The Details: In the Matter of the Arbitration Between: Thornton Academy and Maine Regional School Unit 21

In the Matter of the Arbitration Between:

Thornton Academy

and

Maine Regional School Unit 21

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ARBITRATION FINAL ORDER

INTRODUCTION

This dispute arises out of a 10 year contract for the education of middle school

children between RSU 21, as successor by consolidation to the Arundel School

Department, and Thornton Academy. Thornton has alleged RSU 21 breached the

contract by passing a motion to accept 45 middle school students from Arundel into the

Middle School of the Kennebunks (“MSK”)(part of RSU 21). Thornton initiated this

Arbitration proceeding in accordance with Section 15 of the Contract under the rules of

the American Arbitration Association (“AAA”). Arbitration of this matter was held

before the undersigned arbitrator on July 26-28, 2010.

 
BACKGROUND

In 2002, the Arundel School Department determined that it had outgrown the

Mildred L. Day School for grades 6-8. In order to meet the needs of the Arundel students

and satisfy the requirements of the federal No Child Left Behind Act, the Town decided it

would either need to build a new middle school or send Arundel middle school students

to be educated elsewhere. Arundel Superintendant Richard Marx (“Marx”) explored

several options regarding the placement of Arundel’s middle school student, including

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possible placement in the Biddeford School District and the Kennebunk School District,

MSAD 71. During this process, Arundel was contacted by Thornton about the possibility

of educating the Arundel middle school students. Although Thornton did not have a

middle school, it proposed to build a middle school facility on its campus for the Arundel

students.


On November 5, 2002 the Town of Arundel at a special meeting voted to send its

6th, 7th, and 8th graders to Thornton Academy middle school, rather than build a new

middle school in Arundel. Arundel subsequently entered into negotiations with Thornton

regarding the entry into a contract for the education of Arundel’s middle school students.

On July 19, 2004, Thornton and Arundel entered into the “Contract for Education

of Middle School Pupils of the Town of Arundel at Thornton Academy.” Pursuant to

Section 1 of the Contract, Thornton agreed to “educate all middle level (grades 6, 7, and

8) pupils who qualify as legal residents of Arundel under Maine law for a ten year period

beginning July 1, 2006 and ending June 30, 2016.” Thornton also committed to building

a new facility for the middle school students as part of the Contract. Contract, Section 2.

In exchange, Arundel agreed to pay tuition to Thornton for “every resident Arundel

middle school student enrolled at the Academy as of October 1 of any given year” of the

period of the Contract. Contract, Section 4(a). The Contract also provides that

“Thornton Academy will be a voluntary attendance choice for secondary tuition students

from Arundel during the term of this contract.” Contract, Section 8.

The Contract contains a termination provision, which states that if Arundel (now

RSU, as successor) elects to terminate the Contract before its expiration, it will pay

Thornton the proportionate share of the cost of capital improvements and debt service for

the building of the new middle school. Contract, Section 14.

On February 16, 2005, the Maine Department of Education (“DOE”) approved

the Contract to tuition the Arundel middle school students at Thornton for a period of ten

years, commencing on July 1, 2006. Arundel students were first enrolled in the new

Thornton middle school in the Fall of 2006. From the Fall of 2006 through the

completion of the 2009-2010 school year, with apparently only one exception involving

unique circumstances, all 6th, 7th and 8th grade students from Arundel, for whom public

school tuition was paid, were sent to Thornton.

In 2009, following the enactment of Maine’s School Reorganization Law

(“Reorganization Law”), Arundel and MSAD 71 consolidated and formed RSU 21.

Pursuant to the Reorganization Law, RSU 21 became bound by the terms of the Contract

between Arundel and Thornton, both by Statute (See 20-A M.R.S.A. 1479(2)) as well as

by RSU 21’s affirmative ratification of the contract after its formation (See Section C, p.

21 of RSU 21’s Reorganization Plan approved by the DOE on November 4, 2008). High

school choice was preserved for Arundel’s grade 9-12 students in accordance with 20-A

MRSA § 1479.

On June 21, 2010, the RSU 21 School Board unanimously adopted two motions, as

follows:

I move that the Board authorize the Superintendent of Schools to enroll up
to 15 students per grade level residing in Arundel who wish to exercise
their choice to attend the Middle School of the Kennebunks, pursuant to
policy JCA, effective with the start of the 2010-2011 school year.

