Lawsuits & Settlements

LOS ANGELES – Halting the “anticompetitive effects” of a merger between the nation’s two largest school bus operators, California Attorney General Edmund G. Brown Jr. today announced a settlement with First Group, plc (also known as First Student) and Laidlaw Educational Services. Under the terms of the settlement, the merged company will divest its rights in a bus depot to Riverside Unified School District and agree that Los Angeles Unified School District may terminate certain contracts for school bus services.

Commenting on today’s agreement, Attorney General Brown said, “School districts must be able to choose the best school bus company to ensure that students have rapid and reliable school transportation. Today’s agreement protects school districts and strengthens healthy competition amongst school bus companies.”

Without this agreement, the merged companies would have controlled the majority of the Los Angeles Unified School District private contracts and the only two bus depots in the Riverside Unified School District. In addition to eliminating competition between the two companies, their merger would make it more difficult for competitors to enter the private school bus markets in Los Angeles and Riverside Counties. Today’s settlement will facilitate the entry of new competitors into the areas where the merger’s anticompetitive effects are felt.

Under the agreement, the merged company will transfer its rights to the Franklin Avenue Depot to the Riverside Unified School District and give the Los Angeles Unified School District the right to terminate specific school bus transportation contracts. The parties also agree not to enforce non-competition contracts which would prevent departing employees from starting new school bus transportation companies that would compete with the merged company. The parties will also give the Attorney General notice of any future acquisitions during the next six years and will pay $1.1 million to be divided among the participating states to defray legal fees.

The acquisition of Laidlaw by First Group was first announced in February 2007. FirstGroup, headquartered in Scotland, has operations throughout the United States. It is the second largest school bus operator in the United States. Laidlaw, headquarted in Naperville, Illinois, is the nation’s largest school bus operator.

School districts in California arrange transportation for their students using both in-house and private buses. While many Districts still organize and operate student transportation systems themselves, the practice of contracting with private providers is prevalent. To be eligible to compete for a private contract, bidders must hire personnel and acquire buses, insurance and parking. In many cases, the incumbent bus companies have competitive advantages that make it difficult for new competitors to enter the market.

The California Attorney General, along with ten other states and the U.S. Department of Justice, has been reviewing the proposed acquisition. Under the Clayton Act, Section 7, mergers are illegal if they may substantially lessen competition or tend to create a monopoly. Although the merger did not raise competitive concerns for regular bus services, investigators found that the transaction would significantly lessen competition for home to school and related transportation for Los Angeles Unified School District and Riverside Unified School District.

Brown joined ten other states, Alaska, Connecticut, Illinois, Maine, Massachusetts, Minnesota, Missouri, New Jersey, Rhode Island, and Washington in filing the consent decree agreement with FirstGroup and Laidlaw Education Services today in federal district court in Massachusetts. In agreeing to the consent decree, the merging parties did not admit liability.

The consent decree and the state’s complaint are attached.

SAN FRANCISCO – California Attorney General Edmund G. Brown Jr. today announced that ConocoPhillips has agreed to an “unprecedented global warming reduction plan” to off-set greenhouse gases caused by the expansion of its Northern California oil refinery.

Brown said that the oil company has agreed to offset greenhouse gas emission increases until the carbon-cutting regulations of AB 32 take effect in 2012.

“This agreement is a groundbreaking step in California’s battle to combat global warming and gives the state an early edge in meeting the greenhouse gas reduction goals of AB 32,” Brown told a news conference with ConocoPhillips at the Attorney General’s Office in San Francisco.

ConocoPhillips has proposed an oil refinery expansion at its Rodeo facility in Contra Costa County, including a hydrogen plant to make cleaner-burning gasoline and diesel fuels from the heavy portion of crude oil. Brown appealed to the Contra Costa County Board of Supervisors, challenging the environmental documentation for the project and the failure to mitigate the increased greenhouse gas emissions resulting from the operation of the hydrogen plant.

The Attorney General said he would now withdraw the state’s appeal based on the significant greenhouse gas emission offsets agreed to by ConocoPhillips.

