Court Opinion

ID: 9702041
Source: CourtListenerOpinion
Date Created: 2023-08-25 22:51:26.193062+00
Date Added: 2024-06-11T18:21:32.999655
License: Public Domain

DISSENTING OPINION BY
Judge SMITH-RIBNER.
I respectfully dissent from the decision of the majority to affirm the September 4, 2007 order of the Delaware County Court of Common Pleas. The trial court determined that the Chester-Upland School District (School District) and Chester-Upland School District Empowerment Board of Control (Empowerment Board) lacked authority under the Education Empowerment Act,1 24 P.S. §§ 17-1701-B -17-1716-B, to impose enrollment caps on the number of students enrolled in charter *117schools being operated in the School District. The trial court granted summary judgment to the charter schools and denied summary judgment to the School District and the Empowerment Board, and it held that the Empowerment Board’s Enrollment Resolution approved April 26, 2007 (amended July 19, 2007) violates the Charter School Law,2 24 P.S. §§ 17-1701-A - 17-1751-A, and therefore is illegal and unenforceable.
First, I disagree with the majority’s conclusion that the trial court had subject matter jurisdiction over this litigation because the Department of Education and the Secretary of Education (hereafter, Department/Secretary/Appellants) were indispensable to the litigation, yet they were not named as parties to the trial court proceedings. Second, on the merits, I disagree with the conclusion that the charter issued to the charter schools is not a contract but instead is more akin to a grant of power that allows the charter school board of directors to establish a school to provide public education. Based on this assumption, the majority holds that the Empowerment Board lacked authority under Section 693(1) of the Public School Code of 1949, added by Section 2 of the Act of December 15, 1959, P.L. 1842, 24 P.S. § 6-693(1), to limit charter school enrollment and so affirms the order of the trial court. The majority cites no statutory or case law authority for its conclusions, nor does it recognize that its holding sanctions the potential for charter school enrollment to reach a level that effectively reduces to zero the number of students attending the public schools operated by the School District, which might result in a forced shutdown of an entire public school system.
I
The trial court lacked subject matter jurisdiction because the plaintiffs below faded to join the Department and the Secretary as indispensable parties in their declaratory judgment action. In Delaware County v. J.P. Morgan Chase & Co., 827 A.2d 594 (Pa.Cmwlth.2003), the Court explained the criteria to be used for determining when an absent party is indispensable to an action. Courts should decide whether the absent parties have a right or interest related to the claim; if so, what is the nature of the right or interest of the absent parties; whether the right or interest is essential to the merits of the issue before the court; and whether justice can be afforded without violating the due process rights of the absent parties. Also see Polydyne, Inc. v. City of Philadelphia, 795 A.2d 495 (Pa.Cmwlth.2002). Moreover, in Village Charter School v. Chester Upland School District, 813 A.2d 20, 26 (Pa. Cmwlth.2002), cited by Appellants, the Court observed that “the Commonwealth party may be declared an indispensable party if meaningful relief cannot conceivably be afforded without the Commonwealth party’s direct involvement in the action.”
On October 16, 2006, former Commonwealth Court President Judge Colins granted a request made by the Department in the case then captioned Commonwealth, Department of Education v. Chester-Upland School District, Special Board of Control (Pa.Cmwlth., No. 496 M.D. 2005, filed October 16, 2006), to appoint a Receiver Pendente Lite for the School District because of its “shocking conditions” that required direct and immediate action by the Court. Judge Colins named Secretary of Education Gerald L. Zahorchak as Receiver Pendente Lite to have full power and authority to “monitor, assess, and re*118port to the Court on the financial condition of the District to ensure that the District’s revenues and expenditures are kept in balance during the fiscal year 2006-2007 and all future fiscal years during which this Order or any subsequent Order, Decree, or Judgment entered in this matter and providing for the appointment of a Receiver for the District might be in effect.” Id. at 48. The Special Board of Control, which was appointed to manage and control the School District after it was declared financially distressed in 1994, appealed to the Pennsylvania Supreme Court.
On March 8, 2007, the Department issued a Declaration regarding the re-establishment of a sound financial structure in the School District, which had the effect of dissolving the Special Board of Control in place at that time and ending its control over the School District. The Department established the Empowerment Board pursuant to the Education Empowerment Act to maintain the administration and fiscal affairs of the School District, and the Empowerment Board replaced the Special Board of Control. Ousted Special Board of Control members appealed their removal to the Supreme Court. On April 16, 2007, Judge Colins entered an order granting a request from the Department to substitute the Empowerment Board for the Special Board of Control as respondents in the appeal. By opinion and order of December 27, 2007 in Department of Education v. Empowerment Board of Control of Chester-Upland School District, — Pa. -, 938 A.2d 1000 (2007), the Supreme Court affirmed the substitution order along with an April 17, 2007 order approving a settlement between the Department and the Empowerment Board. The Special Board of Control was no longer a party to any appeals as it had been properly substituted.
In reaching its determination in Empowerment Board of Control that the Special Board of Control had been properly substituted, the Supreme Court elaborated on the power and duty of the Department “[t]o administer all of the laws of this Commonwealth with regard to the establishment, maintenance, and conduct of the public schools.... ” Section 1302(a) of The Administrative Code of 1929,3 71 P.S. § 352(a). The Supreme Court found no ambiguity in the legislative intent with regard to the Secretary, stating that under the scheme set forth in Sections 691 and 692 of the Public School Code, added by Section 2 of the Act of December 15, 1959, P.L. 1842, 24 P.S. §§ 6-691 and 6-692, the Legislature clearly gave the Secretary almost sole discretion and control over the financial distress process and that the Secretary retains primary control over this process.
