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Partner Terry Moore quoted in Minnesota Lawyer article

01.20.14

Provider may pursue payment

A company that offers student day treatment programs may pursue in District Court more than $2 million it claims four large Twin Cities school districts have not paid for services rendered, the Court of Appeals held Jan. 13.

The panel remanded the case to Ramsey County District Court for litigation over breach-of-contract claims brought by Lifespan of Minnesota Inc. against Minneapolis Public Schools, St. Paul Public Schools, Rosemount-Apple Valley-Eagan Public Schools and Anoka-Hennepin School District, which had ended their partnership with the company.

The panel’s opinion reversed the District Court’s dismissal of Lifespan’s breach-of-contract claims. The District Court dismissed those claims because it concluded that they involved “quasi-judicial” decisions by the school districts regarding their relationship with Lifespan. District Courts lack jurisdiction over quasi-judicial decisions, which would leave a writ of certiorari to the Court of Appeals as Lifespan’s only means of recourse.

The Court of Appeals panel, however, disagreed, finding Lifespan’s claims that the districts had failed to pay for services the company already had rendered amounted to “ordinary breach-of-contract claims” over which the District Court does have jurisdiction.

“This aspect of Lifespan’s suits challenges only the districts’ failure to perform by payment, not their decisions about how to educate their students,” Judge Kevin Ross wrote in a 14-page opinion decided with Judge Jill Flaskamp Halbrooks and retired Judge Gary Crippen. “Resolving Lifespan’s contract claims in this regard would involve no second-guessing of the school districts’ policy decisions or their decision-making processes. The only issues are whether contracts existed – a fact conceded by the districts – and whether the districts breached their payment duties under them.”

The plaintiff’s attorney said they were “thrilled” with the decision.

Terrance Moore, Lifespan’s legal counsel said in an e-mail, “… Lifespan has served the needs of children from these four school districts and over the past 1.5 years these districts have refused to pay my client for the educational services it provided for them. These children were in dire need — they were in crisis and suffering and came to Lifespan for help.

“Our aim with this suit is to collect the overdue payments for the education service provided to the children from these four school districts.  We also hope that through the suit, great clarity will also result on a strong working model whereby organizations like Lifespan and the school districts work together seamlessly for the greater good of the children who are suffering.”

But the Court of Appeals  rejected the implication in Lifespan’s complaints that “the districts are somehow prohibited from ending the Lifespan-district education partnerships” because the company continued to provide treatment services. That aspect of Lifespan’s contract claims “challenges the school districts’ reasoning, their interpretation of statutes and their ultimate decisions on who will educate their students,” Ross wrote. “Resolving these issues would require delving into the districts’ decision-making.”

Attorney Cindy Lavorato, who represented the districts with attorney Laura Tubbs Booth, said the decision would give districts “a great ability to feel comfortable exercising their discretion in their roles as educators and to understand that the court will only interfere in limited circumstances.

“What this opinion very clearly says is when school districts are exercising that kind of discretion in terms of how to provide educational services to their students, they’re the bodies that are entitled to make those decisions and courts are not going to interfere with discretionary decisions of this type for the specific reason that it’s the schools that are entrusted with that duty and the schools that have the expertise to make those decisions,”  Lavorato said.

Before the dispute, Lifespan offered psychotherapy and basic education services to district students attending its Youth Transition program, which has locations in Burnsville and Shoreview, with districts paying for those academic services.

District concerns arose when Lifespan began employing its own general and special education teachers, after the company’s June 2011 split with the intermediate school district that had coordinated its education services.

District special education directors allegedly questioned whether Lifespan was complying with state and federal regulations, because it is not subject to Minnesota Department of Education oversight. They also claimed that their districts could provide the same educational services more efficiently and economically.

As a result, each district informed Lifespan that it would no longer reimburse the company for educational costs. Lifespan, however, continued to provide educational services and sent bills that the districts refused to pay.

Standoff over students

The dispute led to a standoff on the first day of school in the fall of 2011 in which the St. Paul district sent buses to remove its students from Lifespan’s campus to transport them to another site where the district would instruct them. “But Lifespan staff refused to allow the children to board the buses, which left empty,” the opinion noted.

Lifespan filed complaints alleging that the districts had breached their contracts by refusing to pay for educational services. The districts moved to dismiss on jurisdictional grounds, claiming that Lifespan could seek review of their decisions only by filing a writ of certiorari in the Court of Appeals.

The District Court dismissed all of Lifespan’s claims with prejudice for lack of jurisdiction because it deemed those claims to challenge the school districts’ “quasi-judicial” decisions.

The Court of Appeals agreed, and cited caselaw in applying to the decisions of school districts the same framework that applies to challenges of municipal decisions. That is, if a municipal decision is legislative, a party can sue in District Court. If the decision is quasi-judicial, the District Court lacks jurisdiction and a proper challenge begins with a writ of certiorari to the Court of Appeals.

“This distinction respects the constitutional separation of powers,” the opinion stated. “Certiorari is faster and less intrusive than de novo review and therefore more appropriate when courts are asked to analyze quasi-judicial municipal decisions. Municipal bodies exercise executive power, and the limits of certiorari review prevent the judiciary from impermissibly encroaching on those powers.”

The opinion cited the Minnesota Supreme Court’s “three indicia of quasi-judicial actions” to help distinguish quasi-judicial decisions from legislative ones: investigation into a disputed claim and weighing of evidentiary facts; application of those facts to prescribed standard; and a binding decision regarding the disputed claim. “If any of these elements is absent, the decision is not quasi-judicial and much be challenged in the District Court,” the appellate court’s opinion stated.

Originally published by Minnesota Lawyer on Thursday, January 16, 2014, By Todd Nelson.