Brown added, “Under this unprecedented global warming reduction plan, ConocoPhillips becomes the first oil company in America to off-set greenhouse gas emissions from a refinery expansion project. This is a breakthrough.”

The hydrogen project will initially emit approximately 500,000 metric tons of CO2 per year. ConocoPhillips will take the following actions as part of its efforts to offset these emissions:

• Auditing all its California refineries and identifying all greenhouse gas emission sources and reduction opportunities.

• Conducting an energy efficiency audit at Rodeo to identify feasible energy efficiency measures.

• Funding a $7 million offset program that the Bay Area Air Quality Management District will use to support offset projects in the Bay Area.

• Funding $2.8 million for reforestation efforts in California, with an estimated sequestration of 1.5 million metric tons of greenhouse gases over the life of the reforestation projects.

• Funding $200,000 for restoration of the San Pablo wetlands.

• Surrendering the operating permit for the calciner at the Santa Maria facility, which ConocoPhillips estimates emitted 70,000 metric tons of greenhouse gases annually.

• If ConocoPhillips reduces its greenhouse gas emissions at the Rodeo facility, it will get credit towards its contribution to the Bay Area Air Quality Management District offset fund.

ConocoPhillips also agrees to offset any CO2 emissions in excess of 500,000 metric tons per year from the hydrogen unit if it increases its use of hydrogen. The company may apply to receive offsets credits for reductions achieved through the projects and activities funded through this agreement, under AB 32, or any equivalent state or federal law or regulation.

In 2005, ConocoPhillips proposed a project, known as the Clean Fuels Expansion Project, designed to make cleaner-burning gasoline and diesel fuels from the heavy gas oil already produced at the refinery. The expansion included a hydrogen plant to produce steam and electricity for these refinery processes. ConocoPhillips estimated that the project would increase the supply of cleaner burning fuels by approximately one million gallons per day in California.

Under the California Environmental Quality Act (CEQA), Contra Costa County prepared an Environmental Impact Report on the project and accepted public comments. After the concluding that the report adequately addressed greenhouse gas emissions and climate change, the County Planning Commission certified the report. Attorney General Brown appealed to the Contra Costa County Board of Supervisors in May 2007 on grounds that the impact report did not adequately address the greenhouse gas emissions and the associated climate change impacts of the project.

Scientists throughout the world overwhelming agree that global warming is real, is here now, and will get worse. At current emissions levels, temperatures in California will increase by 4 to 10 degrees during this century. In 2006 Governor Arnold Schwarzenegger signed AB 32, landmark global warming legislation that commits the state to reduce greenhouse gas emissions to 1990 levels by 2020—a 25% reduction. But AB 32 regulations do not take effect until 2012 and there are no current limits on greenhouse gas emissions.

Today’s agreement with ConocoPhillips comes on the heels of a landmark agreement with San Bernardino County to reduce greenhouse gas emissions at the county level. These actions join a growing movement at the local level to combat climate change. As of June 2007, over 540 mayors from 50 states have signed the U.S. Mayors Climate Protection Agreement, a pledge to reduce global warming pollution in cities 7% below 1990 levels by the year 2012.

In California, the League of California Cities and the California State Association of Counties have partnered with the Institute for Local Government to launch a California Climate Action Network. The network proposes a variety of actions—from conserving energy to using lower carbon fuels—that can be taken by local jurisdictions to cut greenhouse gas emissions. For more information visit: http://www.ca-ilg.org/climatechange/

The attorney general’s global warming agreement with ConocoPhillips is attached.

DISTRICT OF COLUMBIA – California Attorney General Edmund G. Brown Jr. today filed a report questioning the effectiveness of the Microsoft consent decree. Brown joined Connecticut, Iowa, Kansas, Minnesota, Massachusetts and the District of Columbia in filing the Report on Remedial Effectiveness concerning the Microsoft Final Judgment.

Attorney General Brown said: “The decree has not lived up to its goal of increasing market competition.”

The report contains descriptions of the Final Judgment’s lack of effectiveness; it does not contain recommendations on how to improve the Judgment. The California Group will be prepared to discuss at the next Joint Status Conference on September 11, 2007, what, if any, changes the Court might consider in this case.

The report is attached.