In deferring to the Department’s interpretation of the financial distress statutes, the Supreme Court concluded that in view of the fact that the Department administers the Public School Code and the broad discretion granted the Secretary under those statutes, the Department had authority to make the Declaration under Section 692 and to dissolve the Special Board of Control. In his concurring opinion in Empowerment Board of Control Justice Baer highlighted the clear legislative intent to grant the Secretary broad discretion to identify and address nonfunctioning school districts as reflected in a statute that “depends so heavily for its effectuation on the Secretary’s judgment.” Id. at 1015.
*119The Supreme Court was explicit when it explained in Empowerment Board of Control the powers and duties of the Department and the Secretary. The discussion by the Supreme Court in that case and others compels a conclusion that their presence was indispensable to any final declaration by the trial court as to the validity of the enrollment caps and their impact upon the fiscal and academic condition of the School District. Appellants rightfully assert that no meaningful relief can be granted without participation of the Department and the Secretary in the trial court litigation when any future funding disputes between the charter schools and the School District will involve the Department, which must ensure that the charter schools receive funding,4 and when the Secretary as Receiver Pendente Lite must consider and approve payments to charter schools.
Unfortunately, the majority has concluded that the Department and the Secretary were not indispensable to the trial court litigation, and, because of this conclusion, it has erroneously resolved that the trial court had subject matter jurisdiction. The majority does not adequately explain why the trial court could grant effective relief in view of the facts that the Department is the agency that administers the Public School Code, which was most recently acknowledged by the Supreme Court on December 27, 2007; that the Department issued the Declaration to dissolve the Special Board of Control and established the Education Empowerment Board; that the Secretary acted as Receiver Pendente Lite with broad power and authority granted by this Court and broad discretion to take all necessary aetion to protect the integrity of the financial distress process and to identify and address deficiencies in the School District; and most importantly that the Department’s interpretation of the controlling financial distress statutes must be accorded deference by this Court, unless that interpretation is clearly erroneous. Consequently, meaningful relief could not be afforded without the presence and participation of the Department and the Secretary, and because they were not named as parties in the action before the trial court it lacked subject matter jurisdiction, and its order should be vacated.
II
(A)
Assuming arguendo that the trial court did have jurisdiction to decide the matter before it, I strongly disagree with the majority’s decision that a charter issued by the School District is not a contract and therefore that the Empowerment Board lacked authority to impose enrollment caps under Section 693(1) of the Public School Code. In Weavertown Transp. Leasing, Inc. v. Moran, 834 A.2d 1169, 1172 (Pa.Super.2003), cited by Appellants, the court held that “[a] contract is formed when the parties to it 1) reach a mutual understanding, 2) exchange consideration, and 3) delineate the terms of their bargain with sufficient clarity.” Appellants are correct that a charter represents a mutual understanding between the local school board and the charter school, citing Section 1720-A of the Charter School Law, 24 P.S. § 17-1720-A, and that the criteria for *120proving formation of a contract have been met.
Section 693(1) of the Public School Code grants the Empowerment Board authority “[t]o cancel or to renegotiate any contract other than teachers’ contracts to which the board or the school district is a party, if such cancellation or renegotiation of contract will effect needed economies in the operation of the district’s schools.” See also Section 1706-B(a) of the Education Empowerment Act, 24 P.S. § 17-1706-B(a).5 The majority notes the Department’s interpretation in its “Basic Education Circulars” that a charter is a contract, and it additionally notes Section 1720-A of the Charter School Law, which provides that the “written charter shall be legally binding on both the local board of school directors of a school district and the charter school’s board of trustees.” Yet, the majority glosses over relevant statutory provisions and the Department’s interpretation and instead cites provisions from the Charter School Law to announce the following:
[T]he relationship between a school district and a charter school is not contractual, but regulatory.... [The written
charter] is more like the issuance of a regulatory permit where the state or local government must honor the terms of the permit unless breached by the party receiving the permit.... What a charter grants is not a contract that “outsources” public education, but the establishment of schools to provide students with a public education.
Majority opinion at 115.
A rational and logical interpretation, consistent with the Department’s position, is that a charter is a contract. While the Department’s interpretation is not binding on the Court, the Supreme Court signaled its clear intent in Empowerment Board of Control to defer to the Department’s interpretation of statutes, particularly where, as here, the Department is empowered to administer the statutes and where they grant broad discretion in the Secretary. The Court must do likewise and defer to the agency’s interpretation, especially in view of the fact that numerous other charter school laws or state court decisions interpreting those laws have defined a charter as a contract or specifically as a performance-based contract.6
