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July 28, 1992

MARION COUNTY, WEST VIRGINIA BOARD OF EDUCATION, Defendant, v. ERIC EFAW, a minor, by and through his father and natural guardian, KENNETH EFAW, Third Party Defendants.

The opinion of the court was delivered by: GLENN E. MENCER

 Plaintiff Lake Erie Institute of Rehabilitation ("LEIR") brought this action seeking compensation for rehabilitative services rendered. Defendant Marion County, West Virginia Board of Education ("the Board") has filed a motion for summary judgment. LEIR's theory of recovery is based on contract and promissory estoppel; LEIR contends that the Board either entered into a contract or promised to pay for the rehabilitative services rendered to the Third Party Plaintiff, Eric Efaw, a student enrolled in the Marion County school system. The Board argues that under the applicable law, there is no issue of material fact remaining in the case and that the court should enter a favorable judgment as a matter of law.

 This court has subject matter jurisdiction over the primary dispute under 28 U.S.C. § 1332, diversity of citizenship, and over the third party dispute under 28 U.S.C. § 1367, supplemental jurisdiction.


 Sometime in late 1989 or early 1990, Kenneth Efaw, Eric's father, and Michael Bee, the Efaws' attorney, began negotiations with William Fox, an officer of LEIR, for the purpose of having Eric admitted to LEIR for rehabilitation. Although Mr. Efaw did not himself have sufficient cash assets to satisfy Mr. Fox that he would be able to pay for Eric's treatment, Mr. Bee was able to convince Mr. Fox that there were several possible sources of funding, including the Marion County Board of Education. Although at this point the Board had not played any role in having Eric admitted, the Board was charged by state and federal law to provide an education that addressed physical impairments such as Eric's. Although Mr. Fox did not feel fully assured that there would be funding for Eric's care, he permitted him to be admitted to the facility on a thirty day basis, which care would be terminated if it became clear that no funding would be available. Eric was admitted on January 16, 1990.

 In March 1990, representatives from the Board visited LEIR's facility located in Erie, Pennsylvania. Their purpose was to determine what services LEIR provided and how those services met Eric's educational needs. No specific agreement to provide funding for Eric's treatment arose out of that tour.

 On or about May 19, 1990, Mr. Bee met with the Board's Placement Advisory Committee ("PAC") in Fairmont, West Virginia. The PAC is a committee formed of representatives of Marion County's special education program, as well as the parents of the child whose education is being planned. Under West Virginia Department of Education regulations, the PAC must develop an Individualized Education Program ("IEP") and make specific findings before a student will be placed in an out-of-state facility. The purpose of the meeting was to establish an educational program for Eric. Mr. Bee brought Eric's father Kenneth and Dr. Lantzy, a doctor from LEIR. During a recess of the meeting, Mr. Bee took the Superintendent of the Marion County schools, Mr. John Myers, aside. Mr. Bee then telephoned Mr. Fox in Pennsylvania and told him that he would like to mediate Eric's case.

 The participants to this conversation do not agree on what was discussed. Mr. Fox understands that Mr. Myers agreed on behalf of the Board to fund Eric's care up to $ 70,200.00. Mr. Myers believes that all that was concluded was that the Board would pay no more than $ 70,200.00, should the Board decide to fund the care at all. That such a misunderstanding should occur becomes understandable once it is learned that Mr. Myers and Mr. Fox never spoke directly or heard each other speak, and that Mr. Bee served as the intermediary of the conversation. Nevertheless, it is LEIR's position that Mr. Myers promised to fund Eric's care.


 The Board contends that it is entitled to a summary judgment because it is undisputed that no written contract was ever executed and that the full Board never acted to approve the financing of rehabilitative care for Eric. Either of these acts are sufficient to render the payment of state funds ultra vires, and the state, through its organ, the Board of Education, is not bound contractually or quasi-contractually by ultra vires actions under West Virginia law. LEIR's position is that this dispute is governed by the law of Pennsylvania, not West Virginia, and that Pennsylvania law does not in every situation permit state agencies to abrogate ultra vires actions.

 Thus, the court is presented with two questions: one, whether Pennsylvania or West Virginia law governs this dispute; and two, whether, construing the facts in the manner most favorable to the nonmovant, the applicable law would permit the Board to invalidate any obligations to LEIR that it may have incurred.

 A. Choice of Law Analysis

 In diversity cases such as the instant dispute, a federal court must apply the choice of law principles of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941); Melville v. American Home Assurance Co., 584 F.2d 1306, 1308 (3d Cir. 1978). Therefore, ...

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