City of Bell v. Super. Ct. ( 2013 )


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  • Filed 10/25/13 (unmodified opn. attached)
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SECOND APPELLATE DISTRICT
    DIVISION THREE
    CITY OF BELL,                                            B247362
    Petitioner,                                      (Los Angeles County
    Super. Ct. No. BC445497)
    v.
    ORDER
    SUPERIOR COURT OF THE
    STATE OF CALIFORNIA, COUNTY OF                           (1)   MODIFYING OPINION
    LOS ANGELES,                                             (2)   DENYING PETITION FOR
    REHEARING
    Respondent;
    [NO CHANGE IN JUDGMENT]
    ROBERT A. RIZZO,
    Real Party in Interest.
    BY THE COURT:
    It is ordered that the opinion filed herein on October 4, 2013, and modified on
    October 9, 2013, is further modified as follows:
    (1)      On page 3, under the second full paragraph under the heading ―2‖, The
    Underlying Actions, line 4, the sentence ending, ―still in office, a fact which prevented
    the City from taking action in its own name.‖ Please add a footnote at the end of
    sentence which reads:
    Rizzo challenges this fact, relying on press releases and newspaper articles
    which purportedly show the City had begun to retake control of itself prior
    to the filing of the AG‘s action. None of these documents are properly
    before this court.
    (2)    On page 20, in the first full paragraph, line 4, the clause ending ―both the
    City‘s action and the AG‘s action were brought on behalf of the City, . . . .‖ Please add
    a footnote after the comma, which reads:
    Rizzo argues that the AG‘s action was not brought entirely on behalf of
    the City, and that some of the claims in the AG‘s action were brought on
    behalf of the State itself, rendering them third-party claims. At oral
    argument, however, Rizzo conceded that the AG‘s action was brought
    solely on behalf of the City. When asked to identify the third-party claims
    at issue in this action, Rizzo identified only the criminal actions. He
    conceded that the claims at issue in the AG‘s action were brought
    ―standing in the shoes of the City,‖ and specifically argued that ―civil
    claims made by the AG‖ were to be defended by the City as ―first-party
    claims.‖
    (3)    All footnotes are to be renumbered accordingly.
    (4)    In our modification order of October 9, 2013, we modified the opinion to
    add a footnote on page 31. The first line of that footnote includes the reference ―(see
    fn. 6, ante).‖ That reference should be modified to read: ―(see fn. 7, ante).
    2
    The Petition for Rehearing filed herein on October 18, 2013 on behalf of Real
    Party in Interest, Robert A. Rizzo, is denied.
    3
    Filed 10/4/13 (unmodified version)
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    SECOND APPELLATE DISTRICT
    DIVISION THREE
    CITY OF BELL,                                       B247362
    Petitioner,                                 (Los Angeles County
    Super. Ct. No. BC445497)
    v.
    SUPERIOR COURT OF THE
    STATE OF CALIFORNIA, COUNTY OF
    LOS ANGELES,
    Respondent;
    ROBERT A. RIZZO,
    Real Party in Interest.
    ORIGINAL PROCEEDINGS in mandate. Ralph W. Dau, Judge. Petition
    granted with directions.
    Aleshire & Wynder, David J. Aleshire, Anthony R. Taylor and
    Michael C. Huston, for Petitioner, City of Bell.
    No appearance for Respondent.
    Spertus, Landes & Umhofer and James W. Spertus for Real Party in Interest,
    Robert A. Rizzo.
    _______________________________________
    Robert Rizzo, the former Chief Administrative Officer of the City of Bell (City),
    has been sued by the City, as well as the Attorney General acting on behalf of the City,
    for restitution for his alleged looting of the City‘s coffers. He has also been criminally
    charged with multiple counts of misappropriation of public funds. Rizzo, by complaint
    for declaratory relief, seeks a judgment that the City is contractually obligated to
    provide him with a defense to these civil and criminal actions. We conclude that, as
    a matter of law, the City does not owe Rizzo such a defense.1
    FACTUAL AND PROCEDURAL BACKGROUND
    1.     Underlying Factual Allegations
    The City is a charter city with a population of 38,250. It was discovered that
    Rizzo, as well as the assistant chief administrative officer and five City council
    members, were receiving salaries well in excess of the amounts paid to similar
    individuals in similarly sized cities, and that these seven individuals went to great
    lengths to conceal their salaries from public knowledge. (People ex rel. Harris v. Rizzo
    (2013) 
    214 Cal.App.4th 921
    , 928.) The receipt and approval of excessive salaries are
    not, by any means, the only acts of wrongdoing alleged against Rizzo and the other
    individuals. A criminal complaint against Rizzo charges multiple counts of
    misappropriation of public funds (Pen. Code, § 424, subd. (a)) arising out of numerous
    1
    As we explain below, this case is before us on a petition by the City for a writ of
    mandate directing the trial court to vacate its order denying the City a jury trial on the
    unstayed issues raised in Rizzo‘s complaint. In light of our discussion and conclusions
    regarding the substantive merit of Rizzo‘s claim for a defense, however, we will have
    no need to reach or decide the jury trial issue.
    2
    unauthorized ―loans‖ Rizzo made of City funds to various City officers and employees, 2
    and other entities. A full accounting of Rizzo‘s alleged misdeeds is unnecessary to the
    resolution of this appeal. It suffices to say that, as the City alleged, ―[t]his lawsuit arises
    out of a series of long running dishonest acts by . . . Rizzo . . . and other City
    administrators running nearly 17 years. During this time, . . . Rizzo embezzled, stole,
    and misappropriated millions of dollars in City funds by obtaining grossly excessive and
    completely unwarranted compensation packages.‖
    2.     The Underlying Actions
    There are five actions for which Rizzo seeks the City to pay his defense costs.
    We briefly discuss each action.
    The initial complaint against Rizzo was brought by the Attorney General, on
    behalf of the City. We call this ―the AG‘s action.‖ At the time the AG‘s action was
    filed, Rizzo and the City council members with whom he was allegedly in league were
    still in office, a fact which prevented the City from taking action in its own name. The
    complaint, filed on September 15, 2010, alleged causes of action for waste of public
    funds, negligence, fraud, conflict of interest, and breach of fiduciary duty. The current
    status of the AG‘s action is not indicated in the record in the instant writ proceeding.3
    2
    One such count alleges Rizzo made an unauthorized $80,000 loan to himself.
    3
    A demurrer to the Attorney General‘s first amended complaint was sustained
    without leave to amend; the Attorney General successfully appealed. (People ex rel.
    Harris v. Rizzo, supra, 214 Cal.App.4th at p. 929.) We concluded that the Attorney
    General should have been granted leave to amend, in order to: (1) pursue the action on
    behalf of the City; (2) modify the allegations of several of the causes of action already
    alleged; and (3) allege several other causes of action the Attorney General argued that it
    3
    As we shall discuss, Rizzo tendered the AG‘s action to the City for a defense.
