LOOSE CANNON: Report In Opposition To The Confirmation Of Janice Rogers Brown To The United States Court Of Appeals For The DC Circuit

Consumer Protection and Related Issues

Sinclair Paint Co. v. Board of Equalization, 49 Cal. App. 4th 127 (1996), rev’d, 937 P.2d 1350

In 1991, the California Legislature enacted the Childhood Lead Poisoning Prevention Act (the CLPP) to evaluate, screen and provide medical treatment for children at risk for lead poisoning. The program was to be fully funded by fees paid by private companies who manufactured products containing lead. Sinclair Paint sued the State saying that the “fees” it had been required to pay were actually “taxes,” which had been assessed in violation of Proposition 13. Proposition 13 was a voter initiative that required that any new state “taxes” imposed must be approved by no less than two-thirds of the State Legislature.

In her opinion for the three-judge appellate court panel, Judge Brown agreed with Sinclair that the CLPP imposed a tax, rather than a fee. Therefore, because the CLPP was only passed by a majority of the Legislature, it was unconstitutional and Sinclair could not be compelled to pay for the services provided for by the Act. According to Judge Brown, the monies Sinclair paid were taxes not fees because they were unrelated to regulation of Sinclair’s actions. Brown said that because the “regulatory authority involve[d] implementation of the program to evaluate, screen, and provide follow up services to children at risk for lead poisoning. . .[and] does not require Sinclair to comply with any other conditions” the Act cannot be seen as regulating Sinclair. 49 Cal. App. 4th at 139.

In addition, Brown said that the law imposed a tax because the monies did not “constitute payment for a government benefit or service” to Sinclair. 49 Cal. App. 4th at 140. Judge Brown rejected as “speculative” the State’s argument that Sinclair and other manufacturers of lead products benefited from the potential reduction of tort liability as a result of the State’s efforts to identify and treat lead poisoning. Id. Ironically, Brown’s reasoning seems to suggest that if Sinclair had been required to actually do something to prevent lead poisoning rather than just pay for the State to care for those who suffer as a result of Sinclair’s actions, the law would have been upheld. On appeal Brown’s decision was reversed by the California Supreme Court without dissent.

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Marietta Small v. Fritz Companies, Inc., 65 P.3d 1255 (Cal. 2003)

In this case, the majority ruled that where a corporation’s fraud or negligent misrepresentation induces shareholders to hold on to a stock instead of selling it, the shareholders can sue for damages under state common law. As the justice who wrote the majority opinion explained, “disclosures during the past three years have revealed extensive fraud involving numerous corporations, often involving false financial reports and the concealment of true financial data,” and the “victims include not only those who bought or sold stock in reliance upon the false statements, but also those who held stock in reliance.” 65 P.3d at 1271.

The majority decided that only investors “who can make a bona fide showing of actual reliance upon the misrepresentations” of the corporation should be able to bring such a suit, and sent the case back to the lower court to give the shareholder the opportunity to allege and prove his case under the principles it recognized. Id. at 1257. Justice Brown dissented in part. Although she agreed that California law does not “categorically preclude” such a lawsuit, she claimed that the shareholder “does not and cannot allege a causal relationship between the alleged representation and damages,” based on her view that if the company’s alleged concealment of its bad financial situation had not occurred, the stock price would have dropped anyway and no damages could have been caused. Id. at 1276. As the justice who wrote the majority opinion pointed out, however, the issue of damages is a factual matter on which evidence may be in dispute, “but that is no reason to reject a holder’s cause of action” and provide no opportunity to prove such damages. Id. at 1270. Brown’s theory would have meant that at most “only a fraction of those actually injured would be able to gain redress.” Id. at 1271.

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Lugtu v. California Highway Patrol, 28 P.3d 249 (Cal. 2001).

Cecelio Lugtu, two daughters, and one other passenger were riding in a car stopped by a California Highway Patrol (CHP) officer for speeding. Contrary to the procedure in the CHP safety manual and to what a former CHP officer stated were CHP enforcement techniques, the CHP patrol officer directed the car to pull over into the center median area of the highway, rather than onto the right shoulder. A truck rear-ended the car, resulting in serious injury to Lugtu and the other three passengers. A lower court dismissed all claims against CHP and the officer, stating that even if they were negligent, they owed absolutely no duty of care to the injured passengers.

The court of appeal reversed, holding that the officer owed a legal duty of reasonable care when he stopped the car, and that there was an issue of fact as to whether the officer was negligent and whether that helped cause the injuries. The state supreme court agreed. Brown and one other justice dissented, however, claiming that under the factual circumstances, the officer complied with his duty of care as a matter of law. 28 P.3d at 266-68. The majority strongly disagreed, pointing out that Brown’s approach “effectively would eliminate the role of a jury in negligence cases, transforming the question of whether a defendant breached the duty of care under the facts of a particular case into a legal issue to be decided by the court.” 28 P.3d at 262 n.13. Instead, the majority explained, the injured passengers should have the chance to have a jury resolve the conflicting evidence and determine if the officer negligently helped cause their injuries.

