Monday, September 20, 2021

Nede Mgmt. v. Aspen Am. Ins. Co. (Cal. Ct. App. - Sept. 20, 2021)

The majority opinion (written by Justice Ohta) holds that when a policyholder brings a claim for declaratory relief, it's error for the trial court to grant a demurrer.  That's because, in essence, the whole point of a declaratory claim is to declare the rights of the parties, and since that's a permissible basis for a claim, it's wrong to say (on a demurrer) that the request is improper, even if -- as a matter of law -- one side or the other should win.  That's a merits determination, not the proper basis for a demurrer.  The majority thinks that's what the California Supreme Court decided in Maguire v. Hibernia Savings & Loan Soc. (1944) 23 Cal.2d 719.

That said, in the present case, the Court of Appeal says that even though the demurrer shouldn't have been granted, on the merits, it's harmless error here, since, yep, as a matter of law, what the insurance company did here was fine.

Justice Wiley concurs in the result, but disagrees on the process.  He thinks that granting a demurrer should be totally fine, and that there's no reason to waste time and money by making the case resolve on the merits at the subsequent summary judgment (or trial) stage.  Bounce the thing now instead.  Justice Wiley thinks that Maguire doesn't set forth the rule that the majority thinks it does, and that, instead, cases like Zeitlin v. Arnebergh (1963) 59 Cal.2d 901 suggest that it's totally fine to resolve declaratory relief cases on the merits on a demurrer.

For me, I'd have to read the underlying California Supreme Court cases in more detail to decide whether the majority or concurring opinion has the better view of precedent.  But here's what I know for sure:  the rule should be that you should resolve these things on a demurrer.  Maybe it was fine in 1944 to wait until summary judgment or what have you to resolve declaratory disputes that the law definitively requires be resolved in favor of the defendant.  But at this point, the process is far too expensive and burdensome -- for both sides -- to needlessly delay things until that point.  The rule now should be that a demurrer is okay.

That said, here's what we can all agree on:  (1) the California Supreme Court precedent on this point is at least partially unclear (hence the disagreement between Justices Ohta and Wiley); (2) there are plenty of older Court of Appeal cases that say the rule is precisely the one described by the majority (e.g., the several "more recent authorities" cases listed in Justice Wiley's concurrence that he says "err"); and (3) after today, there's an on-point 2021 Court of Appeal opinion that definitively says you can't grant a demurrer in these types of disputes.

Which means, as a practical matter, that's the rule.

Which is bad.

In the perfect world, the losing party here (i.e., plaintiffs) would file a petition for review that says that the Court of Appeal got it wrong and that asks the California Supreme Court to establish the right rule.  But that's almost certainly not going to happen here, for multiple reasons.  First, since every single jurist on the case (both in the trial court and on appeal) agrees that plaintiffs are wrong on the merits, it would make zero sense for plaintiffs to seek review -- even if they got it, they'll surely lose on the merits, so it'd be a waste of money.  Second, the underlying factual dispute (whether plaintiffs were entitled to Cumis counsel) definitely isn't review-worthy, so no reason to take the case on that point to begin with.  Finally, here, the plaintiffs won on the issue that is potentially review-worthy (i.e., whether a demurrer is the right way to dismiss these things), so they've got zero reason to ask for review on this point, and the party that lost (the defendants) on this point has zero reason to ask for review since they ended up winning anyway.

The net result being that cases like this remain the rule and establish a totally inefficient procedure.

So here's what should happen in our (imperfect) world:  The California Supreme Court should grant review of this case on its own pursuant to Rule 8.512(b) and make clear -- either by "clarifying" prior precedent or simply by making a new one -- that, yes, a demurrer can properly be granted in cases like this one.

Will that happen?  Doubtful.  The California Supreme Court doesn't grant review of very many cases on its own.  After all, it's not like it's sitting there reading every Court of Appeal decision that comes down on arcane (albeit important) procedural points and just itching to make more work for itself when even the parties don't bother asking for review.  Moreover, there'd potentially be some procedural complexity since, at this point, since the merits of the lawsuit are already resolved, neither plaintiff nor defendant may have any strong reason to care about how the procedural dispute comes out, so maybe there'd be a need to appoint counsel to argue one position or another.

Moreover, while non-parties can potentially request depublication of opinions, they can neither petition for review nor -- as far as I can tell, anyway -- request a sua sponte grant of review by the California Supreme Court itself.

Still, that's what I think should happen.  Reach out an grant review in this one.  It's a simple dispute.  The answer is (IMHO) clear.  It'll matter in a ton of cases.  And unless review's granted, it's an issue that's likely to evade review pretty much forever (since, at this point, trial courts won't be granting demurrers in these types of cases).  The result of which would be massively inefficient for everyone.

My two cents.