Case No. 1:17-cv-01240-DAD-EPG (PC) FRANK WELLS, Plaintiff, FINDINGS AND RECOMMENDATIONS, RECOMMENDING THAT PLAINTIFF’S v. MOTION TO ENFORCE SETTLEMENT AGREEMENT BE DENIED AND THAT R OSA GONZALES, JURISDICTION OVER THIS MATTER BE TERMINATED
Defendant. (ECF No. 112)
OBJECTIONS, IF ANY, DUE WITHIN FOURTEEN DAYS I. INTRODUCTION Frank Wells (“Plaintiff”) is a state prisoner proceeding pro se and in forma pauperis in this civil rights action filed pursuant to 42 U.S.C. § 1983. This case settled (ECF No. 107) and was closed (ECF Nos. 109 & 110). However, the Court retained jurisdiction to enforce the terms of the settlement agreement. (ECF No. 110). On July 6, 2021, Plaintiff filed what the Court construes as a motion to enforce the settlement agreement. (ECF No. 112). Plaintiff argues that Defendant1 improperly seized the entire settlement payment for restitution, notwithstanding a law and a regulation limiting any deduction of deposits into a trust account to a maximum of 50% of the amount deposited. On
1 Rosa Gonzales, the named defendant, entered into the settlement agreement with Plaintiff. Based on the terms of the settlement agreement, the California Department of Corrections and Rehabilitation made the settlement payment. As the parties’ filings fail to distinguish between these actors in connection with this motion, the Court will refer to them collectively as “Defendant.” July 19, 2021, Defendant filed an opposition. (ECF No. 113). On August 6, 2021, Plaintiff filed a reply. (ECF No. 114). On September 16, 2021, the Court held a hearing on the motion. (ECF No. 117). After the hearing, the Court directed each party to “submit evidence regarding the inflow and outflow of funds from Plaintiff's prisoner trust account from April 1, 2021, to May 31, 2021.” (Id.). The Court also allowed each party to “submit a supplemental brief that is no longer than five pages in length addressing the issues discussed during the hearing, including if relevant the proper remedy if funds were improperly deposited in Plaintiff's prisoner trust account.” (Id.). On September 27, 2021, Defendant filed evidence and a supplemental brief. (ECF No. 118). On September 30, 2021, Plaintiff filed evidence and a supplemental brief. (ECF No. 119). For the reasons described below, the Court will recommend that Plaintiff’s motion be denied. A. Plaintiff’s Motion Plaintiff argues that the California Department of Corrections and Rehabilitation (“CDCR”) improperly seized the entire $5,000 settlement payment to pay for restitution. (ECF No. 212, p. 2). Plaintiff states that, according to the terms of the settlement agreement (which he attached as an exhibit), the agreement “is set forth in accordance with Governing Laws of California.” (ECF No. 112, p. 1). Plaintiff cites to California Penal Code § 2085.5 and argues that it states that the CDCR was only authorized to deduct a maximum of 50% of the amount that was put into his trust account. As relevant here, that section states: (a) If a prisoner owes a restitution fine imposed pursuant to subdivision (a) of Section 13967 of the Government Code, as operative prior to September 29, 1994, subdivision (b) of Section 730.6 of the Welfare and Institutions Code, or subdivision (b) of Section 1202.4 of this code, the secretary shall deduct a minimum of 20 percent or the balance owing on the fine amount, whichever is loefs as, purpis toon ear m, uanxliemssu mpr oohf i5b0it epde rbcye nfet dfreormal ltahwe ,w aangde ss haanldl ttrraunsstf aecr ctohuatn ta mdeopuonsti ttso the California Victim Compensation Board for deposit in the Restitution Fund. The amount deducted shall be credited against the amount owing on the fine. The sentencing court shall be provided a record of the payments.
