School Board On Clock To Secure Proof Of $1.1M

SNOW HILL – It was good news, bad news last week for the Worcester County Board of Education when the state’s Court of Special Appeals ruled it would not have to begin paying the $1.1 million settlement lost to a private contractor in a civil suit over a dispute about work done at the new Ocean City Elementary School until the pending appeal is exhausted, but the school board is now on the clock to get a bond in place to ensure the money will be there when the time comes.

Two weeks ago, the Court of Special Appeals granted a motion filed by Board of Education attorney James Almand to temporarily stay the enforcement of the judgment against the school board while the case is in appeal, citing the “irreparable harm” paying the $1.1 million might cause the public school system in Worcester County. Court of Special Appeals Judge Peter Krauser ruled the enforcement of the $1.1 million judgment should be stayed until attorneys for the plaintiff, Beka Industries, Inc., could file its formal response to Almand’s motion.

Beka attorney David Gilliss then filed his formal response to the school board’s motion to stay the enforcement of the judgment, and the appeals court judge made a further ruling on the motion last Friday. In his official order, Krauser ruled the enforcement of the judgment will be stayed throughout the length of the appeal if the school board secures a bond or a line of credit ensuring the money will be in place if and when Beka is successful in winning again on appeal.

“The motion to stay enforcement of judgment pending appeal is granted in part,” the judge’s order reads. “Enforcement of the judgment of the Circuit Court for Worcester County entered on October 9, 2008, awarding Beka Industries Inc. $1.1 million in monetary damages shall remain stayed pending the outcome of the appeal in this court, if and only if the appellant files, by the close of business on January 2, 2009, a letter of credit from a financial institution or a supersedeas bond in the amount of $1.1 million. By the close of business on January 4, 2009, the appellant shall provide this court with satisfactory proof that this requirement has been met. If such proof is not provided, the stay will be lifted on the court’s own motion.”

In short, the appeals court judge agreed to allow the school board to avoid paying the $1.1 million while the appeal runs its course, which is good news for the Board of Education, and ostensibly Worcester County. However, the judge ruled the school board would have to have the money in place by the close of business next Friday. If not, the order will be lifted and the school board, and/or Worcester County, will have to start paying the plaintiff.

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 October 9, visiting Circuit Court Judge R.L. 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.

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 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 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.

With the Court of Special Appeals’ ruling last Friday, the school board, or more likely Worcester County, is on the clock to secure a line of credit or a bond to ensure the settlement money is in place. It is uncertain at this point how that might be accomplished. County officials could not comment on the situation because of the sensitive legal elements of the case.

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