LIBERTY SURPLUS INSURANCE CORPORATION, a New Hampshire corporation; Liberty Insurance Underwriters, Inc. v. LEDESMA AND MEYER CONSTRUCTION COMPANY, INC., a California corporation; Joseph Ledesma, an individual; Kris Meyer, an individual
No. 14-56120
United States Court of Appeals, Ninth Circuit
August 22, 2016
834 F.3d 998
Before: Thomas I. Vanaskie, Mary H. Murguia, and Paul J. Watford, Circuit Judges.
The majority‘s erroneous reasoning leads to a result that is directly contrary to Congress‘s goals in enacting the FAA. Given that lawyers are unlikely to arbitrate on behalf of individuals when they can represent a class, see id., 563 U.S. at 347, 131 S.Ct. 1740, and an arbitrator cannot hear a class arbitration unless such a proceeding is explicitly provided for by agreement, Stolt-Nielsen S.A. v. AnimalFeeds Int‘l Corp., 559 U.S. 662, 684, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010), the employee‘s purported nonwaivable right to class-wide procedures virtually guarantees that a broad swath of workplace claims will be litigated, Concepcion, 563 U.S. at 347, 131 S.Ct. 1740. The majority‘s reasoning is likewise contrary to the Supreme Court‘s ruling that collective actions are not necessary to protect employees’ federal statutory rights. See Gilmer, 500 U.S. at 32, 111 S.Ct. 1647; see also Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 123, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001) (“We have been clear in rejecting the supposition that the advantages of the arbitration process somehow disappear when transferred to the employment context.“).
IV
The Second, Fifth, and Eighth Circuits have concluded that the NLRA does not invalidate collective action waivers in arbitration agreements. See Cellular Sales of Missouri, LLC v. NLRB, 824 F.3d 772, 775 (8th Cir. 2016); D.R. Horton, 737 F.3d at 362; Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297 n.8 (2d Cir. 2013). These decisions are consistent with Supreme Court precedent, which has made it abundantly clear that arbitration agreements must be enforced according to their terms unless Congress has given an express contrary command.
In teasing out of the NLRA a “mandate” that prevents the enforcement of Morris‘s arbitration agreement, the majority exhibits the very hostility to arbitration that the FAA was passed to counteract. The Court recognized in Concepcion that the pre-FAA judicial antagonism to arbitration agreements “manifested itself in ‘a great variety’ of ‘devices and formulas’ declaring arbitration against public policy.” 563 U.S. at 342, 131 S.Ct. 1740 (quoting Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 406 (2d Cir. 1959)). Today the majority invents a new such formula. Because I would follow the Supreme Court precedent and join the majority of the circuits concluding that
ORDER CERTIFYING QUESTION TO THE SUPREME COURT OF CALIFORNIA
We respectfully request that the Supreme Court of California exercise its discretion to decide the certified question set forth in Part II of this order.
I
Caption and Counsel
A. The caption of the case is:
No. 14-56120
LIBERTY SURPLUS INSURANCE CORPORATION, a New Hampshire corporation; LIBERTY INSURANCE UNDERWRITERS, INC., Plaintiffs-Appellees, v. LEDESMA AND MEYER CONSTRUCTION COMPANY, INC., a California corporation; JOSEPH LEDESMA, an individual; KRIS MEYER, an individual, Defendants-Appellants.
B. The names and addresses of counsel for the parties are:
For Plaintiffs-Appellees: Patrick Peter Fredette and Christopher M. Ryan, McCormick Barstow LLP, 312 Walnut Street, Scripps Center, Cincinnati, OH 45202
For Defendants-Appellants: Michael Bidart, Matthew William Clark, Ricardo Echeverria, and Steven Schuetze, Shernoff Bidart Echeverria Bentley, LLP, 600 S. Indian Hill Blvd., Claremont, CA 91711-5498
II
Question Certified
Pursuant to
Whether there is an “occurrence” under an employer‘s commercial general liability policy when an injured third party brings claims against the employer for the negligent hiring, retention, and supervision of the employee who intentionally injured the third party?
The answer to this question is of exceptional importance to injured parties, employers, and insurance companies doing business in California.
III
Statement of Facts
In April of 2002, Ledesma & Meyer Construction Company, Inc., Joseph Ledesma, and Kris Meyer (collectively “L&M“) entered into a Construction Management Contract with the San Bernardino County Unified School District to complete construction work at the Cesar E. Chavez Middle School (the “Project“). In relevant part, the Construction Contract specified that L&M would defend and indemnify “the Owner, its officers, employees, and agents” from all claims resulting from L&M‘s negligence, errors, acts, or omissions. The Project began in June of 2003, and continued into the 2006-2007 school year.
In 2003, L&M hired Darold Hecht and assigned him to the Project as an Assistant Superintendent. On January 12, 2010, L&M received notice that a tort claim had been filed against the School District, arising out of allegations that Hecht sexually abused a 13-year old student at the Middle School beginning in October of 2006. The School District tendered the defense and indemnification of the claim to L&M pursuant to the Construction Contract.
