Filed 10/19/15 Tabares v. EquiTrust Life Ins. Co. CA2/7
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN


DANIEL TABARES et al.,                                               B254409

         Plaintiffs and Appellants,                                  (Los Angeles County
                                                                     Super. Ct. No. BC390195)
         v.
                                                                         ORDER MODIFYING OPINION
EQUITRUST LIFE INSURANCE                                                 AND DENYING REHEARING
COMPANY,                                                                 (NO CHANGE IN JUDGMENT)

         Defendant and Respondent.



         THE COURT:
         The court has read and considered respondent’s request for modification of
opinion and appellants’ petition for rehearing filed on October 13, 2015. It is ordered
that the opinion filed herein on September 28, 2015 be modified as follows:
         On page 4, section 2 of the Factual and Procedural Background, the first full
paragraph is deleted and the following paragraph is inserted in its place:


              The named plaintiffs purchased different EquiTrust annuities. According to
              the operative complaint, Daniel and Rhodora Tabares were approached by
              defendant Joseph Sackey at their worksite, the Los Angeles County
              Metropolitan Transportation Authority (MTA). Sackey held himself out as a
              financial planner and annuity specialist who had assisted more than 100 MTA
        retirees find profitable investments for their government pensions. In May
        2006 Sackey convinced Daniel, a 23-year employee of the MTA, to retire early
        and roll his entire government pension of more than $395,000 into a
        MarketValue Index annuity issued by EquiTrust. Based on Sackey’s
        representations, Daniel understood he would begin to receive monthly interest
        payments of $2,500 shortly after issuance of the annuity. Contrary to that
        representation, the annuity purchased by Daniel did not provide for
        commencement of immediate payments. Further, instead of the high returns
        promised by Sackey, the annuity bore a minimum guaranteed interest rate
        ranging from 1.5 to 2 percent, and only 87.5 percent of Daniel’s investment
        was guaranteed from loss. Any withdrawals from the annuity within the first
        10 years of purchase were subject to substantial surrender charges of up to
        12 percent. Daniel was never shown a sample contract before the sale. He
        never incurred a surrender charge or MVA.

     There is no change in judgment. Appellants’ petition for rehearing is denied.


_______________________________________________________________________
        PERLUSS, P. J.         ZELON, J.               SEGAL, J.




                                          2
Filed 9/28/15 Tabares v. EquiTrust Life Ins. Co. CA2/7 (unmodified version)
Appendix attached
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                DIVISION SEVEN


DANIEL TABARES et al.,                                               B254409

         Plaintiffs and Appellants,                                  (Los Angeles County
                                                                     Super. Ct. No. BC390195)
         v.

EQUITRUST LIFE INSURANCE
COMPANY,

         Defendant and Respondent.



         APPEAL from orders of the Superior Court of Los Angeles County, Anthony J.
Mohr and Lee Smalley Edmon, Judges. Affirmed.
         Law Offices of Robert S. Gerstein, Robert S. Gerstein; Gianelli & Morris, and
Robert S. Gianelli, for Plaintiffs and Appellants.
         Amy R. Bach and Daniel R. Wade for United Policyholders as Amicus Curiae on
behalf of Plaintiffs and Appellants.
         Reed Smith, Margaret M. Grignon, Robert D. Phillips, Jr., James C. Martin,
Zareh A. Jaltorossian, Kathy J. Huang and Thomas A. Evans, for Defendant and
Respondent.
                                        _________________________
       This class action was filed in 2008 by purchasers of EquiTrust Life Insurance
Company’s deferred equity-indexed annuities. Named plaintiffs Daniel and Rhodora
Tabares, Judy L. Taylor, Elizabeth Young and Judith Gilbert appeal from orders granting
EquiTrust’s motion for summary adjudication of their contract claims, denying class
certification of their claim under the unfair competition law (Bus. & Prof. Code, § 17200
et seq.) (UCL) and denying their request to add Young and Gilbert as class
representatives on the cause of action for declaratory relief. We affirm.
                  FACTUAL AND PROCEDURAL BACKGROUND
       1. The Financial Products Sold Here
       The EquiTrust annuity products challenged in this action include the MarketValue
Index, the MarketPower Bonus Index, the MarketBooster Index and the MarketTen
Bonus Index. All are equity-indexed annuities, meaning that some portion of the
premium may be allocated to one or more accounts that link the crediting of interest to
the performance of the Standard & Poor’s 500 stock index. Annuity purchasers may also
allocate premiums to a fixed rate account, which credits interest to the annuity according
to a preset fixed rate reset at the beginning of each year. EquiTrust sets a new renewal
rate each year depending on a number of factors, although the annuity contracts identify a
guaranteed minimum interest rate below which the fixed rate will never fall. Equity-
indexed accounts include “index caps,” which cap the interest rate a purchaser can
accrue. Initial index caps are fixed for the first year of each annuity but are reset monthly
or annually depending on the account selected by the purchaser. As with the fixed rate
accounts, renewal index caps are calculated based on a number of cost factors and may
not fall below a guaranteed minimum during the life of the contract. The contracts
specify that at no point may the interest rate be a negative figure, even if the equity index
suffers a loss (negative growth). Thus, when a purchaser allocates premiums to an
equity-indexed account, the account is contractually guaranteed a return between zero
percent and the index cap.
       Three of the four annuity contracts also provided bonuses tied to the amount of
premiums paid into the annuities. The contracts defined “Premium Bonus” as “the

                                              2
amount, if any, equal to the Premium (the amount deposited by the purchaser within the
relevant time period, usually one year) multiplied by the Premium Bonus Percentage
shown in the Contract Data Page.” Premium bonuses were added to the premiums to
increase the total Accumulation Value (defined as the premiums paid as augmented by
any premium bonuses, plus interest credited and less any withdrawals) of the annuity. As
EquiTrust admits, it treats the bonuses it pays as a fixed cost factored into its calculation
of the initial rate and the index caps. Based on these contracted rates, which are usually
lower than the rates provided in a non-bonus product, EquiTrust recoups the cost of the
bonus over time.
       EquiTrust sold its annuity products through independent sales agents compensated
by commissions that were calculated as a percentage of the premiums paid into the
annuity contracts sold. Commissions were not deducted directly from purchasers’
premium funds but, like premium bonuses, were considered fixed costs and were factored
into the initial rates and caps.
       Annuities carry an early withdrawal penalty known as a surrender charge. A
surrender charge is calculated as a percentage of the Accumulation Value that decreases
over time, typically 10 to 12 years, sometimes as long as 15 years. The longer an annuity
holder waits to withdraw his or her funds, the smaller the withdrawal penalty becomes;
when the annuity reaches maturity, the surrender charge disappears. Until then, with
limited exceptions, an annuity holder only has access to the Cash Surrender Value of the
annuity.1 Under the terms of the contracts, the Cash Surrender Value is the greater of
either (1) the Accumulation Value less a surrender charge multiplied by a Market Value
Adjustment (MVA), a figure derived from a preset formula linked to the starting and




1
       EquiTrust’s annuity contracts allow a holder to make annual withdrawals (“partial
surrenders”) of up to 10 percent of the full Accumulation Value. Moreover, if the
annuity holder dies, the contracts specify that the full Accumulation Value is payable to
the annuitant’s beneficiary.

