Davis v. Fresno Unified School Dist.

Filed 10/22/26 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT STEVEN K. DAVIS, F089619 Plaintiff and Appellant, (Super. Ct. No. 12CECG03718) v. FRESNO UNIFIED SCHOOL DISTRICT et al., OPINION Defendants and Respondents. APPEAL from a judgment of the Superior Court of Fresno County. Jeffrey Y. Hamilton, Jr., Judge. Carlin Law Group and Kevin R. Carlin for Plaintiff and Appellant. Reed Smith, Raymond A. Cardozo, Kathryn M. Bayes; Whitney Thompson & Jeffcoach, Timothy L. Thompson, Mandy L. Jeffcoach; Baker Manock & Jenson, Jerry H. Mann; Kahn, Soares & Conway and Richard C. Conway for Defendant and Respondent Harris Construction Co., Inc. Creede-Blyth Law and Mark L. Creede for Defendant and Respondent Fresno Unified School District. -ooOoo- Plaintiff Stephen K. Davis sued defendants Fresno Unified School District (Fresno Unified or District) and Harris Construction Co., Inc. (Contractor), alleging defendants’ 2012 lease-leaseback agreements for the construction of a $36 million middle school violated California’s competitive bidding statutes and conflict of interest laws. Defendants argued the competitive bidding requirements did not apply because the project qualified for the exception in Education Code section 17406 (section 17406). In an earlier 2015 appeal, we concluded section 17406’s exception applied to lease- leaseback agreements only if the agreements (1) were genuine leases, (2) included “a financing component for the construction of the project,” and (3) provided for the school district’s “use of the newly built facilities ‘during the term of the lease.’ ” (Davis v. Fresno Unified School Dist. (2015) 237 Cal.App.4th 261, 271, review denied, Aug. 26, 2015, S227786 (Davis I).) Applying this interpretation, we concluded Davis had adequately alleged section 17406’s exception did not apply and, thus, he had stated a claim for a violation of the competitive bidding statutes. (Davis I, supra, at p. 271.) A court trial was held in 2024 on Davis’s competitive bidding and conflict of interest claims. In its statement of decision, the trial court applied the interpretation of section 17406 set forth in Davis I1 and determined the lease-leaseback agreement fell within the exception because the leases were genuine, the construction costs carried by Contractor provided Fresno Unified with a form of financing, and the new facilities were used during the term of the lease. Thus, the court concluded Davis had failed to prove a violation of the competitive bidding statutes. The court also determined Davis had failed to prove that, as a result of entering into preconstruction services agreements with Fresno Unified, Contractor was a “officer” or “employee” of Fresno Unified subject to the conflict of interest prohibition in Government Code section 1090 (section 1090). Consequently, the court denied the conflict of interest claim. Davis filed this appeal. 1 As explained in part III.C. below, the Davis I interpretation applies in this appeal pursuant to the doctrine of law of the case, not the conflicting statutory interpretation adopted in decisions of other districts of the Court of Appeal. In Davis v. Fresno Unified School Dist. (2023) 14 Cal.5th 671 (Davis III), the Supreme Court stated, “that split of authority is not before us.” (Id. at p. 684.) 2.  First, we conclude the conflict of interest claim was properly rejected. Davis has not demonstrated the trial court misapplied the legal standards used to determine when an outside advisor like Contractor is an “officer” or “employee” for purposes of section 1090. Second, we find as a matter of law that the lease-leaseback arrangement did not qualify for the exception to competitive bidding in section 17406 because the project was financed by the issuance of bonds, not by Contractor-financing. Third, the remedy for the competitive bidding violation is set forth in subdivision (d)(1) of section 17406, which was enacted in 2016 after the decision in Davis I was final. That provision states a contractor may be paid its reasonable cost of construction, excluding profit, under agreements that failed to qualify for section 17406’s exception. We conclude the allowance of the contractor’s reasonable cost of construction is not an unconstitutional gift. (Cal. Const., art. XVI, § 16.) We also conclude Davis has not shown the trial court abused its discretion or committed legal or factual error when it included overhead costs as part of the reasonable cost of the services provided. Based on the court’s finding that Contractor’s net profit on the project was $236,129, that is the amount Contractor must refund to Fresno Unified. We therefore reverse the judgment and direct the trial court to enter a modified judgment requiring Contractor to disgorge its profit. FACTS Sometime around 2006 through 2008, Fresno Unified initiated preparation of a facilities master plan—that is, a long-range plan for its facilities that included a needs assessment evaluating the suitability of its schools for student’s educational needs. The plan was created by an outside firm. It identified major deficiencies throughout the district and the kinds of projects needed to correct the deficiencies. The Board of Education of Fresno Unified (board) approved the facilities master plan in 2009. The facilities master plan also identified areas where new construction was needed. 