State Farm Gen. Ins. Co. v. Lara

Decision Date29 October 2021
Docket NumberD077731
Citation286 Cal.Rptr.3d 124,71 Cal.App.5th 197
Parties STATE FARM GENERAL INSURANCE COMPANY, Plaintiff and Appellant, v. Ricardo LARA, as Insurance Commissioner, etc., et al. Defendants and Respondents.
CourtCalifornia Court of Appeals Court of Appeals

Hogan Lovells, Vanessa O. Wells, Victoria C. Brown, Menlo Park, Erin R. Chapman, Kirti Datla, and Katherine B. Wellington for Plaintiff State Farm General Insurance Company.

Rob Bonta, Attorney General, Matthew Rodriquez, Acting Attorney General, Tamar Pachter, Assistant Attorney General, Michael D. Gowe and Cara M. Porter, Deputy Attorneys General, for Defendant Ricardo Lara in his official capacity as Insurance Commissioner of the State of California.

Strumwasser & Woocher, Michael J. Strumwasser, Bryce A. Gee, Julia G. Michel; Harvey Rosenfield and Pamela Pressley, for Defendant Consumer Watchdog.

HUFFMAN, Acting P. J.

INTRODUCTION

State Farm General Insurance Company (SFG) appeals from an order awarding attorney fees to intervenor Consumer Watchdog (CW), in a dispute over documents SFG designated as confidential in a rate hearing under Proposition 103 ( Ins. Code, § 1861.01 et seq. ).1 After the administrative law judge (ALJ) denied SFG's motion to seal, SFG sought writ relief from the superior court, which CW and the Insurance Commissioner successfully opposed. CW then moved for fees under section 1861.10, which provides for reasonable advocacy fees to a consumer representative that makes a substantial contribution to the adoption of an order. The court awarded CW's requested fees, and SFG appealed.

SFG contends the fee motion was untimely, and the fee award was inconsistent with the statutory requirements and an abuse of discretion. We reject these arguments and affirm.

FACTUAL AND PROCEDURAL BACKGROUND
A. Proposition 103

Proposition 103 was approved by voters in November 1988, and made numerous, fundamental changes to insurance regulation in California. ( Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 812, 258 Cal.Rptr. 161, 771 P.2d 1247 ( Calfarm ).) Its stated purpose was "to protect consumers from arbitrary insurance rates and practices, to encourage a competitive insurance marketplace, to provide for an accountable Commissioner, and to ensure that insurance is fair, available, and affordable for all Californians." (Stats. 1988, Prop. 103, uncodified § 2 ["Purpose"]; see also uncodified § 8, subd. (a) ["This Act shall be liberally construed and applied in order to fully promote its underlying purposes."].)

Proposition 103 provides for public participation, including through public notice ( §§ 1861.05, subds. (c)-(d), 1861.06 ), hearings ( §§ 1861.055, 1861.08 ), and, relevant here, inspection ( § 1861.07 ). (See § 1861.07 ["All information provided to the commissioner pursuant to this article shall be available for public inspection, and the provisions of Section 6254(d) of the Government Code and Section 1857.9 of the Insurance Code shall not apply thereto."].) Anyone may intervene in a rate proceeding ( § 1861.10, subd. (a) ), and consumer representatives can recover reasonable advocacy fees for a substantial contribution to an order, regulation, or decision by a court or the Commissioner. ( § 1861.10, subd. (b) (hereafter, 1861.10(b).) The Commissioner has issued regulations for awarding advocacy fees for Commissioner proceedings. ( Cal. Code Regs., tit. 10, § 2662.1, et seq. )2 We discuss section 1861.10(b) and the regulations post.

B. Rate Hearing

SFG filed an application to increase rates in December 2014. CW, a nonprofit organization, intervened in the proceeding.3 The ALJ held a lengthy rate proceeding, which culminated in a rate order in November 2016. That order is the subject of a separate appeal. (State Farm Gen. Ins. Com. v. Lara (October 29, 2021, D075529).)

In August 2015, the parties had entered a stipulated protective order to "facilitate discovery and the free exchange of information ...." The order permitted the parties to designate documents as confidential and required them to move to seal those materials permanently. SFG subsequently filed a motion to seal 39 exhibits and related testimony. SFG argued its documents were properly sealed, including based on trade secrets, and asserted four main legal arguments: (i) section 1861.07 does not apply to documents submitted in rate hearings; (ii) documents submitted with an Own Risk and Solvency Assessment (ORSA) report are confidential; (iii) the Insurance Holding Company System Regulatory Act (Holding Company Act or HCA) and analogous Illinois law require submission of certain information and mandate it be kept confidential; and (iv) estoppel applied based on the protective order. The Department of Insurance (Department) and CW opposed the motion. CW's brief spent 13 pages addressing why specific documents and testimony were not entitled to protection.

