Investors Equity Life Holding Co. v. Schmidt

• Decision Date: 14 September 2011
• Docket Number: No. G042806.,G042806.
• Citation: 11 Cal. Daily Op. Serv. 6571,126 Cal.Rptr.3d 135,2011 Daily Journal D.A.R. 7833,195 Cal.App.4th 1519
• Court: California Court of Appeals Court of Appeals
• Parties: INVESTORS EQUITY LIFE HOLDING COMPANY, Plaintiff and Appellant, v. Jeffrey P. SCHMIDT, as Insurance Commissioner, etc., et al., Defendants and Respondents.

195 Cal.App.4th 1519

126 Cal.Rptr.3d 135

11 Cal. Daily Op. Serv. 6571

2011 Daily Journal D.A.R. 7833

INVESTORS EQUITY LIFE HOLDING COMPANY, Plaintiff and Appellant,

v.Jeffrey P. SCHMIDT, as Insurance Commissioner, etc., et al., Defendants and Respondents.

No. G042806.

Court of Appeal, Fourth District, Division 3, California.

May 31, 2011.

As Modified June 15, 2011.

Rehearing Denied June 20, 2011.

Review Denied Sept. 14, 2011.

Lewis Brisbois Bisgaard & Smith, Joseph K. Hegedus, Roy G. Weatherup, Kenneth D. Watnick, Los Angeles, Joseph R. Lordan, Costa Mesa; Parker Shumaker & Mills, David B. Parker, Los Angeles, and Theodore W. Frank, Long Beach, for Plaintiff and Appellant.

Locke Lord Bissell & Liddell, Los Angeles, C. Guerry Collins, Conrad V. Sison and Michelle C. Ferrara for Defendants and Respondents Jeffrey P. Schmidt, individually and as Liquidator of Investors Equity Life Insurance Company of Hawaii, Ltd., Lawrence M. Reifurth, individually and as Rehabilitator of Investors Equity Life Insurance Company of Hawaii, Ltd., Kerry M. Komatsubara, individually and as Special Deputy Liquidator of Investors Equity Life Insurance Company of Hawaii, Ltd., McCorriston Miller Mukai MacKinnon, William C. McCorriston and John Y. Yamano.

Daley & Heft and Lee H. Roistacher, Solana Beach, for Defendants and Respondents Jeffrey P. Schmidt, individually and as Hawaii Insurance Commissioner, Lawrence M. Reifurth, individually and as Hawaii Insurance Commissioner, and Timothy P. Bogan.

Reed Smith, Bernard P. Simons, Zareh A. Jaltorossian, Los Angeles; Rothgerber Johnson & Lyons, Franklin D. O'Loughlin, Cindy C. Oliver and Tamara F. Goodlette for Defendants and Respondents Hawaii Life and Disability Insurance Guaranty Association, Hawaii Association Grantor Trust, Fred A. Buck and Buck & Associates.

OPINION

RYLAARSDAM, Acting P.J.

Plaintiff Investors Equity Life Holding Company filed this action in California against several defendants, including the current Hawaii Insurance Commissioner, several of his predecessors, employees of the commissioner, the law firm and individual lawyers representing the commissioner, plus the Hawaii Life and Disability Insurance Guaranty Association (Association). The first amended complaint alleges plaintiff is the sole shareholder of Investors Equity Life Insurance Company of Hawaii, Ltd. (IEL), an insurance company currently the subject of a liquidation action in the Hawaii Circuit Court for the First Circuit. Plaintiff seeks damages and equitable relief for defendants' purported “wrongful taking or deprivation of [its] right, title, and interest in the monies and assets remaining in the estate of and in the stock ... of” IEL.

Several defendants filed objections to the amended complaint, including some who moved to stay or dismiss the lawsuit on the ground of forum non conveniens. (Code Civ. Proc., § 410.30, subd. (a).) Finding the state of Hawaii to be a suitable alternative forum and the relevant public and private interests weighed heavily in favor of having the action litigated in that state, the trial court granted these motions and issued a stay of the California action.

Plaintiff appeals, claiming the court erred in issuing the stay. (Code Civ. Proc., § 904.1, subd. (a)(3).) Defendants Jeffrey P. Schmidt, Lawrence M. Reifurth, Kerry M. Komatsubara, both in their individual and official capacities, plus defendants McCorriston Miller Mukai MacKinnon LLP, a law firm, William C. McCorriston, and John Y. Yamano, have filed a request for judicial notice of a postappeal stipulation signed by all defendants and a June 2010 order entered by the Hawaii Circuit Court for the First Circuit in IEL's liquidation action directing the unsealing of all documents previously filed under seal in that proceeding. In addition, the same defendants have filed a motion under Code of Civil Procedure section 909 requesting that we take additional evidence and make independent factual findings in support of the trial court's ruling.

We conclude the trial court properly stayed this action on the ground of forum non conveniens and affirm its decision. While we grant defendants' request for judicial notice, in light of our ruling on the merits of the appeal, their motion to take additional evidence and for independent factual findings is denied.

