action for

intentional misrepresentation, we note from the record the jury was instructed with

respect to this common law tort ostensibly because it too potentially could serve as a

basis to establish a "determinable legal standard" for plaintiffs' IIPEA claim. (See Korea

Supply, supra, 29 Cal.4th at p. 1159 [noting an "act is independently wrongful if it is

unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common

law, or other determinable legal standard" (italics added & fn. omitted)].)

       With respect to "intentional misrepresentation," the jury was instructed as follows:

       "1. That Defendants represented to Mercury, to [UITD] or to [SGT] that a fact was

true; [¶] 2. That Defendants' representation was false; [¶] 3. That Defendants knew that

the representation was false when it was made, or that the representation was made

recklessly and without regard for its truth; [¶] 4. That Defendants intended that Mercury,

UITD or [SGT] rely on the representation; [¶] 5. That Mercury, UITD or [SGT]

reasonably relied on Defendants' representation; [¶] 6. That Plaintiffs were harmed; and




                                             28
[¶] 7. That Mercury's, UITD's or [SGT's] reliance on Defendants' representation was a

substantial factor in causing Plaintiffs' harm."

       The jury was also instructed as follows on the meaning of "reliance":

       "Mercury, [UITD] or [SGT] relied on Defendants' misrepresentation if the

misrepresentation substantially influenced Mercury, UITD or [SGT] to take action in a

certain manner.

       "With respect to UITD, UITD would likely have renewed its policy with Plaintiffs

had Defendants not made misrepresentations of returned premiums as a gift for UITD's

30th anniversary, or had not misrepresented that UITD was entitled to a 5% credit and

paid 5% of UITD's premium in violation of Mercury's written guidelines.

       "Or

       "With respect to [SGT], Mercury would not have offered the policy for the amount

of premium quoted to Defendants without Defendants' misrepresentation regarding the

location of [SGT's] taxi cab units.

       "Or

       "UITD would likely have renewed its policy through Plaintiffs without the

misrepresentations of Defendants.

       "Or

       "[SGT] would likely have renewed its policy through Plaintiffs without the

misrepresentations by Defendants regarding the lower premium based on the incorrect

garaging locations or areas of operation of [SGT's] taxi cabs, or Defendants'


                                              29
misrepresentations regarding the policy's $1 million in uninsured motorist (UM)

coverage, or that [SGT] did not have to pay premiums for its spare taxis.

       "It is not necessary for Defendants' misrepresentations to be the only reason for the

conduct by Mercury, SGT or UITD."

       Finally, the jury was instructed as follows on the meaning of "reasonable

reliance":

       "In determining whether UITD's, Mercury's, or [SGT's] reliance on the

misrepresentation was reasonable, Plaintiffs must first prove that the matter was material.

A matter is material if a reasonable person would find it important in determining his or

her choice of action.

       "If you decide that the matter is material, you must then decide whether it was

reasonable for UITD, Mercury, or [SGT] to rely on this representation. In making this

decision, take into consideration UITD's, Mercury's, or [SGT's] intelligence, knowledge,

education, and experience.

       "However, it is not reasonable for anyone to rely on a misrepresentation that is

preposterous. It also is not reasonable for anyone to rely on a misrepresentation if facts

that are within UITD's, Mercury's, or [SGT's] observation show that it is obviously false."

       Here, plaintiffs contend there is substantial evidence showing Shahri on behalf of

BB&T made myriad false representations.8 However, assuming some or all of such

8      Such misrepresentations included among others Shahri's statement during the
August 2007 UITD board meeting that the returned premiums already given to UITD
were a "gift" for UITD's 30th anniversary; his statement both before and during that same
meeting that UITD was entitled to a 5 percent renewal credit when in fact UITD was not
                                             30
representations were false and assuming plaintiffs can rely on the representations of

defendants to others to establish an intentional misrepresentation cause of action,9 we

conclude under the circumstances of this case that such misrepresentations do not

constitute a "determinable legal standard" for purposes of plaintiffs' IIPEA claim.

