Connecticut Indemnity Co. v. Superior Court

• Citation: 98 Cal.Rptr.2d 221,3 P.3d 868,23 Cal.4th 807
• Decision Date: 24 July 2000
• Docket Number: No. S065841.,S065841.
• Court: United States State Supreme Court (California)
• Parties: CONNECTICUT INDEMNITY COMPANY et al., Petitioners, v. SUPERIOR COURT of San Joaquin County, Respondent; City of Lodi, Real Party in Interest. Maryland Casualty Company et al., Petitioners, v. Superior Court of San Joaquin County, Respondent; City of Lodi, Real Party in Interest.

98 Cal.Rptr.2d 221

23 Cal.4th 807

3 P.3d 868

CONNECTICUT INDEMNITY COMPANY et al., Petitioners, v. SUPERIOR COURT of San Joaquin County, Respondent;

City of Lodi, Real Party in Interest.

Maryland Casualty Company et al., Petitioners, v. Superior Court of San Joaquin County, Respondent;

City of Lodi, Real Party in Interest.

No. S065841.

Supreme Court of California.

July 24, 2000.

Archer, McComas, Breslin, McMahon & Chritton, W. Eric Blumhardt, Amy S. Hutchins and Sean D. White, Walnut Creek, for Petitioner Connecticut Indemnity Company.

Sinnott, Dito, Moura & Puebla, Randolph P. Sinnott, Los Angeles, James M. Ratzer, San Francisco, and Kathleen Hurly, San Francisco, for Petitioner LMI Insurance Company.

Wiley, Rein & Fielding, Thomas W. Brunner, Daniel E. Troy, C. Russell Clause, N. Christopher Hardee, Washington, DC; Kroloff, Belcher, Smart, Perry & Christopherson, Thomas O. Perry, Stockton; O'Connor, Cohn, Dillon & Barr and

Holly S. Burgess, San Francisco, for Petitioners Maryland Casualty Company, Maryland Insurance Group and Northern Insurance Company of New York.

Rivkin, Radler & Kremer, Donald T. McMillan and George J. Keller, Santa Rosa, for Petitioner Fireman's Fund Insurance Company.

Bien & Summers and Elliot L. Bien, San Francisco, for Insurance Environmental Litigation Association as Amicus Curiae on behalf of Petitioners.

No appearance for Respondent.

Randall A. Hays, City Attorney; Envision Law Group, Michael C. Donovan, Lafayette, Cecelia C. Fusich, Palo Alto, John R. Till and Brian R. Paget, Assistant City Attorneys; Zevnik Horton Guibord McGovern Palmer & Fognani, Los Angeles, Bret A. Stone and Adam Babich, Deputy City Attorneys, for Real Party in Interest.

Meyers, Nave, Riback, Silver & Wilson and Rick W. Jarvis, San Leandro, for 17 California Cities and Counties as Amici Curiae on behalf of Real Party in Interest.

GEORGE, C.J.

We granted review to determine whether a city council, pursuant to a legislative investigation of toxic contamination of local groundwater, is authorized by Government Code section 37104 to issue subpoenas for the purpose of obtaining information relating to liability insurance coverage and claims concerning parties believed to be legally responsible for the contamination, where it appears likely that the city also might employ that same information in the course of prospective litigation. As we shall explain, controlling authority establishes that a city may issue legislative subpoenas when it has been authorized by ordinance or similar enactment to do so, when issuance of the subpoenas serves a valid legislative purpose, and when the witnesses or material subpoenaed are pertinent to the subject matter of a legislative investigation. We conclude, contrary to the determination reached by the majority of the Court of Appeal, that the city satisfied these requirements in this case.

I.

The record indicates that 600 acres of groundwater in a central business and residential area of the City of Lodi (subsequently referred to as Lodi, or the city) are contaminated with a number of carcinogenic substances, including perchloroethylene and trichloroethene. Groundwater is Lodi's sole source of drinking water. The city has shut down at least three municipal water wells because of this contamination.

In early 1997, the Lodi City Council adopted resolution No. 97-09, which established a legislative proceeding to address the contamination problem. The council resolved to investigate the adequacy of existing environmental legislation, craft new municipal legislation if needed and recommend appropriate action at the state or federal level, and also to investigate "among other things, [ (i) ] the nature and source of any toxic contamination at and emanating from within the City of Lodi, [(ii)] ... potential sources of releases of the contamination, [(iii)] ... potential methods to finance the abatement, if needed, of said contamination, [(iv)] ... the adequacy and sufficiency of regulatory schemes at the municipal, state, and federal levels, [(v)] ... the adequacy and sufficiency of liability schemes and financial responsibility requirements at the municipal, state, and federal levels, and [(vi)] ... the adequacy, sufficiency, and limitations of financial responsibility mechanisms, including without limitation, liability insurance and other mechanisms in the private and commercial sector of the community." (Italics added.)¹ The resolution also authorized the council's advisory committee to recommend that the city council issue subpoenas requiring attendance of witnesses or production of documents pursuant to Government Code section 37104.