(c) If a prisoner owes a restitution order imposed pursuant to subdivision (c) of Section 13967 of the Government Code, as operative prior to September 29, 1994, subdivision (h) of Section 730.6 of the Welfare and Institutions Code, or subdivision (f) of Section 1202.4 of this code, the secretary shall deduct a minimum of 20 percent or the balance owing on the order amount, whichever is less, up to a maximum of 50 percent from the wages and trust account deposits of a prisoner, unless prohibited by federal law. The secretary shall transfer that amount to the California Victim Compensation Board for direct payment to the victim, or payment shall be made to the Restitution Fund to the extent that the victim has received assistance pursuant to that program. The sentencing court shall be provided a record of the payments made to victims and of the payments deposited to the Restitution Fund pursuant to this subdivision. Cal. Penal Code § 2085.5(a), (c). Plaintiff also cites to California Code of Regulations, Title 15, § 3097(j), which states “Joint Venture Program deposits, funds designated to pay the costs of a family visit ( ‘family visit funds’), Temporary Community Leave funds, federal disability payments, veteran benefits, any reimbursement to an inmate as a result of a claim for lost or damaged property, or money reimbursed to an inmate due to a failed attempt to purchase merchandise are exempt from deductions for fines and direct orders of restitution enumerated in subsections (a), (b), (c), (d), (e), and (f).” Plaintiff argues that his case is founded on a claim for loss of property, and thus this section applies to prevent any deductions from the settlement payment. (ECF No. 112, p. 2). Plaintiff states that he would not have entered into the agreement if he knew that Defendant was not going to follow applicable law. (Id.). Plaintiff asks the Court to hold Defendant in breach of the settlement agreement and order it to pay him the entire settlement amount. (Id.). Plaintiff also asks the Court to order the CDCR not to impede Plaintiff from using the funds once they are returned, and that the CDCR be ordered “to expedite the order” of the court. (Id. at 3). \\\ B. Defendant’s Opposition Defendant argues that Plaintiff’s motion should be denied and that the Court should terminate its jurisdiction over the matter. (ECF No. 113, p. 1). According to Defendant, the settlement agreement states: Plaintiff understands that CDCR is obligated by California Penal Code section 2085.8 to collect any amounts owed by a prisoner under a restitution fine or order, including any administrative fees related to such amounts. Such amounts and fees will be deducted from the settlement amount and paid on Plaintiff’s behalf as required by Penal Code section 2085.8. If the settlement amount exceeds the restitution amounts and fees, the excess balance shall be made by check to Plaintiff’s inmate trust account. (ECF No. 113, p. 2) (quoting ECF No. 112, p. 8, section III-2). And, California Penal Code § 2085.8 states that settlement proceeds shall be paid directly to satisfy any outstanding restitution orders: Compensatory or punitive damages awarded by trial or settlement to any inmate… in connection with a civil action brought against a federal, state, or local jail, prison, or correctional facility, or any official or agent thereof, shall be paid directly, after payment of reasonable attorney’s fees and litigation costs approved by the court, to satisfy any outstanding restitution orders or restitution fines against that person. The balance of the award shall be forwarded to the payee after full payment of all outstanding restitution orders and restitution fines…. (ECF No. 113, p. 2) (quoting Cal. Penal Code § 2085.8(a)). “Furthermore, the material terms of the settlement were put on the record during the February 19, 2021 settlement conference, including that any settlement proceeds would be reduced by deductions to cover administrative fees and any outstanding restitution balances, and any other fees or costs owed by Plaintiff.” (Id. at 3). “Based on the foregoing, CDCR has not breached the settlement agreement. Therefore, this Court should deny Plaintiff’s motion and terminate its jurisdiction over the matter as the terms of the settlement agreement have been fulfilled.” (Id.) C. Plaintiff’s Supplemental Brief and Evidence In his supplemental brief, Plaintiff argues that the settlement funds were placed into his account before being taken out to pay his restitution obligations and an administrative fee in violation of California Penal Code § 2085.8. This shows that no clerical error was made, but that the CDCR intentionally placed the funds into his account and then performed