                                              3
current value of United States Treasury bonds,2 or (2) a Minimum Guaranteed Contract
Value, which is calculated as a percentage of the premiums actually paid, excluding any
premium bonuses and withdrawals.
       The cover page of the annuities sold by EquiTrust contained a number of advisory
statements, including the following “important notice to owners age 60 or older”: “This
contract may be returned within 30 days from the date you received it for a full refund by
returning it to the insurance company or agent who sold you this contract. After 30 days,
cancellation may result in a substantial penalty, known as a surrender charge. The
surrender charges associated with this contract can be found on the contract data page.”
Also on the cover sheet, below the EquiTrust signatures, was the following caution:
“Cash surrender values may increase or decreased based on the equity index and market
value adjustment features of this contract. . . .” The contract data page in turn disclosed
the premium paid, the premium bonus percentage and amount, the minimum interest rate
applicable to the plan, the duration of the MVA in years and the applicable percentage of
the surrender charge over time. A cover sheet from one of the EquiTrust annuities is
reproduced as an appendix to this opinion.
       2. The Named Plaintiffs
       The named plaintiffs purchased different EquiTrust annuities. According to
Daniel and Rhodora Tabares, they were approached by defendant Joseph Sackey at their
worksite, the Los Angeles County Metropolitan Transportation Authority (MTA).
Sackey held himself out as a financial planner and annuity specialist who had assisted
more than 100 MTA retirees find profitable investments for their government pensions.
In May 2006 Sackey convinced Daniel, a 23-year employee of the MTA, to retire early
and roll his entire government pension of more than $395,000 into a MarketValue Index

2
        The MVA, which is expressed in the contract as a mathematical formula, adjusts
the policy’s cash surrender value based on fluctuations in interest rates between purchase
and surrender. According to EquiTrust, the MVA compensates EquiTrust for the cost of
liquidating long-term investments when a policy holder prematurely surrenders all or part
of his or her annuity. The MVA can cause either an increase or decrease in the otherwise
applicable surrender charge and is a common feature of indexed annuities.

                                              4
annuity issued by EquiTrust. Based on Sackey’s representations, Daniel understood he
would begin to receive monthly interest payments of $2,500 shortly after issuance of the
annuity. Contrary to that representation, the annuity purchased by Daniel did not provide
for commencement of distribution payments until 2061 when Daniel would be more than
100 years old. Further, instead of the high returns promised by Sackey, the annuity bore
a minimum guaranteed interest rate ranging from 1.5 to 2 percent, and only 87.5 percent
of Daniel’s investment was guaranteed from loss. Any withdrawals from the annuity
within the first 10 years of purchase were subject to substantial surrender charges of up to
12 percent. Daniel was never shown a sample contract before the sale. He never
incurred a surrender charge or MVA.
       Judy Taylor purchased a MarketPower Bonus Index annuity from an independent
agent in 2008. She was shown a sales brochure and signed a disclosure statement but
was not provided with a sample contract before the sale. She never incurred a surrender
charge or MVA.
       Elizabeth Young, who was added as a named plaintiff in the fourth amended
complaint, purchased a MarketPower Bonus Index annuity in 2006. She surrendered her
annuity in 2007. Judith Gilbert, added as a named plaintiff in the fifth amended
complaint, purchased a MarketTen Bonus annuity in 2008. Although she incurred some
surrender charges when she surrendered her annuity in 2012, this loss was offset in part
by application of the MVA, which decreased the surrender charge as a result of the steep
declines in the market after she purchased the annuity.
       3. The Class Certification Proceedings
       Plaintiffs filed their initial class action complaint in May 2008 and third amended
complaint in September 2009. The third amended complaint alleged that abuses in the
sale of deferred annuities, typified by unlawful and deceptive sales tactics, had become a
growing problem in California. According to plaintiffs, EquiTrust improperly shifted the
cost of paying its agents’ commissions to annuity holders by reducing the annuity’s
credited earnings; shifted the cost of paying a promised 10 percent bonus on some
annuities to the holders by reducing the annuity’s credited earnings; disguised a

                                             5
significant portion of its surrender charge penalty by applying the MVA to hedge losses
on interest rates; and failed to identify the MVA as a surrender charge on the cover page
of annuities sold to seniors (age 60 or older), as required by Insurance Code
section 10127.13 (section 10127.13).
       Plaintiffs moved for certification of two classes in December 2009: (1) all
California residents who had purchased one of four specified deferred annuity insurance
contracts from EquiTrust; and (2) all California residents over the age of 60 who had
purchased one of the four annuities. On August 2, 2010 the court granted certification on
two claims: (1) the contract cause of action on the theory EquiTrust had breached the
covenant of good faith and fair dealing by manipulating renewal rates and caps to recoup
the costs of commissions and bonuses; and (2) the declaratory relief cause of action for
the second (senior) class based on the alleged violation of section 10127.13. The court
denied certification of the fraud and UCL causes of action as to both classes on the
ground there was no evidence either Tabares or Taylor, the only two named plaintiffs at
this point, had actually relied on misrepresentations made by EquiTrust and thus lacked
standing under the UCL. With respect to Taylor, the court also found she was an
inadequate class representative because of discrepancies between her deposition
testimony and her signed declaration: Taylor remembered virtually nothing about the
provisions of the annuity she had purchased or disclosures made to her about its
provisions. Because Taylor was at the time the only named plaintiff aged 60 or older, the
senior class was left without a named class representative.
       In response to the certification order plaintiffs filed a motion seeking clarification
or reconsideration with respect to the issue of reliance for the UCL claim and for leave to
add a new class representative for the senior class. On January 26, 2011 the court denied
the request for reconsideration on the reliance standard. The court emphasized that the
alleged omission of information could not be shown because none of the proposed class
representatives had reviewed the contracts. The court indicated it would reconsider




