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Class Action Defense Cases–Movsesian v. Victoria Versicherung: Ninth Circuit Reverses Denial Of Motion To Dismiss Class Action Holding California Statute Regarding Armenian Genocide Unconstitutional

District Court Erred in Denying Motion to Dismiss Class Action because California Statute Regarding Armenian Genocide was Preempted by Foreign Affairs Doctrine Ninth Circuit Holds

In December 2003, plaintiff filed a class action against various defendants on behalf of “persons of Armenian descent who claim benefits from insurance policies issued by” two of the defendants; the class action complaint sought damages for breach of contract and breach of the implied covenant of good faith and fair dealing, among other claims. Movsesian v. Victoria Versicherung AG, 578 F.3d 1052, 1055 (9th Cir. 2009). The class action complaint followed California’s enactment of Code of Civil Procedure section 354.4 in 2000, which “provide[d] California courts with jurisdiction over certain classes of claims arising out of insurance policies that were held by ‘Armenian Genocide victim[s]’” and which “extend[ed] the statute of limitations for such claims until December 31, 2010.” Id., at 1054. The Ninth Circuit noted that “Section 354.4 was modeled after §§ 354.5 and 354.6, which extended the statute of limitations until 2010 for Holocaust-era insurance claims and World War II slave labor claims, respectively…. Both of these sister statutes have been found unconstitutional, because they interfered with the national government’s foreign affairs power.” Id., at 1054-55 (citations omitted). Defense attorneys moved to dismiss the class action complaint on the grounds that the class members lacked standing and that Section 354.4 was unconstitutional because it “violated the due process clause of the United States Constitution and was preempted under the foreign affairs doctrine.” Id., at 1055. The district court held that the statute was not preempted and accordingly allowed certain claims in the class action to remain. Id. The Ninth Circuit reversed.

The Circuit Court summarized the case at page 1053 as follows: “Section 354.4 of the California Code of Civil Procedure extends the statute of limitations until 2010 for claims arising out of life insurance policies issued to ‘Armenian Genocide victim[s].’ [Citation.] The primary issue in this appeal is whether § 354.4 interferes with the national government’s conduct of foreign relations. We conclude that it does, and accordingly, we hold that the California statute is preempted. The district court’s order denying the Rule 12(b)(6) motion to dismiss is reversed.” After summarizing the de novo standard of review, see id., at 1055-56, the Ninth Circuit analyzed the constitutionality of § 354.4 under the foreign affairs doctrine. The Circuit Court explained at page 1056, “This case presents the issue whether § 354.4 of the California Code of Civil Procedure interferes with the national government’s power to conduct foreign affairs.” After a detailed analysis, that we do not summarize here, see id., at 1056-60, the Ninth Circuit concluded that “there is an express federal policy prohibiting legislative recognition of an ‘Armenian Genocide,’” id., at 1060. The Circuit Court next turned to whether the statute “clearly conflicts with the presidential foreign policy prohibiting legislative recognition of an Armenian Genocide,” and concluded that it did because it uses the phrase, “Armenian Genocide.” See id., at 1060-61.

The Ninth Circuit also rejected the district court’s conclusion that “the presidential policy prohibiting Congress from recognizing an ‘Armenian Genocide’ does not apply to individual states,” see Movsesian, at 1061-62, and further held that the real purpose of the statute was not to regulate insurance but “to provide a forum for the victims of the “Armenian Genocide” and their heirs to seek justice,” see id., at 1062-63 (citation omitted). The Circuit Court explained at page 1063, “By opening its 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. Garamendi and Deutsch clearly hold that this is not a permissible state interest.” (Citations omitted.) Accordingly, the Ninth Circuit reversed the district court order denying the motion to dismiss the class action. Id., at 1063.

NOTE: Judge Pregerson dissented, noting that “There is no express federal policy forbidding California from using the term ‘Armenian Genocide’ in the course of exercising its traditional authority to regulate the insurance industry. Accordingly, I dissent. I would affirm the district court.” See Movsesian, at 1063 (Pregerson, J., dissenting).

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