LIBERTY SURPLUS INSURANCE v. LEDESMA AND MEYER CONSTRUCTION

Amicus Curiae Brief of Los Angeles Unified School District

Cal.May 16, 2017

SUPREME COURT . : | FILED S236765 | . MAY 16.2017 IN THE Jorge Navarrete Clerk — SUPREME COURT OF CALIFORNIA deputy LIBERTY SURPLUS INSURANCE CORPORATION,etal., Plaintiffs and Appellants, VS. LEDESMA AND MEYER CONSTRUCTION COMPANY,INC., et al., Defendants and Appellants. After Order Certifying Question by the U.S. Court of Appeals for the Ninth Circuit 9th Cir. No. 14-56120 APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF AND BRIEF OF AMICUS CURIAE THE LOS ANGELES UNIFIED SCHOOL DISTRICT IN SUPPORT OF DEFENDANTS- APPELLANTS Sean A. Andrade, Esq. (SBN 223591) David W. Steuber, Esq. (SBN 058398) Stephen V. Masterson, Esq. (SBN 159808) Tara C. Kowalski, Esq. (SBN 223834) ANDRADE GONZALEZ LLP JONES DAY 634 South Spring Street, Top Floor 555 South FlowerStreet, 50 Floor Los Angeles, California 90014 Los Angeles, California 90071 Telephone: (213) 986-3950 Telephone: (213) 489-3939 Facsimile: (213) 995-9696 Facsimile: (213) 243-2539 Attorneys for Amicus Curiae The Los Angeles Unified School District TABLE OF CONTENTS Page TABLE OF AUTHORITIES......cecceesseesseeeceseceessessessssescseesaseneeseeeeeeenrensi APPLICATION FOR LEAVETO FILE AMICUS CURIAE BRIEF IN SUPPORT OF DEFENDANTS-APPELLANTS......cccceeesseeeees 1 BRIEF OF AMICUS CURIAE THE LOS ANGELES UNIFIED SCHOOL DISTRICT IN SUPPORT OF DEFENDANTS- APPELLANTS......ccccccccccssccseeseesnecseceeessneesaceeseessaseresesesseseeessececsaseneeses 5 I INTRODUCTION 00... ceccccscesecseeeseteeeeeseseesessscsersecsesseseteneersesessensens 5 II. LEGALDISCUSSION.....ccciscceeesessceneeeseesesesesscnesesecenesesseseeseneesaees 6 A. The Existence and Scope of Public Entity Liability Is Informed By Insurance and Budgetary Considerations.......... 6 B. The Inability to Spread Risk Through Insurance Precludes School District Vicarious Liability for Employee Sexual Abuse Torts...sesaceeaeeesneeeeseeeaees 7 OF Public Entity Negligent Hiring, Retention, and Supervision Liability Is Premised on the Availability of Insurance to Spread the Risk 0.0... ceccesssecseeeseeesenseeeeees 7 D. Answering the Certified Question in the Negative Would Undermine the Rationale Established in this Court’s Prior Decisions for Imposing Vicarious Liability on Public Entities 0.0.0...cesses ceseessereeseeseeereeseees 8 Il. CONCLUSION...........sesseceseeseeaeeeseceseeasessauessaeeaeeaeeeneesaeeseeeseseaaeesnseaes 9 CERTIFICATE OF WORD COUNT.......ecccccsssessssssesseseetssseeseeneeneeseseerens 10 TABLE OF AUTHORITIES Page CASES C.A. v. William S. Hart Union High School District (2012) 53 Cal.4th 861 oo.eeeececereeeresessesressesersseeeseeseeeeeseeeespassim John R. v. Oakland Unified School District (1989) 48 Cal.3d 438 ooceceseeeeseecereeeenecessseneeseecssesensnesesassonseenspassim - Rowlandv. Christian (1968) 69 Cal.2d 108 oo. ceeeesseeceesetseeeeeceeeeeaeeseaeeeesesesseeseusressesansass 6, 8 Thompson v. County ofAlameda (1980) 27 Cal.3d 741 von. eeceecccsecsceccsseesseceesnesesesseesesenseesesaeeeeseessasesssenes 6,7 STATUTES Government Code § 815 .occcccccccccssecccesseecesseececteeeeeeseneeeesessaeeeesseeertaesteeeeees 6 Government Code § 815.2 ociceesseeeeessecesssreeceseeesreessasercesseesevssneseneeseneeeeens 6 OTHER AUTHORITIES California Rules of Court, rule 8.520(f)......... cc cceecesseeseeeeeeeraeeecesneeereeeneneeeees ] il S236765 IN THE SUPREME COURT OF CALIFORNIA LIBERTY SURPLUS INSURANCE CORPORATION,et al., Plaintiffs and Appellants, VS. LEDESMA AND MEYER CONSTRUCTION COMPANY,INC.,et al., Defendants and Appellants. APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF IN SUPPORT OF DEFENDANTS- APPELLANTS Pursuant to rule 8.520(f) of the California Rules of Court, Amicus Curiae the Los Angeles Unified School District (“LAUSD”) respectfully requests leaveto file the attached amicuscuriae brief in support of Defendants-Appellants Ledesma and Meyer