                                              6
whether reliance was required for the “unlawful” prong of the UCL and directed the
plaintiffs to provide a list of possible replacement class representatives.3
       In response to the January 26, 2011 order plaintiffs filed a brief arguing reliance
should not be required for a claim under the unlawful prong of the UCL based on
EquiTrust’s alleged violation of section 10127.13. Because this section is a remedial
statute, the plaintiffs argued, noncompliance alone should establish a violation. As
plaintiffs explained, inserting a reliance requirement in this setting would subvert the
purpose of the law and encourage rather than “‘suppress the mischief at which [the
statute] is directed.’” (Rand v. American Nat. Ins. Co. (N.D.Cal. 2010) 717 F.Supp.2d
948, 957 (Rand).) The court rejected the argument, concluding the Supreme Court’s
decisions in In re Tobacco II Cases (2009) 46 Cal.4th 298 (Tobacco II) and Kwikset
Corp. v. Superior Court (2011) 51 Cal.4th 310 (Kwikset) require a showing of reliance to
state a claim under the unlawful prong of the UCL.
       Plaintiffs continued their efforts to identify a class representative for the senior
class by filing a fourth amended complaint, which added Young as a plaintiff and senior
class representative for the breach of contract and UCL classes. They again sought to
amend the complaint to add Gilbert as a senior class representative. The court agreed to
add both Young and Gilbert as representatives for the breach of the implied covenant
claim but refused to add them as class representatives for the declaratory relief claim
because they had previously surrendered their policies. The court also denied plaintiffs’
request for reconsideration of the reliance requirement on the unlawful prong of the UCL
in light of an intervening decision from this district, Medrazo v. Honda of North
Hollywood (2012) 205 Cal.App.4th 1 (Medrazo), which held reliance was not an element
of the claim.
       In February 2013 EquiTrust moved for summary adjudication of the certified
claims for breach of contract and breach of the implied covenant of good faith and fair


3
       Pursuant to this order the parties stipulated to a notice that was sent to senior
policy holders seeking additional class representatives.

                                              7
dealing. EquiTrust asserted the claim, however it was characterized, failed because the
plaintiffs could not demonstrate an underlying breach of contract.
       In May 2013, pending the hearing on the motion for summary adjudication,
plaintiffs filed a renewed motion to certify their fraud and UCL causes of action and to
clarify the previous class certification order as to whether the court had certified a claim
for breach of the express promise to provide a bonus. After a hearing on October 28,
2013 the court entered an order denying the request to certify the fraud and UCL claims
with Gilbert as a representative. The court concluded that, absent a change in
circumstances, plaintiffs were barred from renewing their previous motion for
certification of claims originally denied (see Safaie v. Jacuzzi Whirlpool Bath, Inc. (2011)
192 Cal.App.4th 1160, 1172) and their failure to seek leave to add Gilbert as a
representative on these claims at the time she was added as a representative for the
implied covenant class was fatal. The court also refused to allow plaintiffs “to expand
the scope of the certified class” by proceeding on the theory that the bonus promised by
EquiTrust (but recouped by the initial contract rates) was a breach of contract. The court
ruled that claim had been waived by the failure to raise it in the first motion for
certification.
       Nonetheless, in an order issued December 16, 2013 the court considered and
rejected both contractual theories, concluding the distinction between the express breach
of contract claim and the breach of the implied covenant was irrelevant. The bonus
conferred by the contract was defined as a credit to the Accumulation Value, and, as
plaintiffs conceded, EquiTrust had duly credited each of the eligible accounts with the
amount specified in the contracts. As to plaintiffs’ theory EquiTrust breached the implied
covenant by manipulating rates to recover the costs of the bonuses and commissions, the
contract afforded EquiTrust the power to reset particular rates; and plaintiffs were unable
to assert EquiTrust’s rate setting was either unfair or had violated the terms of the
contracts at issue. The bonuses and commissions were fixed, and amortized costs
recouped in the initial rates and caps had been fully disclosed to, and accepted by,
plaintiffs.

                                              8
       At a status conference on January 28, 2014, plaintiffs asked the court to decertify
their cause of action for declaratory relief for lack of an adequate class representative,
leaving the breach of contract claim as the only certified cause of action.
                                     CONTENTIONS
       Plaintiffs contend the trial court erred as a matter of law (1) by concluding
EquiTrust had not breached the annuity contracts or violated the implied covenant of
good faith and fair dealing by setting rates at levels that negated its promise of bonuses
and imposing the burden of high commissions on policyholders; and (2) by refusing to
certify the UCL “unlawful” prong claim based on the class representatives’ failure to
demonstrate reliance. Further, plaintiffs contend the court abused its discretion by
refusing to allow a former annuity holder who had surrendered her contract to serve as
the class representative for the declaratory relief claim.
                                       DISCUSSION
       1. Summary Adjudication Was Properly Granted on the Breach of Contract and
          Implied Covenant Claims
           a. Plaintiffs’ breach of contract claim is reviewable
       EquiTrust initially contends plaintiffs have failed to properly present any claim
based on an express breach of contract because that claim was never certified for class
action treatment and plaintiffs limited the issues in their notice of appeal to certified
claims under the “death knell” doctrine. (See In re Baycol Cases I & II (2011) 51 Cal.4th
751, 757.) As EquiTrust points out, the court’s April 2, 2010 certification order restricted
the class contract claim to the theory that EquiTrust had breached the covenant of good
faith and fair dealing by manipulating its rates over the life of the contract to recoup the
bonuses credited to the annuity holders and the high commission rates paid to the selling
agents. After the motion for summary adjudication was filed, plaintiffs sought to clarify
the court’s order had encompassed a claim for express breach of contract, a request the
court denied as untimely. EquiTrust asserts plaintiffs did not challenge that ruling in this
appeal.




                                               9
       While it is true the court ruled the request to certify an express breach of contract
claim was untimely, EquiTrust’s notice of motion for summary adjudication identified
both causes of action, one for breach of contract and one for breach of the implied
covenant of good faith and fair dealing. The notice asserted both causes of action had
been certified by the court in its order of August 2, 2010. The court’s order granting
EquiTrust’s motion for summary adjudication also addressed both causes of action,
concluding the undisputed evidence established EquiTrust had performed its contractual
obligations; the bargained-for limits on EquiTrust’s discretion had been implemented;
and EquiTrust had exercised the discretion conferred by the contract within the scope of
those limits. Plaintiffs appealed from this order, as well as the order denying clarification
and the order denying certification.
       Notices of appeal, of course, are required to be liberally construed. (Cal. Rules of
Court, rule 8.100(a)(2).) Because the parties have had an opportunity to fully brief this
issue and in view of our obligation to review de novo the trial court’s interpretation of the
contract for either claim, we exercise our discretion to consider whether summary
adjudication was properly granted on the breach of contract claim, despite EquiTrust’s
contention it was not properly certified. (See, e.g., Canaan v. Abdelnour (1985) 40 Cal.3d
703, 722, fn. 17 [whether to apply rule of forfeiture for failure to properly raise an issue
“‘is largely a question of the appellate court’s discretion’”], overruled on other grounds in
Edelstein v. City and County of San Francisco (2002) 29 Cal.4th 164, 183; Japan Line,
Ltd. v. County of Los Angeles (1977) 20 Cal.3d 180, 184-185 [appellate court may
consider issue despite “obvious impropriety” in a party’s appellate procedure, provided
the parties have had an opportunity to brief the question], revd. on other grounds (1979)
441 U.S. 434 [99 S.Ct. 1813, 60 L.Ed.2d 336]; Greenlake Capital, LLC v. Bingo
Investments, LLC (2010) 185 Cal.App.4th 731, 740, fn. 6 [“whether the letter agreement
itself is susceptible to severance analysis is a question of law we may properly consider
for the first time on appeal”]; Sheller v. Superior Court (2008) 158 Cal.App.4th 1697,
1709 [parties permitted to raise new issues on appeal involving question of law;