I move that the Board direct the Superintendent of Schools to notify
Thornton Academy that, subject to any budget approvals, it intends to
exercise the option to terminate the Contract for Education of Middle

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School Students between the Arundel School Committee and
Thornton Academy without cause under section 14 of that Contract
effective June 30, 2011, at a cost not to exceed $1,186,099.20.
Termination of the Contract will give Arundel students entering
grades 6, 7 or 8 the free and unimpeded choice to attend the Middle
School of the Kennebunks beginning with the 2011-2012 school year.

On July 6, 2010, the arbitrator, in response to a Motion by Thornton, stayed

enrollment of any Arundel middle school students in MSK and prohibited the acceptance

of any further applications or inquiries until this arbitration was decided. At the time of

the Stay, parents for 19 students from Arundel had inquired about and/or requested

attendance at MSK. Of the inquiries and/or requests, 12 of children were entering the 6th

grade, 3 were entering the 7th grade and 4 were entering the 8th grade.

The contract between the parties, on its face, is reasonably capable of more than

one interpretation. Therefore, extrinsic evidence is properly considered for the purpose

of determining the intent of the parties. Madore v. Kennebec Heights Country Club, 2007

ME 92 ¶ 8, 926 A.2d 1180, 1183.

The clear weight of the evidence established that, at the time the contract was

entered into, both Thornton and Arundel intended that all 6th, 7th and 8th grade students

residing in Arundel, and for whom public school tuition would be paid, would attend

Thornton. This conclusion is supported by the testimony of all the witnesses who were

involved in actually negotiating the key terms of the contact on behalf of Thornton and

on behalf of Arundel. The only witness to suggest differently was transactional counsel

for Arundel at the time, who was not involved in the actual negotiations between officials

from Thornton and Arundel and who never discussed the intent of the contract with the

Arundel officials he represented. The fact that all publicly tuitioned 6th, 7th and 8th

graders were intended to attend Thornton is also supported by the parties course of

conduct under the Contract prior to the formation of RSU 21.

There was also uncontroverted evidence that the decision of the Thornton Board

to accept Arundel students was based on a careful economic analysis regarding the costs

and benefits of such an undertaking. The number of Arundel students projected to attend

Thornton was critical to the negotiations between the parties. If Arundel was not

required to pay Thornton, and only Thornton, for the education of its publicly tuitioned

middle school students, Thornton’s providing of a new middle school facility for the

children of Arundel, at Thornton’s sole expense, would have made no sense.

The vote by RSU 21’s Board to allow 45 students from Arundel to attend the

Middle School of the Kennebunks is contrary to the terms of the contract, which is

binding on RSU 21. The testimony supports the conclusion that the Board members

voting for the pertinent motion did so in good faith, and largely with good intentions.

However, under the contract, RSU is simply not entitled to solicit, accept applications

from or enroll publicly tuitioned students from Arundel.

The vote by RSU 21’s Board to terminate the contract is without any legal force

under the Contract. The uncontroverted testimony established that the Board of RSU 21,

acting alone, has no practical ability to terminate the contract. Termination is ineffective

absent payment of the termination fee as defined by the contract; which is agreed by the

parties to be 1.186 Million Dollars for 2011. The RSU board does not currently have

legal access to good funds sufficient to pay the termination fee. Termination can only be

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accomplished following approval by RSU 21’s voting public of a mechanism to raise or

provide for the termination funds. The Motion to terminate the contract is therefore

legally irrelevant pending voter approval of the contractually mandated funds.

Prior to the entry of an Order of Stay in this case on June 6, 2010, RSU 21 had

accepted inquiries and/or applications from the parents of 19 students from Arundel (12

going into the 6th grade, 3 into the 7th and 4 into the 8th) who wished to have their children

enrolled in the Middle School of the Kennebunks. The enrollment of any of the

referenced children by RSU 21 represents a breach of the contract between the parties.

The contract does not specify or require any specific remedies for breach. An

arbitrator has broad powers to award relief, provided that the arbitrator does not impose a

remedy which re-writes the contract between the parties, or which is contrary to law.

