Warren Consol. Sch. Dist. v. Sch. Dist. of City of Hazel Park

• Decision Date: 02 December 2021
• Docket Number: 354240
• Parties: WARREN CONSOLIDATED SCHOOL DISTRICT, Plaintiff-Appellant, v. SCHOOL DISTRICT OF THE CITY OF HAZEL PARK, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

WARREN CONSOLIDATED SCHOOL DISTRICT, Plaintiff-Appellant,
v.
SCHOOL DISTRICT OF THE CITY OF HAZEL PARK, Defendant-Appellee.

No. 354240

Court of Appeals of Michigan

December 2, 2021

UNPUBLISHED

Macomb Circuit Court LC No. 2020-000352-CZ

Before: Swartzle, P.J., and Cavanagh and Gadola, JJ.

Per Curiam.

Plaintiff appeals by right the circuit court's order granting defendant summary disposition under MCR 2.116(C)(4). We vacate the order of the circuit court and remand for further proceedings.

I. FACTS

Plaintiff and defendant are neighboring school districts in the Detroit metro area. They each receive state funds under The State School Aid Act of 1979 (SSAA), MCL 388.1601 et seq. The SSAA governs the distribution of state funds to local school districts and appropriates funds on the basis of each district's membership count. See MCL 388.1606(4); see also Rowley v Garvin, 221 Mich.App. 699, 709; 562 N.W.2d 262 (1997). A district's membership count is generally comprised of pupils that reside in a district's geographic area and whom the district educates. See MCL 388.1606(4)(a)-(b). The Michigan Department of Education (MDE) examines each district's membership count annually in accordance with the SSAA for purposes of allocating funding. See MCL 388.1606(4); MCL 388.1620. Under the SSAA, a school district may include a nonresident pupil in its count if the school district is educating that student and if the resident district approves or if an exception to the required approval applies. MCL 388.1606(6)(a)-(o).

Beginning in approximately 2008, defendant collaborated with a nonprofit entity, International Network for Vocational Education Skills Training, Inc. (INVEST), to establish an alternative education program approved by the MDE. According to defendant, the program

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provides a unique learning environment for students who benefit from its non-traditional class and curriculum structures. According to plaintiff, defendant partnered with INVEST to target non-English speaking families, particularly Chaldean families hesitant to enroll their children in a typical American public school, and to offer those students an alternative program. The parties agree that some of the students who attended defendant's INVEST program resided in plaintiff's district at that time, and that defendant did not obtain approval from plaintiff to educate those students. The parties also do not dispute that defendant included those students in its student count for purposes of determining state aid under the SSAA.

In 2011, plaintiff filed a complaint against defendant in the circuit court seeking declaratory and injunctive relief, as well as monetary damages, arising from the alleged improper count of defendant's students under a theory of unjust enrichment (the 2011 lawsuit). Plaintiff asserted that defendant had lured students who reside in plaintiff's district to attend defendant's INVEST program without obtaining plaintiff's permission and absent an applicable exception under the SSAA, thereby wrongfully depriving plaintiff of students within its own district.

In 2012, the circuit court granted defendant summary disposition under MCR 2.116(C)(10). The circuit court held that defendant had demonstrated that the students in question could be counted without plaintiff's approval under the SSAA because the alternative education program had been initiated before the 2010-2011 school year. The circuit court determined that because plaintiff had not submitted contrary proof and discovery had closed, defendant was entitled to summary disposition on that basis. The trial court denied defendant's motion for summary disposition that was premised on plaintiff's failure to exhaust its administrative remedies.

Thereafter, the circuit court granted plaintiff's motion for reconsideration and reopened the case, determining that discovery had not closed at the time of the circuit court's order and permitting plaintiff to present further proofs. In 2014, the circuit court again granted defendant summary disposition, this time on the basis that plaintiff had failed to exhaust its administrative remedies. The circuit court explained that when it previously determined that plaintiff had no obligation to exhaust administrative remedies under MCL 24.264, the circuit court had not been apprised of the appeal process set forth in the MDE Pupil Auditing Manual. The circuit court determined that the manual set forth a specific process for challenging a district's student count audit, thereby providing an administrative remedy that plaintiff had failed to exhaust.

Plaintiff did not appeal the circuit court's 2014 decision holding that the court lacked subject matter jurisdiction. Instead, plaintiff challenged the per pupil count of defendant's students before the MDE. In October 2016, the MDE's assistant director of the Office of Financial Management issued a letter denying plaintiff relief on the basis that plaintiff lacked standing to challenge defendant's pupil count and because the MDE could not award plaintiff the monetary relief it sought. The MDE also declined to issue a declaratory ruling that defendant had improperly claimed plaintiff's students.

Rather than appeal that administrative determination, plaintiff initiated a new action against defendant in the circuit court (the 2017 lawsuit), raising claims substantially similar to those raised in the 2011 lawsuit. Citing MCL 24.301, the circuit court dismissed plaintiff's complaint for failure to exhaust administrative remedies, observing that plaintiff had failed to appeal the decision of the MDE assistant director to the state superintendent. Plaintiff thereafter appealed the assistant

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director's decision to the state superintendent who issued a letter dated January 8, 2020, affirming the assistant director's decision. The superintendent observed that although the time in which to appeal the assistant director's decision had expired, he would consider plaintiff's letter as a request for a declaratory ruling. The superintendent then determined "I concur in [the assistant director's] determination to decline to issue a declaratory ruling." The superintendent explained that "[t]he Department declines to issue a declaratory ruling for the following reasons," including the reason that no relief was available from the department. The superintendent then concluded "I decline to issue a declaratory ruling in this matter."

Rather than seek to appeal the state superintendent's determination to the circuit court, plaintiff instead initiated this action, raising substantially the same claims it raised before the MDE and in the 2011 and 2017 lawsuits. Specifically, plaintiff again sought declaratory and injunctive relief and also damages, asserting that defendant had counted plaintiff's pupils in violation of the SSAA. Defendant moved for summary disposition in part on the basis that plaintiff's complaint was an impermissible collateral attack on the MDE's...