                      FOR PUBLICATION

    UNITED STATES COURT OF APPEALS
         FOR THE NINTH CIRCUIT


 SANFORD J. WISHNEV,                           No. 16-16037
 individually and on behalf of
 all others similarly situated,                 D.C. No.
              Plaintiff-Appellee,         3:15-cv-03797-EMC

                 v.
                                         ORDER CERTIFYING
 THE NORTHWESTERN                         QUESTION TO THE
 MUTUAL LIFE INSURANCE                      CALIFORNIA
 COMPANY,                                 SUPREME COURT
        Defendant-Appellant.


        Appeal from the United States District Court
           for the Northern District of California
         Edward M. Chen, District Judge, Presiding

           Argued and Submitted October 16, 2017
                 San Francisco, California

                      Filed January 18, 2018

 Before: Sandra S. Ikuta and Andrew D. Hurwitz, Circuit
     Judges, and Donald W. Molloy,* District Judge.

                               Order

    *
      The Honorable Donald W. Molloy, United States District Judge for
the District of Montana, sitting by designation.
2            WISHNEV V. NORTHWESTERN MUTUAL

                            SUMMARY**


     Certified Question to California Supreme Court

    The panel certified the following questions of state law to
the California Supreme Court:

         1. Are the lenders identified in Article XV of
         the California Constitution, see Cal. Const.
         art. XV, § 1, as being exempt from the
         restrictions otherwise imposed by that article,
         nevertheless subject to the requirement in
         section 1916-2 of the California Civil Code
         that a lender may not compound interest
         “unless an agreement to that effect is clearly
         expressed in writing and signed by the party
         to be charged therewith”?

         2. Does an agreement meet the requirement of
         section 1916-2 if it is comprised of: (1) an
         application for insurance signed by the
         borrower, and (2) a policy of insurance
         containing an agreement for compound
         interest that is subsequently attached to the
         application, thus constituting the entire
         contract between the parties pursuant to
         section 10113 of the California Insurance
         Code?




    **
       This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
          WISHNEV V. NORTHWESTERN MUTUAL                    3

                        COUNSEL

Timothy J. O’Driscoll (argued) and Stephen C. Baker,
Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania;
Marshall L. Baker, Matthew J. Adler, Alan J. Lazarus, and
Michael J. Stortz, Drinker Biddle & Reath LLP, San
Francisco, California; for Defendant-Appellant.

Robert Bramson (argued) and Jennifer S. Rosenberg,
Bramson Plutzik Mahler & Birkhaeuser LLP, Walnut Creek,
California, for Plaintiff-Appellee.

Thomas A. Evans, Reed Smith LLP, San Francisco,
California; Lisa Tate, Vice President, Litigation & Associate
General Counsel, American Council of Life Insurers,
Washington, D.C.; for Amicus Curiae American Council of
Life Insurers.

Laura L. Geist and Andrew S. Azarmi, Dentons US LLP, San
Francisco, California; Brad Wenger, Association of
California Life and Health Insurance Companies,
Sacramento, California; for Amicus Curiae Association of
California Life and Health Insurance Companies.


                          ORDER

    We ask the California Supreme Court to resolve two open
questions of state law that have significant effects on
insurance companies and insureds in California.

   An initiative measure enacted in 1918 (the Initiative), Cal
Civ. Code §§ 1916-1–5, limits the amount of interest lenders
may charge, and provides that lenders may not compound
4          WISHNEV V. NORTHWESTERN MUTUAL

interest “unless an agreement to that effect is clearly
expressed in writing and signed by the party to be charged
therewith” (hereafter, the “disclosure requirement”). Cal.
Civ. Code § 1916-2. An amendment to the California
constitution exempts certain lenders from some aspects of the
Initiative. Cal. Const. art. XV, § 1. The state legislature has
included insurance companies as an exempt lender. Cal. Ins.
Code § 1100.1. It is not clear, however, whether the
constitutional provision exempts lenders from the disclosure
requirement, and courts considering this issue have reached
different results.

    Nor is it clear whether a lender that is an insurance
company can satisfy the disclosure requirement of section
1916-2 by obtaining the borrower’s signature on an
application for insurance, and then subsequently providing an
insurance policy that includes a compound interest provision,
even though the state legislature has provided that an
insurance application and policy form a single contract. Cal.
Ins. Code § 10113.

     By addressing these open issues, the California Supreme
Court will resolve the appeal before us. Sanford Wishnev, an
insured who borrowed money from Northwestern Mutual
Life Insurance Company and was assessed compound
interest, is suing the insurance company on behalf of a
putative class for a violation of the disclosure requirement in
section 1916-2. Northwestern Mutual claims that it is exempt
from complying with the disclosure requirement, and also
claims that the application signed by Wishnev, which is
attached to the insurance policy, satisfies the disclosure
requirement. If Northwestern Mutual is correct on either of
its claims, it is not liable to Wishnev or other members of the
putative class for violating section 1916-2. If Northwestern
           WISHNEV V. NORTHWESTERN MUTUAL                     5

Mutual is subject to section 1916-2's disclosure requirement,
and did not fulfill its obligation under California law, then
Northwestern Mutual is potentially liable to Wishnev and any
class members who have been charged compound interest
without the required disclosure.

