Foreign affairs and insurance regulation do not often intersect, but a recent decision from the Ninth Circuit puts the two into play. Movsesian v. Victoria Versicherung AG, 2009 WL 25226676 (9th Cir. Aug. 20, 2009), addresses the validity of California Code of Civil Procedure § 354.4, the California Armenian Genocide statute. In a 2-1 decision, the court held that presidential foreign policy preempts the California statute. 2009 WL 2526676, at *10.
Section 354.4 extends the statute of limitations until 2010 for claims arising out of life insurance policies issued to “Armenian Genocide victims.” The statute further provides that legal actions by such persons to recover on “a claim arising out of an insurance policy or policies purchased or in effect in Europe or Asia between 1875 and 1923” may be brought in California. Movsesian filed a class action against VV and Munich Re seeking damages from these companies for breach of written contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and other related claims. Munich Re filed a motion to dismiss, asserting among other grounds that the statute was preempted under the foreign affairs doctrine. The district court granted Munich Re’s motion to dismiss the claims for unjust enrichment and constructed trust, and denied Munich Re’s motion to dismiss the claims for breach of contract and breach of covenant of fair dealing. The district court held that the California statute was not preempted under the foreign affairs doctrine. The Ninth Circuit reversed.
During the pendency of the appeal, the court received a letter from the Turkish Ambassador expressing Turkey’s opposition to the California statute and urging the court to invalidate the statute. The court declined “to take judicial notice of the letter, because the letter was submitted after – and apparently in response to – the district court’s decision.” The court remarked that “even if we did take notice of the letter, however, it would not alter our decision in this case.” 2009 WL 2526676, at *3.
The court observed that “the Supreme Court has long recognized that the Executive Branch’s foreign-policy preferences are entitled to preemptive weight when they take the form of executive agreements.” 2009 WL 2526676, at *4. The court found controlling the Supreme Court’s decision in American Ins. Assoc. v. Garamendi, 539 U.S. 396 (2003), which invalidated the California Holocaust Victims Insurance Relief Act. “And just as in Garamendi, the evidence here is more than sufficient to demonstrate that the state Act stands in the way of the President’s diplomatic objectives.” Id.
The court found decisive the fact that Presidents Clinton and Bush expressed opposition to three Congressional resolutions which expressed concern regarding the Armenian Genocide and expressed support for the Convention on the Prevention and Punishment of the Crime of Genocide. “The foregoing account of negotiations between the Executive Branch and Congress, and the public statements and letters of two Presidents, clearly establish a presidential foreign-policy preference against providing legislative recognition to an ‘Armenian Genocide.’” 2009 WL 2526676, at *7.
The court remarked that “unlike the presidential foreign policy at issue in Garamendi, the presidential foreign policy in the present case is not embodied in any executive agreement.” “This does not, however, detract from the policy’s preemptive force.” Id. Rather, “the preemptive power of the federal policy is not derived from the form of the policy, but rather from the force of the Executive Branch’s authority to act.” Id. “Here, however, the presidential policy concerns national security, a war in progress, and diplomatic relations with a foreign nation.” Id. “The Constitution, squarely, if not solely, vests these powers with the Executive Branch.” Id. On these conclusions, the court determined that “there is an express federal policy prohibiting legislative recognition of an ‘Armenian Genocide’ as embodied in the previously mentioned statements and letters of the President and other high-ranking Executive Branch officials.” 2009 WL 2526676, at *8.
The court concluded that the California statute “clearly conflicts with the presidential foreign policy prohibiting legislative recognition of an Armenian Genocide.” Id. “California has defied the President’s foreign-policy preferences.” Id. The court concluded that “the heart of § 354.4’s conflict with the presidential foreign policy lies in” the use of the words “Armenian Genocide.” Id.
The court rested this conclusion on its observation that “the federal government has made a conscious decision not to apply the politically charged label of ‘genocide’ to the deaths of these Armenians during World War I.” 2009 WL 2526676, at *9. “Whether or not California agrees with this decision, it may not contradict it.” Id. “In sum, § 354.4 conflicts with the Executive Branch’s clearly expressed foreign policy refusing to provide official legislative recognition to the ‘Armenian Genocide.’” 2009 WL 2526676, at *10.
The court further held that the district court erred in holding that “§ 354.4 was within the state’s traditional area of competence because it was a procedural rule extending the statute of limitations reviving previously barred claims.” Id. “By opening the doors as a forum to all ‘Armenian Genocide’ victims and their heirs and beneficiaries, California expresses its dissatisfaction with the federal government’s chosen foreign-policy path.” Id. “Garamendi … clearly hold[s] that this is not a permissible state interest.” Id.
Judge Pregerson dissented. He reasoned that “California’s interest in ensuring that its citizens are fairly treated by insurance companies over which the State exercised jurisdiction is hardly a superficial one.” 2009 WL 2526676, at *11. In his view, “the strength of this traditional state interest weighs against preemption in a case, such as the case before us, where there is doubt about the clarity of the conflict between state law and federal policy.” Id.