                                             10
“application of the forfeiture rule is not automatic; appellate courts have discretion to
excuse such forfeiture”].)
          b.   Standards of contract interpretation
       The fundamental goal of contract interpretation is to give effect to the mutual
intention of the parties as it existed at the time they entered into the contract. (Hartford
Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 288; Bank of the West
v. Superior Court (1992) 2 Cal.4th 1254, 1264; see Civ. Code, § 1636.) That intent is
interpreted according to objective, rather than subjective, criteria. (Wolf v. Walt Disney
Pictures & Television (2008) 162 Cal.App.4th 1107, 1126 (Wolf ).) When the contract is
clear and explicit, the parties’ intent is determined solely by reference to the language of
the agreement. (See Civ. Code, §§ 1638 [“language of a contract is to govern its
interpretation, if the language is clear and explicit, and does not involve an absurdity”];
1639 [“[w]hen a contract is reduced to writing, the intention of the parties is to be
ascertained from the writing alone, if possible”].) The words are to be understood “in
their ordinary and popular sense” (Civ. Code, § 1644), and the “whole of [the] contract is
to be taken together, so as to give effect to every part, if reasonably practicable, each
clause helping to interpret the other.” (Civ. Code, § 1641.)
       Although parol evidence is inadmissible to vary or contradict the clear and
unambiguous terms of a written, integrated contract (Code Civ. Proc., § 1856, subd. (a);
Wolf, supra, 162 Cal.App.4th at p. 1126), extrinsic evidence is admissible to interpret the
agreement when a material term is ambiguous. (City of Hope National Medical Center v.
Genentech, Inc. (2008) 43 Cal.4th 375, 395; see Pacific Gas & Electric Co. v. G.W.
Thomas Drayage & Rigging Co. (1968) 69 Cal.2d 33, 39-40 [if extrinsic evidence reveals
that apparently clear language in the contract is susceptible to more than one reasonable
interpretation, it may be used to determine contracting parties’ intent]; Code Civ. Proc.,
§ 1856, subd. (g) [extrinsic evidence admissible to interpret terms of ambiguous
agreement].) Whether an ambiguity exists is a question of law, subject to independent
review on appeal. (Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1351; Winet v.
Price (1992) 4 Cal.App.4th 1159, 1165.)

                                              11
       As we explained in Wolf, supra, 162 Cal.App.4th 1107, when the meaning of
words used in a contract is disputed, the trial court engages in a three-step process: “First,
it provisionally receives any proffered extrinsic evidence that is relevant to prove a
meaning to which the language of the instrument is reasonably susceptible. [Citations.]
If, in light of the extrinsic evidence, the language is reasonably susceptible to the
interpretation urged, the extrinsic evidence is then admitted to aid the court in its role in
interpreting the contract. [Citations.] When there is no material conflict in the extrinsic
evidence, the trial court interprets the contract as a matter of law. [Citations.] This is true
even when conflicting inferences may be drawn from the undisputed extrinsic evidence
[citations] or [when] extrinsic evidence renders the contract terms susceptible to more than
one reasonable interpretation. [Citations.] If, however, there is a conflict in the extrinsic
evidence, the factual conflict is to be resolved by the jury.” (Wolf, at pp. 1126-1127,
fn. omitted; see Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 439 [“[i]t is solely a
judicial function to interpret a written contract unless the interpretation turns upon the
credibility of extrinsic evidence, even when conflicting inferences may be drawn from
uncontroverted evidence”]; Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 527 [same].)
             c. Plaintiffs failed to establish a breach of contract by EquiTrust
       Plaintiffs’ breach of contract argument is straightforward: They contend the word
“bonus” should be understood in its “ordinary and popular sense.” (Civ. Code, § 1644;
see Reilly v. Inquest Technology, Inc. (2013) 218 Cal.App.4th 536, 554.) Plaintiffs were
promised a bonus they did not receive because the so-called bonus payments were
recouped by EquiTrust through lower index credits on those annuities. In other words,
the higher the bonus percentage, the lower the return over time. At minimum, they argue,
the term “bonus” is ambiguous, and a triable issue of material fact that cannot be resolved
on summary judgment exists as to whether EquiTrust breached the terms of the annuity
contracts.
       As the trial court pointed out, however, Civil Code section 1644 contains a crucial
caveat: “The words of a contract are to be understood in their ordinary and popular
sense, rather than according to their strict legal meaning; unless used by the parties in a

                                               12
technical sense . . . in which case the latter must be followed.’” (Italics added.) The
court observed, “the question is not, as Plaintiffs suggest, whether EquiTrust provided
class members with ‘a true bonus’ as a layperson would understand it, but whether
EquiTrust provided a ‘Premium Bonus’ as defined in the contract.” As defined, the court
concluded, there is no ambiguity in the contract and thus no basis for the admission of
extrinsic evidence as to the contract’s meaning.
       This ruling was correct. The integrated contract identifies a premium bonus that is
defined only with reference to the annuity’s Accumulation Value. The purchasers received
the premium bonuses promised in the contracts. That the individual annuities varied in
ultimate credit accumulation based on whether a particular annuity included an upfront
premium bonus or lower credits over time does not constitute a breach of contract; to the
contrary, the rates were disclosed, as was the range of discretion afforded to EquiTrust by
the contract. The perception by some purchasers they would receive a 10 percent bonus
(with no cost to them or tradeoff in the promised return credits) reflects more than anything
the lack of sophistication of those purchasers and their vulnerability to misleading sales
tactics. It does not, however, give rise to a contract claim and, indeed, is inadmissible to
vary the express language of the contract. (See Wolf, supra, 162 Cal.App.4th at pp. 1126-
1127; see also Cirzoveto v. AIG Annuity Ins. Co. (W.D.Tenn. 2009) 625 F.Supp.2d 623,
627 [granting summary judgment to insurer on breach of contract claim based on promise
of “bonus”; terms of policy were clear and unambiguous]; Phillips v. American
International Group, Inc. (S.D.N.Y. 2007) 498 F.Supp.2d 690, 694-695 [rejecting
contention word “bonus” barred insurer from altering interest rates to recoup bonus so
long as rates complied with minimum rates contained in contract].)
       The extrinsic evidence cited by the plaintiffs, moreover, does not in any way
support a contention the contract’s use of the word “bonus” was reasonably susceptible to
the meaning they propose. Noel Abkemeier, who helped design the annuity for an
actuarial company retained by EquiTrust, essentially testified the bonus products were
designed with intrinsically lower rates in order to recover the upfront costs of the bonus:



                                             13
“There’s a tradeoff over a time horizon.”4 This testimony is inherently consistent with
the language of the contract. (Cf. Eller v. EquiTrust Life Ins. Co. (9th Cir. 2015)
778 F.3d 1089, 1093 (Eller) [finding no duty to disclose to purchaser that annuity “may
provide lower index credits than might have been available in an alternative product
without the bonus feature”].)5
       Accordingly, summary adjudication in favor of EquiTrust on the plaintiffs’ breach
of contract claim was proper.
          d. There was no breach of the implied covenant of good faith and fair dealing
             as a matter of law
       California law recognizes in every contract, including insurance policies, an
implied covenant of good faith and fair dealing. (Wilson v. 21st Century Ins. Co. (2007)
42 Cal.4th 713, 720; Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 575.) In the
insurance context the implied covenant requires the insurer to refrain from injuring its

4
        EquiTrust objected to this testimony as inadmissible, and the court sustained the
objection. Plaintiffs did not appeal the ruling. Nonetheless, it is relevant to our de novo
determination of ambiguity. (See Cline v. Homuth (2015) 235 Cal.App.4th 699, 705-706
[“‘[E]ven if the trial court personally finds the document not to be ambiguous, it should
preliminarily consider all credible evidence to ascertain the intent of the parties. “The
test of whether parol evidence is admissible to construe an ambiguity is not whether the
language appears to the court to be unambiguous, but whether the evidence presented is
relevant to prove a meaning to which the language is ‘reasonably susceptible.’”’”];
accord, Wolf, supra, 162 Cal.App.4th at pp. 1126-1127.)
5
        In Eller, supra, 778 F.3d 1089 plaintiff Harrington alleged EquiTrust’s marketing
of its MarketPower Bonus Index annuity violated the Racketeer Influenced and Corrupt
Organizations Act (18 U.S.C. § 1962(c) (RICO)), as well as Arizona law. In rejecting the
RICO claim, the court stated: “[I]t is uncontested here that EquiTrust delivered precisely
what it promised. The 10% bonus was accurately described in the Annuity materials and
properly credited to Harrington’s account. The bonus increased Harrington’s
accumulation value without requiring him to deposit additional funds, allowing him to
withdraw more money without penalty than otherwise would have been possible. The
promise of a ‘bonus’ was thus not, as Harrington claims, illusory. [Citation.] Nor is it
clear that Harrington would have been better off absent the bonus feature. If the index
credits were regularly low, Harrington’s investment would outperform a non-bonus
annuity that provided the possibility of higher credits. The district court thus correctly
concluded that use of the term ‘bonus’ was not fraudulent.” (Eller, at pp. 1093-1094,
fn. omitted.)

                                            14
insured’s right to receive the benefits of the insurance agreement. (Egan v. Mutual of
Omaha Ins. Co. (1979) 24 Cal.3d 809, 818.) “[T]he covenant is implied as a supplement
to the express contractual covenants, to prevent a contracting party from engaging in
conduct that frustrates the other party’s rights to the benefits of the agreement.” (Waller
v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36; see Carma Developers (Cal.), Inc.
v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 372 [“the covenant
requires the party holding such [discretionary] power to exercise it ‘for any purpose
within the reasonable contemplation of the parties at the time of formation—to capture
opportunities that were preserved upon entering the contract interpreted objectively’”].)
       As a general rule, as the trial court recognized, there can be no breach of the
implied covenant of good faith and fair dealing if no benefits are due under the policy or
contract: “[T]he covenant is based on the contractual relationship between the insured and
the insurer. . . . Absent that contractual right [to policy benefits], the implied covenant has
nothing upon which to act as a supplement, and ‘should not be endowed with an existence
independent of its contractual underpinnings.’” (Waller v. Truck Ins. Exchange, Inc.,
supra, 11 Cal.4th at p. 36; accord, Brandwein v. Butler (2013) 218 Cal.App.4th 1485,
1514-1515; Brehm v. 21st Century Ins. Co. (2008) 166 Cal.App.4th 1225, 1235-1237;
Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 279.)6 “[T]he
implied covenant will only be recognized to further the contract’s purpose; it will not be
read into a contract to prohibit a party from doing that which is expressly permitted by the
agreement itself.” (Wolf, supra, 162 Cal.App.4th at p. 1120.) “Thus, although it has been
said the implied covenant finds ‘particular application in situations where one party is
invested with a discretionary power affecting the rights of another’ [citations], if the
express purpose of the contract is to grant unfettered discretion, and the contract is


6
       Breach of a specific provision of the contract, however, is not a necessary
prerequisite to a claim for breach of the implied covenant of good faith and fair dealing.
(See Carma Developers (Cal.), Inc. v. Marathon Development California, Inc, supra,
2 Cal.4th at p. 373; Brehm v. 21st Century Ins. Co., supra, 166 Cal.App.4th at pp. 1235-
1236.)

                                             15
otherwise supported by adequate consideration, then the conduct is, by definition, within
the reasonable expectation of the parties and ‘can never violate an implied covenant of
good faith and fair dealing.’” (Id. at pp. 1120-1121; see also Third Story Music, Inc. v.
Waits (1995) 41 Cal.App.4th 798, 808 [“courts are not at liberty to imply a covenant
directly at odds with a contract’s express grant of discretionary power except in those
relatively rare instances when reading the provision literally would, contrary to the
parties’ clear intention, result in an unenforceable, illusory agreement”].)
       Relying on this court’s decision in April Enterprises, Inc. v. KTTV (1983)
147 Cal.App.3d 805, the plaintiffs contend EquiTrust’s discretion was not unfettered and
its failure to ensure that credited returns fulfilled their reasonable expectations of the
benefit of the bonuses they were promised breached the covenant of good faith and fair
dealing. In April Enterprises plaintiff, a ventriloquist, entered into a contract with a
television station to produce a television show based on the characters he had created.
The contract gave both parties the right to enter into syndication deals with third parties,
with half the profits going to the other party. Under the contract, however, the station
owned the show videotapes and was authorized to erase the tapes of each show six
months after initial broadcast. (Id. at p. 814.) Some years after the contract was signed,
the station erased the only copies of the programs; and the ventriloquist sued. Reversing
a nonsuit judgment in favor of the station, this court held, because the contract contained
conflicting terms, the station’s discretion to erase the tapes had to be construed as limited
by the covenant of good faith and fair dealing to allow erasure only when future
syndication was not feasible. (Id. at pp. 816-817.)
       As EquiTrust argues, April Enterprises is not apposite because the annuity
contracts do not contain unclear or conflicting terms. The contracts specify the initial
premium bonuses and guaranteed minimums bargained for by plaintiffs. There is no
evidence EquiTrust violated these terms or subsequently manipulated renewal rates to
deprive annuitants of credits due under the initial terms of the contracts. The evidence
instead supports the conclusion the trial court reached, that is, EquiTrust complied with
the rates specified in the contracts and exercised its discretion to set renewal rates and

