Defunct Ohio Online School Renews Fight Against Funding Clawback

A shuttered virtual school in Ohio is making a new attempt to overturn an order to repay $60 million in funding, arguing that final state agency decisions can be appealed in trial courts.


COLUMBUS, Ohio (CN) — The Ohio Supreme Court heard oral arguments Tuesday over whether a shuttered online charter school can appeal an order to repay millions in funding to the state. 

The Electronic Classroom of Tomorrow, known as ECOT, operated as Ohio’s first online community school, also known as a charter school, until it abruptly closed in early 2018 after audits by state officials showed its enrollment numbers were inflated and students were not receiving full-time instruction as required. 

Much of the funding ECOT received for the 2015-2016 school year was based on those enrollment numbers and the full-time instruction the school claimed the students were getting. The audit found that the Ohio Department of Education overpaid ECOT more than $60 million dollars and a state board ordered it to repay that money. 

The issue before the state high court is whether ECOT should be allowed to appeal the Ohio State Board of Education decision requiring repayment. The state argues the board’s decision is final. 

Prior to the release of the audit, ECOT filed a lawsuit contesting the Department of Education’s method for calculating each student’s participation time in online learning. The school lost the case and was ordered to refund the overpayment.  

ECOT then filed two more lawsuits, including a mandamus petition filed directly with the Ohio Supreme Court to block the decision and force the state to accept ECOT’s original claim of student participation. The justices dismissed this case without an opinion in 2017. 

The second lawsuit was filed in Franklin County Common Pleas Court and centered on Ohio’s administrative appeal laws. The trial court ruled that ECOT could only appeal the board’s determinations through a mandamus action, which it had already done unsuccessfully. The Tenth District Court of Appeals ultimately upheld the trial court’s decision, prompting the school’s appeal to the Ohio Supreme Court.

Marion Little Jr. of Zeiger, Tigges & Little represented ECOT on Tuesday and argued that state law allows the school to appeal the board’s decision in county trial courts.

He cited Brookwood Presbyterian Church v. Ohio Department of Education, a 2010 Ohio Supreme Court decision involving a church that applied to sponsor a charter school, in which the justices found that the statutory word “final” did not mean unappealable. 

In his motion seeking review by the Ohio Supreme Court, Little wrote, “Absent relief from this court, all community schools in this state — whether of the brick-and-mortar or online variety — will be left with no recourse from the adjudicatory funding determinations made by elected and politically appointed members of the Board of Education, irrespective of the impact on the schools, the thousands of Ohio students who choose to attend them and the community school employees.”

Much of the hearing centered around the meaning of the word final in Ohio state laws and potential avenues for appealing state agency decisions.

“This court said final means simply a final determination by the agency. It does not mean that there is no further appeal recourse is available,” Little told the justices, referring to the Brookwood ruling.  

Erik Clark, special counsel to the Ohio Attorney General’s Office, argued for state and said an agency decision marked as final must explicitly mention the right to appeal if such a challenge is allowed. He also criticized ECOT’s decision to file two lawsuits at the same time, asserting that the right course was the mandamus action that the Ohio Supreme Court already rejected.  

“ECOT was seeking both bites at the apple,” he said.  

Justice Patrick DeWine questioned Clark’s argument.  

“They only had a right to seek one remedy or the other, they just didn’t know which one it was,” he said. “It’s understandable why they took inconsistent positions, but it’s a little harder to understand why the state would have a position about what is the proper way to challenge.”

Clark explained that the state’s position in both lawsuits was clear – that ECOT had no right to appeal the board’s order.

“But I agree, your honor, that ultimately the procedural posture in this case isn’t relevant to the question before the court. It’s simply a matter of statutory interpretation that’s going to apply, regardless of the procedural posture,” Clark told the court.

Chief Justice Maureen O’Connor then asked what ECOT’s remedy for appeal is, to which Clark reiterated that it was the mandamus action the court had already dismissed.

Justice Patrick Donnelly questioned Clark’s assertion that ECOT has no right to appeal in the lower courts.

“When decisions are rendered at the Common Pleas Court, they typically state ‘this is a final, appealable order,’ so that the parties know that everything’s been disposed of that was in dispute and that you can move to the next step of appealing,” Donnelly said. “Why wouldn’t the legislature, if it intended to make this unappealable, simply have stated that clearly?”

“You can put an agency decision into essentially three groups: Sometimes they say final and not appealable, sometimes they say final and sometimes they say final and appealable,” Clark replied. “ECOT argues that ‘well, you could have said final and unappealable, that would have solved it. So since you didn’t, it must have been appealable.’ But the same goes the other way.” 

O’Connor seemed skeptical.    

“We’re supposed to just take the middle road, which is that final means just final, with no nonappealable or appealable, and divine that that means nonappealable?” the chief justice asked.

Clark said that without a clear distinction, the court should take the ordinary meaning of the word final.

“When people walk around and think of the word final, they’re thinking about the end of the road,” he argued.  

Little used his last minute to explain ECOT’s need to file the two lawsuits, claiming that the State Board of Education and Department of Education have been inconsistent in their position.

“We’ve done our best to respond to them, but, in general, it’s a struggle. It was explained as to why we would even make our modes of appeal conditional because we simply did not know what position the state would take on any particular day of the week,” he said.

Little returned to his position on the wording in the original decision.

“At the end of the day, the court did say that final as used in the very section we are discussing today has a meaning of simply concluding the proceedings at that level,” the attorney said, again referring to the Brookwood ruling.  

Attorneys for each side did not respond to requests for comment after the hearing.

The Ohio Attorney General’s Office filed its own lawsuit over ECOT funding in 2018, seeking to holder its founder Bill Lager personally liable for corruption based on claims that he made millions of dollars by contracting with two businesses he owned for school services. That case is pending in the Franklin County Common Pleas Court.

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