National Asian American Coalition v. Newsom

A federal lawsuit, to which 49 states and the District of Columbia had joined, ended in a settlement agreement (the National Mortgage Settlement, or "NMS"), the terms of which the federal court formally entered as consent judgments in 2012. The NMS provided $2.5 billion to be paid to the states; California's share of the settlement funds was approximately $410 million. The California Legislature enacted Government Code section 12531, creating a special deposit in the treasury where 90 percent of the $410 million would be deposited. The director of finance received approval for various expenditures from the National Mortgage Special Deposit Fund “to offset General Fund costs of programs that support public protection, consumer fraud enforcement and litigation, and housing related programs” during specified fiscal years. In 2014, plaintiff community groups sued seeking declaratory and injunctive relief against the Governor, the director of finance, and the controller, seeking the immediate return of approximately $350 million they alleged was unlawfully diverted from the National Mortgage Special Deposit Fund to the General Fund in contravention of both section 12531 and the federal consent judgments. Rejecting defendants’ contention 12531(e) permitted the director of finance to use the National Mortgage Special Deposit Fund to offset General Fund expenditures, the trial court reasoned such a reading of the statute would “raise serious doubts about the legality of the statute, not only as to whether the Legislature may override a federal judgment, but also whether the Legislature constitutionally may delegate to an agency the authority to decide how millions of dollars of state funds shall be spent with virtually no guidance or direction from the Legislature.” The trial court concluded $331,044,084 was unlawfully appropriated from the National Mortgage Special Deposit Fund. Nevertheless, noting it lacked authority to order the Legislature to appropriate funds, the trial court declared an obligation to restore the unlawfully diverted funds. After the Court of Appeal issued its original opinion in this case, defendants petitioned the California Supreme Court for review. While that petition was pending, the Legislature passed and the Governor signed into law Senate Bill No. 861 (2017 – 2018 Reg. Sess.) (Stats. 2018, ch. 331 (SB 861)), amending section 12531 to add subdivision (h). Thereafter, the Supreme Court transferred the matter to the Court of Appeal for reconsideration in light of the new 12531(h). Having done so, and giving SB 861 all due consideration, the Court confirmed the conclusions reached in its original opinion. View "National Asian American Coalition v. Newsom" on Justia Law