21ST Century Ins. Co. v. Superior Court

• Decision Date: 30 March 2005
• Docket Number: No. B179503.,B179503.
• Citation: 127 Cal.App.4th 1351,26 Cal.Rptr.3d 476
• Court: California Court of Appeals Court of Appeals
• Parties: 21ST CENTURY INSURANCE COMPANY, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent; James Schwartz et al., Real Parties in Interest.

26 Cal.Rptr.3d 476

127 Cal.App.4th 1351

21ST CENTURY INSURANCE COMPANY, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent James Schwartz et al., Real Parties in Interest.

No. B179503.

Court of Appeal, Second District, Division 3.

March 30, 2005.

Review Denied June 22, 2005.^*

Barger & Wolen, Kent R. Keller, Larry M. Golub, Michael A. S. Newman, Los Angeles; Delmer, Armstrong & Roland, Michael Wade and John W. Myers IV, Long Beach, for Petitioner.

Horvitz & Levy, Lisa Perrochet, Jeremy B. Rosen, Gina McCoy, Encino, for Association of California Insurance Companies and American Insurance Association as Amicus Curiae on behalf of Petitioner.

Reed Smith, James C. Martin, Lorenzo E. Gasparetti, Los Angeles, and Jayne E. Fleming, Oakland, for Truck Insurance Exchange, Farmers Insurance Exchange, Fire Insurance Exchange and Mid-Century Insurance as Amici Curiae on behalf of Petitioner.

No appearance for Respondent.

Bill Lockyer, Attorney General, David S. Chaney, Senior Assistant Attorney General, Randall P. Borcherding, and Anne Michelle Burr, Deputy Attorneys General, for John Garamendi, Insurance Commissioner of the State of California as Amicus Curiae on behalf of Respondent.

Law Offices of Bernie Bernheim, Bernie Bernheim, North Hollywood, Joshua H. Haffner, Marina Del Rey; Parisi & Havens, David C. Parisi, North Hollywood,

Suzanne Havens Beckman; Law Offices of Steven L. Zelig, and Steven L. Zelig, Los Angeles, for Real Parties in Interest.

CROSKEY, J.

In 2000, in response to charges of rampant mishandling of insurance claims arising out of the Northridge earthquake of 1994, the Legislature enacted Code of Civil Procedure section 340.9 (section 340.9), which revived certain previously time-barred insurance claims. In 20th Century Ins. Co. v. Superior Court (2001) 90 Cal.App.4th 1247, 109 Cal.Rptr.2d 611, we concluded the statute revived not only contract claims, but also tort claims for bad faith. We also concluded the revival statute did not destroy vested rights in violation of the due process clause.

Plaintiffs and real parties in interest James and Jobeth Schwartz ("plaintiffs") filed an action against 21st Century Insurance Company ("21st Century") alleging claims for damages arising out of the Northridge earthquake. Their complaint alleged causes of action for breach of contract and bad faith. They sought punitive damages incident to their cause of action for bad faith. 21st Century moved for summary adjudication of the claim for punitive damages, on the basis that revival of a claim for punitive damages violates the ex post facto clause of the United States Constitution. The motion was denied. 21st Century sought review by petition for writ of mandate.

We issued an order to show cause. We hold that punitive damages are not sufficiently penal in intent or effect to trigger the protection of the ex post facto clause. We therefore deny the petition.

FACTUAL AND PROCEDURAL BACKGROUND

The facts are not in dispute. Plaintiffs were insured by 21st Century, and pursued an insurance claim for damages arising out of the Northridge earthquake. The claim was denied. In 2000, the Legislature enacted section 340.9, reviving, for one year, previously time-barred civil actions against insurers arising out of the Northridge earthquake. Taking advantage of this statute, plaintiffs filed their complaint against 21st Century on December 31, 2001, alleging breach of contract and bad faith. The case was assigned to the Complex Litigation Department of the Los Angeles Superior Court.

The trial judge presiding over this case was also presiding over several similar Northridge earthquake insurance lawsuits. In one such suit, Basurco v. 20th Century Insurance Company, Los Angeles Superior Court, No. BC 212224, defendant 21st Century moved for summary adjudication of the claim for punitive damages, on the basis that the revival of such a claim violated the ex post facto clause of the United States Constitution. The trial court denied the motion in the Basurco action, concluding that the statutory revival of punitive damages was not an ex post facto law.

The parties in this action then agreed that the decision in Basurco would apply to this case, and stipulated to entry of an order denying summary adjudication of the issue. 21st Century sought writ relief.¹

CONTENTIONS OF THE PARTIES

The sole question presented is whether section 340.9 violates the federal Constitution's prohibition against ex post facto laws² to the extent it revives previously time-barred claims for punitive damages incident to causes of action for bad faith. 21st Century argues that it is unconstitutional, on the basis that revival of a criminal prosecution is an ex post facto violation, and punitive damages are akin to criminal penalties for purposes of ex post facto analysis. Alternatively, 21st Century argues we should avoid the constitutional issue by simply construing section 340.9 as not reviving liability for punitive damages. Plaintiffs argue that section 340.9 does not violate the prohibition against ex post facto laws, because that prohibition applies exclusively to penal legislation, while this statute is entirely civil in nature.

