E-Alert Case Updates
School Boards Cannot Take Shelter Under Sovereign Immunity for School Construction Contracts
Beka Indus., Inc. v. Worcester County Bd. Of Educ.
In Beka Industries, Inc. v. Worcester County Board of Education, the Maryland Court of Appeals held that while the state sovereign immunity laws apply to county school boards in school construction cases, the county school boards have waived sovereign immunity. In so holding, the Court of Appeals overturned the Maryland Court of Special Appeals’ decision, which held that county school boards had not waived sovereign immunity in school construction contract cases because there was no money set aside to satisfy the judgment.
This case arose out of the construction of Ocean City Elementary School in Worcester County, in which Beka Industries, Inc. (“Beka”) was one (1) of twenty (20) contractors. On June 8, 2004, the Worcester County Board of Education executed a written contract with Beka to perform site clearing, excavation grading, site utilities, curb work, gutter work, and the paving for the new elementary school. The “lump sum bid” proposed for the work by Beka and accepted by the County Board of Education was for $1,856,000. Subsequent to the execution of the contract, the party agreed to three (3) approved change orders totaling $105,913. To date, the Board of Education has only paid Beka a total of $1,421,852 on the $1,961,913 contract. As a result, Beka filed a complaint for money damages and other relief in the Circuit Court for Worcester County. The trial court entered judgment in favor of Beka Industries and the school board appealed.
On appeal, the county school board argued application of a two (2)-part test. Part one (1) of the test assessed whether the school board was protected under the laws of state sovereign immunity and part two (2) of the test assessed whether the school board had waived state sovereign immunity. The Maryland Court of Special Appeals found that the County Board of Education was protected under the state sovereign immunity laws, and, that it had not waived sovereign immunity. MD. CODE ANN. STATE GOVT. § 12-201 only waives sovereign immunity where the state has set aside funds for the judgment. The Court of Special Appeals relied on the case of Chesapeake Charter v. Board of Ed., 358 Md. 129 (2000), which held that county school boards did not waive sovereign immunity in school bus procurement contracts, because there were no funds set aside to satisfy the judgment. Beka Industries appealed the case to the Maryland Court of Appeals and the Maryland Court of Appeals granted certiorari.
The Maryland Court of Appeals affirmed the two (2) part test used by the intermediate appellate court. Judge Greene also affirmed the Court of Special Appeals’ holding on part one (1) of the test, finding that county school boards are essentially extensions of the state, with respect to new school construction. The Court reasoned that the majority, if not all of the funding, for new school construction projects comes from the state and the details and guidelines for construction of new schools is mandated by the state. Therefore, county school boards are merely extensions of the state.
The Maryland Court of Appeals reversed the Court of Special Appeals on part two (2) of the test, finding that the school board waived sovereign immunity. The Maryland Court of Appeals distinguished this case from Chesapeake Charter because, in school bus procurement cases, the county board of education is almost entirely self-funded whereas in new-school construction cases, the county school boards receive almost all of their money from the state. Therefore, the Court of Appeals found that portion of the state government article respecting waiver of sovereign immunity applies to county school boards.
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