California ex rel. Rono, LLC v. Altus Finance S.A.
| Decision Date | 15 September 2003 |
| Docket Number | No. 02-56038.,02-56038. |
| Citation | 344 F.3d 920 |
| Parties | State of CALIFORNIA ex rel. RONO, LLC, Plaintiffs-Appellants, v. ALTUS FINANCE S.A.; CDR Creances; Credit Lyonnais USA; Jean-Francois Henin, Defendants, and CDR Enterprises; Consortium de Realisation S.A.; Mutuelle Assurance Artisanale de France; Mutuelle Assurance Artisanale de France Vie S.A.; Omnium Geneve S.A.; Credit Lyonnais S.A.; Aurora National Life Assurance Company; New California Life Holdings, Inc.; Artemis S.A.; Artemis Finances S.N.C.; Aurora S.A.; Artemis America Partnership; Francois Pinault; Apollo Advisors L.P.; Leon D. Black; Craig M. Cogut; Credit Lyonnais Securities, Inc.; John J. Hannan; Lion Advisors L.P.; Pegasus Insurance Partners, L.L.P.; Eric B. Siegel, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Arthur J. Shartsis, Shartsis, Friese & Ginsburg, San Francisco, CA, Jan Zabriskie, DAG, Attorney General's Office, Sacramento, CA, Brian D. Daly, Beck, Decorso, Daly, Barrera & Kreindler, Los Angeles, CA, for Plaintiffs-Appellants.
No appearance, for Defendant.
Travers D. Wood, C. Randolph Fishburn, White & Case, Los Angeles, CA, Thomas McGanney, White & Case, New York, NY, Richard J. Ney, Chadbourne & Parke, Los Angeles, CA, Whitney I. Gerard, New York, NY, Stanley G. Roman, Krieg, Keller, Sloan, Reilley & Roman, San Francisco, CA, Lionel Aeschlimann, Switzerland, Lawrence B. Friedman, Cleary Gottlieb Steen & Hamilton, New York, NY, Theodore N. Miller, Sidley Austin Brown & Wood, Los Angeles, CA, Richard D. Bernstein, Sidley Austin Brown & Wood LLP, Washington, DC, Robert L. Weigel, Gibson, Dunn & Crutcher, New York, NY, Robert S. Warren, Gibson, Dunn & Crutcher, Los Angeles, CA, Marshall R. King, Gibson, Dunn and Crutcher, LLP, New York, NY, James E. Lyons, Skadden, Arps, Slate, Meagher & Flom, San Francisco, CA, John J. Quinn, Arnold & Porter, Los Angeles, CA, Joseph Nocella, White & Case, Los Angeles, CA, for Defendants-Appellees.
Before: A. Wallace TASHIMA, Marsha S. BERZON, and Richard R. Clifton, Circuit Judges.
Pursuant to Rule 29.8 of the California Rules of Court, we grant the motion of the Attorney General and request the California Supreme Court to decide the two questions of California law set forth in Part II of this order. This case is withdrawn from submission until further order of this court and all further proceedings in this court are stayed pending final action by the California Supreme Court.
There are no controlling precedents resolving these important questions, and the answers will in all probability determine the outcome of the present appeal. Our phrasing of the questions below is not meant to restrict the California Supreme Court's consideration of the issues involved. We agree to follow the answers provided by the California Supreme Court.
The State of California ex rel. RoNo, LLC, is deemed the petitioner in this request because California appeals from the district court's adverse rulings on the specified issues. The caption of the case is:
STATE OF CALIFORNIA ex rel. RONO, LLC, Plaintiffs-Appellants, v.
COMPANY; NEW CALIFORNIA LIFE HOLDINGS, INC.; ARTEMIS S.A.; ARTEMIS FINANCES S.N.C.; AURORA S.A.; ARTEMIS AMERICA PARTNERSHIP; FRANCOIS PINAULT; APOLLO ADVISORS L.P.; LEON D. BLACK; CRAIG M. COGUT; CREDIT LYONNAIS SECURITIES, INC.; JOHN J. HANNAN; LION ADVISORS L.P.; PEGASUS INSURANCE PARTNERS, L.L.P.; ERIC B. SIEGEL, Defendants-Appellees.
The names and addresses of counsel are:
For the State of California: Jan Zabriskie, Attorney General's Office, State of California, Sacramento, CA. Arthur J. Shartsis, Shartsis, Friese & Ginsburg, San Francisco, CA.
For RoNo, LLC: Brian D. Daly, Beck, Decorso, Daly, Barrera & Kreindler, Los Angeles, CA.
For Altus Finance S.A., CDR Creances, Crédit Lyonnais USA, Jean-François Henin: No appearance.
For CDR Enterprises and Consortium de Réalisation S.A.: Travers D. Wood, C. Randolph Fishburn, White & Case, Los Angeles, CA; Thomas McGanney, White & Case, New York, N.Y.
For Mutuelle Assurance Artisanale de France and Mutuelle Assurance Artisanale de France Vie S.A.: Richard J. Ney, Chadbourne & Parke, Los Angeles, CA 90071; Whitney I. Gerard, Chadbourne & Parke, New York, N.Y.
