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StudentsMatter Is Millions in Debt from Vergara Lawsuit, Yet It Keeps on Suing

August 26, 2016

On August 22, 2016, the California Supreme Court denied reviewing the appellate court decision in Vergara et al. vs. State of California et al. The appellate court decided in April 2016 that Vergara did not prove constitutional violation of equal protection. Vergara was originally filed in 2012; four years later, it had reached its litigious end.

The following day, on August 23, 2016, the same group responsible for astroturfing education litigation like Vergara,, filed a fresh, corporate-reform-promoting lawsuit in Connecticut, Martinez vs. Malloy. In short, the goal of Martinez is not to improve Connecticut’s “failing” public schools; it is to promote a dual school system in which those who choose to “escape the failing schools” are provided with magnet and charter schools to which to flee.

StudentsMatter is a corporate reform lawsuit factory, and the organization is okay with that. From its home page:

Our Mission

Students Matter promotes access to quality public education through impact litigation, communications and advocacy.

StudentsMatter has an advisory board, and interestingly, at the top of the board bio web page, StudentsMatter offers this disclaimer:

Note: The individuals below are representing themselves on Students Matter’s advisory board and not representing the organization for which they work.

The corporate reform litigation factory does not want to be held responsible for its own board. That’s funny.

Board members include

  • former StudentsMatter policy director and former Parent Revolution exec director Ben Austin;
  • former Chief of School Family and Parent/Community Services for Los Angeles Unified School District Maria Casillas;
  • former LAUSD superintendent John Deasy;
  • former California state senator Becky Morgan;
  • former chief of staff to VP Joe Biden and former chief domestic policy advisor to former Pres Bill Clinton, Bruce Reed;
  • investment banker and venture capitalist Arthur Rock, and
  • former chairman of the National Venture Capital Association and founding CEO of Fortify, a pioneer in the software security market, Ted Schlein.

StudentsMatter lists a single staffer, David Stanley:

David Stanley leads major gifts fundraising at Students Matter. He enlists philanthropists to serve as key partners to Students Matter and helps sustain the organization’s high-performing Board.

Prior to joining Students Matter in January 2014, David was Executive Director of Teach For America….

As for the StudentsMatter founder, well, that’s Dave Welch, who is all in for *public schools*:

David F. Welch grew up in Maryland where, along with his six siblings, he was educated in public schools. His passion for public education arises from his roles both as a parent of three school-aged children and as an employer in two highly successful start-ups in Silicon Valley. Dr. Welch founded Students Matter in 2011 with the goal of creating positive structural change in the California K-12 public education system.

Note that “structural change” means the market-driven reform model of limiting (better yet, killing) teacher job protections; evaluating teachers using student test scores, and feeding public money into cap-lifted, privately-run charter schools.

Of course, StudentsMatter has a featured law firm: Gibson, Dunn, and Crutcher, which was founded in Los Angeles.

Even though StudentsMatter lost its centerpiece case, Vergara, it still has a California case alive in the Contra Costa Superior Court, Doe vs. Antioch, which StudentsMatter features as follows (and which was filed in July 2015, before losing Vergara):

The California Constitution guarantees every student in California equal access to a quality education, including equal access to effective teachers. As the evidence presented in Vergara v. California overwhelmingly demonstrated, teacher quality is the most important in-school factor affecting student success. In order to ensure that all students are being taught by effective teachers, school districts need a fair and consistent way to evaluate educators. Originally enacted by the California Legislature in 1971, the Stull Act requires school districts to evaluate the performance of teachers and other certificated employees using multiple measures of performance, including student progress toward district and state academic content standards, as measured by standardized tests.

Extensive research has shown that effective teaching can be measured, and that evaluations composed of multiple components—including, but not limited to, students’ progress on state standardized tests—demonstrate the greatest reliability and the least volatility from year to year.

Yet, for over 40 years, many California school districts have ignored or outright defied the Stull Act. At least thirteen school districts, serving nearly 250,000 students, have entered into collective bargaining agreements with their local teachers unions that explicitly prohibit the use of any standardized test results in teacher evaluations, in clear violation of the Stull Act.

We think it’s simple: reward and retain excellent teachers and hold accountable those who are failing our children.

However, the StudentsMatter argument regarding the Stull Act is not airtight. Note the term “reasonably” in the language of the bill (bolded):

(b) The governing board of each school district shall evaluate and assess certificated employee performance as it reasonably relates to:

(1) The progress of pupils toward the standards established pursuant to subdivision (a) and, if applicable, the state adopted academic content standards as measured by state adopted criterion referenced assessments.

