Dowling v. Farmers Ins. Exch. ? Action Should Not Be Dismissed For Failure To Timely Prosecute Within The Five-Year Statutory Period If It Was Impracticable Or Futile To Do So

September 2012

The California Court of Appeal, Second Appellate District, reversed judgment entered in favor of the insurer after the trial court granted the insurer’s motion to dismiss based on the plaintiffs’ failure to bring the case to trial within five years, as required under section 583.310 of the California Code of Civil Procedure (“section 583.10”).  The appellate court remanded the case back to trial court for a “limited reconsideration” of whether the potential impact of pending appellate proceedings in a related case made it impracticable or futile for the plaintiffs to bring the case to trial. 

Section 583.310 requires “[a]n action shall be brought to trial within five years after the action is commenced against the defendant.”  Section 583.340 tolls the five-year period “during which any of the following conditions existed:  (1) the jurisdiction of the court to try the action was suspended; (2) prosecution or trial of the action was stayed or enjoined; or (3) bringing the action to trial was “impossible, impracticable, or futile.”

This class action was filed against Farmers Insurance Exchange in June 2003, alleging a single count for violation of the unfair competition law codified at California Business and Professions Code sections 17200, et seq. (“UCL”).  The trial court determined early on that this action was related to MacKay v. 21st Century Ins. Co., which involved the legality of rates charged by insurance companies, and assigned both cases to the same judge. 

The trial court also found the issues raised by this class action were similar to issues raised in two other separate cases, Donabedian v. Mercury Ins. Co. and Poirer v. State Farm Mut. Ins. Co., both of which involved the issue of whether an insurer’s violation of Proposition 103 – which sets forth the statutory scheme for determining rates, premiums, and insurability based on certain rating factors – gives rise to a private right of action.  The trial court stayed Ryan’s action while both cases were pending in the Court of Appeal.  Donabedian and Poirer were decided on March 11, 2004 and October 15, 2004, respectively. 

In November 2004, California voters passed Proposition 64, restricting a plaintiff’s standing under the unfair competition law to individuals who are actually injured by and suffered a financial loss due to unfair, unlawful, or fraudulent business practices.  Farmers moved for judgment on the pleadings on the class action based on the new standing requirements.  The trial court granted Farmers’ motion in May 2005, but also granted Plaintiffs leave to amend the Complaint to allege violation of Insurance Code section 1861.02, which sets forth the statutory scheme for determining rates and premiums for automobile insurance policies.

Farmers challenged the ruling by petitioning the Court of Appeal for a writ of mandate.  The trial court stayed the action in June 2005 pending the Court of Appeal’s decision in the writ proceeding.  The Court of Appeal subsequently held there was no private right of action for a violation of Insurance Code section 1861.02.

Following remand, the trial court granted Farmers’ motion for judgment on the pleadings and dismissed the action in its entirety.  This time, it was Plaintiffs who petitioned for writ review.  The Court of Appeal issued an Order stating that it was considering issuing a peremptory writ of mandate directing the trial court to vacate its order on the ground that Proposition 64 did not necessarily preclude an amendment to a complaint to substitute a new plaintiff who had suffered an injury in fact.

The trial court responded by vacating its prior order granting judgment on the pleadings.  Plaintiffs’ counsel filed a first amended class action complaint in January 2007 naming a new class representative. 

In April 2008, the parties entered into a Stipulation to extend the time for bringing the action to trial.  The Stipulation recited the procedural history of the case, including prior stays.  The Stipulation further provides in pertinent part:  “Absent any further periods wherein the Superior Court’s jurisdiction … is suspended … and/or any further Court orders or party stipulations extending or tolling the time period … the five year time period to bring the Farmers action to trial under Code of Civil Procedure § 583.310 does not expire until June 17, 2010.”  (Emphasis supplied.)

Following the April 2008 Stipulation, the defendant in the related MacKay action, 21st Century, moved for summary adjudication on the ground that challenges to approved rates could only be made via the administrative procedure set forth in the Insurance Code, and not by means of a separate civil action for section 17200 of the California Business and Professions Code.  The MacKay plaintiffs filed a writ of mandate on November 24, 2009.  The Court of Appeal issued its decision on October 6, 2010 and filed its remittitur on October 25, 2010.

On May 13, 2010, while the MacKay action was pending before the Court of Appeal, Farmers moved to dismiss the class action, arguing that plaintiffs could not possibly obtain class certification by the June 17, 2010 deadline provided for in the Stipulation.  Plaintiffs opposed the motion, urging the deadline should be tolled by an additional 21 months based on four events, three of which had already occurred prior to the Stipulation:  (1) the then-pending writ proceedings in MacKay made it impracticable or futile to bring this case to trial; (2) the dismissal of this action in September 2006 made it impossible to bring this case to trial until the Order of dismissal was vacated in December 2006; (3) passage of Proposition 64 made it impracticable and futile to bring this case to trial until appellate review was completed; and (4) the trial court did not lift the stay in this action after filing its opinion in Poirer until December 8, 2004.

The trial court granted Farmers’ motion, finding (1) the “plain meaning” of the parties’ Stipulation called for the five-year period to bring the case to trial would end on June 17, 2010 absent any future tolling events, and (2) the fact that an issue in this case might be decided in a pending appellate proceeding in another case involving different parties does not make it impracticable or futile to bring the case to trial as a matter of law. 

On appeal, the Court of Appeal agreed with the trial court that the language of the Stipulation and its context indicate an agreement to establish June 17, 2010 as the five-year deadline based on the events that “had occurred as of the date stipulation.”  (Emphasis supplied.)  The Stipulation provides for extensions beyond the June 17, 2010 deadline only if there were “further periods wherein the Superior Court’s jurisdiction to try the Farmers action is suspended.”  The language of the Stipulation “suggests that any further tolling periods would be in the future rather than before the date of the stipulation.” Three of the four events relied upon by Plaintiffs occurred prior to the Stipulation.  Only one – the writ proceedings in MacKay – occurred after. 

While the Court of Appeal agreed with the trial court that only stays that occurred after the Stipulation could extend the June 17, 2010 deadline, it did not agree with the trial court that a pending appellate proceeding involving the same issues but different parties did not make it impracticable or futile to bring the case to trial as a matter of law. Rather, the trial court must decide “whether the particular circumstances of this case, common legal questions and practical realities made it impracticable or futile to bring this case to trial” while the writ proceedings in MacKay were pending.  The Court of Appeal remanded the case for the limited purpose of conducting this evaluation.

Lastly, the Court of Appeal affirmed the trial court’s ruling denying Plaintiffs’ claim for rescission based on unilateral mistake if the Stipulation is interpreted to preclude any tolling before the date of the Stipulation.  A unilateral mistake is, at most, a mistake of law rather than of a mistake of fact.  A mistake of law vitiates consent only if (1) all contracting parties shared the same misunderstanding of the law; or (2) one party misunderstood the law, and the other contracting parties were aware of this and failed to rectify it.

The Court of Appeal found Plaintiffs did not show either that Farmers shared Plaintiffs’ purported misunderstanding of the Stipulation at the time it was executed or that Farmers was aware of Plaintiffs’ misunderstanding.  There was no basis for rescission.

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This opinion is not final.  It may be withdrawn from publication, modified on rehearing, or review may be granted by the California Supreme Court.  These events would render the opinion unavailable for use as legal authority in California state courts.

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