    Accordingly, we certify the following two questions to
the California Supreme Court:

       1. Are the lenders identified in Article XV of
       the California Constitution, see Cal. Const.
       art. XV, § 1, as being exempt from the
       restrictions otherwise imposed by that article,
       nevertheless subject to the requirement in
       section 1916-2 of the California Civil Code
       that a lender may not compound interest
       “unless an agreement to that effect is clearly
       expressed in writing and signed by the party
       to be charged therewith”?

       2. Does an agreement meet the requirement of
       section 1916-2 if it is comprised of: (1) an
       application for insurance signed by the
       borrower, and (2) a policy of insurance
       containing an agreement for compound
       interest that is subsequently attached to the
       application, thus constituting the entire
       contract between the parties pursuant to
       section 10113 of the California Insurance
       Code?

Our phrasing of the questions should not restrict the Court’s
consideration of the issues involved. The Court may rephrase
the questions as it sees fit in order to address the contentions
6             WISHNEV V. NORTHWESTERN MUTUAL

of the parties. If the Court agrees to decide these questions,
we agree to accept its decision. We recognize that the Court
has a substantial caseload, and we submit these questions
only because of their significance to the administration of
insurance policy loans in the state of California, illustrated by
the numerous cases involving these questions of state law.

                                      I

    The ambiguities before us today are a product of the
development of California usury law. In 1918, the California
voters approved the Initiative, which prevents lenders from
charging usurious interest rates. See Cal. Civ. Code §§ 1916-
1–5.1 Section 1916-1 established that the interest rates for
loans in California could not exceed 12 percent per year. Id.
§ 1916-1.       Section 1916-2 prohibited lenders from
compounding interest “unless an agreement to that effect is
clearly expressed in writing and signed by the party to be
charged therewith.” Id. § 1916-2. Finally, the Initiative
provided that every person “who for any loan or forbearance
of money, goods or things in action shall have paid or
delivered any greater sum or value than is allowed to be
received under the preceding sections” may sue to recover
“treble the amount of the money so paid or value delivered in
violation of said sections, providing such action shall be
brought within one year after such payment or delivery.” Id.
§ 1916-3(a).

   In 1934, the voters amended the California Constitution
“to abolish the inflexible, inadequate and unworkable
provisions of the usury law and to reestablish in the
Legislature the power to enact laws affecting the business of

    1
        The full text of the 1918 Initiative appears in Appendix A.
              WISHNEV V. NORTHWESTERN MUTUAL                               7

lending money in this state.” Carter v. Seaboard Fin. Co., 33
Cal. 2d 564, 579 (1949).2 The amendment, now Article XV,3
lowered the maximum interest rate that could be charged by
covered lenders. Cal. Const. art. XV, § 1. Paragraph 1 of
Article XV set a 10 percent maximum interest rate on loans
for “personal, family or household purposes.” Id. Paragraph
2 of Article XV set a different interest rate for loans that were
not for personal use, such as for the “purchase, construction
or improvement of real property.” Id. In addition, paragraph
2 stated that “[n]o person . . . shall by charging any fee,
bonus, commission, discount or other compensation receive
from a borrower more than the interest authorized by this
section upon any loan or forbearance of any money, goods or
things in action.” Id.

    Paragraph 2 of Article XV also gave the state legislature
the desired flexibility to set interest rates for particular
lenders. First, it exempted certain lenders from its
prohibitions by providing that “none of the above restrictions
shall apply to any obligations of, loans made by, or
forbearances of, [list of exempt lenders] or any other class of
persons authorized by statute.” Id. Second, it gave the state
legislature authority over these exempt lenders, by providing
that:

           The Legislature may from time to time
           prescribe the maximum rate per annum of, or


    2
        The full text of Cal. Const. art. XV, § 1 appears in Appendix B.
    3
       Article XV was adopted in 1976 to replace a prior amendment,
Article XX, section 22, which had nearly identical language. In 1979,
Article XV was amended to give the state legislature power to expand the
class of exempt lenders by statute.
8          WISHNEV V. NORTHWESTERN MUTUAL

       provide for the supervision, or the filing of a
       schedule of, or in any manner fix, regulate or
       limit, the fees, bonuses, commissions,
       discounts or other compensation which all or
       any of the said exempted classes of persons
       may charge or receive from a borrower in
       connection with any loan or forbearance of
       any money, goods or things in action.

Id. The term “or other compensation” is not defined in the
amendment. The amendment concludes that “[t]he provisions
of this section shall supersede all provisions of this
Constitution and laws enacted thereunder in conflict
therewith.” Id.

    In 1981, the state legislature enacted section 1100.1 of the
California Insurance Code, which provides that “the
restrictions upon rates of interest contained in Section 1 of
Article XV of the California Constitution shall not apply to
any obligation of, loans made by, or forbearances of, any
incorporated admitted insurer.”

