Who pays $4M awarded in Big City Coffee suit? Boise State, insurance or administrators?

In September, a jury of Ada County residents decided that two Boise State University administrators owe the owner of a now-defunct local coffee shop $4 million in a lawsuit that centered around the closure of the shop's campus location four years ago.

The administrators, who were acting in their official capacities, were sued as individuals. Boise State was not a defendant. So who pays the damages?

Richard Seamon, a law professor at the University of Idaho who teaches administrative and constitutional law, said most government employers have a policy that says they will indemnify employees who are found to be negligent and held liable for actions that occurred within the scope of their official duties.

"Here's the usual scenario," Seamon said by phone. "Imagine some employee is driving during the day, running an errand for the boss, maybe going to the FedEx store, and they have an accident. If the employee is held negligent for the accident, the idea is that they would be covered because the accident wouldn't have happened if they weren't doing their job."

The state of Idaho has a self-funded insurance program, known as the Retained Risk Account, which is managed by the state Department of Administration's Risk Management Program. According to a copy of the program's coverage document, which was obtained by the Idaho Statesman via a public records request, most state universities and colleges are covered, save for a handful of community colleges.

But there are limitations, such as a $500,000 cap on liability per occurrence. The document also lists several types of claims that are not covered, like intentional illegal acts.

Lawsuit targets individual administrators

Big City Coffee and owner Sarah Fendley initially sued Boise State and the administrators in their official capacities, seeking $10 million in damages.

Those counts were dismissed because the Supreme Court has ruled that the 11th Amendment bars lawsuits against the state, which the university and the administrators represented. While the charges were pared down, much of the lawsuit was allowed to proceed, including against the individual administrators: Leslie Webb, the university's former vice president of student affairs, who now works at the University of Montana; and Alicia Estey, then-Boise State's vice president for university affairs and now its chief financial and operating officer.

Fendley had argued that the administrators forced the closure of her shop near the university's library in October 2020, a month and a half after it opened, to appease a group of students who took issue with her support of the thin blue line — the idea that police form the line between order and lawlessness — particularly in the wake of George Floyd's death, when the nation saw widespread calls for police reform.

Fendley's former fiance was a Boise police officer and she displayed a thin blue line flag in her downtown shop at 1416 W. Grove St., which she unexpectedly closed permanently halfway through the trial. Caffeina Kitchen opened in its place.

Boise State argued during the trial that Fendley left of her own volition, after she asked the administrators to use the university's student code of conduct to punish the students for expressing opinions she didn't like and was told no. The administrators said they were aware of Fendley's support for the thin blue line and potential problems it could cause on campus before agreeing to the contract, and that it didn't deter them.

Boise State 'on the hook' for payout

John Rumel, another law professor at the U of I, told the Statesman that Boise State will "most likely" rely on its insurance to pay at least part of the damages awarded to Fendley.

If insurance only covers $500,000 of the damages, the university may pay the rest out of pocket, he added.

"I don't think Boise State would actually require its own employees to pay the difference," Rumel said. "Public entities — they're not going to leave the individual on the hook. If its not insurance money that covers it, they've got a bank account, they'll cover it."

Mike Keckler, spokesperson for the Idaho State Board of Education, declined to answer questions about what funds the money might come from or whether the State Board would be involved, citing ongoing litigation.

Punitive damages not covered by insurance

The jury deliberated for nearly three hours on Sept. 13 before delivering a verdict in favor of Fendley. It awarded $3 million for business losses, mental and emotional distress, personal humiliation and lost reputation, and tacked on an additional $1 million in punitive damages against Webb. Punitive damages are punishment for behavior found to be malicious or especially harmful.

"Punitive damages are a high standard," Rumel said. "Usually, they're not awarded."

The state's Retained Risk Account does not cover any dishonest, fraudulent, criminal or malicious act, according to the document. That means Boise State or Webb would be on the hook for the extra $1 million in punitive damages.

State law says under the Idaho Tort Claims Act that governmental entities and their employees "shall not be liable for punitive damages on any claim."

But federal law, which supersedes Idaho law, does allow an award of punitive damages against state employees in cases involving constitutional actions, according to Keely Duke, the attorney representing the Boise State administrators. Fendley had argued her case on the ground that the university violated her civil rights, under section 1983 of the Civil Rights Act, by retaliating against her for exercising free speech.

"Plaintiffs seek punitive damages in this case under federal law, and thus, federal law governs the standards for proving punitive damages under section 1983, not Idaho code," 4th District Judge Cynthia Yee-Wallace wrote in an order on punitive damages in the case in November 2023.

State may reveal amounts paid when claim closes

Sherry Squires, a spokesperson for Boise State, did not answer a question about who would pay the damages awarded by the jury. Squires told the Statesman by email that the university is working with the state's Risk Management Program to "assess financial questions."

"We respectfully but strongly disagree with the verdict and plan to appeal," Squires' statement said.

Duke filed a motion in court on Sept. 30 asking Yee-Wallace, who presided over the trial, to reject the jury's verdict and rule in their favor or grant a new jury trial. Duke argued at a hearing Oct. 28 that "there was not substantial or competent evidence presented" and that the verdict "should not stand."

Rumel, the law professor, said post-trial motions could take a few months to resolve and, if the plaintiffs appeal to the Idaho Supreme Court, the case could be tied up for an additional 18 months.

"The law generally respects the verdicts of juries," he said. "That doesn't mean the judge can't set it aside if the evidence supports that. I don't think we've gotten the last word yet on whether this judgment is going to stick."

The state Department of Administration denied part of a Statesman public records request related to the damages, citing an exemption in the Idaho Public Records Act for insurance claims and lawsuits defended by the Risk Management Program. Kimberly Rau, a spokesperson for the Department of Administration, said the program may release statistical data and actual amounts paid when litigation concludes and the claim is closed.

Conservative donor bankrolls lawsuit

The attorneys for Big City Coffee and Fendley filed a motion requesting nearly $1.7 million in legal fees. The fee arrangement between Fendley and Boise law firm Givens Pursley was at first on an hourly basis at discounted rates and later converted to a contingency fee structure in mid-2023, according to the filing.

Michael Roe, a partner at the firm and Fendley's lead attorney, racked up about $730,000 in attorney fees alone, most of which was charged at $550 an hour.

The filing also revealed that Larry Williams, a prominent Boise businessman and wealthy Republican donor, was Fendley's benefactor.

Williams "generously paid" her counsel to the tune of about $475,000 in "a somewhat complex financial arrangement," the motion said. In June 2023, Williams stopped paying Fendley's entire legal fees and instead began paying $10,000 a month, which was still not enough to completely cover the costs. They agreed Williams would be reimbursed from whatever damages were awarded in the case.

"Although plaintiffs did not prevail on every claim or against every party ... plaintiffs obtained an excellent result in the form of a $4 million jury verdict," the motion said. That would be more than enough to pay back Williams.

The defense filed a motion in response to reject Fendley's request for attorneys fees. A hearing on those motions, and a request from the defense to delay payment of the $4 million verdict pending appeals, is scheduled for Jan. 6.

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