    The City refused, which resulted in Rizzo filing a cross-complaint against the City,
    seeking a declaration that the City must defend and indemnify him against the Attorney
    General‘s action. This cross-complaint, in turn, prompted the City, on November 24,
    2010, to bring its own cross-complaint against Rizzo. We call this ―the City‘s action.‖
    The City alleged causes of action against Rizzo for intentional misrepresentation,
    constructive fraud, breach of fiduciary duty, negligence, conflict of interest, declaratory
    relief, and unjust enrichment.
    In addition to the two civil actions, Rizzo faces two criminal complaints, and one
    indictment. The first complaint, filed September 20, 2010, charged 44 counts of
    misappropriation of public funds4 (Pen. Code, § 424, subd. (a)), 3 counts of conflict of
    interest (Gov. Code, § 1090) and 6 counts of falsification of public records (Gov. Code,
    § 6200, subd. (c)). The second criminal action charges 1 count each of
    misappropriation of public funds and conflict of interest.5 The third criminal action was
    instituted by an indictment filed March 29, 2011. It alleges 1 count of conspiracy to
    could allege. (Id. at p. 951.) We also stated that, since the City had, in the interim,
    brought a cross-complaint against Rizzo in its own name, we left it ―to the trial court, on
    remand, to decide whether and how to consolidate the City‘s action against Rizzo with
    the Attorney General‘s action against Rizzo on behalf of the City.‖ (Id. at p. 951,
    fn. 31.)
    4
    The complaint was subsequently amended to add a 45th count of
    misappropriation of public funds.
    5
    The complaint in the second criminal action does not specifically allege the facts
    underlying these charges; however, it is alleged that the property involved had a value
    exceeding $1,300,000.
    4
    misappropriate public funds, 2 counts of conflict of interest, 4 counts of secretion of
    a public record (Gov. Code, § 6200), and 1 count of misappropriation of public funds.
    3.     Rizzo’s Tender of the Actions for a Defense is Denied
    Shortly after the AG‘s action, the City‘s action, and the criminal complaints were
    filed, Rizzo tendered them to the City for a defense.6 Rizzo relied on a term in his
    employment contract with the City, as well as statutory provisions which govern the
    defense of public entity employees by their public entity employers.7
    We first set forth the language of the defense obligation in Rizzo‘s employment
    contract. It is part of an indemnification clause,8 which states as follows: ―City shall
    defend, hold harmless and indemnify Employee against any claim, demand, judgment or
    action, of any type or kind, arising out of any act or failure to act, by Employee, if such
    act or failure to act was within the course and scope of Employee‘s employment. City
    may compromise and settle any such claim or suit provided City shall bear the entire
    cost of any such settlement.‖
    6
    The record does not reflect any tender of the second and third criminal actions
    for a defense.
    7
    In addition, Rizzo relied on Labor Code section 2802. Rizzo‘s right to a defense
    under any of the statutory provisions on which he relied is not before us; as we shall
    discuss, the matter before us in the instant writ proceeding relates only to his contractual
    defense rights. Nonetheless, we note that this argument appears to be foreclosed, at
    least with respect to the criminal actions, by Los Angeles Police Protective League v.
    City of Los Angeles (1994) 
    27 Cal.App.4th 168
    , 177.)
    8
    Rizzo repeatedly represents that the City drafted the clause. Yet the contract
    specifically states that the terms of the contract ―have been negotiated and discussed
    between the parties,‖ and that the contract ―reflects their mutual agreement.‖ It
    provides that, because of those negotiations, ―it would be inappropriate to deem any
    party to be the drafter.‖
    5
    Government Code section 995 provides that, subject to statutory exceptions,
    a public entity is generally required to provide for the defense of a civil action brought
    against an employee or former employee, on account of an act or omission in the scope
    of the employee‘s employment. Under Government Code section 995.2, a public entity
    may refuse to provide an employee or former employee with a defense to a civil action
    if the public entity determines: (1) that the act or omission was not within the scope of
    the employee‘s employment; (2) that the employee acted or failed to act because of
    actual fraud, corruption, or actual malice; or (3) the defense of the action by the public
    entity would create a conflict of interest between the public entity and the employee or
    former employee. (Gov. Code, § 995.2, subd. (a).) The City declined to defend Rizzo
    in the civil actions, relying on all three of these grounds.
    Under Government Code section 995.8, a public entity ―is not required to
    provide for the defense of a criminal action or proceeding . . . brought against an
    employee or former employee,‖ but may do so if: (1) the criminal action is brought on
    account of an act within the course and scope of the employee‘s employment; and
    (2) the public entity determines that provision of a defense would be in its best interests
    and the employee or former employee acted, or failed to act, in good faith, without
    actual malice, and in the apparent interests of the public entity. Based on the findings
    the City had made which justified its denial of a defense of the civil actions against
    Rizzo, the City also denied a defense of the criminal actions against him.
    6
    4.     Rizzo Seeks Declaratory Relief
    As noted above, Rizzo filed a cross-complaint against the City (in the Attorney
    General‘s action) alleging three causes of action for declaratory relief, each seeking
    provision of a defense and indemnity. The first cause of action relied on Rizzo‘s
    employment contract; the second relied on Government Code section 995; the third
    relied on Labor Code section 2802.
    Rizzo‘s complaint was filed prior to the City‘s action being filed against Rizzo.
    It was also filed before the third criminal action, and possibly the second. As such,
    Rizzo‘s complaint did not seek a defense for those actions. There is no indication in the
    record before us that Rizzo ever amended or supplemented his complaint to seek
    a defense of those actions. However, both parties proceeded as though these actions are
    encompassed by Rizzo‘s complaint.
    5.     The Proceedings Leading to the City’s Writ Petition
    The procedural history leading to the instant writ petition is somewhat
    convoluted. At one point, the City attempted to take Rizzo‘s deposition, but Rizzo
    asserted his Fifth Amendment privilege and refused to answer all questions put to him
    concerning relevant events. As a result, in January 2012, the City sought a stay of
    Rizzo‘s claims against it, pending such time as he could meaningfully participate in
    discovery. Rizzo did not oppose a stay – except he sought to pursue that part of his
    cause of action based on his employment contract which sought a declaration that the
    City must provide him with a defense. Rizzo argued that he was entitled to an
    7
    immediate defense, at City expense, of the civil and criminal proceedings, regardless of
    whether he may ultimately be entitled to indemnification.
    On April 30, 2012, the court ordered that both Rizzo‘s action against the City and
    the City‘s action against Rizzo be stayed pending further order of the court.9 However,
    the court did not stay Rizzo‘s partial cause of action against the City for a defense,
    pursuant to his employment contract. In its order, the court analyzed the language of
    Rizzo‘s employment contract and controlling law, and concluded that the City was
    required ―to defend Rizzo from the time he tenders the defense of a claim arising out of
    any act or failure to act,‖ regardless of whether the act or failure to act was within the
    course and scope of his employment.