If I were a lawyer opposing StudentsMatter, that one word, “reasonably” would offer me a lot to work with in empirically establishing just how unreasonable it is to try to tie teacher evaluation to test scores.

And now, for some news on the nonprofit behind StudentsMatter, the Students First Foundation (SFF) (EIN 27-3816952). SFF was founded in 2010 and received its nonprofit status in 2011;

As to 2011 finances:

  • the largest contribution was $320,000 from David and Heidi Welch.
  • David Welch also loaned SFF $472,764, without interest, for foundation expenses.

And in 2012,

  • the Welch Trust contributed $550,000 to SFF;
  • the Broad Foundation contributed $200,000, and
  • Tammy and Bill Crown contributed $100,000.
  • There were also several contributions under $100,000.
  • Moreover, SFF received gifts of various stocks (Facebook, LinkedIn, Zillow, Ehealth, Imperva, and others) with an estimated fair market value of $647,361.

At the outset of 2012, SFF was in the red, with net assets of -$420,331 and end-of-year assets also in the red at -$799,486.

In 2012, SFF paid Gibson, Dunn and Crutcher $1,115,912 for “litigation.”

A second SFF 2012 990, filed in August 2013, is the first to mention StudentsMatter and the Vergara lawsuit (Note: the first 2012 990 includes a request for the August 2013 extension.):




Note that the above statement stops just short of claiming that StudentsMatter played any role in “identifying” the individual plaintiffs, who must have serendipitously happened upon an astroturf ed reform organization that just happened to be planning to sue the state in the name of teacher quality. An amazing coincidence, to be sure, but less likely as one continues reading the info in the SFF 2012 990:


“Creating a common viewpoint.” Now that’s not serendipity.

The above “common viewpoint” campaign cost SFF $491,758.

This next part is my favorite: Creating grass-rootsish buy-in for top-down-birthed education litigation. Also included on the second 2012 tax form:


That 2012 grass roots only cost SFF $40,000.

By the close of 2012, SFF still owed Welch a total of $949,122, which it listed on its 2013 990 as its “total liabilities.”

By the end of 2013, the SFF total liabilities had risen to $5,576,311, and its total net assets was listed in the red, at -$5,128,268.

Even though SFF reported total 2013 revenue of $2,752,824, it costs a lot of money to sue; Gibson, Dunn and Crutcher was SFF’s highest paid independent contractor, at $5,693,876, for “project srvc.” The second highest expense was $608,012 to Griffin Schein for “public relation.”

As to the SFF 2013 revenue, top donors included

  • Arthur Rock Foundation, $500,000
  • Bill and Susan Oberndorf Foundation, $100,000
  • Bloomfield Family Foundation, $100,000
  • East Bay Community Foundation, $150,000
  • Emerson Collective, $200,000
  • Schwab Charitable Fund, $212,000
  • Silicon Valley Community Foundation, $357,000
  • Tammy and Bill Crown, $500,000
  • Walton Family Foundation, $500,000

SFF managed to reduce its debt to Welch from $949,122 to $480,429. However, it also took out a line of credit to the tune of $4,249,122 with Bancorp for SFF operating expenses.

In 2014, SFF received $6,441,741 in total revenue and had $5,510,409 in total expenses. Of course, it also still had the Welch and Bancorp debt as liabilities ($5,576,311 total). The result was another year of negative total net assets: -$4,196,936.

As was true in 2012 and 2013, in 2014, SFF’s highest expense was Gibson, Dunn and Crutcher, this time for $3,842,832 in “project srvc”; the second highest expense was to a Los Angeles-based organization, Rally: $809,955 for “public relation.”

The largest contributions to SFF in 2014 (> $100,000) include

  • Dave and Heidi Welch Foundation, $250,000;
  • Tammy and Bill Crown, $250,000;
  • Walton Family Foundation, $1,250,000;
  • Silicon Valley Community Foundation, $3,191,800;
  • Bloomfield Family Foundation, $200,000;
  • Arthur (misspelled as “Author”) Rock, $250,000;
  • Jewish Communal Fund, $100,000;
  • Schwab Charitable Fund, $317,350, and
  • John Scully, $500,000.

By the end of 2014, SFF paid the balance owed to Dave Welch, $480,429. However, that Bancorp loan increased by roughly $60,000 to a total end-of-year balance of $4,308,029, presumably from accrual of the 2.5% interest rate. However, the terms of repayment for the Bancorp loan was supposedly “interest only payments.”

