Retroactivity of appellate court decisions: The truth is out there

Appellate court decisions are presumed to be statements of what the law has always been. (E.g., Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 979 (Newman) [“ ‘[J]udges do not create, but instead find the law. A decision interpreting the law, therefore, does no more than declare what the law had always been.’ ”]. ) Moreover, since “the truth is out there” waiting to be discovered,“ ‘ “[t]he general rule [is] that judicial decisions are given retroactive effect.” ’ ” (Frlekin v. Apple Inc. (2020) 8 Cal.5th 1038, 1057.)

But, is the “truth” revealed in an appellate court decision always applied retroactively? No. Courts refuse to apply decisions retroactively “[w]hen considerations of fairness and public policy are so compelling in a particular case that, on balance, they outweigh the considerations that underlie the basic rule.” (Newman, supra, 48 Cal.3d at p. 983.) “ ‘[C]onsiderations include the purpose to be served by the new [decisional] rule, and the effect on the administration of justice of retroactive application.’ ” (Id. at p. 986.)

Perhaps the most important factor in determining the fairness of retroactively applying case law is “the extent of reliance by litigants on the former rule. The most compelling example of such reliance occurs when a party has acquired a vested right or entered into a contract based on the former rule. … [W]e are more reluctant to apply our decisions retroactively in those cases.” (Newman, supra, 48 Cal.3d at p. 989, citation omitted; see Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, 967 (Grafton) [no retroactive application where “decision alters a settled rule upon which parties justifiably relied, [i.e.,] when a decision constitutes a ‘ “clear break” ’ with decisions of this court or with practices we have sanctioned by implication” (emphasis omitted)].)

So, for example, there is no retroactive application “when the subsequent decision completely bars the litigant’s claims, as, for example, where a subsequent change in a procedural rule would work to bar a cause of action filed in reliance on the former rule.” (Newman, supra, 48 Cal.3d at p. 990; see Smith v. Rae-Venter Law Group (2002) 29 Cal.4th 345, 372–373 [refusing to give retroactive application to decision changing longstanding construction of statute pertaining to fee-shifting provisions for attorney fees]; Camper v. Workers’ Comp. Appeals Bd. (1992) 3 Cal.4th 679, 688–689 [decision not applied retroactively because procedural rule announced in decision changed calculation of time under Labor Code for filing workers compensation petition for writ of review]; Woods v. Young (1991) 53 Cal.3d 315, 330 (Woods) [“Retroactive application of an unforeseeable procedural change is disfavored when such application would deprive a litigant of any remedy whatsoever”].)

Similarly, the courts will not apply the retroactivity presumption where a decision announces a new rule of law. (See, e.g., Claxton v. Waters (2004) 34 Cal.4th 367, 377–379 [no retroactivity where decision changed recognized evidentiary rule]; Droeger v. Friedman, Sloan & Ross (1991) 54 Cal.3d 26, 45 [no retroactivity where “[a] decision announces a new rule of law, for example, when it disapproves of a long-standing and widespread practice expressly approved by a near-unanimous body of lower court authorities”]; Woods, supra, 53 Cal.3d at p. 330 [no retroactivity where seven prior Court of Appeal decisions “established a settled rule upon which plaintiff could reasonably rely”].) There are, however, limits to the definition of a “new” rule of law. (See, e.g., Woosley v. State of California (1992) 3 Cal.4th 758, 794 [“An example of a decision which does not establish a new rule of law is one in which we give effect ‘to a statutory rule that the courts had theretofore misconstrued.’ [Citations.] ‘Whenever a decision undertakes to vindicate the original meaning of an enactment, putting into effect the policy intended from its inception, retroactive application is essential to accomplish that aim.’ ”]; Alvarado v. Dart Container Corp. of California (2018) 4 Cal.4th 542, 572–573 [government’s interpretation of statute and corresponding wage order, although inconsistent with a previous decision, was consistent with existing law and therefore would be applied retroactively].)

The underlying rationale for each of these “non-retroactivity” factors is essentially the same – when revealing the truth about what the law has always been, the courts do not want to upset the apple cart. Thus, when approaching the issue of whether an appellate court decision should be applied retroactively, consider the following checklist:

How extensive and reasonable was reliance on the rule that preceded the appellate court’s decision?

Will retroactive application of the new decision result in a deprivation of vested property rights?

Will retroactive application of the new decision adversely impact the administration of justice?

Does the decision overrule or disagree with a previously unquestioned body of law?

Does the decision announce a genuinely new rule of law?

Once the “truth” about the law on a particular issue has been revealed in an appellate court opinion, the principles governing retroactive application ensure that the truth is not harshly applied.

The author gratefully acknowledges the editorial and research assistance of Claire Sears, appellate fellow with Horvitz & Levy LLP.