3.  A major need was a middle school in southwest Fresno. Since 1978, southwest Fresno had no middle school and students from that neighborhood were transported by bus to four middle schools in other parts of Fresno. The construction of the southwest middle school—later named the Rutherford B. Gaston Sr. Middle School (Gaston Project)—was an important part of the facilities master plan. Bonds In March 2001, voters within the school district approved General Obligations Bond Measure K authorizing Fresno Unified to sell $199 million in bonds to fund the acquisition, construction, maintenance, and renovation of school facilities. In November 2010, after the board approved the facilities master plan, voters approved General Obligation Bond Measure Q authorizing Fresno Unified to sell $280 million in bonds to fund the acquisition, construction, maintenance, and renovation of school facilities. Both measures authorized an ad valorem tax on taxable property within the school district to fund Fresno Unified’s payment obligations under the bonds. Board Communications—Project Delivery Methods In December 2010 and January 2011, after the approval of Measure Q, Fresno Unified’s Deputy Superintendent Ruth F. Quinto prepared, and Superintendent Michael H. Hanson approved and signed, a series of “board communications” to the members of Fresno Unified’s Board of Education (board) providing information about the methods for completing facilities projects. Quinto testified that, as soon as the bond measure passed, the superintendent wanted to begin educating board members about how Fresno Unified could most effectively provide for the construction of its school projects and, thus, avoid surprises as Fresno Unified moved forward with different construction delivery methods. The first of these board communications, “BC No. A.1,” included as attachments two chapters from the Association of California Construction Managers (ACCM) Project Delivery Handbook titled “What is Construction Management?” and “What is Agency 4. Construction Management?” The board communication described future topics as “Project Delivery Overview” and the three basic project delivery methods or models: (1) traditional design-bid-build, (2) construction manager at risk, and (3) lease-leaseback. Subsequent board communications addressed the three delivery methods and provided chapters from the ACCM handbook describing each method. The three-page chapter addressing the lease-leaseback method stated it involved the selection of a developer-contractor to develop a new building or improvements on property the district owned, followed by the simultaneous execution of “a Site Lease of the property giving the [developer-contractor] the right to develop the project and a Facilities Lease giving it the obligation to develop the project and to lease the improvements and the site back to the District, with the District owning the improvements when the lease expires.” The description also stated that different school districts and their attorneys had taken different approaches to financing (if any), selection of the developer-contractor, lease terms, and the methods for selecting trade contractors. It asserted this flexibility was a primary attraction of the lease-leaseback method. Next, the description stated: “Preconstruction work by the Developer-Contractor up to the time of signing of leases is sometimes conducted under a Preliminary Services Agreement, although some attorneys draft leases that are signed immediately and then amended as design and pricing are developed. “Some attorneys draft leases providing for pre-construction services, even design responsibility, with language that calls for an amendment to give approval for construction to proceed including setting the date of completion and the Guaranteed Maximum Price.” The ACCM handbook’s description stated that “close coordination with a law firm is critical” due to political sensitivities, the preparation of two additional contracts (i.e., the lease and leaseback), and the “decisions about the extent or terms of any financing