LOS ANGELES – California Attorney General Edmund G. Brown Jr. today announced a “landmark settlement” of the state’s global warming lawsuit against San Bernardino County. The agreement, approved today by the County Board of Supervisors, establishes a unique greenhouse gas reduction plan that will identify sources of emissions and set feasible reduction targets for the County.

“San Bernardino now sets the pace for how local government can adopt powerful measures to combat oil dependency and climate disruption. This landmark agreement establishes one of the first greenhouse gas reduction plans in California. It is a model that I encourage other cities and counties to adopt,” Brown told a news conference at the Attorney General’s Office in downtown Los Angeles.

Under today’s agreement, the County will embark upon a thirty month public process aimed at cutting greenhouse gas emissions attributable to land use decisions and County government operations. The Greenhouse Gas Emissions Reduction Plan mandates the following:

• An inventory of all known, or reasonably discoverable, sources of greenhouse gases in the County.
• An inventory of the greenhouse gas emissions level in 1990, currently, and that projected for the year 2020.
• A target for the reduction of emissions attributable to the county’s discretionary land use decisions and its own internal government operations.

Commenting on the agreement, San Bernardino County Board of Supervisors Vice Chairman Gary C. Ovitt said, “Only a handful of California counties and cities have formally addressed climate change issues, and San Bernardino County will lead the way in the implementation of strategies and steps to enhance our future and serve as a model for others.”

Under California law, the state is committed to reducing greenhouse gas emissions to 1990 levels by 2020 and then reducing 80% below 1990 levels by 2050. Currently, California generates approximately 500 million metric tons of CO2 equivalent, significantly above 1990 levels. To achieve the 2020 target, California must reduce current emissions by at least 25%.

“Local government action to combat global warming is absolutely essential to meet the goals which Governor Schwarzenegger and the California Legislature set forth in AB 32,” Brown asserted.

To date, the Attorney General has submitted formal comments, under the California Environmental Quality Act (CEQA), to San Bernardino, San Diego, Sacramento, Orange County, Merced, Kern, Fresno, San Joaquin, Contra Costa, Yuba, Richmond, and San Jose.

On their own, the following communities in California are already initiating measures to reduce greenhouse gas emissions: Los Angeles, San Francisco, Sonoma, Santa Monica, Berkeley, Marin, Palo Alto, Chula Vista, Modesto and Healdsburg.

Feasible mitigations include the following:

• High-density developments that reduce vehicle trips and utilize public transit.
• Parking spaces for high-occupancy vehicles and car-share programs.
• Electric vehicle charging facilities and conveniently located alternative fueling stations.
• Limits on parking.
• Transportation impact fees on developments to fund public transit service.
• Regional transportation centers where various types of public transportation meet.
• Energy efficient design for buildings, appliances, lighting and office equipment.
• Solar panels, water reuse systems and on-site renewable energy production.
• Methane recovery in landfills and wastewater treatment plants to generate electricity.
• Carbon emissions credit purchases that fund alternative energy projects.

Today’s settlement resolves a lawsuit, filed by the Attorney General in April, contesting the adequacy of San Bernardino’s general plan under the California Environmental Quality Act. Brown contended that the plan, a blueprint for the physical development of land until year 2030, did not adequately analyze the effects of development on global warming nor did it identify feasible mitigation measures.

San Bernardino currently generates about 10 trips per household per day, and over 84% of the work trips are made by car. The County, one of the fastest growing in California, projects a 25% increase in population, more than 400,000 people.

The settlement agreement is attached.

In response to today's California Supreme Court Decision In Re Tobacco Cases II, California Attorney General Edmund G. Brown Jr. issued the following statement:

"This decision, while upholding some restrictions, nevertheless reaffirms the full authority of the California Attorney General to enforce the multi-billion dollar tobacco settlement, especially when minors are involved.'

LOS ANGELES — California Attorney General Edmund G. Brown Jr. today announced that Corinthian Schools, Inc. and Titan Schools, Inc. will pay $6.5 million, including $5.8 million in consumer restitution, to settle a lawsuit alleging that the for-profit vocational operator engaged in false advertising and unlawful business practices by presenting inaccurate salary and employment information to students.

