Opinion
A142332 A145900
06-15-2017
THRIVENT FINANCIAL FOR LUTHERANS, Plaintiff and Appellant, v. BETTY T. YEE, as Controller, etc., et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco County Super. Ct. No. CGC-13-535156)
These consolidated appeals involve a single dispute over the scope of an audit of the records of Thrivent Financial for Lutherans (Thrivent), an out-of-state insurance company doing business in California. The audit was initiated by John Chiang, then Controller of the State of California (Controller), as part of a multistate investigation of insurance practices focused on the handling of unclaimed property due to be escheated to the state. The Controller sought to audit Thrivent's records covering more than a 20-year period (1992-2013) and sought records of policies Thrivent had issued in states across the country, not just in California. Thrivent filed a complaint seeking injunctive and declaratory relief from what it claimed was an unconstitutional and overbroad audit, and the Controller filed a cross-complaint seeking to enforce what he saw as his right to conduct the wide-ranging audit. When Thrivent was denied a preliminary injunction to halt the audit, it appealed in No. A142332.
On March 22, 2017, on our own motion, we ordered the appeals consolidated for purposes of argument and decision.
John Chiang, as Controller, was initially the named defendant and respondent. In January 2015, Betty T. Yee was sworn into office, replacing Chiang. We refer to both as "the Controller." Our use of pronouns correlates to whichever Controller was in office when the specified actions or decisions occurred.
While that appeal was pending, in the course of discovery, the Controller learned that any unclaimed property in Thrivent's hands potentially escheatable to California was of such a minimal amount that she decided to abandon California's audit of Thrivent. The Controller voluntarily dismissed her cross-complaint with prejudice and issued Thrivent a comprehensive release of liability for the audit period. The trial court then found Thrivent's lawsuit was moot, granted the Controller's motion for judgment on the pleadings, and entered judgment in favor of the Controller on the complaint and in favor of Thrivent on the cross-complaint, which judgment Thrivent appeals in No. A145900.
We agree these appeals have outlived the underlying dispute. In No. A142332, we grant the Controller's motion to dismiss because the issue relating to the preliminary injunction is moot. In No. A145900, because the entire case is moot, we shall reverse the judgment and remand to the trial court with instructions to dismiss the action.
I. BACKGROUND
The Controller is a constitutional officer of the state empowered to administer the law with regard to unclaimed property. (See Cal. Const., art. V, § 11; Code Civ. Proc., § 1500 et seq.; Gov. Code, § 12402 et seq.) In August 2013, the Controller commenced an audit of, among others, Thrivent, a fraternal benefit society (a form of life insurer) organized under the laws of Wisconsin. The audit was part of a multistate investigation of the insurance industry that had been initiated in August 2012 on behalf of eleven states by Kelmar Associates, LLC (Kelmar), a third-party auditing firm.
After the Controller initiated the audit by requesting documents relating to potential unclaimed property both in California and in the other states involved in the Kelmar audit, Thrivent in October 2013 filed a lawsuit seeking (1) an injunction to prevent the Controller from going forward with the planned audit and (2) declaratory relief to settle certain disputes about the conduct of the audit. The Controller responded in March 2014 with a cross-complaint for a mandatory injunction to enforce what the Controller saw as his right to conduct the audit as planned. In May 2014, Thrivent's request for a preliminary injunction was denied (per Hon. Marla Miller) because "Thrivent has not established a likelihood of success on the merits, nor has it established that the balance of harms weighs in its favor." Thrivent appealed. (No. A142332.)
While that appeal was pending, and as discovery progressed, the court (per Hon. Ernest Goldsmith) in February 2015 granted the Controller's motion to compel Thrivent to turn over records of its policies having a nexus to California. The documents were turned over (evidently in electronic form) marked "Attorneys' Eyes Only" and were not disclosed to any employees in the Controller's Office. Instead, the Controller's outside attorneys hired an independent expert to examine and analyze the electronic records. The Controller's attorney has filed a declaration indicating that no employees of the Controller's Office were involved in auditing Thrivent's records. Thrivent had 88,000 policies that had a nexus to California, and among those, the outside auditor found only 80 that involved property that could potentially escheat to the state. Upon learning these results, the Controller determined that any escheatable unclaimed property in Thrivent's possession was such a minuscule percentage of Thrivent's overall business in California that she decided to abandon the audit.