the deductions, which would be subject to the 50% limitation. As the funds were placed in his account, California Code of Regulations, Title 15, § 3097 must be applied. Plaintiff also asks the Court to apply § 3097(c) and order that half of the settlement payment be placed in Plaintiff’s trust account. Plaintiff also asks the Court to order that no administrative fee be applied, as this amount has already been collected. In support of his assertion that the settlement funds were placed into his trust account, Plaintiff submitted a copy of his Inmate Account Statement dated May 12, 2021, which shows the transactions that occurred on May 6, 2021, as follows: On May 6, 2021, a deposit of $5,000 labeled “DIRECT RESTITUTION PAYMENT,” bringing Plaintiff’s account balance to $5.000.15. (ECF No. 119, p. 4). Also on May 6, 2021, a deduction of $4,761.91 labeled “RESTITUTION FINE PAYMENT,” bringing Plaintiff’s account balance to $238.24. (Id.). Additionally, also on May 6, 2021, a deduction of $238.09 labeled an “ADMINISTRATIVE FEE,” bringing Plaintiff’s account balance to $0.15. (Id.). D. Defendant’s Supplemental Brief and Evidence In its supplemental brief, Defendant argues that Plaintiff is incorrect that California Penal Code § 2085.5, California Code of Regulations, Title 15, § 3097(a)-(f), and California Code of Regulations, Title 15, § 3097(j) cap the amount of restitution that Plaintiff was required to pay from the settlement award. (ECF No. 118, p. 2). “California Penal Code section 2085.8 legally requires CDCR to pay Plaintiff’s restitution first, and then deposit any remaining funds into his trust account. Therefore, Penal Code section 2085.5 and Title 15, section 3097(a)-(f), which deal with trust account deposits, do not apply to payment of Plaintiff’s restitution under Penal Code section 2085.5. Likewise, Title 15, section 3097(j), which specifically states that it is an exception to deductions from trust account deposits under section 3097(a)-(f) for property reimbursement, does not apply to Penal Code section 2085.8. Moreover, Plaintiff was proceeding on a retaliation claim and the settlement was paid to resolve his lawsuit under 42 U.S.C. section 1983, not to reimburse him for lost or damaged property.” (ECF No. 118, p. 3). “The requirement that the settlement funds be applied to Plaintiff’s restitution was also stated and agreed to in the settlement agreement and on the record at the settlement conference. And Plaintiff’s settlement was processed in accordance with California Penal Code section 2085.8, as shown in the CDCR Settlement Flow Chart. At the time of settlement, Plaintiff owed $9,436.46 in restitution obligations, therefore, the settlement was paid directly to his restitution obligations from the settlement check. Because the full amount of [] Plaintiff’s $5,000 settlement was applied to his restitution (subject to an administrative fee), there were no funds left to deposit into his trust account.” (ECF No. 118, p. 3) (citations omitted). “Furthermore, even if CDCR had erred in the processing of a settlement, payment of restitution is legally required under California law. See Cal. Penal Code § 1202.4 (restitution requirement following criminal conviction); Cal. Penal Code § 2085.8 (settlements shall be paid directly to restitution). Consequently, both common sense and statutory authority indicate that an inmate should not be able to exploit clerical errors to avoid their restitution obligations. Instead, the remedy would be to correct the error to ensure the appropriate amount of restitution is paid to the inmate’s victim(s).” (ECF No. 118, p. 3) (footnote omitted). In support of its assertion that the settlement funds were not paid directly to Plaintiff, Defendant submitted the declaration of S. Saunders, an accounting administrator at CDCR; a settlement flow chart, which shows the order of disbursement for settlements awarded to represented plaintiffs; a copy of Plaintiff’s restitution obligations; and an Inmate Statement Report for Plaintiff’s account from May 1, 2021, to September 20, 2021. A. Deduction for Restitution The parties rely on the following statutes and a regulation, which apply to Defendant’s ability to deduct restitution from a settlement payment to Plaintiff. California Penal Code section 2085.8(a) states that restitution shall be paid directly out of any settlement: Compensatory or punitive damages awarded by trial or settlement to any inmate, parolee, person placed on postrelease community supervision pursuant to Section 3451, or defendant on mandatory supervision imposed pursuant to scuobnpnaercatigornap whi (thB )a ocfi vpial raacgtrioapnh b (r5o)u gohf ts uagbadiinvsits iao nfe (dhe)r aolf, Ssteacttei,o onr 1l1o7ca0l