Friday, September 18, 2015
C.A. Allows Suit Over School Construction Scandal to Go Forward
Panel Says ‘Public Interest’ Exemption From Anti-SLAPP Law Applies
By KENNETH OFGANG, Staff Writer
The anti-SLAPP law does not apply to a suit by San Diego County taxpayers who want to invalidate contracts between a builder and a local school district whose former officials admitted receiving illegal benefits from those defendants, the Fourth District Court of Appeal has ruled.
Div. One yesterday certified for publication its Aug. 31 opinion in the case. It said San Diegans for Open Government may continue their lawsuit against Har Construction, Inc., one of three defendants in a taxpayer suit arising from a “pay to play” scandal in the Chula Vista-based Sweetwater Union High School District.
The suit was filed in 2012, less than a month after criminal charges were filed against the former superintendent of the district, Jesus Gandara, and then-school board member Pearl Quinones, Arlie Ricasa, and Greg Sandoval. The criminal probe was an outgrowth of reporting by the San Diego Union-Tribune about apparent gifts of travel, meals and sports tickets by contractors to the defendants and others while the donors were seeking contracts from the district.
That reporting also eventually led to investigations of two nearby districts. All in all, 18 defendants were charged, and all entered guilty pleas, prosecutors said.
State laws prohibit public officials from voting on contracts in which they have a personal financial interest, limit the amounts of gifts they can accept from non-family members, and require that all such gifts above a nominal amount be reported to the Fair Political Practices Commission.
Government Code §1090 authorizes a civil action to invalidate any contract that was approved by officials who had a financial conflict of interest. The plaintiff, known as SanDOG, brought such a suit and asked the district to join as co-plaintiff, but the charged board members were a majority of the board at the time and the district did not respond to the request.
Contracts and Change Orders
SanDOG alleged that more than $40 million in contracts and change orders, including more than $14.6 million that went to Har Construction, were approved despite the fact that district officials and employees “had a financial interest in the contract in violation of . . . Section 1090.” The district was originally named a defendant in the suit, but after the board majority was replaced, the plaintiff and the district stipulated that the district’s status be changed from that of defendant to real party in interest.
Har Construction argued in support of its anti-SLAPP motion that the complaint arose from “political contributions and statements made to District officials regarding the contract review and award process” and that these activities were “quintessential rights of free speech and petition protected by the Anti-SLAPP statute.” It also argued that the plaintiff was unlikely to prevail on the merits because the contracts were competitively bid, and thus could not have been influenced by whatever payments were made to the board members.
The anti-SLAPP motion was brought 15 months after the amended complaint was filed, but just two months after the stipulation changing the district’s status in the lawsuit was approved. The court scheduled a hearing on the anti-SLAPP motion and on the defendant’s summary judgment motion at the same time.
The plaintiff argued that there was no justification for bringing the motion more than 60 after the amended complaint was filed, that the “public interest” exemption of Code of Civil Procedure §425.17 applied, that the complaint arose from illegal activity that was not constitutionally protected, and that it was likely to prevail because Har’s president had admitted giving gifts to the district officials when he testified before a grand jury.
San Diego Superior Court Judge William Dato concluded that the motion was timely and that the public interest exception did not apply. But he denied the motion on the ground that the plaintiff had shown a sufficient likelihood of winning on the merits.
Justice Judith Haller, writing for the Court of Appeal, said Dato reached the correct result for the wrong reasons.
“An anti-SLAPP motion is not a vehicle for a defendant to obtain a dismissal of claims in the middle of litigation; it is a procedural device to prevent costly, unmeritorious litigation at the initiation of the lawsuit,” she wrote. “When a case has been pending long after the 60-day period, the parties have presumably engaged in pretrial litigation and the purposes of an anti-SLAPP motion are no longer applicable.”
SanDOG, she went on to say, established that it brought the action for public benefit, bearing a financial burden that was disproportionate to its private interests and that private enforcement was “necessary” under the circumstances.
The trial judge’s reasoning, that there was no disproportionate financial burden because SanDOG presented no admissible evidence of its costs and was a “tax-exempt organization that has no receipts or expenses,” was “faulty,” Haller said.
“The undisputed facts show SanDOG—a public interest entity formed to monitor governmental conduct—has no financial interest in bringing the action,” the justice explained. “The action was brought solely to obtain the return of contract payments to the District, for the benefit of the District.”
If SanDOG has no money, and its litigation expenses are ultimately picked up by someone else, its financial burden would still be disproportionate to its individual financial stake in the litigation, which is zero, she said, citing cases interpreting the private attorney general statute.
As for the necessity of private enforcement, the jurist said the facts as they existed at the time of the amended pleading are controlling, and noted that it was not until two years later that the allegedly conflicted board members ceased to control the board.
Since the motion was untimely and the anti-SLAPP statute inapplicable, it was unnecessary to determine whether SanDOG’s claims arose from protected activity or whether it was likely to prevail, Haller said.
The case is San Diegans for Open Government v. Har Construction, Inc., D066514.
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