required.” In addition, it stated: “An attorney’s advice is also necessary to decide 5. whether a Validation process is advisable. This is a legal proceeding recommended by some attorneys to obtain court approval of the terms of the lease.”2 Request for Qualifications After informing the board about the lease-leaseback delivery method, Fresno Unified’s next step was to identify construction firms capable of completing school facilities projects using that delivery method. In March 2011, Fresno Unified published a request for qualifications3 titled “RFQ No. 110327, Lease Leaseback Services” in the Fresno Bee newspaper and sent fax transmissions to various third parties. RFQ No. 110327’s introduction stated Fresno Unified was “requesting ‘statements of qualifications’ from business entities experienced in the Lease Leaseback (LLB) public project delivery method, or business entities that can demonstrate their competence and ability to complete a public works project using the lease-leaseback delivery method.” The request stated Fresno Unified would evaluate and qualify the firms that best met the District’s needs for future projects based on 16 listed factors and other considerations it deemed relevant. The factors included “expertise in finance and funding issues” and experience, expertise, and knowledge of the lease-leaseback process. RFQ No. 110327 split the description of the anticipated scope of services into two categories: (1) assisting with project planning services and (2) construction and post- 2 An overview of validation actions by public agencies and reverse validation actions is set forth in part I.C. of Davis v. Fresno Unified School Dist. (2020) 57 Cal.App.5th 911, 927–929 (Davis II). California has over 200 statutes, mostly in the Government Code and Water Code, that authorize validation proceedings. (Davis II, supra, at p. 929.) The statute at issue in Davis II and Davis III was Government Code section 53511, which authorizes local agencies to bring an action to determine the validity of its bonds, warrants, contracts, or obligations or evidence of indebtedness pursuant to the validation provisions in the Code of Civil Procedure. 3 A request for qualifications asks for information about how the responding firm is qualified to provide the requested services, which is more general than a request for proposals regarding a particular project. 6. construction services. The planning services included cost estimating and value review; expedited design reviews that would generate proposed modifications; preparing a report to Fresno Unified with recommendation for maintaining project budget; development of a guaranteed maximum price acceptable to Fresno Unified; negotiating lease-leaseback contracts with Fresno Unified; bidding the work with a minimum of three bids for each trade and with input from Fresno Unified; identifying and obtaining will-serve letters from all utilities serving the site; and preparing a critical path method schedule on Primavera or other approved software. The request also stated: “A selected LLB entity for a Project may also perform design/constructability review and value engineering. If the District proceeds with the Construction Phase of a Project, the selected LLB entity will enter into appropriate Site and Facilities Lease Agreements and related Construction Provisions, and may contract with separate trade contractors to perform the various trades comprising the entire Scope of Work.” On March 18, 2011, after the newspaper notices had been published, Superintendent Hanson approved and signed a board communication “to inform the Board that the district is requesting qualification statements for lease-leaseback (LLB) services for future district facilities projects.” The board communication stated the deadline to respond was April 6, 2011, and, in accordance with best business practices, a pre-RFQ conference for interested firms would be held two weeks before the deadline. On March 31, 2011, after the conference, Fresno Unified issued an addendum to RFQ No. 110327 explaining that the statement of qualifications should be limited to 30 pages and advising that firms approved would remain qualified for a three-year period Twenty-four contractors responded to the request. FUSD created a five-person committee to individually score the contractors based on nine criteria. After the scores were tabulated, Contractor Harris was ranked first, David A. Bush, Inc. was ranked second, and plaintiff’s firm, Davis Moreno Construction, Inc., was ranked 14th. 7.  On May 17, 2011, Fresno Unified staff sent all firms that had responded to RFQ No. 110327 an alphabetical list of the 14 contractors that staff would recommend the board approve at its May 25, 2011 meeting. Contractor was on the list and Davis Moreno Construction, Inc. was not. The agenda item prepared for the board meeting stated “staff recommends approval of the following fourteen (14) respondents to provide lease- leaseback services, on an as-needed basis, for a three (3) year period.” The agenda item also stated the recommended approval would have no financial impact on Fresno Unified because funding would be established on a project-by-project basis. Fresno Unified’s board communication for that agenda item explained that approval of the recommendation would establish a pool of “qualified contractors to provide lease- leaseback services to the district for new construction and modernization projects when it is determined that this method is appropriate for the particular project”; the list would allow staff to negotiate a project with any qualified contractor; and all agreements for lease-leaseback services would require board approval. A readily apparent implication of the board communication was that any board member who disagreed with Fresno Unified’s use of the lease-leaseback delivery method should vote against establishing a pool of contractors qualified to provide construction services under that method. At the May 25, 2011 meeting, the board approved the recommended list and, thus, qualified those contractors pursuant to RFQ No. 110327. No contractor challenged the scoring process used or the board’s approval of the 14 firms. The trial court stated it received no evidence suggesting the “selection process was infirm or conflicted in any manner.” The court specifically found that Contractor was not involved in the issuance of RFQ No. 110327. Lease-Leaseback Projects Before setting forth details about the Gaston Project, we describe Fresno Unified’s use of the lease-leaseback delivery method for other projects. The first lease-leaseback project was approved by the board on August 10, 2011. The documents used were titled 8. “Site Lease,” “Facilities Lease,” and “Construction Provisions.” The contractor was Lewis C. Nelson and Sons; the project was the construction of Vang Pao Elementary School; the contract amount was almost $16 million; and the source of funds was Measure K. In total, the board voted 25 times to award lease-leaseback projects to contractors that had been qualified under RFQ No. 110327. The last lease-leaseback project was the $5,550,000 Hoover High School Aquatic Center approved by the board on October 15, 2014. The contract was awarded to Bush Construction, Inc. and funded by Measure Q. Nine of Fresno Unified’s 25 lease-leaseback projects were awarded to Contractor. To design and prepare the plans and specifications for the 25 lease-leaseback projects, Fresno Unified used architectural firms that had been prequalified. A majority of the lease-leaseback projects involved the use of preconstruction services agreements, which Fresno Unified awarded with the intent that the contractor performing those services would build the project. That intent was implemented in all Fresno Unified’s projects that used a preconstruction services agreement. On October 13, 2011, Fresno Unified sold approximately $55.5 million in “Series G” general obligations bonds pursuant to Measure K and approximately $50.4 million in “Series B” general obligation bonds pursuant to Measure Q. Fresno Unified secured the indebtedness by pledging receipts from certain levies of ad valorem taxes on real property within the district. Gaston Project Fresno Unified retained Darden Architects to draft the Gaston Project’s plans and specifications and to act as the architect of record. Next, Fresno Unified and Contractor entered into a “PRE CONSTRUCTION SERVICES AGREEMENT” for the Gaston 9. Project stating the agreement was effective as of February 10, 2012.4 Deputy Superintendent Quinto’s signature on the agreement was dated February 28, 2012. The preconstruction services included plan and design review, value engineering, schedule preparation, and other services. In a recital titled “Compensation,” the agreement stated: “In return for District’s selection of Contractor to construct the Project, the services rendered [under this preconstruction services agreement] shall be performed at no cost to the District. However, should the District utilize another contractor to construct the Project, the District shall pay and Contractor shall receive as full compensation for all Services contemplated … the total sum of Five Thousand Dollars.” (Italics added.) That amount was below the threshold requiring the approval of Fresno Unified’s board and, as a result, the board did not vote on the award of the preconstruction services agreement to Contractor. Before entering into the preconstruction services agreement, Fresno Unified’s staff considered whether to ask other contractors to construct the entirety of the Gaston Project. When Fresno Unified selected Contractor from among the 14 contractors qualified under RFQ No. 110327, the mutual expectation and intent was that Contractor would bring the Gaston Project to completion, provided the board approved the lease- leaseback agreements. On March 2, 2012, three days after Quinto signed the preconstruction services agreement, Contractor received the construction plans and specifications for the Gaston Project prepared by Darden Architects. Contractor began its review and the scheduling 4 In Davis I, we noted that “counsel for Fresno Unified stated during oral argument [on March 24, 2015,] that there was no preconstruction contract.” (Davis I, supra, 237 Cal.App.4th at p. 295, fn. 18.) 10. of meetings with specific trades to discuss ideas on enhancing the schedule, constructability, estimate and value engineering.5 During the preconstruction review, Fresno Unified, with input from Darden Architects and Contractor, decided to divide the Gaston Project into two phases to allow separate submissions of construction drawings to the Division of State Architect (DSA). The phase 1 site work included demolition of Carver Academy, construction of a flood control basin, off-site landscaping and soil remediation, below ground electrical and plumbing work, and sidewalks. The DSA could review and approve the plans for the first phase more quickly than plans for the entire project and, thus, the work on the first phase could begin before DSA completed its review of the plans for the second phase— construction of the buildings. Doug Reitz managed the preconstruction part of the Gaston Project for Contractor. He testified that splitting the project into phases instead of waiting for DSA approval of the entire project reduced the project’s timeline by three to five months. In April 2012, Contractor issued a bid package soliciting bids from subcontractors for the site work (demolition, abatement, grading, underground utilities) and off-site work (concrete, landscaping). On May 17, 2012, DSA approved Darden Architects’ plans and 5 Davis I and Davis II were decided at the pleading stage, when we were not informed of the steps Fresno Unified had taken before the preconstruction services agreement was signed. Those steps included (1) the board’s approval, in concept, of a new middle school located in southwest Fresno; (2) the board communications describing the three basic project delivery methods and the use of a Preliminary Services Agreement with the contractor; (3) RFQ No. 110327 and its description of the lease-leaseback method of project delivery; (4) the board’s 2011 approval of the prequalification of 14 construction firms, including Contractor, pursuant to RFQ No. 110327; and (5) Fresno Unified’s use of lease-leaseback arrangements for projects predating the Gaston Project. Why defendants did not seek judicial notice of this information, particularly RFQ No. 110327 and the board’s 2011 prequalification of Contractor in connection with their pleading-stage challenges to Davis’s claims, is unknown. Counsel for each party could offer no reason for these omissions at oral argument. That information would have significantly affected our analysis of Davis’s conflict of interest claims. 11. specifications for the first phase of the Gaston Project, which included the site improvements, outdoor athletic fields and courts, and marquee sign. Phase 1 Lease-Leaseback The agenda for the May 23, 2012 board meeting included items A-9 and A-10, which were labeled “ADOPT Resolution 11-21, Authorizing the Execution of Lease- leaseback Agreements (Site Lease and Facilities Lease with Construction Provisions) for Construction of Rutherford B. Gaston, Sr. Middle School, Phase I (On-Site /Off-Site Work)” and “APPROVE Pre-Construction Services Agreement for Structural Steel Detailing Professional Services for Rutherford B. Gaston, Sr. Middle School,” respectively. (Boldface omitted.) Item A-9 described the work included in phase 1, stated approval of the resolution would allow that work to begin, identified the maximum guaranteed price ($5,277,469), and stated the superintendent recommended approval. It also stated: “Fiscal Impact: Sufficient funds of $5,277,469 are available in the 2011/2012 Measure K budget.” Item A-10 stated approval of the preconstruction services agreement relating to structural steel was “recommended at this time due to the anticipated long lead time to procure and fabricate the structural steel.” It also stated: “Fiscal Impact: Sufficient funds of $375,300 are available in the 2011/2012 Measure K budget.” On May 20, 2012, Superintendent Hanson signed a board communication numbered “AS.1” to provide the board additional information on the Gaston Project and agenda items A-9 and A-10. The board communication stated that phase 1 covered only on-site and off-site work for the Gaston Project, not construction of the buildings, and explained the reasons for dividing the project into two phases. It stated that approvals were being sought for individual components of the overall project, rather than just one construction agreement, to “accelerate construction of this challenging project.” It stated the actual procurement and fabrication of steel would be included in the scope of work 12. for phase 2 of the Gaston Project and the lease-leaseback agreements for phase 2 would “be recommended to the Board in the next few months.” At its May 23, 2012 meeting, the board adopted a resolution authorizing the lease- leaseback agreements for phase 1 of the Gaston Project with a guaranteed maximum price of $5,277,469. The vote was 8-0 with one member absent. A clause in the resolution addressed financing by stating: “WHEREAS, in order to ensure that moneys sufficient to pay all costs will be available for the Project, the District desires to appropriate funds for the Project from its current fiscal year as provided in the Facilities Lease.” The board also approved Fresno Unified entering into the preconstruction service agreement with Contractor for structural steel detailing. The proposed preconstruction services agreement for structural steel detailing stated Contractor would “provide detailed plans, drawings and other documents for the ultimate fabrication and erection of steel members to be used in the construction of the [Gaston] Project” in exchange for $375,300. The day after the board meeting, Fresno Unified issued a notice of award letter to Contractor stating the board had approved the phase 1 agreements for a final guaranteed maximum price of $5,277,469, which included contingencies of $435,753. The site lease and facilities lease (with incorporated construction provisions) executed by Fresno Unified and Contractor were dated as of May 24, 2012. Phase 2 Lease-Leaseback On August 8, 2012, DSA approved the plans for construction of phase 2 of the Gaston Project consisting of an administrative/classroom/library/music/science/kitchen building, a gymnasium and shower-locker building, and a mechanical building. On September 24, 2012, Fresno Unified sent a notice of intent letter to Contractor requesting it to execute and return the proposed site lease and facilities lease for phase 2 of the Gaston Project in advance of the board’s anticipated approval of the agreements at its September 26, 2012 meeting. The agenda for the board meeting included item B-11 13. describing Resolution 12-01, which would authorize the execution of the lease-leaseback agreements for phase 2 of the Gaston Project at a guaranteed maximum price of $36,702,876. Item B-11 stated the superintendent recommended adoption and also addressed the fiscal impact by stating: “Sufficient funds of $36,702,876 are available in the 2012/2013 Measure K and Measure Q budgets.” At the September 26, 2012 meeting, the board adopted Resolution 12-01 by a vote of 6-0, with two members absent. The next day, Fresno Unified sent Contractor a notice of award letter and a notice to proceed letter. The notice of award stated the board had approved the phase 2 agreements for a final guaranteed maximum price of $36,702,876 that included owner-controlled contingencies of $1,938,292. It also stated Contractor was required to provide certain documents within 10 days, including executed performance and payment bonds, a certificate of insurance, certificate of workers’ compensation, a completed emergency contact information form, a designation of subcontractors form listing agreed subcontractors, and executed escrow agreements if Contractor desired to use an escrow account. The eight-page site lease for phase 2 of the Gaston Project was dated as of September 27, 2012 (Site Lease). Under its terms, Fresno Unified leased the project site to Contractor for $1 in rent for a term coinciding with the term of the facilities lease. Section 6.1 of the Site Lease stated: “Title to all improvements made on the Site during the term hereof shall vest subject to the terms of the Facilities Lease.” The 15-page facilities lease for phase 2 of the Gaston Project also was dated as of September 27, 2012 (Facilities Lease). Under its terms, Contractor agreed to cause the project to be constructed in accordance with the DSA approved plans and specification and the “Construction Provisions for the Project” attached to the Facilities Lease (Construction Provisions). Contractor, as