Supreme Court Denies Review of Lease-Leaseback Case

August 2015
Number 48

In a closely watched case, the California Supreme Court has denied petitions for review of the opinion in Davis v. Fresno Unified School District (June 1, 2015) case no. F068477 (5th App. Dist.). The Court has also denied requests for depublication of the case by the school district and various statewide organizations interested in the outcome. This means that a lawsuit will be allowed to proceed against a particular lease-leaseback arrangement that is similar to many in use by school districts in the State, and the trial court will be bound by the guidance provided by the Fifth District Court of Appeal in its decision. The lawsuit will also be allowed to proceed on a civil cause of action for conflict of interest under Government Code section 1090, et seq., seeking to invalidate the contract on the basis of an alleged conflict of interest involving an outside consultant.

As addressed in our recent CNB (See Client News Brief No. 30, June 2015), the appellate court’s decision called into question a number of aspects of many school district lease-leaseback agreements. TheDavis court also addressed conflict of interest in a manner that is applicable to all local agencies. The court allowed further legal action on a claim that the contractor, as a pre-construction consultant to the school district, participated in the making of a contract in which it subsequently became financially interested, and thus potentially violated conflict of interest laws. With today’s action by the Supreme Court, the appellate court’s opinion will remain binding law, although it could be overturned in the future by legislative action or, eventually, by a further appellate ruling if the case is again appealed after the trial court has completed proceedings in this case.

Lozano Smith will be monitoring the Davis case, which will now return to the trial court, and will report on any significant developments. Because of the scrutiny of lease-leaseback agreements that has followed the Davis case, and may continue until the case is finally resolved, school districts may wish to work particularly closely with their legal counsel on lease-leaseback issues and agreements. Similarly, for all public agencies, care should be taken when considering issuing contracts to consultants who have previously advised the agency on a related matter.

If you have any questions regarding this case or lease-leaseback agreements that school districts may have in place or are considering, please contact one of our nine offices located statewide. You can also visit our website, follow us on Facebook or Twitter, or download our Client News Brief App.

Written By

Megan Macy
Sacramento Office

Devon B. Lincoln
Monterey Office

©2015 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.