Opinion ID: 2633588
Heading Depth: 1
Heading Rank: 7

Heading: May charter schools and their operators be sued under the CFCA?

Text: Though we have disagreed with the Court of Appeal about whether the district defendants are persons subject to CFCA actions, we have little difficulty upholding the Court of Appeal's determination that the charter school defendants are persons who may be liable under the CFCA. [22] The CFCA expressly defines persons to include corporations and limited liability companies, as well as, among other things, organizations and associations. (Gov.Code, § 12650, subd. (b)(5).) The statute includes no exemption, either in the definitional section or elsewhere, for corporations organized under the Nonprofit Public Benefit Corporation Law (Corp.Code, § 5110), or for corporations, limited liability companies, organizations, or associations that operate charter schools under the CSA. The instant complaint alleges, and apparently there is no dispute, that defendants One2One, CSRA, Sierra Summit Academy, and Camptonville Academy are corporations. Moreover, Mattole Valley School, though apparently not itself a corporation, is alleged to be operated by corporations, and is certainly an organization within the meaning of the statutory definition. Nonetheless, the charter school defendants insist that, by virtue of the CSA, they are entitled to any public entity immunity enjoyed by their chartering districts. The charter school defendants point to various declarations in the CSA that charter schools are part of the Public School System as defined in [a]rticle IX of the California Constitution (Ed.Code, § 47615, subd. (a)(1)), [23] are under the jurisdiction of the Public School System and the exclusive control of the officers of the public schools ( id., subd. a)(2)), and, for specified purposes of funding, are deemed to be . . . `school district[s]' ( id., § 47612, subd. (c); see also id., § 47650). [24] We are not persuaded. Though charter schools are deemed part of the system of public schools for purposes of academics and state funding eligibility, and are subject to some oversight by public school officials (see Wilson, supra, 75 Cal.App.4th 1125, 1136-1142, 89 Cal.Rptr.2d 745), they are operated, not by the public school system, but by distinct outside entitiesincluding nonprofit public benefit corporations with independent legal identities (see Ed.Code, § 47604, subd. (a); Corp.Code, §§ 5000 et seq., 5110 et seq.)that are given substantial freedom to achieve academic results free of interference by the public educational bureaucracy. The sole relationship between a charter school operator and the chartering district is through the charter governing the school's operation. Except in specified respects, charter schools and their operators are exempt from the laws governing school districts. (Ed.Code, § 47610.) The autonomy, and independent responsibility, of charter school operators extend, in considerable degree, to financial matters. Thus, where a charter school is operated by a nonprofit public benefit corporation, the chartering authority is not liable for the school's debts and obligations. ( Id., § 47604, subd. (c).) A 2003 amendment to the CSA makes clear that the chartering authority's immunity from financial liability for a charter school extends to claims arising from the performance of acts, errors, or omissions by the . . . school, if the authority has complied with all oversight responsibilities required by law. ( Ibid. ) The CFCA was designed to help the government recover public funds of which it was defrauded by outside entities with which it deals. There can be little doubt the CFCA applies generally to nongovernmental entities that contract with state and local governments to provide services on their behalf. The statutory purpose is equally served by applying the CFCA to the independent corporations, organizations, and associations that receive public monies under the CSA to operate schools on behalf of the public education system. On the other hand, we conclude, the sovereign power over public education is not infringed by application of the CFCA, including its treble-damages-plus-penalties provisions, to independent charter school operators. As we have seen, public school districts are the entities fundamentally responsible for operating the system of free public education required by the Constitution. The districts' continuing financial ability to carry out this mission at basic levels of adequacy is thus critical to satisfying the state's free public school obligation. (See Butt, supra, 4 Cal.4th 668, 678-692, 15 Cal.Rptr.2d 480, 842 P.2d 1240.) Accordingly, we have concluded that the Legislature did not intend to undermine this sovereign obligation by exposing public school districts to the harsh monetary sanctions of the CFCA. But the CSA assigns no similar sovereign significance to charter schools or their operators. Under that statute, the term of a charter cannot exceed five years, subject to renewal. (Ed.Code, § 47607, subd. (a)(1).) The grant and renewal of charters are dependent upon satisfaction of statutory requirements, including attainment of specific educational goals. ( Id., subds. (b), (c); see also id., § 47605.) A charter may be revoked for material violations of the law or charter, failure to meet pupil achievement goals, or fiscal mismanagement. ( Id., § 47607, subd.(d).) If a charter school ceases to exist, its pupils are reabsorbed into the district's mainstream public schools, and the ADA revenues previously allotted to the charter school for those pupils revert to the district. The CSA was adopted to widen the range of educational choices available within the public school system. That is a salutary policy. Yet application of the CFCA's monetary remedies, however harsh, to a particular charter school or its operator presents no fundamental threat to maintenance, within the affected district, of basically adequate free public educational services. Thus, application of the CFCA to charter school operators cannot be said to infringe the exercise of the sovereign power over public education. This being so, there is no reason to conclude that the charter school defendants are not persons within the definition expressly set forth in the CFCA. In our view, they are such persons, and they may be held liable under the terms of that statute if they submit false claims for state or district educational funds. [25]