Opinion ID: 2774027
Heading Depth: 2
Heading Rank: 3

Heading: Attorney's Fees under Section 15-77-300

Text: Appellant argues the trial court erred in awarding attorney's fees under section 15-77-300 of the South Carolina Code. Section 15-77-300 provides, in relevant part: (A) In any civil action brought by the State, any political subdivision of the State or any party who is contesting state action . . . the court may allow the prevailing party to recover reasonable attorney's fees to be taxed as court costs against the appropriate agency if: 10 The dissent cites Timmons, apparently for the proposition that special damages are not appropriate here. The dissent's view is at odds with Timmons, however, as Timmons permitted a special damages award for the same reason we allow them here—because the record indicates that Appellant was aware of the damages that would be occasioned by a breach of contract. See 310 S.C. at 253, 423 S.E.2d at 253 (finding special damages appropriate because the record below indicates that [the defendant] was aware of the need for fill dirt and aware of the probable damage that would result from a time delay prior to her signing the contract). (1) the court finds that the agency acted without substantial justification in pressing its claim against the party; and (2) the court finds that there are no special circumstances that would make the award of attorney's fees unjust. (Emphasis added). The decision to award or deny attorney's fees under the state action statute will not be disturbed on appeal absent an abuse of discretion by the trial court in considering the applicable factors set forth by the statute. Layman v. State, 376 S.C. 434, 444, 658 S.E.2d 320, 325 (2008) (citation omitted). An abuse of discretion occurs when the conclusions of the trial court are either controlled by an error of law or are based on unsupported factual conclusions. Id. (citing Zabinski v. Bright Acres Assocs., 346 S.C. 580, 601, 553 S.E.2d 110, 121 (2001)).
Appellant argues that McNaughton's request for attorney's fees does not satisfy the factors of section 15-77-300 for three reasons. First, Appellant contends that as a charter school, it is not a state actor, and thus, there has been no state action to trigger application of the statute. We disagree. Section 59-40-40(2)(a) of the South Carolina Code provides that a charter school is, for purposes of state law and the state constitution, considered a public school and part of the South Carolina Public Charter School District, the local school district in which it is located, or is sponsored by a public or independent institution of higher learning. S.C. Code Ann. § 59-40-40(2)(a) (Supp. 2013). Section 59-17-10 of the South Carolina Code provides, in part, that “[e]very school district is and shall be a body politic and corporate . . . of . . . the State of South Carolina.” S.C. Code Ann. 59-17-10 (Supp. 2013); Camp v. Sarratt, 291 S.C. 480, 481, 354 S.E.2d 390, 391 (1987). In its order awarding attorney's fees, the trial court found that under section 59-40-40(2), when read together with sections 5940-40(1)11 and 59-40-50,12 a charter school is considered a state entity and is 11 Section 59-40-40(1) provides: A 'charter school' means a public, nonreligious, nonhome-based, nonprofit corporation forming a school that operates by sponsorship subject to the provisions of section 15-77-300. We agree with the trial court's conclusion. At trial, the principal testified that Appellant is funded by revenue received from the Charleston County School District. In addition, Appellant conceded that it is part of the public school system. Nevertheless, in its brief, Appellant set forth a list of reasons why it is not a state actor subject to section 15-77-300. For example, Appellant contends that as an independent entity [which] is not supervised by anyone—including the state or the school district, it stands alone and is governed only by its board of directors. Further, Appellant asserts that it does not have the authority to perform governmental functions such as taxing citizens to raise revenue or exercising the power of eminent domain, but that instead, it is simply a non-profit corporation formed for the benefit of the public. Contrary to Appellant's suggestion, state actors need not perform all possible governmental functions. Rather, Appellant is a state actor because it is classified of a public school district, the South Carolina Public Charter School District, or a public or independent institution of higher learning, but is accountable to the board of trustees, or in the case of technical colleges, the area commission, of the sponsor which grants its charter. Nothing in this chapter prohibits charter schools from offering virtual services pursuant to state law and subsequent regulations defining virtual schools. 12 Section 59-40-50(B)(4) states that a charter school must: be considered a school district for purposes of tort liability under South Carolina law, except that the tort immunity does not include acts of intentional or wilful racial discrimination by the governing body or employees of the charter school. Employees of charter schools must be relieved of personal liability for any tort or contract related to their school to the same extent that employees of traditional public schools in their school district or, in the case of the South Carolina Public Charter School District or a public or independent institution of higher learning sponsor, the local school district in which the charter school is located are relieved . . . . S.C. Code Ann. § 59-40-50(B)(4) (Supp. 2013). as a public school; is funded by state money; and created by virtue of state law in furtherance of the state's duty to provide public education pursuant to Article XI, section 3 of the South Carolina Constitution. See S.C. Const. art. XI, § 3; S.C. Code Ann. § 59-40-40(1). Charter schools such as Appellant would cease to exist but for the public funding which they receive. Accordingly, we hold that charter schools organized under Title 59, Chapter 40 of the South Carolina Code may be subject to attorney's fees awarded for state action under section 15-77-300.
