Wednesday, February 4, 2015

We Limn in Limines

McMillin Cos.v. Am. Safety Indem. Co., No. D063586 (D4d1 Jan. 22, 2015)

The case is an insurance coverage dispute where, after denying the insurer’s summary judgment motion on policy interpretation, the court granted a couple of motions in limine that effectively ended the case, in that they ruled that the insurer couldn’t contest liability, but that the plaintiff's damages were entirely offset by prior settlement proceeds. The parties stipulated to judgment and both appealed.

After an unpublished discussion of how badly the parties bollixed up the appellate record, the court addresses the standard of review on motions in limine. For normal MILs—the kind that make rulings on the admissibility of evidence—that standard is abuse of discretion. But when a court rules that a party can't admit any evidence on an issue because it's become irrelevant based on the resolution of some disputed issue of law in the case, the court isn't really ruling on evidence, it’s ruling on law. Under those circumstances, the decision gets reviewed under the standard that would apply to a more apropos statutory motionsuch as a summary judgment motion or a nonsuit—which is usually de novo. Given the nature of the rulings here, that was the case.

This all relates to a rather frustrating aspect of California procedure: How do you get a ruling on a disputed issue of law when it does not dispose of a whole claim?

The most common avenues to obtain a ruling on an issue of law are a demurrer and a summary adjudication motion. But a demurrer is practically available only to the defendant and both motions are limited to issues that resolve an entire cause of action. Whether by statute, see Cal. Code Civ. Proc. § 473c(f) (limiting summary adjudication to a whole cause of action), or by common law, see, e.g., Fremont Indem. Co. v. Fremont Gen. Corp., 148 Cal. App. 4th 97, 119 (2007) ("A demurrer must dispose of an entire cause of action to be sustained.").

Although I’m not totally on board with the policy of it, I respect that the California legislature has made the choice that summary adjudication of less than a cause of action isn
t worth the effort, unless both parties agree otherwise, see § 437c(s). As to the demurrer, while I don’t entirely understand why you shouldn’t, for instance, be permitted demur to one theory where a cause of action jams a legit theory in with several legally bogus ones,* or to one of several theories of damages, the rule is venerable and unlikely to change. See Reed v. Drais, 67 Cal. 491 (1885) (“A demurrer cannot be interposed to a part of a cause of action or defense.).

There is also some support in the case law that part of a cause of action can be excised for legal insufficiency with a motion to strike. See PH II, Inc. v. Superior Court, 33 Cal. App. 4th 1680, 1683 (1995); see also City of Rancho Cucamonga v. Reg'l Water Quality Control Bd.-Santa Ana Region, 135 Cal. App. 4th 1377, 1386 (2006); Cnty. of L.A. v. Cal. State Water Res. Control Bd., 143 Cal. App. 4th 985, 1001 (2006); accord Reed, 67 Cal. at 491. But the statutory language doesn’t clearly say that. See Cal. Code Civ. Proc. § 436 (permitting a court to “[s]trike out any irrelevant, false, or improper matter inserted in any pleading”). And outside the context of striking punitive damages allegations, where the procedure is pretty well-established, see Grieves v. Superior Court, 157 Cal. App. 3d 159, 163 (1984), even the most supportive cases—few and far between as they are—say stuff like the “use of the motion to strike should be cautious and sparing.” PH II, 33 Cal. App. 3d at 1683. And that courts have “no intention of creating a procedural ‘line item veto’ for the civil defendant,” id. In any event, in my experience, I have never gotten traction on a motion to strike attacking anything other than class or punitive damages allegations in state court. Anyhow, sometimes a crucial disputed legal issue isn't framed by the pleadings, so a motion to strike won't be available, particularly for a plaintiff.

So it sometimes comes down to a motion in limine. For the most part, motions in limine
—which are entirely creatures of common laware supposed to be evidentiary. They seek to avoid the need to unring the bell if the court makes a bad evidence call on the fly. But relevance—the quintessential principle of evidence—is necessarily dependent on what the law views as the issues of consequence to the action. See Cal. Evid. Code § 210. So it is not too hard to frame an in limine motion as seeking exclusion of any evidence or argument inconsistent with an allegedly erroneous legal theory because it is irrelevant. 

Courts vary in their openness to this procedure, especially when it is used to knock out a whole case. There are opinions that are critical, largely in dicta, of its use as a “shortcut” that deprives the opposing
litigant the protections provided by trial or by the statutory processes.  Amtower v. Photon Dynamics, Inc., 158 Cal. App. 4th 1582, 1588 (2008); see also Blanks v. Shaw, 171 Cal. App. 4th 336, 376 (2009); R & B Auto Ctr., Inc. v. Farmers Grp., Inc., 140 Cal. App. 4th 327, 371 (2006) (Rylaarsdam, J., concurring). But even these courts generally recognize that “nontraditional” uses of a motion in limine are within the trial court’s discretion.

