BILL ANALYSIS Ó
SB 730
Page 1
Date of Hearing: February 9, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 730 (Kehoe) - As Amended: Jan. 25, 2012
Policy Committee:
AppropriationsVote:
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill appropriates $13 million to the Department of Justice
(DOJ) to pay for settlements in six cases. Any funds
appropriated in excess of the amount required for the payment of
these claims reverts to the appropriate fund.
FISCAL EFFECT
This bill appropriates $12,992,000 ($11,492,000 GF; $1,500,000
State Parks and Recreation Fund) to pay for six settlements,
including interest for two cases (Environmental Protection
Information Center, et al v. California Department of Forestry
and Fire Protection, et al and Steelworkers of American, et al,
v. California Department of Forestry and Fire Protection, et al
(Headwaters); and California School Boards Association, et al.
v. State of California).
Estimated interest on the Headwaters case is about $1,100 per
day, beginning Nov. 15, 2011. Should payment not be made until
Sept. 15, for example, interest would amount to about $315,000.
Interest on the school boards case does not begin to accrue if
the court-ordered payment is made within 180 days of the
stipulation (Jan 20, 2012). Should the payment not be made until
Sept. 20, for example, interest would amount to about $17,000.
Any funds appropriated in excess of the amount required will
revert to the appropriate fund.
COMMENT.
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1)Rationale. This bill is one of two annual bills carried by the
Appropriations chairs to provide appropriation authority for
legal settlements approved by DOJ and the Department of
Finance (DOF).
These settlements were entered into lawfully by the state upon
advice of counsel (DOJ). They are binding state obligations.
2)Case background .
a) Aaron Ciccotti, Harold Ciccotti, and Bradley Ciccotti v.
State of California; Merced County Superior Court - $1.5
million (State Parks and Recreation Fund).
On October 23, 2009, plaintiffs brought an action against
the state Department of Parks and Recreation as the result
of a June 19, 2009 accident at the Los Banos Creek
Reservoir in Gustine. Aaron Ciccotti was struck by a large
tree that fell by his campsite. As a result of this
accident, Aaron Ciccotti underwent three surgeries to his
clavicles and right knee. The complaint included a cause of
action for negligence and for dangerous condition of public
property. The matter was resolved with a $1.5 million
settlement.
b) Environmental Protection Information Center, et al v.
California Department of Forestry and Fire Protection, et
al and Steelworkers of American, et al, v. California
Department of Forestry and Fire Protection, et al; Humboldt
County Superior Court - $5.5 million (GF), $3.5 million,
plus interest, for EPIC, and $2 million, plus interest, for
the steelworkers.
The Headwaters Agreement entered into in 1996 between the
state and federal governments and the Pacific Lumber
Company (PLC) set aside the old-growth redwood trees of the
Headwaters Grove for conservation purposes. This grove
belonged to the PLC, and in return the PLC was authorized
to harvest redwood trees on the remainder of its lands
subject to permits. The plaintiffs challenged certain
permits and findings associated with California
Environmental Quality Act compliance.
Petitioners alleged abuse of discretion and violations of
the Forest Practice Act and the California Environmental
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Quality Act, among other things. From 1999 to 2010, the
parties litigated the cases in the trial court, the Court
of Appeal and the Supreme Court. Ultimately, the appellate
courts found certain provisions of the incidental take
permit and the sustained yield plan invalid. Petitioners
moved for attorneys' fees, initially requesting nearly $14
million for their work in invalidating the sustained yield
plan and certain provisions of the incidental take permit.
In 2011, the agencies and the petitioners settled the
attorneys' fees issue.
A settlement to award attorney fees was agreed upon in
lawsuits filed by the steel workers and the Environmental
Protection and information Center (EPIC) against the
Department of Forestry and Fire Protection (CAL FIRE), and
the Department of Fish and Game (DFG). The settlement
requires CAL FIRE and DFG to pay $2 million, plus interest,
to the Steel Workers and $3.5 million, plus interest, to
EPIC.
c) California School Boards Association, et al. v. State of
California; San Diego Superior Court - $312,000, with
interest, (GF).
This case challenged the practice of deferring education
mandates by partially funding them with a $1,000
appropriation. The Court of Appeal ruled the partial
funding practice was inconsistent with the constitutional
and statutory scheme, but reversed the trial court's writ
and injunctive relief.
The school districts' cross-appeal seeking the right to
$900 million owed the districts from existing state
accounts was rejected. The Court of Appeal found that
permitting such an incursion into the budgeting process
would elevate the judiciary over the legislative branch and
violate principles of separation of powers.
The parties agreed to resolve the petitioners' attorney
fees claim without further litigation. Fees and costs total
$294, 974, plus interest.
d) Mather Development Partners IV, L.P. v. EdFund, Inc., et
al; Sacramento County Superior Court - $4,230,000 (GF).
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In October 2006, Mather entered into a 10-year commercial
lease agreement with the California Student Aid
Commission's (CSAC) auxiliary organization, EdFund, a
nonprofit public benefit corporation. EdFund provided
operational and administrative services related to CSAC's
state guarantor responsibilities under the Federal Family
Education Loan Program (FFELP). The State of California
did not sign the lease, but CSAC and EdFund jointly
solicited bids for the lease and shared a planning
committee for the move to Mather's newly constructed
buildings. Under an Operating Agreement between EdFund and
CSAC, EdFund paid the lease payments and then sought
approval and reimbursement from CSAC. On October 31, 2010,
the U.S. Department of Education terminated CSAC's
guarantor designation under the FFELP, and ordered the
transfer of all CSAC and EdFund guarantor functions,
operations, and assets to a private entity, causing EdFund
to default on its lease with Mather.
Mather claimed losses exceeding $40 million from the breach
of the commercial lease and the failure to properly phase
out the state's non-profit corporation. Claims against the
state included breach of contract, negligent
misrepresentation, fraudulent conveyance of funds, and
third party beneficiary liability arising under the
CSAC/EdFund Operating Agreement. Mather filed a lawsuit in
March 2011 against the outstanding lease obligation.
DOF participated in mediation in June 2011 with Mather,
CSAC, and EdFund. Subsequent discussions resulted in a
settlement of $4,230,000 for tenant improvements, real
estate broker commissions, assets, and other costs.
e) Entertainment Merchants Association v. Edmund Brown;
U.S. Supreme Court, referred to Ninth Circuit - $950,000
(GF).
On June 27, 2011, the U.S. Supreme Court affirmed the
judgment of the Court of Appeal and the District Court for
the Northern District of California to award attorney fees
and expenses incurred by plaintiffs in their successful
defense in the case of Entertainment Merchants Association
v. Edmund Brown. The Supreme Court ruled that a 2005
California law that banned the sale of certain violent
video games to children under 18 without parental
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supervision violated the First Amendment. The court's
stipulation agreement requires that by no later than June
30, 2012, the state pay $950,000 in attorney fees. These
fees are for U.S. Supreme Court proceedings only; the
parties had previously settled fee requests in the district
court and the Ninth Circuit.
3)Related Legislation .
a) AB 140 (Fuentes) and SB 206 (Kehoe), both chaptered in
2011, appropriated funds state settlements last year.
b) AB 1714 (Fuentes) and SB 911 (Kehoe), both chaptered in
2010, appropriated funds for state settlements in 2010.
Analysis Prepared by : Geoff Long / APPR. / (916) 319-2081