In May of 2010, Jane JS Doe, filed a complaint in state court (the “Underlying Action“), naming as defendants, L&M, the School District, Hecht, Joseph Ledesma, Kris Meyer, and others.1 Doe amended the complaint twice. The operative complaint in the underlying action alleged claims for Negligence; Negligent Hiring/Retention and Supervision; Violation of the California Education Code; Violation of California Civil and Penal Codes; Intentional Infliction of Emotional Distress; Violation of
Liberty Surplus Insurance Co. had issued L&M a commercial general liability policy (“General Policy“) for the relevant time period. The General Policy between the parties provided, in pertinent part:
SECTION I—COVERAGES
COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” ... to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” ... to which this insurance does not apply....
b. This insurance applies to “bodily injury” and “property damages” only if:
(1) The “bodily injury” ... is caused by an “occurrence” that takes place in the “coverage territory“;
* * *
SECTION V—DEFINITIONS
13. “Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
(ER 267-68, 289.)
Pursuant to the General Policy, and other insurance policies,2 both L&M and the School District tendered their defense in the Underlying Action to Liberty Surplus Insurance Corporation and Liberty Insurance Underwriters, Inc. (collectively “Liberty“). Liberty defended L&M under a reservation of rights and denied a defense to the School District on the ground that the School District was not insured under the General Policy. Because Liberty denied a defense to the School District, L&M paid expenses incurred by the School District to defend against Jane Doe‘s claims, pursuant to the terms of the Construction Contract.
Liberty commenced the current action in the United States District Court for the Central District of California, seeking a declaration that, among other things, it was under no obligation to defend or indemnify L&M or the School District in the Underlying Action. L&M filed a counterclaim, arguing, among other things, that the insurance policies at issue required Liberty to defend or indemnify L&M and the School District in relation to the Underlying Action. After the parties filed cross-motions for summary judgment, the district court entered summary judgment in favor of Liberty. Relying on Delgado v. Interinsurance Exchange of Automobile Club of Southern California, 47 Cal.4th 302, 97 Cal.Rptr.3d 298, 211 P.3d 1083 (2009), the district court found that L&M‘s negligent hiring, retention, and supervision of Hecht was too attenuated from the injury-causing conduct committed by Hecht to constitute an “occurrence“—defined as an accident—under the General Policy.
IV
Explanation of Our Request
We seek the California Supreme Court‘s determination as to the proper interpretation of liability insurance policies that provide coverage for injuries sustained as a result of an “occurrence,” which is defined as “an accident, including continuous or repeated exposure to substantially the
The Supreme Court of California has yet to address this issue of exceptional importance. Nonetheless, in Minkler v. Safeco Insurance Co. of America, 49 Cal.4th 315, 110 Cal.Rptr.3d 612, 232 P.3d 612, 617 n.3 (2010), when answering a question certified by this Court in the context of a claim for coverage for damages caused by the sexual molestation of a minor, the California Supreme Court signaled the unsettled nature of the question of whether such intentional abuse constitutes an “occurrence” under a liability policy that defined “occurrence” as an “accident.” Because the parties had not addressed this issue, the California Supreme Court declined to do so. Although declining to address the issue, the Court in Minkler cited Delgado and Hogan v. Midland National Insurance Co., 3 Cal.3d 553, 91 Cal.Rptr. 153, 476 P.2d 825 (1970). Delgado held that an assault and battery committed by the insured did not constitute an “accident” under the liability policy at issue there. 97 Cal.Rptr.3d 298, 211 P.3d at 1092. Hogan, in pertinent part, held that damages caused by a decision to cut lumber wider than had been specified in order to compensate for a defect in the saw were not the result of an “accident” within the meaning of the liability policy. 91 Cal.Rptr. 153, 476 P.2d at 827.
Delgado and Hogan thus provide general guidance on the question of whether deliberate conduct constitutes an “accident” under a liability policy. Neither case, however, addresses the question of whether claims of negligence in hiring, retaining and supervising an employee who commits a sexual assault fall within a policy‘s coverage for an “occurrence,” which is defined as an “accident.”
The California Courts of Appeal have also not provided clear guidance on this issue. In L.A. Checker Cab Co-op., Inc. v. First Specialty Insurance Co., 186 Cal.App.4th 767, 112 Cal.Rptr.3d 335, 336 (2010), ordered not to be officially published (Oct. 27, 2010), the Court ruled that the alleged negligent supervision of a cab driver who intentionally shot a passenger did not constitute an occurrence under the insurance policy. But the case was ordered not to be published. In the absence of a controlling decision on this question, a deep division of the federal district courts of California persists.3
The parties shall notify the Clerk of this Court within one week after the Supreme Court of California accepts or rejects certification.
If the Supreme Court of California denies the request for certification, this case will be automatically resubmitted upon notice of that denial. If the Supreme Court of California accepts the certified question, the case will be automatically resubmitted upon receipt of the Supreme Court of California‘s answer to the certified question. Additionally, if our request for certification is accepted, the parties shall file a joint status report with our Court every six months.
IT IS SO ORDERED.
V
Accompanying Materials
In accordance with
Further proceedings before us are stayed pending the Supreme Court of California‘s decision regarding certification and, in the event the certification is accepted, our receipt of the answer to the question certified.
This case is withdrawn from submission, but we retain jurisdiction over further proceedings after the Supreme Court of California renders a decision or declines to answer the certified question.