The Controller dismissed her cross-complaint with prejudice and issued a comprehensive release to Thrivent, relieving it of any liability with respect to the audit period. She then moved for judgment on the pleadings on the theory that the entire action was either moot or unripe. The trial court (per Hon. Harold Kahn) agreed the parties' dispute was "over" and the litigation moot, and on June 15, 2015, granted the Controller's motion for judgment on the pleadings. On July 30, 2015, the court entered judgment in favor of the Controller on all causes of action in the complaint and in favor of Thrivent on all causes of action in the cross-complaint (even though the cross-complaint had already been dismissed). Thrivent again appealed. (No. A145900.)
On September 2, 2015, the Controller moved to dismiss the appeal in No. A142332 as moot. On October 1, 2015, we issued an order deferring ruling on the motion, indicating we would consider it along with the merits of the appeals. We now conclude the issue of a preliminary injunction is indeed moot and on that basis grant the Controller's motion to dismiss the appeal in No. A142332. In appeal No. 145900, we also agree with the trial court that the entire action has become moot because "the audit that is the subject of Plaintiff's complaint has been completed." We disagree, however, that the proper remedy for mootness was to enter the judgment described. Rather, the case should have been dismissed. We therefore reverse and remand in No. A145900, with directions to dismiss.
II. DISCUSSION
Although the parties have filed lengthy briefs and the record is large, the appeals boil down to three issues: (1) whether the trial court properly took judicial notice of the May 5, 2015 letter from the Controller's Office to Thrivent, which the Controller characterizes as a release of liability; (2) whether there is a realistic concern that the Controller will repeat in the future the activity that brought the parties before the court; and (3) whether the case raises issues of such broad public interest that it ought to be decided even if moot. Because we answer the first question in the affirmative and the second two in the negative, we conclude the entire case is moot and should have been dismissed.
A. Judicial Notice of the May 5, 2015 Letter from the Controller's Office to Thrivent
1. The Controller's position that the May 5 letter is subject to judicial notice
Thrivent contends the trial court should not have taken judicial notice of a letter dated May 5, 2015 from Jeffrey Brownfield, Division of Audits Chief in the Controller's Office, to Randall Boushek, Chief Financial Officer of Thrivent (May 5 letter), which explained that, after receiving the records produced by Thrivent relating to policies with a nexus to California, the Controller's Office "has been able to conduct a satisfactory examination of Thrivent's unclaimed property escheatable to the State . . . for the examination period of January 1, 1992 to June 30, 2013." The letter also purported to "serve as a full and final release" for the same examination period, stating the Controller's intention not to initiate another audit of Thrivent for at least five years.
The Controller claimed the May 5 letter was subject to judicial notice under Evidence Code section 452, subdivision (c), as an official act of the executive department of the state government. (See Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 759 (Scott).) Official acts of the Controller, as an executive officer, may be judicially noticed. (Chas. L. Harney, Inc. v. State (1963) 217 Cal.App.2d 77, 85-86 [courts "have the power to take judicial notice of the official records and files of . . . the office of the State Controller"].) The Controller cites additional authority specifically authorizing judicial notice of letters from a state agency. (Travelers Indemnity Co. v. Gillespie (1990) 50 Cal.3d 82, 96; Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470, 1483-1484.)
