Monarch Academy Baltimore Campus, Inc. v. Baltimore City Board of School Commissioners

REPORTED

IN THE COURT OF SPECIAL APPEALS

OF MARYLAND

No. 404

September Term, 2016

______________________________________

MONARCH ACADEMY BALTIMORE

CAMPUS, INC., ET AL.

v.

BALTIMORE CITY BOARD OF SCHOOL

COMMISSIONERS

______________________________________

Graeff,

Berger,

Shaw Geter,

JJ.

______________________________________

Opinion by Graeff, J.

______________________________________

Filed: February 2, 2017

This appeal arises from complaints filed in the Circuit Court for Baltimore City by

appellants, charter schools in Baltimore City (the “Charter Schools”), against the Baltimore

City Board of School Commissioners (the “City Board”), appellee. 1 The complaints

alleged a breach of contract by appellee in failing to provide funding to the charter schools

that was commensurate with the amount disbursed to other public schools and in failing to

provide budget and financial information. After counterclaims were filed, the circuit court

issued an order that stayed the proceedings in the circuit court “pending administrative

review of the parties’ dispute by the State Board of Education” (the “State Board”).

On appeal, the Charter Schools present a single question for our review, which we

have rephrased, as follows:

Did the circuit court err in staying the proceedings pending administrative

review on the ground that the State Board has primary jurisdiction over the

issues raised in the complaint?

For the reasons set forth below, we conclude that the circuit court’s order is not an

appealable order, and therefore, we shall dismiss this appeal.

1

Appellants are operators of the following Baltimore City charter schools: Afya

Baltimore, Inc., Baltimore International Academy Inc., Baltimore Montessori, Inc., City

Neighbors Charter School, Inc., City Neighbors Hamilton, Inc., City Neighbors High

School, Inc., Creative City Public Charter School Foundation, Inc., Empowerment Center,

Inc., Experiential Environmental Education, Inc., Kipp Baltimore, Inc., Patterson Park

Public Charter School, Inc., Southwest Baltimore Charter School, Inc., and Monarch

Academy Baltimore Campus, Inc. Appellants have provided in the record extract one

complaint, as a representative complaint, stating that “identical versions were filed in

various actions that were subsequently consolidated.” Appellees have not disputed this

representation.

BACKGROUND

A decision to dismiss an appeal typically will not require a detailed discussion of

background facts and law. In this case, however, the nature of the issues presented to the

circuit court, including the connection between the authority of the State Board with respect

to school budgets and the issues presented in the Charter Schools’ breach of contract claim,

requires some background discussion.

State Board’s Authority Over Public Schools

Maryland Code (2014) § 2-205 of the Education Article (“ED”) sets forth the

“broad” and “comprehensive” authority of the State Board. See Bd. of Educ. for

Dorchester County v. Hubbard, 305 Md. 774, 787-88 (1986). It “exercise[s] general

control and supervision over the public schools and educational interests in this State,” ED

§ 2-205(g)(2), determines the “educational policies of this State,” ED § 2-205(b), and it

“shall decide all controversies and disputes under” the Education Article. ED § 2-

205(e)(2).

The Court of Appeals has stated that ED § 2-205 provides the State Board with

“visitatorial power of such comprehensive character as to invest the State Board ‘with the

last word on any matter concerning educational policy or the administration of the system

of public education.’” Hubbard, 305 Md. at 788 (quoting Bd. of Educ. Of Prince George’s

County v. Waeldner, 298 Md. 354, 360 (1984)). Accord Baltimore City Bd. of Sch.

Commr’s v. City Neighbors Charter Sch., 400 Md. 324, 343 (2007) (State Board has the

“paramount role” “in interpreting the public education law.”). Although that visitatorial

power is not unlimited, “‘the paramount role of the State Board of Education in interpreting

2

the public education law sets it apart from most administrative agencies,’” Patterson Park

Pub. Charter Sch., Inc. v. Baltimore Teachers Union, 399 Md. 174, 195 (2007) (quoting

Hubbard, 305 Md. at 790-91), and “‘decisions of the State Board of Education are entitled

to greater deference than those of most other administrative agencies.’” Id. at 197.

