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75 Spruce Street, L.L.C. v. New Jersey State Board of Education

382 N.J. Super. 567, 889 A.2d 1144 (Law Div. 2005)

CONTRACTS; AGENCY—Charter schools are not agents of the State Board of Education and the State Board is not liable for the school’s contracts when the Board revokes the school’s charter.

A consultant and landlord of a charter school sued the State Board of Education for payment due under certain contracts with the trustees of the charter school. They claimed that the trustees were public agents for the State Board, and therefore the State Board was liable to pay the amounts due under the contracts. The State Board had given preliminary approval to a municipal charter school contingent on the school taking a year to plan, with the expectation that it would begin serving students the following year. The approval was also contingent on the charter school providing certain documentation. The school entered into a consulting contract with a consultant and entered into a triple-net lease with a landlord for space to house the school. The State Board then determined that the charter school had failed to meet its obligations to open and denied final approval of the charter. The consultant and landlord, in separate actions, sued the State Board. They claimed that, pursuant to the applicable charter school statute, the charter school trustees were public agents authorized by the State Board to supervise and control the charter school, and therefore the State Board was liable for the obligations of its agents. They also claimed that they had reasonably relied on the approved charter application.

The Court disagreed. It looked at the legislative intent of the charter school statute, which was to establish a corporate body with the powers necessary to carry out the charter programs. Included within the powers was the power to sue or be sued, acquire property, receive or disburse funds, make contracts, and incur temporary debts in anticipation of receiving funds. The Court interpreted the charter school statute as one that allowed creation of a governing body for charter schools which would then be responsible as public agents for that charter school. Therefore, the trustees of the charter school were public agents for the charter school but not for the State Board. The Court also rejected the consultant’s and landlord’s claims of reasonable reliance on the approved charter. It noted that each knew it was a conditional approval and they should have inquired as to the status of compliance with those conditions before entering into the contracts and providing the services. The Court also noted that the landlord should not have made improvements to the space without confirming that the charter school had available federal funds. In fact, the charter school statute specifically prohibits the construction or renovation of a facility with the use of public funds other than federal funds. Therefore, the landlord should have assured itself that federal funds were available before it began renovations for the charter school.

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