The Pleasanton school district has hired Signature Properties' law firm that won the developer's suit against it to seek full recovery of millions of dollars it has spent and will have to pay to settle litigation and other costs for the ill-fated Neal Elementary School funding effort.
The action, announced by School Supt. John Casey, follows last Tuesday's announcement that the school district has agreed to pay $2.6 million to local developers Signature and Standard Pacific Homes as part of a court-approved settlement of a seven-year-old dispute over financing Neal.
The long-planned school to serve the Ruby Hill and now the burgeoning Vineyard Corridor communities was estimated to cost $8.5 million in 2001 when the two developers offered to advance the funds and actually build the school.
The school district even bought property mid-way between Montevino Drive and Ruby Hill as the future Neal site, installed water and sewer lines and the city of Pleasanton spent $600,000 to design and install traffic circles on its new Vineyard Avenue bypass to accommodate future school traffic. The Neal site now lies vacant, surrounded by multi-million-dollar new homes built over the last three years.
When School 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 district could afford to reimburse the developers under what lawyers had told him was a binding agreement and 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. Now, five years later, the court has agreed and has ordered the district to reimburse the developers for $2.1 million in their legal fees plus another $500,000 for the architectural plans the developers prepared.
After agreeing to abide by the court's decision and to not appeal the case to a higher court, Casey and the board also agreed to hire Bernard, Balgley & Bonaccorsi to seek reimbursement of at least $4.5 million from the district's original law firm, Lozano Smith.
"This is the firm that represented the district in drafting the cooperative and amended fee agreements with the district and the developers and advised us at the time the agreements with the developers were prepared," Casey said.
"Their advice was not successful in court and the financial agreement that they prepared with Signature and Standard Pacific was deemed not to be a legal document," Casey added. "We are asking that they pay the $2.6 million we now owe the developers and also reimburse us for our legal costs and other expenditures related to this case."
Casey estimated that the district has spent $2 million on its own legal fees, with additional expenses for portable classrooms because Neal was not built as scheduled, on bridge loans related to accommodating the overflow of students from Ruby Hill that were expected to be attending Neal and other costs related to depositions and fees during the long and costly litigation.
"So we expect Lozano Smith to pay back what we have spent and what we have now agreed to pay Signature and Standard Pacific," he said.
"With the judgment made by Judge Hernandez, we want to basically say to Lozano Smith that their firm needs to step up and help the district here financially because of the work that they did," Casey added. "And the best firm to do that and to get it done as cheaply and quickly as possible, because they know the case, is the firm of Bernard, Balgley & Bonaccorsi. They heard the testimony, they did all the depositions."
"The board of trustees feels that this is the best outcome for the district given the ruling by Judge Hernandez," Casey explained. "The stipulated judgment preserves sections of the amended cooperative fee agreement that are important to the district."
"It also brings to an end many years of uncertainty, and the judgment will enable the district to redirect our resources to other areas," he added. "There is no desire to appeal or otherwise continue with this lawsuit between the district and the two developers."
Casey said that the district intends to keep the Vineyard Corridor acreage the it owns and is zoned for a school, but has no funds to commit at this time to building Neal School. It would have been the school district's 10th elementary school and, at the time it was planned, was intended to be the last one built.
Besides no school at the Vineyard Avenue site, the traffic circles are also gone, an additional expense the city paid to remove them after motorists complained.