California Court of Appeals, Second District, Sixth Division
STRATEGIC CONCEPTS, LLC, Plaintiff, Cross-defendant and Respondent,
BEVERLY HILLS UNIFIED SCHOOL DISTRICT, Defendant, Cross-complainant and Appellant.
Superior Court County of Los Angeles, No. BC420456, J.
Stephen Czuleger, Judge.
Horvitz & Levy LLP, Barry R. Levy, Bradley S. Pauley,
Scott P. Dixler; Greenberg Glusker Fields Claman &
Machtinger LLP, Fred A. Fenster, Steven A. Stein for
Defendant, Cross-complainant and Appellant.
Offices of Philip Kaufler, Philip Kaufler; Law Offices of
Jonathan P. Chodos, Jonathan P. Chodos for Plaintiff,
Cross-defendant and Respondent.
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,  prohibiting
conflicts of interest in the making of public contracts, and
section 4525 et seq., requiring competitive bidding for
certain public contracts.
sued the district for breach of contract and the district
cross-complained to recover money paid under the alleged void
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.
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.
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 District'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
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.
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.”
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
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 use 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
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.
formed Strategic Concepts, LLC (Strategic), of which she was
the sole owner. In early 2007, Christiansen assigned her
consulting contract to Strategic.
Under the Contract
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. They 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.
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
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, 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.
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.
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.
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. In the event of a termination without cause, the
DISTRICT shall pay CONSULTANT for all SERVICES performed and
all expenses incurred under this AGREEMENT supported by
documentary evidence, including payroll records, and expense
reports up until the date of notice of termination plus any
sums due the CONSULTANT for BOARD approved extra SERVICES....
In addition, CONSULTANT will receive a termination fee that
shall be the equivalent of one (1) month of payment to
CONSULTANT for SERVICES based on the average of the valid
invoiced amounts from the three (3) months preceding
termination (‘Termination Fee').” The
contract was later amended to require 120 days' notice of
termination, and the one-month termination fee was amended to
three months' payment.
contract further provided in part: “In the event a
termination for cause is determined to have been made
wrongfully or without cause, then the termination shall be
treated as a termination for convenience..., and CONSULTANT
shall have no greater rights than it would have had if a
termination for convenience had been effected in the first
instance. No other loss, cost, damage, expense or liability
may be claimed, requested or recovered by CONSULTANT.”
signed the contract on behalf of the District. The contract
was approved by the Board.
for School Bond
Spring 2008, Christiansen advocated for a new school bond
issue. She pressed the District to conduct a survey to
determine whether voters would favor it. She said the ...