    The court‘s order indicated that the parties could ―stipulate that the court‘s
    construction of . . . Rizzo‘s contract would be unchanged by a trial . . . . ‖ Otherwise,
    the court would set a trial date on Rizzo‘s partial cause of action for a declaration that
    the City was required by its employment contract to provide him with a defense.10
    On May 16, 2012, the City demanded a jury trial. On September 5, 2012, Rizzo
    moved to strike the City‘s demand for a jury trial. Rizzo argued that the sole issue for
    trial was interpretation of his employment contract, which presented an issue of law for
    the court. The City responded that numerous factual issues existed, including issues
    9
    At this time, the AG‘s action was stayed pending appeal.
    10
    Rizzo argues the City should have appealed from this order and, having failed to
    do so, is barred from challenging it now. But the order itself simply regarded the scope
    of the stay, with which the City apparently had no quarrel. The trial court clearly
    indicated its construction of the contract was preliminary, and that (unless the parties
    stipulated otherwise) it was subject to change at trial.
    8
    relating to whether the contract was ambiguous and issues relating to its affirmative
    defenses. The trial court, however, agreed with Rizzo and, on January 31, 2013,
    ordered the City‘s jury trial demand stricken.
    6.     The City’s Writ Petition and the Issues Raised
    On March 8, 2013, the City filed its petition for writ of mandate, challenging the
    trial court‘s order striking its jury trial demand. We issued a temporary stay and sought
    preliminary opposition. In the City‘s reply to Rizzo‘s opposition, the City argued that
    interpreting Rizzo‘s employment contract to require the City to provide a defense would
    render the contract void as against public policy. In other words, the City raised the
    issue that the employment contract should be interpreted, as a matter of law, not to
    require the City to provide a defense to the actions. Rizzo immediately filed a motion to
    strike those portions of the City‘s reply which were not germane to the narrow issue of
    whether the City was entitled to a jury trial. We did not rule on the motion at that time;
    we will now deny it.
    On May 8, 2013, we extended the stay order and issued an order to show cause.
    We asked the parties to brief seven enumerated issues, specifically including: (1) ―Does
    Rizzo‘s employment contract obligate the [City] to provide indemnity to Rizzo against:
    [¶] (a) Criminal charges involving allegations in which the City and/or the citizens
    thereof were victims? [¶] (b) Civil actions alleging that Rizzo engaged in ultra vires
    acts and/or the waste or misuse of funds belonging to the City and/or the citizens
    thereof?‖ and (2) ―If there is no obligation to provide indemnity for such claims under
    the terms of Rizzo‘s employment contract, on what rationale and authority would the
    9
    City be obligated to provide a defense to such claims?‖ The parties briefed the issues as
    requested.
    As this court continued its review of the applicable law, we sought further
    briefing on additional issues, including: (1) whether the indemnity clause in Rizzo‘s
    employment contact was ―a routine third-party indemnity clause which does not extend
    to first-party claims in the absence of clear and explicit language to that effect‖;
    (2) whether the clause was ―reasonably subject to the interpretation that the City
    intended to pay for the defense of any action brought by the City, or on its behalf,
    against Rizzo‖; and (3) whether ―Government Code section 9[9]6.6, which permits
    a governmental entity to contract to give its employees additional [defense] rights,[11]
    permit a governmental entity to agree to provide its employee a defense to future
    criminal conduct, not yet committed.‖ The parties briefed the issues as requested.12
    ISSUES PRESENTED
    We first consider the terms of Rizzo‘s employment agreement, and conclude that
    the clause on which he relies is simply a third-party indemnification agreement, which
    11
    As we shall discuss, we have now concluded that our characterization of
    Government Code section 996.6 was not entirely correct.
    12
    To some extent, Rizzo chose not to brief the issues. As the sole issue left
    unstayed by the trial court related to the City‘s alleged contractual obligation to defend
    Rizzo, Rizzo believed any issues relating to whether the City had a contractual
    obligation to indemnify him were simply not ripe for review before this court. As Rizzo
    argued that the City‘s contractual defense obligation is wholly unrelated to its
    contractual indemnity obligation, Rizzo declined to address, in part, this court‘s
    questions relating to indemnity. As we shall discuss, we conclude the contractual
    provisions relating to defense and indemnity are inextricably intertwined, and the
    determination of whether a duty to defend exists depends on whether there is a potential
    for indemnity.
    10
    does not apply to civil actions, by or on behalf of, the City itself. As the indemnity
    agreement does not apply to such actions, the duty to defend likewise does not apply to
    them either. We then consider the statutory provisions governing public entity
    indemnity for criminal prosecutions and conclude that, even if the City had contracted
    to provide Rizzo a defense to criminal prosecutions, such an agreement would be
    unenforceable, as the City has no statutory power to make such an agreement. Finally,
    we address considerations of public policy, and conclude that they fully support our
    result.
    Rizzo argues that we should not reach these issues. He takes the position that if
    the employment contract is to be interpreted as a matter of law, the trial court was
    correct in striking the City‘s request for a jury trial, and we should simply deny the writ
    petition and let the trial court interpret the contract in the first instance. Such a course
    of action would, in our view, be a waste of judicial resources. The contract can be
    interpreted as a matter of law; the parties have been given a full opportunity to brief the
    issues before this court; and it appears, from the trial court‘s ruling on the stay motion,
    that the trial court‘s present interpretation of the contract is erroneous.
    We will conclude that the contract does not require the City to provide Rizzo
    with a defense to the underlying actions. We will therefore grant the City‘s writ
    petition, and direct that the trial court conduct no trial, bench or jury, on Rizzo‘s partial
    cause of action for a defense under his employment contract, as the City is entitled to
    judgment on that claim as a matter of law.
    11
    DISCUSSION
    1.     Interpreting the Language of the Agreement Itself
    a.     Standard of Review
    The interpretation of a written instrument, even though it involves what might
    properly be called questions of fact, is essentially a judicial function to be exercised
    according to the generally accepted canons of interpretation so that the purposes of the
    instrument may be given effect. (Parsons v. Bristol Development Co. (1965) 
    62 Cal.2d 861
    , 865.) Since indemnity agreements are construed under the same rules which
    govern the interpretation of other contracts, the indemnity agreement must be
    interpreted so as to give effect to the mutual intention of the parties. (Myers Building
    Industries, Ltd. v. Interface Technology, Inc. (1993) 
    13 Cal.App.4th 949
    , 969; Civ.
    Code, § 1636.) In interpreting an express indemnity agreement, the courts look first to
    the words of the contract to determine the intended scope of the indemnity agreement.
    (Smoketree-Lake Murray, Ltd. v. Mills Concrete Construction Co. (1991)
    
    234 Cal.App.3d 1724
    , 1737.) The intention of the parties is to be ascertained from the
    ―clear and explicit‖ language of the contract, and if possible, from the writing alone.