Construction Company,Inc.; Joseph Ledesma; and Chris Meyeron the issue certified by the Ninth Circuit Court of Appeals to this Court: “Whether there is an ‘occurrence’ [defined as an accident] under an employer’s commercial generalliability policy whenaninjured third party brings claims against the employer for the negligent hiring, retention, and supervision of the employee who intentionally injured the third party.” LAUSDisthe largest public schooldistrict in California and employs over 25,000 teachers in more than 900 schools with more than 555,000 students. Since the high-profile arrests in 2012 of two teachersat Miramonte Elementary School, a teacher at Telfair Elementary School, and a teacher at De La Torre Elementary School, LAUSDhas spent approximately $300,000,000 to resolve claims by hundredsofstudents alleging abuse by those teachers. The claims against LAUSDareall based on the theory of liability— articulated by this Court through John R. v. Oakland Unified School District (1989) 48 Cal.3d 438 (John R.), and C.A. v. William S. Hart Union High School District (2012) 53 Cal.4th 861 (C.A.)—that, although a school district cannot be vicariously liable for an employee’s sexual abuse (intentional injury) of a student, a school district may be vicariously liable for the negligence of administrators or supervisors in hiring, supervising and retaining such an employee whosexually harasses and abuses a student. This distinction, and the creation and scope of a school district’s vicariousliability in this context, has been based in material part on the availability of insurance. Specifically, this Court has imposed such negligence-basedliability against aschooldistrict based in material part on the premise that the school district can spread the risk of such liability via insurance. In contrast, this Court has declined to imposeliability against a schooldistrict based on,orfor, employees’ intentional acts of abuse becausesuchliability would not fall within the normal range ofrisks for which costs can be spread via insurance. (See John R., supra, 48 Cal.3d at pp. 450-451.) | Having been forced to spend approximately $300,000,000 of its own funds to resolve hundreds of negligent hiring, retention, and supervision claimsfiled against it without any assistance from its insurancecarriers, LAUSDis nowprosecuting massive (and costly) insurance recovery litigation against its insurance carriers seeking to recover those funds. Althoughthe insurancepolicies at issue in those cases differ from the policy at issue here, LAUSDanticipates that the carriers will argue thatthis Court’s answerto the certified question may preclude LAUSD from recovering the funds it has expended. The attached LAUSD amicuscuriae brief does not repeat arguments already presented to this Court through Defendants-Appellants’ briefs or other amici briefing. Instead, this brief focuses on a narrow issue concerning public entity liability for negligent hiring, supervision, and retention and insurance coverage for those claims, which has not been previously addressed andis of extreme importance to LAUSDand other public entities. LAUSDbelieves that its discussion ofthis issue will assist the Court in answering the certified question. Noparty or counselfor a party in the pending appeal authored any part of the proposed amicuscuriae brief or made any monetary contribution intended to fund the preparation or submission of the brief. No person or entity other than the Amicusorits counsel in the pending appeal has made any monetary contribution intended to fund the preparation or submission of the proposed amicus curiae brief. DATED: May10, 2017 ANDRADE GONZALEZ LLP By__Sera,bndpte vy Sean A. Andrade Stephen V. Masterson DATED: May 10, 2017 JONES DAY ByBebe { David W.Steuber A Tara C. Kowalski Attorneys for Amicus Curiae Los Angeles Unified School District BRIEF OF AMICUS CURIAE THE LOS ANGELES UNIFIED SCHOOLDISTRICT IN SUPPORT OF DEFENDANTS- APPELLANTS I. INTRODUCTION “The principaljustification for the application of the doctrine of respondeat superior in any case is the fact that the employer may spread the risk through insurance andcarry the cost thereofas part of his costs of doing business.’ [Citation.]” (John R. v. Oakland Unified School Dist. (1989) 48 Cal.3d 438, 450 (John R.).) This risk-spreading justification and the availability or unavailability of insurance has informed and formed a powerful foundational premise underlying California law on schooldistrict vicarious liability for abuse- related claims. A schooldistrict may be vicariously liable for negligence “in hiring, supervising and retaining” a teacher who abusesa student in material part becausethe risk of that negligence-based liability can be readily spread through insurance; but the same cannotbesaid if vicarious liability were imposed against a schooldistrict for the intentional abuse by the teacher. Asa result, this Court has imposed vicariousliability on school districts only for negligence-basedliability, includingliability for the negligence of administrators or supervisors in hiring, supervising and retaining an employee who sexually harasses and abuses. It has declined to imposevicariousliability on school districts for intentional abuse by employees on the groundthat: “[t]he imposition of vicariousliability on schooldistricts for the sexual torts of their employees would tend to make insurance, already a scarce resource, even harder to obtain, and could lead to the diversion of needed funds from the classroom to cover claims.” (John R., supra, 48 Cal.3d at p. 451.) The Ninth Circuit Court of Appeals has asked this Court: “Whether there is an ‘occurrence’ [defined as an accident] under an employer’s commercial generalliability policy when an injured third party brings claims against the employerfor the negligent hiring, retention, and supervision of the employee whointentionally injured the third party.” In light of the risk-spreading justification for holding schooldistricts vicariously liable for negligent hiring, retention, and supervision of an abusive teacher, this Court should answerthe certified question in the affirmative. I. LEGAL DISCUSSION A. The Existence and Scope of Public Entity Liability Is Informed by Insurance and Budgetary Considerations Pursuant to Government Codesection 815, tort liability of a public entity—such as LAUSD—is“exclusively statutory.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 868 (C.A.).) There is no statutory authority imposing direct tort liability against a schooldistrict for abuse by a teacheror the negligent hiring, supervision, or retention of that teacher. Instead, victims of teacher sexual abuse sue schooldistricts based on vicariousliability theories under Government Codesection 815.2, which provides, in part, that “[a] public entity is liable for injury proximately caused by an act or omission of an employee of the public entity within the scope of his employmentif the act or omission would, apart from this section, have givenrise to a cause of action againstthat employeeor his personal representative.” (Gov. Code, § 815.2, subd. (a).) In determining the existence and scope of a duty that mayresult in tort liability, courts consider “‘the availability, cost, and prevalence of insurance for the risk involved. [Citations.]’” (Thompson v. County of Alameda (1980) 27 Cal.3d 741, 750 (Thompson), quoting Rowlandv. Christian (1968) 69 Cal.2d 108, 113.) “When public agencies [such as LAUSD]are involved, additional elements include ‘the extent of [the agency’s] powers, the role imposed uponit by law andthe limitations imposed uponit by budget; ...’