*121(B)
The issue of whether a charter is a contract or, as the majority puts it, is akin to a license or part of some regulatory scheme has not been decided directly by the courts of this Commonwealth, but the issue is not new to numerous other jurisdictions where charter schools exist. Various charter school laws specifically refer to the “contract” between a charter school and local school board that allows the school to operate.7 In enacting its charter *122school law, the California legislature did not expressly define a charter as a contract or a performance-based contract as have other legislatures, but in Knapp v. Palisades Charter High School, 146 Cal. App.4th 708, 714, 53 Cal.Rptr.3d 182, 186 (2007), the court explained that under the Charter Schools Act of 1992, Cal. Educ. Code §§ 47600-47664, “[t]he charter establishing a charter school is a contract detailing the school’s educational programs, goals, students served, measurable pupil outcomes and measurement methods, and the school’s governance structure.... Charters are granted for a specific term, typically not in excess of five years. At the end of the term, the entity granting the charter may renew the school’s contract.” (Emphasis added.) (Citation omitted.)
California’s Charter Schools Act of 1992 was enacted for the identical purposes and with identical language used in the Charter School Law. In enacting the California law, the legislature intended “to provide opportunities for teachers, parents, pupils, and community members to establish and maintain schools that operate independently from the existing school district structure, as a method to accomplish all of the following: (a) Improve pupil learning. ...” Cal. Educ.Code § 47601. In enacting the Charter School Law, Pennsylvania’s legislature intended “to provide opportunities for teachers, parents, pupils and community members to establish and maintain schools that operate independently from the existing school district structure as a method to accomplish all of the following: (1) Improve pupil learning.” Section 1702-A, 24 P.S. § 17-1702-A (emphasis added). The majority should be guided by the Knapp court and other jurisdictions that have dealt with the precise issue before this Court, and it should also defer to the interpretation of the Department that a charter is a contract.
On this same issue, the majority again offers no support for the theory that a charter is more akin to “the issuance of a regulatory permit where the state or local government must honor the terms of the permit unless breached by the party receiving the permit.” Majority opinion at 115. Nowhere in the Charter School Law, the Education Empowerment Act or in any other statute or case law is there support for this theory. A permit generally is issued by a clerk acting pursuant to the lawful powers of a governmental entity, and the issuance of a license or a permit generally is considered to be a ministerial or administrative act. Breinig v. Allegheny County, 332 Pa. 474, 2 A.2d 842 (1938). Permits are not considered a contract with the entity that issues them. Id. The majority’s analogy simply lacks logic, especially when the Charter School Law makes it clear that the issuance of a charter involves a detailed and thorough process that far surpasses the performance of a ministerial or administrative act.
Finally, because the charter clearly is a contract issued by the School District, the Empowerment Board had full authority under Section 693(1) of the Public School Code to impose the enrollment caps that the trial court invalidated. The issue in Zager v. Chester Community Charter School, — Pa.-, 934 A.2d 1227 (2007), involved the failure of the chief executive officer of a charter school management corporation (Vahan Gureghian) to produce under the Right-to-Know Act, Act of June 21, 1957, P.L. 390, as amended, 65 P.S. §§ 66.1-66.9, an independent auditor’s report and financial statements and other records related to the Chester Community Charter School, one of the Appellees here. *123In holding that charter schools, as providers of public education, were subject to the Right-to-Know Act and that the requested records were subject to disclosure, the Supreme Court recognized the constitutional mandate under Article III, § 14 of the Pennsylvania Constitution, for the legislature to provide public education to serve the needs of the Commonwealth.
Citing the decision in Malone v. Hayden, 329 Pa. 213, 197 A. 344 (1938), the Supreme Court observed in Zager that the Pennsylvania Constitution recognizes that the cause of education is a distinct obligation of the state and that it makes that cause an indispensable governmental function. It is now settled that charter schools are distinctly “independent, nonprofit, public schools” created for the purpose of providing an essential governmental service and to provide another educational choice for parents and students. Zager. Charter schools were not created by the legislature, however, to supplant, replace or eliminate the public schools operated by school districts throughout this Commonwealth, nor were they created to cause potential for a shutdown or insolvency of an entire public school system due to the amount of taxpayer dollars diverted from the public schools and provided to the charter schools. The majority fails to comprehend this potential threat to the constitutional mandate for the Commonwealth to maintain a system of public education to serve the needs of its school-aged children.
As a result, if the entities authorized to implement and to administer the Public School Code and the financial distress statutes deem it necessary within their broad discretion and judgment to impose enrollment caps on charter schools to protect the financial health of the existing public school system, then, absent an abuse of discretion, this Court must defer to the judgment of those entities. Accordingly, I would vacate the trial court’s order invalidating the enrollment caps because the trial court lacked subject matter jurisdiction to decide the issue or alternatively I would reverse the trial court’s order because the Empowerment Board acted lawfully in imposing the caps.

. Article XVII-B of the Public School Code of 1949, Act of March 10, 1949, P.L. 30, as amended, added primarily by Section 8.1 of the Act of May 10, 2000, P.L. 44.

. Article XVII-A of the Public School Code, added by Section 1 of the Act of June 19, 1997, P.L. 225, and Section 14 of the Act of June 29, 2002, P.L. 524.

. Act of April 9, 1929, P.L. 177, as amended, added by Section 1 of the Act of May 15, 1945, P.L. 540.

. Section 1725-A(a)(5) of the Charter School Law, 24 P.S. § 17-1725-A(a)(5), requires that "[i]f a school district fails to make a payment to a charter school as prescribed in this clause, the secretary shall deduct the estimated amount, as documented by the charter school, from any and all State payments made to the district after receipt of documentation from the charter school.”

. Section 1706-B(a) of the Education Empowerment Act provides:
(a) Except for the power to levy taxes, the board of control may exercise all other powers and duties conferred by law on the board of school directors and the powers and duties conferred by law on a special board of control under sections 693, 694 and 695. In addition to the powers set forth in section 1704-B(a), the board of control shall have the power to close a district school.

. Appellants correctly maintain that the legislative history of the Charter School Law demonstrates that the legislature never intended for charter schools to jeopardize the financial health of school districts throughout the Commonwealth and that the trial court’s decision could produce the unintended consequence of unchecked growth in charter school enrollment to the detriment of School District operations. Appellants note that the Education Empowerment Act explicitly addresses the Empowerment Board’s authority while the Charter School Law is silent on enrollment caps, and because the statutes relate to the same subject matter they should both.be given effect. Appellants also are correct in pointing out that the rules of statutory construction require that specific provisions of the Education Empowerment Act and fiscal distress statutes should prevail over general provisions in the Charter School Law. They cite Department of Transportation, Bureau of Driver Licensing v. Campbell, 138 Pa.Cmwlth. 337, 342, 588 A.2d 75, 78 (1991), where the Court held that "where two statutes appear to conflict, effect should be given to both if possible.” This rule applies where statutes relate to the same subject and are considered to be in pari materia. 1 Pa.C.S. § 1932.