    After the enactment of Article XV, the California
Supreme Court decided several cases that addressed, either
directly or indirectly, the extent to which the interest rate
limitations in the Initiative and Article XV applied to exempt
lenders. In Penziner v. Western American Finance Co., a
non-exempt lender claimed that after Article XV was
adopted, the Initiative became a dead letter. 10 Cal. 2d 160,
174. (1937). The California Supreme Court disagreed. It
explained that a constitutional amendment repeals or
supersedes “only those portions of prior acts repugnant to the
later act.” Id. at 174–75 (approving the rule that a
constitutional amendment “operates as an express limitation
            WISHNEV V. NORTHWESTERN MUTUAL                             9

upon the extent to which it is intended that former acts shall
cease to be operative, namely, only so far as they are actually
inconsistent with the new act”). Accordingly, the portions of
the Initiative that “are not repugnant to and inconsistent with
the new act are to remain in force.” Id. at 175 (citation
omitted).

    Penziner then differentiated between exempt and non-
exempt lenders. According to Penziner, “the power granted
to the legislature by the constitutional amendment is
expressly limited in its scope to the regulation and control of
the charges of the exempted classes of lenders.” Id. at 177.
Specifically, the legislature has “control of the charges to be
made by the exempted groups,” and that authority is
inconsistent with the Initiative.4 Id. But “[a]s to the
nonexempt classes of lenders, the legislature possesses no
such power.” Id. Accordingly, “at least as to the non exempt
classes of lenders,” the Initiative “was not repealed by the
adoption of the constitutional provision, and plaintiff's cause
of action was not affected thereby.” Id. at 178. Penziner,
however, did not address the Initiative’s disclosure
requirement.

    After Penziner indicated that under Article XV only the
legislature had authority to impose interest rate limitations on
exempt lenders, the California Supreme Court confirmed the
broad scope of this exemption. See Carter, 33 Cal. 2d at 582.

    4
       Indeed, on the same day Penziner was decided, the California
Supreme Court also held that personal property brokers, an exempt class,
are not subject to the Initiative’s maximum interest rate provision. Wolf
v. Pac. Sw. Disc. Corp., 10 Cal. 2d 183, 184 (1937) (“The third paragraph
of said section of the Constitution designated certain organizations and
individuals which are exempt from the general provisions of the usury
law.”).
10         WISHNEV V. NORTHWESTERN MUTUAL

Carter raised the question whether a personal property broker
who sold a truck secured by a security interest in the truck
was subject to the maximum interest rate established by
Article XV. Id. at 568, 578. The plaintiff first noted that
paragraph 1 of Article XV set a 10 percent maximum interest
rate for loans involving personal, family or household
purposes, while paragraph 2 set different interest rates for
loans that were not for personal use. Id. at 578–79. The
crucial language exempting certain lenders (i.e., stating that
“none of the above restrictions shall apply” to the exempt
lenders listed in Article XV or “any other class of persons
authorized by statute”) appears in paragraph 2. Cal. Const.
art. XV, § 1. Accordingly, the plaintiff argued that paragraph
1 applied to all lenders, exempt and non-exempt, while
paragraph 2 applied only to non-exempt lenders. Carter,
33 Cal. 2d at 579. Under this theory, even though a personal
property broker was among the class of exempt lenders, it
was still subject to the interest rate limits imposed by
paragraph 1.

    Carter rejected this argument. After reviewing the
history of usury legislation in California, the Court concluded
that the language of paragraph 2 (i.e., that “none of the above
restrictions shall apply”) encompassed all the restrictions in
Article XV, and therefore an exempt lender is exempt from
all provisions in Article XV. Id. at 580. Moreover, the
language authorizing the legislature to “in any manner fix,
regulate or limit, the fees, bonuses, commissions, discounts
or other compensation,” Cal. Const. art. XV, § 1, put such
regulations “entirely within the control of the Legislature.”
Carter, 33 Cal. 2d at 583. If the legislature does not act, an
exempt lender “is subject to no restriction on interest rates or
charges.” Id. at 582. Because a personal property broker was
an exempt lender (and not subject to the rates set forth in
           WISHNEV V. NORTHWESTERN MUTUAL                     11

Article XV), and because the legislature had not enacted
applicable legislation affecting the interest and charges of
personal property brokers, Carter rejected the plaintiff’s
claim that the charges were usurious. Id. at 585–86.

    The California Supreme Court has repeatedly confirmed
that an exempt lender under Article XV is subject only to
interest rate limitations imposed by the legislature. W. Pico
Furniture Co. v. Pac. Fin. Loans, 2 Cal. 3d 594, 614 (1970)
(“As to these exempt classes, there are no restrictions on the
rates of interest charged unless the Legislature so provides.”);
Wolf v. Pac. Sw. Disc. Corp., 10 Cal. 2d 183, 184 (1937)
(holding that “the legislature was given power to prescribe
the maximum rate of interest” on loans by exempt lenders).
Exempt lenders are not even subject to common law limits on
rates, because “[a]ny other result would frustrate the
constitutional amendment which was designed to place in the
hands of the Legislature the control of the charges to be made
by the exempted groups.” W. Pico Furniture, 2 Cal. 3d at
615.