According to the complaint, Corinthian students pay between $7,000 and $27,000 for vocational courses, which typically take from six months to one year to complete. Corinthian allegedly overstated the percentage of its students who obtained employment from these courses, inflated starting salary information, and used these misrepresentations to convince potential students to enroll. Students wound up paying tuition fees through a combination of government grants, taxpayer-subsidized loans, and private loans arranged by Corinthian.

California Attorney General Brown said: “Corinthian students fully expected that their tuition payments would result in the glowing job opportunities the company promised. Unfortunately, their hopes were dashed as many of the students ended up unemployed and deep in debt. This groundbreaking settlement provides a measure of justice and fair restitution to these students. It also commits Corinthian to reforming its practices for the future.”

The complaint alleges that Corinthian engaged in additional unfair, unlawful or fraudulent business acts and practices, including falsifying records provided to the government, offering vocational programs that did not meet the minimum standards for course completion or subsequent employment, and using provisions in settlement agreements that bar former students from revealing anything about their disputes with Corinthian to government authorities.

Brown submitted the settlement today in Los Angeles County Superior Court, along with the lawsuit it resolves. The settlement, pending judicial approval, provides for a total of $5.8 million in restitution to students, of which $1.5 million is for debt cancellation and $4.3 million is in the form of refunds to former students. The settlement also provides for a payment of $700,000 in civil penalties and costs.

Aside from monetary payments, the settlement requires that Corinthian cease offering a total of 11 substandard programs, including the Pharmacy Technician and Medical Lab Assistant Programs, at various campuses in Anaheim, City of Industry, Gardena, Los Angeles, Ontario, San Bernardino, San Francisco and San Jose. The settlement also enjoins Corinthian from engaging in any of the unlawful business practices alleged in the complaint.

Corinthian, one of the nation’s largest for-profit vocational school chains, offers vocational courses in job occupations such as dental assisting, massage therapy, and medical assisting to thousands of students at its 14 California campuses of Bryman College, Everest College, and National Institute of Technology.
There are approximately 400,000 vocational school students in California. In 1989, the state established a regulatory agency to maintain oversight of vocational schools, today known as the California Bureau of Postsecondary and Vocational Education. This regulation was established, in part, as a response to a rising number questionable vocational schools and “diploma mills,” notorious for pumping out graduates with little education and massive tuition debt.

Consumers who believe they have been victimized by a vocational school can register a complaint by contacting the Public Inquiry Unit of the Attorney General's Office at www.ag.ca.gov/consumers, or by calling (800) 952-5225.

The complaint and judgment are attached.

SACRAMENTO - California Attorney General Edmund G. Brown Jr. today began mailing restitution claim forms to approximately 78,000 customers who were 'targets of improper sales practice' after joining a national $325 million lawsuit settlement with Ameriquest. The settlement provides $51 million for eligible California customers of Ameriquest Mortgage Company, Town and County Credit Corporation, and AMC Mortgage Services, Inc., formerly known as Bedford Home Loans.

The settlement resolves allegations that Ameriquest and its affiliates failed to adequately disclose home loan terms, failed to disclose whether loans carried fixed or adjustable rates, refinanced borrowers into inappropriate loans, inflated the appraisals used to qualify borrowers for loans, and charged excessive loan origination fees and prepayment penalties. The company engaged in these unlawful mortgage lending practices from 1999 through 2005.

"Hard-working families trying to buy a home wound up as targets of improper sales practice,' said Attorney General Brown. 'This settlement provides homebuyers with at least some of the restitution they deserve.'

Other parties in the $325 million settlement include the California Department of Corporations, Alameda, Los Angeles, Merced, Monterey, San Francisco, and San Mateo County District Attorneys, Attorneys General and banking and finance regulators from the District of Columbia and every state (except Virginia where Ameriquest did not conduct business).

The forms mailed today indicate the minimum payment that customers can expect to receive. The average restitution payment is $812.15 but the amount could be larger depending upon how many customers choose to participate in the settlement. Consumers who want the restitution payment should mail completed and signed forms to the settlement administrator by September 10, 2007.

