Ohio Supreme Court Rules Against Charter Schools in White Hat case

Sep 16, 2015

The Ohio Supreme Court has sided with a controversial charter school operator in a very narrow decision.

The case involved 10 Cleveland-area charter schools that contracted with White Hat Management to operate them.

Over a three year period, more than $90 million in state money flowed to White Hat, which used those funds to pay teachers and buy computers, desks and other equipment for the schools to use.

But there were problems – seven of the 10 schools had serious academic issues, with two being completely shut down for poor performance. When the schools’ contract was up, White Hat said the equipment was its property, and the schools had to pay to keep using it. 

The schools sued, and the case was argued before the Ohio Supreme Court almost exactly a year ago. Karen Hockstad represented the schools before the Court.

“The absurdity here is that, ‘Sure, we’ll pay you with these taxpayer dollars, and then we’ll buy this property back again with more taxpayer dollars if we ever terminate the contract,’” Hockstad told the justices. “It’s absurd.”

But in its decision, the court sided with White Hat and its lawyer, David Paragus, who said the case “is simply a straightforward contract interpretation case.”

White Hat Management, based in Akron, is owned by David Brennan. Brennan and his family have given millions in campaign contributions to Republican state legislative and statewide candidates over the years, White Hat lobbyists have helped shape Ohio's charter school policies over the years.  

The only thing the court ruled on was the contracts. In her opinion, Justice Judith Lanzinger noted the schools hadn’t performed well under White Hat’s management, but that the contracts the schools had with White Hat were entered into voluntarily and were enforceable.

But while five justices agreed with the overall judgment, Lanzinger was the only justice to stand behind that opinion.  Mark Weaver teaches law at the University of Akron and Ohio State, and is also a Republican strategist and represents some charter schools, but has no legal relationship with White Hat.

“The court was split in many different ways – the justices all ran in different directions,” Weaver said. “And so the only majority holding in this case is that the contract can be upheld and that White Hat is what we call a fiduciary or somebody who’s in a position of trust with respect to these schools.”

Chad Aldis is with the Fordham Institute, a pro-charter school group that has endorsed measures to increase accountability and transparency. He says this wasn’t the case for the court to rule on issues of public money, charter school performance or other issues. 

“I think that would have required a little bit of judicial gymnastics that probably we generally don’t want to see in contract law,” he said.

In her opinion, Justice Lanzinger turned some issues back to state lawmakers, who she wrote have “enacted statutes that take a laissez-faire attitude toward operators of community schools.” And she wrote that the General Assembly will have to determine whether those laws should be stiffened.

As expected, the state’s two teachers unions aren’t happy. Ohio Education Association President Becky Higgins said the union is “disappointed in the ruling because we know that as the laws are written, they’re written to benefit the operators and not benefiting the students.” And Darrold Johnson with the Ohio Federation of Teachers said he’s hoping state lawmakers will take note and pass charter school reforms soon.

And Ohio Democratic Party chairman David Pepper says the ruling does nothing to fix what he called the broken system of charter schools in Ohio.

“This is another setback for taxpayers who are out millions from these schools,” Pepper said. “And now we see money – here an operator is running a school, the school fails, and the operator is the one who benefits and the money doesn’t go back to the public taxpayer.”

As they have in other recent high-profile cases, Justices Bill O’Neill and Paul Pfeifer wrote blistering dissents, with both of them blasting White Hat and the majority’s judgment.

O’Neill wrote that the contract is “a fraudulent conversion of public funds in to personal profit. That is not the relationship that was bargained for.” And O’Neill also wrote that the ruling “rewards failure and encourages its repetition in the future in the name of profit”. Pfeifer called the contracts “unconscionable” and that the opinion went “out of its way to support the insupportable.”