Lawsuits & Settlements

SAN FRANCISCO -- Attorney General Kamala D. Harris today announced a $750 million settlement with Powerex over claims arising from the 2000-2001 California energy crisis. The vast majority of the settlement money will go to ratepayers of California’s largest utilities.

According to testimony submitted by the Attorney General, Powerex engaged in market gaming by purchasing and exporting to Canada huge quantities of electricity California needed, and selling it back to California at exorbitant prices.

“Californians suffered through huge rate hikes and blackouts during the energy crisis,” Attorney General Harris said. “This settlement brings long-awaited compensation to California ratepayers for Powerex’s conduct.”

The settlement includes the Department of Water Resources’ California Energy Resources Scheduling (CERS) Division, the Public Utilities Commission and the state’s investor-owned utilities (IOUs), PG&E, Southern California Edison and SDG&E.

During the energy crisis, CERS purchased energy on behalf of California’s IOUs to help keep the lights on for customers. The Public Utilities Commission will determine how settlement funds will flow to the ratepayers of the investor-owned utilities.

LOS ANGELES -- Attorney General Kamala D. Harris today filed an enforcement action against JPMorgan Chase & Co. (Chase) alleging that the bank engaged in fraudulent and unlawful debt-collection practices against tens of thousands of Californians.

The suit alleges that Chase engaged in widespread, illegal robo-signing, among other unlawful practices, to commit debt-collection abuses against approximately 100,000 California credit card borrowers over at least a three-year period.

“Chase abused the judicial process and engaged in serious misconduct against California credit card borrowers,” Attorney General Harris said. “This enforcement action seeks to hold Chase accountable for systematically using illegal tactics to flood California’s courts with specious lawsuits against consumers. My office will demand a permanent halt to these practices and redress for borrowers who have been harmed.”

From January 2008 through April 2011, Chase filed thousands of debt collection lawsuits every month in the State of California. On one day alone, Chase filed 469 such lawsuits in California. The Attorney General’s complaint against Chase alleges that, to maintain this pace, Chase employed unlawful practices as shortcuts to obtain judgments against California consumers with speed and ease that could not have been possible if Chase had adhered to the minimum substantive and procedural protections required by law.

“At nearly every stage of the collection process, Defendants cut corners in the name of speed, cost savings, and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits,” the complaint states.

Chase used California’s judicial system as a mill to obtain default judgments, the suit alleges, using illegal tactics to flood the state’s court system in order to secure default judgments and garnish wages from Californians.

The alleged misconduct includes:

• Robo-signing: Chase illegally robo-signed various litigation filings, including sworn documents, declarations, and verified complaints, without reviewing the relevant files or bank records or even reading the documents before signing.

• “Sewer Service”: Chase failed to properly serve notice of debt collection lawsuits against consumers while claiming they had been served as required by law. This practice, known as “sewer service,” deprives the consumer of any notice of the lawsuit.

• Filing Irregularities: Chase haphazardly assembled its official legal filings. For example, Chase failed to redact consumers’ personal information in attachments to filings, potentially exposing them to identity theft and in violation of California law. In addition, when asking courts to enter default judgments against consumers, Chase consistently swore under penalty of perjury that the consumers were not on active military duty. In fact, Chase never checked.  This deprived servicemembers of important legal protections to which they are entitled while on active duty.

The suit was filed in Los Angeles Superior Court and a copy of the complaint is attached to the online version of this release at http://oag.ca.gov.

Consumers who believe they have been victims of this misconduct may submit a complaint online at http://oag.ca.gov/consumers.

SAN FRANCISCO -- Attorney General Kamala D. Harris today announced California’s National Mortgage Settlement Grant Program has awarded $9.4 million to 21 organizations in order to assist Californians affected by the state’s foreclosure crisis.

“The foreclosure crisis has inflicted wide-ranging and deep harm to California homeowners and communities,” said Attorney General Harris. “These grants will give homeowners and families the financial and legal tools they need to recover.”

The grants will benefit many of the state’s neediest homeowners and families by providing or expanding access to free legal assistance and representation, foreclosure intervention aid, homeowner education and financial literacy clinics, blight remediation services, fraud prevention education and employment support services.

Many of the organizations receiving grants focus on underserved and disproportionately impacted populations, including agricultural workers, communities of color, the disabled, the elderly, immigrant communities, Native Americans, rural homeowners, veterans and active-duty military. Services will be offered in more than a dozen languages, including American Sign Language, Armenian, Cantonese, Farsi, Hmong, Japanese, Khmer, Korean, Mandarin, Russian, Spanish, Tagalog and Vietnamese.

