Old wounds continue to fester at Scottsdale Unified School District, and now it appears the district is on the hook in a legal battle between a governing board member and the resident who claims she violated his First Amendment rights.
The district, via its insurance provider, is currently covering legal defense costs for Barbara Perleberg, who is fighting a lawsuit filed by Mark Greenburg, a Scottsdale resident and father of Board Member Jann-Michael Greenburg.
Perleberg’s defense is being paid for by the Arizona Schools Risk Retention Trust, the district’s insurance provider.
SUSD General Counsel Michelle Marshall told the Progress that “the district has never retained, engaged, or paid for legal counsel for Mrs. Perleberg in this matter.”
While that is technically true — no district funds are directly paying for Perleberg’s defense — Perleberg is being covered under SUSD’s coverage agreement with the trust, according to a letter dated March 14, 2019 obtained by the Progress.
SUSD pays annual premiums in excess of $1 million to the Arizona Schools Risk Retention Trust for liability coverage, according to district records.
SUSD paid $1.46 million in 2018 for the insurance in the fiscal year ending June 30.
Perleberg’s defense is being covered under the district’s policy for fiscal year 2018, during which the district paid a $1.33 million premium.
Ryan Cole, trust director of operations, said the Perleberg claim did not factor into the roughly 10 percent premium increase.
The court fight dates back to last year when Perleberg filed a lawsuit against the then-unknown individual behind PerlebergforSUSD.com, a satirical website set up in Perleberg’s name.
She obtained a subpoena that was used to identify Mark Greenburg as the individual behind the website.
The website included fake gossip about Perleberg and other board members and also attributed offensive statements to the then-board president, including those making light of the Holocaust and AIDS deaths.
After obtaining the subpoena and outing Greenburg as the author in the local media, Perleberg allowed the lawsuit to lapse.
In November 2018, Greenburg filed his own lawsuit claiming Perleberg abused the judicial process to unmask him and obstruct his right to free speech.
The lawsuit argues that Greenburg’s “right to engage in protected speech anonymously on the internet is protected by American jurisprudence, including Arizona case law.”
That case is ongoing, but there is some question as to whether Perleberg qualifies for coverage under the district’s insurance policy.
In Greenburg’s lawsuit, he argued that Perleberg “acted to serve her own interests” in filing the first lawsuit.
The trust initially denied Perleberg coverage based on that claim, arguing that board members are only covered if they were acting on behalf of the district in an authorized role.
In a letter to Perleberg on Nov. 19, 2018, Trust General Counsel Norman Hall wrote that district’s coverage agreement only covers “those persons ‘undertaking an action for the district under the express and direct jurisdiction of the district’s governing board, superintendent…and/or principal or while acting solely on behalf of the district…”
“Because the Lawsuit alleges that you acted ‘to serve [your] own interests,’ and there is no indication that the litigation that you initiated against claimant was filed ‘for the district’ or ‘within the scope of authorization granted’ to you by the District, you do not qualify as a ‘covered party,’” he added.
The Scottsdale Unified School District was not a party in Perleberg’s original lawsuit against Greenburg and the board did not vote to give Perleberg authorization to file that lawsuit.
Perleberg did not respond to a request for comment.
In court filings, Perleberg’s attorney argued she was acting within the scope of her employment with the distinct and that the lawsuit was “incidental to her legitimate work activity.”
Perleberg’s attorney’s also argued that since Greenburg’s website heavily critiqued the entire board’s performance and other individual board members “Ms. Perleberg’s lawsuit served the District, as it had the effect of removing Mr. Greenburg’s website.”
The website has since been reactivated and is currently live.
Perleberg’s lawyers further argued that the Perleberg, as a member of the board, had authority to sue but does not address the fact that the board never actually voted to sue Greenburg.
The trust had a change of heart, according to a March 2019 letter, and agreed to provide Perleberg with coverage.
The only reason given in the letter for the reversal is a claim by Greenburg that Perleberg’s public outing of him caused a spike in blood pressure that resulted in a retinal vein contusion.
“Claimant’s new allegations could potentially give rise to coverage under the trust’s applicable coverage agreement with Scottsdale Unified School District,” the letter, also written by Hall, stated.
The letter does not, however, resolve the issue central to the Trust’s initial denial of coverage: whether or not Perleberg was acting within her role as a board member when she filed the original lawsuit.
In the March letter, the trust hedged its bets, stating “And please understand that if the court in the lawsuit at any time makes a determination that your alleged conduct was not ‘for the district’ or ‘within the scope of authorization granted’ to you by the district, you will not be entitled to any further defense coverage under the trust’s coverage agreement.”
It is unclear why the trust suddenly deferred to the court to make that determination.
Cole did not respond to a request for comment on that issue.
Marshall said the district played no role in appealing the trust’s initial denial of coverage and that the trust is solely responsible for deciding who is covered under the district’s policy.
“The Arizona Risk Retention Trust makes coverage determinations, not Scottsdale Unified School District or its governing board. The Scottsdale Unified School District Self-Insurance Trust and its trustees have no involvement in such determinations either,” Marshall said.
That contradicts previous statements by SUSD interim CFO Jeff Gadd, who said the district has avenues to appeal if the Arizona Schools Risk Retention Trust denies a claim.
“The district then has the ability to appeal that denial to the board of the risk retention trust,” Gadd said.
The confusion could be caused by the fact that the trust actually has no process to appeal denials.
“There is no formal appeals process,” Cole said.
Despite the lack of a formal process, it appears Perleberg, through her own attorney, appealed the decision directly to the Trust’s general counsel.
The March 2019 letter from the trust indicates it reversed its decision only after receiving new information about Greenburg’s alleged eye injury directly from Perleberg’s attorney.
It is unclear whether Perleberg actually had standing to appeal the coverage denial in the first place, though.
The trust had already determined that she was not acting on behalf of the district in the lawsuit, according to the denial of coverage letter, and there is no evidence that the governing board, superintendent or the district’s own self-insurance trust ever authorized an appeal.
The district does have rules regulating when board members can contact outside counsel, as it appears Perleberg did to appeal the coverage denial.
SUSD Governing Board policy states that “Only the Superintendent, general counsel, or board president may authorize board members or staff to contact outside legal counsel regarding district matters.”
Perleberg could have theoretically authorized herself to contact outside counsel regarding her defense in Greenburg’s lawsuit, because it was filed while she was still board president in 2018.
However, it appears the appeal took place in 2019 when Perleberg was no longer Board President.
Board policy clearly states she would have needed approval from the superintendent, general counsel or board president to do so.
When asked if Perleberg received this approval, Marshall only said that the district never engaged legal counsel for Perleberg in this matter.
If Perleberg did not receive approval, the district could be off the hook for her legal fees — at least according to its own policy.
SUSD policy states that “The district will not be responsible for fees that accrue because of unauthorized individual board member or staff consultation with outside legal counsel.”
According to Arizona Risk Retention Trust, it is up to the judge to decide if Perleberg was acting within her authorized role as a board member.
The lawsuit is ongoing with a pre-trial conference set for February 2020.