What
s frustrating about this is that there is no real clarity about when a court should exercise its discretion to address an in limine motion on such a theory. There’s no test. So, to be all normative about it, it seems to me that the following four factors merit consideration:

First, does the motion dodge procedural constraints placed on motions specifically permitted by statute? The legislature has decided that summary judgment needs a lot of notice, should not be given to only part of a claim, and is best resolved by submitting a bunch of onerous paperwork. Until they change their minds, that’s the law. So you shouldn’t be able to use an in limine motion as a back-door SJ that asks the court to decide whether there enough facts to raise a dispute that gets to a jury. Similarly it should not displace motions like nonsuit or the statutory motion for judgment, where the plaintiff gets to present its case (or at least, on occasion, its opening statement) before it gets tossed for not being good enough.

Second, is the decision contingent or subject to re-visitation by anything that might happen at trial or otherwise later in the case? If the trier of fact needs to resolve some disputed factual issue as a predicate to the decision, an in limine motion is a bad vehicle for resolving it. 

Third, and on the flip side, does the motion ask the court to resolve a dispute that (a) is within the court
s sole province to decide; and that (b) cannot practicably be resolved by an established statutory procedure short of trial. 

And finally, does resolving the motion in limine rationally further the resolution of the parties’ dispute? This factor should anticipate concerns of both efficiency and justiciability. One one hand, a court does not need to resolve trivial or theoretical disputes between the parties. On the other, some disputes—particularly those that depend on legal determinations regarding the parties’ theories of the case—are significant, disputed, and crucial to resolving the merits of a case, whether by settlement or at trial.

If #1 and #2 are no, and #3 and #4 are yes, the court should seriously consider resolving the issue on an in limine motion. And that includes an in limine motion brought and heard significantly in advance of trial. If not, there is probably a better avenue to reach the decision.

I digress. 

In this case both parties used in limine motions to “exclude all evidence” on critical issues. Plaintiff successfully excluded any evidence disputing coverage, and the insurer excluded any evidence that plaintiff was damaged. With liability established but no damages, the parties agreed that the case was effectively over, so they stipulated to judgment and appealed.

Plaintiff's in limine motion was essentially styled as a motion to enforce the practical consequences of the trial court's denial of the insurer's summary judgment motion on the duty to defend. Substantive insurance law provides that an insurer can deny a defense only when there is no reasonable dispute over coverage. The upshot of a pair of 1993 California Supreme Court opinions is that a dispute of fact over coverage means the insurer has the duty to defend.  Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 1076, 1078 (1993); Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 301 (1993). So if the carrier can't win on summary judgment, it's argument against coverage fails as a matter of law. The trial court thus understood that the denial of the insurer's motion would effectively result in a grant of summary judgment for plaintiff, and on that basis ruled that the carrier couldn't admit any evidence otherwise.

But, according to the court here, the Horace Mann/Montrose rationale doesn’t apply when an insurer's summary judgment motion is denied for reasons other than the existence of disputed factual issues. Here, it was denied—in a somewhat inscrutable trial court ruling that wasn't appealed—because the insurer failed to meet its initial burden of coming forward with a prima facie showing that there are no triable fact issues. According to the court, that didn’t mean there weren't any fact disputes, it just meant the burden wasn’t met. So defendant was enitled to an opportunity to prove at trial that the lack of coverage was indisputable under the terms of the policy.

Defendant's in limine motion asserted that any damages that plaintiff might be able to prove would be entirely offset by settlements with other insurers and thus that plaintiff could obtain no net recovery in the case. True, the net settlement recovery exceeded the cost of defense in the case in which the coverage was disputed. But whether those recoveries could be set off against plaintiff's damages depends on how they are allocated between tort and contract recovery. If could be allocated to contract damages in the coverage disputes with the other insurers, they can be set off. But if they are damages for bad faith, they can’t. Treating the motion like a post-opening nonsuit, the court holds that there was evidence in the record that the proceeds allocatable to the former were less than the total cost of defense. Thus, crediting that evidence—as the court must on a nonsuit—plaintiff was entitled to get to a jury. Depriving it of that right on an in limine motion was error.

Reversed and remanded.

*I suppose one could rely on primary rights theory to say they should have been separate causes of action because different primary rights were invaded. Because what state court trial judges really want to do is debate a theory that nobody understands, that has entirely outlived the rationale for its existence, and which—if serving as the basis for a sustained demurrer—is sure to be an issue on appeal. If you win on that in superior court, let me know.

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