If I understand you correctly, the following syntax should do what you want:

{LF:ParentName="*California*"}|{Lf:Name="*California*",type="DFS"}

The first clause, ParentName, will return all documents and folders that whose parent folder has California somewhere in the name. The second clause, Name, will return all folder, documents, or shortcuts with California in the name.

Example folder structure to help demonstrate what Parent Name does:

RepoRoot

• California
  • Subfolder 1
    • Subsubfolder
    • Document on California 1
  • California subfolder
    • Document on California 2
• Federal Folder
  • Subfolder 2
    • document on California 3
  • California Subfolder
    • Laws document

{LF:ParentName="*California*"} alone will return:

 Subfolder 1, California subfolder, Document on California 2, and Laws document

Note that ParentName does not iterate through subfolders. That is, Subsubfolder will not be returned, since it's direct parent does not have California in the name.