2. Judicial Notice of an Official Executive Act Taken as a Party in Litigation
Thrivent claims the May 5 letter cannot be judicially noticed because it was "created by the Controller as a party to the litigation, only days before she filed the [motion for judgment on the pleadings] and for the express purpose of supporting" that motion. Thrivent relies primarily on Childs v. State of California (1983) 144 Cal.App.3d 155 (Childs) to support its argument that the Controller's preparation of the document during ongoing litigation somehow makes it unsuitable for judicial notice. But Childs does not stand for so broad a principle. In Childs, the plaintiff submitted a claim to the State Board of Control for injuries he sustained while lifting weights at the California Rehabilitation Center. (Id. at p. 158.) After his claim was rejected, he had six months within which to file a complaint in superior court. The rejection letter was dated June 10, 1980, and the plaintiff's action was not filed until December 11, 1980, arguably one day late. (Id. at p. 159.) The statutory time limit, however, ran from the date on which the rejection letter was deposited in the mail. (Id. at pp. 159-160.) The document that the state submitted for judicial notice was a declaration by a state employee describing the mailing practices of the State Board of Control. (Id. at p. 162.) Division One of this court held the declaration was (1) not an official act of the executive, and (2) not subject to judicial notice of its truth, even if judicially noticeable for its existence. (Ibid.) "The court cannot take judicial notice of self-serving hearsay allegations—such as would be required to determine the critical date of deposit in the present case—merely because they are part of a document which qualifies for judicial notice." (Id. at pp. 162-163.)
Childs is distinguishable. The declaration there was apparently made by a low-level employee who spoke from his own knowledge of the agency's mailing practices, but he did not purport to know the actual date when the document in question was mailed. (Childs, supra, 144 Cal.App.3d at p. 162.) The court held the declaration was not subject to judicial notice because it did not represent an "official act" of the executive branch. (Ibid.; Evid. Code, § 452, subd. (c).) There is no indication that the declaration in Childs was on official state executive officer's letterhead or signed by an officer of the state agency or that it purported to speak for the head of the State Control Board or to make undertakings or promises on behalf of an executive officer. And importantly, it was not relevant as an operative fact in the litigation, which changes the whole picture. We shall discuss this more fully in section II.A.4, post.
After briefing was complete, Thrivent filed a letter citing additional authority, including Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821 (Tenet Healthsystem), which it apparently cites for the proposition that a party's letter to an opposing party in litigation is by its very nature disputed and should not be judicially noticed. (Id. at p. 836.) The letter in Tenet Healthsystem did not purport to be an official act of the executive branch, but rather judicial notice was requested because the letter supposedly contained "[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy." (Evid. Code, § 452, subd. (h); Tenet Healthsystem, at p. 836.) Thrivent has cited no case holding that a document otherwise subject to judicial notice as an official act of the executive department loses its character as a judicially noticeable document just because it was prepared in connection with litigation in which the executive is engaged. But the more pertinent point is that the letter here was noticeable for its operative facts, not the truth of its general factual assertions.
3. Authentication of the May 5 Letter
Thrivent also claims the May 5 letter was not properly authenticated. (See Scott, supra, 214 Cal.App.4th at p. 755.) The letter was written on the State Controller's letterhead, signed by "Jeffrey V. Brownfield, CPA, Chief, Division of Audits." Contemporaneously with its filing, the Controller filed a declaration by Brownfield in which he declared that he is employed as Chief of the Division of Audits in the Office of the State Controller. His declaration recited, based on personal knowledge, that his office had been able to "conduct a satisfactory examination of Thrivent's unclaimed property escheatable to the State of California" based on "Thrivent's electronically available policy records . . . with a nexus to California." The declaration further authenticates the May 5 letter as a "true and correct copy" of the letter he sent to Thrivent. This was more than sufficient authentication. (Landale-Cameron Court, Inc. v. Ahonen (2007) 155 Cal.App.4th 1401, 1409; see also Evid. Code, §§ 1411 [subscribing witness testimony not required], 1453 [presumption of authenticity for official writings].)
