Alternatives Unlimited-Special, Inc. v. Ohio Department of Education , 163 Ohio Misc. 2d 10 ( 2011 )


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  • [Cite as Alternatives Unlimited-Special, Inc. v. Ohio Dept. of Edn., 
    163 Ohio Misc.2d 10
    , 
    2011-Ohio-886
    .]
    Court of Claims of Ohio
    The Ohio Judicial Center
    65 South Front Street, Third Floor
    Columbus, OH 43215
    614.387.9800 or 1.800.824.8263
    www.cco.state.oh.us
    ALTERNATIVES UNLIMITED-SPECIAL,                             Case No. 2009-03410
    INC., et al.,
    February 7, 2011
    v.
    OHIO DEPARTMENT OF EDUCATION
    Aaron D. Plasco and Amy L. Tumey; and Luther L. Liggett Jr., for plaintiffs.
    Michael DeWine, Attorney General, and Christopher P. Conomy, Assistant Attorney
    General, for defendant.
    CLARK, Judge.
    {¶ 1} On August 19, 2010, plaintiffs, Alternatives Unlimited-Special, Inc. (“AU-
    Special”) and Alternatives Unlimited, Inc. (“AU, Inc.”) filed a motion for partial summary
    judgment pursuant to Civ.R. 56(A).                On September 3, 2010, defendant, the Ohio
    Department of Education (“ODE”) filed a response and a cross-motion for partial
    summary judgment.1 On September 20, 2010, plaintiffs filed a response to defendant’s
    cross-motion and a motion for leave to file the same, and a motion for leave to file an
    1
    On September 1, 2010, defendant filed a motion to stay the proceedings pursuant to Civ.R.
    41(D) pending payment of costs that were assessed in case No. 2002-0482. Inasmuch as those costs
    were subsequently paid by plaintiffs, defendant’s motion is denied as moot.
    amended motion for partial summary judgment. Plaintiffs’ motions for leave are hereby
    granted instanter. On December 22, 2010, the court held an oral hearing on the
    motions.
    {¶ 2} Civ.R. 56(C) states:
    {¶ 3} “Summary judgment shall be rendered forthwith if the pleadings,
    depositions, answers to interrogatories, written admissions, affidavits, transcripts of
    evidence, and written stipulations of fact, if any, timely filed in the action, show that
    there is no genuine issue as to any material fact and that the moving party is entitled to
    judgment as a matter of law. No evidence or stipulation may be considered except as
    stated in this rule. A summary judgment shall not be rendered unless it appears from
    the evidence or stipulation, and only from the evidence or stipulation, that reasonable
    minds can come to but one conclusion and that conclusion is adverse to the party
    against whom the motion for summary judgment is made, that party being entitled to
    have the evidence or stipulation construed most strongly in the party’s favor.” See also
    Gilbert v. Summit Cty., 
    104 Ohio St.3d 660
    , 
    2004-Ohio-7108
    , citing Temple v. Wean
    United, Inc. (1977), 
    50 Ohio St.2d 317
    . As an initial matter, in its response to plaintiffs’
    motion for summary judgment, defendant asserts that plaintiffs have improperly relied
    on trial transcripts from case No. 2002-04682.       However, on September 20, 2010,
    plaintiffs filed both an amended motion for partial summary judgment and a transcript of
    proceedings in case No. 2002-04682.           Inasmuch as Civ.R. 56(C) provides that
    “transcripts of evidence” may be considered in ruling on a motion for summary
    judgment, the transcripts from case No. 2002-04682 shall be considered as evidence in
    this case.
    2
    {¶ 4} Plaintiffs’ claims arise from a contract that was executed by the parties in
    1999. In this case, plaintiffs have refiled claims that were originally filed in case No.
    2002-04682.     On December 9, 2008, the Tenth District Court of Appeals issued a
    decision in case No. 2002-04682 affirming the May 2, 2008 judgment of this court,
    which granted partial summary judgment to defendant. In its decision, the court of
    appeals summarized the procedural history of the case as follows:
    {¶ 5} “On May 7, 2002, appellants filed suit against ODE in the Court of Claims,
    asserting two causes of action for breach of contract, which included claims for
    promissory estoppel and unjust enrichment. Appellants generally sought declaratory
    judgment and monetary damages for ODE’s failure to pay for all of the students actually
    enrolled and taught at [the Cleveland Alternatives Learning Academy] CALA, as well as