    (Civ. Code, §§ 1638-1639.) Unless given some special meaning by the parties, the
    words of a contract are to be understood in their ―ordinary and popular sense,‖ focusing
    on the usual and ordinary meaning of the language used and the circumstances under
    which the agreement was made. (Civ. Code, § 1644; Continental Heller Corp. v.
    Amtech Mechanical Services, Inc. (1997) 
    53 Cal.App.4th 500
    , 504; Lloyd’s
    Underwriters v. Craig & Rush, Inc. (1994) 
    26 Cal.App.4th 1194
    , 1197-1198.)
    12
    When a dispute regarding the meaning of a contractual provision exists, the court
    must first determine whether on its face the language is capable of differing or
    inconsistent reasonable interpretations. (Southern Cal. Edison Co. v. Superior Court
    (1995) 
    37 Cal.App.4th 839
    , 848.) The test ―is not whether [the instrument] appears to
    the court to be plain and unambiguous on its face, but whether the offered evidence is
    relevant to prove a meaning to which the language of the instrument is reasonably
    susceptible.‖ (Pacific Gas & Electric Co. v. G. W. Thomas Drayage & Rigging Co.
    (1968) 
    69 Cal.2d 33
    , 37; Founding Members of the Newport Beach Country Club v.
    Newport Beach Country Club, Inc. (2003) 
    109 Cal.App.4th 944
    , 955.) Accordingly, if
    the instrument is reasonably susceptible to the interpretation urged, the court must
    receive any relevant extrinsic evidence the party puts forth to prove its interpretation.
    (Wolf v. Walt Disney Pictures & Television (2008) 
    162 Cal.App.4th 1107
    , 1126.) If
    there is no material conflict in the extrinsic evidence, the trial court must interpret the
    contract as a matter of law. Otherwise, it is a factual conflict dependent on the
    credibility of extrinsic evidence to be properly resolved by the jury. (Ibid.)
    In this case, Rizzo is correct when he argues that there are no factual issues to
    resolve. The dispute over the interpretation of the employment contract between the
    City and Rizzo is entirely one of law. Our standard of review is therefore de novo.
    b.      Non-Insurance Indemnity Contracts
    In Crawford v. Weather Shield Mfg., Inc. (2008) 
    44 Cal.4th 541
    , 552 (Crawford),
    the California Supreme Court articulated the appropriate standard of review for the
    interpretation of noninsurance indemnity agreements: ―subject to public policy and
    13
    established rules of contract interpretation, the parties have great freedom to allocate
    such responsibilities as they see fit. . . . [¶] Though indemnity agreements resemble
    liability insurance policies, rules for interpreting the two classes of contracts do differ
    significantly.‖ (Id. at pp. 551-552.) Ambiguities in a policy of insurance are construed
    against the insurer because the insurer has received premiums to provide the agreed
    protection. (Ibid.) In a noninsurance indemnity agreement, however, it is the
    indemnitee who may often have the superior bargaining power, and this gives rise to
    public policy concerns which influence how such agreements are construed. (Ibid.)
    c.      Duty to Defend in Indemnity Agreements
    We now turn to the issue of the scope of the duty to defend in indemnity
    agreements, and, specifically, its relation to the scope of the duty to indemnify. In the
    absence of a contrary intention in the language used, the law will imply, in an
    agreement to indemnify, an agreement to defend actions brought against the indemnitee
    ―in respect to the matters embraced by the indemnity.‖ (Civ. Code, § 2778, subd. 4.) In
    other words, in the absence of any contrary intention, the scope of the duty to defend
    which is implied in an indemnification clause has the same scope as the duty to
    indemnify. Conversely, if an action is brought against the indemnitee which is not
    ―embraced by the indemnity‖ duty, there is no duty to defend.
    However, sometimes it will not be clear whether an action brought against the
    indemnitee is within the scope of the indemnity until after the underlying action has
    been resolved. In those situations, the duty to defend nonetheless arises. That is to say,
    the law implies in every indemnity contract, unless the contract provides to the contrary,
    14
    the duty to defend claims which, at the time of tender, allege facts that would give rise
    to a claim of indemnity. (Crawford, supra, 44 Cal.4th at p. 558.)
    This rule of law presumes that there is no language to the contrary. The parties
    are free to agree to a broader duty to defend; that is, the parties can agree that a defense
    will be provided even in situations where the facts alleged would not give rise to a claim
    of indemnity.13 The parties may also agree to a more narrow duty to defend, and
    specifically agree that, for example, no defense will be provided, but defense costs will
    be reimbursed only if the underlying claim was ultimately encompassed by the
    indemnity. (Crawford, 
    supra,
     44 Cal.4th at pp. 556-557.) What matters is simply
    whether the parties agreed to a different duty to defend than the one implied in all
    indemnity contracts by Civil Code section 2778, subdivision 4; and, if not, whether the
    underlying claims, at the time of tender, alleged facts that would give rise to a claim of
    indemnity.
    13
    Rizzo relies on case authority discussing the somewhat related issue of whether
    a duty to defend exists when an insurer agreed to defend a claim which, by statute or
    public policy, an insurer is prohibited from insuring. (Mt. Hawley Ins. Co. v. Lopez
    (2013) 
    215 Cal.App.4th 1385
    , 1417 [there is no public policy against insurers
    contracting to provide a defense to insureds facing criminal charges]; Downey Venture
    v. LMI Ins. Co. (1998) 
    66 Cal.App.4th 478
    , 487 [insurer agreed to indemnify for, and
    defend claims alleging, malicious prosecution; coverage is barred by Insurance Code
    section 533, but not defense]; (B & E Convalescent Center v. State Compensation Ins.
    Fund (1992) 
    8 Cal.App.4th 78
    , 101 [an insurer and an insured are free to contract for
    the provision of a defense to a claim which cannot be indemnified, although they did not
    do so in this case].) We have no quarrel with this authority; it is simply not material.
    The issue with which we are presently concerned is not whether the City could have
    agreed to defend Rizzo for actions brought by City itself, but whether it did.
    15
    d.     Indemnity Agreements are Generally Not Exculpatory
    As we noted above, in a noninsurance indemnity agreement, in contrast to an
    insurance agreement, the indemnitee may often have the superior bargaining power,
    and, as a result, public policy concerns influence how such agreements are construed.
    As such, if a party seeks, in a noninsurance agreement, to be indemnified for protections
    beyond those afforded by the doctrines of implied or equitable indemnity—for his or
    her own active negligence, or regardless of the indemnitor‘s fault—the language on the
    point must be particularly clear and explicit, and will be construed strictly against the
    indemnitee. (Crawford, 
    supra,
     44 Cal.4th at p. 552.)
    This rule applies when the indemnitee seeks to be indemnified for claims made
    by the other party to the contract – the indemnitor – itself. ―[A] clause which contains
    the words ‗indemnify‘ and ‗hold harmless‘ is an indemnity clause which generally
    obligates the indemnitor to reimburse the indemnitee for any damages the indemnitee
    becomes obligated to pay third persons. [Citation.] Indemnification agreements
    ordinarily relate to third party claims.‖ (Myers Building Industries, Ltd. v. Interface
    Technology, Inc. (1993) 
    13 Cal.App.4th 949
    , 969.) ―An indemnity agreement may
    provide for indemnification against an indemnitee‘s own negligence, but such an
    agreement must be clear and explicit and is strictly construed against the indemnitee.‖
    (Rooz v. Kimmel (1997) 
    55 Cal.App.4th 573
    , 583.)