Grant recipients will begin to implement their programs immediately.

In March, Attorney General Harris announced an additional $1 million California Homeowner Bill of Rights implementation grant to the National Housing Law Project. All grant funds were secured by Attorney General Harris in 2012 through the National Mortgage Settlement.

In March 2012, Attorney General Harris appointed Professor Katherine Porter of the University of California, Irvine School of Law as the California monitor of the commitment by the nation’s five largest banks to perform as much as $18 billion worth of homeowner and borrower benefits in the state.

“In working with homeowners up-and-down California, I have seen the invaluable work being done by community-based organizations like these,” said Professor Katherine Porter.  “Families working to get back on their feet will benefit greatly from the programs funded by these grants.”

Professor Porter has attended dozens of events in the state and has organized forums on best practices for helping struggling homeowners. Upcoming forums will take place in Irvine on Friday, April 19 and in Fresno on Friday, May 3.

The California State Bar has partnered with the Attorney General’s office to administer the grants and monitor compliance. Grant recipients will be required to provide financial and program reports to both offices.

Distribution of funds was overseen by an expert panel that reviewed proposals and provided recommendations to Attorney General Harris.  Information about the expert panel and grant application process is available at: http://oag.ca.gov/grants. 

Attached to the online version of this release are descriptions of the grant recipients’ programs, as well as contact information for homeowners and a map showing counties served by the grant recipients. All supplemental information can be found at: http://oag.ca.gov/news

LOS ANGELES -- Attorney General Kamala D. Harris today announced a settlement with Skilled Healthcare Group, Inc. that will require court-enforceable improvements of staffing levels and quality of care at the chain's 20 facilities. The nursing homes are comprised of 2,360 beds throughout California, most of which are in the Los Angeles region.

The agreement empowers Attorney General Harris to appoint an independent monitor who will ensure compliance with California's staffing laws and conduct an ongoing evaluation of quality of care and staffing sufficiency at all of Skilled's 20 facilities.

"This is a case about neglect and abuse of California's elders by a facility that was supposed to protect and care for them," said Attorney General Harris. "This agreement ensures that the elderly occupying Skilled's 2,360 beds will receive better and higher quality care. At a time when California's elderly population is growing twice as fast as the general population, family and friends should have peace of mind that their loved ones are being well cared for when they are in a nursing home setting."

The independent monitor will make regular reports to the Attorney General and conduct surprise inspections of Skilled's nursing homes for two years. The cost of the monitor, estimated to be $350,000 a year, will be paid for by Skilled.

The Attorney General's enforcement action stems from 76 citations and 209 deficiencies issued by the California Department of Public Health to Skilled's nursing facilities from 2008 to 2012. Specifically, the citations and deficiencies were issued because of Skilled's failure to prevent pressure ulcers, dehydration, malnutrition, over-medication and medication errors, deficient catheter care, urinary incontinence, and naso-gastric feeding care practices.

This case was investigated and prosecuted by the Justice Department's Bureau of Medi-Cal Fraud and Elder Abuse (BMFEA).  Attorney General Harris has created specialized BMFEA teams in Sacramento and Los Angeles composed of legal and nursing professionals to combat abuse, neglect and poor quality of care in California's nursing homes.

Earlier this week, Attorney General Harris charged a Sacramento-area residential care provider with manslaughter for negligence that directly led to a patient's death. In January, Attorney General Harris announced a three-year state prison sentence for a nurse who pled no contest to "convenience drugging."

Skilled and its subsidiaries operate nursing homes in Fresno, Los Angeles, Orange, Riverside, and Santa Barbara counties. A complete list of the facilities and the settlement document is attached to the online version of this press release.

LOS ANGELES -- Attorney General Kamala D. Harris today announced a settlement in a lawsuit challenging the approval of an industrial project in Riverside County that would cause additional diesel truck traffic near a community already disproportionately affected by diesel exhaust and noise pollution.

As part of today's agreement, the City of Jurupa Valley and other parties will take action to significantly reduce the project's air quality impacts on Mira Loma Village, a primarily Hispanic residential community. 

"It is a false choice to suggest that in order for California business to thrive, public health must suffer," Attorney General Harris said. "It is my intention that this settlement will provide a model for local governments, developers and communities to work together to ensure responsible development benefiting all Californians."