    the alleged invalid, unilateral rescission of the contract. ODE countered that it owed no
    obligation to provide funding for students improperly enrolled in grades two, seven, and
    eight, and that certain individuals associated with appellants were entitled to rescind the
    contract as the governing authority. ODE also asserted that appellants lacked standing
    to bring suit on the contract.
    {¶ 6} “The issues of liability and damages were bifurcated, and the case
    eventually proceeded to trial regarding liability only on July 12, 2004. On September
    15, 2005, the trial court issued its judgment in favor of ODE, concluding that neither AU-
    Special nor AU, Inc. was a party to the contract as the governing authority for CALA,
    and, thus, they lacked standing to pursue their claims for breach of contract. Appellants
    appealed, and in Alternatives Unlimited-Special, Inc. v. Ohio Dep’t of Educ., 
    168 Ohio App. 3d 592
    , 
    2006 Ohio 4779
    , 
    861 N.E.2d 163
     (‘Alternatives I’), this court reversed the
    judgment of the trial court, finding ODE was estopped from denying appellants’ standing
    3
    based upon an unrelated case in another appellate jurisdiction, in which the state and
    appellants agreed that appellants were the ‘governing authority’ for CALA, and, thus,
    were the proper party in the present case. This court remanded the matter to the Court
    of Claims.
    {¶ 7} “Upon remand, prior to trial, ODE moved for partial summary judgment,
    arguing that the contract between the parties was never modified to include funding for
    grades two, seven, and eight.           After an oral hearing on ODE's motion for partial
    summary judgment, at which appellants did not appear, the trial court granted ODE's
    motion.     On April 23, 2008, appellants moved to amend their complaint to dismiss
    without prejudice all remaining claims not related to the funding for grades two, seven,
    and eight. On May 2, 2008, the trial court entered judgment for ODE.” Alternatives
    Unlimited-Special, Inc. v. Ohio Dept. of Edn., Franklin App. No. 08AP-396, 2008-Ohio-
    6427 (“Alternatives II”), ¶ 4-6.
    {¶ 8} In this case, plaintiffs are asserting the same claims regarding grades
    three through six that were asserted in case No. 2002-04682, but were later dismissed
    with the filing of an amended complaint pursuant to Civ.R. 15(A). Counts 1 through 3 of
    the complaint in this case are identical to the first three counts in the complaint filed in
    case No. 2002-04682.2
    EQUITABLE CLAIMS
    {¶ 9} Defendant asserts that it is entitled to judgment as a matter of law on
    plaintiffs’ claims for unjust enrichment and promissory estoppel. At the December 22,
    2010 oral hearing, plaintiffs conceded that they cannot prevail on their claims for
    2
    On March 5, 2010, the Tenth District Court of Appeals issued a decision finding that plaintiffs’
    claims regarding grades three through six were timely filed pursuant to the saving statute, R.C.
    2305.19(A).
    4
    equitable relief (Counts 2 and 3) inasmuch as a valid contract existed. See Alternatives
    II, 
    2008-Ohio-6427
    , ¶ 23. Accordingly, defendant is entitled to judgment as a matter of
    law on plaintiffs’ claims for unjust enrichment and promissory estoppel.
    LOST PROFITS
    {¶ 10} Defendant also asserts that it is entitled to judgment as a matter of law on
    plaintiffs’ claim for lost profits “because the contract and the governing statutes do not
    permit community schools to operate as profit-making enterprises.”
    {¶ 11} “The contract must also specify that ’the school shall be established as * *
    * [a] nonprofit corporation established under Chapter 1702. of the Revised Code.’ R.C.
    3314.03(A)(1)(a).” Alternatives I, 
    168 Ohio App.3d 592
    , 
    2006-Ohio-4779
    , 
    861 N.E.2d 163
    , ¶ 5.
    {¶ 12} Defendant argues that inasmuch as AU-Special was established as a
    nonprofit entity, “as a matter of public policy,” the governing authority of a public school
    should not be “engaged in a profit-making enterprise.” However, defendant has not
    identified any provision of the contract, nor has defendant identified any legal authority,
    to support that argument.
    {¶ 13} Although plaintiffs formed AU-Special as a nonprofit entity to operate