    Although the California Supreme Court has directly held
that the legislature has plenary authority over the interest
rates charged by exempt lenders, it has suggested in dicta that
the legislature also has plenary authority over other aspects of
exempt lenders’ operations. See Heald v. Friis-Hansen,
52 Cal. 2d 834, 838 (1959) (“[B]y exempting from its
restrictions certain enumerated classes of persons . . . [Article
XV] operates to exempt those classes from the restrictions in
the Usury Law.”); Ex parte Fuller, 15 Cal. 2d 425, 434
(1940) (“As to the exempted groups, the legislature was
reinvested with the same control over them as it had prior to
the enactment of the Usury Law.”). Accordingly, it is an
open question whether the Initiative’s disclosure requirement
12          WISHNEV V. NORTHWESTERN MUTUAL

for compound interest, which regulates the procedures a
lender must take before imposing a compound interest
charge, is superseded by the legislature’s power over exempt
lenders.5

                                    II

    This is an appropriate case in which to seek the California
Supreme Court’s guidance on this issue because it squarely
raises the question whether exempt lenders are subject to the
Initiative’s prohibition against charging compound interest
“unless an agreement to that effect is clearly expressed in
writing and signed by the party to be charged therewith.”
Cal. Civ. Code § 1916-2. We now turn to the facts and
arguments.

    The following allegations are derived from Wishnev’s
First Amended Complaint and the four life insurance policies
issued to Wishnev. See Lee v. City of L.A., 250 F.3d 668, 688
(9th Cir. 2001) (holding that on a motion to dismiss, a court
can consider documents that are not physically attached to the
complaint, so long as “the documents’ ‘authenticity . . . is not
contested’ and ‘the plaintiff’s complaint necessarily relies’ on
them.” (alteration in original) (citation omitted)).




     5
      A depublished California Court of Appeal decision addressed this
question, concluding that the legislature’s authority “to regulate ‘in any
manner’ the interest charged by exempt lenders” includes the regulation
of compound interest, and this authority supersedes any regulation of
compound interest, including the disclosure requirement. Thomason v.
Bateman Eichler, Hill Richards, Inc., 245 Cal. Rptr. 319, 322 (Ct. App.
1988) (depublished opinion).
           WISHNEV V. NORTHWESTERN MUTUAL                        13

    Northwestern Mutual is a Wisconsin corporation admitted
in California.6 Northwestern Mutual issued Wishnev four life
insurance policies between 1967 and 1976. These policies
are “permanent” life insurance policies, which pay a benefit
on the death of the insured and also accumulate a cash value
during the insured’s lifetime. Northwestern Mutual’s
policyholders may take out loans secured by a permanent life
insurance policy’s cash value. Northwestern Mutual
generally pays annual dividends to its policyholders, but
when a policyholder borrows funds using the policy’s cash
value as collateral, Northwestern Mutual applies the annual
dividend to reduce the amount of the loan balance, including
accrued interest.

    Wishnev completed, submitted, and signed an application
for each policy. None of these applications authorized
Northwestern Mutual to charge compound interest, but each
application asks: “Shall the PREMIUM LOAN provision, if
available, become operative according to its terms?”
Wishnev checked the box marked “Yes” on each application.

    After Wishnev signed each application, Northwestern
Mutual sent him the insurance policy. Paragraph 1 of
“General Provisions” in each policy states: “This policy and
the application, a copy of which is attached when issued,
constitute the entire contract.” Paragraph 4 of “Loan
Provisions” states: “Unpaid interest shall be added to and
become part of the loan and shall bear interest on the same
terms.”




   6
     Under California Insurance Code section 24, the word “admitted”
means “entitled to transact insurance business” in California.
14          WISHNEV V. NORTHWESTERN MUTUAL

    Sometime after 1980, Wishnev took out four policy loans,
secured by the cash value and death benefit value of each
policy. Northwestern Mutual assessed compound interest on
the loan balances. In addition, Northwestern Mutual reduced
the amount of dividends paid to Wishnev due to the
compound interest that had accrued.

    Wishnev brought a class action lawsuit in state court on
behalf of himself and “all others similarly situated” arising
from Northwestern Mutual’s “pattern and practice of
charging compound interest on life insure policy and
premium loans without a written agreement signed by the
borrower providing for such compounding.” Wishnev
claimed that Northwestern Mutual violated section 1916-2 of
the California Civil Code by failing to obtain a clearly
expressed writing signed by the borrower before charging
compound interest.7 The complaint seeks repayment of
dividends withheld from Wishnev and the putative class and
treble damages under section 1916-3.

