RICHARD ALLEN PREPARATORY CHARTER SCHOOL, Pеtitioner v. COMMONWEALTH of Pennsylvania, DEPARTMENT OF EDUCATION; and Pedro A. Rivera, in his official capacity as Secretary of Education, Respondents
No. 51 M.D. 2016
Commonwealth Court of Pennsylvania.
Decided May 1, 2017
Argued December 14, 2016
For all these reasons, we vacate the trial court‘s discovery order and remand for further proceedings...
ORDER
AND NOW, this 21st day of April, 2017, the Order dated September 18, 2015 and entered on September 21, 2015, is VACATED, and the matter is REMANDED for further proceedings.
Jurisdiction is relinquished.
Before the Court is Richard Allen Preparatory Charter School‘s (Charter School) Application for Summary Relief (Application) seeking payment from the Commonwealth of Pennsylvania, Department of Education (Department) and Pedro A. Rivera, in his official capacity as Secrеtary of Education (Secretary) (collectively, Respondents) of reconciliation monies for the 2014-2015 school year pursuant to Section 1725-A of the Charter School Law (CSL).1 Also before the Court are Respondents’ preliminary objections (Preliminary Objections) to the Charter School‘s Petition for Review in the Nature of an Appeal and a Complaint for Direct Payment, Mandamus, Declaratory and Injunctive Relief (Complaint).
I. Background
“Pursuant to [S]ection 1725-A of the CSL ..., a school district that has any resident students enrolled in a charter school must pay the charter school for each enrolled student.” Waslow v. Pa. Dep‘t of Educ., 984 A.2d 575, 576 (Pa. Cmwlth. 2009).
Andrew K. Garden, and Aaron Judson, Philadelphia, for petitioner.
M. Abbegael Giunta, Senior Deputy Attorney General, Harrisburg, for respondents.
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge, HONORABLE RENEE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE JULIA K. HEARTHWAY, Judge
If a school district fails to make a payment to a charter school as prescribed in this clause, the [S]ecretary shall deduct the estimated amount, as documented by the charter school, from any and all [s]tate payments made to the district after receipt of documentation from the charter school.
On September 25, 2015, the Charter School submitted a reconciliation report to the Department for $83,593.32 it claimed the School District of Philadelphia owed to it, and $19,492.40 it claimed the William Penn School District owed to it for the 2014-2015 sсhool year (collectively, the Districts). See Complaint Exs. A, B. On January 8, 2016, the Department notified Pennsylvania charter schools and school districts (January 2016 Notice):
In 2012, the Pennsylvania Commonwealth Court [in Chester Community Charter School v. Pennsylvania Department of Education, 44 A.3d 715 (Pa. Cmwlth. 2012) (Chester II)] determined that the mandatory withholding requirements of [S]ection 1725-A(a)(5) of the [CSL] apply only to claims on current year funding. The prior administration delayed the implementation of the [C]ourt‘s decision.
[The Department] cannot contravene the law, and therefore will cease the end-of-year reconciliation process. Instead, charter schools may work directly with resident school districts to reconcile each school year‘s tuition payments based on the number of days that each student was enrolled in the charter school.
Charter schools may continue to submit invoices to [the Department] for deduction of estimated amounts related to current school year enrollment. However, pursuant to the law, charter schools must first provide resident school districts with an invoice and must have provided the resident school district with sufficient time and opportunity to make a payment before requesting subsidy redirection from [the Department]. Therefore, [the Department] will only process charter school withholding requests that relate to the enrollment of students in the current school year.
Complaint Ex. C (emphasis added). Effectively, the Department declared it would only redirect delinquent school districts’
On February 4, 2016, Charter Choices, Inc. (Charter Choices)4 submitted an email inquiry to the Department regarding the status of the Charter School‘s fund redirection request. On February 5, 2016, the Department notified Charter Choices by telephone that the Department would not pay the Charter School‘s 2014-2015 reconciliation.