    Cases which have interpreted an indemnification agreement to act as an
    exculpatory clause between the parties to the agreement have involved agreements
    which contain language clearly providing that the indemnification clause applied to
    16
    such claims. (E.g., Rooz v. Kimmel, supra, 55 Cal.App.4th at p. 586 [indemnification
    clause provided that indemnitee had been requested to act as an accommodation and
    without consideration; indemnitor agreed to protect indemnitee against ― ‗all
    liabilities . . . which may be sustained or incurred by [indemnitee] under, or arising
    directly or indirectly out of‘ ‖ the acts it had been requested to perform].) Putting it
    another way, as one court explained, ―If the parties go out of their way and say ‗we
    really, really mean it,‘ language clearly contemplating exculpation may be enforced.‖
    (Queen Villas Homeowners Assn. v. TCB Property Management (2007)
    
    149 Cal.App.4th 1
    , 6 (Queen Villas).)
    In Queen Villas, a management company attempted to rely on an indemnity
    clause in its agreement with a homeowners association to defeat an action by the
    association alleging the management company had breached the agreement.14 The
    indemnification clause simply provided that the association would indemnify the
    management company ― ‗against any and all claims, costs, suits, and
    damages . . . arising out of the performance of this agreement or in connection with the
    management and operation of the [a]ssociation . . . . ‘ ‖ (Id. at p. 4.) The court noted
    that the management company ―seeks to conscript the indemnification agreement in this
    case into a direct, two-party exculpatory clause,‖ (id. at p. 5) and rejected the attempt.
    The court found no language in the terms of the contract indicating an intent for the
    indemnification clause to go ―beyond the usual context of third party indemnification.‖
    14
    Rizzo argues that Queen Villas should not be relied upon in this case because it
    involved only a claim for ―indemnity,‖ not defense. We disagree. In the context of this
    case, that is a distinction without a difference.
    17
    (Id. at p. 7.) The court further noted ―the reductio ad absurdum of the . . . management
    company‘s position vis-à-vis the association‘s contract claims . . . . Under
    the . . . management company‘s interpretation, it could just outright plain fail to do any
    work at all for the association, such as hiring a gardening company or arranging for
    insurance or the typical things that property managers do, and the clause would protect
    it even from a breach of contract action by the association for having paid for services
    never performed.‖ (Id. at p. 8.)
    e.     The Instant Indemnification Agreement
    We now turn to the terms of the instant agreement, and first consider whether the
    duty to defend is, in any way, broader than the duty to indemnify. Clearly, it is not.
    The duty to defend and duty to indemnify are not only discussed in precisely the same
    terms, they are part of the same sentence. We repeat the language: ―City shall defend,
    hold harmless and indemnify Employee against any claim, demand, judgment or action,
    of any type or kind, arising out of any act or failure to act, by Employee, if such act or
    failure to act was within the course and scope of Employee‘s employment. City may
    compromise and settle any such claim or suit provided City shall bear the entire cost of
    any such settlement.‖ There is no defense obligation beyond the indemnity obligation;
    thus, there is no duty for the City to defend any claims which do not, at the time of
    tender, allege facts which would fall within the scope of the indemnity.
    Rizzo would separate the defense and indemnity provisions, and argue that,
    regardless of the scope of the City‘s obligation to indemnify (which will be resolved at
    a later date), the City agreed to ―defend . . . [Rizzo] against any claim, demand,
    18
    judgment or action, of any type or kind, arising out of any act or failure to act‖ as long
    as the act or failure to act was alleged to be within the course and scope of Rizzo‘s
    employment. Yet this overlooks the fact that the defense obligation is part and parcel of
    the indemnity obligation, and the legal principle that the City need not defend if the
    underlying actions do not allege claims that could at least potentially give rise to a duty
    of indemnity.15
    Thus, it is critical to determine the scope of the indemnity obligation.
    Specifically, as Rizzo seeks defense of the City‘s action and the AG‘s action on behalf
    of the City, we must determine whether the indemnity clause can reasonably be
    interpreted to include claims made by the City, or on its behalf. We believe that the
    question must be answered in the negative.
    As we have discussed, indemnity agreements generally apply only to third-party
    claims. In order for an indemnity agreement to encompass claims between the parties to
    the agreement, and to act as an exculpatory clause or release, there must be clear and
    explicit language to that effect. No such language is present in the agreement before us.
    Indeed, there is language indicating a contrary intent. The final sentence of the
    15
    At oral argument, Rizzo suggested that the defense agreement could be severed
    from the indemnity clause under the employment contract‘s severability clause. That
    clause provides, in full: ―This Agreement is severable, and if any provision or part
    hereof is judicially declared invalid, the remaining provisions shall . . . remain in force
    and effect.‖ This provides no basis for Rizzo‘s attempt to parse the indemnity clause.
    The indemnity language of the indemnity clause is in no way invalid. That the
    indemnity language limits the scope of the defense obligation is no basis to strike the
    indemnity language from the agreement. A party to an agreement cannot use the
    severability clause to remove from the agreement legally valid enforceable language
    which has the effect of limiting other language which he would prefer to be unlimited.
    19
    indemnification clause gives the City the right to compromise and settle ―any such
    claim or suit‖ (that is, a claim or suit within the scope of the indemnity agreement)
    provided it bears the cost of the settlement. Such language can only be read to apply to
    claims or suits by third parties. The idea that the City ―may compromise and settle‖
    a suit brought by the City against Rizzo, if it pays itself the settlement amount, would
    make no sense whatever. The language of this clause is that of a third-party indemnity
    only. It is not reasonably susceptible of an interpretation that it also releases Rizzo from
    any liability to the City itself.
    As the indemnity agreement does not apply to first-party claims, the defense
    obligation cannot extend to such claims either. The City is only obligated to defend
    actions which allege facts which could potentially give rise to a claim of indemnity. As
    both the City‘s action and the AG‘s action were brought on behalf of the City, and the
    City has no duty to indemnify for such claims,16 it has no duty to defend them.
    We believe the same conclusion applies to the issue of whether a defense is owed
    for the criminal actions. The language of the indemnity clause clearly applies to
    third-party civil actions, not criminal complaints and indictments. We again note the
    provision allowing the City to settle the actions on behalf of Rizzo, as long as it pays the
    settlement. This provision demonstrates that criminal actions were not contemplated by
    the agreement; Rizzo could not agree to allow City to enter into a plea bargain on his
    16
    This determination does not turn on whether the acts alleged by the Attorney
    General and the City were within the course and scope of Rizzo‘s employment. Instead,
    it turns on the fact that the Attorney General and the City both brought actions against
    Rizzo on behalf of the City. That fact alone excludes the actions from the scope of the
    indemnity agreement as a matter of law.