ijna il, prison, or correctional facility, or any official or agent thereof, shall be paid directly, after payment of reasonable attorney's fees and litigation costs approved by the court, to satisfy any outstanding restitution orders or restitution fines against that person. The balance of the award shall be forwarded to the payee after full payment of all outstanding restitution orders and restitution fines, subject to subdivision (c). Cal. Penal Code § 2085.8(a) (emphasis added) However, California Penal Code section 2085.5 states that restitution may be deducted from trust account deposits up to a maximum of 50% of deposits: (a) If a prisoner owes a restitution fine imposed pursuant to subdivision (a) of Section 13967 of the Government Code, as operative prior to September 29, 1994, subdivision (b) of Section 730.6 of the Welfare and Institutions Code, or subdivision (b) of Section 1202.4 of this code, the secretary shall deduct a minimum of 20 percent or the balance owing on the fine amount, whichever is less, up to a maximum of 50 percent from the wages and trust account deposits of a prisoner, unless prohibited by federal law, and shall transfer that amount to the California Victim Compensation Board for deposit in the Restitution Fund. The amount deducted shall be credited against the amount owing on the fine. The sentencing court shall be provided a record of the payments.
(c) If a prisoner owes a restitution order imposed pursuant to subdivision (c) of Section 13967 of the Government Code, as operative prior to September 29, 1994, subdivision (h) of Section 730.6 of the Welfare and Institutions Code, or subdivision (f) of Section 1202.4 of this code, the secretary shall deduct a minimum of 20 percent or the balance owing on the order amount, whichever is less, up to a maximum of 50 percent from the wages and trust account deposits of a prisoner, unless prohibited by federal law. The secretary shall transfer that amount to the California Victim Compensation Board for direct payment to the victim, or payment shall be made to the Restitution Fund to the extent that the victim has received assistance pursuant to that program. The sentencing court shall be provided a record of the payments made to victims and of the payments deposited to the Restitution Fund pursuant to this subdivision. Cal. Penal Code § 2085.5(a), (c) (emphasis added). California Code of Regulations, Title 15, section 3097(c) similarly limits the department to 50% of trust account deposits to pay a restitution order: Effective January 1, 2007 and thereafter, when an inmate owes any obligation pursuant to a direct order of restitution imposed by a court, the department shall deduct 50 percent or the balance owing, whichever is less, from the iinncmoamtee',s s wubajgeecst aton tdh ter uexste macpctoiounnst edneupmoseirtsa treedg ainrd sluebsss eocft itohne (sjo).u rIcne aodfd siuticohn , an administrative fee of 10 percent of the deduction shall be deducted to reimburse the department for its administrative costs, for a maximum deduction of 55 percent. Cal. Code Regs. tit. 15, § 3097(c) (emphasis added). Although at first glance these appear inconsistent, in that California Penal Code section 2085.8(a) says that settlement payments should be applied to restitution while California Penal Code section 2085.5 and California Code of Regulations, Title 15, § 3097(c) limit the amount that can be deducted to approximately 50%, they can be read consistently based on the flow of deposits. California Penal Code section 2085.8(a) provides that for a settlement payment in a civil action like this one, restitution “shall be paid directly.” California Penal Code section 2085.5 and California Code of Regulations, Title 15, § 3097(c), on the other hand, limit the amount of a payment that can be deducted once the payment is deposited in a prison trust account, up to a maximum of approximately 50%. By the plain terms of these statutes, and consistent with the terms of the settlement agreement, the settlement payment should have been paid directly to restitution, and only if there was a balance left over should those funds have been deposited into Plaintiff’s trust account. In other words, if Defendant had complied fully with the settlement agreement and applicable law, the entire $5,000 settlement should have been paid to restitution and no funds should have been deposited into Plaintiff’s trust account. It is not clear as a matter of fact if this happened. On the one hand, according to the declaration of S. Saunders, an Accounting Administrator with the California Department of Corrections and Rehabilitation, the restitution payment was made directly. (ECF No. 118-1, p. 2). And, the transaction