    Northwestern Mutual removed the state court action to
federal court pursuant to the Class Action Fairness Act,
28 U.S.C. § 1332(d). In a motion to dismiss, Northwestern
Mutual argued that, as an insurance company, it is an exempt
lender under section 1100.1 of the California Insurance Code,
and therefore exempt from the Initiative’s disclosure
requirement. Second, Northwestern Mutual argued that it
complied with the disclosure requirement because the
“contract,” comprised of the insurance application and



     7
      Wishnev also asserted claims for declaratory relief, violation of
California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200,
money had and received, and unjust enrichment.
             WISHNEV V. NORTHWESTERN MUTUAL                               15

insurance policy, Cal. Ins. Code § 10113, provides for
assessment of compound interest.8

    The district court denied Northwestern Mutual’s motion.
The district court held that because Article XV did not
address disclosure of compound interest, the Initiative’s
disclosure requirement was not repugnant to the California
Constitution and therefore remained in effect. The court also
reasoned that the legislature’s authority to regulate “fees,
bonuses, commissions, discounts, or other compensation” of
exempt lenders did not supersede the Initiative’s disclosure
requirement, because “other compensation” included only
“such things as loan fees and points, not compound interest.”
The court then certified its order for interlocutory appeal.

                                     III

   On appeal, Northwestern Mutual first raises the question
whether lenders that are exempt from the interest rate
requirements of Article XV (providing that “none of the
above restrictions shall apply to any obligations of, loans
made by, or forbearances of” specified exempt lenders) and

    8
      Northwestern Mutual also argued that Wishnev did not make any
interest payments, and so lacked standing to sue. We reject this argument.
A borrower that has paid interest assessed in violation of the Initiative
may maintain a suit for treble the amount of “money so paid or value
delivered.” Cal. Civ. Code § 1916-3. Wishnev effectively made interest
payments when Northwestern Mutual applied the annual dividend to
reduce the amount of his loan balance, including accrued interest. See
Black’s Law Dictionary 1243 (9th ed. 2009) (defining “payment” as
“[p]erformance of an obligation by the delivery of money or some other
valuable thing accepted in partial or full discharge of the obligation.”); see
also Corwin v. Ward, 35 Cal. 195, 196, 198 (1868) (holding that offsetting
two loans discharges a party’s obligation, even when money doesn’t
change hands.).
16         WISHNEV V. NORTHWESTERN MUTUAL

subject to the plenary authority of the legislature as to interest
rates and “other compensation” are also exempt from the
disclosure requirement of section 1916-2.

     There is no dispute that Northwestern Mutual is an
exempt lender for purposes of Article XV. See Cal. Ins. Code
§ 1100.1. Northwestern Mutual argues that Article XV, as
interpreted by the California Supreme Court, supersedes the
disclosure requirement for two main reasons. First,
Northwestern Mutual asserts that the legislature’s plenary
authority over insurers exempts them from all of the
Initiative’s requirements. According to Northwestern Mutual,
this interpretation is consistent with Carter, which noted that
the regulation of exempt lenders “is entirely within the
control of the Legislature,” 33 Cal. 2d at 583, and that an
exempt lender “is subject to no restriction on interest rates or
charges” until the legislature exercises its power under the
amendment, id. at 582. Northwestern Mutual argues that this
broad reading is consistent with “the objective” of Article
XV, “to reestablish in the Legislature the power to enact laws
affecting the business of lending money in [California].” Id.
at 579.

    Second, Northwestern Mutual argues that even if exempt
lenders are subject to some provisions in the Initiative, they
are not subject to the disclosure requirement because it is in
direct conflict with Article XV. This argument proceeds
through several steps. According to Northwestern Mutual,
the regulation of compound interest falls squarely within the
legislature’s exclusive power over exempt lenders because
Article XV provides that the legislature may “in any manner
fix, regulate or limit the fees, bonuses, commissions,
discounts or other compensation” that the exempted class
may “charge or receive” on a loan. Cal. Const. art. XV, § 1.
          WISHNEV V. NORTHWESTERN MUTUAL                   17

Northwestern Mutual asserts that when lenders compound
interest, they directly “charge” a borrower on the loan by
increasing the loan payments at each interval. Moreover, the
phrase “other compensation” is broad enough to cover
compound interest. Indeed, Northwestern Mutual asserts,
compound interest can be a form of interest. For instance, the
California Supreme Court has held that compound interest is
included in the interest rate calculation when looking at the
total interest charged by a lender. See Heald, 52 Cal. 2d at
840 (citing numerous cases for the proposition that
compounding at intervals of less than one year can make a
transaction “usurious” when the effective interest rate
exceeds the maximum interest rate). Thus, the legislature’s
power to regulate compound interest is also derived from the
power to “prescribe the maximum rate per annum” that the
exempted lenders “may charge or receive” on a loan. Cal.
Const. art. XV, § 1.

    Northwestern Mutual next argues that the legislature’s
power to regulate compound interest encompasses the
procedures for charging compound interest, including any
disclosure requirement. If exempt lenders were subject to a
procedural disclosure requirement, Northwestern Mutual
argues, the purpose of giving the legislature flexibility to
regulate different categories of lenders would be hampered or
defeated. Because the authority granted to the legislature
under Article XV includes the regulation of compound
interest, which encompasses the manner in which it is
charged, Northwestern Mutual concludes that Article XV
directly conflicts with, and therefore supersedes, the
Initiative’s disclosure requirement.

