Ivy Academia v. Los Angeles Unified School District

Summary

required by its charter petition, Ivy Academia challenged LAUSD's failure to comply with Proposition 39 in three consecutive years and won an arbitration award of over $7 million including compensation for the value of the facilities not provided and attorneys' fees.

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Case Overview

This case resulted in an arbitration award of over $7 million to a charter school for a school district's failure to comply with Proposition 39 over three years, including compensation for the value of the facilities not provided and attorneys' fees.

After the Los Angeles Unified School District ("LAUSD") made a non-compliant Prop.39 offer, Ivy Academia had to find a private facility to rent at the annual cost of about $3 million, and initiated the dispute resolution process required by its charter petition. Ivy sought a ruling that the District's offer violated Prop. 39 and that the District should be required to compensate Ivy for the damages it incurred. The District made two more non-compliant offers and all three school years (2007-2008, 2008-2009, and 2009-2010) were consolidated into one dispute resolution process. The District ultimately conceded that the three offers did not comply with Prop. 39. However, the District argued it was not required to compensate the school for these failures. It offered up a variety of defenses, including (1) the school received SB 740 rent reimbursement; (2) the school would have rejected a compliant offer since they entered into a private lease; (3) Ivy's founder Eugene Selivanov was convicted of fiscal crimes and therefore the school had "unclean hands"; and (4) Ivy's students suffered damage, not the school itself. The arbitrator rejected LAUSD's proferred defenses.

Instead, the arbitrator found unequivocally that Ivy was damaged in an amount equal to the value of the use of reasonably equivalent facilities rent-free, subject only to the pro rata share allowed under Prop.39. The parties stipulated to the comparison group schools, which form the basis of the reasonably equivalent facilities standard. Since there is not a ready market of school facilities, or any facilities closely similar, the arbitrator considered "evidence regarding the cost to replicate facilities by (theoretically) building and then depreciating them". Recognizing various complicating factors to finding the right value, the arbitrator settled on a range of somewhere above $3 million to $13 million. The arbitrator then determined an approximate offset amount of $450,000 in pro-rata share amount for three years. Finally, "without attempting any false pretense of a precision not permitted by the circumstances and factoring in all the variables as best as can be done including the issue of pro rata share and maintenance costs," the arbitrator found the damages due to Ivy for the three years in question at $7.1 million.

By way of background, Ivy Academia's charter with LAUSD's required all disputes to proceed through a multi-step resolution process, including an issues conference, mediation, and arbitration conducted according to the rules of the American Arbitration Association. The dispute resolution language is found in LAUSD's "district required language" [link], adoption of which is a condition of charter approval. The arbitrator suggested that the matter was not suitable for arbitration as it is a matter of "such apparent public interest", and that it should be in public courts where all proceedings would be public, and legal precedents could be established and made binding on appeal.

CCSA applauds Ivy's perseverance in pursuing its claims through the dispute resolution process. CCSA has previously argued that the District's dispute resolution process is unwarranted for disputes arising under the Proposition 39--a statutory duty by which districts are required to share facilities fairly with charter schools. By requiring a lengthy multi-step process, LAUSD has ensured that charter schools are rarely able to resolve disputes in time to make a difference for the school year in which facilities are needed.

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