On February 8, 2016, the Charter School filed the Complaint seeking: (1) an order directing the Department and/or the Secretary to pay the Charter School $103,085.72 owed by the Districts for the 2014-2015 school year (Count I); (2) a mandamus order directing the Secretary to withhold the Districts’ state funds until the Charter School is paid in full, redirect the Charter School‘s overdue payments, make all outstanding payments to the Charter School and pay the Charter School all costs and attorney‘s fees (Count II); (3) a declaration that the Department is in violation of the CSL‘s mandatory fund withholding prоvisions, Chester II does not prevent its 2014-2015 school year claims, the Department‘s January 8, 2016 statement that Chester II precludes it from withholding the Charter School‘s funds is incorrect, the Department must withhold the funds as mandated by the CSL, and the Charter School is entitled to costs and attorney‘s fees (Count III); (4) a permanent injunction prohibiting Respondents from delaying or refusing the Charter School‘s withholding requests and from refusing to make future reconciliation payments (Count IV); and, (5) to the extent that the January 2016 Notice is the Department‘s final determination of the Charter School‘s right to funds for the 2014-2015 school year, an appeal therefrom (Count V).
On March 7, 2016, the Department issued a letter to Pennsylvania charter schools, including the Charter School (March 2016 Notice), clarifying:
On January 8, 2016, the [Department] notified charter schools and school districts that it would no longer be performing аn end-of-year reconciliation process. However, prior to issuing this notification, the [Department] received documentation from charter schools for the 2014-2015 school year. As a result, the Department is providing school districts with the information received prior to January 8, 2016. One or more charter schools have prepared the enclosed report(s) related to payments made and the amount claimed to be due for students enrolled during the 2014-2015 school year.
As indicated in its previous communication, the Department will not be withholding funds related to the documentation submitted by charter schools because there are no 2014-[20]15 funds from which to withhold. This matter will proceed to an administrative hearing as prescribed by [Chester II].
As a result of the record established through the administrative hearing process, the Secretary will thеn issue a decision. Since there are no 2014-[20]15 funds from which to withhold, the manner in which funds are paid based on the Secretary‘s decision will be decided by
the respective charter school and school district.
Application Ex. A (emphasis added).
On March 14, 2016, Respondents filed their Preliminary Objections to the Complaint arguing that: (1) the Charter School failed to exhaust its statutory remedies since the matter has not been submitted to a hearing (Objection I); (2) this Court lacks jurisdiction because the January 2016 Notice was not a final, appealable order (Objection II); (3) Complaint Counts I through IV fail to state claims upon which relief may be granted because, inter alia, Respondents have sovereign immunity (Objections III, V-VIII); and, (4) the Charter School failed to join necessary parties (Objection IV).
On April 13, 2016, the Charter School filed the Application seeking judgment in its favor and against Respondents because Respondents have denied its reconciliation request for thе 2014-2015 school year in violation of
II. Summary Relief
Flagg v. Int‘l Union, Sec., Police, Fire Prof‘ls of Am., Local 506, 146 A.3d 300, 305 (Pa. Cmwlth. 2016) (emphasis added).
A. Genuine Issues of Material Fact
At December 14, 2016 oral argument before this Court, counsel for the Charter School represented, and Respondents acknowledged, that under Governor Corbett‘s administration, the Department‘s practice was to allow charter schools to conduct end-of-year reconciliations and, based upon the amounts charter schools documented they were owed, the Department would withhold state funding from delinquent school districts in the relevant amounts in accordance with
Based on the foregoing, there are no genuine issues of material fact that would preclude this Court from deciding the Charter School‘s Application.
B. Clear Right to Relief
The Charter School‘s Complaint seeks declaratory, mandamus and injunctive relief against Respondents.8
The Charter School avers that Respondents are in violation of the CSL‘s mandatory fund withholding provisions, that Chester II does not prevent its 2014-2015 school year claims, and that the Department‘s reliance on the January 2016 Notice that Chester II precludes it from withholding the Charter School‘s funds is incorrect. The Charter School also seeks an order from this Court that:
(1) [Respondents are] in violation of [their] mandatory obligations under the CSL by failing to withhold the funds sought by [the Charter School];
(2) this Court‘s decision in Chester II does not prevent Respondents from withholding state payments where the claim was made after the requisite school year;
(3) [Respondents‘] statement in the January 8, 2016 email that the CSL or Chester II preclude [them] from withholding the funds sought by [the Charter School] is incorrect;
(4) [Respondents] must withhold the funds sought by [the Charter School] and pay them to [the Charter School] in order for Respondents to be in compliance with their mandatory obligations under the CSL[.]
