Thursday, May 5, 2016
Court of Appeal Orders Publication of Ruling on School Contractor’s Conflict of Interest
By a MetNews Staff Writer
A ruling that allows civic activists to sue a builder they accuse of having a conflict of interest in connection with construction projects in the Torrance Unified School District was ordered published yesterday by this district’s Court of Appeal.
Div. Eight, in an opinion last month by Justice Madeleine Flier, said the role of Balfour Beatty Construction, which supplied preconstruction consulting to the district in connection with the building of two elementary schools may have violated Government Code §1090.
The statute generally prohibits a public official or employee from acting on a contract in which that person has an interest. The Supreme Court explained in a 2013 decision that the law “is concerned with ferreting out any financial conflicts of interest, other than remote or minimal ones, that might impair public officials from discharging their fiduciary duties with undivided loyalty and allegiance to the public entities they are obligated to serve.”
James McGee and the California Taxpayers Action Network claimed in their complaint that as project manager, Balfour “filled the roles and positions of officers, employees, and agents” of the district.
The appellate panel said that Los Angeles Superior Court Judge Ramona G. See erred in sustaining a demurrer to the conflict-of-interest cause of action. But it upheld the dismissal of claims that the district violated the competitive bidding provisions of the Education and Public Contract codes.
This is the second appellate reversal in litigation between McGee and Balfour Beatty and the district. In January of last year, the Court of Appeal reached a similar result in a suit over the construction of three other schools.
The contracts involved in the current litigation call for a leaseback arrangement in which the builder pays the district $1 per year to lease each school site, then leases the property back to the district for an amount determined by the cost of construction, subject to a guaranteed maximum.
McGee and the taxpayer group claim such agreements are a subterfuge designed to avoid competitive bidding. The Court of Appeal, however, said Education Code §17406, which exempts lease-leaseback arrangements from competitive bidding requirements, bars all of the plaintiffs’ claims other than the one they raised under §1090.
The Fifth District Court of Appeal reached a contrary result in Davis v. Fresno Unified School Dist. (2015) 237 Cal.App.4th 261, reasoning that the statute applies only to “genuine” leases. But Flier said that decision was contrary to the plain language of the statute.
“If the Legislature shares plaintiffs’ view that the competitive bid process is superior, it may amend section 17406 to specify that it requires a school district to obtain competitive bids,” she wrote.
Compton Case Cited
The conflict-of-interest claim, however, should have survived demurrer, the justice said, citing Hub City Solid Waste Services, Inc. v. City of Compton (2010) 186 Cal.App.4th 1114. The court there held that a contractor who bribed city officials to obtain an exclusive waste hauling franchise while also running the city’s in-house waste division had violated §1090.
Flier also rejected the claim that consultants are not subject to §1090 because Public Contract Code §10365.5, a different conflict-of-interest statute, applies to consultants specifically. The two sections are not mutually exclusive, the jurist concluded.
The case is McGee v. Balfour Beatty Construction LLC, 16 S.O.S. 2279.
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