type on the Inmate Statement Report does say “DIRECT RESTITUTION PAYMENT.” (Id. at 10). On the other hand, the Inmate Statement Report also shows Plaintiff’s account balance increasing with the settlement payment and decreasing with the payment of restitution and the administrative fee. (Id.). Thus, it appears possible that the settlement funds were improperly, but momentarily, deposited in Plaintiff’s trust account instead of being paid directly to restitution. It is also possible that the funds were paid directly but were reflected as a matter of accounting on the Inmate Statement Report. In the end, the Court believes it need not determine this factual question. This is a motion to enforce the settlement agreement. If the Court were to enforce the settlement agreement, it would require payment directly to restitution, as required by Section 3, paragraph 2 of the settlement agreement2 and California Penal Code section 2085.8(a). There is no factual scenario that would entitle Plaintiff to the full settlement amount, or even half the settlement amount. B. Provision for Property Claims In the alternative, Plaintiff argues that California Code of Regulations, Title 15, section 3097(j), prevented Defendant from deducting any of the settlement payment to pay for restitution because his case is founded on a claim for loss of property, and California Code of Regulations, Title 15, section 3097(j) applies to prevent any deductions from the settlement payment. California Code of Regulations, Title 15, section 3097(j) states that “any reimbursement to an inmate as a result of a claim for lost or damaged property … are exempt from deductions for fines and direct orders of restitution enumerated in subsections (a), (b), (c), (d), (e), and (f).” However, this action is not proceeding on a claim for lost or damaged property. As of the date of settlement, this case was only proceeding on a section 1983 First Amendment retaliation claim. (See ECF Nos. 92, 100, & 107). And, in denying summary judgment to Defendant on Plaintiff’s retaliation claim, the Court found that “Plaintiff has put forth evidence that, taken in the light most favorable to Plaintiff, presents genuine issues of material fact regarding whether Defendant Gonzales threatened to write Plaintiff up for manipulation of staff and announced a punitive search of the law library in response to Plaintiff’s declaration that he would file a staff complaint and that such actions did not reasonably advance a
2 “CDCR shall pay Plaintiff $5,000 (the settlement amount). However, Plaintiff understands that CDCR is obligated by California Penal Code Section 2085.8 to collect any amounts owed by a prisoner under a restitution fine or order, including any administrative fees related to such amounts. Such amounts and fees will be deducted from the settlement amount and paid on Plaintiff’s behalf as required by Penal Code section 2085.8. If the settlement amount exceeds the restitution amounts and fees, the excess balance shall be made by check to Plaintiff’s inmate trust account.” (ECF No. 112, p. 8). legitimate correctional goal.” (ECF No. 92, p. 18; ECF No. 100, pgs. 2-3 & 6). Thus, the claims that survived summary judgment involved a threatened write-up and the announcement of a punitive search, not lost or damaged property. Moreover, as discussed above, California Code of Regulations, Title 15, section 3097 deals with deposits to an inmate’s trust account, and the entire settlement payment should have been paid directly to restitution without ever being placed into Plaintiff's trust account. Accordingly, based on the foregoing, the Court will recommend that Plaintiff's motion to enforce the settlement agreement be denied. For the foregoing reasons, IT IS HEREBY RECOMMENDED that Plaintiff's motion to enforce the settlement agreement (ECF No. 112) be denied and that jurisdiction over this matter be terminated. These findings and recommendations are submitted to the United States district judge assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636(b)(1). Within fourteen (14) days after being served with these findings and recommendations, any party may file written objections with the court. Such a document should be captioned “Objections to Magistrate Judge's Findings and Recommendations.” Any response to the objections shall be served and filed within fourteen (14) days after service of the objections. The parties are advised that failure to file objections within the specified time may result in the waiver of rights on appeal. Wilkerson v. Wheeler, 772 F.3d 834, 838-39 (9th Cir. 2014) (citing Baxter v. Sullivan, 923 F.2d 1391, 1394 (9th Cir. 1991)). 73 Dated: _ October 12, 2021 [see ey UNITED STATES MAGISTRATE JUDGE