Complaint at 19. The Charter School also requests “costs, attorney‘s fees, and such other relief as the Court shall deem appropriate for Respondents’ failure to comply with the CSL.” Complaint at 19.
Respondents claim that
Section 7532 of the Declaratory Judgments Act provides: “Courts of record, within their respective jurisdictions, shall have power to declare rights, status, and other legal relations whether or not further relief is or could be claimed.”
However, declaratory judgment is appropriate only where there exists an actual controversy. Allegheny Cnty. Constables Ass‘n, Inc. v. O‘Malley, 108 Pa. Cmwlth. 1, 528 A.2d. 716 (1987). “An actual controversy exists when litigation is both imminent and inevitable and the declaration sought will practically help to end the controversy between the parties.” Chester Cmty. Charter Sch. v. Dep‘t of Educ., 996 A.2d 68, 80 (Pa. Cmwlth. 2010) (Chester I). “Granting or denying a petition for a declaratory judgment is committed to the sound discretion of a court of original jurisdiction.” GTECH Corp. v. Dep‘t of Revenue, 965 A.2d 1276, 1285 (Pa. Cmwlth. 2009).
The General Assembly mandated in
[u]nder [Section 1725-A(a)(5) of the CSL], if a school district does not make its required statutory payments, the Secretary, upon notification by the affected charter school, shall deduct the estimated amount as documented by the charter school from any and all state payments made to the school district. If a school district refuses to transfer funds to a charter school, the Secretary has no discretion to decline to withhold the estimated amount of payment from the charter school. Thus, the Secretary has a mandatory, non-discretionary obligation to deduct the estimated amount of payment due a charter school by a school district upon submission of supporting documentation by the charter school. [Under
Section 1725-A(a)(6) of the CSL a] school district has 30 days to challenge the accuracy of the estimated amount withheld by the Secretary and to require the Secretary to provide the school district with an opportunity to be heard on the estimated deduction.
Chester II, 44 A.3d at 719-20.
Despite this Court‘s acknowledgement in Chester II that Section 1725-A(a) of the to the CSL have left the Charter School without a means to assert its statutory rights, this Court has jurisdiction over its claims for declaratory, mandamus and injunctive relief.
Respondents assert that the Secretary may only deduct, withhold and pay monies allocated for the current school year, and that a hearing may be held before Respondents withhold funds, was based solely upon this Court‘s Chester II holding. In Chester II, the Chester Community Charter School (CCCS) filed a petition in this Court to compel the Department and then-Secretary Gerald L. Zahorchak to withhold Chester Upland School District‘s (Chester Upland) state subsidies because Chester Upland used an improper special education student calculation rate between September 1998 and September 2007 and, thus, underfunded CCCS by $7,490,171.75. Chester Upland responded, inter alia, that CCCS’ claims for past school yeаrs were barred as untimely filed.9 CCCS filed an application for summary relief.
In denying the summary relief application, this Court expressly held:
Under
Section 1725-A(a)(5) [of the CSL], challenges are made by the charter school to one or all of the 12 equal monthly payments calculated by the school district based on the budgeted education expenditures within the operating school year. Because that ties the challenge to the withholding to a particular school year, withholding for purported underfunding can only be made against funds appropriated in the school year for which payment is authorized to withhold disputed amounts.Our previous holding in Chester I [was] that Sections 1725-A(a)(5) and (6) [of the CSL] provide the exclusive remedy for underpayment(s) to a charter school, and our holding in this case [is] that withholding can only be made against appropriations for the school year in question .... [Thus, when there are no funds to withhold, the Secretary must still acknowledge the receipt of the claim for underpayment from the charter school, state that there are no appropriated funds for the year in which the charter school claim can be withheld, and because there is no ‘trigger’ for the School District to appeal, the Secretary must inform the charter school that the claim will go directly to a hearing. In keeping with the process under
Section 1725-A(a)(6) [of the CSL] that the school district has to take the appeal, the school district still has the burden to prove the claim is invalid. Of course, the school district can defend the purported claim based on the timeliness or validity of the claim.Because we have previously held that the administrative remedy is the exclusive remedy to hear disputes regarding payments made to charter schools by school distriсts, this court will not address the merits of the claims or whether the claims were untimely filed. Accordingly, the application for summary relief is denied. The Secretary is to hold a hearing, previously held in abeyance, in accordance with this opinion.
