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Uploaded: Sunday, May 18, 2008, 9:17 AM
Signature Properties v. school district case trial begins
Dispute arose over responsibility in building Neal Elementary School
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by Janet Pelletier
Pleasanton Weekly Staff
| After more than five years of very-public dispute, another—and possibly decisive phase of the litigation between the Pleasanton school district and the city's premier housing developer Signature Properties is under way in the Fremont Court of Appeal.
The trial is expected to last at least two weeks.
The case involves the construction of Neal Elementary School in the Vineyard Corridor, which would be the city's long-planned 10th and final K-5 grade school. The school district bought a 3-acre parcel that is located between Old Vineyard Avenue and the new Vineyard Avenue that was built, in part, to accommodate traffic and underground utilities to the school.
Last Thursday, Judge George Hernandez of the Fremont Hall of Justice began hearing arguments from Signature and the school district on a purported agreement which the district claims obligates Signature pay the full cost of building Neal no matter what the cost, an agreement that Signature said it never made nor signed.
Both groups acknowledge that Signature, along with Standard-Pacific Homes, agreed to build the school in 2001 at a projected cost of $8.5 million, with that cost to be a cash-advance in the form of a low-interest loan that the district would pay back over time as developer fees were collected by the district. Both developers also received a $2 discount per square foot in developer fees for new construction as part of the agreement.
Signature, which developed Ruby Hill, and Standard-Pacific, which built homes in other parts of the city, including in the Mohr Elementary School area, have no housing projects under way in Pleasanton.
But when John Casey was hired as Pleasanton school superintendent in 2002, construction analysts told him that the cost of Neal had already risen to $13.5 million. Casey, the school board and many on the City Council said Signature had not only agreed to advance the $8.5 million, but also to pay any costs to build Neal that exceeded that amount. He said the $5 million difference was more than the district could afford and that the developers should honor their agreement and commit to building Neal.
For its part, Signature CEO Jim Ghielmetti told the school district it wouldn't pay "a nickel" over $8.5 million. To clarify what the agreement actually was, and because his and Signature's names were being besmirched by city and school officials publicly, Signature filed a suit in Superior Court. Although Standard-Pacific is still a party in the suit, it has largely deferred its responses and actions to Signature.
In 2004, Alameda County Superior Court Judge Ronald Sabraw ruled that Signature has no obligation to pay any of the costs of building Neal Elementary School, as the school district had claimed. It's that decision that the school district is now contesting before Judge Hernandez in the Fremont Court of Appeal.
The appeal is continuing with some changes in the once-bitter relations between the district and Signature as well as in those involved. The city of Pleasanton, once part of the school district's suit, agreed with the district to drop the two agencies' charges of fraud and deceit against both Ghielmetti and Signature Vice President and General Counsel Jim McKeehan. It was an awkward suit to begin with since at the time, McKeehan's wife Deborah Acosta McKeehan, was also Pleasanton's city manager. Since then, the city also has dropped out of the case altogether.
Also, since 2000 when plans for Neal were moving forward, some now see the need for a 10th elementary school diminishing, with enrollment projections, particularly at the elementary level, starting to drop. Parents in Ruby Hill who used to crowd into school board meetings, long ago quit coming and for most of those, their children have long since passed the age of attending elementary school. Children who live in Ruby Hill and the now fast-developing custom homes in the Vineyard Corridor attend either Vintage Hills or Valley View elementary schools or private schools.
After attorneys for both parties made their opening statements in the case Thursday, McKeehan took the stand as the first witness.
He said that because Signature never entered into a construction agreement with the Pleasanton school district, developers had never reached the point of actually estimating the exact cost of building Neal School or moving forward on plans. Therefore, there never could have been an agreement in paying for Neal since its cost was not been determined.
McKeehan's testimony was continued to the afternoon court session after a lunch break. But just as a cross examination by the school district attorneys began, the courthouse went dark, presumed to be a power outage related to the triple-digit temperatures, and court was recessed.
The case will resume Monday in Dept. 607 of the Fremont Hall of Justice, 39439 Paseo Padre Pkwy, in Fremont.
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| Comments
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Posted by Rick, a resident of the Vintage Hills Elementary School neighborhood, on May 18, 2008 at 9:30 am If the district wins, which is a long shot, the district should explore the idea of building a high school on the site instead. There are not enough young children to support an elementery school in that area.
Also, I believe the legal bill for the district is over 2 million and counting.
The board is going to look pretty bad if they loose.
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Posted by Bill, a resident of the Vintage Hills Elementary School neighborhood, on May 18, 2008 at 12:19 pm I completely disagree with Rick. Vintage hills school was constructed to service the Vintage hills neighborhood. Why should the school and neighborhood be overloaded by the construction of more than 1,000 homes in the vineyard corridor? A greedy developer should not be left off the hook for building a school to service the multi-million neighborhoods they construct. The city should prohibit further construction by these developers until the school is completed.
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Posted by I saw him, a resident of the Another Pleasanton neighborhood neighborhood, on May 18, 2008 at 1:05 pm
WOW!!!!!!
"McKeehan's testimony was continued to the afternoon court session after a lunch break. But just as a cross examination by the school district attorneys began, the courthouse went black,"
Could this have been an act of God for the deceit in Mr. McKeehan's testimony. Everyone that watched the negotiations saw him commit to building that school for 8.5 mil. making cute quips about his wife's role as our City Manager at the time.
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Posted by John Q Public, a resident of the Another Pleasanton neighborhood neighborhood, on May 18, 2008 at 1:33 pm
There was no doubt in the minds of the public watching that Signature was clear in stating they would build the school for 8.5 mil.