For Omnium Genève S.A.: Stanley G. Roman, Krieg, Keller, Sloan, Reilley & Roman, San Francisco, CA; Lionel Aeschlimann, Geneva 3, Switzerland.
For Crédit Lyonnais S.A. and Crédit Lyonnais Securities, Inc.: Travers D. Wood, C. Randolph Fishburn, Joseph Nocella, White & Case, Los Angeles, CA 90071-2007; Thomas McGanney, White & Case, New York, N.Y.; Lawrence B. Friedman, Cleary Gottlieb Steen & Hamilton, New York, N.Y.
For Aurora National Life Assurance Company and New California Life Holdings, Inc.: Theodore N. Miller, Sidley Austin Brown & Wood, Los Angeles, CA; Richard D. Bernstein, Sidley Austin Brown & Wood, Washington, DC.
For Artemis S.A., Artemis Finances S.N.C., Artemis America Partnership, Aurora, S.A., and François Pinault: Robert S. Warren, Gibson, Dunn & Crutcher, Los Angeles, CA; Marshall R. King, Robert L. Weigel, Gibson, Dunn & Crutcher, New York, N.Y.
For Apollo Advisors L.P., Leon D. Black, Craig M. Cogut, John J. Hannan, Lion Advisors L.P., Pegasus Insurance Partners, and Eric B. Siegel: James E. Lyons, Skadden, Arps, Slate, Meagher & Flom, San Francisco, CA; John J. Quinn, Arnold & Porter, Los Angeles, CA.
For Amicus Curiae National Organization of Life and Health Insurance Guaranty Associations: Wm. Carlisle Herbert, Kathleen R. Pasulka-Brown, Susanne R. Blossom, Foley & Lardner, Angeles, CA.
The questions of law we wish to be answered are:
A. Can the Attorney General pursue civil remedies, under the California False Claims Act, Cal. Gov't Code § 12650 et seq., and the California Unfair Competition Law, Cal. Bus. & Prof.Code § 17200 et seq., concerning the assets of an insolvent insurance company for which the Insurance Commissioner is acting as conservator or liquidator, or does the California Insurance Code, particularly section 1037, give exclusive authority to the Insurance Commissioner to bring civil actions?
B. Do assets to which the California Insurance Commissioner acquires title from an insolvent insurance company under California Insurance Code section 1101 constitute "state funds" within the meaning of the California False Claims Act, Cal. Gov't Code § 12650(b)(1)?
As this case was dismissed on the pleadings for failure to state a claim, we take the following alleged facts as true, construing the complaint in the light most favorable to the plaintiffs:1
More than a decade ago, Executive Life Insurance Company (ELIC), a California insurance company with approximately 300,000 insureds, became insolvent when many policyholders cashed out their policies because of concerns about ELIC's large junk bond portfolio. Pursuant to California law, the state's Insurance Commissioner ("the Commissioner") seized ELIC's assets on April 11, 1991 by order of the California Superior Court and put ELIC into conservatorship.
The Commissioner adopted and implemented a two-part plan to rehabilitate ELIC. First, appellee Altus Finance S.A. ("Altus"), a French company, purchased the company's junk bond portfolio. Second, other French investors, the MAAF Group, formed a holding company, New California Life Holdings (NCLH),2 that in turn purchased ELIC's insurance business and named the new company Aurora National Life Assurance Company ("Aurora").
According to the Attorney General, the corporation behind these transactions was Crédit Lyonnais, a French bank owned in part by the government of France, operating through its subsidiary, Altus. Crédit Lyonnais and affiliated companies are among the appellees here, along with American investment bankers (the "Apollo" parties) and other purported co-conspirators who acted as fronts for Altus. The complaint posits that Moreover,
Apollo and Altus/Credit Lyonnais knew they could not meet the announced bidding requirements ... because neither had any experience operating an insurance business, and state and federal law prohibited Altus from owning or operating the insurance business anyway. Apollo also knew that the Commissioner would not approve of Apollo acquiring any financial interest in the insurance business because of its bad public image as a result of its extensive connections with Drexel [Burnham Lambert] and Michael Milken.
The Attorney General alleges that Altus fraudulently acquired ELIC's insurance company assets from the Commissioner, in violation of state insurance and federal banking law. California Insurance Code § 699.5 precludes foreign governments, agencies, or subdivisions thereof from owning, operating, or controlling, directly or indirectly, a California insurance company. The Bank Holding Company Act, 12 U.S.C. § 1841 et seq., prohibits a foreign bank from owning an American insurance company.
Altus and its fronts purportedly made false statements denying that Crédit Lyonnais would have any equity interest or control over the buyers. Yet, after Altus secretly acquired the insurance company assets, "[u]sing a back-dated and falsified agreement, Altus sold Artemis [S.A., a French company owned in part by appellees Crédit Lyonnais and François Pinault] the insurance business, and Apollo orchestrated the timing of formal transfers of ownership from the phony fronts to Artemis in order to...
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