Chester II, 44 A.3d at 722-23 (emphasis added; footnote omitted). However, Chester II is clearly distinguishable from the current case and is limited to its particular facts.
Initially, although Respondents purportedly applied Chester II‘s legal conclusions, they failed to satisfy the conditions the Chester II Court established. Specifically, Respondents did not, as the Chester II Court prescribed, “acknowledge the receipt of the claim for underpayment from the charter school, [and/or] state that there are no appropriated funds for the year in which the charter school claim can be withheld.” Chester II, 44 A.3d at 722 (emphasis added). Rather, Respondents in this case issued the general January 2016 Notice of its policy change to all Pennsylvania charter schools and school distriсts more than three months after the Charter School‘s request. It was not until another four months later, on April 14, 2016 (the day after the Charter School filed the instant Application), that the Department issued specific notice to the Charter School and the Districts that there are no funds from which payments could be made, and these particular parties were entitled to a hearing. See Respondents’ Ans. to Application Ex. 1. However, the Department has never scheduled a hearing. Under the circumstances, Respondents’ failure to adhere to Chester II‘s clear mandates eviscerates their argument that they followed Chester II and that it controls in the resolution of this matter.
Moreover, the fact that Chester II did not address timeliness or the merits of CCCS’ claims also distinguishes that case from the instant matter. The Court finds it significant that, in Chester II, CCCS sought underpayment reconciliations up to nine years after the applicable fiscal years. In the case at bar, the Charter
In addition, Section 1921(b) of the Statutory Construction Act of 1972 requires: “When the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit.”
Further illustrative of Respondents’ misguided application of Chester II to this case is that Act 86 has since amended
Having concluded that Chester II is not controlling in this case and, thus, does not prohibit the Charter School‘s 2014-2015 school year reconciliation claims, we declare that Respondents are in violation of the CSL‘s mandatory fund withholding provisions.
2. Mandamus
The Charter School also seeks an order of preemptory mandamus as follows:
(1) directing [Respondents] to withhold all further state payments to school districts until [the Charter School‘s] reconciliation request is paid in full in accordance with Section 1725-A of the CSL;
(2) directing [Respоndents] to redirect the overdue payment in the full amount of [the Charter School‘s] claim in accordance with Section 1725-A of the CSL;
(3) ordering [Respondents] to direct the school districts to make all outstanding payments in full to [the Charter School] or be in contempt of this Court[.]
Complaint at 16. The Charter School also requests an order “directing [Respondents] to pay to [the Charter School] all costs, attorney‘s fees, and such other relief as the Court shall deem appropriate.” Complaint at 16.
A writ of mandamus is an extraordinary remedy used to compel official performance of a ministerial act when a petitioner establishes a clear legal right, the respondent has a corresponding duty, and the petitioner has no other adequate remedy at law. The purpose of mandamus is to enforce rights thаt have been clearly established. Tindell v. Dep‘t of Corrs., 87 A.3d 1029, 1034 (Pa. Cmwlth. 2014) (citation omitted; emphasis added).
3. Injunctive Relief
An injunction that commands the performance of an affirmative act, a ‘mandatory injunction,’ is the rarest form of injunctive relief and is often described as an extreme remedy. The case for a mandatory injunction must be made by a very strong showing, one stronger than that required fоr a restraining-type injunction. An applicant seeking mandatory injunctive relief must establish the following elements: (1) ir-
In the instant case, there is a strong showing that the Districts had a legal obligation to fully fund the Charter School for the 2014-2015 school year, but failed to do so, and Respondents refused to reconcile payments due to the Charter School.