. Various other states’ statutes or case law define a charter as a contract or performance-based contract, with application procedures and educational outcomes the same as or similar to those provided in the Charter School Law. See (1) Alaska Stat. §§ 14.03.250- 14.03.290, setting forth the application procedures and the essential elements for the contract, including, inter alia, educational requirements, statement of funding allocation from the local school board and costs assignable to the program budget, location and description of charter school facility, teacher-to-student ratio, number of students to be served, contract term and termination clause providing that contract may be terminated by the local school board if the charter school fails to meet the educational achievement goals or fiscal management standards; (2) Ariz.Rev.Stat. Ann. §§ 15-181 -15-189.03, setting forth the application procedures and providing that a charter school is a public school established by contract with a district governing board, state board of education or state board for charter schools; see also Shelby School v. Arizona State Board of Education, 192 Ariz. 156, 962 P.2d 230 (Ct.App.1998) (recognizing that legislature authorized charter schools to provide learning environment that will improve pupil achievement and to provide additional academic choices for parents and students); (3) The Arkansas Charter Schools Act of 1999, Ark.Code Ann. §§ 6-23-101-6-23-601, defining a “charter" in § 6-23-103(2) as "a performance-based contract for an initial five-year period between the State Board of Education and an approved applicant” that exempts the public charter school from state and local rules, regulations etc. specified in the contract; (4) Charter Schools Act of 1998, Ga.Code Ann. §§ 20-2-2060-20-2-2071, defines a charter as a performance-based contract between a local board and a charter petitioner and provides that by entering into a charter the "charter petitioner and local board shall be deemed to have agreed to be bound to all the provisions of this article as if such terms were set forth in the charter.” § 20-2-2062(1); (5) Charter Schools Law, 105 Ill. Comp. Stat. §§ 5/27A-1 - 5/27A-13, provides in 27A-6 that a "certified charter shall constitute a binding contract and agreement between the charter school and a local school board....” 105 Ill. Comp. Stat. 5/27A-6(a); (6) Under Md.Code Ann., Educ. §§ 9-101-9-110, charter schools are in the nature of semi-autonomous public schools that operate under contract with a state or local school board, and the contract, or charter, defines how the charter school will function, what programs it will offer and how it will account for its activities. Baltimore City Board of School Commissioners v. City Neighbors Charter School, 400 Md. 324, 929 A.2d 113 (2007); (7) Under Michigan charter schools legislation, Mich. Comp. Laws §§ 380.501 -380.507, charter schools are referred to as public school academies, and Section 380.501(2)(d) defines a contract as a written instrument executed by an authorizing body conferring rights, franchises, privileges and obligations on a public school academy and confirming the status of a public school academy as a public school in the state of Michigan; see also Council of Organizations & Others for Educ. About Parochiaid, Inc. v. Governor, 455 Mich. 557, 566 N.W.2d 208 (1997); (8) Miss.Code Ann. §§ 37-28-1 - 37-28-21 defines a charter as an academic or vocational, or both, performance-based contract between the state board of education, the school board of the local school district and a local school that exempts the school from rules, regulations, etc. of the state board of education'and the school district; (9) The court in In re Grant of Charter School Application of Englewood on Palisades Charter School, 320 N.J.Super. 174, 727 A.2d 15 (App.Div.1999), explained that under New Jersey’s Charter School Program Act of 1995, N.J. Stat. Ann. 18A:36A-1 - 18A:36A-18, a charter is a type of contractual agreement with the state whereby the charter school is freed from most state regulation in return for its commitment to increased standards of accountability; and (10) Under Va.Code Ann. §§ 22.1-212.5-22.1-212.16, an approved charter application shall constitute an agree*122ment, and its terms shall be the terms of a contract between the charter school and the local school board etc.