In September 2011, Attorney General Harris joined the California Environmental Quality Act (CEQA) action filed by the Center for Community Action and Environmental Justice to set aside Riverside County's approval for the Mira Loma Commerce Center, which would consist of a million square feet of warehouses and industrial buildings.

The suit outlined the county's failure to adequately analyze and mitigate the project's impacts on Mira Loma Village residents in light of the already serious health and environmental risks suffered by the community.

The City of Jurupa Valley, which was incorporated in 2011, now has jurisdiction over the project site. The city and the project developers agreed as part of today's settlement to implement and fund the following:

-          Proceedings for preparation of an Environmental Justice Element of the City's General Plan;

-          Installation of air filtration systems in the homes of Mira Loma residents;

-          Air quality monitoring in Mira Loma Village;

-          Landscaping in setback areas with plants with potential to remove or reduce exposure to diesel particulate emissions; and,

-          A "green" project site, including a 100kW capacity solar photovoltaic system, LEED Silver certified project buildings, and electric vehicle charging stations.

"We are extremely impressed with the cooperative process that took place to arrive at this agreement," said Penny Newman, Executive Director of the Center for Community Action and Environmental Justice. "This settlement has created the 'gold standard' for settlements in addressing impacts through a model process of how diverse stakeholders can come together and cooperatively find comprehensive solutions."

The settlement also requires the City of Jurupa Valley to conduct proceedings to adopt an ordinance to prohibit heavy trucks on the road adjacent to Mira Loma Village, to implement an anti-idling enforcement program and to consider environmental justice during CEQA review for future projects in the City.

Since the 1990s, Riverside County has approved a series of warehouse projects that are now under the City of Jurupa Valley's jurisdiction. Thousands of trucks travel to and from the ports of Los Angeles and Long Beach to distribution centers and warehouses in the City of Jurupa Valley and other areas of Riverside County each day. These trucks spew diesel exhaust causing harmful health impact to residents living near the freeways and roads on which the trucks travel. Diesel exhaust is listed as a known carcinogen under Proposition 65. The levels of particulate matter and ozone pollutants in the Jurupa Valley area are significantly higher than both California and federal air quality standards.  

This settlement will help reduce the public health impacts caused by the project and existing warehouse facilities on the overburdened community of Mira Loma Village. This settlement serves as a model for how other local governments can encourage smart development while also addressing environmental public health in their communities.

A copy of the consent judgment is attached to the press release.

SAN FRANCISCO -- Attorney General Kamala D. Harris today filed a lawsuit against one of the nation's major credit rating companies for inflating its ratings of structured finance investments, which caused California's public pension funds and other investors to lose billions of dollars.

The complaint, filed today in San Francisco Superior Court, alleges that the McGraw-Hill Companies, Inc. and Standard and Poor's Financial Services LLC violated the False Claims Act and other state laws by using a ratings process based on what senior executives described as "magic numbers" and "guesses."

"For years, S&P placed its priority on maintaining its market share, instead of the investors who trusted in its supposedly objective ratings," said Attorney General Harris. "When the housing bubble burst, S&P's house of cards collapsed and California paid the price—in billions. S&P must be held accountable for its conduct that contributed to one of our country's worst financial crises."

Investors relied on S&P and its competitors to rate these securities because they had access to only general descriptions of the assets backing their investments, which often included mortgages. California's public pension funds also relied on S&P because they are often required to buy securities that received a coveted "AAA" rating, signaling that the investment was top-tier and bore minimal risk.

The complaint alleges that, from 2004 to 2007, S&P systematically misrepresented to the public, and to CalPERS and CalSTRS, that its ratings of structured finance securities were based on an independent, objective and reliable analysis, and not influenced by S&P's economic interests.

In doing so, S&P lowered its standards for rating securities to gain market share and increase profits, and violated the False Claims Act by making false statements about the nature and risk of investments. The complaint also describes the company's efforts to suppress the development of new and more accurate ratings models.

In mid-2007, the housing bubble burst. After securities that S&P had deemed the least risky began defaulting, S&P downgraded many residential mortgage backed securities investments. The market collapsed, and of those securities issued in 2007, more than 90 percent were downgraded to junk status.

The California Public Employees Retirement System (PERS) and the California State Teachers Retirement System (STRS) – two of the nation's largest institutional investors – lost approximately $1 billion.

Attorney General Harris today joined the U.S. Department of Justice and 12 other states and the District of Columbia in announcing lawsuits in Washington, D.C. The other lawsuits allege violations of the federal Financial Institutions Reform, Recovery and Enforcement Act and state unfair competition laws.

