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Yee v. American National Insurance Co.

California Court of Appeals, Third District, Sacramento

March 24, 2015

BETTY T. YEE, as State Controller, etc., et al., Plaintiffs and Respondents,

APPEAL from a judgment of the Superior Court of Sacramento County, No. 34-2013-00144517-CU-MC-GDS David I. Brown, Judge.

Page 454


Greer, Herz & Adams, Kelly-Ann F. Clarke; Quinn Emanuel Urquhart & Sullivan, Steven G. Madison and Michael E. Williams for Defendant and Appellant.

Page 455

Sidley Austin, Carol Lynn Thompson, Nicole M. Ryan, Emily A. Caveness and Mark E. Haddad for United Insurance Company of America, The Reliable Life Insurance Company, and Reserve National Insurance Company as Amici Curiae on behalf of Defendant and Appellant.

Cozen O’Connor, Andrew B. Kay, Catherine R. Reilly; Pillsbury Winthrop Shaw Pittman, Thomas V. Loran III and Andrew D. Lanphere for Thrivent Financial for Lutherans as Amicus Curiae on behalf of Defendant and Appellant.

State Controller’s Office, Richard J. Chivaro; Kaye Scholer, Steven S. Rosenthal, Marc S. Cohen, Alicia Clough and Michael K. Robertson, for Plaintiff and Respondent.



Consistent with unclaimed property laws nationwide that derive from a uniform act on the subject, California’s Unclaimed Property Law (the UPL; Code Civ. Proc., § 1500 et seq.)[1] is remedial legislation with a dual objective. That dual objective is to end the fortuitous enrichment of holders of unclaimed property; and to return such property to its rightful owner or, if that is not possible, to the state (i.e., escheat) for public benefit rather than for private gain. (See 13 Witkin, Summary of Cal. Law (10th ed. 2005) Personal Property, §§ 36-38, pp. 44-46; Goldstein v. PHH Corp. (Md.Ct.Spec.App. 1998) 123 Md.App. 214, 217-218 [717 A.2d 950, 951-952] (PHH Corp.).)

At issue in this appeal is section 1571, subdivision (a) (hereafter section 1571(a)) of the UPL, which states: “The [State] Controller may at reasonable times and upon reasonable notice examine the records of any [entity] if the Controller has reason to believe that the [entity] is a holder [of property] who has failed to report property that should have been reported pursuant to [the UPL].” Pursuant to this section, the trial court here granted a preliminary injunction to plaintiff, the State Controller (the Controller), to examine the records of defendant American National Insurance Company, a life insurance company (American National).

We conclude: (1) The trial court erred in granting the preliminary injunction-which mirrored the Controller’s request for a permanent injunction-because the court did so without a trial on the merits; (2) the standard of “reason to believe” in section 1571(a) means specific articulable facts that

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would justify a belief by a reasonable person, knowledgeable in the field of unclaimed property, that an entity was not reporting property as the UPL requires (and one way in which this standard can be met is if the suspected holder of unreported property has been chosen for record examination pursuant to a general administrative plan to enforce the UPL that is based on specific neutral sources); and (3) that if the Controller proves, at trial on the merits, the significant facts underlying its preliminary injunction request, the Controller will have met this “reason to believe” standard with respect to examining the records of American National’s in-force policies. Accordingly, we reverse the preliminary injunction order and remand for further proceedings.

We will proceed immediately to discuss these conclusions, and set forth in those discussions the pertinent facts. As we shall explain, these conclusions are as far as we can go on the truncated record before us.


I. The Trial Court Erred in Granting the Preliminary Injunction

A. Contention

In deciding whether to issue a preliminary injunction to a plaintiff, a trial court must weigh two interrelated factors: (1) The plaintiff’s likelihood of success on the merits at trial, and (2) the harm to the plaintiff if the injunction is not issued against the harm to the defendant if it is. (Butt v. State of California (1992) 4 Cal.4th 668, 677-678 [15 Cal.Rptr.2d 480, 842 P.2d 1240].) On appeal, we determine whether the trial court’s decision was an abuse of discretion. (Id. at p. 678.)

American National contends the trial court abused its discretion by ignoring the irreparable injury American National would suffer from a preliminary injunction that granted the Controller the ultimate relief the Controller sought in its lawsuit; in short, says American National, the trial court’s decision deprived it of an opportunity to defend itself on the merits. We essentially agree.

B. Background

Pursuant to a multistate investigation that California joined to determine life insurance industry compliance with state laws on unclaimed property-an investigation that ...

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