By | December 4, 2019

 By , NC POLICY WATCH

[Editor’s note: This story has been updated to correct an error in the original version which indicated that the trial court had ruled that defendant Ozie Hall was liable for damages. In fact, no such ruling has yet been made. Rather, the trial court ruled (and the Court of Appeals affirmed) that the lawsuit demanding such damages can proceed. We regret the error.] 

A State Court of Appeals panel has ruled there’s “insufficient evidence” to determine whether a former Kinston charter school operator can claim “public official immunity” in defense of charges that he misused public money.

As a result, a Wake County Superior Court ruling stands holding that a lawsuit against Ozie Hall, the former CEO of now-defunct Kinston Charter Academy, can proceed.

“We merely conclude that, at the pleadings stage, the record contains insufficient evidence to determine whether Hall is entitled to assert public official immunity and, if so, whether Hall’s actions amounted only to negligence,” the panel ruled in court documents filed Dec. 3. “Thus, the trial court did not err by denying Hall’s motion to dismiss under Rule 12(b)(6).”

Hall sought to have the claims dismissed under Rule 12 (b)(6), which allows a court to dismiss a complaint before the development of a proceeding.

Click here to read the full opinion.

The appeal stemmed from a 2016 complaint by the state alleging that Hall, his wife Demyra McDonald-Hall, who served as board chairwoman, and Kinston Charter violated the North Carolina False Claims Act (NCFCA) and the Unfair and Deceptive Trade Practices Act (UDTPA) by inflating enrollment estimates to receive state money to educate students they did not serve.

The case dates to August 2013 when Kinston Charter received more than $666,000 in state money after reporting a projected enrollment of 366 students.

Charter schools and traditional public schools receive state money based on average daily membership, which is essentially the number of students served.

Kinston Charter’s actual enrollment in early September 2013 was 189 and it closed just days later, leaving students scrambling to find new schools and teachers new jobs.

In 2016, then-attorney general Roy Cooper, now the state’s governor, sued Hall, McDonald-Hall and Kinston Charter on behalf of North Carolina.

“Charter schools receive taxpayer dollars to educate students and they have a duty to spend them wisely,” Cooper told area media at the time. “There are many excellent charter schools but North Carolina needs more tools to protect families who choose charter schools.”

The lower court eventually dismissed all UDTPA claims against McDonald-Hall, Hall and Kinston Charter. Claims against Hall in his official capacity as CEO of the school were also dismissed.

But the trial court denied Hall’s motion to dismiss the NCFCA claim against him in his individual capacity.

In the appeal, Hall argued that the trial court was in error when it denied his motion to dismiss the charges because, as an individual, he is immune from liability under NCFCA.

“Specifically, Hall contends that he should not be considered a ‘person’ for purposes of the Act because he is a public official and is entitled to public official immunity,” the panel wrote. “At this stage of the proceedings, viewing the material allegations of the State’s complaint as admitted for purposes of the motion to dismiss, we conclude that there is insufficient information in the record to determine if he is entitled to public official immunity to defeat the State’s claim.”

In addition to affirming the lower court order denying dismissal of claims against Hall, the appeals court reversed the lower court’s order, which had denied dismissal of NCFCA complaints against Kinston Charter. It also denied Hall’s petition for writs of certiorari, which would have required the lower court to hand over case records to the appeals court for further review.

The three-judge panel included Judge Philip Berger Jr., Judge Richard Dietz and Judge Donna Stroud. The panel’s opinion was written by Berger.

The NCFCA was signed into law in 2009 by then governor Bev Perdue.

Like the federal False Claims Act, the act allows private individuals to file a lawsuit against a person or business for submitting or causing the submission of false claims to the state. People or businesses that become aware of mistakenly submitted claims and fail to submit repayment can also be held liable under the act.