It is clear, ... that as between the school district and the charter school, the legislature has decided that more harm will befall a charter school that is not paid timely and accurately than upon a school district that may experience a delay in the receipt of the state subsidy to which it is entitled.
Id. at 78 (emphasis added). The injunction will restore the status quo between the Charter School and the Districts. Accordingly, the Charter School is entitled to injunctive relief.
In addition to there being no genuine issues of material fact, the Charter School has a clear legal right to declaratory, mandamus and injunctive relief. Accordingly, the Court grants the Charter School‘s Application.
Costs
Section 1726 of the Judicial Code provides, in relevant part:
[(a)](1) Attorney‘s fees are not an item of taxable costs except to the extent authorized by [S]ection 2503 [of the Judicial Code, 42 Pa. C.S. § 2503] (relating to right of participants to receive counsel fees).
[(a)](2) The prevailing party should recover his costs from the unsuccessful litigant except where the:
(i) Costs relate to the existence, possession or disposition of a fund and the costs should be borne by the fund.
(ii) Question involved is a public question or where the applicable law is uncertain and the purpose of the litigants is primarily to clarify the law.
(iii) Application of the rule would work substantial injustice.
[(a)](3) The imposition of actual costs or a multiple thereof may be used as a penalty for violation of general rules or rules of court.
Attorney‘s Fees
The American Rule states that a litigant cannot recover counsel fees from an adverse party unless there is express statutory authorization, a clear agreement of the parties or some other established exception. Lavelle v. Koch, 532 Pa. 631, 617 A.2d 319, 323 (1992). In Pennsylvania, the American Rule is embodied in [Section 1726(a)(1) of the Judicial Code,]
Mosaica Acad. Charter Sch. v. Dep‘t of Educ., 572 Pa. 191, 813 A.2d 813, 822-23 (2002). The Mosaica Academy Charter School Court held that attorney‘s fees may be ordered in a charter school‘s favor (as against a school district) to effectuate a declaratory judgment, but not as ancillary relief under the Declaratory Judgments Act. Id.
Relative to mandamus, Section 8303 of the Judicial Code provides: “A person who is adjudged in an action in the nature of mandamus to have failed or refused without lawful justification to perform a duty required by law shall be liable in damages to the person aggrieved by such failure or refusal.”
Section 2503 of the Judicial Code provides, in pertinent part:
The following participants shall be entitled to a reasonable counsel fee as part of the taxable costs of the matter:
....
(6) Any participant who is awarded counsel fees as a sanction against another participant for violation of any general rule which expressly prescribes the award of counsel fees as a sanction for
dilatory, obdurate or vexatious conduct during the pendency of any matter.
(7) Any participant who is awarded counsel fees as a sanction against another participant for dilatory, obdurate or vexatious conduct during the pendency of a matter.
....
(9) Any participant who is awarded counsel fees because the conduct of another party in commencing the matter or otherwise was arbitrary, vexatious or in bad faith.
[t]he phrase ‘or otherwise’ in [Section 2503(9) of the Judicial Code] refers to misconduct in the raising of defenses, and cannot be construed to refer to the [Commonwealth agency‘s] action before the commencement of the case in court. [Dep‘t of Transp., Bureau of Driver Licensing v.] Smith, 145 Pa.Cmwlth. 164[, 602 A.2d 499 (1992) ].
Norris v. Commonwealth, 159 Pa.Cmwlth. 23, 634 A.2d 673, 676 (1993). Accordingly, “[Section 2503 of the Judicial Code], by its very terms, is a ‘taxable costs’ provision, thereby relating to the conduct of a party at some point during the litigation process.”16 Bucks Cnty. Servs., Inc. v. Phila. Parking Auth., 71 A.3d 379, 393 (Pa. Cmwlth. 2013) (emphasis added).