Charter School Funding

Charter schools have been described as “semi-autonomous public schools that

operate under a contract with a State or local school board.” City Neighbors, 400 Md. at

328. “The contract, or charter, defines how the school will be structured, staffed, managed,

and funded, what programs will be offered, and how the school will operate and account

for its activities.” Id.

In 2003, the General Assembly created the Maryland Public Charter School

Program by enacting Title 9 to the Education Article. Id. at 329. The purpose of the charter

school system is to “establish an alternative means within the existing public school system

in order to provide innovative learning opportunities and creative educational approaches

to improve the education of students.” ED § 9-101(b). Because charter schools are public

schools, they generally are subject to the “provisions of law and regulation governing other

public schools.” ED § 9-102(11).

The General Assembly, in “trying to fashion a formula for public funding” for

charter schools, opted not to set a “specific formula,” but rather, it determined that funding

for charter schools should be in an amount “commensurate” with the amount disbursed to

other public schools. City Neighbors, 400 Md. at 354-55. Accordingly, the statute

provides:

3

A county board shall disburse to a public charter school an amount of county,

State, and federal money for elementary, middle, and secondary students that

is commensurate with the amount disbursed to other public schools in the

local jurisdiction.

ED § 9-109(a).

The Court of Appeals has explained that this funding provision “necessarily left

some room for interpretation – what was commensurate and how was the amount disbursed

to other public schools to be determined when no amounts were actually disbursed to public

schools?” City Neighbors, 400 Md. at 355. The Court stated that, by providing for funding

in this manner, the legislature “must have envisioned that” the State Board, “the body it

has consistently vested with the ultimate administrative authority to interpret, explain, and

apply the public education laws – would have the primary authority to interpret, and the

ultimate authority to implement, that provision.” Id.

Commensurate Funding Cases

In May 2005, the State Board issued opinions addressing several charter school

funding cases. Id. at 335-36. 2 The State Board concluded that the phrase “commensurate

with the amount disbursed to other public schools in the local jurisdiction” meant that a

public charter school would receive funding in an “amount proportionate to the amount of

funds expended for elementary, middle, and secondary level students in the other public

schools in the same system.” Id. at 336. That included “funding for services for which

2

The schools involved were City Neighbors Charter School and Patterson Park

Public Charter School, Inc., Baltimore City schools who are appellants in this appeal, as

well as Lincoln Public Charter School, Inc., a Prince George’s County school. City

Neighbors, 400 Md. at 331.

4

students in the public charter schools are eligible such as free and reduced price meals, pre-

kindergarten, special education, English language learners, Perkins, Title I, and

transportation.” Id.

Noting that there was “no statewide formula or methodology for determining how

local school systems fund their schools,” the State Board decided on an “average per-pupil

amount,” which is then multiplied by the student enrollment of the school. Id. at 336-37.

The formula to determine the average per-pupil amount was the “[t]otal annual school

system operating budget,” excluding debt service and adult education, divided by the

“September 30 enrollment count for the previous year.” Id. at 337 & n.5. This amount

was then reduced by 2% for reasonable administrative costs of performing school system

central office functions. Id. at 337. 3 The Court determined that the Board’s use of an

average per pupil funding approach “had the virtues of both simplicity and flexibility,”

given that, at that time, there was not an enrollment history at the schools “upon which to

base a more refined enrollment-driven allocation of funds.” Id. at 355-56. Once that type

of history existed, however, the Board could revisit the issue. Id. at 356.

The Board again addressed charter school funding in Monocacy Montessori

Communities, Inc. v. Frederick County Board of Education, MSBE Op. No. 06-17, p. 3

3

In Baltimore City Bd. of School Comm’rs v. City Neighbors Charter School, 400

Md. 324, 338 (2007), the Court of Appeals explained the 2% deduction, as follows:

Recognizing that there were certain support functions, such as data

collection and the development of public charter school policies, that could

be performed only by the central office of the local school system, [the State

Board] directed that the total average per pupil amount be reduced by 2% as

a reasonable cost of performing those functions.

5

(May 24, 2006). As this Court explained in Frederick Classical Charter School, Inc. v.