Consumers who accept the restitution payment will relinquish their right to file lawsuits against Ameriquest unless their home goes into foreclosure. If a consumer's home goes into foreclosure, the consumer may still file a lawsuit against Ameriquest even if the restitution payment was accepted.

Consumers are encouraged to consult a private attorney or legal services attorney before deciding whether to participate in the settlement. A 'Frequently Asked Questions' pamphlet was mailed with the claim forms to provide additional information about the restitution process for eligible consumers. Consumers can also obtain detailed information about the settlement by contacting the Ameriquest Settlement Administrator at: or by calling 1-800-420-5875 (1-866-494-8274 for deaf or hard of hearing consumers).

The state's complaint against Ameriquest is attached. The court's judgment is attached. A copy of the information letter and 'Frequently Asked Questions' mailed today is also attached.

SACRAMENTO – California Attorney General Edmund G. Brown Jr. today announced a $3 million settlement with America Online (AOL), one of the nation’s largest Internet service providers. The prelitigation settlement, entered into by California, the District of Columbia and 47 other states, resolves complaints that AOL failed to disclose terms and conditions of paid service and made it extremely difficult for consumers to cancel their AOL pay services. Under today’s agreement AOL will make a number of improvements including: easier cancellation procedures, improved billing disclosures and commitment to refunding unauthorized charges.

Historically, AOL’s primary service has been dial-up Internet access, typically offered through a free trial offer that requires consumers to cancel their accounts to avoid a monthly membership fee. AOL announced in August 2006, that it would begin limiting its role as an Internet access provider and start allowing customers to convert to free e-mail accounts.

California Attorney General Edmund G. Brown Jr. said: “Today’s agreement will minimize the potential for consumer confusion during the transition to free e-mail accounts.”

Prior to this settlement, AOL only allowed customers to cancel their service by fax, mail or telephone. The majority of consumers called AOL directly and wound up speaking with service representatives who earned rewards, in some cases up to $3000 per month, for persuading customers not to terminate service. Consumers complained that this practice of trying to “save” customers made cancellation extremely difficult if not impossible.

Today’s settlement puts strict limitations on the practice of “saving” customers and requires recording and verification of these telephone calls. In addition, consumers are now able to easily cancel service online at: http://cancel.aol.com.

Today’s settlement also requires AOL to change confusing billing practices. AOL will clearly disclose how terminated accounts are reactivated and the customer must now resubmit any payment information before AOL can reactivate a paid service. The company will also clearly disclose the exact charge that will be placed directly on a customer’s monthly telephone bill. AOL will also revise its practice of allowing consumers to create “spin off” accounts, which are additional paid accounts for AOL service that stem from one original membership. Under the settlement, these accounts can now only be created over the telephone and customer service agents must completely disclose the exact additional cost of creating a “spin off” account.

The agreement also requires AOL to give refunds to consumers who complained of unauthorized charges for AOL service. If a consumer can show AOL billing after a cancellation attempt, AOL will refund those charges. The company will continue cooperating with the state to resolve outstanding complaints and continue refunding consumers for unauthorized charges.

The California Attorney General's Office was on the executive committee that led the negotiated agreement. Other participants in today’s settlement include: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia Wisconsin, and Wyoming, the Commonwealths of Kentucky, Massachusetts, Pennsylvania and Virginia, and the District of Columbia.

Under the settlement, AOL must provide a proper mailing address, fax number, and e-mail address where consumer complaints may be forwarded. Consumers who believe they have been charged by AOL for unauthorized service may contact the Attorney General’s Public Inquiry Unit to make a complaint. Complaints may be made in writing to: Public Inquiry Unit, Attorney General's Office, Attn: P.O. Box 944255, Sacramento, CA 94244-2550, or by using the online consumer complaint form: http://ag.ca.gov/contact/complaint_form.php?cmplt=CL

The settlement agreement is attached.

WASHINGTON D.C. – California Attorney General Edmund G. Brown Jr. announced today that Microsoft has agreed to make significant changes in the design of its desktop search feature in the Windows Vista operating system. Details of Microsoft’s agreement were outlined in a joint status report that was filed today in federal district court regarding the company’s compliance with a 2002 antitrust Final Judgment.