. [Citations.]” (Thompson, supra, 27 Cal.3d at p. 750.) _ B. The Inability to Spread Risk Through Insurance Precludes School District Vicarious Liability for Employee Sexual Abuse Torts In John R., the Court addressed the question of “whether an employer (specifically, a school district) can be held liable for a sexual assault committed by an employee (here, a teacher) on another person(particularly, on a student committed to that teacher’s supervision).” (John R., supra, 48 Cal.3d at p. 447.) The Court explainedthat “‘[t]he principal justification for the application of the doctrine of respondeat superior in any caseis the fact that the employer mayspread the risk through insurance and carry the cost thereof as part of his costs of doing business.’ [Citation.]” (Ud. at p. 450.) In deciding that schooldistricts may not be held vicariously liable for sexual abuse by teachers, this Court basedits decision largely on the fact thatif it were to do so, insurance would notbe readily available to spread the risk of that liability: The imposition of vicariousliability on school districts for the sexualtorts of their employees would.tend to make insurance, already a scarce resource, even harder to obtain, and could lead to the diversion of needed funds from the classroom to coverclaims. (Id. at p. 451.) Accordingly,the plaintiffs could not hold the Oakland School District vicariously liable for the teacher’s sexual assault. C. Public Entity Negligent Hiring, Retention, and Supervision Liability Is Premised on the Availability of Insurance to Spread the Risk In C.A., the Court considered whether a schooldistrict may be vicariously liable for its supervisory or administrative employee’s negligent hiring, retention, and supervision of an abusive counselor: [T]he question presented is whether the district may be found vicariously liable for the acts of its employees (Gov. Code, § 815.2}—notfor the acts of the counselor, which were outside the scope of her employment(see John R.[, supra, 48 Cal.3d at] 441, 451-452), but for the negligence of supervisory or administrative personnel whoallegedly knew,or should have known,ofthe counselor’s propensities and nevertheless hired, retained and inadequately supervised her. (C.A., supra, 53 Cal.4th at p. 865, fn. omitted.) In finding that the school district could be vicariously liable for its supervisory or administrative employee’s negligent hiring, supervision, and retention of the abusive counselor, this Court explained that the Rowland factors, specifically including “ ‘the availability, cost, and prevalence of insurance for the risk involved,’” were used in determining the scope of the school district’s . liability. Ud. at p. 877, fn. 8, quoting Rowland v. Christian, supra, 69 Cal.2d at p. 113.) . Similarly, in John R., while the unavailability of insurance prevented the plaintiffs from holding the Oakland School District vicariously liable for the teacher’s sexual assault, they were “free to pursue ... their claims against the district premised on its own direct negligence in hiring and supervising the teacher,]” which were more readily insurable. (John R., supra, 48 Cal.3d at p. 453.) D. Answeringthe Certified Question in the Negative Would Underminethe Rationale Establishedin this Court’s Prior Decisions for Imposing Vicarious Liability on Public Entities If this Court were to answerthe certified issue in the negative, LAUSD’s insurers will almost certainly use that decision to attempt to bar coverage for the more than $300,000,000 loss already paid by LAUSDin the sexual-abuserelated claims brought against it. That loss is grounded exclusively on the decisions articulated in C.A. and John R. creating negligence-based vicariousliability against school districts. Yet with an answerin the negative here, a critical basis for the very creation of such liability—the ability of school districts like LAUSDto spread the risk of suchliability “through insurance”—will be undermined, leaving school districts (and other public entities) with the threat of potentially having no insurance protection for overwhelmingliability, which is premised on the very existence of that insurance. In the words of the John R. Court, these consequences“could lead to the diversion of needed funds