sublessor, subleased the project and the site to Fresno Unified, as sublessee, for a term ending “on the completion of the Project and 14. payment of the last Lease Payment, as provided in the Lease Payment Schedule.”6 That schedule, Exhibit C to the Facilities Lease, stated Fresno Unified “shall make Lease Payments … in conformance with and subject to the terms and conditions for payments for the Project as set forth in the Construction Provisions – Exhibit D.” The Construction Provisions required monthly progress payments for the construction services rendered, with a five percent retention pending the acceptance of the project and recordation of a notice of completion. The Construction Provisions also stated that the guaranteed maximum price included $1,000 rental/lease payments that could be prepaid or paid monthly by Fresno Unified during the course of construction. The Construction Provisions allowed Contractor until May 15, 2014, to complete the project, which was 595 days after the notice to proceed. The Facilities Lease stated the parties understood and intended that Fresno Unified’s payment obligations constituted a current expense and “shall not in any way be construed to be a debt of [Fresno Unified] in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness.” It also stated Fresno Unified “has appropriated that portion of the Guaranteed Maximum Price to be earned during the current fiscal year from [Fresno Unified’s] current fiscal year and/or State funds to be received during the [Fresno Unified’s] current fiscal year, and has segregated or will segregate such funds in a separate account to be utilized solely for Lease Payments. [Fresno Unified] will do so for each fiscal year during which the Project is to be constructed or Lease Payments are to be made.” To receive monthly payments for construction services rendered, Contractor submitted an “APPLICATION AND CERTIFICATION FOR PAYMENT” that 6 The Site Lease is the “lease” in the lease-leaseback arrangement and the Facilities Lease is the “leaseback.” (Davis I, supra, 237 Cal.App.4th at pp. 271–272.) 15. included the total sum of the work completed to date and the amount of the current payment due. The applications include an architect’s certificate for payment in which the architect certified the quality of work and stated Contractor was entitled to payment of the amount requested. Each monthly application was accompanied by a certificate for retention payment and two invoices. For example, application No. 4 was signed by Contractor on February 7, 2013. It covered the period from January 1, 2013, through January 31, 2013, and stated the current payment due was $2,130,889.14. Certificate for retention payment No. 4R requested a payment of $112,152.06 be made into the escrow account at United Security Bank. Contractor’s invoice Nos. 3773A and 3773B were dated January 31, 2013, and requested payment of $2,129,889.14 (i.e., the application’s amount less the $1,000 lease payment) and a monthly lease payment of $1,000, respectively. On May 29, 2014, Fresno Unified and Contractor signed a certificate of occupancy stating Fresno Unified (1) had assumed full possession 10 days earlier and (2) accepted the work on phase 1 and 2 as substantially complete. On June 7, 2014, Fresno Unified opened the middle school for an open house and tours to the public. Since June 26, 2014, Fresno Unified has continuously occupied the entirety of the middle school. In August 2014, students started attending classes there. On November 19, 2014, an amended notice of completion identifying the punch list work completed since May 19, 2014, was recorded. The amended notice stated the work on phase 1 of the Gaston Project had been completed on September 1, 2014. On December 4, 2014, a notice of completion for phase 2 of the Gaston Project was recorded. It stated the work on phase 2 had been completed on November 13, 2014. The final lease payment was made by a release of $65,875.44 of escrowed funds to Contractor on March 24, 2016. This release of funds occurred approximately 16 months after the notice of completion for phase 2 was recorded. In total, Fresno Unified paid Contractor $36,051,375 in connection with phase 2 of the Gaston Project. 