However, California's suit is unique because it is being filed not only under California's unfair competition laws but also under the state's False Claims Act. This suit includes a claim for triple damages – because when the state makes a purchase based on a false statement, the defendant is responsible for the amount lost times three.

The lawsuit arises from a 20-month investigation into the issuance and rating of mortgage-backed securities by Attorney General Harris's California Mortgage Fraud Strike Force, which she formed in May 2011 to comprehensively investigate misconduct in the mortgage industry. The Attorney General's additional efforts to investigate the mortgage crisis include securing an estimated $18 billion for California in the National Mortgage Settlement and sponsoring the California Homeowner Bill of Rights, a package of laws instituting permanent mortgage-related reforms.

The complaint is attached to the online version of this press release at http://oag.ca.gov/.

OAKLAND-- Attorney General Kamala D. Harris filed a civil lawsuit on February 1 against BP West Coast Products, BP Products North America, Inc. and Atlantic Richfield Company for allegedly violating state laws governing hazardous materials and hazardous waste by failing to properly inspect and maintain underground tanks used to store gasoline for retail sale at more than 780 gas stations in California.

"Safe storage of gasoline is not only common sense, it is essential to protecting the integrity of California's groundwater resources," Attorney General Harris said. "California's hazardous waste laws safeguard public health and this lawsuit ensures proper maintenance of the tanks that store fuel beneath California’s communities."

Attorney General Harris was joined in this enforcement action by Alameda County District Attorney Nancy E. O'Malley, Glenn County District Attorney Robert Maloney, Merced County District Attorney Larry D. Morse II, Nevada County District Attorney Clifford Newell, Placer County District Attorney R. Scott Owens, San Bernardino County District Attorney Michael A. Ramos, Stanislaus County District Attorney Birgit Fladager and Yuba County District Attorney Patrick McGrath.

The complaint filed February 1 in Alameda County Superior Court alleges that, since October 2006, the BP companies and ARCO have improperly monitored, inspected and maintained underground storage tanks used to store gasoline for retail sale. The complaint alleges that the defendants tampered with or disabled leak detection devices, and failed to test secondary containment systems, conduct monthly inspections, train employees in proper protocol, and maintain operational alarm systems, among other violations. The lawsuit also alleges that the defendants improperly handled and disposed of hazardous wastes and materials associated with the underground storage tanks at retail gas stations throughout the state.

The complaint follows a recent statewide investigation led by Attorney General Harris's office, which found violations of hazardous materials and hazardous waste laws and regulations at BP gas stations in 37 counties across the state.

In January 2012, the Attorney General's office filed a similar lawsuit against Phillips 66 and ConocoPhillips:

http://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-sues-phillips-66-and-conocophillips-over.

Deputy Attorney Generals Brett J. Morris and Deborah Halberstadt are prosecuting the case for Attorney General Harris's Environment Section.

A copy of the complaint, which contains the addresses of the gas stations, is attached to the online version of this release at http://oag.ca.gov.

LOS ANGELES -- Attorney General Kamala D. Harris today filed lawsuits against two international apparel manufacturers for gaining an unfair competitive advantage over American companies by using pirated software in the production of clothing imported and sold in California.

The companies, based in China and India, did not pay licensing fees for software, including products manufactured by Adobe, Microsoft, Symantec and others. The complaints allege that the foreign apparel manufacturers who have not paid software licensing fees have a significant cost advantage in the low-margin business of apparel manufacturing, shipment and sales.

“Companies across the globe should be on notice that they will be held accountable in California for stealing our intellectual property,” Attorney General Harris said. “This is an anticompetitive practice which harms our state’s economy and is illegal. These lawsuits go after overseas companies whose unlawful actions are eroding California’s garment industry and placing California companies who legally pay for computer software at a disadvantage.”

The lawsuits, filed in Los Angeles County Superior Court, charge Pratibha Syntex Ltd. of India and Ningbo Beyond Home Textile Co. Ltd., and its sister companies, of China with violating California’s Unfair Competition Law. Since 2010, the Ningbo Companies shipped approximately 713,000 pounds of apparel products into California. Pratibha has shipped more than 19,000 pounds into the state.

Ningbo Beyond Group exports men’s suits, blazers, coats and jackets, as well as fleece cargo pants, fleece jackets and caps to California. Pratibha Syntex exports women’s cotton tops and other clothes for men, women, and children.

