A Fresno County judge has sided with Fresno Unified School District and Harris Construction in their defense of a lawsuit filed against them by contractor Stephen Davis.
Fresno County Superior Court Judge Jeffrey Hamilton Jr. issued his ruling on Wednesday, 13 years after the lawsuit was first filed.
The backstory: Davis, who has conducted more than $180 million in work for Fresno Unified, filed a lawsuit against the district and Harris Construction in 2012 over the district’s use of the old lease-leaseback system.
- Fresno Unified pre-qualified Harris Construction under the lease-leaseback system in 2011, leading to the $37.6 million contract to build Gaston Middle School.
- The lease-leaseback system allowed school districts to lease land to builders for $1 per year, with the builder then constructing the school. The builder would then lease the new facilities back to the district to recover costs. The California Legislature ended that practice in 2016.
- Harris Construction also had a pre-construction agreement with Fresno Unified for Gaston Middle School and served as an advisor for the school’s planning and development before signing the contract.
- Davis argued in the lawsuit that Fresno Unified used lease-leaseback to illegally avoid competitive bids. The lawsuit was dismissed in 2013, but the Fifth District Court of Appeal later reversed that decision, leading to a trial last year.
The big picture: When Davis filed the lawsuit, he did so as a taxpayer, not in his position as a contractor. But Hamilton wrote in his ruling that Davis’s primary motivations for the lawsuit were for his and his company’s personal profit, rather than a public benefit.
- Hamilton ruled that Harris Construction did not violate state law with the lease-leaseback agreement and negotiated the contract at arms-length and in good faith.
- Hamilton also ruled that Harris met its burden of proof to meet the Safe Harbor exemption in case Davis decides to appeal the ruling. Davis argued for $36 million in disgorgement for Harris Construction, plus interest. “This last allegation is further evidence of Davis’s true motivation, to eliminate his competitor, HARRIS,” Hamilton wrote.
- Davis would be entitled to $236,129 in disgorgement if he was even entitled to any recovery, Hamilton ruled.
What they’re saying: Fresno Unified said in a statement that the district is very pleased with Hamilton’s decision.
- “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,” Fresno Unified said.
- Michael Spencer, the President of Harris Construction, said, “This is a significant victory and further affirms what we’ve been saying for nearly 13 years. We feel vindicated. While this is a monumental step forward, the battle is not yet over. In the meantime, this decision clearly signals to all parties involved that it is time to bring this long-running saga to a final resolution.”
Read the ruling:
