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Academy of Art Settles Case Brought by City of San Francisco

By George Khoury, Esq. on December 21, 2016 | Last updated on March 21, 2019

The San Francisco Academy of Art has agreed to settle the lawsuit filed against them by San Francisco's City Attorney after nearly a decade-long dispute. The academy will pay $20 million to the city (over the next five years) for various housing, code, and zoning ordinance violations they committed in San Francisco over the past decade, while the housing crisis was at an all time peak. Additionally, as part of the settlement, the academy will spend nearly $40 million on bringing two of their own buildings into compliance and offering 160 units of affordable housing to seniors.

While the city might be trying to spin this settlement as a positive result, the Academy's attorney made it clear that they would have accepted this same settlement deal without litigation being filed. The academy has 40 buildings across the city and could easily turn quite a nice profit just by serving as a landlord in one of the most expensive cities in the country. The lawsuit alleged that 33 of the 40 buildings owned by the academy in the city were out of compliance. Furthermore, the academy allegedly illegally converted several building they purchased from residential use to commercial use.

Art School Isn't Above the Law

While San Francisco's City Attorney, Dennis Herrara, said that the days of the academy being above the law are over, clearly the settlement is proof of the exact opposite. Although it is being lauded as the largest code enforcement case in the city's history, the punishment seems light, given that the daily damages, additional fines, and interest for just one year could potentially dwarf the $20 million cash to be paid to the city over the next 5 years. When a wealthy organization flaunts the laws for over a decade, then is able to settle without flinching, or even admitting wrong-doing, can the city really call that a win?

The Academy of Art is a for-profit educational institution, owned by a family whose wealth is reaching the billion dollar mark, which means that its primary mission is making a profit. According to Forbes, the academy has been constantly embroiled in controversy over their low graduation rates, coupled with the fact that many students are able to qualify for federal student loans, and therefore, go into major debt in order to attend.

Elisa Stephens, President of the Academy of Art, noted the organization's satisfaction with the outcome: "We are very pleased to reach this agreement, which allows the academy to make significant contributions to San Francisco while maintaining our academic excellence and providing for our students."

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