The ALJ denied SFG's motion to seal. The ALJ found in part that even if trade secret protection applied to rate hearings under Proposition 103, SFG had not "met its burden in demonstrating the elements required for trade secret protection" including because it did "not identify the nature of the harm threatened by public disclosure of most documents." It further found public interest would justify disclosure regardless.

C. Court Proceedings

In November 2016, SFG filed a petition for writ of mandate to the superior court, in which it also sought declaratory relief. SFG included CW as a respondent, because it possessed the sealed documents as a rate hearing participant and this would "ensure the effectiveness of any orders" issued by the superior court.

SFG advanced its arguments from the rate hearing, regarding section 1861.07, ORSA, the HCA, and estoppel. SFG also argued the ALJ's findings were insufficient, including because it "[did] not make findings as to the confidential status for the various records ...." SFG cited Topanga Association for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506, 515, 113 Cal.Rptr. 836, 522 P.2d 12 ( Topanga ) and Environmental Protection Information Center v. California Dept. of Forestry & Fire Protection (2008) 44 Cal.4th 459, 516, 80 Cal.Rptr.3d 28, 187 P.3d 888 ( EPIC ), among other cases. SFG further contended there was "no contest[ ]" to its evidentiary showing in any event, explaining it "submitted evidence sufficient to make a prima facie case for sealing"; "no party submitted any evidence in response"; and the Department "more or less conceded the issue," while CW "made some conclusory arguments and asserted a non-existent right to later address on an evidentiary basis."

The Commissioner and CW filed separate briefs opposing SFG's petition. On section 1861.07, ORSA, the HCA, and estoppel they made consistent, but not identical, arguments. On the ALJ findings, the Commissioner argued the "ALJ did, in fact, consider whether SFG's documents contained trade secrets," and did not find SFG " ‘met its burden in demonstrating the elements required for trade secret protection.’ " He also noted the ALJ "specifically pointed out fatal deficiencies in SFG's trade secret claim, including that SFG did ‘not identify the nature of the harm threatened by public disclosure of most documents.’ "

CW likewise noted the nature of the harm finding, but also addressed the ALJ finding regarding the public's interest in disclosure and several other points as well. For example, CW disputed SFG's argument that the ALJ findings were inadequate, and addressed its authorities in doing so; it explained agency findings must "bridge the analytic gap" ( Topanga, supra , 11 Cal.3d at p. 515, 113 Cal.Rptr. 836, 522 P.2d 12 ), but "do not need to be extensive or detailed" ( EPIC, supra , 44 Cal.4th at p. 516, 80 Cal.Rptr.3d 28, 187 P.3d 888 ), and argued the ALJ's findings were sufficient. CW also disputed SFG's assertion that there was any concession as to the sealing of specific records, explaining its brief "contained an entire section spanning 13 pages titled ‘Arguments Regarding Specific Documents and Testimony,’ which discussed in detail why each specific record was not entitled to confidential treatment."

CW further argued, inter alia, that SFG had not "even attempted to present argument why each specific record is entitled to be sealed."

In January 2019, the superior court issued an order denying the petition for writ of mandate, because SFG had not established the ALJ "abused his discretion in finding that the documents were not protected from disclosure." The court did not address section 1861.07, explaining that if the ALJ did not abuse his discretion, "whether or not he was also correct in finding the documents could not be sealed is immaterial." The court then addressed the documents, explaining in part:

"[SFG's] opening brief does not attempt to demonstrate that any of the 39 exhibits at issue are trade secret. Instead, [SFG] argues that the finding is deficient because it fails to ‘set forth findings to bridge the analytical gap between the raw evidence and ultimate decision or order.’ Topanga [, supra , 11 Cal.3d at p. 515, 113 Cal.Rptr. 836, 522 P.2d 12]. [SFG] contends that respondents did not contest its evidentiary showing and essentially conceded the issue. CW says its opposition brief below contained 13 pages which discussed why each record was not entitled to confidential treatment. [Citation.] [¶] Findings ‘do not need to be extensive or detailed.’ [ EPIC, supra , 44 Cal.4th at p. 516, 80 Cal.Rptr.3d 28, 187 P.3d 888.] .... Here, the issue of sealing was extensively briefed and argued by the parties. The applicable standard for a trade secret is relatively straight-forward. The ALJ had the benefit of the parties’ briefing, the documents at issue, and argument. Under these circumstances, the ALJ's finding was sufficient."

The court also rejected SFG's arguments under ORSA and the HCA.

In February 2019, SFG moved ex parte for a status conference on its declaratory relief claim,...

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