Board Says Paying Judgment Could Close Schools

BERLIN – Worcester County public schools officials last week were successful, albeit briefly, in avoiding paying a $1.1 million award lost to a private contractor in a civil suit over a dispute about work done at the new Ocean City Elementary School after convincing the state’s Court of Special Appeals making the payments while the case is in appeal could cause “irreparable harm” to the school system and might cease operations and instruction.

Two weeks ago, a visiting Worcester County Circuit Court judge rejected an effort by the Worcester County Board of Education to avoid paying the $1.1 million settlement awarded to Beka Industries, Inc. at the conclusion of a civil trial in October, ruling the defendant must begin paying the plaintiff despite the ongoing appeal in the case. Last week, after Beka filed writs of garnishment on several school board accounts in local banks from which the settlement might be paid, the Court of Special Appeals temporarily stayed the enforcement of the judgment until Beka attorneys have the opportunity to respond to the motion.

School board attorney James Almand filed the motion to stay enforcement of the judgment owed to Beka after the plaintiff’s attorneys filed paperwork to begin garnishing Board of Education accounts with PNC Bank and Taylor Bank, accounts from which salaries, utilities, purchases of instructional materials, etc. are paid. Almand argued in his motion to the Court of Special Appeals raiding the school board’s bank accounts could ultimately close the schools by absorbing the financial resources they need to stay up and running.

“Irreparable harm will result if the Board is required to use funds in its general accounts to fund the judgment,” the motion reads. “The Board genuinely fears that should this court deny the requested relief in the form of a stay of enforcement pending appeal, the citizens of Worcester County may well risk a cessation of instructional activities in its public schools since one potential source of funds which the plaintiff, without this court’s intervention, may seek to seize is the board’s teacher and staff payroll accounts.”

The Worcester County Board of Education in 2004 hired Beka Industries to complete various components of the site work for the new Ocean City Elementary school including grading, sediment and erosion control, water and sewer line installation and, ultimately, demolition of the existing school. In August 2005, the school board allegedly became unsatisfied with the pace of the work being done by Beka and replaced the company with another contractor to finish certain components within the scope of the $1.8 million contract.

Last October, Beka filed a breach of contract lawsuit against the Board of Education seeking repayment for the entire amount it estimated it was due for its work on OCES. The amount of the original contract was $1.8 million and the school board had paid the contractor around $1.4 million.

Because of a complicated string of contested change orders within the scope of the project, Beka Industries was seeking around $1.3 million in the lawsuit. On Oct. 9, Karwacki ruled in favor of Beka and against the school board, awarding the contractor $1.1 million after a protracted four-day trial in Circuit Court.

Two weeks later, school board attorney James Almand officially filed an appeal in the case with the state’s Court of Special Appeals after getting a unanimous endorsement from the seven-member Board of Education. Last month, the school board filed a motion to stay the enforcement of the judgment until the appeal ran its course, but Karwacki denied the motion, essentially allowing Beka to explore ways to begin collecting the $1.1 million settlement.

Beka attorneys then urged the school board to take out a bond for the $1.1 million settlement to ensure the money will be in place when a decision on the appeal is rendered, but school board officials argued the unique nature of the Board of Education’s revenue sources prevented it from securing a bond, claiming “sovereign immunity.” Because the school board receives all of its money from federal, state and county sources, and because it has no ability to levy taxes or raise money on its own, it is incapable of securing such a bond.

Beka attorneys then began to explore other sources for the $1.1 million settlement the company is owed in the case by filing writs of garnishment on the school board’s bank accounts. Last week, Almand appealed to the Court of Special Appeals for relief, citing the potential harm to the public school system if the plaintiff began collecting the settlement by garnishing the various accounts.

“If the Board is unable to obtain a bond, or if the acquisition of the bond takes a significant amount of time, then Beka would continue to garnish sources of funds dedicated to the purchase of textbooks, other instructional materials, school maintenance and utilities, free and reduced meals for students and even teacher salaries,” the motion reads.

“It would, therefore, not serve the interest of justice, much less the citizens of Worcester County, to risk shutting down the operations of the public schools in order to satisfy a verdict against a county Board of Education that is presently on appeal in this court,” the motion continues.

In a separate filing, Beka filed a notice of deposition for a corporate designee for the Board of Education that can testify about the school board’s assets including bank accounts, real property, investment accounts, vehicles such as school buses, and even computers and other equipment. Almand argued in his motion the plaintiff could effectively shut the schools down if it attempted to garnish their assets for the settlement.

“Additionally, by seeking information about the Board’s real property, vehicles, computers and other instructional-based items, Beka seeks to stop instruction in Worcester County,” the motion reads. “In short, left unimpeded, Beka might be in a position to close Worcester County schools, thereby jeopardizing the education of over 6,700 students whose absence from school due to an absence of available funds to continue paying its faculty and staff will in turn violate federal and state laws governing compulsory education.”

Finally, the school board argued in its motion to stay the enforcement of the judgment the funds it receives from federal, state and county sources are earmarked for education purposes and using them to pay a settlement could cause them to disappear or be curtailed in the future.

“Misappropriation of those funds to fund a judgment could result in the termination of federal and state funding sources,” the motion reads. “This would have a tangible detrimental affect on compulsory public education in Worcester County.”

Based on the information in the school board’s motion, the Court of Special Appeals last week agreed to stay the enforcement of the judgment owed to Beka, but only for a short time. The plaintiff has the opportunity to respond to the motion, which could come as early as next week.

“The Court of Special Appeals is persuaded that the motion to stay enforcement should be granted only until the appellee (Beka) has an opportunity to respond to the motion and this court has opportunity to review that response,” the opinion authored by Chief Judge Peter B. Krauser reads. “Enforcement is stayed until December 15 when the appellee shows in writing why the Board’s motion to stay should be denied in whole or in part.”

Beka attorney David Gilliss said this week he is preparing a response to the motion on behalf of Beka, which will seek to overturn the high court’s decision on the stay of enforcement.

“The Court of Special Appeals has, on a temporary basis, ruled Beka cannot begin collecting the settlement until we respond to the school board’s motion, which will happen next week,” he said. “We’re confident the court will reverse its decision when it hears our response. The circuit court has already heard and denied this motion.”

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