California Attorney General Edmund G. Brown Jr. said: “This agreement—while not perfect—is a positive step towards greater competition in the software industry. It will enhance the ability of consumers to select the desktop search tool of their choice.”

The California Attorney General’s Office became concerned with allegations that Microsoft was in violation of the Final Judgment after Google presented a complaint about the desktop search function in Vista, referred to as “Instant Search” in Microsoft’s promotional materials. Google argued that desktop search in Windows Vista is a “Microsoft Middleware Product” (MMP) and is therefore subject to the Final Judgment. The state contended that Vista’s desktop search feature is functionality that did not exist in prior Windows operating systems and is therefore covered under the Final Judgment.

Under the proposed solution, Microsoft will provide users and Original Equipment Manufacturers, such as HP or Dell, with greater flexibility to choose and access competing desktop search products. Microsoft has promised to deliver the required changes in a beta Service Pack 1 of Windows Vista, which Microsoft currently anticipates will be available by the end of the year.

The attorney general announced the agreement in conjunction with Microsoft, the United States Department of Justice and Plaintiffs in the New York Group (including New York, Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina, and Wisconsin) and the California Group (including California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah, and the District of Columbia). The changes resolve complaints lodged against Microsoft under the California Group’s Final Judgment from November 2002.

The agreement is reflected in the attached joint status report, filed today in the federal district court in Washington D.C. The Final Judgment is also attached. The Judge is Colleen Kollar-Kotelly.

WASHINGTON – Charging the Bush Administration is “acting in collusion with the auto and oil industries,” California Attorney General Jerry Brown said California is preparing to sue the federal government if it blocks the state’s efforts to reduce greenhouse gas-causing emissions from motor vehicles.

Addressing a U. S. Environmental Protection Agency (EPA) hearing, Brown said federal law allows California to set vehicle emission standards tougher than federal regulations, and then allows other states to adopt the California standard.

“The California legislature passed a greenhouse law in 2002 requiring automakers to reduce vehicle global warming emissions 30 percent by 2016,” Brown explained. “There is no doubt that automobile manufacturers can meet that goal, and since the federal government does not want to seek such a reduction California intends to move forward.”

Brown said that 11 other states -- Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington -- have now adopted the California standard.

“Together we represent one-third of the population of the United States, and the people of our 12 states want to act now to combat global warming. We are not willing to wait while President Bush offers only rhetoric, excuses and delays. Suing the federal government is not our first choice, but we will have no choice if our legitimate efforts to protect our planet are blocked because of partisan political games in Washington.”

Brown pointed out that the states’ battle against global warming is a bi-partisan effort.

“Gov. Schwarzenegger supports our plans to sue EPA if we are not allowed to implement the California law. Protecting our planet is not a partisan issue, and the states now want to do what we can in the absence of federal action, and the EPA has no right to deny us the ability to move forward.”

Brown said the proposed California standards are the most comprehensive effort to combat global warming in U.S. history.

The California attorney general was also scheduled to testify Tuesday following his EPA testimony before the Senate Committee on Environment and Public Works.

Brown said California filed its request for an EPA waiver, which in the past has always been routinely granted, in December 2005. Under the Clean Air Act, California can adopt stricter standards by requesting a waiver from EPA and such requests have been approved more than 50 times in the past. Approval of California’s waiver means the other states would get approval automatically.

Congress passed the Clean Air Act in 1963 and subsequent amendments in 1967, 1970 and 1977 expressly allowed California to impose stricter environmental regulations in recognition of the state’s “compelling and extraordinary conditions,” including topography, climate, high number and concentration of vehicles and its pioneering role in vehicle emissions regulation. Brown said Congress intended the state to continue its pioneering efforts at adopting stricter motor vehicle emissions standards, far more advanced than the federal rules.

“Our waiver request has been pending for a year and a half, which is an unreasonable delay,” Brown said. “Our patience is wearing thin. We watch the President and his EPA acting in collusion with the auto and oil industries, while we want to take reasonable, constructive steps to reduce greenhouse gas emissions. We are now preparing to sue unless we receive our waiver within a short time.”

See the attached three documents for additional background.