Service Employees Union, AFL-CIO, CLC v. Local 1199 N.E., SEIU, AFL-CIO, CLC, 70

F.3d 647 (1st Cir. 1985); Commercial Arbitration Rule 43; Staklinski v. Pyramid Elec.

Co., 6 N.Y.2d 159 (1959); United Steelworkers v. Enterprise Wheel & Car, 363 U.S. 593,

597 (1960). Monetary damages are generally appropriate to compensate a party where a

breach of contract has occurred. There was substantial testimony that the key focus for

Thornton with regard to assuming the obligations to educate Arundel’s students revolved

around economic feasibility. There was also testimony from Thornton’s headmaster that

slightly smaller class sizes would not adversely impact the educational product being

offered by Thornton.

On the other hand, a school is not a factory, and a student is not a widget.

Planning, funding, and running a school requires some degree of certainty and confidence

in the direction of the school. Allowing RSU to endlessly “buy out” the middle school

age children of Arundel, 45 at a time, in violation of the contract, would clearly be both

inconsistent with the fabric and intent of the contract and would gut the purpose of the

termination provision.

Therefore, I find as follows:

1.

Monetary damages are sufficient to fairly compensate Thornton for any of

the 19 children who inquired and/or applied to Thornton prior to the entry

of the stay in this case. Substantial testimony was offered by both sides

that one of the greatest benefit of bringing a 6th grader into school was the

very high likelihood that the child would stay in the same school through

the 8th grade. This likelihood was also evidenced by the survey of

Arundel parent interest in attending MSK conducted by RSU’s

superintendent (RSU Exhibit 18), as well as by the grade distribution of

the 19 applications/inquiries at issue. Testimony was also offered that the

additional cost of educating one additional student was nominal.

Therefore, as to the 2010-2011 school year, RSU 21 must pay Thornton

the full public school tuition for each of the 19 children referenced above

that attend MSK. As to each of the incoming 6th and 7th graders among

the 19 children, RSU must also pay Thornton 75% of the public school

tuition for each child for every subsequent year they are enrolled at MSK,

even if the contract between the parties is subsequently terminated. These

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payments give Thornton the benefit of its bargain as to these students,

including the lost income from the additional years they likely would have

attended Thornton if they had initially enrolled there. RSU shall not be

required to pay Thornton tuition for any of the 19 referenced students to

the extent that they do not attend MSK in any given year (i.e. if none of

the 19 students were to actually attend MSK in 2010-2011, no monies for

those students would be due from RSU 21 to Thornton. Likewise, if a 6th

grader among the 19 students attends MSK in 2010-2011, but does not

attend MSK in 2011-2012, the 75% payment from RSU to Thornton for

that student for 2011-2012 would not be owed). Within 30 days of the

beginning of each school year, RSU shall provide Thornton with a list of

the students among the 19 at issue who are enrolled in MSK, along with

the full tuition payments required by this order. No refunds shall be due to

RSU should a student enrolled at MSK leave after the beginning of the

school year.

2.

While monetary damages are sufficient to compensate Thornton for the

limited number of students who sought entry to MSK prior to the June 6

stay, they are totally insufficient to compensate Thornton for, or protect

Thornton against, any ongoing siphoning-off of Arundel students by RSU

21 in violation of the contract. Therefore, based on the unique and

compelling circumstances of this case, Thornton is entitled to the remedy

of specific performance of contract going forward. Other than the 19

students mentioned above, RSU 21 is absolutely prohibited from

soliciting, accepting or enrolling any 6th, 7th or 8th grade students from

Arundel who are publicly tuitioned. This shall not impact the rights of

parents in Arundel who wish to privately pay to have their children attend

any school of their choice. This prohibition, as per the contract between

the parties, will not terminate until the contract between the parties either

expires of its own terms, or RSU 21 has legally terminated the contract;

where termination without cause necessarily includes and is contingent

upon transfer of good funds to Thornton of the termination fee.

3.

All other claims arising between or raised by the parties are dismissed

with prejudice. Any claims raised by the parties but not specifically

addressed are hereby denied.

4.

This order may be enforced in a court of competent jurisdiction.

5.

The arbitrator retains jurisdiction over this matter for the purpose of

enforcing or clarifying the terms of this award, or entering such other

orders as may be necessary.

Rendered this 2nd day August, 2010

By: /s/ Patrick C. Coughlan
Patrick C. Coughlan, Arbitrator.