    CALA, it does not follow that plaintiffs cannot recover damages in the form of lost profits
    should they prevail on their claim for breach of contract. See Greene Cty. Guidance
    Ctr., Inc. v. Greene-Clinton Community Mental Health Bd. (1984), 
    19 Ohio App.3d 1
    , 6
    (A nonprofit corporation may recover lost profits as money damages when its funding
    contract is unlawfully terminated or nonrenewed). Accordingly, defendant is not entitled
    to judgment as a matter of law.
    BREACH OF CONTRACT
    5
    {¶ 14} “[I]n an action for breach of contract, the plaintiff has the burden of proving
    four elements: (1) the existence of a contract; (2) performance by the plaintiff; (3)
    breach by the defendant; and (4) damage or loss to the plaintiff.” Alternatives II, 2008-
    Ohio-6427, at ¶ 12, citing Jarupan v. Hanna, 
    173 Ohio App.3d 284
    , 
    2007-Ohio-5081
    .
    {¶ 15} The parties executed a five-year contract for the term September 1, 1999,
    to June 30, 2004, which authorized plaintiffs to operate the school for students in grades
    three through six. Pursuant to the contract, plaintiffs received funding for the 1999-2000
    and 2000-2001 school years.            However, on August 24, 2001, before CALA was
    reopened for its third year of operation, defendant sent a letter stating, “Please be
    advised the community school known as the Cleveland Alternatives Learning Academy
    no longer has the authority to operate as a community school pursuant to Chapter 3314
    of the Ohio Revised Code. The governing authority members of the school, Elijah Scott
    and David Smith, rescinded the contract with the Sponsor, State Board of Education,
    effective August 1, 2001.”3
    {¶ 16} With regard to performance, plaintiffs assert that “AU Special operated the
    community school contemplated in the agreement until it was no longer able to continue
    due to lack of funding from ODE.” There is no dispute that plaintiffs operated CALA for
    the 1999-2000 and 2000-2001 academic years.                    Furthermore, plaintiffs presented
    evidence that CALA opened in the fall of 2001. Accordingly, the court finds that there is
    no genuine issue of material fact as to whether plaintiffs operated CALA for the first two
    3
    Plaintiffs contended that the purported recision was invalid inasmuch as Scott and Smith were
    not the governing authority of CALA. The Tenth District Court of Appeals subsequently determined that
    defendant was collaterally estopped from denying that AU was the governing authority of CALA inasmuch
    as the state had previously taken that position during litigation in a court of competent jurisdiction.
    Alternatives I, 
    168 Ohio App.3d 592
    , 
    2006-Ohio-4779
    , 
    861 N.E.2d 163
    , at ¶ 51.
    6
    academic years of the five-year contract period, albeit not to defendant’s satisfaction,
    and that they were prepared to continue operations when the contract was terminated.
    {¶ 17} Plaintiffs assert that defendant failed to fulfill its contractual obligations
    with regard to termination as set forth in Article VIII of the contract, which provides:
    {¶ 18} “The expiration of this contract for Cleveland Alternatives Learning
    Academy Community School between the SPONSOR and the GOVERNING
    AUTHORITY shall be the date provided in this contract. * * * The termination of this
    contract shall be effective only at the conclusion of a school year. At least 180 days
    prior to the termination or non-renewal of this contract, the SPONSOR shall notify the
    Cleveland Alternatives Learning Academy Community School of the proposed action in
    writing. The notice shall include the reasons for the proposed action in detail and that
    the Cleveland Alternatives Learning Academy Community School may, within fourteen
    days of receiving the notice, request an informal hearing before the SPONSOR. Such
    request shall be in writing.” (Boldface and capitalization sic.)
    {¶ 19} The court notes that defendant has stipulated “that no termination letter
    was sent.” Inasmuch as CALA did not receive written notice of the termination of the
    contract, plaintiffs were never given the opportunity to request an informal hearing as
    provided in Article VIII of the contract. Rather, defendant unilaterally terminated the
