Pleasanton Weekly

News - July 22, 2011

PUSD Neal School lawsuit ends

District, law firm split award, with bulk going to firm

by Glenn Wohltmann

After spending $2 million to fight a lawsuit, the decade-long battle over construction of Neal Elementary School has ended, with a little more $350,000 headed back to the district.

The issue dates back to 2001 when Signature Properties agreed to loan the Pleasanton Unified School District $8.1 million to build the school at Vineyard Avenue and Thiessen Street.

However, when former Superintendent John Casey was hired in 2002, he determined that the cost of Neal had risen to $13.5 million, $5 million more than the PUSD could afford to reimburse the developers under what the district's own lawyers had told him was a binding agreement. Casey said the developers should pay the difference, which would not be reimbursed.

The developers, through Signature's law firm of Bernard, Balgley & Bonaccorsi of Newark, argued that they had never signed such an agreement and initiated court action to clarify their position. In 2008, the court agreed and ordered the district to reimburse the developers for $2.1 million in legal fees plus another $500,000 for the architectural plans the developers had prepared.

PUSD then hired Signature's lawyers to sue its own law firm, Lozano Smith, for legal malpractice. The district claimed, among other things, that Lozano Smith wrote an illegal ACFA (Amended Cooperative Fee Agreement) that violated public bid requirements.

The district also claimed Lozano Smith and attorney Robert Freiman wrote an ACFA that was "ambiguous and unenforceable," and failed to amend it before construction on the property was delayed from 2001 to 2002, during which time construction costs rose well above the $8.5 million Signature Properties originally agreed to pay.

Although it originally hoped to get the $8.5 million promised by the developer, in its lawsuit against Lozano Smith, the district set its sights much lower: It sued to recover the $2.6 million judgment against it from its original lawsuit with Signature and nearly $2 million in legal costs from that suit.

Superintendent Parvin Ahmadi, without mentioning Lozano Smith, said this week "the district was released" from the $2.5 million it owed Signature. Ahmadi said the total received was $1.315 million, with the district receiving $357,885.41.

Signature's attorneys signed on with the agreement that the company would accept whatever settlement came out of the suit.

The suit was resolved July 7 by an oral agreement not entered into court records, which avoided legal requirements for prompt filing of documents. Neither Judge Steven Austin nor Signature's attorneys would discuss the case, and School Board Member Jeff Bowser -- the only member of either the board or administration who attended the hearing -- deferred all questions to Ahmadi.

In addition to the $2 million the district spent in legal fees to fight its original case, it spent $1.1 million to add four classrooms at Valley View Elementary School, and later spent another $847,393 for two more classrooms there.

Meanwhile, the Neal site lies vacant, surrounded by multi-million-dollar new homes built over the last six years.

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