Los Alamitos Unified School District v. Howard Contracting, Inc.
178 Cal. Rptr. 3d 355, 2014 Cal. App. LEXIS 851, 229 Cal. App. 4th 1222 (2014)
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Rule of Law:
California Education Code section 17406 creates a specific statutory exemption allowing school districts to enter into 'lease-leaseback' agreements for construction projects without being subject to the general public contract requirement of competitive bidding.
Facts:
- Los Alamitos Unified School District (the District) sought to perform upgrades and improvements to its high school's track and athletic field.
- The District's governing board authorized a 'lease-leaseback' agreement with a contractor, Byrom-Davey, Inc., to complete the project.
- Under the agreement, the District leased its property to Byrom-Davey for $1 per year.
- The agreement required Byrom-Davey to construct the improvements on the property, and the District would then lease the improved property back from Byrom-Davey.
- Title to the site and all improvements was set to vest in the District at the end of the lease term.
- The District did not employ a competitive bidding process to select Byrom-Davey, Inc. for the project.
- Howard Contracting, Inc., another contractor, objected to the lack of a competitive bidding process.
Procedural Posture:
- Los Alamitos Unified School District (the District) filed a complaint in the trial court to validate its lease-leaseback agreement with Byrom-Davey, Inc.
- Howard Contracting, Inc. (Howard) filed an answer, challenging the validity of the agreement.
- The District filed a motion for summary judgment, arguing it was entitled to judgment as a matter of law.
- The trial court granted the District's motion for summary judgment and entered judgment in its favor.
- The trial court denied Howard's subsequent motion for a new trial.
- Howard, as the appellant, filed a timely notice of appeal from the judgment to the California Court of Appeal, with the District as the appellee.
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Issue:
Does Education Code section 17406 exempt a school district from the general public contract requirement of competitive bidding when it enters into a lease-leaseback agreement for the construction of school facilities?
Opinions:
Majority - Fybel, J.
Yes. Education Code section 17406 provides a clear statutory exemption from competitive bidding requirements for school district lease-leaseback agreements. The court's reasoning is based on several points. First, the plain language of section 17406(a) explicitly states that a school district may enter into such agreements 'without advertising for bids.' Second, the statute begins with the phrase 'Notwithstanding Section 17417,' the very section that establishes general bidding requirements, thus demonstrating a clear legislative intent to create an exception. Third, the court found persuasive a 1973 Attorney General opinion which concluded that the predecessor statute was 'plainly, unambiguously, and explicitly' an exemption from bidding. Finally, the court noted that a 2004 legislative attempt to amend section 17406 to require competitive bidding was vetoed, implying that the legislature understood the existing statute did not require it.
Analysis:
This decision solidifies the legality of the lease-leaseback arrangement as a significant exception to California's public works competitive bidding laws for school districts. It provides legal certainty to districts, shielding them from challenges by contractors who were not selected through a bidding process. The ruling reinforces a strict statutory interpretation approach, emphasizing that clear legislative language creating an exception will be upheld, even against strong public policy arguments for competitive bidding. The decision effectively places the responsibility on the California Legislature to amend the statute if it wishes to subject these specific agreements to bidding requirements in the future.