                                              16
caps consistently with those terms. In this respect, the credited returns were calculated
within the parameters of the costs to EquiTrust of each annuity; for those annuities
conferring a premium bonus—at a higher initial cost to the insurer—EquiTrust was
required to hedge, or protect, its investment exposure by offering lower initial caps that
adversely affected credit accumulation for the purchaser. Nothing in the contracts
prohibited this approach; indeed, the contracts expressly contemplated this distinction in
rates and, ultimately, credited returns.
       Again, the wrong complained of by plaintiffs, the inducement to purchase the
annuity contracts with the promise of a bonus that, in practice, does not accumulate to the
ultimate good of the purchaser, sounds in actionable misrepresentation. (See Eller,
supra, 778 F.3d at p. 1093.) It does not support a cause of action for breach of contract
or the implied covenant of good faith and fair dealing when the insurer provides all that is
promised by the contract.
       2. The Trial Court Did Not Err in Refusing To Certify Plaintiffs’ UCL Unlawful
          Prong Cause of Action
           a. Plaintiffs have adequately preserved this issue on appeal
       EquiTrust contends plaintiffs have forfeited the issue whether the trial court erred
as a matter of law in refusing to certify the UCL cause of action due to an absence of
reliance because they failed to propose an alternative class representative after Taylor
was found to be inadequate. (See Lafferty v. Wells Fargo Bank (2013) 213 Cal.App.4th
545, 571-572 [failure to address alternative grounds for ruling forfeits appellate challenge
to ruling].) Plaintiffs respond they repeatedly challenged the trial court’s ruling that
reliance was required and proposal of another class representative who could not
demonstrate reliance would have been futile. (See Phillips v. Sprint PCS (2012)
209 Cal.App.4th 758, 773 [“‘[w]aiver should not be found on the basis of a party’s failure
to undertake a futile act’”].)
       The record does not support the finding of forfeiture requested by EquiTrust.
Plaintiffs advised EquiTrust and the court at the time they sought leave to file the fourth
amended complaint that the newly proposed class representatives would not be able to


                                             17
testify they had relied on EquiTrust’s alleged violation of section 10127.13, “as
delineated by the Court at the July 6, 2011 hearing.” The court never altered its position
that a showing of reliance was required to state a claim under the UCL’s unlawful prong.
Consequently, no alternative class representatives were proposed for that particular class.
       Amendments to add proper class representatives are routinely permitted. For
example, in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235 the Supreme
Court rejected defendants’ argument plaintiffs should not be permitted to name a new
class representative when the failure to do so in the initial complaint was not a mistake.
As the Court stated, “No such rule exists. To the contrary, courts have permitted
plaintiffs who have been determined to lack standing, or who have lost standing after the
complaint was filed, to substitute as plaintiffs the true real parties in interest. [Citations.]
Amendments for this purpose are liberally allowed.” (Id. at p. 243; accord, Troyk v.
Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1351, fn. 35 (Troyk); CashCall, Inc.
v. Superior Court (2008) 159 Cal.App.4th 273, 288.) We see no reason why this general
rule does not apply in this instance.
           b. The MVA notice on the policies did not comply with section 10127.13
       Plaintiffs premise their remaining claims on the contention the MVA was not
properly disclosed as a surrender charge on the cover page of the annuities sold by
EquiTrust to persons age 60 or older in violation of section 10127.13. At the time these
policies were sold, section 10127.13 provided: “All individual life insurance policies and
individual annuity contracts for senior citizens that contain a surrender charge period
shall either disclose the surrender period and all associated penalties in 12-point bold
print on the cover sheet of the policy or disclose the location of the surrender information
in bold 12-point print on the cover page of the policy, or printed on a sticker that is
affixed to the cover page or to the policy jacket. . . .” (Stats. 1994, ch. 984, § 4, p. 5732.)7


7
        Former section 10127.13 was repealed effective July 1, 2015 and replaced with a
new section 10127.13, which provides: “(a) All individual life insurance policies and
individual annuity contracts for senior citizens that contain a charge upon surrender,
partial surrender, excess withdrawal, or penalties upon surrender shall contain a notice

                                               18
       The existence of surrender charges is disclosed on the cover page of the annuities
sold by EquiTrust and, as permitted by section 10127.13, described in full on the
“Contract Date Page” found after the annuity’s table of contents. In addition to this
notice, each policy contains a second advisory in a separate paragraph on the cover page.
The notice states, in bold capital letters set in what appears to be a 10-point font, “CASH
SURRENDER VALUES MAY INCREASE OR DECREASE BASED ON THE
EQUITY INDEX AND MARKET VALUE ADJUSTMENT FEATURES OF THIS
CONTRACT.” The cover page does not identify the MVA as a surrender charge or
disclose how the MVA operates. Indeed, EquiTrust acknowledges it did not consider the
MVA to be a surrender charge and did not attempt to comply with section 10127.13 in
posting this notice. (See Eller, supra, 778 F.3d at p. 1094 [the MVA is designed to take
into account “the capital gains or losses resulting from the sale of securities needed to
fund early withdrawal or surrender requests”].) Nevertheless, EquiTrust contends it
substantially complied with the purpose and mandate of section 10127.13.
       The sole published decision addressing whether a notice of surrender charges on
the cover of an indexed annuity policy must disclose the policy’s MVA is Rand, supra,
717 F.Supp.2d 948. There, an 86-year-old woman purchased two separate annuities from
the same company, neither of which would mature until 2025, when she reached the age
of 106. (Id. at p. 950.) Three years later her conservator surrendered one of the policies,8
and a surrender charge and MVA were assessed, reducing the amount returned. (Ibid.)


disclosing the location of the charge, the charge time period, the charge information, and
any associated penalty information, in bold 12-point print on the front of the policy jacket
or on the cover page of the policy. [¶] (b) A policy shall have just one cover page. If
the notice required by this section and the statutorily required right to examine notice are
both on the cover page, as opposed to the front cover of the policy jacket, they shall
appear on the same page. [¶] (c) General references to ‘policy’ in this section refer to
both life insurance policies and annuity contracts. [¶] (d) This section shall become
operative on July 1, 2015.” Plaintiffs’ request that we take judicial notice of two items
from the legislative history of the current version of section 10127.13 is granted.
8
      Upon Rand’s death, the second policy paid a death benefit to her beneficiary, the
proceeds of which were also reduced by a surrender charge.