Frederick County Board of Education, 227 Md. App. 439, 446, cert. granted, 448 Md. 724

(2016), the Board in Monocacy determined that “a school system could use a different

formula so long as it resulted in a ‘bottom line amount of money’” that the Board could

conclude amounted to the school system providing “proportionate/commensurate funds to

the charter school.”

More recently, in Frederick Classical, the Board again addressed funding issues

relating to a charter school. This Court upheld the Board’s determination that the charter

school was not entitled to funding for transportation costs when, pursuant to its charter

agreement, the school did not “participate in the public school transportation program,” but

rather, the families of the students provided transportation. Id. at 459. The Board

determined that a charter school is not entitled to receive funds for services it does not

provide, and if it did, it would receive “more than its share of commensurate county funds.”

Id. at 453.

Proceedings in the Present Case

In 2015, a number of Baltimore City’s public charter schools filed breach of contract

complaints against the City Board. 4 The complaints alleged that, for the 2015-2016 school

year, there would be 34 charter schools in Baltimore City, “with a combined enrollment of

approximately 13,724 students, or more than 15% of Baltimore City’s public school

enrollment.” The Charter Schools asserted that the Charter School Agreement (the

4

Appellants represent, and the record reflects, that the complaints were consolidated

by the time the stay order that is the subject of this appeal was issued.

6

“Contract”) that they entered into with the City Board, addressed, among other things,

funding of the schools and the City Board’s obligation to provide financial transparency in

the funding process. Specifically, the Contract provided the following:

6.1 OPERATING FUNDS. The parties agree that Title 9[5] requires funding

of the charter school that is commensurate with the amount disbursed to other

public schools in the local jurisdiction, and that Commensurate Funding is

integral to this contractual relationship and essential to the School Operator’s

ability to operate the School hereunder and that all funds provided by the

School Board to the school are to be used solely for the benefit of the school

and its students. Accordingly, during each school year during the Term, the

School Board shall allocate Commensurate Funding to the School Operator

for the following school year pursuant to Applicable Requirements. Any

financial commitment on the part of the School System contained in this

Agreement is subject to the annual appropriation by the School Board. The

School Board’s staff shall deliver to the School Operator a draft of the

funding formula including the amount of the estimated per pupil allocation

for the applicable school year (determined in accordance with the School

Board’s “approved funding formula” and Applicable Requirements) and will

make a good faith effort to deliver these materials in no less than two weeks

prior to the budget (distinct from the Budget of the School Operator covered

in Section 6.2) submission deadline for the School, such deadline to be

consistent with the deadline for all School System schools. The draft

document will include: (i) the School System’s budget and line item amounts

necessary to calculate the per pupil allocation, and (ii) copies of any materials

or documentation related thereto that is delivered to the School Board for

public presentation. Additionally, the School Board agrees to make

reasonable efforts to provide to the School Operator background information

on the methodology and assumptions behind the calculations as soon as such

materials are available.

(footnotes omitted).

The complaints asserted one count for breach of contract, averring that the City

Board “is contractually obligated to provide [the Charter Schools] ‘commensurate funding’

5

The contract defines “Title 9” as “the Public Charter School Act of 2003, Title 9

of the Education Article of the Maryland Annotated Code (‘Maryland Public Charter

School Program’).”

7

under the Contracts, but has failed to do so”; the City Board “is contractually obligated to

provide [the Charter Schools] certain budget and financial information under the Contracts,

but has failed to do so”; and the Charter Schools “ha[ve] sustained damages and will

continue to sustain damages as a result of [the City Board’s] breach of contract.”

Specifically, the complaints alleged that the City Board never provided the Charter

Schools with commensurate funding, and instead, “from year to year, arbitrarily presented

charter school operators with take-it-or-leave-it charter school per pupil figures derived

using varying (or no) calculation methodology, inflated estimates of overall System

enrollment, and unsupported and dubious financial and budget figures.” Further, the City

Board “failed to apply the per pupil calculation methodology put forth by the [State Board]

and affirmed by the Court of Appeals,” and it not only failed to disclose the details of its

calculations, but it “unilaterally changed their methodology in developing the amount to

be disbursed to charter schools.”

The City Board filed motions “to dismiss, or in the alternative, motion to stay,”

asserting, among other things, that the “gravamen” of the complaints, that the City Board

had not provided “commensurate funding” for charter school students, was a matter that

should be decided by the State Board, not the court, under the primary jurisdiction doctrine.

