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Strategic Concepts, LLC v. Beverly Hills Unified School District (2018)

May 14, 2018

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Horvitz & Levy LLP successfully obtained reversal of a $23 million breach of contract judgment against Beverly Hills Unified School District, ruling the trial court erred by failing to instruct the jury to determine whether the contract violated government conflict of interest and competitive bidding statutes.

Plaintiff Karen Christiansen was the Director of Planning and Facilities for defendant Beverly Hills Unified School District.  She then negotiated an arrangement with the District for her company, plaintiff Strategic Concepts, LLC, to perform the same work as an independent contractor for substantially more money.  She then overbilled the District.  She then negotiated an additional contract and amendment, giving her still more money, including a lucrative percentage fee contract for managing projects funded by a $334 million school bond measure she proposed and lobbied the District to pass.  After paying Strategic $250,000 per month under that contract to manage projects that existed only on paper, the District terminated the contract as violating California’s conflict of interest statute, Government Code section 1090, as well as California’s competitive bidding statutes. 

Christiansen and Strategic sued the District for breach of contract.  The trial court failed to instruct the jury concerning section 1090 and the competitive bidding statutes, and further instructed the jury that section 1090 does not apply as a matter of law because Christiansen and Strategic were independent contractors, not District employees. So instructed, the jury found the District liable for breach of contract and awarded $23 million in general and special damages.  The California Court of Appeal reversed the judgment against the District for a new trial, holding section 1090 does apply to independent contractors like plaintiffs. It also held the trial court erred by refusing to instruct the jury regarding the application of the competitive bidding statutes. The Court of Appeal also held the agreement’s damages limitation provision enforceable and offered guidance to the trial court and the parties for its potential application upon remand.