Appellate court finds plaintiff may still recover for violation of public bidding requirements after completion of the school construction contract

On Nov. 24, 2020, a California appellate court held in Davis v. Fresno Unified School District that the plaintiff’s claim that a contract for school construction violated public bidding requirements was not moot after construction was completed, because the plaintiff could still recover by having the contractor pay back to the district the profits they received to build the middle school. The case has been remanded to the lower court for further proceedings.

The case originated in 2012, when the plaintiff, who was also a building contractor, sued the school district and building contractor, alleging they entered into a $36.7 million lease-leaseback construction contract in violation of California’s competitive bidding requirements. The appellate court held in 2015 that the district’s lease-leaseback arrangement for construction of a school did not meet the statutory requirements; the court declared the construction contract invalid and sent the case back to the trial court for further proceedings.

On remand, the district argued in a pretrial motion the case was moot, because the middle school complex was already completed. The trial court agreed, finding that there was no longer effective relief and the plaintiff appealed again.

In reversing the trial court’s finding that the case was moot, the appellate court found that plaintiff had alleged a taxpayer action and could obtain relief by the contractor refunding or “disgorging” any profits earned under the contract, even though the work on the contracts had already been performed. Completion of the contract therefore does not necessarily mean a lawsuit for violation of bidding laws is moot, as remedies to disgorge or refund public funds paid under the construction contract may still be available.

The decision is a reminder to districts and but especially to contractors of the financial importance of properly executing the procedures required of construction contracts. Boards can review their board policies, including Board Policy 3311 (Bids) and Administrative Regulation 3311.2 (Lease-Leaseback Contracts) for additional information.

Read the appellate court’s decision here.