The complaints also allege that these companies obtain an unfair advantage because they can redirect money saved by using pirated software to hire employees and to expand their facilities and their research and development efforts. Furthermore, American companies that are developing software, particularly software that is used in the garment industry, are discouraged from investing in new technology and products if they know their software will be used illegally.

California’s apparel manufacturers, which are largely based in Los Angeles County, employed more than 58,000 people last year and generated more than $5 billion in annual revenues since 1990. In 2010, the industry employed 40,872 workers in Los Angeles County, which accounts for nearly 70 percent of the industry’s workforce in the state.

A study by the Orange County Business Council found that California has lost nearly 400,000 manufacturing and technology jobs over the past decade to countries where piracy rates are as high as 80 percent. This activity has resulted in a loss of $1.6 billion in economic activity and $700 million in tax revenue for California.

The complaints are attached to the online version of this release at http://oag.ca.gov/news.

SAN FRANCISCO -- Attorney General Kamala D. Harris today filed a civil lawsuit against Phillips 66 and ConocoPhillips for allegedly violating state law by failing to properly inspect and maintain underground tanks used to store gasoline for retail sale at more than 560 gas stations in California.

"The state's hazardous waste laws help protect our residents from contaminated groundwater," Attorney General Harris said. "This lawsuit safeguards public health by ensuring proper maintenance of the tanks that store fuel beneath many California communities."

The Attorney General's office was joined in this enforcement action by Alameda County District Attorney Nancy E. O'Malley, El Dorado County District Attorney Vern Pierson, Merced County District Attorney Larry D. Morse II, Nevada County District Attorney Clifford Newell, Placer County District Attorney R. Scott Owens, San Bernardino County District Attorney Michael A. Ramos, and Stanislaus County District Attorney Birgit Fladager.

The complaint filed today in Alameda County Superior Court alleges that, since November 2006, Phillips 66 and ConocoPhillips have improperly monitored, inspected and maintained underground storage tanks used to store gasoline for retail sale. The complaint alleges that the defendants tampered with or disabled leak detection devices, and failed to test secondary containment systems, conduct monthly inspections, train employees in proper protocol, and maintain operational alarm systems, among other violations. The lawsuit also alleges that the defendants improperly handled and disposed of hazardous wastes and materials associated with the underground storage tanks at retail gas stations throughout the state.

A statewide investigation led by the Attorney General's office found violations of hazardous materials and hazardous waste laws and regulations at gas stations in 34 counties across the state.

Deputy Attorney Generals Brett J. Morris and Deborah Halberstadt are prosecuting the case for Attorney General Harris' Environment Section.

A copy of the complaint is attached to the online version of this release at http://oag.ca.gov.

SAN FRANCISCO -- Attorney General Kamala D. Harris today filed a lawsuit against eBay for entering into a “handshake” hiring agreement with Intuit that prohibited the company from recruiting and hiring one another's employees.

The complaint alleges that from 2006 to 2009, senior executives at eBay and Intuit agreed not to recruit employees who worked for the other company, and eBay agreed not to hire any Intuit employees. As a result, employees of both companies were prevented from seeking potentially better-paying positions. The companies passed on talented employees because of their anticompetitive agreement.

“The pact harmed employees and it harmed competition,” said Attorney General Harris. “If California is going to continue to be the high-tech capital of the world, we can’t allow anticompetitive conduct that prevents talent from going where it’s put to its highest use.”

The complaint filed by Attorney General Harris alleges that senior executives at eBay entered into a “no-poach” agreement to restrict their ability to recruit and hire employees of the other company. Intuit is being named a co-conspirator. The agreement prohibited either company from soliciting one another’s employees for employment opportunities and for over a year, prevented eBay from hiring any employees at all from Intuit.

The agreement was enforced at the highest levels of the company. The complaint alleges that emails exchanged between eBay’s chief executive officer and Intuit’s founder and chairman detail their intention not to recruit or hire one another’s employees.

Harris' complaint alleges that the agreement between the companies violated California’s Unfair Competition Law, the Sherman Anti-Trust Act and the Cartwright Act.

The California Justice Department worked closely with the U.S. Department of Justice on this matter. The U.S. Department of Justice also has filed a case against eBay for their “no poach” agreement. The U.S. DOJ already has an injunction in place against Intuit relating to a similar agreement Intuit reached with other companies. Harris' separate lawsuit, however, is significant because it seeks to enforce California laws which contain stronger protections against anti-competitive conduct than federal law.

California seeks to recover damages for each act of unfair competition, as well as injunctive relief to prevent any such agreement from occurring again.