from the classroom to cover claims.” (John R., supra, 48 Cal.3d at p. 451.) That result cannot be what the Court anticipated or desired in C_A. or John R. To the contrary, it would be in direct contravention of what this Court was expecting to accomplish through its rulings in both cases. Til. CONCLUSION For the forgoing reasons, and those stated in Defendants-Appellants’ briefs, the Court should answerthecertified issue in the affirmative. DATED: May 10, 2017 ANDRADE GONZALEZ LLP By_ated Sean A. Andrade > Stephen V. Masterson DATED: May10, 2017 JONES DAY BydatHlebarhia\ David W. Steuber Tara C. Kowalski Attorneys for Amicus Curiae Los Angeles Unified School District CERTIFICATE OF COMPLIANCE WITH CALIFORNIA RULE OF COURT, RULE8.204(c)(1) Counsel of Record herebycertifies, pursuant to rule 8.204(c)(1) of the California Rules of Court, that this brief was produced using 13-point type and contains approximately 2,302 words. This certification is made on reliance on the word count of the computer program usedto prepare this brief. DATED: May 10, 2017 DATED: May 10, 2017 10 ANDRADE GONZALEZ LLP By_I,tS Sean A. Andrade Stephen V. Masterson JONES DAY By_Darsny[8 David W. Steuber Tara C. Kowalski Attorneys for Amicus Curiae Los Angeles Unified School District Liberty Surplus Insurance, et al. v. Ledesma and Meyer Construction,etal. CA Supreme Court No. 8236765 Ninth Circuit No. 14-56120 USDC Central District No. 2:12-cv-00900-RGK-SP PROOF OF SERVICE I, Margaret Landsborough,declare: Iam a citizen of the United States and I am employed in the County of San Francisco, State of California. I am over the age of 18 and not a party to the within action. My business address is: 555 California Street, 26" Floor, San Francisco, California 94104. On May10, 2017, I served the foregoing document described as APPLICATION FOR LEAVETO FILE AMICUS CURIAE BRIEF AND BRIEF OF AMICUS CURIAE THE LOS ANGELES UNIFIED SCHOOL DISTRICT IN SUPPORT OF DEFENDANTS-APPELLANTSonthe interested parties in this action by placing a true copy thereof enclosed in sealed envelopes addressed as follows: Patrick P. Fredette Attomeys for Plaintiffs and Appellants MCCORMICK BARSTOW SHEPPARD Liberty Surplus Insurance Corporation WAYTE & CARRUTH LLP and Liberty Insurance Underwriters, Inc. 7647 North Fresno Street Fresno, CA 93720 Christopher M. Ryan Attomeys for Plaintiffs and Appellants MCCORMICK BARSTOW SHEPPARD Liberty Surplus Insurance Corporation WAYTE & CARRUTH LLP and Liberty Insurance Underwriters, Inc. 312 Walnut Street, Suite 1050 Cincinnati, OH 45202 Michael J. Bidart Attorneys for Defendants and Ricardo Echeverria Appellants Ledesma and Meyer Matthew William Clark _ Construction Company, Inc., Joseph Steven Schuctze ‘ Ledesma, and Kris Meyer SHERNOFF BIDART ECHEVERRIA LLP 600 S Indian Hill Blvd. Claremont, CA 91711 NAI-1502700918v1 Jeffrey I. Ehrlich THE EHRLICH LAW FIRM 16130 Ventura Blvd. Ste 630 Encino, CA 91436 Clerk of the Ninth Circuit Court of Appeal 95 7th Street San Francisco, CA 94103-1526 No. 14-56120 Hon. R. Gary Klausner United States District Court Central District of California 350 West Ist Street, Courtroom 9B Los Angeles, CA 90012 Case No. 2:12-cv-00900-RGK-SP Attorneys for Defendants and Appellants Ledesma and Meyer Construction Company, Inc., Joseph Ledesma, and Kris Meyer > By Mail. I placed the above-documents in sealed envelope(s), with postage thereon fully prepaid, for collection and mailing at San Francisco, California, following ordinary business practices. I am readily familiar with the firm’s practices for processing of correspondence,said practice being that in the ordinary course ofbusiness, correspondenceis deposited in the United States Postal Service the same day asit is placed for processing. I declare underpenalty of perjury under the lawsof the State of California that the foregoing is true and correct. Executed this 10th day of May, 2017, in San Francisco, California. AM: Margaret Landsborough NAI-1502700918v1