Fresno Unified refuses to disclose potential legal fees in Harris construction case

Fresno taxpayers could be paying even more for Fresno Unified School District’s legal battle over a no-bid construction contract – but the district won’t disclose how much.

On Wednesday, attorneys for Fresno Unified denied a request made by The Bee under the Public Records Act that asked for legal bills the district has received from Harris Construction, the developer whose 2012 “lease-leaseback” contract with the district has spurred a costly lawsuit and a federal investigation of the district’s construction deals.

As of April, Fresno Unified had paid about half a million dollars in legal fees related to the case. But an “indemnification clause” written into the contract in question could also put the district on the hook for legal fees Harris Construction has accrued since the case began.

Several sources say the contractor has confronted the district about enforcing that clause, potentially increasing the cost to taxpayers by hundreds of thousands of dollars.

In its denial of The Bee’s request, Fresno law firm Atkinson, Andelson, Loya, Ruud & Romo says that the legal bills are not subject to public disclosure because of pending litigation that has not yet been settled.

The district did not disclose Wednesday how much the law firm was paid to respond to The Bee’s request, but documents show the district pays them up to $295 an hour.

Attorney Peter Denno, who signed the response, claims that the records are exempt because “public interest served by non-disclosure clearly outweighs the public interest served by disclosure.”

He also pointed to case law that says the release of communications pertaining to pending litigation could “eviscerate the parties’ ability to vigorously litigate and protect their client’s interests.”

“If parties outside of the litigation were able to obtain such documents through a PRA request, the ability to communicate openly and freely during litigation would be severely hampered,” the letter says.

In the leaseback contract being contested in court, the district agreed to “indemnify, hold harmless and defend” Harris Construction and its employees from any action that might challenge the legality of the contract. The same language was also found in a pre-construction contract the district signed with the company.

Fresno Unified Trustee Carol Mills, an attorney, has voiced concern about the financial implications of the indemnification clause several times over the past year, questioning whether the district should consider a malpractice suit against Atkinson, Andelson, Loya, Ruud & Romo for allowing it in the contract.

“In my opinion, enforcement of either of these clauses faces significant, potential legal obstacles,” Mills said in an email Wednesday, pointing out that last year the 5th District Court of Appeal found the contract violated conflict of interest laws, which could potentially invalidate the contract. “Moreover, the indemnity clause itself is open to some interpretation, I believe, as to its extent. These issues likely will have to be addressed in the context of (the litigation) and until there is a final resolution, I would not support any attempt at enforcement of these clauses.”

Last August, the California Supreme Court denied Fresno Unified’s request to review the 5th District opinion, which said the district misused the leaseback process.

Fresno Unified Trustee Brooke Ashjian would not comment on the specifics of the case but said he’s concerned about how it could affect the district’s budget and the public’s uncertainty.

It’s unclear how the district would be budgeting for extra legal bills.

“We’re a public institution. If somebody’s sending us bills and we’re not putting it on our payables or potential payables, then that means we’re cooking the books,” he said Wednesday. “That’s an accounting no-no.”

The Bee first asked for the legal costs in an email on May 20, but the district referred questions to Mark Creede, an attorney at Lang, Richert and Patch. Creede would not answer questions, pointing to pending litigation. The Bee sent an official public records request to the district June 20.

Fresno Unified has a history of delaying or denying information. Earlier this year, the district twice postponed the public release of emails The Bee asked for between district and Harris Construction officials. The emails portrayed a cozy relationship between officials and showed they discussed no-bid projects long before the school board approved them.

This story was originally published June 29, 2016 at 6:31 PM with the headline "Fresno Unified refuses to disclose potential legal fees in Harris construction case."