4. Judicial Notice of the Facts Stated in the May 5 Letter
Thrivent also claims the court abused its discretion when it took judicial notice of the facts stated in the May 5 letter and drew legal conclusions from them, rather than just taking judicial notice of the letter's existence. Thrivent is correct that a distinction must sometimes be made between taking judicial notice of a document's existence and taking judicial notice of the truth of the facts stated in it. (See Licudine v. Cedars-Sinai Medical Center (2016) 3 Cal.App.5th 881, 901-903 [trial court acted within its discretion in refusing to take judicial notice of a report by the United States Bureau of Labor Statistics insofar as it stated the median annual salary of attorneys for a given year]; Tenet Healthsystem, supra, 245 Cal.App.4th at p. 836; Scott, supra, 214 Cal.App.4th at p. 754.) This distinction does not come into play, however, when the document is a "legally operative document," such as a contract or, in this case, a release. (Scott, supra, at p. 754, see generally, id., at pp. 754-757.) Such a document is not hearsay (Arechiga v. Dolores Press, Inc. (2011) 192 Cal.App.4th 567, 576-577; 1 Witkin, Cal. Evidence (5th ed. 2012) Hearsay, § 32, pp. 825-826), and it is not improper for a court to take judicial notice of the words used in the release and their legal effect (Kalnoki v. First American Trustee Servicing Solutions, LLC (2017) 8 Cal.App.5th 23, 36-37; Linda Vista Village San Diego Homeowners Assn., Inc. v. Tecolote Investors, LLC (2015) 234 Cal.App.4th 166, 184; Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 265). This is a situation in which the truth of facts stated is not the issue; the issue is the legal effect of those statements. That much courts are presumably competent to judge. We do not take judicial notice of disputed or disputable facts within the document. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924, fn. 1.)
5. Thrivent has identified no reasonably "disputable" facts such as to render the May 5 letter inappropriate for judicial notice.
Thrivent also argues that the facts stated in the May 5 letter are reasonably subject to dispute, and hence not subject to judicial notice, raising several questions supposedly unanswered by the letter: (1) whether the Controller's audit of Thrivent is "complete"; (2) the meaning of the word "release" as used in the letter; (3) whether the Controller has bound herself not to conduct another audit for at least five years; and (4) whether Brownfield was authorized to bind the Controller. There is no merit to any of these contentions, and they warrant neither a refusal to take judicial notice of the May 5 letter, nor a trial to resolve these so-called "disputable" issues.
Addressing first the issue whether Brownfield was authorized to bind the controller, the May 5 letter bears every indication of being an official letter on behalf of "Betty T. Yee, California State Controller." It purports to convey the conclusions and undertakings of the Controller and was authenticated by the declaration of Brownfield. A signature is presumed to be genuine and authorized if it purports to be the signature of a public employee of any public entity in the United States. (Evid. Code, § 1453, subd. (b).) Thrivent has produced no evidence to overcome that presumption. On the contrary, Thrivent admitted in discovery that Brownfield "possesses unique personal knowledge relevant to the parties' claims and defenses." When it was seeking to compel his deposition, Thrivent said Brownfield had played a "pervasive role in this litigation," verified the Controller's cross-complaint, filed multiple declarations in the case, verified the Controller's discovery responses, and was named by the Controller as one of the people most qualified to discuss the planned Thrivent audit. No legitimate controversy exists on this point, and it was not an abuse of discretion to judicially notice the letter.
The May 5 letter does not say "the audit . . . has been completed," but the court said that in its order granting judgment on the pleadings. Thrivent claims this fact remains in dispute. It is irrelevant whether the exact procedural steps described in the letter were taken and by whom. For the purpose of determining whether the audit is complete we turn to the operative words in the letter, such as those in the release contained in the second paragraph. We are convinced the audit is for all intents and purposes over. That is not because we accept the words as true, but because we recognize their legal effect.
Another detailed declaration of the Controller's outside attorney explained that the "examination" was conducted by a third party consulting expert, with no one from the Controller's office participating. Thus, it may not be quite true that the Controller had "completed" an "audit" of Thrivent, but rather more accurately, the evidence suggests she abandoned the audit of Thrivent's records because of facts learned through discovery in this case.
Thrivent also contends the Controller's meaning of the word "release" is disputable. On the contrary, the May 5 letter said the Controller "releases and forever discharges Thrivent, including its related subsidiaries and affiliates, from any and all matters, claims, complaints, charges, demands, damages, causes of action, debts, liabilities, interest, controversies, and suits of every kind and nature whatsoever, foreseen or unforeseen, known or unknown, in connection with the [Controller's] examination of Thrivent for unclaimed property escheatable to the State of California under the California Unclaimed Property Law . . . for the examination period of January 1, 1992 to June 30, 2013." Thrivent has pointed to no specific language that makes the scope of the release "disputable," and we see no wiggle room retained by the Controller.