    20
    behalf, nor could the City agree to serve a sentence on Rizzo‘s behalf. As the
    indemnification clause, as a factual matter, did not extend to criminal actions, the
    defense obligation could not do so either. However, there is a more fundamental reason
    why the City owes Rizzo no duty to defend the criminal actions: it is statutorily
    prohibited from doing so.
    2.     Government Code Limitations on Provision of a Defense
    The Government Code contains various provisions relating to a public entity‘s
    obligation to provide its employees, or former employees, with a defense to actions
    arising out of acts taken in the course and scope of their employment.17 These
    provisions are all found in the California Tort Claims Act, which was enacted in 1963
    ―in order to provide a comprehensive codification of the law of governmental liability
    and immunity.‖ (Los Angeles Police Protective League v. City of Los Angeles, supra,
    27 Cal.App.4th at p. 174.) At issue in the instant writ petition is whether, and to what
    extent, a public entity and its employee are free to contract around these provisions, in
    order to give the employee greater defense rights. Rizzo concedes that, with respect to
    the criminal actions, there is no statutory duty for the City to provide him with
    a defense. We therefore consider whether the City is permitted to contract to provide
    him a defense to the criminal actions. In order to do so, we first discuss the legislative
    17
    The statutes that we will discuss relate to actions against employees or former
    employees for acts or omissions occurring within the course and scope of their
    employment with the public entity. In the interests of brevity, and unless it is otherwise
    clear from the context, when we use the phrase ―public employee,‖ it should be
    understood to mean an employee or former employee alleged to have acted (or failed to
    act) within the course and scope of public employment.
    21
    framework – briefly addressing provisions of the Tort Claims Act governing defenses to
    civil and criminal actions – before turning to the key issue of the extent to which
    a public entity may contract to provide additional defense rights in criminal actions.
    a.      Relevant Provisions of the Tort Claims Act
    As to the obligation to defend a civil action, there is a general provision,
    followed by two exceptions. The general provision provides, ―Except as otherwise
    provided in Sections 995.2 and 995.4, upon request of [a public employee], a public
    entity shall provide for the defense of any civil action or proceeding brought against
    him, in his official or individual capacity or both . . . . ‖ (Gov. Code, § 995.)
    As already noted, Government Code section 995.2, provides: ―(a) A public
    entity may refuse to provide for the defense of a civil action or proceeding brought
    against [a public employee] if the public entity determines any of the following: [¶]
    (1) The act or omission was not within the scope of his or her employment. [¶] (2) He
    or she acted or failed to act because of actual fraud, corruption, or actual malice. [¶]
    (3) The defense of the action or proceeding by the public entity would create a specific
    conflict of interest between the public entity and the [public employee]. For the
    purposes of this section, ‗specific conflict of interest‘ means a conflict of interest or an
    adverse or pecuniary interest, as specified by statute or by a rule or regulation of the
    public entity.‖
    Government Code section 995.4 provides: ―A public entity may, but is not
    required to, provide for the defense of: (a) An action or proceeding brought by the
    public entity to remove, suspend or otherwise penalize its own [public employee], or an
    22
    appeal to a court from an administrative proceeding by the public entity to remove,
    suspend or otherwise penalize its own [public employee]. [¶] (b) An action or
    proceeding brought by the public entity against its own [public employee] as an
    individual and not in his official capacity, or an appeal therefrom.‖
    It is important to recognize that the language of each of these statutory
    exceptions is permissive. That is to say, the provisions of Government Code
    section 995.2, subdivision (a) indicate circumstances in which a public entity ―may
    refuse‖ to provide a defense for a public employee; they do not suggest that the public
    entity may not provide a defense in those circumstances. Similarly, Government Code
    section 995.4 specifically states that, when its circumstances exist, the public entity
    ―may, but is not required to‖ provide the defense.
    The language set forth above is to be contrasted with the language of
    Government Code section 995.8, which governs the provision of a defense to criminal
    actions. It provides: ―A public entity is not required to provide for the defense of
    a criminal action or proceeding . . . brought against a [public employee], but a public
    entity may provide for the defense of a criminal action or proceeding . . . brought
    against an employee or former employee if: [¶] (a) The criminal action or proceeding is
    brought on account of an act or omission in the scope of his employment as an
    employee of the public entity; and [¶] (b) The public entity determines that such defense
    would be in the best interests of the public entity and that the employee or former
    employee acted, or failed to act, in good faith, without actual malice and in the apparent
    interests of the public entity.‖ This language is restrictive. It indicates that a public
    23
    entity ―may provide‖ a defense for a public employee if the two circumstances set forth
    in the statute exist; it does not in any way suggest that a public entity may also provide
    a defense if those circumstances do not exist.
    b.     Government Code Section 996.6 Does Not Permit a Public Entity
    to Provide Greater Defense Rights to a Public Employee
    Facing Criminal Prosecution
    Rizzo argues that an additional provision, Government Code section 996.6,
    allows a public entity to agree to provide greater defense rights for public employees
    charged with crimes than the limited rights set forth in Government Code section 995.8.
    Government Code section 996.6 provides, in its entirety, ―The rights of an employee or
    former employee under this part are in addition to and not in lieu of any rights he may
    have under any contract or under any other enactment providing for his defense.‖
    There is little law interpreting this provision, although dicta in Los Angeles
    Police Protective League v. City of Los Angeles, supra, 
    27 Cal.App.4th 168
    , supports
    Rizzo‘s interpretation. That language states, ―public entities and employees can
    voluntarily agree to change the indemnity structure of the Tort Claims Act by collective
    bargaining. Government Code section 996.6 provides that if the City agrees to
    indemnify the criminal defense costs of its employees,[18] it may do so. Likewise, if the
    City decides to provide greater indemnity rights to its employees under a City
    ordinance, that ordinance will be upheld.‖ (Id. at pp. 181-182.) To the extent that this
    18
    The facts in that case involved public employee criminal defendants who sought
    indemnification for their criminal defense costs from their public entity employer after
    they had been acquitted. Rizzo does not seek such limited relief, arguing that the City
    has a contractual obligation to provide him with a defense to pending charges.
    24
    language suggests that a public entity can contract with its employees to provide
    a criminal defense when the circumstances of Government Code section 995.8 which
    allow such a defense are not present, we respectfully disagree.
    The key language in Government Code section 996.6 provides that the defense
    rights in the Tort Claims Act are ―in addition to . . . any rights [the public employee]
    may have under any contract . . . providing for his defense.‖ Rizzo interprets this
    provision to mean that the public entity may contract with the public employee to
    provide him with greater rights than those permitted by the provisions of the Tort
    Claims Act. An alternative interpretation, however, is that this language simply means
    that the public entity is required to provide the public employee with a defense
    according to the terms of the Tort Claims Act, regardless of whether the public
    employee has a contract with a third party (e.g., an insurer) to also provide the employee
    with a defense. (Pacific Indem. Co. v. American Mut. Ins. Co. (1972) 
    28 Cal.App.3d 983
    , 993-994.) In determining which interpretation is correct, we consider statutory
    analysis and legislative history.
