Education Lab

Fresno Unified wants leaseback lawsuit dismissed

Harris Construction workers put beams into place on the roof of Fresno High School in 2012.
Harris Construction workers put beams into place on the roof of Fresno High School in 2012.

The Fresno Unified School District wants a judge to dismiss a lawsuit that alleges administrators signed an illegal $37 million no-bid contract.

Attorneys for the district filed a motion in Fresno County Superior Court to dismiss the suit, claiming that Stephen Davis – the Fresno contractor who first alleged the district abused the “lease-leaseback” system – does not have a right to make his case.

The motion, filed April 6, does not address whether the district wrongfully used the leaseback financing method, which allows districts to circumvent the traditional competitive bidding process, but rather focuses on whether Davis is allowed to make that claim.

In 2012, Davis filed the suit as an individual, not on behalf of his company, Davis Moreno Construction. The FUSD motion contends Davis cannot pursue the lawsuit as a taxpayer who was not directly involved in the contract in question, and that he has failed to adequately show that he has standing to bring his claims to court.

“Allowing public agency decisions to be challenged by every disgruntled contractor (like Davis) under the guise of a ‘taxpayer’ suit would embroil public agencies (like FUSD) in endless litigation and divert precious resources and taxpayer money away from public projects and public needs,” the motion says. “Regardless of the merits of Davis’ claims (they have none), he lacks standing to bring the causes of action asserted.”

Davis’ lawsuit sparked a federal investigation of the contract and several other of Fresno Unified’s leaseback deals. The grand jury investigation, which began in August, is still underway.

Davis claims that not only did the district deliberately misuse the process to ensure the Gaston Middle School project went to Harris Construction, but it also broke conflict-of-interest laws by allowing the firm to perform pre-consulting work on the project.

Districts and contractors across the state are closely watching the case, which could change how school deals are done in California. Legislation has been introduced that would require competitive bidding in leaseback projects.

However, expected amendments to Assembly Bill 2316 would protect contractors who previously signed those deals from having to pay back money to districts.

Last year, the state Supreme Court denied Fresno Unified’s request to review an appellate court decision that sided with Davis, allowing him to move forward with his allegations.

Davis wants the money spent on the Gaston Middle School project to be returned to the district, and has invited Fresno Unified school officials to join him in his fight against Harris Construction, but to no avail.

“I’m shocked that the school district would attempt to defeat our efforts to return to them $37 million they paid out under a contract that appears to be illegal,” Davis’ attorney, Kevin Carlin of San Diego, said Tuesday. “I’m confident that the Superior Court will deny the motion and find we do have standing.”

“Fresno Unified School District’s position on the standing issue is made clear in its motion for judgment on the pleadings, and we will not comment further with the matter pending before the court,” Fresno attorney Mark Creede, representing Fresno Unified, said in an email Tuesday.

Mackenzie Mays: 559-441-6412, @MackenzieMays