    In response, Wishnev argues that Penziner makes it clear
that Article XV does not supersede the Initiative unless the
18         WISHNEV V. NORTHWESTERN MUTUAL

two are “irreconcilable, clearly repugnant, and so inconsistent
that the two cannot have concurrent operation.” 10 Cal. 2d at
176. Because Article XV does not directly address the
Initiative’s disclosure requirement, Wishnev argues the
disclosure requirement is not irreconcilable or repugnant to
the operation of Article XV. Wishnev also argues that
compound interest is not “other compensation” a lender may
receive or charge on a loan; rather, he contends, that term
refers to “charges (and discounts), not methods of calculating
interest” and is “best understood to refer to loan points and
similar loan-related charges.”

    Second, Wishnev argues that, even if the legislature has
exclusive authority to regulate the compound interest charged
by an exempt lender, this power does not include authority
over procedural requirements, such as the disclosure
requirement. Because the Initiative “merely imposes a
procedural threshold of disclosure and consent,” it does not
conflict with the legislature’s power to govern the amount of
compound interest a lender can charge, and therefore remains
in effect under Penziner.

    Four federal district courts have addressed the issues
raised in this certification order, reaching different
conclusions. In this case, the district court held that exempt
lenders are subject to the compound interest disclosure
requirement. In contrast, three other district courts in the
Ninth Circuit have held that exempt lenders are not subject to
the Initiative’s disclosure requirement. See Washburn v.
Prudential Ins. Co. of Am., 158 F. Supp. 3d 888, 896 (N.D.
Cal. 2015) (recognizing that the power to “in any manner fix,
regulate or limit” the charges of exempt lenders includes
regulation of compound interest, and holding the Initiative is
superseded by Article XV); Martin v. Metro. Life Ins. Co.,
           WISHNEV V. NORTHWESTERN MUTUAL                     19

179 F. Supp. 3d 948, 954–55 (N.D. Cal. 2016) (reasoning that
because “[c]ompound interest is a tool lenders may employ
to circumvent the interest rate cap,” the legislature’s authority
“to regulate such charges places compound interest within the
legislature’s ambit”); Lujan v. New York Life Ins. Co., No.
16-CV-00913-JSW, 2016 WL 4483870, at *5 (N.D. Cal.
Aug. 9, 2016) (same).

    These cases illustrate that both Northwestern Mutual’s
and Wishnev’s arguments find support in the case law and
language of the Initiative. Moreover, the division among the
district courts shows that the lack of clarity is causing
confusion. We therefore need guidance from the California
Supreme Court to determine whether Northwestern Mutual is
subject to the Initiative’s compound interest disclosure
requirement.

                               IV

    If the California Supreme Court determines that exempt
lenders are subject to the Initiative’s disclosure requirement,
a second unsettled question arises: Did the procedures in this
case satisfy that requirement?

    The Initiative provides that “interest shall not be
compounded, nor shall the interest thereon be construed to
bear interest unless an agreement to that effect is clearly
expressed in writing and signed by the party to be charged
therewith.” Cal. Civ. Code § 1916-2. Under California
insurance law, the “entire contract” includes the life insurance
policy and any “application” if the application is “indorsed
upon or attached to the policy.” Cal. Ins. Code § 10113. The
California Supreme Court has not determined whether a
20        WISHNEV V. NORTHWESTERN MUTUAL

signature on an application for insurance, when later attached
to the full insurance policy, satisfies section 1916-2.

    The California Supreme Court has twice addressed
whether a lender’s document satisfies the Initiative’s
disclosure requirement—that “an agreement” stating the
lender may charge compound interest “is clearly expressed in
writing and signed by the party to be charged therewith.” See
McConnell v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
21 Cal. 3d 365 (1978) (McConnell I); McConnell v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 33 Cal. 3d 816 (1983)
(McConnell II). In McConnell I, an agreement between
borrower and lender stated that interest would be charged in
the broker’s “usual custom.” 21 Cal. 3d at 370. The Court
held that “the customer’s agreement on its face does not
clearly express an understanding that interest would be
compounded,” and therefore did not satisfy the Initiative’s
requirement that “the parties ‘clearly expressed in writing’
that defendant could charge compound interest.” Id. at 375.
In McConnell II, the same brokerage house asserted that it
complied with the Initiative’s requirement by sending
monthly statements that “assertedly provided notice to [its
customers] that compound interest was being charged on their
accounts.” 33 Cal. 3d at 823. McConnell II explained that
these follow-up monthly statements “would not satisfy the
unequivocal requirement of [the Initiative] that the borrower
must agree in writing to pay compound interest.” Id.
Because “the documents relied on by defendant as providing
notice to its customers do not satisfy the precise
requirements” of the Initiative, the Court determined it was
irrelevant whether the customers understood that the lender
intended to charge compound interest. Id. Neither of these
cases, however, considered whether a signed application for
insurance, together with an insurance policy that clearly sets
           WISHNEV V. NORTHWESTERN MUTUAL                   21

forth the lender’s intent to compound interest, constitutes an
“agreement” that satisfies the requirement of the Initiative.