By the end of 2014, SFF was in the hole for over $4 million due to expenses related to its astroturf-incited Vergara suit, which appeared to be in the bag based upon Judge Rolf Treu’s June 2014 ruling that teacher job protections, such as tenure, violate student civil rights. The 2014 SFF tax form includes the following description of the organization’s “direct charitable activities”:

The Organization believes the future of a high quality education for each student depends on every child having an effective teacher in every classroom on each and every instructional day. The Organization believes Californian’s can create an education system that gives every child an effective, passionate and motivated teacher and gives those teachers the respect and rewarding careers they deserve. In carrying on this mission, management has assembled a quality public relations firm and an outstanding legal firm to sue the State of California for legislation written into the California Education Code that is being challenged as unconstitutional, as follows; the permanent employment law – tenure, grants or denies permanent employment to teachers after eight-teen months of employment, which does not provide enough time to determine a teacher’s performance. In addition, dismissal statutes require an inordinate amount of documentation to terminate ineffective teachers and layoff rules under the statute require the newest teachers to be riffed first, regardless of performance. On June 10, 2014 the Superior Court of California issued a historical decision striking down five harmful provisions of the California Education Code as unconstitutional. According to the court the laws in question that cover teacher tenure, dismissal and layoffs impose substantial harm on students by forcing administrators to push passionate and inspiring teachers out of the school system and keep grossly ineffective teachers in the classroom year after year.

However, Vergara was not over, and when it was, it was not a win for StudentsMatter. Still, one year after the initial Vergara ruling, StudentsMatter filed its second lawsuit, Doe vs. Antioch (July 2015, noted above), and then, the initial Vergara decision was overturned (April 2016) and was officially appealed as StudentsMatter petitioned the California Supreme Court (May 2016).

And now, the day after StudentsMatter’s appeal to the California Supreme Court was denied review, StudentsMatter files Martinez vs. Malloy previously discussed in this post.

Looming question: How is SFF able to afford its astroturf ed litigation? SFF owes Bancorp over $4 million, and SFF paid Gibson, Dunn and Crutcher a total of $10,652,620 from 2012-2014, with Vergara alone, pre-appeals.

SFF has apparently notified the IRS that it plans to convert its status from private foundation to public charity. One of the benefits of doing so is that the public charity allows for donors to remain anonymous. As a private foundation, SFF must include details about its donors (including names, addresses, and amounts) as part of its 990 tax reporting.

Perhaps SFF will draw more corporate-reform billionaire cash if those billionaires are able to hide even as they still benefit from the nonprofit-donor tax breaks.

To keep feeding Gibson, Dunn and Crutcher, the SFF behind StudentsMatter must attract more money. Much more.

Can’t wait for the continuing saga as told by SFF’s 2015 990 tax forms.

in the red


Released July 2016– Book Three:

School Choice: The End of Public Education? 

school choice cover  (Click image to enlarge)

Schneider is a southern Louisiana native, career teacher, trained researcher, and author of both A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?.

both books

Don’t care to buy from Amazon? Purchase my books from Powell’s City of Books instead.

  1. This could be interesting :

    “(b) The governing board of each school district shall evaluate and assess certificated employee performance as it reasonably relates to:

    (1) The progress of pupils toward the standards established pursuant to subdivision (a) and, if applicable, the state adopted academic content standards as measured by state adopted criterion referenced assessments”..

    All the current tests are norm referenced.

  2. Laura H. Chapman permalink

    Amazing deconstruction and analysis. Howard has an interesting point on the tests. I suppose something like a cut-off score could be applied to a norm referenced test…the biggie is SBAC… to create/ invent a criterion-referenced test. Then the question is what to do about the estimated 69% of teachers for whom there are no statewide tests, or if so, with no irrefutable records attending to their reliability, validity. I do think that California should not grant tenure after only 18 months.

    • Those supposedly criterion referenced tests are made using norm referenced means for each question-remember we must have questions that are good at discriminating who knows what. Heaven forbid everyone would get a 100% on a criterion referenced test item. I’d hate to see the mangled language that the pro-test camp will use to justify the norm referenced items as criterion referenced.

  3. Christine Langhoff permalink

    Ah, Mercedes! Careful these astroturfing gazillionaires don’t put you on their enemies list.

  4. As I read this, my eyes played a trick. Instead of seeing “magnet” I saw the word “marginal” and my brain further thought “marginalized” which makes a lot of sense, because the charter/choice advocates love to send other people’s children to schools in which the kids are marginalized (to treat a person, group, or concept as insignificant or peripheral) while the administrators, landlord, board members make a profit.

