Editor’s Viewpoint – Taxpayers on the Hook Again: Examining the Cost of the Phillips Lawsuit

February 23, 2025

Once again, Newberg taxpayers find themselves footing the bill for another costly legal battle, this time over the termination of former Superintendent Dr. Steve Phillips. With the district already spending over half a million dollars on legal fees in recent years, the question must be asked: Was this situation avoidable?

At stake is not just the $2.5 million Phillips is suing for, but also the financial stability of the district’s general fund, which directly affects classrooms, teachers, and students. Did the school board and legal counsel oversee this situation in a way that protected the district financially, or did they take unnecessary legal risks that could cost taxpayers even more?

A Politically Motivated Firing?

Phillips’ lawsuit, as previously reported in a September 25, 2024 news article, alleges wrongful termination. The facts suggest he may have a compelling case. Newberg’s political divisions have played out dramatically in its school board, particularly since the previous board’s firing of former Superintendent Dr. Morelock. When Phillips was hired to replace Morelock, community tensions only deepened.

By 2023, a new board majority was elected, and some in the community voted for these new members with the expectation that they would fire Phillips. Regardless of intent, from that moment, his departure seemed inevitable. But how the district managed his removal could be what costs taxpayers the most.

The Investigation: Legal Oversight or Financial Risk?

The district’s legal team made a crucial decision that could have major implications in upcoming litigation.

After complaints were brought before the district about Phillips, an outside investigator was initially hired. But when that investigator was unable to complete the work, the district’s legal team chose Novotney Consulting LLC to continue the investigation.

While this was framed as a continuation of the original inquiry, it raises significant questions of impartiality. Dr. Novotney had previously worked for Newberg as an interim administrator. Would a truly independent investigator with no ties to the district have been a better choice?

If Phillips’ legal team can argue that the investigation was biased, that could strengthen his wrongful termination claim, putting taxpayers on the hook for a massive settlement or judgment.

What the Investigation Found

The investigation substantiated several allegations against Dr. Phillips, meaning the findings were considered more likely than not to have occurred based on the evidence.

The report found that Phillips: (read full REDACTED investigation here)

• Failed to Provide Adequate Oversight of District Finances – Did not implement systems to properly monitor the district’s financial health, leading to budget errors and overspending.
• Used Racist and Discriminatory Language – Two of 27 witnesses interviewed alleged that Phillips referred to Caucasian students as “Whities,” Hispanic students as “Brownies,” and LGBTQ students as “the gays and the weirdos.” The report did not include audio recordings or documentation confirming these remarks, and Phillips denied making them.
• Misrepresented Compliance with Division 22 State Standards – Reported compliance with three state education requirements despite being informed the district was not in compliance.
• Failed to Implement an Administrator Evaluation Process – Did not follow required evaluation protocols for district administrators, leading to a lack of oversight.

The district had the discretion to withhold the investigation under ORS 192.345(12), which allows public agencies to protect investigatory reports unless the public interest in disclosure outweighs the need for confidentiality.

Despite this, the district chose to release the full report while litigation is ongoing, creating potential legal and financial risks.

The District’s Legal Gamble: ORS 192.345(12) and ORS 192.363

The district’s most questionable legal decision may not be Phillips’ termination itself, but the decision to release the investigative report while litigation is ongoing.

Oregon law provides some protections for investigatory records. Under ORS 192.345(12), investigatory information can be exempt from public disclosure unless a clear and convincing public interest outweighs the government’s interest in confidentiality.

However, ORS 192.363 allows for the release of investigatory records if they meet a public interest test, meaning the district had to determine that disclosing Phillips’ investigative report was more beneficial to the public than keeping it confidential.

Was This Truly About Public Interest, or an Attempt to Control the Narrative?

By making the report public while Phillips’ lawsuit is still active, the district opened itself up to further legal exposure:

• Phillips’ legal team can argue that the district was trying to discredit him, making it easier for him to claim a hostile and politically motivated firing.
• If a judge or jury believes the district used the investigation to justify a predetermined decision, the cost to taxpayers could skyrocket.
• Every dollar spent on legal fees comes from the district’s general fund, which means less money for classrooms, teachers, and students.

A Second Lawsuit: The Cost of the Linenberger Termination

Phillips’ lawsuit is not the only one the district is now facing. The board’s decision to terminate Deputy Superintendent Scott Linenberger has also led to active litigation, as previously reported in an October 11, 2024 news article.

With two high-stakes lawsuits now pending, the financial liability for the district could exceed anything the previous board faced.

While the previous board’s legal disputes drew significant attention, the current board may be exposing the district to even greater financial risk. If both lawsuits result in large settlements or judgments, taxpayers will be the ones paying the price—not the district’s attorneys, and not the board members who made these decisions. Previous lawsuits and legal fees top over $800,000 as reported August 7th, 2024 and do not include 24-25 expenditures.

At what point does the district learn from past legal missteps and start prioritizing risk reduction instead of increasing exposure?

What’s Next?

Newberg’s school board and legal counsel owe taxpayers an explanation:

• Why did they choose to release the investigation during active litigation, knowing it could increase financial risk?
• Are they prepared to justify how much of the general fund will be spent on these lawsuits instead of on education?

At a time when Newberg schools should be focused on stabilizing finances, improving education, and regaining public trust, the district instead finds itself mired in yet another expensive legal fight.

Photo Credit:  Yamhill County News File