Strategic Concepts, LLC v. Beverly Hills Unified Sch. Dist.

232 Cal. Rptr. 3d 579, 23 Cal. App. 5th 163
CourtCalifornia Court of Appeal, 5th District
DecidedMay 10, 2018
Docket2d Civil No. B264478
StatusPublished
Cited by1 cases

This text of 232 Cal. Rptr. 3d 579 (Strategic Concepts, LLC v. Beverly Hills Unified Sch. Dist.) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Strategic Concepts, LLC v. Beverly Hills Unified Sch. Dist., 232 Cal. Rptr. 3d 579, 23 Cal. App. 5th 163 (Cal. Ct. App. 2018).

Opinion

GILBERT, P.J.

*581*165A school district employee persuaded the district to convert her position from employee to independent contractor. She formed a limited liability company (LLC). The result: she was no longer an employee to whom the district paid $113,000 per year; she was now the sole owner of an LLC to which the district paid more than $1.3 million a year. Later she persuaded the district to award her LLC a $16 million no-bid contract. The district later declared the contracts void in violation of Government Code section 1090,1 prohibiting conflicts of interest in the making of public contracts, and section 4525 et seq., requiring competitive bidding for certain public contracts.

The LLC sued the district for breach of contract and the district cross-complained to recover money paid under the alleged void contracts.

The trial court instructed the jury that the LLC's contracts did not violate section 1090 on the theory the statute does not apply to independent contractors. The court did not instruct on the competitive bidding statutes. It also concluded that a "termination for convenience" clause in the contract did not limit damages. The jury awarded millions in damages to the LLC.

We reverse. Section 1090 applies to independent contractors. The trial court misinterpreted section 1090 and erred in not instructing on the competitive bidding statutes. The contract also limits the LLC's damages.

FACTS2

Karen Christiansen was employed as director of planning and facilities for the Beverly Hills Unified School District (District). Among her duties Christiansen administered the planning, construction, and maintenance of the *166District's school facilities. She received a salary of $113,000 per year plus a $150 per month automobile allowance. Her written employment agreement ran from February 2005 through June 2007.

In 2006, Christiansen lobbied District officials to change her position from an employee to a consultant. A former member of the Board of Education (Board) testified, "Ms. Christiansen lobbied hard to move from the director of facilities and planning to consulting status." In June 2006, Christiansen entered into a new three-year contract with the District terminating her status as an employee and naming her a consultant.

The new contract, however, did not change her duties. The contract provided in part: "It is the intent of The District and Karen Christiansen that the transition be seamless as far as the operations of The District and the responsibilities of Karen Christiansen are concerned and that Karen Christiansen continue to have the same responsibilities she had as the Director of Planning and Facilities except for those duties and responsibilities which would be precluded due to her change in status from employee to consultant."

The contract further provided: "The District shall provide office space, office equipment and supplies in an amount, quantity and quality as is currently being provided to Consultant."

Pursuant to the contract, Christiansen's two minor children were considered children of a District employee for the purpose of attending school in the District. Christiansen was allowed to continue her *582use of the District's email. The new District Superintendant Kari McVeigh believed for a time that Christiansen was a District employee and a member of her staff.

The contract set Christiansen's compensation at $160 per hour with a maximum compensation of $170,000 per year. Compensation could not exceed the maximum without prior written recommendation by the District staff and prior written approval by the Board.

Christiansen formed Strategic Concepts, LLC (Strategic), of which she was the sole owner. In early 2007, Christiansen assigned her consulting contract to Strategic.

Payments Under the Contract

McVeigh and Assistant Superintendant of Business Services Cheryl Plotkin were required to review and approve Strategic's invoices. McVeigh described her relationship with Christiansen as "friendly, friends." Plotkin frequently socialized with Christiansen. She attended parties at Christiansen's home.

*167They went on two pleasure trips. At Plotkin's request, Christiansen obtained tickets to a show in Las Vegas for Plotkin and her husband. They reimbursed her. Christiansen hired Plotkin's daughter to work for Strategic.

In spite of the $170,000 per annum contract limitation, Strategic's invoices were approved and paid in the following amounts: $253,520 in 2006; $1,313,035 in 2007; and $1,390,804 in 2008. No one from the District alerted the Board about the over-payments. The invoices simply appeared on the Board's "consent calendar"; that is, items that the Board does not usually review on an individual basis.

When Christiansen discovered her contract and payments were being questioned by the District's Citizens' Oversight Committee, she emailed Plotkin: "Let's just say that the contract was developed by your attorney .... Please shut this down fast."

2008 New Contract

In June 2008, with one year left on her existing contract, Christiansen negotiated a new contract. She testified that McVeigh wanted a new contract because the existing contract did not contain a "termination for convenience" clause; that is, a clause that would allow the District to terminate her contract without cause.

Christiansen's friend was the District's counsel, David Orbach, and his partner, David Huff. Christiansen, Orbach and Huff were among a group of friends who often met for drinks after work. In emails Orbach referred to Christiansen as "my queen" and she referred to him as "my prince." Christiansen sent Orbach and Huff an unsolicited picture of herself in a black bikini. The attorneys and Christiansen exchanged a number of emails containing sexual innuendo.

On June 3, 2008, the District and Strategic entered into a new consulting contract. The contract terminated on June 30, 2009. The contract it replaced provided for maximum compensation of $170,000 per annum. The new contract provided for compensation per an hourly rate schedule attached as exhibit B to the contract. In addition, the contract provided for a retroactive payment in an amount not to exceed $950,000 for services performed between January 1 and June 30, 2008. The compensation would be updated annually as approved by the Board.

The new contract contained a "termination for convenience" provision. The provision stated in part: "This AGREEMENT may be terminated without cause by DISTRICT upon sixty (60) days' written notice to CONSULTANT.

*168In the event of a termination without cause, the DISTRICT shall pay CONSULTANT for all SERVICES

*583

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Bluebook (online)
232 Cal. Rptr. 3d 579, 23 Cal. App. 5th 163, Counsel Stack Legal Research, https://law.counselstack.com/opinion/strategic-concepts-llc-v-beverly-hills-unified-sch-dist-calctapp5d-2018.