Noting that it had filed, the same day as it filed the motions to dismiss, a petition for

declaratory relief with the State Board, seeking a ruling that it had provided commensurate

funding and properly applied the funding formula, the City Board asked that the complaints

be dismissed pending a decision from the State Board. Alternatively, the City Board

8

proposed that the circuit court proceedings be stayed until the State Board, the body best

equipped to hear those issues, had ruled on the administrative proceeding.

The Charter Schools opposed the City Board’s motions, asserting that the circuit

court, not the State Board, “has proper jurisdiction over this breach of contract action.”

They asserted that the relief being sought was “equitable and legal redress and monetary

damages for [the City Board’s] ongoing breach of its contractual obligations to pass

through commensurate funding to [the Charter Schools] and its students in an open and

transparent process,” which is “not a dispute resolvable through administrative remedies.”

In any event, they argued, “the only remedy the . . . State Board . . . could provide – its

own interpretation of [the City Board’s] related statutory obligations,” including the

methodology applicable to funding of charter schools, had already been decided in City

Neighbors. Thus, they asserted, to the extent the State Board “ever had ‘primary

jurisdiction’ over its interpretation of [ED § 9-109] that jurisdiction has long been fully

completed.”

With respect to the alternative relief requested, the Charter Schools asserted that the

City Board’s motions to stay should be denied because its petition to the State Board was

not asking the State Board to interpret the “true intent and meaning” of education law, but

instead, it was requesting that the State Board “apply the education law, as already

explained and interpreted, and incorporated into a contract, to a specific set of

circumstances.” Moreover, they asserted that, because the State Board was not required to

issue a declaratory ruling, if the motions to stay were granted, appellants could “be left

indefinitely without any result.”

9

After a hearing on January 8, 2016, the circuit court issued a lengthy oral ruling

from the bench. The court relied heavily on the City Neighbors opinion, stating that the

following paragraph in the opinion was important:

Finally, perhaps in light of the fact that it was already dealing with three

charter schools and that there were several others in the pipeline and that it

was issuing a declaratory ruling, the Board noted that its opinions should be

used as “guidance and direction” to other charter school applicants and local

school systems “for the refinement of the working relationships on behalf of

the public school children throughout this [S]tate.”

(quoting City Neighbors, 400 Md. at 339). The circuit court explained that this paragraph

was important because it showed that the State Board understood that the methodology

identified “should be used as guidance and direction” in future cases.

The court ultimately determined that City Neighbors “provided sufficient guidance”

regarding the meaning of commensurate funding, including the “requisite factors to be

considered, the data to be considered.” Under these circumstances, it concluded that the

court was “no longer obliged to punt the issue to the expertise of the administrative body,”

but rather, it was entitled “to decline to invoke primary jurisdiction.” Accordingly, the

court denied the motion to dismiss.

After the circuit court ruled, the State Board dismissed the City Board’s petition,

without prejudice. It noted that the circuit court had “asserted its jurisdiction” on the issue,

and it did not serve the interests of conserving judicial (and quasi-judicial) resources to

have parallel proceedings. 6

6

The State Board further stated that the petition for declaratory ruling failed to

present any “concrete facts from which [it] could declare the law.”

10

Subsequently, the City Board filed counterclaims against the Charter Schools. It

stated that Baltimore City is the fourth largest school system in Maryland, serving 85,000

students in 186 schools and programs. Of those 186 schools, 34 are public charter schools,

and approximately 16% of all students in public schools attend charter schools.

The counterclaim alleged that the City Board’s goals for schools had to “be carried

out with limited resources that must be spread across a diverse population of students with

varying needs,” and if “Charter Schools receive more than their legally required share, less

money is available for students attending Traditional Public Schools.” The City Board

asserted that Charter Schools had received services that exceed “the 2% administrative cost

included in the funding formula,” and as a result, the Charter Schools had “received more

funding than the Traditional Public Schools.” Accordingly, because the parties disputed

“which services provided by the District Office are appropriately included in

‘Administrative Costs,’” the City Board sought a “declaratory judgment regarding which

services provided by the District Office are appropriately included in the funding formula

2% line item for ‘Administrative Costs.’” The City Board also sought damages for breach

of contract by the Charter Schools and unjust enrichment.