In May 1997 the city entered into a comprehensive cooperative agreement with the California Environmental Protection Agency, Department of Toxic Substances Control (DTSC), under which Lodi accepted "lead agency" status with responsibility to clean up the contamination by either (i) undertaking the work itself and seeking reimbursement from potentially responsible parties, or (ii) prosecuting actions against potentially responsible parties. That same month the city council, acting pursuant to resolution No. 97-09 and Government Code section 37104, issued subpoenas to the known liability insurers of three potentially liable parties a printing business (Lustre-Cal Nameplate Corporation) and two dry cleaners (Guild Cleaners and Busy Bee Cleaners), seeking information about the existence, terms, and remaining limits of liability of any liability insurance policies that the responsible parties have had since they have been in business. The subpoenas served upon the insurers sought, for example, the insurance policies themselves, certificates of insurance, coverage cards, policy registers, claims files, and related documents. The subpoenas also sought applications for insurance, underwriting files, and correspondence between the insurer and the insured.

The insurers unsuccessfully challenged the subpoenas in the trial court, which upheld Lodi's authority to issue the subpoenas pursuant to Government Code section 37104 and limited its decision to that threshold matter. The court deferred for a later day specific claims of privacy, privilege, immunity, relevance, protection for proprietary information, etc., relating to particular responsive documents. The court also stayed enforcement of the subpoenas and invited the insurers to seek writ review of its threshold ruling.

The insurers filed two writ proceedings seeking to quash the subpoenas, and initially the Court of Appeal summarily denied relief. We thereafter granted the insurers' petitions for review and directed the Court of Appeal to vacate its summary denials and to issue orders to the trial court to show cause why the relief sought should not be granted. Thereafter, the Court of Appeal consolidated the matters and, in a divided opinion, granted relief to the insurers, on the ground that the insureds' interest in keeping private the [subpoenaed documents outweighed the city's interest in disclosure of the documents. We granted review.²

II.

A.

The legislative subpoena power is broad. (Watkins v. United States (1957) 354 U.S. 178, 187, 77 S.Ct. 1173, 1 L.Ed.2d 1273 (Watkins).) As the United States Supreme Court observed in McGrain v. Dougherty (1927) 273 U.S. 135, 47 S.Ct. 319, 71 L.Ed. 580, the legislative "power of inquiry — with process to enforce it — is an essential and appropriate auxiliary to the legislative function." (Id., at p. 174, 47 S.Ct. 319; see also In re Battelle (1929) 207 Cal. 227, 240, 277 P. 725 et seq.; cf. Dibb v. County of San Diego (1994) 8 Cal.4th 1200, 1216-1218, 36 Cal.Rptr.2d 55, 884 P.2d 1003.)

Lodi's general authority to exercise broad police powers is set out in article XI, section 7 of the California Constitution.³ The city's specific authority to issue subpoenas is set out in Government Code section 37104, which provides that a "legislative body may issue subpoenas requiring the attendance of witnesses or production of books or other documents for evidence or testimony in any action or proceeding pending before it." (See id., § 34000 [defining "legislative body" to include a city council].)⁴

There are, of course, limits on the use of legislative subpoenas. We agree with the United States Supreme Court that issuance of such a subpoena is proper only if (i) it is authorized by ordinance or similar enactment, (ii) it serves a valid legislative purpose, and (iii) the witnesses or material subpoenaed are pertinent to the subject matter of the investigation. (Wilkinson v. United States (1961) 365 U.S. 399, 408-409, 81 S.Ct. 567, 5 L.Ed.2d 633; cf. Millan v. Restaurant Enterprises Group, Inc. (1993) 14 Cal.App.4th 477, 480-481, 18 Cal.Rptr.2d 198 (Millan) [administrative subpoena].)

The insurers do not contest the first element, authorization, apparently because resolution No. 97-09 clearly establishes the necessary authority for the city council's investigation. The insurers assert, however, that the final two elements are not satisfied here.

1.

A legislative investigation cannot properly be an end in itself; it must be related to, and it must further, a legitimate purpose of the legislative body. (Watkins, supra, 354 U.S. at p. 187, 77 S.Ct. 1173.) It long has been recognized that a legislative body may conduct an investigation in order to assist its decisionmaking regarding legislative or appropriative matters. (Barenblatt v. United States (1959) 360 U.S. 109, 111-112, 79 S.Ct. 1081, 3 L.Ed.2d 1115 (Barenblatt); see also id., at p. 111, 79 S.Ct. 1081 ["The scope of the power of inquiry ... is as penetrating and farreaching as the potential power to enact and appropriate...."].)

The insurers repeatedly argue that the subpoenas further solely Lodi's interests in litigation, and that the city's asserted legislative interests are nothing more than a pretext and a sham.

We begin with the proposition that a court's authority to second-guess the...