The law firm that advised PUSD to enter into this contract with Signature is the same firm that is representing PUSD in the current litigation. They continue to collect fees in this litigation that is based on their poor representation in the contract negotiations. PUSD has paid them more than half a million in legal fees already and continues to use them as council on this and other matters as well.
Two of our trustees at the time were attorneys. If you are questioning how we could be in this position read the link that was posted on another thread.
The District used a law firm called 'Lozano Smith' for their legal advice. Why would Pleasanton contract with a law firm that was recently sanctioned state-wide by a Federal judge for ethics violations? He ordered the entire firm to have ethics training and indicated Lozano Smith engaged in "repeated misstatements of the record, frivolous objections to plaintiff's statement of facts, and repeated mischaracterizations of the law." Take a look at this article from this law web site.
Web Link
Posted by Michael, a member of the Vintage Hills Elementary School community, on May 17, 2008 at 12:17 pm
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Posted by Rick, a resident of the Vintage Hills Elementary School neighborhood, on May 18, 2008 at 5:30 pm John Q public
I read the link and it is disturbing. One must weigh the risks of litigation
as well as the motives of the lawyers involved.
Regarding the cost of litigation, the number I got from the council was over 2 million to date. They tempered that by saying that it was from the infrastructure budget so it would not affect the students. I disagree. 2.5 million dollars could make a lot of capital improvements which are much needed or cover half of the shortfall this year
Due to the state budget cuts.
When you come to the voters and ask for more money in the form of a parcel tax,
you must establish the public's funds are not being wasted.
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Posted by Rick, a member of the Vintage Hills Elementary School community, on May 18, 2008 at 8:23 pm Correction:
The district bill to date is around 1.475 million to date according to the council's
public info officer.
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Posted by John Q, a resident of the Another Pleasanton neighborhood neighborhood, on May 18, 2008 at 8:35 pm
1.5 mil to pay the incompetent attorney that negotiated a poor contract more money........
Signature Properties gives developer's their bad name.
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Posted by Bill, a member of the Vintage Hills Elementary School community, on May 19, 2008 at 3:27 pm Fortunately not all developers in the community operate under the same ethical practices as Signature Properties.
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Posted by Sam, a resident of the Downtown neighborhood, on May 19, 2008 at 7:54 pm The attorneys that are in trial for the District are not the attorneys that wrote the contract. Different law firm totally.
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Posted by Jim, a resident of the Jensen Tract neighborhood, on May 19, 2008 at 8:46 pm
There is no question that Harold from Lazano Smith was representing and advising the school district to enter into this contract with Signature Properties. He said it was "Iron Clad" and a good deal for the district because Signature was refusing to honor the previous contract.
The discussions were televised. Mr. McKeehan's promises are caught on video.
Harold is still PUSD's lead attorney on this litigation.
There was always suspicion that Signatures attorney's wrote their own contract but PUSD's attorney, Harold, was representing the district at the time.
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Posted by Reality check, a member of the Amador Valley High School community, on May 22, 2008 at 7:20 pm Use some common sense people, no developer is going to enter into an "open checkbook" agreement with a school district. The district absolutely "could have" built the school as agreed for 8.5 Million, instead they dragged their feet while determine whether or not the school was really needed? As many developers have said in the central valley as that market has collapsed. They are perplexed by those who are faulting them for selling houses for the market rate consumers are wanting to pay and trying to sue the developers for "lost equity". As one developer responded, "I have never in the 25 years of my company asked any homeowner to share thier increase in equity value with me, why should I have to share the loss"?
To think any developer would agree in principal or otherwise to an open ended blank check agreement is obsurd, and now the district is pouring good money after bad to make things worse.
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Posted by Phil, a resident of the Kottinger Ranch neighborhood, on May 23, 2008 at 7:47 am I saw the meeting where a council member asked the City Attorney to confirm if the cost of the school went over $8.5M, would the developers (Signaure and Standard Pacific) be paying the amount over the $8.5M. Our City Attorney said "yes" and at the time he said this, Signature's legal council was there and he did not refute this. So that means Signature's representative was deceitful by not correcting this if they never had an intention of paying this extra amount. The deal was, Signature was going to pay a lower fee than other developers (about $2 less per square foot) and in exchange, they would be building the school for $8.5M. Why do you think the city and the school district would have accepted this deal of a lower fee per square foot if there was not something that Signature was going to do to make the $2/foot less a "good investment"?
Did anybody find it a problem that Mr. McKeenan is married to our City Manager at the time (Deborah McKeenan) and the City Manager was still representing the City on this contract and the problems that came afterwards? Talk about a big financial interest conflict.
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Posted by Fred, a resident of the Another Pleasanton neighborhood neighborhood, on May 23, 2008 at 3:08 pm Many of us had a very BIG problem with the conflict of interest but we were largely ignored. When she was finally told to recuse herself she threw quite a fit. She was a very good city manager before her marriage caused the conflict of interest.
The video of that fateful meeting still exists despite that the official copy mysteriously got erased. There are a number of personal copies, it would be great is CTV30 would air it.
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Posted by Jack, a resident of the Downtown neighborhood, on May 24, 2008 at 11:34 am The school district never wanted the school. The school district never intended to build or operate the school. The school district wanted the land, so just as they have done in Stoneridge, Del Prado and other neighborhoods over the years, they could sell it. It's a money grab, plain and simple. That's why Signature wanted to "build" the school, not just pay huge fees. Now that Ruby Hills is sold out, Signature has no motivation to build it, and the school distict still has their hand out... It stinks all around.
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