Next, Thrivent contends there is an ongoing dispute over whether the Controller has bound herself to refrain from auditing Thrivent for five years. The May 5 letter states: "the [State Controller's Office] has no intention of authorizing or conducting another unclaimed property examination of Thrivent under California Unclaimed Property Law . . . for the next five or more years from the present date." The letter is unambiguous. Brownfield's letter is binding on the Controller. (See Evid. Code, § 1453 [presumption of authorization for official writings].) Thrivent has presented no evidence from which we may infer the Controller's undertaking is disingenuous or any other reason to believe the letter is not binding on her. If she does try to claim later that she is not bound, it will be more appropriate to deal with the problem at that time. Thrivent's suspicions now are nothing more than speculation.
B. The Entire Dispute Between Thrivent and the Controller is Now Moot
1. The law of mootness
The trial court based its ruling on the motion for judgment on the pleadings on the concept of mootness, declaring repeatedly that the case was "over" and there was nothing left to litigate. Thrivent argues, however, that it should prevail on appeal because the (1) Controller voluntarily ceased her attempts to audit Thrivent in order to deprive Thrivent of an adjudication on the merits; and (2) the audit involves a matter of substantial public interest likely to recur, and hence the court should have proceeded to a trial on the merits.
The courts of California have long decided only live controversies and refused to issue "advisory" opinions. (Pacific Legal Foundation v. California Coastal Com. (1982) 33 Cal.3d 158, 170 [ripeness]; Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1573-1574 (Wilson & Wilson).) This means they must not decide issues before they have become ripe and must cease entertaining a case after it has become moot.
A true controversy at its inception becomes moot " ' "if before decision it has, through act of the parties or other cause, occurring after the commencement of the action, lost that essential character." ' " (Wilson & Wilson, supra, 191 Cal.App.4th at p. 1573.) "The pivotal question in determining if a case is moot is . . . whether the court can grant the plaintiff any effectual relief. [Citations.] If events have made such relief impracticable, the controversy has become 'overripe' and is therefore moot." (Id. at p. 1574.)
The voluntary cessation of allegedly wrongful conduct renders an action moot unless there is a reasonable expectation the allegedly wrongful conduct will be repeated. (Center for Local Government Accountability v. City of San Diego (2016) 247 Cal.App.4th 1146, 1157.) But a case otherwise moot may nevertheless be decided if it presents issues of " 'general public interest' " that are " 'likely to recur in the future.' " (Rawls v. Zamora (2003) 107 Cal.App.4th 1110, 1113.)
2. There are no remaining live issues in the action.
We turn first to the causes of action asserted by Thrivent. It asserted three causes of action for declaratory relief based on its contention that (1) the Controller misconstrued the "triggering event" that would start the running of the dormancy period described in Code of Civil Procedure section 1515, (2) the Controller's proposed audit was overbroad, and (3) the Controller had adopted an "underground" regulation. It also asserted in four causes of action the Controller's violation of state and federal constitutional rights to due process based on (1) limits imposed on the state's administrative subpoena power, and (2) lack of notice of the standard by which Thrivent would be judge in the audit.
With respect to any dispute about the conduct of the audit, there can be no live controversy, as the audit will not go forward. Likewise, injunctive relief is not required to prevent an audit that was abandoned two years ago.
3. The Controller's abandonment of the audit rendered Thrivent's entire complaint moot.
There is case authority saying an injunction may and should be denied when the party against whom the injunction was sought voluntarily undertakes to do what the injunction would have required. (Nelson v. Pearson Ford Co. (2010) 186 Cal.App.4th 983, 1020-1021 (Nelson), disapproved on other grounds in Raceway Ford Cases (2016) 2 Cal.5th 161, 180; Madrid v. Perot Systems Corp. (2005) 130 Cal.App.4th 440, 464-465; Midpeninsula Citizens for Fair Housing v. Westwood Investors (1990) 221 Cal.App.3d 1377, 1393 [injunction would serve no purpose where the "challenged policy was withdrawn nearly four years ago, and nothing in the record indicates any intention . . . to reinstate it"]; see generally, Robinson v. U-Haul Co. of California (2016) 4 Cal.App.5th 304, 315-316 (Robinson).) In this case the Controller's discontinuance of the audit, coupled with her issuance of a comprehensive release of liability to Thrivent, would appear to call for denial of an injunction.