    Northwestern Mutual argues that McConnell I and II do
not provide guidance in this case, and instead we should rely
on section 10113 of the California Insurance Code, which
provides that an application attached to a policy shall be
deemed to “constitute the entire contract between the parties.”
Northwestern Mutual argues that the policy and the
application together are one agreement, that Wishnev signed
the agreement by signing the application, and that the
agreement clearly states compound interest will be charged
through language in the policy. Therefore, Northwestern
Mutual asserts it complied with the plain language of the
Initiative and California contract law, because the Initiative
does not require disclosure “on the actual document signed by
the borrower,” only that the “agreement” be signed and
disclose sufficient information. See Lujan, 2016 WL
4483870, at *7.

    Wishnev, by contrast, argues that the purpose of the
Initiative’s requirement is to ensure that a borrower knows of
the lender’s intent to charge compound interest before
entering into an agreement with the lender, and this
knowledge can be demonstrated only by signing the paper
that actually contains those terms. Because the application
did not contain the compound interest terms, and Wishnev
signed only the application, the fact that Northwestern Mutual
subsequently provided an unsigned policy does not satisfy the
Initiative’s requirements any more than the subsequently
provided monthly statements in McConnell II.

  The district court here agreed with Wishnev. It read
McConnell II as requiring a signature on the paper disclosing
22        WISHNEV V. NORTHWESTERN MUTUAL

the lender’s intent to assess compound interest, and held
Northwestern Mutual failed to comply with this requirement.
Other district courts have rejected this reading of McConnell
II and concluded that the insurance policy and the application
constitute an agreement for purposes of the Initiative’s
requirements. See Martin, 179 F. Supp. 3d at 957; Lujan,
2016 WL 4483870, at *6–7.

    Resolution of both questions is essential to the more than
300 California insurers and millions of policyholders who
have outstanding policy loans. Currently, the conflicting
interpretations of state law create uncertainty around policy
loans. Moreover, the Association of California Life and
Health Insurance Companies claims that if insurers are
subject to the Initiative’s disclosure requirement, and that
requirement is not satisfied by the steps taken here,
compliance would require an “overhaul of insurers’ business
processes.” An authoritative interpretation of the California
Constitution, the Initiative, and, if necessary, California
contract law is needed to give insurance companies guidance
on these critical issues of policy loan formation.

                              V

    The Clerk of Court is hereby directed to transmit
forthwith to the California Supreme Court, under official seal
of the Ninth Circuit, a copy of this order and request for
certification and all relevant briefs and excerpts of record
pursuant to California Rule of Court 8.548. Submission of
this case is withdrawn, and the case will be resubmitted
following receipt of the California Supreme Court’s opinion
on the certified questions or notification that it declines to
answer the certified questions.           The Clerk shall
administratively close this docket pending a ruling by the
           WISHNEV V. NORTHWESTERN MUTUAL                   23

California Supreme Court regarding the certified questions.
The panel shall retain jurisdiction over further proceedings in
this court. The parties shall notify the Clerk of this court
within one week after the California Supreme Court accepts
or rejects certification. In the event the California Supreme
Court grants certification, the parties shall notify the Clerk
within one week after the Court renders its opinion.

  CERTIFICATION REQUESTED; SUBMISSION
VACATED.
24        WISHNEV V. NORTHWESTERN MUTUAL

                        Appendix A

     The 1918 Initiative: Cal. Civ. Code §§ 1916-1–5

1916-1     The rate of interest upon the loan or forbearance
           of any money, goods or things in action or on
           accounts after demand or judgments rendered in
           any court of this state, shall be seven dollars upon
           the one hundred dollars for one year and at that
           rate for a greater or less sum or for a longer or a
           shorter time; but it shall be competent for parties
           to contract for the payment and receipt of a rate of
           interest not exceeding twelve dollars on the one
           hundred dollars for one year and not exceeding
           that rate for a greater or less sum or for a longer
           or shorter time, in which case such rate exceeding
           seven dollars on one hundred dollars shall be
           clearly expressed in writing.

1916-2     No person, company, association or corporation
           shall directly or indirectly take or receive in
           money, goods or things in action, or in any other
           manner whatsoever, any greater sum or any
           greater value for the loan or forbearance of
           money, goods or things in action than at the rate
           of twelve dollars upon one hundred dollars for
           one year; and in the computation of interest upon
           any bond, note, or other instrument or agreement,
           interest shall not be compounded, nor shall the
           interest thereon be construed to bear interest
           unless an agreement to that effect is clearly
           expressed in writing and signed by the party to be
           charged therewith. Any agreement or contract of
           any nature in conflict with the provisions of this
         WISHNEV V. NORTHWESTERN MUTUAL                   25

         section shall be null and void as to any agreement
         or stipulation therein contained to pay interest and
         no action at law to recover interest in any sum
         shall be maintained and the debt can not be
         declared due until the full period of time it was
         contracted for has elapsed.