    Meanwhile, just on my local news this morning, there was a black leader/minister, stating that he met with Donald Trump to make him understand that children, black, brown, latino, are already born into poverty, then they are forced into failing schools in their neighborhoods, and that african americans and latinos WANT and DEMAND choice. So if you moved an entire school population into a charter school… the kids do better? No. This has been proven. This is why charters open just a few grade levels at a time, usually 1st and 2nd grade, and cherry pick their students.

  5. The cabal of billionaires who are funding not only Vergara lawsuits nationwide, but also so many other efforts to privatize education (and other government run agencies/industries such as transportation, the postal service, health care, etc.), with the determined goal of all things being run by the Free Market for investment opportunity, represent not only most of the wealth of the US, but most of the world’s wealth. Toting up their combined billions leads to assets closer to trillions of dollars.

    Therefore, this minor Vergara debt is of little consequence to them. What is a hundred million more or less, paid to law firms like Gibson Dunn and Cruther, Manatt, Olson, etc. when the pockets are bottomless money pits.?

    All this is at the expense of the rest of us. The Mylan pharma epi-pen is an exemplar of wealth and greed run amuck. There is NO philanthropy involved with the DFERs nor any of their vulture ilk. They will never be satisfied until they have it all, so breaking the union movement is their first step in taking it all.

    • Here is the list put out by Forbes Magazine (where they list the 50 biggest billionaire philanthropists). I will only list the first 20 who combined represent many 100s of billions of dollars.

      Their Foundations represent :

      Gates, Buffett, Zuckerberg, Waltons, Broad, Bloomberg, Paul Allen, Chuck Feeney, Gordon and Betty Moore, James and Marilyn Simons, John and Laura Arnold, Carl Icahn, Koch brothers, Julian Robertson Jr.,Sheldon Adleson, Stephen Bechtel Jr., Michael and Susan Dell, Hansjorg Wynn, J. Wayne and Delores Weaver.

      Then there are ‘pikers’ who only have one billion but are listed by Forbes elsewhere as major donors, like Meyer Luskin who founded Alliance Charter Schools and still sits on their Board.

      Almost all of these wealthiest people on earth are charter school supporters. Do you really think they will run out of money to file Vergara-like lawsuits in perpetuity…until they start to prevail?

      • I am going by what is in the tax forms. Vergara took four years and cost SFF over $10 million just for the lawyers. We’ll see if the billionaires want to dump millions into more SFF lawsuits.

        I am interested in seeing the SFF 2015 return.

      • Thanks Mercedes for this, as always, remarkable research and coming at the topic from the nitty gritty focus on costs of pressing the Vergara lawsuit(s). I reflect on a different prism.

  6. Bruce Reed. From Idaho. Gone to the ‘dark side”. From a short notice in the local paper: “Bruce Reed, chief of staff to Vice President Biden will become president of the Eli and Edythe Broad Foundation. He will vacate the post in December 2014. Reed also worked with the Clinton Administration and was president of the Democratic Leadership Council. He also was executive director of the Simpson-Bowles Commission (National Commission on Fiscal Responsibility and Reform).”

    • Mary….”Dark Side”, Bruce Reed can now carry a pitchfork and roast in the deep pit he fall into by taking Broad cash. Here is a telling article about him and we can clearly see how he has prostituted himself. StudentsMatter, and Vergara are only the tip of this iceberg.


      “Here’s Why Bruce Reed Is Now One of the Most Powerful People in Education

      Author L.S. Hall

      In his two months as the Broad Education Foundation’s new president, Bruce Reed has spent much of his time with Eli Broad, learning about Broad’s vision for education reform and examining the work the foundation has supported in years past. It’s been a quiet transition. But don’t be fooled; this may well be the lull before a major new spending spree by Broad and a hugely influential role for Reed in U.S. education policy.

      The Broad Education Foundation approaches school reform at the system level, funding projects that design new schools and education systems. That includes staunch support of charter schools, but also big investments in bolstering the management skills of public education leaders. The foundation favors reforms that are designed to reduce what Eli Broad sees as bureaucratic barriers that interfere with teaching and learning. The foundation also supports value-added teacher appraisal models. And there’s more: the foundation gives generous scholarships to high schoolers who graduate from urban school districts that have made big improvements. And it has a initiative to connect schools to new digital resources for “personalized learning.”

      That’s a big agenda, and one with serious money behind it: Forbes’ most recent billionaire list estimates Eli Broad’s wealth at $6.9 billion. After the Gates Foundation and the Walton Family Foundation, Broad has been the biggest spending education philanthropist of recent years.

      Now he seems poised to ratchet things up further. Eli Broad has always favored what he describes as a national education system. “Rather than having 14,000 school boards across America, it would get governors involved, big city mayors involved, and it would have a longer school day and a longer school year,” is how Broad described his idea of the perfect education system to California radio station KPCC.