Thrivent suggests, however, the Controller was not acting in good faith in issuing the release, that she instead abandoned the audit mid-litigation for the sole purpose of avoiding a judicial determination of the merits of the controversy. At the hearing on the motion for judgment on the pleadings, Thrivent's counsel pointed out that the Controller continued to insist that her overbroad audit demands were lawful, and insinuated the Controller treated other regulated companies the same way.
But Thrivent's distrust of the Controller is not reason enough to decline to accord judicial notice to the May 5 letter, nor to require a trial. Nelson held that a party seeking an injunction must present " 'actual evidence that there is a realistic prospect that the party enjoined intends to engage in the prohibited activity' " in the future. (Nelson, supra, 186 Cal.App.4th at p. 1020.) Thrivent has presented no evidence on this point where the Controller is concerned. Although it appears that some 80 insurance companies were subjected to the same sort of audit with which Thrivent was threatened, only a "small number" have objected to the audit's scope. Thrivent has pointed to Yee v. American National Ins. Co. (2015) 235 Cal.App.4th 453, 456, 463 (Yee), in which the Third District in March 2015 refused to enforce an order allowing the Controller's audit to go forward in a case similar to this one. But Thrivent has not developed a record with an eye toward either establishing the need for or supporting the issuance of a statewide injunction against the Controller. Aside from this one round of multistate audits, we find nothing in the record to suggest the Controller either engaged in a widespread practice of conducting overbroad audits, nor any reason to believe she will trouble Thrivent again in the next five years with a similar demand. It is reasonable to infer from the facts in evidence that most of the audits in which the audited company did not object to the scope of the audit have already been completed.
Of course, we have observed there is no "hard-and-fast rule" that a party's discontinuance of complained-of conduct makes injunctive relief against him or her unavailable. (Robinson, supra, 4 Cal.App.5th at p. 315.) "While voluntary cessation of conduct may be a factor in a court's exercise of its equitable jurisdiction to issue an injunction, it is not determinative . . . ." (People ex rel. Feuer v. Superior Court (Cahuenga's the Spot) (2015) 234 Cal.App.4th 1360, 1385.) We find this case parallel to Robinson, in that both cases involved a claim that one party to litigation had voluntarily agreed to refrain from the conduct that had led the other party to seek an injunction. But, as we shall explain, Robinson is more enlightening for its significant differences from this case than for its similarities.
Robinson involved a U-Haul dealer who wanted to sever his business relationship with U-Haul and begin renting Budget trucks instead. (Robinson, supra, 4 Cal.App.5th at p. 310.) But once he announced his intention to U-Haul, the company threatened him with "aggressive[]" enforcement of a noncompetition clause in their dealership agreement, a clause that was illegal in California. (Id. at pp. 309-310.) When Robinson persisted with his plans, U-Haul sued him to enforce the noncompetition covenant. (Id. at p. 310.) Robinson was able to show U-Haul had included the noncompetition covenant in other dealers' contracts as well as his own, and U-Haul had for many years pursued a litigation strategy of suing to enforce those covenants, only to abandon the action before a decision on the merits had been reached, for the apparent purpose of avoiding an adverse ruling on the legality of its clause. (Id. at pp. 311, 316-317.)
In Robinson, U-Haul announced in the midst of the litigation it would cease enforcing the illegal noncompetition clause against Robinson. (Robinson, supra, 4 Cal.App.5th at p. 310.) Later the company told the court it would stop enforcing the covenant throughout California, but it did not remove the clause from its California form contracts and merely added a "void where prohibited" disclaimer. (Id. at pp. 313, 315.) Thus, in Robinson we found the defendant's proclaimed cessation of enforcing its illegal contract clause in California was insufficient assurance that it would truly cease its illegal conduct, given its long history of aggressively attempting to enforce and threatening to enforce the illegal clause. (Id. at pp. 315-317.)
No such evidence of historical practice is part of the record on Thrivent's appeal. Thus, Robinson provides a useful counterpoint to this case. Here, the Controller has not only given Thrivent a legally binding release of liability for the entire audit period, but has promised not to audit Thrivent again for at least five years. We have far greater assurance in this case that the dispute really is "over."
4. Thrivent produced no evidence that the Controller is likely to engage in a similar audit of Thrivent in the future.
The May 5 letter states: "the [State Controller's Office] has no intention of authorizing or conducting another unclaimed property examination of Thrivent under California Unclaimed Property Law . . . for the next five or more years from the present date." The trial court queried counsel for the Controller whether it was true that the Controller had bound herself not to conduct a further audit of Thrivent for at least five years, and they answered in the affirmative. Though Thrivent intimates that the Controller's representations and those of its attorneys should be regarded with distrust and not taken at face value, it offers no evidence whatsoever to support such a jaundiced view. Unlike Robinson, supra, where we found evidence to suspect the good faith of the party potentially subject to an injunction (Robinson, supra, 4 Cal.App.5th at pp. 314-317), we see no reason to suspect the Controller took the actions she did for any reason other than that stated: the discovery through a third-party expert that the audit was not worth pursuing.
C. The Broad Public Interest Exception to Mootness Does Not Apply.
Despite the cessation of the complained-of activity, a claim for injunctive or declaratory relief may survive if its object is a matter of broad public interest likely to recur or the issue is likely to recur between the same parties. (Cucamongans United for Reasonable Expansion v. City of Rancho Cucamonga (2000) 82 Cal.App.4th 473, 479.) " '[T]he voluntary discontinuance of alleged illegal practices does not remove the pending charges of illegality from the sphere of judicial power or relieve the court of the duty of determining the validity of such charges where by the mere volition of a party the challenged practices may be resumed.' " (Marin County Bd. of Realtors, Inc. v. Palsson (1976) 16 Cal.3d 920, 929.) " '[If] a pending case poses an issue of broad public interest that is likely to recur, the court may exercise an inherent discretion to resolve that issue even though an event occurring during its pendency would normally render the matter moot.' " (Johnson v. Hamilton (1975) 15 Cal.3d 461, 465.) The broad public interest exception may apply even if one of the litigants caused the mootness by ceasing the complained-of conduct. (Robinson, supra, 4 Cal.App.5th at pp. 314-322.) This public interest exception is most often applied where there is reason to anticipate the party opposing the injunction may engage in a continuing violation in the future. (See id. at pp. 315-316; People v. Overstock.com, Inc. (2017) ___ Cal.App.5th ___, 2017 Cal.App.LEXIS 506, at pp. *23-*25.)
Even if we assume for purposes of argument that the Controller's audit was overbroad and violated due process, Thrivent simply has not made a record of persistent illegality or threatened continuance of an illegal practice to warrant application of the public interest exception to mootness. We have been made aware of only one other action pending in which the scope of the audit is challenged. In that case, a preliminary injunction was issued allowing the audit to go forward. The injunction was vacated by the Third District in Yee, supra, 235 Cal.App.4th 453, 456, 463. The current status of that case is not before us, and it will proceed on its own course to address the concerns of those litigants. So far as we know, there are no other plaintiffs waiting in the wings to sue about the overbreadth of the Controller's audits.
As noted, we recently had occasion to invoke the broad public interest exception in Robinson, but there we were justifiably concerned that the enjoined party might engage in similar behavior in the future. (Robinson, supra, 4 Cal.App.5th at pp. 315-317.) In Robinson, U-Haul had promised in the midst of the litigation that it would cease enforcing the illegal noncompetition clause against the plaintiff and other California dealers, but we found it had taken only "half measures" toward reform. (Id. at pp. 313, 315.) We concluded, "Where, as here, a company has not taken action to bind itself legally to a violation-free future, there may be reason to doubt the bona fides of its newly established law-abiding policy." (Id. at p. 316.)
