Rodriguez v. Rwa Trucking Co.

• Citation: 162 Cal.Rptr.3d 250
• Decision Date: 12 September 2013
• Docket Number: B241727
• Court: California Court of Appeals
• Parties: Salvador RODRIGUEZ et al., Plaintiffs and Appellants, v. RWA TRUCKING COMPANY, INC., Defendant and Appellant.

?162 Cal.Rptr.3d 250

Salvador RODRIGUEZ et al., Plaintiffs and Appellants,

v.RWA TRUCKING COMPANY, INC., Defendant and Appellant.

B241727

Court of Appeal,

Second District, Division 4, California.

Filed September 12, 2013

As Modified September 20, 2013

Affirmed in part, reversed in part, and remanded.

See 7 Witkin, Summary of Cal. Law (10th ed. 2005) Constitutional Law, § 8 et seq.

Cal. Ins. Code §§ 1631, 1623(a).

Cal. Civ. Code § 1748.9

APPEAL from a judgment of the Superior Court of Los Angeles County, Emilie Elias, Judge. Affirmed in part, reversed in part, and remanded. (Los Angeles County Super. Ct. Nos. BC182763 & BC182764)

Miles L. Kavaller for Defendant and Appellant.

Law Offices of Stephen Glick, Stephen Glick, and Anthony Jenkins for Plaintiffs and Appellants.

Defendant RWA Trucking Company, Inc. (RWA) appeals from the trial court's judgment that it violated the unfair competition law, Business and Professions Code section 17200 (UCL or section 17200), by charging its drivers for automobile liability insurance, physical damage insurance, cargo insurance, and workers' compensation insurance from 1993 to 2011. RWA contends that the UCL causes of action and the state laws on which they are based are preempted by federal law. We affirm in part, reverse in part, and remand the matter to the trial court.

RWA is an interstate trucking company registered as a “for-hire interstate motor carrier” with the Federal Motor Carrier Safety Administration (FMCSA). At all relevant times, RWA conducted its trucking business from facilities in Long Beach, California, transporting containers and other cargo from the ports of Los Angeles and Long Beach.

RWA contracted with plaintiff Salvador Rodriguez and other drivers who owned their own tractors (drivers) under written lease agreements (Agreements). Under the Agreements, RWA leased the tractors from the drivers and dispatched the drivers to transport cargo. The Agreements characterized the drivers as independent contractors.

The Agreements required each driver to carry automobile liability insurance, physical damage insurance, and cargo insurance (collectively, liability insurance), and it gave the drivers the option either to obtain their own policies or elect coverage under RWA's fleet policies. If the drivers elected coverage under RWA's fleet policies, RWA deducted from the drivers' earnings (or “charged back” from his or her compensation) the costs of the insurance. RWA also deducted from the drivers' earnings the cost of workers' compensation insurance. The chargebacks were reflected on weekly settlement statements given to each driver.

The Agreements authorized RWA to charge an administrative fee for arranging insurance for the drivers. An administrative fee for that purpose of at least 1 percent was deducted from the drivers' compensation during some years.

RWA deducted the following amounts from the drivers for workers' compensation: December 12, 1993, to December 31, 1994: $71,688.60; December 31, 1994, to December 31, 1995: $71,688.60.

During the years 1993 to 1995, RWA collected from its drivers a 1 percent administration fee for automobile liability insurance, physical damage insurance, and cargo insurance. During the years 1996 to 2002, RWA collected significantly less from its drivers than it paid in insurance premiums, ranging from $2,611.48 in 2002 to $244,269.55 in 1997. During the years 2003 to 2009, RWA deducted more from its drivers than it paid in insurance premiums.

Plaintiff filed the present action in Los Angeles Superior Court in 1997. The complaint alleged: (1) plaintiff was an employee, not an independent contractor, but was denied employee benefits; (2) defendants failed to comply with federal Truth–in–Leasing regulations, thereby breaching fiduciary duties to plaintiff; and (3) defendants sold insurance to plaintiff without a license. ( Rivas v. Rail Delivery Serv. (9th Cir.2005) 423 F.3d 1079, 1081.) On January 16, 1998, defendants removed the case to federal court; on September 8, 2005, the Ninth Circuit held plaintiff lacked article III standing and remanded the case back to state court. ( Id. at p. 1084.)

Plaintiff filed the operative fourth amended complaint on May 12, 2009. The first cause of action alleged RWA “transacted insurance” within the meaning of Insurance Code section 1631 by “selling insurance to Plaintiff for compensation” and “charging Plaintiff an administrative fee of at least 1% on the aforementioned insurance that Defendant sold to Plaintiff.” Such transactions were unlawful, plaintiff alleged, because RWA was not licensed to transact insurance in California. Further, RWA “failed to properly disclose the total premium it charged Plaintiff and each Class Member by failing to properly disclose the at least 1% commission Defendants earned, violating California Insurance Code § 381(f).” These Insurance Code violations were alleged to be unlawful and to constitute unfair business practices in violation of the UCL. The second cause of action alleged RWA violated section 17200 by charging plaintiff for workers' compensation insurance, in violation of Labor Code section 3751 (section 3751) and Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 8 Cal.Rptr.3d 350 ( Albillo ).