      In Bruce Reed, the 80-year-old Broad may have found the perfect man to expand the foundation’s national scope and impact. Reed has the knowledge and political clout to ramp things up. He’s been chief of staff for Vice President Biden, a speech writer for former Vice President Gore, and a top policy expert in the Clinton administration.

      Ideologically, Reed looks like a perfect fit for Broad, whose political affiliations lean Democratic but who is an ardent foe of teachers unions, a traditionally reliable Democratic constituency. Reed’s political resume includes a stint as CEO of the Democratic Leadership Council (DLC), the centrist Democratic organization whose founders included Bill Clinton. In its quest to remake domestic policy, the DLC supported some forms of school choice, such as charter schools, and didn’t hesitate to ruffle the feathers of organized labor, including teachers’ groups.

      If the Broad Education Foundation does rachet up its work nationally under Reed, its first president, one question is whether it will also begin moving a lot more money out the door. In 2012, the Eli and Edythe Broad Foundation gave out a total of $153 million for all its activities (which also includes giving for medical research and the arts), putting it among the top 35 foundations by giving that year. Yet at this rate, the Broads—who signed the giving pledge—won’t make much of a dent in giving away even half their fortune while they’re still alive.

      That’s why bigger giving for education—maybe much bigger—seems highly likely. Perhaps that’s how Broad convinced Bruce Reed to move across the country to take a foundation job, when he surely could have snagged more prestigious positions.

      If Broad really opens the floodgates, it could mean major opportunities for groups that have already gotten Broad money, but also for new organizations and school districts. If you’re an educator who’s yet to get Broad funds, now’s a good time to suddenly remember that you and Bruce Reed knew each other in college. Or whatever. Reed is likely to become one of the powerful figures in U.S. education philanthropy starting, well, now.”

  7. Laura H. Chapman permalink

    Here is the follow on to the Vergara case in Connecticut. I posted this morning on Diane Ravitch’s blog. Hope you don’t mind the duplications. This one is not about teacher unions, it is about CHOICE.

    The lawyers who lost the Vergara case have targeted ” the cruel ” limits on charter and magnet schools in Connecticut. The case is Martinez v. Malloy. According to the lawyer’s op ed in today’s Wall Street Journal, this will be a federal case, arguing for “a federal constitutional right to challenge laws that force inner city children to attend schools the state knows are failing to provide a minimally accept able education. These laws are especially cruel in Connecticut” ….

    The lawyers claim that ” California’s refusal to protect its young citizens (from grossly ineffective teachers) has made federal protection essential. Public education meets the US Supreme Court’s fundamental-right test in Washington v. Glucksberg (1997) because it is ‘deeply rooted in this Nation’s history and tradition’ and (is) ‘implicit in the concept of ordered liberty.’”

    I have poked around the Internet and found that the Connecticut legislature tried to prevent any freedom of information requests aimed at charter schools, on the grounds that would allow people to harass and spread lies about them. I think that the legislative session ended before that was acted upon… but it could resurface and foreshadow similar efforts in other states.

    The outline of the federal case Is presented in the WSJ opted written by the lawyers Boutrous and Lipshultz. The argument will go back to Brown in support of “equal opportunity” as the grounds for eliminating all caps of charter and magnet schools, initially in one state, then marching on to the Supreme Court.

    My take is that the lawyers really want a deregulation of schools. They are working on behalf of the idea that money follows the student, per Milton Friedman’s perverted concept that a free market exists even when it is tax subsidized.

    • Laura…Malloy is hardly a lib Governor, more of a ‘Rep in Dem clothing’ and Eli has donated to his campaigns. And the WSJ, owned by a leader of the privatization movement, Rupert Murdoch, would print this opinion to suit their perspective. Remember….the plaintiffs of this lawsuit, and their backers (see all the Broad-puppet/John Deasy statements as a witness for the plaintiffs), claim this it is one of the greatest CIVIL RIGHTS lawsuits of our times.

      I suggest we all write letters to the editor of the WSJ and educate them about the real reasons for Vergara lawsuits pushed and financed by Broad/Welch/Waltons/Wasserman and others of their uber wealthy ilk.

  8. Thanks again, Mercedes, for your diligent work!

Trackbacks & Pingbacks

  1. Mercedes Schneider: Who Paid for Vergara Case and Why Is Students Matter Deep in Debt? | Diane Ravitch's blog
  2. Silicon Valley Community Foundation: Mega-donor to Vergara and Controller of Numerous CA Nonprofits | deutsch29

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