The striking difference in the case before us is that the Controller did bind herself not to pursue another audit of Thrivent for at least five years. Thrivent has presented no evidence the Controller has engaged in a pattern of conducting overbroad audits, intends to engage in overbroad audits in the future, or is unlikely to abide by her release of liability where Thrivent is concerned. Even if Thrivent's suspicion of the Controller were justified, and if she were to revive the audit in the future, there is still no reason to think this litigation is an appropriate vehicle for the issue's resolution. The trial court asked counsel for the Controller to affirm on the record the Controller's intention to abandon the audit and to forgo any claim of money due from Thrivent as a result of property that should have escheated to the state during the audit period. Four attorneys answered in open court that the Controller would not "re-open the audit" for the relevant period and would "give[] up the right to ask for Thrivent to escheat to the State any moneys found due" as a result of the audit.
We cannot agree with Thrivent that there is an ongoing live controversy. As the trial court pointed out, Thrivent "[has] been given everything [it] wanted," namely an end to the audit without disclosing its out-of-state records and without incurring any liability. The court asked Thrivent's attorney, "Why do you want there to be a continuing controversy? Isn't it in your client's best interest to put this—to close the book on this chapter?"
Thrivent has made no showing that the Controller engaged in a pattern of misconduct by routinely making overbroad audit demands. Thrivent did not seek an injunction to shut down the Controller's audit activities in any case but its own. This is in contrast to Robinson, because Robinson initially filed his complaint as a class action, and he sought and obtained an injunction that operated throughout California to protect other dealers, not just himself. Consequently, he was awarded private attorney general fees. (Robinson, supra, 4 Cal.App.5th at pp. 311-312, 314, 326-328; Code Civ. Proc., § 1021.5.) The trial court in our case specifically asked whether any other insurance companies were involved in similar disputes with the Controller, and Thrivent's counsel failed to name any other companies. Indeed, apart from citing Yee, supra, 235 Cal.App.4th 453, Thrivent has made no showing whatsoever in support of its argument that a repetition of the allegedly overbroad demand for documents is likely to recur in the future. And, once the Controller had proven her abandonment of the audit and the release given to Thrivent, it became Thrivent's burden to produce "actual evidence" of a continuing threat, not merely rhetoric and speculation. (Nelson, supra, 186 Cal.App.4th at p. 1020; accord, Robinson, supra, 4 Cal.App.5th at p. 315.)
D. The Remedy
The appeal in No. A142332 is clearly moot, for in that appeal the requested relief was a preliminary injunction. Ordering such relief now, after the Controller has dismissed her cross-complaint, would be an idle act, for the Controller has relieved Thrivent of liability for any audit during the relevant period and abandoned any further effort to conduct an audit of Thrivent's compliance with the unclaimed property laws. There is no effective relief we could grant Thrivent upon this appeal. We therefore shall grant the Controller's motion to dismiss the appeal in No. A142332.
The appeal in No. A145900 also stems from a finding of mootness by the trial court, with which we agree. Because the entire dispute is now moot, and the trial court so ruled, the proper disposition in the trial court would have been dismissal. (Robinson, supra, 4 Cal.App.5th at p. 322; see generally, Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129, 134-135; Association of Irritated Residents v. Department of Conservation (2017) ___ Cal.App.5th ___, 2017 Cal. App. LEXIS 480, at p. *35, fn. 17; cf. La Mirada Avenue Neighborhood Assn. of Hollywood v. City of Los Angeles (2016) 2 Cal.App.5th 586, 590-591 [when there has been a decision on the merits, and the losing party causes the case to become moot while pending on appeal, appropriate disposition is to dismiss appeal].) A decision on mootness is not a decision on the merits, and the preferred disposition of dismissal at the trial court level prevents the underlying judgment from having res judicata effect.
III. DISPOSITION
The appeal in No. A142332 is ordered dismissed as moot. The judgment in No. A145900 is reversed and the case is remanded with directions to the trial court to dismiss the action. The Controller shall recover costs on appeal.
/s/_________
Streeter, J. We concur: /s/_________
Ruvolo, P.J. /s/_________
Rivera, J.