July 10, 2018

Jenner & Block won a significant victory on behalf of three groups that assist low-income and minority homeowners. Today, the California Court of Appeal, Third Appellate District, ruled in favor of the National Asian American Coalition, COR Community Development Corporation and the National Hispanic Christian Leadership Conference, remanding their case back to the trial court with directions to the court to issue a writ of mandate requiring California Governor Jerry Brown to transfer more than $331 million from the State’s general fund to a settlement fund established to provide aid to financially distressed homeowners following the subprime mortgage crisis.  After California received these funds, Governor Jerry Brown diverted the money to instead plug holes in California’s budget.

In 2014, the firm filed a lawsuit on behalf of the three groups challenging Governor Brown’s diversions of funds that had been designated to help homeowners from the National Mortgage Special Deposit Fund (NMSDF) to the State’s general fund.  In June 2015 after a one-day trial, the trial court agreed with the firm’s position, declaring “that $331,044,084 in offsets were unlawfully diverted from the NMSDF” and that California “is obligated to restore/return those funds to the NMSDF.”  However, the court believed that separation-of-powers considerations precluded the court from issuing a writ of mandate requiring the transfer of the funds back to the NMSDF and therefore simply enjoined California “to restore/return those funds to the NMSDF as soon as there is a sufficient appropriation ‘reasonably’ and ‘generally’ available for such purpose.”  The trial court ended its ruling by calling on the Legislature and the Governor to “take whatever steps are necessary and appropriate to meet this obligation.”

The State appealed.  Following oral argument in Sacramento, the three-judge appellate court delivered a full victory to the firm’s clients.  The appellate court not only agreed with the trial court’s ruling that the funds were unlawfully appropriated, but also went further than the trial court in ordering the full remedy the firm’s clients had requested.  The appellate court “remand[ed] the matter to the trial court with directions to issue a writ of mandate directing the immediate retransfer from the General Fund to the NMS Deposit Fund the sum of $331,044,084.”

Partner Neil M. Barofsky argued the case in the California Court of Appeals.  Other members of the Jenner & Block team included Partners Jessica Ring Amunson, Rick Richmond and Jeffrey A. Atteberry, and Associates Alexander M. Smith, Benjamin Eidelson and Ava U. McAlpin.