(c)

1. (1) In the event that the department decertifies the mattress recycling organization, the department shall establish a process and schedule that will, to the maximum extent possible, allow for an orderly transition of responsibility from the decertified organization to a successor organization. As part of that transition process, the department shall certify a successor mattress recycling organization pursuant to Section 42987.
2. (2) If requested by the department, the decertified organization may continue to administer the program, including, but not limited to, its receipt of charges remitted pursuant to Section 42989.1, until a successor organization certified by the department assumes all financial, statutory, contractual, and other legal responsibilities for implementing the successor organization’s obligations under this chapter. The department shall not require the decertified organization to provide transitional services for more than 12 months unless the decertified organization consents to doing so.
3. (3) Once a successor organization assumes the responsibilities described in paragraph (2), the decertified organization shall within 30 days transfer to the successor organization all assets and liabilities, and all financial, statutory, contractual, and other legal rights and responsibilities, including, but not limited to, the receipt of the mattress recycling charge remitted pursuant to Section 42989.1. Before any financial liability is transferred to the successor organization, the decertified organization shall first obtain approval from the department for each item of liability. Transferred liabilities may include, but shall not be limited to, notes payable, accounts payable, salaries payable, wages payable, interest payable, other accrued expenses payable, income taxes payable, customer deposits, vendor contracts, and any other contractual liabilities. Transferred liabilities shall not include any civil or criminal liabilities or fines or penalties issued by the state.
4. (4) If the mattress recycling organization is no longer able or willing to serve as the mattress recycling organization, it shall notify the department in writing and the department shall decertify that mattress recycling organization. The department may also decertify the mattress recycling organization if it finds that the organization has intentionally violated one or more provisions of this chapter in a manner that materially impacted the organization’s ability to substantially meet its obligations under the plan approved by the department or if the department has revoked the mattress recycling organization’s plan pursuant to Section 42993.2.

5. (5) If the department decides not to request the decertified organization to provide the transitional services described in paragraph (2), the department may direct, in writing, the decertified organization to set up a trust fund or escrow account and to transfer all unexpended funds into that account within 30 days. The trust fund or escrow account shall be subject to reasonable requirements that the department may set until the department certifies a successor organization. The trustee or escrow agent shall do both of the following:

   1. (A) Accept mattress recycling charges directly from manufacturers, renovators, retailers, and distributors into the trust fund or escrow account that would have been made to the mattress recycling organization prior to the mattress recycling organization’s decertification.
   2. (B) Make payments from the trust fund or escrow account as the department shall direct, in writing, to implement the most recently approved plan.
6. (6) If a new mattress recycling plan has not been approved by the department within one year after decertification, the department may modify the previously approved plan, as it deems necessary, and continue to direct payments from the trust fund or escrow account in accordance with paragraph (5) to implement the modified plan.
7. (7) A trustee or escrow agent in possession of mattress recycling charge revenue shall, as directed by the department, transfer those funds to a successor mattress recycling organization with an approved plan.
8. (8) If the department revokes the plan pursuant to Section 42993.2, each manufacturer, renovator, retailer, or distributor that sells a mattress to a consumer or to an ultimate end user of the mattress in the state may continue to do so until the effective date of a successor plan approved by the department without being subject to penalties pursuant to Section 42993.1, provided that the manufacturer, renovator, retailer, or distributor continues to meet the applicable requirements of this chapter, including, but not limited to, Sections 42989.1 and 42992.
9. (9) For purposes of this subdivision, “unexpended funds” means mattress recycling charge revenue in the mattress recycling organization’s accounts that the organization is not already obligated to pay pursuant to a contract, claim, or similar mechanism.