1916-3   (a) Every person, company, association or
         corporation, who for any loan or forbearance of
         money, goods or things in action shall have paid
         or delivered any greater sum or value than is
         allowed to be received under the preceding
         sections, one and two, may either in person or his
         or its personal representative, recover in an action
         at law against the person, company, association or
         corporation who shall have taken or received the
         same, or his or its personal representative, treble
         the amount of the money so paid or value
         delivered in violation of said sections, providing
         such action shall be brought within one year after
         such payment or delivery.

         (b) Any person who willfully makes or negotiates,
         for himself or another, a loan of money, credit,
         goods, or things in action, and who directly or
         indirectly charges, contracts for, or receives with
         respect to any such loan any interest or charge of
         any nature, the value of which is in excess of that
         allowed by law, is guilty of loan-sharking, a
         felony, and is punishable by imprisonment in the
         state prison for not more than five years or in the
         county jail for not more than one year. This
         subdivision shall not apply to any person licensed
         to make or negotiate, for himself or another, loans
26       WISHNEV V. NORTHWESTERN MUTUAL

         of money, credit, goods, or things in action, or
         expressly exempted from compliance by the laws
         of this state with respect to such licensure or
         interest or other charge, or to any agent or
         employee of such person when acting within the
         scope of his agency or employment.

1916-4   Sections one thousand nine hundred seventeen,
         one thousand nine hundred eighteen, one
         thousand nine hundred nineteen and one thousand
         nine hundred twenty of the Civil Code and all acts
         and parts of acts in conflict with this act are
         hereby repealed.

1916-5   This act whenever cited, referred to, or amended
         may be designated simply as the “usury law.”
           WISHNEV V. NORTHWESTERN MUTUAL                    27

                            Appendix B

                      Cal. Const. art. XV, § 1

§ 1. Interest rates

    The rate of interest upon the loan or forbearance of any
    money, goods, or things in action, or on accounts after
    demand, shall be 7 percent per annum but it shall be
    competent for the parties to any loan or forbearance of
    any money, goods or things in action to contract in
    writing for a rate of interest:

    (1) For any loan or forbearance of any money, goods, or
    things in action, if the money, goods, or things in action
    are for use primarily for personal, family, or household
    purposes, at a rate not exceeding 10 percent per annum;
    provided, however, that any loan or forbearance of any
    money, goods or things in action the proceeds of which
    are used primarily for the purchase, construction or
    improvement of real property shall not be deemed to be
    a use primarily for personal, family or household
    purposes; or

    (2) For any loan or forbearance of any money, goods, or
    things in action for any use other than specified in
    paragraph (1), at a rate not exceeding the higher of (a) 10
    percent per annum or (b) 5 percent per annum plus the
    rate prevailing on the 25th day of the month preceding the
    earlier of (i) the date of execution of the contract to make
    the loan or forbearance, or (ii) the date of making the loan
    or forbearance established by the Federal Reserve Bank
    of San Francisco on advances to member banks under
    Sections 13 and 13a of the Federal Reserve Act as now in
28          WISHNEV V. NORTHWESTERN MUTUAL

     effect or hereafter from time to time amended (or if there
     is no such single determinable rate of advances, the
     closest counterpart of such rate as shall be designated by
     the Superintendent of Banks of the State of California
     unless some other person or agency is delegated such
     authority by the Legislature).

     No person, association, copartnership or corporation shall
     by charging any fee, bonus, commission, discount or
     other compensation receive from a borrower more than
     the interest authorized by this section upon any loan or
     forbearance of any money, goods or things in action.

     However, none of the above restrictions shall apply to any
     obligations of, loans made by, or forbearances of, [list of
     exempt lenders] or any other class of persons authorized
     by statute, or to any successor in interest to any loan or
     forbearance exempted under this article, nor shall any
     such charge of any said exempted classes of persons be
     considered in any action or for any purpose as increasing
     or affecting or as connected with the rate of interest
     hereinbefore fixed. The Legislature may from time to
     time prescribe the maximum rate per annum of, or
     provide for the supervision, or the filing of a schedule of,
     or in any manner fix, regulate or limit, the fees, bonuses,
     commissions, discounts or other compensation which all
     or any of the said exempted classes of persons may
     charge or receive from a borrower in connection with any
     loan or forbearance of any money, goods or things in
     action.

     The rate of interest upon a judgment rendered in any court
     of this state shall be set by the Legislature at not more
     than 10 percent per annum. Such rate may be variable and
      WISHNEV V. NORTHWESTERN MUTUAL                   29

based upon interest rates charged by federal agencies or
economic indicators, or both.

In the absence of the setting of such rate by the
Legislature, the rate of interest on any judgment rendered
in any court of the state shall be 7 percent per annum.

The provisions of this section shall supersede all
provisions of this Constitution and laws enacted
thereunder in conflict therewith.