Here, after the Charter School commenced this action on February 8, 2016, Respondents continued to delay and/or refuse the Charter School‘s withholding requests. Also during the pendency of this matter since the Complaint was filed, the Department issued its March 2016 Notice wherein it declared that the matter “will proceed to administrative hearing as prescribed by [Chester II]” and, “[a]s a result of the record established through the administrative hearing process, the Secretary will then issue a decision.” Application Ex. A. Notwithstanding, Respondents have failed to make any withholdings and/or schedule a hearing.
We hold that Respondents’ retroactive application of a significant policy change without proper notice to the Charter Sсhool or the Districts was, at the very least, arbitrary, and its ongoing refusal to withhold reconciliation funds and/or schedule a hearing in accordance with the CSL since the Complaint was filed is dilatory and obdurate. Thus, the Charter School is entitled to attorney‘s fees from Respondents related to the Charter School‘s mandamus action.17
Having determined that the Charter School is entitled to summary relief, Respondents’ Preliminary Objections are overruled as moot. See Leach v. Commonwealth, 118 A.3d 1271, 1289 (Pa. Cmwlth. 2015), aff‘d, 141 A.3d 426 (Pa. 2016); see also Marshall v. Pa. Bd. of Prob. & Parole, 162 Pa.Cmwlth. 256, 638 A.2d 451 (1994) (summary relief may be granted before disposing of outstanding preliminary objections).
IV. Conclusion
Chester II does not apply to the circumstances presented in this case, nor did Respondents seek to adhere to its ruling. Based upon the particular facts presented herein, the Charter School‘s Application is granted. Accordingly, we direct Respondents to:
(1) Deduct and withhold $83,593.32 for the 2014-2015 school year, as documented by the Charter School, from any and all state payments made to the School District of Philadelphia.
(2) Deduct and withhold $19,492.40 for the 2014-2015 school year, as documented by the Charter School, from any and all state payments made to the William Penn School District.
(3) Pay to the Charter School costs and attorney‘s fees incurred from the date the Charter School‘s Complaint was filed with this Court, until the aforementioned amounts are deducted and withheld by Respondents.
Respondents’ Preliminary Objections are overruled.
ORDER
AND NOW, this 1st day of May, 2017, Richard Allen Preparatory Charter School‘s (Charter School) Application for Summary Relief is GRANTED. The Commonwealth of Pennsylvania, Department of Education and Pedro A. Rivera (Respondents) are directed to:
(1) Deduct and withhold $83,593.32 for the 2014-2015 school year, as documented by the Charter School, from any and all state payments made tо the School District of Philadelphia.
(2) Deduct and withhold $19,492.40 for the 2014-2015 school year, as documented by the Charter School, from any and all state payments made to the William Penn School District.
(3) Pay to the Charter School costs and attorney‘s fees incurred from the date the Charter School‘s Petition for Review in the Nature of an Appeal and a Complaint for Direct Payment, Mandamus, Declaratory and Injunctive Relief was filed with this Court, until the aforementioned amounts are deducted and withheld.
Respondents’ Preliminary Objections are OVERRULED.
ANNE E. COVEY
JUDGE
Notes
Within thirty (30) days after the [S]ecretary makes the deduction described in [Section 1725-A(a)](5) [of the CSL], a school district may notify the [S]ecretary that the deduction made from [s]tate payments to the district under this subsection is inaccurate. The [S]ecretary shall provide the school district with an opportunity to be heard concerning whether the charter school documented that its students were enrolled in the charter school, the period of time during which each student was enrolled, the school district of residence of each student and whether the amounts deducted from the school district were accurate.
The Act of July 13, 2016, P.L. 716 (Act 86), amended
No later than October 1 of each year, a charter school shall submit to the school district of residence of each student final documentation of payment to be made based on the average daily membership for the students enrolled in the charter school from the school district for the previous school year. If a school district fails to make payment to the charter school, the [S]ecretary shаll deduct and pay the amount as documented by the charter school from any and all [s]tate payments made to the [school] district after receipt of documentation from the charter school from the appropriations for the fiscal year in which the final documentation of payment was submitted to the school district of residence.
Indeed, under Section 761(a)(1) of the Administrative Agency Law,
Were we to adopt Respondents’ position that this Court lacks any jurisdiction whatsoever to hear this matter, the Charter School‘s