By Alberto Garcia
The San Ysidro School District voted unanimously to settle a malpractice lawsuit against its former lawyers for approximately $1.8 million.
The settlement comes after the District sued the law firm of Stutz Artiano Shinoff
& Holtz and its partners, alleging fraud and misrepresentation in a legal case that uncovered corruption in the District.
“The Board decided to accept a monetary settlement today instead of spending years and millions of dollars in litigation,” new board member Steven Kinney said
after the vote to approve the deal. “We are recovering legal fees we paid these lawyers
in a case that caused us years of turmoil,” he added.
The lawsuit stems from the case between the District and EcoBusiness Alliance, LLC, over the wrongful termination of a solar energy contract in 2011. The lawyers fought a 3-year legal case that ultimately resulted in a $12 million verdict against the District. That case was settled earlier this year when the District agreed to reinstate the prior solar contract and the company is now developing the solar energy project.
The District filed the malpractice lawsuit in February of this year alleging the law firm – and specifically one of its senior partners, Daniel Shinoff – violated several duties to the District, including not informing the District of settlement offers made by the solar company before and after the trial. Additionally, the District alleged the lawyers created a conflict of interest when they chose the represent both the District and their embattled superintendent, Manual Paul. The law firm billed the District over $1.2 million in fees during the solar contract case.
“It was important to get this case resolved” board member Rodolfo Linares said. “I can say this agreement finally puts an end to a very difficult situation between the District and our former lawyers,” Mr. Linares concluded.
In June, the law firm forced the case into arbitration and kept the District from being able to pursue the case in court. The settlement deal was reached last week during a mediation session between the law firm’s lawyers and the school district’s new lawyers, William Trejo and Sandra Garcia of Leal-Trejo Law.
The Stutz Artiano firm’s malpractice insurance limit was $2 million and school district officials verified that most of the law firm partners have protected their own personal assets in trusts or other legal entities that basically make them judgment proof.
“It would have taken years to potentially get through those asset protection strategies in order to access the personal wealth of the lawyers,” said Mr. Linares, “and even then there may not have been enough value to make it worth the trouble.”
In a related case, the District has also filed a lawsuit against Manuel Paul, the former superintendent who resigned in 2013 while under indictment on corruption charges. Mr. Paul later pled guilty to federal charges and served 60 days in federal prison for coercing money from a prospective contractor.
That lawsuit is seeking the return of over $200,000 the District paid Mr. Paul at the time of his resignation. It was the same lawyer, Daniel Shinoff that advised the District and negotiated the settlement. The District is alleging fraud and gift of public funds in that case. The case is still pending and may go to trial in 2016.
“We were fortunate that the solar contract case was settled in a way that helped the District recover quickly financially,” said Marcos Diaz, Vice President of the San Ysidro School Board. “Our negotiations helped offset some of the damages and now with this settlement we can recover the fees we paid these lawyers,” Mr. Diaz added.
The Stutz Artiano Shinoff & Holtz law firm has represented most of the school districts in San Diego for over 30 years. Critics have argued they receive special treatment from the San Diego County Office of Education because Diane Crosier, the person that manages the risk pool and directs cases to lawyers, used to work directly for Daniel Shinoff and his firm before she took the school district position. Records of the past three years indicate the firm received nearly 70% of the school district cases for a total of $4.6 million in billings.
In addition to the solar contract lawsuit, the Stutz firm has lost several other school district cases in the past few years that have resulted in significantly large legal bills. Sweetwater Union High School District lost a 7-year old case this year stemming from a Title IX women’s sports complaint; Solana Beach School District lost a special education case after 7 years and paid over $800,000 in legal fees; and the Fallbrook School District lost a $1.2 million wrongful termination case. Each of these cases was tried and appealed by the same law firm.