The ruling represented a victory for the charter-school operator, White Hat Management Co., and a defeat for 10 now-closed schools in Northeast Ohio that claimed they owned the property since it was bought with public funds.
Justice Judith Ann Lanzinger wrote in the majority opinion that charter school operators perform a governmental function and establish a fiduciary relationship with the schools they manage in purchasing school equipment, contrary to the position taken by White Hat.
That finding should allow the public to obtain charter-school operator financial records that long have been withheld, said Karen Hockstad, a Columbus lawyer who represented the ex-White Hat charter schools.
Current law largely does not address the duties of school operators and does not restrict the provisions of contracts between operators and charter schools, Lanzinger wrote.
Therefore, a provision in White Hat’s contract allowing it to title property in its name and later require the schools to buy back any property they wanted to keep is enforceable, the opinion stated.
Unless there is fraud, courts cannot save “a competent person from the effects of his own voluntary agreement,” the opinion said.
“The schools were represented by their own legal counsel and they agreed to the provisions in the contracts. They may not rewrite terms simply because they now seem unfair.”
The schools wanted the court to overturn a decision by the Franklin County Court of Appeals that determined that nearly all of the property belonged to White Hat.
The funds were paid by the state to the seven Hope Academies and three Life Skills Centers in the Cleveland and Akron areas that hired White Hat in 2005 to handle operations. White Hat received 95 percent of each school’s state funding to pay teacher salaries, building rentals, utilities and other expenses.
The schools’ lawyer had argued the funds remained public despite their payment to White Hat and that classroom equipment belonged to the schools.
About $100 million was paid by the state to the seven Hope Academies and three Life Skills Centers in the Cleveland and Akron areas that hired White Hat in 2005 to handle operations. White Hat received 95 percent of each school’s state funding to pay teacher salaries, building rentals, utilities and other expenses.
White Hat Management is owned by David L. Brennan, of Akron, one of the early proponents of the publicly funded and privately operated charter schools and a major donor to Ohio Republicans.
The court ordered the case returned to a trial court to inventory the disputed equipment and dispose of it under the terms of the White Hat contract.
The justices were split over various components of the ruling, with two justices dissenting from the judgment.
“There has been no quality education, there has been no safeguarding of public funds, and there most certainly has been no benefit to the children,” Justice William M. O’Neill wrote.
He concluded that the contracts are not enforceable because they “permit an operator who is providing a substandard education to squander public money and then, upon termination for poor performance, reap a bonus, paid for by public money.”
Justice Paul E. Pfeifer wrote that the court should have overturned the contract.
“The contracts require that after the public pays to buy those materials for a public use, the public must then pay the companies if it wants to retain ownership of the materials,” he wrote.
“This contract term is not merely unwise as the opinion would have us believe; it is extremely unfair, so unfair, in fact, as to be unconscionable. … The contract term is so one-sided that we should refuse to enforce it.”