                                             19
Rand’s estate sued, alleging the defendant insurer had violated the UCL in part by failing
to comply with section 10127.13. According to Rand, the MVA, which was not
mentioned on the cover page of the policy but was described instead in a section of the
policy entitled “Premiums and Cash Value Strategies,” should have been disclosed on the
cover page as a penalty associated with surrender of the policy. (Id. at pp. 953-954.)
       The district court agreed, finding that “Section 10127.13 is not limited to those
penalties that [the insurer] chooses to label as a ‘surrender charge.’ . . . Rather than
simply requiring disclosure of ‘all surrender charges,’ the statute requires disclosure of
‘all’ ‘penalties’ ‘associated’ with the surrender period, which is broader than simply
requiring disclosure of surrender charges. . . . The MVA operates as a penalty because it
reduces or forfeits a portion of the [policy] account value in connection with any early
surrender that exceeds the penalty-free amount. The MVA . . . is ‘associated’ with the
surrender period because the MVA applies only during the surrender period stated in the
contract.” (Rand, supra, 717 F.Supp.2d at p. 956.)
       While the Rand holding appears to be correct, EquiTrust’s annuity cover page is
fundamentally different from the one considered in that case. Here, the cover page of the
policies contained an advisory expressly warning purchasers that “cash surrender values
may increase or decrease based on the equity index and the market value adjustment
features of this contract.” (Italics added.) This language advises a purchaser that the
MVA may operate as a penalty upon surrender of the policy. The cover page of the
policy in Rand contained no such information.
       Plaintiffs argue that, as a remedial statute, section 10127.13 must be adhered to
strictly and that substantial compliance is insufficient when a statute mandates disclosure
of consumer information. Indeed, the Rand court rejected the insurer’s argument it had
substantially complied with section 10127.13: “‘[T]he doctrine of substantial compliance
does not apply at all when a statute’s requirements are mandatory, instead of merely
directory.’” (Rand, supra, 717 F.Supp.2d at p. 961, quoting Troyk, supra,
171 Cal.App.4th at p. 1333.) In Troyk the Court of Appeal similarly rejected an insurer’s
argument it had substantially complied with the disclosure obligations of Insurance Code

                                              20
section 381, which requires an insurance policy to state the premium charged for
insurance coverage. As the Troyk court explained, “‘“Substantial compliance, as the
phrase is used in the decisions, means actual compliance in respect to the substance
essential to every reasonable objective of the statute.” [Citation.] Where there is
compliance as to all matters of substance[,] technical deviations are not to be given the
stature of noncompliance. [Citation.] Substance prevails over form. When the plaintiff
embarks [on a course of substantial compliance], every reasonable objective of [the
statute at issue] has been satisfied.’ [Citation.] ‘Thus, the doctrine gives effect to our
preference for substance over form, but it does not allow for an excuse to literal
noncompliance in every situation.’ [Citation.] Furthermore, the doctrine of substantial
compliance does not apply at all when a statute’s requirements are mandatory, instead of
merely directory. [Citations.] A mandatory statute ‘is one that is essential to the
promotion of the overall statutory design and thus does not permit substantial
compliance.’” (Troyk, at pp. 1332-1333.) “Were insurers allowed, by substantial
compliance or otherwise, to state all or part of a premium in documents other than a
policy, those underlying purposes of section 381, subdivision (f), would not be promoted.
Because section 381, subdivision (f)’s disclosure requirement is essential to the overall
promotion of the statutory design, we conclude that statute’s disclosure requirement is
mandatory.” (Id. at p. 1333.)
       Like the premium disclosure requirement at issue in Troyk, we agree that
disclosure of the MVA’s potential impact on surrender charges is “essential to the overall
promotion of the statutory design,” that is, to alert seniors to the adverse consequences of
surrendering their policies before maturity, and is thus mandatory within the meaning of
Troyk. While section 10127.13’s purpose has been substantially accomplished by the
disclosure of the potential effect of the MVA on the cover of the policy in eminently
readable form (see Costa v. Superior Court (2006) 37 Cal.4th 986, 1026 [“courts have
taken a realistic and practical view of the consequence of relatively minor statutory
lapses, refusing, for example, to withhold a measure from the ballot because of the
theoretical possibility that a smaller type size in a title might have affected potential

                                              21
signers when the actual type size utilized was not unduly small and was clearly
readable”]; Assembly v. Deukmejian (1982) 30 Cal.3d 638, 652 [“technical deficiencies in
referendum and initiative petitions will not invalidate the petitions if they are in
‘substantial compliance’ with statutory and constitutional requirements”]), the failure to
present the notice in the mandated 12-point font is not its only defect. As might be
expected in light of EquiTrust’s assertion the MVA does not constitute a true surrender
charge, the notice does not advise a senior purchaser of those circumstances in which the
MVA will impose a surrender penalty or identify where in the policy that information
may be found, as required by section 10127.13. In fact, very little information is
provided in the policy other than the formula used to calculate the MVA, which is set
forth in the general definitions (rather than on the contract data page) and is identified as
(1 + s) / (1 + c + 0.005)n/12, where s is the starting Treasury Rate, c is the Treasury Rate
for the remaining period at withdrawal or surrender and n is the number of complete
months until the end of the surrender period.
       EquiTrust points out that this algebraic formula is unlikely to mean anything to the
average—or even educated—purchaser, and disclosure of the formula’s effect is more
than sufficient. This argument is belied, however, by EquiTrust’s own description of the
MVA in disclosures provided to agents to review with purchasers at the point of sale. The
information contained in EquiTrust’s single-page disclosure identifies the MVA formula
as [(1 + s) / (1 + c + 0.005)] n/12 - 1 (emphasis added; the - 1 is omitted in the policy’s
version of the formula)9 and gives detailed examples of its operation, including instances
in which it would increase the surrender charge. This information could have been
included on the contract data page, and the mandate of the statute would have been met.




9
       The discrepancy between the two versions of the formula is not explained in the
record; but EquiTrust filed a post-argument letter brief demonstrating the two different
formulas, when properly understood and applied, yield identical results. Plainly,
however, the discrepancy undermines any argument the policy cover page complies with
section 10127.13’s statutory mandate.

                                              22
           c. Plaintiffs failed to satisfy the standing requirement applicable to their UCL
              cause of action
       The UCL prohibits, and provides civil remedies for, unfair competition, which it
defines as “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof.
Code, § 17200.) In 2004 California voters “materially curtailed the universe of those
who may enforce” the UCL by enacting Proposition 64. (Kwikset, supra, 51 Cal.4th at
p. 320.) Proposition 64 limited private standing under the UCL to any “‘“person who has
suffered injury in fact and has lost money or property”’ as a result of unfair competition.”
(Kwikset, at pp. 20-321., quoting Bus. & Prof. Code, § 17204.) “‘The phrase “as a result
of’ in its plain and ordinary sense means “caused by” and requires a showing of causal
connection or reliance. . . .’” (Id. at p. 326.) Thus, in order to pursue a claim under the
UCL, a plaintiff must “(1) establish a loss or deprivation of money or property sufficient
to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury
was the result of, i.e., caused by, the unfair business practice . . . that is the gravamen of
the claim.” (Kwikset, at p. 322; accord, Sarun v. Dignity Health (2014) 232 Cal.App.4th
1159, 1166.)
       The question presented here is whether, absent an allegation she read the policy
cover page, any of the senior plaintiffs could represent the proposed class on the claim
EquiTrust’s policy violated the requirements of section 10127.13.10 The trial court
concluded they could not. We agree.


