BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1558 (Kehoe) - state claims
Amended: March 29, 2012 Policy Vote: Not Applicable
Urgency: Yes Mandate: No
Hearing Date: April 12, 2102 Consultant:
Bob Franzoia
This bill meets 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
settlements are considered valid obligations of the state.
Additionally, judgments and settlements may have time
sensitivity.
Bill Summary: This bill would appropriate $1,300,000 from the
General Fund to the Department of Justice to pay the settlement
and accumulated interest in Darling v. Douglas, United States
District Court, Northern District of California, Case No.
4:09-cv-03798-SBA. Any funds appropriated in excess of the
amount required for the payment of this claim shall revert to
the General Fund.
This bill would also appropriate $1,300,000 from the Federal
Trust Fund to the Department of Justice to pay the settlement
and accumulated interest in Darling v. Douglas, United States
District Court, Northern District of California, Case No.
4:09-cv-03798-SBA. Any funds appropriated in excess of the
amount required for the payment of this claim shall revert to
the Federal Trust Fund.
Fiscal Impact: Appropriations; $1,300,000 from the General Fund
and $1,300,000 from the Federal Trust Fund
Interest of seven percent commencing 90 days after the
effective date of the settlement (January 25, 2012) or April
24, 2012.
Background: Darling, et al v. Douglas, et al
United States District Court, Northern District of California,
Case No. 4:09-cv-03798-SBA
In Darling v. Douglas, plaintiffs, participants in an optional
Medi-Cal program, Adult Day Health Care (ADHC) brought suit
SB 1558 (Kehoe)
Page 1
contending that the Department of Health Care Services (DHCS)
did not have an adequate transition plan in place prior to the
elimination of ADHC. Plaintiffs filed their initial complaint
on August 18, 2009. Plaintiffs did not challenge the
elimination per se, but contended that DHCS was required to
provide replacement services before the DHCS could eliminate the
program. Plaintiffs asserted that the changes to the program
would place them at risk of unnecessary institutionalization,
alleged their due process rights were violated and that the
restrictive new eligibility criteria violated Medicaid
requirements.
In mid-November 2011, the parties agreed to settle the
litigation. Under the terms of the settlement agreement, a new
program, Community-Based Adult Services (CBAS), would be
provided to those ADHC participants who qualify and enhanced
case management would be provided to those who do not qualify
for CBAS. The settlement agreement provides that both programs
will eventually only be offered through managed care plans
(except in areas where a plan does not operate).
The settlement agreement provides for payment of attorneys' fees
to plaintiffs' counsel in the amount of $2.2 million for all
work performed prior to the court's approval of the settlement
agreement and an additional $400,000 to be billed for the length
of the agreement (thirty months) for any work performed
regarding implementation and compliance with the agreement.
Judgments against the state are enforceable under Government
Code 965.5. In California Federal Savings and Loan Association
v. City of Los Angeles (1995) 11 Cal.4th 342, the court held the
rate of interest on a judgment against a local government is
seven percent based upon Government Code 970.1. The language in
Government Code 970.1 is identical to Government Code 965.5.
The court concluded: "Section 970.1, subdivision (b), of
Division 3.6 of Title 1 of the Government Code, which provides
that "�a] judgment ... is not enforceable under Title 9,"
exempts local public entities from Title 9 of the Code of Civil
Procedure. Division 3.6 does not, however, itself set a rate of
postjudgment interest for claims against the state or local
public entities. Accordingly, pursuant to Article XV, Section
1, of the California Constitution, "�i]n the absence of the
setting of such rate by the Legislature," the applicable rate of
SB 1558 (Kehoe)
Page 2
postjudgment interest to be paid by local public entities is
seven percent per annum. (Id. at pp. 344-345.)
For this settlement, interest of seven percent begins commencing
90 days after the effective date of the settlement (January 25,
2012) or April 24, 2012.
Related Legislation: SB 1504 (Kehoe) would revise statutes
relating to the payment of interest on claims approved by the
board and on judgment and settlement claims. SB 1504 is on
today's agenda.
SB 730 (Kehoe) Chapter 5/2012 appropriated $13 million to the
Department of Justice to pay six settlement claims.