[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.




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       {¶ 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


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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).


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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


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       {¶ 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.


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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




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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.




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