DISCUSSION

1. General Principles of Ex Post Facto Analysis

Article I, section 10 of the United States Constitution prohibits states from enacting "any ... ex post facto law." "[O]ur best knowledge of the original understanding of the Ex Post Facto Clause [is that] Legislatures may not retroactively alter the definition of crimes or increase the punishment for criminal acts." (Collins v. Youngblood (1990) 497 U.S. 37, 43, 110 S.Ct. 2715, 111 L.Ed.2d 30.) A statute which revives an otherwise time-barred criminal prosecution violates the ex post facto clause. (Stogner v. California (2003) 539 U.S. 607, 609, 123 S.Ct. 2446, 156 L.Ed.2d 544.) The ex post facto clause "has been interpreted to pertain exclusively to penal statutes."³ (Kansas v. Hendricks (1997) 521 U.S. 346, 370, 117 S.Ct. 2072, 138 L.Ed.2d 501.)

Many other constitutional provisions also apply only to penal laws, such as the prohibition against double jeopardy (e.g., Hudson v. United States (1997) 522 U.S. 93, 96, 118 S.Ct. 488, 139 L.Ed.2d 450) and the Fifth and Sixth Amendment rights granted criminal defendants (e.g., Kennedy v. Mendoza-Martinez (1963) 372 U.S. 144, 163-164, 83 S.Ct. 554, 9 L.Ed.2d 644 (Mendoza-Martinez)). While it is well established that only penal laws are subject to the restrictions of the ex post facto clause, the prohibition against double jeopardy, and the procedural protections afforded criminal defendants, the United States Supreme Court has acknowledged the possibility that a statute which is facially civil may in fact be penal enough in effect to trigger these constitutional protections. (Mendoza-Martinez, supra, 372 U.S. at pp. 168-169, 83 S.Ct. 554.)

It is on this narrow ground that 21st Century bases its challenge to section 340.9. 21st Century argues that, to the extent that section 340.9 revives a claim for punitive damages incident to a bad faith cause of action, the statute is penal and therefore violates the ex post facto clause.

The United States Supreme Court has never directly addressed the issue of whether punitive damages are penal for the purposes of ex post facto analysis. It has, however, acknowledged that the retroactive application of punitive damages would "raise a serious constitutional question," without answering that question. (Landgraf v. USI Film Products (1994) 511 U.S. 244, 281, 114 S.Ct. 1483, 128 L.Ed.2d 229.) The Landgraf court was concerned with whether to interpret a statute, allowing for punitive damages, retroactively. In the absence of a clear congressional intent that the statute be applied retroactively, and the presence of a serious constitutional question if the statute were so interpreted, the Supreme Court chose to interpret the statute prospectively only. (Id. at pp. 281, 293, 114 S.Ct. 1483.) In contrast, section 340.9 is necessarily retroactive in application; its entire purpose is to revive causes of action otherwise time-barred. As such, we decline 21st Century's invitation to construe the statute to avoid the constitutional question. Section 340.9 is, by its terms, retroactive. We have already held that it applies to causes of action for bad faith, and punitive damages are incidental to such causes of action on proof of the requisite state of mind. (Civ.Code, § 3294 (section 3294).) The question of whether section 340.9 violates the ex post facto clause is squarely presented.

2. Controlling California Authority Has Held Punitive Damages Are Not Penal For Ex Post Facto Purposes

In Peterson v. Superior Court (1982) 31 Cal.3d 147, 181 Cal.Rptr. 784, 642 P.2d 1305, the California Supreme Court considered whether to give retroactive effect to a judicial decision holding punitive damages could be recovered from a drunk driver. The court applied the decision retroactively, rejecting the defendant's contention that the principles underlying the ex post facto clause prohibited retroactive application. (Id. at pp. 159-161, 181 Cal.Rptr. 784, 642 P.2d 1305.) The court concluded that, since the ex post facto prohibition applies to criminal, not civil, statutes, there was no ex post facto problem. (Id. at pp. 160-161, 181 Cal.Rptr. 784, 642 P.2d 1305.) The court stated, "The potential punitive damages award in this case is unquestionably a penalty civil in nature. There is no possibility of the stigma of a criminal conviction nor the potential loss of personal freedom. Thus, although the award of punitive damages is a type of penalty imposed to deter wrongful conduct, `[t]he authorization to award exemplary damages ... does not convert a civil action into a criminal action insofar as it affects constitutional protections in criminal proceedings.'" (Id. at p. 161, 181 Cal.Rptr. 784, 642 P.2d 1305.)

21st Century contends Peterson is inapplicable because it...