The court granted plaintiff's motion for class certification and, on June 9, 2011, it issued an order certifying the following class: “All persons and entities in California that provided trucking services, including the transport of cargo and freight, for RWA Trucking Co., Inc., from December 12, 1993 through the present, who had money deducted from their earnings by RWA Trucking Co., Inc. to pay for Liability Insurance Coverage, Property Damage Insurance Coverage, Cargo Loss Insurance Coverage, or Workers' Compensation Insurance Coverage.”

The case went to trial on stipulated facts. On December 6, 2011, the court filed a statement of decision. Following is a summary.

Prior to trial, the court found that RWA was transacting insurance and receiving compensation for doing so within the meaning of the Insurance Code. The court explained: “It is undisputed that RWA received compensation in connection with obtaining insurance for Rodriguez. Accordingly, RWA was required to have a license to transact insurance, but, undisputedly, RWA did not have a license. [¶] The Court finds that Albillo v. Intermodal Container Services, Inc.[, supra,] 114 Cal.App.4th 190 does not compel a different result as to the transacting insurance without a license issue.” (Fn.omitted.)

Following trial, the court further found that RWA did not comply with the Insurance Code's disclosure requirements: “RWA stipulated that it did not comply with Insurance Code § 381.... RWA did not give any class member an insurance policy or certificate of insurance, nor any of the items listed in Insurance Code Section 381, i.e., nothing was given to the class members that showed the insurance premium, rates, or criteria used to determine how much to charge the truck driver for insurance.

“... RWA stipulated in Fact Nos. 38, 47 and 48, just as Farmers did in the Troyk case, that it charged Plaintiff an ‘administrative fee’ for providing insurance to Plaintiff. Troyk [ v. Farmers Group, Inc. (2009) ] 171 Cal.App.4th [1305,] 1324–1325. RWA, like Farmers, did not comply with the disclosure requirement in Insurance Code § 381(f). Following Troyk, RWA violated Insurance Code § 381(f) and Plaintiff has established through Stipulated Fact No. 48 that Plaintiff and each class member has standing to sue RWA under California's Unfair Competition Laws for RWA's violation of Insurance Code § 381(f).

in the amount of $233,360.”

In concluding that plaintiffs were entitled to compensation for RWA's violations of California law, the court determined that these laws were not preempted by federal law, namely, the Federal Aviation Administration Authorization Act of 1994 (FAAAA), title 49 United States Code section 14501 et seq., or the Truth–in–Leasing Act. It explained: “There is no California case that says that the UCL is preempted in a FAAA[A] case. [¶] ... [¶] ... Equally important, the U.S. District Court for the Central District of California already rejected the precise preemption arguments raised by RWA; holding that Plaintiff's claims here are not preempted by 49 U.S.C. § 14501(c). SeeRenteria v. K & R Transportation,Inc. (C.D.Cal.1999) 1999 WL 33268638.... Furthermore, the McCarran–Ferguson Act, 15 U.S.C. § 1012, prevents the Court from interpreting 49 U.S.C. § 14501(c) so as to preempt Plaintiff's claims that are based upon California insurance laws. Here, Congress expressly reiterated State authority to regulate insurance when enacting 49 U.S.C. § 14501(c)(2). Renteria, 1999 WL 33268638 at *2. The Renteria Court held that ‘[t]he aim of the regulation [49 C.F.R. § 376.12(j)(1) ] is to compel disclosure of the contract terms between the owner-operators and the carriers, Similarly, while separate licensing requirements in each state may impact carriers in some way, the brokering of insurance is not the focus of the federal law[,]’ so 49 U.S.C. § 14501(c) does not preempt California's worker's compensation insurance or liability insurance laws. Renteria, 1999 WL 33268638 at *3 (emphasis added). Under 49 U.S.C. § 14501(c), ‘[t]he effects of the state insurance, wage, and workers' compensation laws on defendants ... [are] insufficient to “relate to” prices.... Additionally, insurance and wage requirements are areas generally reserved to the states. See [ Californians for Safe and Competitive Dump Truck Transp. v.] Mendonca [ (9th Cir.1998) 152 F.3d 1184]; 49 U.S.C. § 14501(c)(2).’ Renteria, 1999 WL 33268638 at *4.” (Fns. & underling omitted.)

The court entered judgment on May 22, 2012. The judgment awarded plaintiffs “as and for restitution for the first cause of action the sum of $502,636.32 principal, plus prejudgment interest through May 17, 2012 in the...