Section 15-77-300(B)(1) requires that a court awarding attorney's fees under that section must find that the state actor acted without substantial justification in pressing its claim against the party requesting attorney's fees. Appellant argues that it did not lack substantial justification in defending McNaughton's breach of contract claim, and therefore, the trial court erred in awarding McNaughton attorney's fees. To find that a party acted without substantial justification in pressing its claim, the party must have been justified to a degree that could satisfy a reasonable person. Heath v. Cnty. of Aiken, 302 S.C. 178, 183, 394 S.E.2d 709, 712 (1990). Action supported by substantial justification has a reasonable basis in law and fact. McDowell v. S.C. Dept. of Soc. Servs., 304 S.C. 539, 542, 405 S.E.2d 830, 832 (1991). Also relevant to the substantial justification consideration is the outcome of the matter eventually litigated. Layman, 376 S.C. at 448, 658 S.E.2d at 327; Heath, 302 S.C. at 184, 394 S.E.2d at 712. In its order, the trial court concluded that [a]fter listening to the testimony presented during the case, the arguments of counsel, the evidence presented, and considering the jury's findings, Appellant was not substantially justified in pursuing its defense against McNaughton as there was no reasonable basis in law or fact on which to defend [McNaughton's] breach of contract claim. We find no abuse of discretion in the trial court's finding that Appellant lacked substantial justification under section 15-77-300(B)(1). See Layman, 376 S.C. at 444, 658 at 325.
Appellant also argues that special circumstances exist rendering the award of attorney's fees unjust. See S.C. Code Ann. § 15-77-300(B)(2). In particular, Appellant relies on the fact that the principal solicited legal advice before terminating McNaughton's employment to ensure that the existence of the contingency clause in her employment agreement did not have legal significance. Appellant also cites the contingency clause itself, its students' math scores, and the letter of recommendation provided to McNaughton as special circumstances making attorney's fees unjust. Appellant contends that because its decision to terminate McNaughton's employment was made in good faith and in pursuit of its students' best interests, the trial court should not have awarded attorney's fees. The trial court rejected these arguments, and found that no special circumstances existed to make an award of attorney's fees unjust in this case. We find the trial court did not abuse its discretion in making this finding, but instead, carefully considered and applied each of the applicable factors in the statute. See Layman, 376 S.C. at 444, 658 S.E.2d at 325. Accordingly, we affirm the trial court's decision to award McNaughton's attorney's fees under section 15-77-300.
Finally, Appellant contends that section 59-40-50(A) of the South Carolina Code exempts charter schools from liability under section 15-77-300, and because Appellant did not elect to be covered by the statute, the trial court erred in awarding attorney's fees. We disagree. Section 59-40-50(A) provides: (A) Except as otherwise provided in this chapter, a charter school is exempt from all provisions of law and regulations applicable to a public school, a school board, or a district, although a charter school may elect to comply with one or more of these provisions of law or regulations. S.C. Code Ann. § 59-40-50(A) (Supp. 2013). According to Appellant, because section 15-77-300 is not specifically listed in Section 59, Chapter 40 as one of the laws or regulations that applies to charter schools, Appellant cannot be held liable for attorney's fees under that section. We disagree. The purpose of 59-40-50(A) is to distinguish between charter schools and other public schools, school boards, or school districts by providing charter schools with more flexibility in their operations. While section 15-77-300 is generally applicable to public schools, school boards, or districts, the provision also covers other state actors and political subdivisions of the State. In other words, the provision was not enacted especially for public schools, school boards, or school districts, and is not a provision that a charter school may opt out of merely because of its charter school status as opposed to a traditional public school. Therefore, the exemption in section 59-40-50(A) does not cover section 15-77-300, and we hold that a court may find a charter school liable for attorney's fees under section 15-77300.