SAN FRANCISCO (CN) — A California law that allows state courts to hear insurance claims by victims of the Armenian genocide cannot stand, a full panel of the 9th Circuit ruled Thursday, finding that the statute intrudes on policy territory reserved for the U.S. government.
The decision by an 11-judge panel in San Francisco sealed the fate of a long-suffering class action for insurance benefits filed by survivors of the World War I-era slaughter of more than 1,500,000 Armenians living in the former Ottoman Empire.
California legislators passed a law in 2000 that gave victims until the end of 2010 to file insurance claims related to the mass extermination of Armenians in the Ottoman Empire between 1915 and 1923.
Referencing the little-used theory of “field preemption” or “dormant foreign affairs preemption,” the judges found that section 354.4 of the law intrudes on the federal government’s exclusive right to handle foreign affairs.
“The existence of this general foreign affairs power implies that, even when the federal government has taken no action on a particular foreign policy issue, the state generally is not free to make its own foreign policy on that subject,” Judge Susan Graber wrote for the unanimous panel. “Field preemption is a rarely invoked doctrine. Supreme Court jurisprudence makes clear, however, that field preemption may be appropriate when a state intrudes on a matter of foreign policy with no real claim to be addressing an area of traditional state responsibility.”
The ruling marks the third time the 9th Circuit has considered the issue, and it reverses a previous panel’s revival of the underlying class action last year.
Since 2003, Vazken Movsesian and other Californians of Armenian descent have tried to use the law to win damages for bad faith, breach of contract and constructive trust from two German insurers owned by Munich Re.
A federal judge who first heard the case rejected the insurance companies’ contention that the foreign affairs doctrine pre-empted the state law, but a three-judge appellate panel reversed, finding that it infringed on federal foreign policy. On rehearing, however, the panel found “no express federal policy forbidding states to use the term ‘Armenian genocide,'” and reversed.
The court then agreed to rehear the issue before a full panel. That group reversed again and ordered dismissal of the class action on Thursday.
“Section 354.4 expresses a distinct point of view on a specific matter of foreign policy,” Graber wrote. “Its effect on foreign affairs is not incidental; rather, section 354.4 is, at its heart, intended to send a political message on an issue of foreign affairs by providing relief and a friendly forum to a perceived class of foreign victims. Nor is the statute merely expressive. Instead, the law imposes a concrete policy of redress for ‘Armenian Genocide victim[s],’ subjecting foreign insurance companies to suit in California by overriding forum-selection provisions and greatly extending the statute of limitations for a narrowly defined class of claims. Thus, section 354.4 ‘has a direct impact upon foreign relations and may well adversely affect the power of the central government to deal with those problems.’ Section 354.4 therefore intrudes on the federal government’s exclusive power to conduct and regulate foreign affairs.”

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