The fallout from the subprime mortgage crisis is far from over. Today's opinion is just a portion of what's left.
This particular case involves what to do with the $410 million settlement that California received when the federal government and 49 states (with Oklahoma as the inexplicable holdout) sued the nation's five largest mortgage servicers for various violations of federal law. Under the settlement agreement, those funds were to be used "for purposes intended to
avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to
enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or
deceptive acts or practices and to compensate the States for costs resulting from the
alleged unlawful conduct of [the Bank defendants]." But over a series of years, California basically used ("allocated") that money to offset various general fund expenditures.
Various consumer groups brought suit in 2014, and were originally successful; with the trial court holding that "$331,044,084 was unlawfully appropriated from the National Mortgage Special Deposit
Fund for purposes inconsistent with these instructions" but which hesitated to order that the money be put back. The case then went up to the Court of Appeal, which largely agreed with the trial court on the merits but which granted a more expansive remedy, ordering "the immediate retransfer from
the General Fund to the National Mortgage Special Deposit Fund the sum of
$331,044,084."
At which point both the Legislature and the California Supreme Court get involved.
The Legislature doesn't like losing, so it passes a new law, which is expressly designed to abrogate the Court of Appeal's holding. And the California Supreme Court thinks that the new law is a fairly material new matter, so it orders the Court of Appeal to take a new look at the issue under the new statute.
Which the Court of Appeal promptly does. Leading to today's opinion.
Which completely reaffirms its prior holding and instructions.
The Legislature has a lot of power. Power that private litigants typically don't possess.
But that doesn't mean that the Legislature uniformly gets what it wants.
Because there's separation of powers in our democracy. Which allow you to lead the courts to water, but you can't always make 'em drink.
