On February 28, 2012, the Dallas Court of Appeals found in favor of Universal Academy Charter School in a case filed by the school’s former commercial real estate broker. The broker raised both tort and contract claims against the school, arguing that the school failed to pay required commission under a signed agreement. In Universal Academy v. Palasota Property Company, the Court of Appeals dismissed both claims and decided for the school. Because of the court’s unprecedented conclusions, this case is instructive for all types of charter school litigation and contracts.
First, the Palasota court reaffirmed its earlier holding in LTTS Charter School Inc. C2 Construction II, that open-enrollment charter schools enjoy government immunity from suit from tort claims. Relying on the reasoning of the Texas Supreme Court’s 2011 decision in LTTS Charter School Inc. C2 Construction I, the court of appeals found that open enrollment charter schools are immune from suit as a matter of common law. This is a significant finding because the court reached this decision without reliance on section 12.1056 of the Texas Education Code, the statutory provision that expressly affords charter schools immunity from liability. Consequently, an open-enrollment charter school can use the Palasota holding and its sister case in C2 Construction II, to urge early dismissal from any litigation filed against the school. Since charter schools are immune from suit as a matter of common law – as the Palasota court found – then the school is not required to incur the expense of discovery in any case in which immunity from suit has not been waived.
Next, concerning the broker’s contract claims, the Palasota court also held that the charter school had immunity from suit. In an unprecedented ruling, the court found that open-enrollment charter schools are “local government entities” under Section 271.152 of the Texas Local Government Code. Any “local government entity that enters into a contract subject to Chapter 271 waives immunity from suit for the purpose of adjudicating a claim for breach of contract”. However, for immunity to be waived, the contract must meet the specific statutory definition of a contract: “a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity.” The Palasota court found that the broker’s contract did not contain the essential term describing the amount and/or method of calculating the broker’s commission. Because the broker’s contract did not meet the statutory definition stated in Chapter 271, the court concluded that the waiver of immunity did not apply.
TCSA congratulates Universal Academy and Tommy Fuller, their attorney on this case, on this important victory for open-enrollment charter schools. In light of the new developments in the Palasota case, charter schools should consult their local counsel for advice concerning litigation and contracting.