California Supreme Court: Business friend or foe?

By Seth Sandronsky | Nov 6, 2016

That's an important question. Much is at stake, as the Golden State is the sixth largest economy in the world.

Does business have a foe or friend at the California Supreme Court? 

That's an important question. Much is at stake, as the Golden State is the sixth largest economy in the world.

“Courts can be friendly or unfriendly to business,” former California Supreme Court Justice Cruz Reynoso told the Northern California Record. “Courts are influenced by their view of what the law means and what is best (for) society.”

Governors appoint justices to the state’s high court, comprised of a Chief Justice and six Associate Justices. Current Democratic Gov. Jerry Brown’s newest trio of appointments tilted away from business in a recent decision, said one attorney.

“With the addition of Justices (Goodwin H.) Liu, (Mariano-Florentino) Cuellar, and (Leondra R.) Kruger (the author of Nickerson v. Stonebridge Life Insurance Co.),” attorney Evan Tager of Meyer Brown in Washington, D.C. blogged, “the current court may be among the least business-friendly in decades.” 

The Nickerson case decision calculates a constitutional limit in a ratio of punitive damages (beyond necessary compensation) of 10 times’ compensatory damages (necessary compensation) in bad faith insurance cases by in part including attorneys’ fees (Brandt fees).

“The California Supreme Court is sometimes business-friendly and sometimes not,” Kim Stone, president of the Civil Justice Association of California, told the Northern California Record.

She disagrees with Tager’s view that the state’s high court tilts away from the interests of business now in contrast to decades past.

Definitions matter in the language and usage of words in the practice of law. What does a term such as “business-friendly” mean for the California high court?

UC Hastings Law Professor David Levine told the Northern California Record the answer is in the eye of the beholder (e.g., whose interest are harmed or helped in high court decisions). Levine said when business loses litigation it describes such rulings as “business unfriendly.”

“When a business wins a case then the court is business-friendly,” Levine said. It is a little like calling a court “activist,” meaning how are you are using the term depends on your perspective, Levine said.

In late July, the California Supreme Court released its opinion in People ex rel. Kamala Harris v. Pac Anchor Transportation. In that case, “the issue is whether an action under the UCL (unfair competition law) against a trucking company for treating individuals who drive trucks for them as 'individual contractors' instead of 'employees' is preempted by the Federal Aviation Administration Authorization Act (FAAAA),” Stone said.

The California high court ruled that UCL preempts the FAAAA. Companies such as the ride-hailing firm Uber also face litigation over the status of drivers that labor as independent contractors, not employees, across the U.S.

The California Supreme Court going back quite some time prior to Gov. Brown has been quite protective of consumers’ interest in arbitration cases, Levine said. That trend does not extend to the highest court in the land though, he said.

“The U.S. Supreme Court has pushed very hard back against the Golden State’s high court decisions making it easier for corporations to force individuals into arbitration agreements that exclude class-action lawsuits in banking, health care and telecommunications,” Levine said. Under Chief Justice Roberts, the current U.S. Supreme Court is quite pro-business, he said.

There are exceptions to pro-consumer protection decisions in the Golden State’s high court.  

In the Sanchez v. Valencia Holding Co. decision of early August, the California Supreme Court held the challenged arbitration agreement valid in all respects, Stone said.

A California Supreme Court decision in late July held that class-wide arbitration must be decided on a case-by-case basis in Sandquist v. Lebo Auto., Inc.

In upcoming decisions, California’s high court will rule on employer liability for employees, their family and friends in take-home asbestos cases. Two cases of note are Haver v. BNSF Railway Company, and Kesner v. Superior Court (Pneumo Abex, LLC).

The California Center for Jobs and the Economy and the University of San Francisco Law School declined requests for comment from the Northern California Record.

California high court’s annual reports on appeals for the 2013-14 fiscal year do not show dramatic changes in its decisions for or against business, Levine said. For the 2013–2014 court year, the Supreme Court filed opinions in a total of 33 civil matters out of an overall figure of 83. 

Four of the current seven California Supreme Court justices are GOP governor appointees. By contrast, the electorate in the Golden State is a Democratic majority including the governor and both houses of the state Legislature, putting the California GOP at a disadvantage.

That the Golden State is rock-solid blue is beyond dispute in 2016, but such has not always been true, with implications for California's high court. In 1986, for instance, GOP Gov. George Deukmajian backed the death penalty, a political wedge that helped to seal the fate of then-Supreme Court Justice Cruz Reynoso, one of three jurists who were ousted in an historic vote under the state system of electoral judicial-retention.

“The high court took a clear turn to the right in terms of protecting insurance companies and other businesses,” he said.

Democratic Gov. Jerry Brown had appointed him, Chief Justice Rose Bird and Associate Justice Joseph Grodin to the state Supreme Court. Thirty years ago the Republican Party was more powerful in California, a shadow of its former self today in the face of Democratic majority.

“I think Gov. Brown’s appointees — Justices Liu, Cuéllar and Kruger— have been pretty reasonable,” the CJAC’s Stone said. “I would not say they differ tremendously from the general California electorate.”



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