    (1)     Statutory Analysis
    ―Our primary duty when interpreting a statute is to ‗ ―determine and effectuate‖ ‘
    the Legislature‘s intent. [Citation.] To that end, our first task is to examine the words
    of the statute, giving them a commonsense meaning. [Citation.] If the language is clear
    and unambiguous, the inquiry ends. [Citation.] However, a statute‘s language must be
    construed in context, and provisions relating to the same subject matter must be
    harmonized to the extent possible. [Citation.]‖ (Van Horn v. Watson (2008) 
    45 Cal.4th 25
    322, 326.) A ― ‗[l]iteral construction should not prevail if it is contrary to the legislative
    intent apparent in the statute. The intent prevails over the letter, and the letter will, if
    possible, be so read as to conform to the spirit of the act.‘ [Citation.]‖ (Id. at p. 327.)
    Moreover, we avoid interpretations which would render other statutes unnecessary
    surplusage. (Id. at p. 333.)
    It is clear that Rizzo‘s interpretation would read the bulk of Government Code
    section 995.8 out of existence. Government Code section 995.8 provides that a public
    entity may provide a public employee a defense to a criminal action if the public entity
    determines that the defense would be in the best interests of the public entity and that
    the public employee had acted in good faith and without malice. If Government Code
    section 996.6 is interpreted to mean that a public entity can contract to provide a public
    employee with a criminal defense even when Government Code section 995.8 does not
    specifically allow it, there is no need for the restrictions of Government Code
    section 995.8. Government Code section 995.8 would effectively be rewritten to state
    ―A public entity is not required to provide for the defense of a criminal action brought
    against a public employee, but may provide such a defense whenever it agrees to do so.‖
    Had the Legislature sought to enact such a provision, it could have done so. Indeed, the
    Legislature used such permissive language when discussing the provision of a defense
    of a civil action brought by the public entity itself, stating that the public entity ―may,
    but is not required to, provide for the defense of‖ such an action. (Gov. Code, § 995.4.)
    As the Legislature used restrictive language in Government Code section 995.8, we
    26
    must assume that the Legislature intended to do so, and did not intend to undermine that
    language with the general language in Government Code section 996.6.
    (2)    Legislative History
    We are fortunate in that the legislative history of the key language in
    Government Code section 996.6, as well as of Government Code section 995.8, is
    available and is unambiguous. We first consider that of Government Code
    section 996.6.
    Prior to the enactment of the comprehensive Tort Claims Act, the predecessor
    statute to Government Code section 996.6 was Government Code former section 2001,
    subdivision (4). That language provided, ―The rights of a public employee under this
    section are in addition to and not in lieu of any rights the employee may have under any
    other law, charter, ordinance or regulation providing for the defense of a public
    employee.‖ (Stats. 1961, ch. 1692, § 2, p. 3669.) At that time, the statute did not refer
    to contracts in any way.
    In 1963, the California Law Revision Commission issued its recommendations,
    which would later provide the basis for the Tort Claims Act. The Law Revision
    Commission stated, ―The recommended legislation should be in addition to and not in
    lieu of any rights the public employee may have under any contract [footnote citing to
    39 Ops. Cal. Atty. Gen. 71 (1962)] or under any other law, charter, ordinance or
    regulation providing for his defense.‖ (Recommendations Relating to Sovereign
    Immunity, No. 4, Defense of Public Employees (Jan. 1963) 4 Cal. Law Revision Com.
    Rep. (1963) p. 1309.) Clearly, then, the addition of the word ―contract‖ to the language
    27
    then existing in Government Code former section 2001 was due to the cited Attorney
    General opinion.
    That opinion involved a police officer, who had, at his own expense, purchased
    a false arrest insurance policy, and was seeking a defense from his employing entity.
    (39 Ops. Cal. Atty. Gen. at p. 71.) The question presented was whether the entity could
    avoid paying the defense costs on the theory that its employee already had an insurance
    policy which would provide a defense. The Attorney General rejected the argument,
    stating, ―To permit the public entity to avoid a statutory duty by relying upon the
    contractual duty owed by a third party would be akin to the creation of a novation
    without the necessary consent or agreement of the obligee to release the additional
    obligor [citation]. It is concluded, therefore, that the terms of the insurance contract
    relative to the insurer‘s duty to defend have no bearing upon the statutory duty of the
    public entity which upon request of the employee is responsible for providing a legal
    defense at public expense against actions for false arrest and imprisonment or assault
    and battery arising out of acts performed during the course of his duties.‖ (Id. at p. 74.)
    Thus, the addition of the word ―contract‖ in what is now Government Code
    section 996.6 was not intended to allow a public entity to contract to provide its public
    employee with additional defense rights beyond those provided in the Tort Claims Act
    itself, but merely to prevent a public entity from relying on the contractual obligations
    owed by others to the public employee to satisfy its own statutory obligations.
    This interpretation is consistent with the legislative history of Government Code
    section 995.8, which was intended to provide a public entity with very limited rights to
    28
    provide a public employee with a criminal defense. The Law Revision Commission
    explained, ―A public entity should be authorized, but not required, to defend a criminal
    action or proceeding brought against a public employee on account of an act or
    omission occurring in the scope of his public employment if the public entity
    determines that such defense would be in the best interests of the public entity and that
    the employee acted in good faith, without actual malice and in the apparent interests of
    the public entity. Public entities do not now have this authority. The Commission has
    been advised, however, that cases occasionally arise where a criminal proceeding is
    brought against a public employee who was simply carrying out his orders. For
    example, one case brought to the attention of the Commission involved a school district
    employee charged with criminal assault for ejecting a bully from a school playground.
    Because the school district was not authorized to provide him with counsel, this
    employee was required to secure his own attorney to make an appropriate motion to
    dismiss the criminal proceeding brought against him. The Commission has concluded,
    therefore, that it would be sound public policy to give public entities a limited
    discretionary authority to defend criminal actions and proceedings brought against their
    employees.‖ (Recommendations Relating to Sovereign Immunity, No. 4, Defense of
    Public Employees (Jan. 1963) 4 Cal. Law Revision Com. Rep. (1963) p. 1308, italics
    added, footnote omitted.) The limited discretionary authority of Government Code
    section 995.8 would be defeated by Rizzo‘s interpretation of Government Code
    section 996.6.
