A Fresno County judge has issued a tentative ruling in favor of Fresno Unified School District and Harris Construction in a 13-year-old lawsuit filed by contractor Stephen Davis.
The school district, Harris and Davis have 20 days to file any objections to Judge Jeffrey Hamilton’s tentative ruling. If no objections are made, the ruling will become final.
The backstory: The lawsuit dates back to 2011, when Harris Construction was pre-qualified under the lease-laseback system for projects, leading to a $37.6 million contract to build Gaston Middle School.
- Under the lease-leaseback system – which was significantly altered by the California Legislature in 2016 – school districts lease land to builders for $1 per year. The builder would construct the school buildings on the land, and the developers would then lease the new facilities back to the district to recover costs.
- FUSD pre-qualified 14 contractors, including Harris Construction, to partner on lease-leaseback projects in 2011. Harris Construction agreed to the deal a year later and completed the school in two years, taking a profit of $1.1 million.
- Harris Construction had a pre-construction agreement with FUSD for the project, meaning the builder served as an advisor on the project’s planning and development before signing the lease-leaseback agreement.
- Davis, a contractor who has done over $182 million in work for Fresno Unified, filed a lawsuit against the district and Harris Construction in 2012 arguing that FUSD was using lease-leaseback to illegally avoid competitive bids. Davis filed the lawsuit as a taxpayer, not in his capacity as a developer.
- The lawsuit was dismissed in 2013, but that decision was later reversed by the Fifth District Court of Appeal, eventually leading to a trial last April.
The big picture: Following a series of briefings with the parties after the trial last April, Hamilton issued his tentative ruling last Monday.
- Hamilton tentatively ruled that while Harris Construction was providing recommendations and opinions to the district as part of its consulting agreement, it never had any ability to control FUSD’s actions or decisions.
- “Plaintiff presented no evidence that Harris participated and/or influenced the RFQ process in any respect,” Hamilton tentatively ruled. “This is fatal as the California Supreme Court has indicated that it is the participation in the planning of a project that gives rise to a conflict of interest… The overwhelming evidence proved that Harris did not play any role in the RFP process, beyond submitting a response along with 23 other contractors.”
- Hamilton also tentatively ruled that the contract was “negotiated at arms-length and in good faith,” with Harris Construction and Fresno Unified not violating the law.
What they’re saying: Kevin Carlin, the attorney representing Davis, told GV Wire that he expects the final ruling to go in their favor.
- “I don’t know why you would be doing a story on a tentative decision that is subject to change based upon each party’s right to submit additional briefing and request for final statement of decision,” Carlin said to GV Wire. “Based on the foregoing, plaintiff is confident that the court in its final statement of decision will rule in plaintiff’s favor. Notwithstanding this most recent Super Bowl, the media does not declare the winner based on the score at halftime.”
- Fresno Unified said in a statement that the district is very pleased with the tentative ruling.
- “We have firmly held the belief since the start of this litigation that the lease-leaseback contracting methodology was beneficial to the district and our community, and that our implementation was completely legal,” FUSD said. “Our only regret is that this vindication in court has cost the taxpayers of Fresno $1,723,343.87 in legal fees and thousands of hours of staff time, resources that would be better spent in the service of improving student outcomes.”
- Harris Construction President Michael Spencer told The Sun that the company is gratified with the ruling.
- “This case was originally filed in November 2011. For almost 13 years now, we have maintained that we did nothing wrong and that the agreements in question were legal,” Spencer said. “After many appeals, we finally got our day in court – a trial over a two-week period with hundreds of exhibits being put into evidence. We are gratified that the court agreed with what we have been saying for all these years: Harris Construction did nothing wrong and the agreements, prepared by Fresno Unified’s attorneys, were legal. We also agree with Fresno Unified that this case has wasted millions in taxpayer dollars that would have been better spent on educating students.”