16. Parties Contractor was founded in 1914 and, since that time, has engaged in the business of construction and construction management, predominately in central California. Contractor worked on a wide variety of construction projects in both the public and private sector, developing a proficiency in the areas of education, healthcare, and dairy and food processing. In 2006, Contractor undertook its first lease-leaseback school construction project when it managed the construction of a school for Kings Canyon School District. By 2016, Contractor had been awarded many lease-leaseback contracts for the construction of schools in the region. The parties stipulated that Davis has standing as a taxpayer to bring this action pursuant to Code of Civil Procedure section 526a. He is the president, treasurer, chief executive officer, and the majority shareholder of Davis Moreno Construction, Inc., a Fresno-based contractor that has handled construction projects for school districts and sometimes is a direct competitor of Contractor. The trial court found Davis’s primary motive for pursuing this lawsuit was his and his company’s financial interests, rather than providing a public benefit. In particular, the court stated Davis’s request for disgorgement of the $36 million paid to Contractor, plus interest, and the absence of a request that subcontractors or suppliers disgorge payments is “evidence of Davis’s true motivation, to eliminate his competitor, [Contractor].” Before this lawsuit was filed, Davis and his company were familiar with the lease- leaseback arrangement that uses a preliminary services agreement for certain preconstruction services before the same contractor enters into lease-leaseback agreements. In November 2006, his firm entered into a nine-page “Preliminary Services Agreement” with Kerman Unified School District (KUSD) for the design and construction of a new school. The preconstruction services provided were substantially similar to the preconstruction services provided by Contractor on the Gaston Project. 17.  In April 2007, the related KUSD lease-leaseback agreements were signed. Specifically, Davis’s firm and KUSD executed a 31-page lease-leaseback agreement, a “Site Lease,” and a “Sublease Agreement” for the turn-key construction of a four- classroom building with restroom facilities at the Liberty Intermediate School. The terms of these agreements were similar to the terms of the lease-leaseback arrangement challenged in this lawsuit. Davis’s firm relied on this project and two others using a lease-leaseback arrangement to show its experience with the lease-leaseback delivery method in its response to Fresno Unified’s RFQ No. 110327. The appellate record’s copy of Davis’s firm’s response to RFQ No. 110327 does not contain the certificate described in the last paragraph of section 4 of the RFQ. That paragraph stated: “Exceptions to this RFQ – The Response shall certify that the Respondent takes no exceptions to this RFQ or any addenda.” Davis did not challenge the lease-leaseback arrangement used for phase 1 of the Gaston Project because he intended to have his construction firm bid to perform work as a subcontractor. On July 24, 2012, Davis’s firm submitted bids to perform concrete work on the Gaston Project. Davis filed this lawsuit after his firm’s bid to perform concrete work was not accepted. From June 2016 (approximately one year after Davis I) through the trial in March 2024, Fresno Unified awarded contracts to Davis’s firm totaling over $224 million under the design-bid-build delivery method. At the time of trial, approximately $9.4 million in change orders had been submitted on those projects, and Davis’s active (i.e., pending) contracts had a value of approximately $114 million. In contrast, Contractor was not involved in any projects awarded by Fresno Unified during that period. PROCEEDINGS Davis filed this lawsuit in November 2012. The operative pleading is the first amended complaint filed in March 2013. The first appeal arose from a judgment entered after the trial court sustained demurrers of Fresno Unified and Contractor to that 18. pleading. (Davis I, supra, 237 Cal.App.4th at p. 271.) In June 2015, we reversed the judgment, concluding the first, third, and fourth causes of action stated claims for (1) violations of California’s competitive bidding laws and (2) conflicts of interest. (Ibid.) The Supreme Court denied review and remittitur was issued. Fresno Unified and Contractor answered the first amended complaint in October 2015. (Davis II, supra, 57 Cal.App.5th at p. 923.) In 2016, Fresno Unified filed a motion for judgment on the pleadings and Davis filed a motion for summary adjudication of the conflict of interest claims against Contractor. (Ibid.) The trial court denied these motions. In May 2019, Fresno Unified filed another motion for judgment on the pleadings asserting all the claims (1) were subject to California’s validations statutes and (2) were moot because the challenged contracts had been fully performed. (Davis II, supra, 57 Cal.App.5th at p. 924.) The trial court granted the motion and filed a judgment dismissing the action and awarding costs to defendants. (Ibid.) Davis filed a second appeal, and we reversed the judgme