    29
    We therefore conclude that Government Code section 996.6 simply provides that
    a public entity‘s defense obligations, as set forth in the Tort Claims Act, are in addition
    to any other contractual rights the public employee may have to a defense.19
    Government Code section 996.6 does not permit a public entity to provide a defense
    where other sections of the Tort Claims Act would prohibit such a defense. As
    Government Code section 995.8 prevents a public entity from providing its employee
    a defense to a criminal action unless the public entity determines that the defense would
    be in the best interests of the public entity and that the public employee had acted in
    good faith and without malice, no contractual provision requiring a criminal defense
    under any other circumstances can be enforced.20 Thus, although we conclude that the
    City did not contract to provide Rizzo with a defense to any criminal action which
    might have been brought against him, we further conclude that the City was prohibited,
    in any event, from doing so.
    19
    In fact, the City had an insurance policy under which Rizzo was an additional
    insured. Rizzo sought a defense under the policy from the City‘s insurer. Recently, the
    district court granted the insurer‘s motion for summary judgment, on the basis that
    policy exclusions applied. (Rizzo v. Insurance Company of the State of Pennsylvania
    (C.D. Cal. Aug. 30. 2013, CV 12-04347 DMG (FMOx)) 
    2013 WL 4675063
    .)
    20
    A public entity cannot agree in advance that any time its public employee is
    subsequently charged with a crime, the provision of a defense would be in the best
    interests of the public entity and the public employee will have acted in good faith and
    without malice. These are determinations which, by necessity, must be made on a case
    by case basis, after the criminal prosecution has begun. (See Recommendations
    Relating to Sovereign Immunity, No. 4, Defense of Public Employees (Jan. 1963)
    4 Cal. Law Revision Com. Rep. (1963) pp. 1308-1309.)
    30
    3.     Public Policy Supports Our Conclusions
    While we base our opinion on the language of the contract and controlling law, it
    is also important to not lose sight of the policy issues implicated. Rizzo is alleged to
    have ―embezzled, stole, and misappropriated millions of dollars in City funds‖ over
    a period of 17 years. When the City sought restitutionary relief for such losses, by
    means of civil actions brought by itself and the Attorney General on its behalf, and the
    District Attorney initiated criminal prosecutions, Rizzo‘s response was to demand that
    the City defend him against the allegations in all such actions. This is not a case in
    which the public entity has chosen to stand behind its employee, perhaps wrongly
    accused by third parties. Instead, the entity has brought the accusations itself, and
    (when asked to provide a defense) has made a specific finding that its employee acted
    out of fraud, corruption, or malice.
    Under these circumstances, we find it difficult to believe that any expenditure of
    City funds to defend Rizzo would not constitute an impermissible waste of public funds.
    In this regard, we are guided by Tenwolde v. County of San Diego (1993)
    
    14 Cal.App.4th 1083
    . That case concerned a lieutenant in the sheriff‘s public affairs
    division, who, at the request of the sheriff, distributed to the public materials which took
    a position on a political matter. A suit was brought to enjoin the practice, and the
    sheriff agreed to stop the distribution. Thereafter, both the sheriff and the lieutenant
    were held liable for the plaintiffs‘ costs and attorneys fees in the underlying action. The
    lieutenant sought reimbursement from the county for those funds. The trial court
    ordered reimbursement, and the county appealed, ―complaining the judgment require[d]
    31
    the taxpayers to indemnify [the plaintiff] for ‗having squandered taxpayer resources in
    the first place.‘ ‖ (Id. at p. 1088.)
    On appeal, the judgment was reversed. The court noted that while the county
    may be liable to indemnify the lieutenant if he had been held liable to a third party
    injured by his lobbying activities, the instant situation was different. ―This was not
    a case of injury to a third party. It was, instead, an action to block illegal activities by
    a public agency. The injury resulting from the illegal activity was an injury to the
    public itself. The title to the article here under discussion is ‗Indemnification of Public
    Employees.‘ [Citation.] While the text of the statutes in question does not use the word
    ‗indemnification,‘ it is clear that this is the principle with which we deal. Granted, these
    indemnification provisions are statutory, and hence common law concepts are not
    necessarily applicable. However, indemnification is typically a tripartite concept,
    resting upon equitable principles. Ordinarily, it is the right of one who has satisfied
    another‘s debt to a third party to recover from the principal obligor. [Citation.] It
    makes no sense to talk about indemnification of a claim upon an indemnitee when the
    claim arises from damage by the indemnitee to the indemnitor. Here the wrong giving
    rise to the expenditure of fees and costs was an illegal expenditure of County funds—
    a tort by the sheriff‘s lieutenant against his own employer. When the party committing
    the wrong is stopped, and then assessed costs and fees, it would not be logical, and
    certainly would not accord with equitable principles, to require the wronged party, the
    County, to reimburse the employee.‖ (Tenwolde v. County of San Diego, supra,
    14 Cal.App.4th at p. 1092.)
    32
    The court went on to note that, although the plaintiff in the underlying action had
    been a private party, the Attorney General could have brought the underlying action
    instead, in its capacity as the ―public entity generally authorized to enforce [the] laws of
    the state.‖ (Tenwolde v. County of San Diego, supra, 14 Cal.App.4th at p. 1093.)
    ―[H]ad the action been brought by the Attorney General, with the resulting halt in the
    sheriff‘s political activities, and had thereafter costs been assessed against [the
    lieutenant], would there have been any question about the denial of reimbursement of
    those costs from the very entity sought to be protected by the lawsuit? We think not.‖
    (Ibid.) The award was for the benefit of the county and its citizens. ―When, then, a cost
    award including fees based on the ‗private attorney general doctrine‘ is made, it would
    turn the objective of the suit on its head to require indemnification of the judgment by
    the very governmental agency the suit sought to benefit.‖ (Id. at p. 1094.)
    We recognize that Tenwolde is distinguishable, in that it pertained to
    indemnification rather than defense costs, and was specifically concerned with statutory
    indemnification rather than contractual indemnification. We further recognize that the
    statutes permit a public entity to choose to pay defense costs for an action it brings
    against its own employee. Nonetheless, Tenwolde‘s discussion of the policy issues is
    illuminating. The City is of the belief that Rizzo stole millions of dollars from its
    coffers; the idea that the City must pay Rizzo additional funds in order provide him
    a defense against the very actions seeking to obtain justice for the City is unacceptable.
    Public policy necessarily rejects the concept that a public entity allegedly
    victimized by a corrupt employee must provide that employee with a defense to those
    33
    charges. The Tort Claims Act does not require such a result. A contract term intended
    only to provide the employee with indemnification from, and a defense to, third party
    actions, cannot be interpreted to require that result. Moreover, to the extent that we are
    concerned with the provision of a defense to criminal actions, a contract could not
    require that result, even if the parties had intended it.
    34
    DISPOSITION
    The petition is granted. The matter is remanded to the trial court with directions
    to conduct further proceedings consistent with this opinion. Costs shall be awarded to
    the City in these writ proceedings.
    CERTIFIED FOR PUBLICATION
    CROSKEY, J.
    WE CONCUR:
    KLEIN, P. J.
    ALDRICH, J.
    35
    

Document Info

Docket Number: B247362N

Filed Date: 10/25/2013

Precedential Status: Precedential

Modified Date: 10/30/2014