BILL ANALYSIS �
SB 730
Page 1
SENATE THIRD READING
SB 730 (Kehoe)
As Amended January 25, 2012
2/3 vote. Urgency
SENATE VOTE :32-5
APPROPRIATIONS 11-0
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|Ayes:|Fuentes, Blumenfield, | | |
| |Bradford, Charles | | |
| |Calderon, Campos, Gatto, | | |
| |Hall, Hill, Lara, | | |
| |Mitchell, Solorio | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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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
General Fund (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 November 15, 2011. Should payment not be made
until September 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 (April 20, 2012). Should the payment not be
made until September 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.
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COMMENTS :
Rationale . This bill is one of two annual bills carried by the
Appropriations Committee 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.
Case background .
1)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.
2)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.
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Petitioners alleged abuse of discretion and violations of the
Forest Practice Act and the California Environmental 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.
3)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.
4)Mather Development Partners IV, L.P. v. EdFund, Inc., et al;
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Sacramento County Superior Court - $4,230,000 (GF).
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.
5)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 supervision violated the First Amendment.
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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.
Related legislation .
1)AB 140 (Fuentes) and SB 206 (Kehoe), both chaptered in 2011,
appropriated funds for state settlements last year.
2)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 FN:
0003122