10
        In Tobacco II, supra, 46 Cal.4th 298 the Supreme Court addressed the impact of
Proposition 64’s standing requirement on UCL class actions. Tobacco II involved a class
action brought by smokers against the tobacco companies alleging the companies’
marketing and advertising violated the UCL. After Proposition 64 was enacted, the trial
court decertified the class, finding that each absent class member was now required to
show they suffered an injury in fact as a result of the alleged unfair competition. (Id. at
p. 306.) Reversing the decertification order, the Supreme Court held that Proposition 64
“was not intended to, and does not, impose [Business and Professions Code] section
17204’s standing requirements on absent class members in a UCL class action where
class requirements have otherwise been found to exist.” (Id. at p. 324.) Thus, “relief
under the UCL is available [to absent class members] without individualized proof of
deception, reliance and injury” so long as the class representative meets Proposition 64

                                              23
       In Tobacco II the Court emphasized that its “discussion of causation in this case is
limited to such cases where, as here, a UCL action is based on a fraud theory involving
false advertising and misrepresentations to consumers. . . . There are doubtless many
types of unfair business practices in which the concept of reliance, as discussed here, has
no application.” (Tobacco II, supra, 46 Cal.4th at p. 325, fn. 17.) In Kwikset, supra,
51 Cal.4th 310 the Court extended the reasoning of Tobacco II to claims brought under the
unlawful prong when the alleged unlawful conduct is that the defendant engaged in
misrepresentations and deception. (Kwikset, at p. 326, fn. 9, citing Durell v. Sharp
Healthcare (2010) 183 Cal.App.4th 1350, 1363; accord, Hale v. Sharp Healthcare (2010)
183 Cal.App.4th 1373, 1385.) As the Durell court explained, “[a] consumer’s burden of
pleading causation in a UCL action should hinge on the nature of the alleged wrongdoing
rather than the specific prong of the UCL the consumer invokes.” (Durell, at p. 1363.)
       Plaintiffs contend that neither Tobacco II nor Kwikset requires a showing of
reliance here and urge us to follow the decision in Medrazo, supra, 205 Cal.App.4th 1.
There, the plaintiff sued a motorcycle dealer under the UCL, alleging it had violated
provisions of the Vehicle Code forbidding the sale of motorcycles without hanger tags
providing specified pricing information. (Medrazo, at pp. 4-5.) Although the pricing
information was ultimately disclosed to the purchaser once she decided to buy the
motorcycle, the motorcycle she bought had not been outfitted with the required tag. (Id. at
pp. 7-8.) The trial court concluded the plaintiff lacked standing to sue under the unlawful
prong because she failed to demonstrate she had relied on the tag in making the decision
to purchase the motorcycle. (Id. at p. 9.)
       Division Four of this court reversed. The court concluded the plaintiff had
suffered “a concrete, particularized, and actual invasion of an interest legally protected by
[the Vehicle Code], i.e., the disclosure—before a decision to purchase a specific
motorcycle is made —of the MSRP and any dealer-added charges for all new

standing requirements. (Id. at p. 320, see also Medrazo, supra, 205 Cal.App.4th at p. 11
[“[w]hen the private action is brought as a class action, only the named plaintiff is
required to meet this standing requirement”].)

                                             24
motorcycles offered for sale.” (Medrazo, supra, 205 Cal.App.4th at p. 13.) As the court
observed, the statute was “‘designed to provide . . . motorcycle buyers with information
that is necessary to make a wise purchase.’” (Ibid.) The absence of the tag deprived the
purchaser of information the Legislature had deemed necessary for an informed
purchasing decision.
       Although Medrazo has been criticized for reaching beyond the four corners of
Tobacco II and Kwikset (see, e.g., Kane v. Chobani, Inc. (N.D. Cal. 2014) 973 F.Supp.2d
1120, 1131), we believe it was correctly decided based on the specific facts presented,
which constituted one of the “types of unfair business practices in which the concept of
reliance. . . has no application” envisioned by the Supreme Court in Tobacco II. (See
Tobacco II, supra, 46 Cal.4th at p. 325, fn. 17.) Medrazo’s injury was caused by the
absence of the tag, and she had no opportunity to review the information a tag would
have conveyed before she decided to buy that particular motorcycle. As plaintiffs have
argued, inserting a reliance requirement in this setting would have subverted the purpose
of the law and encourage rather than “‘suppress the mischief at which [the statute] is
directed.’” (Rand, supra, 717 F.Supp.2d at p. 957.)
       The same situation does not exist here, however. In what is almost the reverse of
the facts in Medrazo, the plaintiffs here were shown a comprehensive notice disclosing
the existence and operation of the MVA before they made the decision to purchase an
EquiTrust annuity. After the purchase was completed, each received a copy of the
policy, which contained the defective cover page advising she had 30 days to rescind.
Not one of the plaintiffs was able to assert she had reviewed the cover page when given
the opportunity. In this instance the absence of the necessary information was irrelevant
to the decision to purchase the selected policy. These facts more closely resemble those
in Durell, supra, 183 Cal.App.4th 1350 in which the court affirmed dismissal of the
plaintiff’s UCL claim when the plaintiff could not allege he had ever visited the
defendant’s website and read the alleged misrepresentation. (Durell, at p. 1363; see also
Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 523 [rejecting UCL
standing of plaintiff whose foreclosure was not triggered by alleged unlawful acts].) As

                                            25
one court succinctly stated, “[a] plaintiff fails to satisfy the causation prong of the statute
if he or she would have suffered ‘the same harm whether or not a defendant complied
with the law.’” (Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1099.) Plaintiffs
have failed this crucial test.
       In reaching this conclusion, we do not condone marketing tactics that appear to
have generated sales of indexed annuities to unsuitable clients. Nonetheless, the trial
court did not err in finding plaintiffs’ failure to allege they had reviewed the defective
notices barred their claim under the UCL.
       3. The Declaratory Relief Cause of Action Also Fails
       Declaratory relief is available to “[a]ny person interested under a written
instrument . . . who desires a declaration of his or her rights or duties with respect to
another, or in respect to, in, over or upon property . . . in cases of actual controversy
relating to the legal rights and duties of the respective parties. . . .” (Code Civ. Proc.,
§ 1060; Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 728 [“[a] complaint for
declaratory relief is legally sufficient if it sets forth facts showing the existence of an
actual controversy relating to the legal rights and duties of the respective parties under a
written instrument and requests that these rights and duties be adjudged by the court”];
accord, Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 615.) In light of
our conclusion EquiTrust did not breach the provisions of its policies, there is no actual
controversy warranting our intervention.
                                       DISPOSITION
       The orders of the trial court are affirmed. EquiTrust is to recover its costs on
appeal.



                                                           PERLUSS, P. J.

       We concur:



               ZELON, J.                                   SEGAL, J.

                                               26
27
