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Waslow v. Pennsylvania Dep't of Education

October 23, 2009


The opinion of the court was delivered by: Senior Judge Friedman

Argued: September 14, 2009



Before this court are the preliminary objections in the nature of a demurrer filed by the Pennsylvania Department of Education (Department) in response to the Petition for Review (Petition) filed by Larry Waslow, Liquidating Supervisor of the National Organization for Children, Inc., f.d.b.a. T.E.A.C.H., f.d.b.a. The Einstein Academy Charter School (Einstein). In its Petition, Einstein requests a writ of mandamus or a declaratory judgment in connection with Einstein's claims against the Department for reimbursement of special education services provided by Einstein. We overrule the preliminary objections.

During the 2001-2002 and 2002-2003 academic years, Einstein operated as a cyber charter school and provided education services to both regular and special education students from various school districts. (Petition, ¶¶4-5.) Pursuant to section 1725-A of the Charter School Law*fn1 (CSL), 24 P.S. §17-1725-A, a school district that has any resident students enrolled in a charter school must pay the charter school for each enrolled student. Section 1725-A(a) of the CSL sets forth separate formulas to determine the amounts to be paid for regular education students enrolled in the charter school (General Education Funds) and special education students enrolled in the charter school (Special Education Funds). 24 P.S. §17-1725-A(a). A prerequisite for payment of Special Education Funds from a school district is that the charter school provide an Individualized Education Plan (IEP) for each special education student invoiced. If a school district fails to make a required payment to the charter school, the Secretary of Education (Secretary), after receiving documentation from the charter school, deducts the estimated amount owed from any State payments due to the non-paying school district and gives that payment to the charter school. Section 1725-A(a)(5) of the CSL, 24 P.S. §17-1725-A(a)(5). (Petition, ¶¶7-11, 19.) In August 2002, the Department issued its "Guidelines for Post-Withholding Reconciliation Process under 24 P.S. §17-1725-A(a)," which established a reconciliation process for the limited purpose of ensuring that the Secretary withheld the proper sums from school districts. See Boyertown Area School District v. Department of Education, 861 A.2d 418 (Pa. Cmwlth. 2004). The affected school district has thirty days to challenge the accuracy of the Secretary's deduction and must be provided an opportunity to be heard on the matter. Section 1725-A(a)(6) of the CSL, 24 P.S. §17-1725-A(a)(6).

Einstein encountered a cash infusion problem, allegedly due, in part, to the failure of resident school districts to pay for education services rendered by Einstein. Einstein alleged that, as a result, it was unable to timely provide the IEPs required by law for Einstein's qualifying special education students. (Petition, ¶¶6, 20-21.) Thus, beginning in June 2001, Einstein invoiced the various school districts only for General Education Funds, not for any additional Special Education Funds. (Petition, ¶¶12-13, 17-18.) The school districts failed to submit payment, and Einstein sought payment from the Department, which, after completion of the CSL's reconciliation process, paid some, but not all, of the General Education Funds invoiced by Einstein. (Petition, ¶¶14-16.) Einstein lost its charter effective June 30, 2003. However, Einstein acquired funds pursuant to a 2002 agreement with the Department,*fn2 and, through March 2006, Einstein provided IEPs and compensatory education services to formerly enrolled special education students.*fn3 (Petition, ¶¶22-25.)

On March 2, 2006, Einstein filed for Chapter 11 Bankruptcy, and by letter dated December 27, 2006, the creditors' committee invoiced the Department for the cost of the IEPs and compensatory education provided to Einstein's former special education students;*fn4 the Department did not remit payment. (Petition, ¶¶27-28.) On January 24, 2008, liquidators for Einstein sent invoices to the various school districts in which the special education students were resident, seeking the Special Education Funds; again, the subsidies were not paid. (Petition, ¶¶29-30; Ex. B.) On February 29, 2008, the Department was again invoiced, but it refused to remit payment and further refused to allow Einstein to invoke the administrative process to receive a hearing regarding the Department's refusal to pay. (Petition, ¶31.)

On March 3, 2008, Einstein filed a petition for review with this court, asking that we order the Department to pay the special education subsidies owed to Einstein.*fn5 After the Department filed preliminary objections asserting that Einstein had failed to exhaust its administrative remedies, Einstein withdrew its petition and initiated administrative proceedings in accordance with the procedures described in the Department's preliminary objections and in a March 12, 2008, letter from the Department.*fn6 The Department responded by raising various legal bars to Einstein's recovery, and the parties began a series of discussions regarding the merits of their respective legal arguments. (Petition, ¶¶34-44; Ex. C, D, E, F, G.)

Ultimately, on February 17, 2009, Einstein received a letter from the Secretary advising Einstein that the Department would not hear Einstein's claims for several reasons.*fn7 In concluding, the letter specifically stated that because Einstein has no rights affected by the letter, "this letter does not constitute an adjudication." (Petition, ¶45; Ex. H.) Einstein now alleges that, by this letter, the Department denied Einstein its right to due process by simultaneously denying Einstein's claims without providing an opportunity to be heard and by refusing to issue a final adjudication upon which Einstein may appeal, leaving Einstein with no remedy. (Petition, ¶46.)

On March 13, 2009, Einstein filed its Petition. In Count I, Einstein seeks a writ of mandamus ordering the Department to either (a) enter a final adjudication based upon Einstein's submissions or (b) assign a date for a hearing so that the merits of Einstein's claims can be finally adjudicated. (Petition, ¶¶47-50.) Alternatively, in Count II, Einstein requests a declaratory judgment, declaring that the Secretary's February 17, 2009, letter constitutes a final adjudication for purposes of appeal and granting Einstein thirty days to file an appeal from that adjudication. (Petition, ¶¶51-55.)

The Department has filed preliminary objections in the nature of a demurrer, asserting that: (1) Einstein previously participated in and completed the reconciliation process for the 2001-2002 and 2002-2003 school years; (2) Einstein already pursued, through the reconciliation process, any and all rights Einstein had against school districts for the payment of funds pursuant to the CSL; (3) Einstein is seeking a second opportunity to go through an administrative process that already has been completed; and (4) Einstein's provision of compensatory education does not allow Einstein to reopen the reconciliation process to receive additional funds from the school districts. (Preliminary objections, ¶33.) The Department alleges that because Einstein has been provided with all of its due process rights and now has no rights that need to be remedied, it cannot state a claim for a writ of mandamus or declaratory judgment. (Preliminary objections, ¶¶34-55, 56-63.) Einstein filed an answer, and the preliminary objections are now before us for disposition.*fn8

Initially, we point out that the Department's preliminary objections, as well as the supporting arguments in its brief, focus on the merits of Einstein's underlying right to the claimed reimbursement for compensatory special education services rather than whether the Secretary's letter constitutes an adjudication or whether mandamus is appropriate. However, the only issue raised in Einstein's Petition is its claimed right to an order directing the Secretary to adjudicate the merits or, alternatively, an order recognizing that the Secretary already has rendered such an adjudication. Thus, the facts and legal conclusions relating to whether Einstein ultimately is entitled to reimbursement are not properly before us at this stage of the proceedings.

1) Writ of Mandamus

Mandamus is an extraordinary writ which will issue to compel the performance of a ministerial act or mandatory duty. Antonini v. Western Beaver Area School District, 874 A.2d 679 (Pa. Cmwlth. 2005). In order to prevail in a mandamus action, the petitioner must demonstrate: a clear legal right in the petitioner for performance of a ministerial act or mandatory duty; a corresponding duty in the respondent to ...

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