       Indeed, as the jury instructions illustrate, to state a valid cause of action for

intentional misrepresentation plaintiffs were required to prove, and the jury to find,

several elements other than whether defendants' various representations to UITD, SGT

and/or Mercury were false. We note plaintiffs have not argued in their brief that there is

substantial evidence in the record to support findings with respect to these additional

elements, including that UITD, SGT and/or Mercury relied on such misrepresentations

and/or whether their reliance was reasonable. We further note there is no finding by the

entitled to such a credit; his statement that SGT's taxi cab units were operated and/or
garaged in certain locations, when in fact those units were actually operated and/or
garaged in a different location that subsequently required an upward adjustment of SGT's
premiums; and his statement that SGT was not required to pay a premium on 75 of its
"spare" cabs, which were operated when a "regular" cab was out of commission, which
turned out not to be correct.

9       We note the jury was instructed it could find intentional misrepresentation based
on defendants' conduct directed at UITD, SGT and/or Mercury. We note none of these
entities were a party to the lawsuit, and it is not altogether clear that plaintiffs had
"standing" to assert a misrepresentation claim involving conduct not directed at them.
California Civil Jury Instruction (CACI) No. 1900, the standard jury instruction for
intentional misrepresentation, teaches that the misrepresentations must have been directed
to the plaintiff and that the plaintiff must have relied on such misrepresentations. (See
CACI No. 1900, which provides in part that defendant represented to plaintiff a fact that
was true that turned out to be false; that defendant intended plaintiff to rely on the
representation and plaintiff did so rely; and that plaintiff's reliance on the representation
was reasonable.) In light of our decision in this case, we decline to reach the standing
issue or address any other issues in connection with the intentional misrepresentation jury
instructions, including the (confusing) instruction regarding "reliance."
                                              31
jury in the special verdict form that defendants actually committed the tort of intentional

misrepresentation.

       We therefore conclude on this record that plaintiffs' failure to address this issue on

appeal and to provide evidence from the record—which also must be substantial—to

establish all the elements of intentional misrepresentation, if such evidence even exists,

results in a forfeiture of the issue on appeal. (See Tiernan v. Trustees of Cal. State

University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4.) As such, we further conclude

plaintiffs cannot use the tort of intentional misrepresentation to establish the element of

"determinable legal standard" for purposes of IIPEA.

       C. Plaintiffs Cannot State a Cause of Action for IIPEA or for the Violation of the

UCL

       We conclude as a matter of law plaintiffs cannot state a cause of action for IIPEA

because they did not prove conduct that is independently wrongful separate from the

interference itself, which is a required element of this tort. (See Korea Supply, supra, 29

Cal.4th at p. 1159.) We reach this conclusion because Mercury's commissions and/or

incentives tenets do not constitute a "determinable legal standard" for purposes of this

tort; because these two tenets, in any event, "unduly restrict[ed] free competition" (see

Stevenson, supra, 138 Cal.App.4th at p. 1223); and because neither plaintiffs' UCL claim

nor an intentional misrepresentation cause of action based on defendants'

misrepresentations to UITD, SGT and/or Mercury satisfy the independently wrongful

standard under the circumstances of this case.


                                             32
       We further conclude plaintiffs cannot state a UCL claim because, as noted, the

conduct set forth in Question Nos. 2 and 3 of the special verdict, on which this claim is

expressly based, does not constitute "unfair competition" as a matter of law.10

                                    DISPOSITION11

       The judgment is reversed. The trial court is ordered to enter judgment in favor of

defendants. Defendants to recover their costs of appeal.



                                                                      BENKE, Acting P. J.

WE CONCUR:


AARON, J.


IRION, J.




10     In any event, we note the jury awarded plaintiffs "$0.00" for out-of-pocket
expenses on their UCL claim. We also note that plaintiffs were not entitled to an award
of damages or punitive damages even if successful on this claim. (See Clark v. Superior
Court (2010) 50 Cal.4th 605, 610 [noting "damages, including punitive damages and
increased or enhanced damages" are not recoverable for a violation of the UCL].)

11     In light of our decision, we need not reach defendants' other contentions on appeal.
                                            33