    contract, without notice, with three academic years remaining before the contract period
    ended.
    {¶ 20} Furthermore, R.C. 3314.07 also provides limitations regarding the
    expiration, termination, or nonrenewal of a contract establishing a community school as
    follows:
    7
    {¶ 21} “(A) The expiration of the contract for a community school between a
    sponsor and a school shall be the date provided in the contract. A successor contract
    may be entered into pursuant to division (E) of section 3314.03 of the Revised Code
    unless the contract is terminated or not renewed * * *.
    {¶ 22} “(B) (1) A sponsor may choose not to renew a contract at its expiration or
    may choose to terminate a contract prior to its expiration for any of the following
    reasons:
    {¶ 23} “(a) Failure to meet student performance requirements stated in the
    contract;
    {¶ 24} “(b) Failure to meet generally accepted standards of fiscal management;
    {¶ 25} “(c) Violation of any provision of the contract or applicable state or federal
    law;
    {¶ 26} “(d) Other good cause.
    {¶ 27} “(2) A sponsor may choose to terminate a contract prior to its expiration if
    the sponsor has suspended the operation of the contract under section 3314.072
    [3314.07.2] of the Revised Code.
    {¶ 28} “(3) At least ninety days prior to the termination or nonrenewal of a
    contract, the sponsor shall notify the school of the proposed action in writing. The
    notice shall include the reasons for the proposed action in detail, the effective date of
    the termination or nonrenewal, and a statement that the school may, within fourteen
    days of receiving the notice, request an informal hearing before the sponsor. Such
    request must be in writing. The informal hearing shall be held within seventy days of the
    receipt of a request for the hearing. Promptly following the informal hearing, the sponsor
    8
    shall issue a written decision either affirming or rescinding the decision to terminate or
    not renew the contract.
    {¶ 29} “(4) A decision by the sponsor to terminate a contract may be appealed to
    the state board of education. The decision by the state board pertaining to an appeal
    under this division is final. If the sponsor is the state board, its decision to terminate a
    contract under division (B)(3) of this section shall be final.
    {¶ 30} “(5) The termination of a contract under this section shall be effective upon
    the occurrence of the later of the following events:
    {¶ 31} “(a) Ninety days following the date the sponsor notifies the school of its
    decision to terminate the contract as prescribed in division (B)(3) of this section;
    {¶ 32} “(b) If an informal hearing is requested under division (B)(3) of this section
    and as a result of that hearing the sponsor affirms its decision to terminate the contract,
    the effective date of the termination specified in the notice issued under division (B)(3)
    of this section, or if that decision is appealed to the state board under division (B)(4) of
    this section and the state board affirms that decision, the date established in the
    resolution of the state board affirming the sponsor’s decision.” (Emphasis added.)
    {¶ 33} Defendant had the authority to terminate the contract with plaintiffs prior to
    its expiration for any of the reasons listed in R.C. 3314.07 (B) (1). However, defendant
    was required to notify CALA of the proposed termination in writing at least 90 days prior
    thereto. As stated above, defendant failed to provide any written notice of termination
    prior to the August 24, 2001 letter that purported to rescind the contract.            Thus,
    defendant committed a breach of the contract by failing to provide plaintiffs with either
    the required statutory or contractual notice of termination.
    9
    {¶ 34} Based upon the foregoing, defendant’s motion for partial summary
    judgment shall be granted as to plaintiffs’ claims for unjust enrichment and promissory
    estoppel, and judgment shall be rendered in favor of plaintiffs on their breach-of-
    contract claim as to grades three through six.
    So ordered.
    10
    

Document Info

Docket Number: 2009-03410

Citation Numbers: 2011 Ohio 886, 163 Ohio Misc. 2d 10

Judges: Clark

Filed Date: 2/7/2011

Precedential Status: Precedential

Modified Date: 8/31/2023