FACTS AND PROCEDURAL BACKGROUND

The following is a summary of the material facts taken primarily from the allegations of the first amended complaint along with evidence presented in support of the forum non conveniens motions.

IEL was a life insurance company organized under and regulated by the State of Hawaii with approximately 99 percent of its policyholders residing in that state. Plaintiff alleges it is a Delaware Corporation “authorized to transact business as a foreign corporation in ... California.” It acquired all of IEL's shares in 1991.

According to the amended complaint, in 1993 plaintiff received authorization from the Hawaii Division of Insurance to enter into what are described as “ ‘repurchase transactions' ” and to invest in “ ‘hedging transactions.’ ” The next year, defendant Reifurth became Hawaii's Insurance Commissioner. He filed an action in Hawaii state court to seize and rehabilitate IEL, claiming the repurchase and hedging transactions had rendered the insurer insolvent. ( Reifurth v. Investors Equity Life Ins. Co. of Haw., Ltd, (Haw. 1st Cir., 1994, S.P. No. 94–0337).) IEL's president stipulated to appointing a deputy insurance commissioner as the insurer's rehabilitator. The amended complaint alleges defendant McCorriston, a lawyer with the McCorriston law firm, which represented Reifurth, allegedly told plaintiff “if anything is left over in IEL's estate after rehabilitation or liquidation ..., then that remainder will go to [p]laintiff as the sole shareholder.”

Reifurth later obtained an order liquidating IEL. Plaintiff appealed that ruling, but the Hawaii Supreme Court affirmed, holding plaintiff lacked standing to oppose the insurance commissioner's liquidation petition. ( Metcalf v. Investors Equity Life Ins. Co. of Hawai‘ i, Ltd. (1996) 80 Hawai‘i 339, 910 P.2d 110, 111.) As noted, the liquidation action is still pending.

In late 1994, Reifurth, represented by the McCorriston law firm, filed an action in Hawaii state court against plaintiff and its owner, Gary Vose, alleging fraud and misuse of IEL's funds. ( Reifurth v. Vose (Haw. 1st Cir., 1994, No. 94–4337–11).) The parties reached a settlement terminating this lawsuit August 1996. Plaintiff also alleges that, in 1995, IEL entered into a reinsurance assumption agreement with the then Hawaii Insurance Commissioner, defendant Association, and Hartford Life Insurance Company under which IEL “transferr[ed] almost all insurance policy-related liabilities ... to Hartford.”

According to the amended complaint, “[a]t no time did IEL's directors authorize forfeiture and cancellation of IEL's shares of stock,” nor has “[p]laintiff surrendered its shares ... for cancellation and forfeiture.” “Neither Reifurth nor any other person holding the position of Hawaii Insurance Commissioner, or any person acting on behalf of a commissioner, has given timely and proper notice for [p]laintiff, or other person with interest, to cure any impairment that IEL had, and Reifurth and every other person holding the position of such commissioner have failed to take such other steps as would authorize him or her to effect cancellation and forfeiture of IEL's shares.” But a declaration submitted by defendant Yamano, a lawyer with the McCorriston law firm, asserts plaintiff surrendered its IEL stock under the settlement and Vose signed a document to that effect. Yamano further claims the settlement contained a choice of law clause applying Hawaiian law.

A focal point of the amended complaint is the purported transfer of IEL's stock to a trust controlled by the Association under a stock subscription agreement. Plaintiff alleges that, in December 1996, Wayne C. Metcalf III, then serving as Hawaii's Insurance Commissioner, filed a motion in the liquidation action seeking approval of that agreement. According to the amended complaint, “[a]lthough [p]laintiff was a party to the [l]iquidation [a]ction, [it] was not served with a copy of the [s]ubscription [a]greement at the time the ... motion was filed....”

Plaintiff claims the stock subscription agreement is void because, by its terms, the agreement needed to be submitted to and approved by the court by December 31, 1996 and that was never done. The amended complaint alleges defendants not only failed to serve plaintiff with a copy of the stock subscription agreement or timely submit that agreement to the court for approval, but also took other steps “to misrepresent, deceive, and mislead concerning the ... [a]greement and the purported transactions relating to that agreement” by which they “defraud[ed plaintiff] and depriv[ed it] of its right, title, and interest in the monies and assets remaining in IEL's estate and IEL's stock ... and value of such stock.” It further alleges “[b]y a long series of intertwined, complex, and in many cases unlawful or improper transactions, ... defendants have siphoned, or assisted others to siphon, monies in a variety of ways from IEL's estate.”

According to the amended complaint, plaintiff first discovered evidence of defendant's wrongful conduct in March 2008. Plaintiff claims it then learned a February 2008 interim report on IEL's assets contained “a materially false and misleading entry ... denot[ing] some sort of claim by the ... Association” for over $35 million. “When the balance sheet is adjusted to correct that entry alone, IEL has a surplus (positive net worth) of” over $21 million that “rightfully belongs to [p]laintiff.”

In February 2009, plaintiff filed the current action. The first amended complaint alleges 14 counts, including causes of action for unlawful taking, denial of due process and equal protection, various...