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Stop Youth Addiction, Inc.(“SYA”) v. Lucky Stores, Inc., 950 P.2d 1086 (Cal. 1998) and Quelimane Company, Inc. v. Stewart Title Guaranty Co., 960 P.2d 513 (Cal. 1998).

Brown filed vigorous solo dissents in both these decisions concerning California’s unfair competition law and related issues. In SYA, all the other justices agreed that a for-profit corporation can file suit on behalf of the public under the unfair competition law against a retailer that illegally sells cigarettes to minors. Although both the majority and Brown acknowledged that there were serious questions relating to proper evidence and relief in the case, the majority explained that the only question properly before it was whether SYA could bring the lawsuit itself. Based on the very broad language of the unfair competition law, which authorizes any corporation or person “acting for the interests of itself, its members, or the general public” to file suit against “any unlawful, unfair or fraudulent business act,” and based on more than 25 years of consistent California precedent, the majority ruled that the answer was yes. 950 P.2d at 1090, 1089.

Brown strongly dissented. She directly challenged the California courts’ precedents “[o]ver the last quarter century.’ Id. at 1111. She argued that the courts should exercise what she called their “inherent power to restrain their own precedents” because of “perceptions that past constructions of legislation have produced anomalous and harmful results,” or otherwise exercise what she termed the courts’ “equitable powers of abstention in appropriate cases” to simply “decline to grant relief.” Id. at 1114, 1115. As the majority explained, however, it has been the state legislature that has consistently acted to “expand” and “never to narrow” the unfair competition law. Id. at 1097 (emphasis in original). Acting as the defendant or Brown suggested to effectively narrow the law by judicial fiat would contradict the fundamental principle that “the judicial role in a democratic society” is to “interpret laws, not to write them.” Id. at 1102.

All the justices except Brown agreed in Quelimane that landowners who claim that they have been harmed by a conspiracy among title insurance companies to refuse to sell title insurance on property acquired at a tax sale can bring a lawsuit for unfair competition and interference with contract. The court made clear that it was deciding only that the landowners could proceed with their case, and that factual matters, like whether a tax deed conveys “good” title and whether there was a business justification for the insurance companies’ conduct, would have to be proven at trial. See 960 P.2d at 530, 531.

Brown nevertheless dissented, based on her interpretation of what was said at oral argument about the evidence in the case and her view that tax titles “have historically been uninsurable” and that “no law requires title companies to insure unreasonable risks against their business judgment.” Id. at 534. As the majority emphasized, however, these were factual issues as to which the landowners should receive an opportunity to present evidence at trial, and the court was legally “obliged to accept as true” the complaint’s allegations. Id.. at 516 n.3. Brown’s dissent disregarded that important principle, which she characterized as a “technical rule” that should not prevent “put[ting] this sham lawsuit out of its misery.” Id. at 534.

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Lane v. Hughes Aircraft Co., 993 P.2d 388 (Cal. 2000).

In another of what she called one of her ten most significant cases, Brown wrote both the majority and a concurring opinion in a case involving a multi-million dollar damage award against Hughes Aircraft. All the justices agreed with the majority opinion, which ruled that the court of appeal had improperly reversed the trial court’s order granting a new trial because of insufficient evidence to support the damage award and because the trial court considered the punitive damages award “excessive” under state law and under the circumstances of the case.

Brown argued in her concurring opinion, however, that this was not enough. She maintained that the supreme court should simply rule as a matter of law that in order not to be “excessive,” punitive damages should “rarely exceed compensatory damages by more than a factor of three,” and that most punitive damage awards “should fall well below that limit.” Id. at 399. She argued that this numerical standard was justified because the legislature itself had provided for double or treble damages as punishment for wrongful acts in some 30 instances, and had never mandated a larger multiplier. Id. at 401.

Justice Mosk strongly criticized Brown’s concurrence. He explained that the legislature had imposed the limit of double or treble damages in only a “small minority of the statutes in which it has chosen to address punitive damages,” and suggested that the court had no authority to “second-guess the Legislature and import a damages limitation” when the “Legislature has deliberately declined to impose one”. Id. at 397. Far from reflecting proper judicial “creativity,” as Brown suggested (Id. at 403), Mosk argued that Brown’s concurrence “advocates a brand of judicial lawmaking.” Id. at 395. Several years after Lane, a majority of the U.S. Supreme Court ruled that as a matter of constitutional due process, a higher 9-to-1 ratio between punitive and compensatory damages should rarely be exceeded. See State Farm Mutual Automobile Ins. Co. v. Campbell, 123 S.Ct. 1513 (2003).

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