BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 1693 (Gonzalez) - Claims against the state:  payment
          
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          |Version: May 10, 2016           |Policy Vote:                    |
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          |Urgency: Yes                    |Mandate: No                     |
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          |Hearing Date: June 20, 2016     |Consultant: Mark McKenzie       |
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          This bill does not meet the criteria for referral to the  
          Suspense File.  Pursuant to the committee's rules, the Suspense  
          File rule does not apply to the provisions of this bill as  
          judgments and settlement are considered valid obligations of the  
          state.  Additionally, judgments and settlements may have time  
          sensitivity.


          Bill  
          Summary:  AB 1693, an urgency measure, would appropriate $10.55  
          million from the General Fund to the Department of Justice (DOJ)  
          for the payment of two settlements.  Any funds appropriated in  
          excess of the amounts required for payment of these claims would  
          revert to the General Fund.


          Fiscal  
          Impact:  
           One-time appropriation of $10,164,000 in 2016-17 from the  
            General Fund to DOJ to pay the settlement in Ruelas, et.al. v.  
            State of California, et al.

           One-time appropriation of $387,088 in 2016-17 from the General  







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            Fund to DOJ to pay  the judgment in Pacific Merchant Shipping  
            Association v. The Board of Pilot Commissioners for the Bays  
            of San Francisco, et al.


          Background:  This bill is one of several annual bills carried by the chairs  
          of the Appropriations Committees 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.


          Proposed Law:  
            This bill would appropriate General Fund revenues to DOJ to  
          pay the following settlements:
           Settlement agreement for Ruelas, et.al. v. State of California,  
          et al.  


          (Superior Court of California, County of San Bernardino, Case  
          No. RCVRS083017)  $10 million settlement, plus interest, payable  
          from the General Fund.
          This case initially involved four former wards who had been  
          incarcerated at Heman G. Stark Youth Correctional Facility.  The  
          wards alleged that a youth correctional counselor had sexually  
          abused them during their incarceration, and that two members of  
          facility management knew about the counselor's propensities but  
          failed to take appropriate action.


          A 2010 jury verdict found in favor of all four plaintiffs'  
          claims for $1,077,896.  Parties stipulated to punitive damages  
          of $100,000 for the counselor and $50,000 each for the two  
          defendants from management.  The court awarded costs and  
          attorneys' fees at $7,228,136.47, bringing the total judgment  
          amount to $8,506,032.47.





          The state appealed this case to the Fourth District Court of  
          Appeal; that court issued a final ruling in October, 2016.  One  








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          of the plaintiffs' judgments was reversed; the trial court's  
          judgments for the remaining three were almost entirely affirmed.  
           A rehearing took place, and the opinion was upheld with only  
          slight modifications.  This rehearing represented the final  
          opportunity for the state to contest the awarded judgment.





          In February 2016, the California Department of Corrections and  
          Rehabilitation entered into a settlement with the three  
          prevailing plaintiffs, agreeing to pay a total of $10 million in  
          exchange for a waiver of punitive damages against all  
          defendants, a waiver of any further claims to attorneys' fees  
          and costs, and the filing of acknowledgments of full  
          satisfaction of the judgments.  DOJ notes that, absent the  
          settlement, state liability would likely be in the range of $11  
          million as a result of additional potential costs related to the  
          appeal.


          Per the settlement agreement, interest began to accrue on the  
          principal amount of the judgments ($7,128,593.55) as of April  
          23, 2016, and approximately $1,367.12 will be added per day to  
          the amount owed until payment is complete.  DOF estimates that a  
          payment should be completed within 120 days of the due date;  
          therefore, a maximum of $164,000 in potential interest has been  
          added to the principal.  In the event that a lesser amount of  
          interest has accrued at the time of payment, the excess  
          appropriation will revert to the General Fund.


           Settlement agreement for Pacific Merchant Shipping Association  
          v. The Board of Pilot Commissioners for the Bays of San  
          Francisco, et al.  


          (Superior Court of California, County of San Francisco, Case No.  
          CPF-12 512320)  $387,088, payable from the General Fund.
          This is a case that involved a Port Agent who refused to turn  
          over records relating to the assignments and work hours of  
          harbor pilots in the San Francisco Bay.  The state argued that  
          such Port Agents are not agents of the state and that their  








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          records are not subject to the Public Records Act.  Although the  
          Port Agent designation was created by statute, Port Agents are  
          not employed by any state agency and do not act as the agent of  
          any state agency.  Instead, this Port Agent works for the  
          private San Francisco Bar Pilots, in their private offices.   
          Port Agents are merely regulated by the state through the Board  
          of Pilot Commissioners.


          Although the Attorney General represented the Port Agent in his  
          alleged "official capacity" in the litigation, this was only  
          done to present arguments to the court that the Port Agent is  
          not a state officer or state official who is himself subject to  
          the PRA.  Moreover, the Attorney General argued throughout the  
          litigation that the State of California is neither responsible  
          for the Port Agent's activities or for payment of any judgment  
          rendered against him in PRA litigation.


          A San Francisco Superior Court judgment found in favor of the  
          plaintiffs (Pacific Merchant Shipping Association) and awarded  
          them their fees and costs.  The judgment is not directed to any  
          state agency; instead, it directs the Port Agent, in his  
          official capacity, to pay $387,088.15 as fees and costs incurred  
          by PMSA in the PRA litigation. For purposes of this judgment,  
          however, the Attorney General's representation of the Port Agent  
          in his alleged official capacity makes it necessary to comply  
          with the court's ruling that a judgment be paid through the  
          Attorney General's annual claims bill.


          DOJ notes that while the state is conclusively obligated to pay  
          the judgment in PMSA, the State of California does not concede  
          that a Port Agent is a state officer or state official and will  
          continue to argue that the state should not be liable for the  
          actions of Port Agents in any future litigation.


          Related  
          Legislation:  SB 1187 (Lara), which is currently pending in this  
          Committee, is a vehicle to provide payment of any pending  
          settlements that may require legislative approval this year.
          SB 302 (Lara), Chapter 5/2015, appropriated approximately $24.2  
          million from specified funds for the payment of four  








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          settlements.


          AB 164 (Gomez), Chapter 394/2015, appropriated approximately  
          $2.7 million from specified funds to DOJ for the payment of two  
          settlements.




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