On April 18, 2016, a hearing was held on the Charter Schools’ motion to dismiss

the counterclaims. At the hearing, the court questioned whether there was an

administrative procedure pending, and it asked “what happened that causes you to

rightfully be in my courtroom.” 7 Counsel for the City Board responded:

7

The judge was not the same judge that had ruled in January that the court would

not invoke the doctrine of primary jurisdiction and dismiss the complaint.

11

I wish I was in front of you several months ago. I think in January we had a

hearing on a motion to dismiss where we argued exactly what Your Honor is

stating, the doctrine of primary jurisdiction that this case should be stayed in

favor of the State Board . . . making a determination of these issues and our

motion was denied.

After further discussion regarding the procedural history of the case, and after a

brief recess, the court noted that the City Board “would like to make an oral motion at this

time.” Counsel for the City Board then moved to dismiss “on the basis that the appropriate

tribunal or court or body to hear this matter is the State Board of Education.” Citing City

Neighbors, counsel stated that the “case law is very clear that that body should be the first

one to take up matters such as the ones that have been raised by the Plaintiff here relating

to intricate, detailed, and important issues of public policy relating to education and

educational funding.”

Counsel for the Charter Schools responded that the claim raised in the complaint

was for breach of contract, and the resolution of such disputes are for the courts. Counsel

asserted that the issue of commensurate funding had already been settled and affirmed by

the courts, thus “satisfying the requirements of primary jurisdiction of letting the

administrative agency have a crack at setting out the interpretation.”

The court ultimately granted the Charter Schools’ motion to dismiss the

counterclaim seeking declaratory judgment, without prejudice. With respect to the other

matters, however, it ruled that dismissal was not appropriate, and the action should be

stayed “pending the matter be administratively reviewed before it comes to the [c]ircuit

[c]ourt.” The court entered a written order to that effect.

12

On May 5, 2016, the Charter Schools filed this appeal seeking review of the court’s

stay order. 8

DISCUSSION

The issue presented by the Charter Schools involves the exhaustion of

administrative remedies. As the Court of Appeals has explained, when the General

Assembly provides an administrative remedy and a judicial remedy to resolve a matter, the

relationship between the remedies typically falls into one of three categories:

“[T]he administrative remedy may be exclusive, thus precluding any resort

to an alternative remedy. Under this scenario, there simply is no alternative

cause of action for matters covered by the statutory administrative remedy.

[T]he administrative remedy may be primary but not exclusive. In this

situation, a claimant must invoke and exhaust the administrative remedy, and

seek judicial review of an adverse administrative decision, before a court can

properly adjudicate the merits of the alternative judicial remedy.

[T]he administrative remedy and the alternative judicial remedy may be fully

concurrent, with neither remedy being primary, and the plaintiff at his or her

option may pursue the judicial remedy without the necessity of invoking and

exhausting the administrative remedy.”

United Ins. Co. of Am. v. Maryland Ins. Admin., 450 Md. 1, 14-15 (2016) (quoting Prince

George’s County. v. Ray’s Used Cars, 398 Md. 632, 644-45 (2007)). In the situation where

there is no “specific statutory language indicating the type of administrative remedy, there

8

The City Board subsequently filed a second petition with the State Board seeking

a declaratory ruling that it had provided, and continued to provide, “cash and services to

all of its charter schools . . . that amount to more than commensurate funding.” It also

requested that the State Board “raise the 2% cap” or “clarify that the 2% cap covers only a

limited bundle of services.” After the Charter Schools opposed the petition, noting this

appeal, the State Board dismissed the second petition “because the case remains within the

jurisdictional purview of the courts.”

13

is a rebuttable presumption that an administrative remedy was intended to be primary,”

which means that “‘a claimant cannot maintain the alternative judicial action without first

invoking and exhausting the administrative remedy.’” Id. at 15 (quoting Zappone v.

Liberty Life Ins. Co., 349 Md. 45, 63 (1998)).

Primary jurisdiction applies “‘where the claim is initially cognizable in the courts

but raises issues or relates to subject matter falling within the special expertise of an

administrative agency.’” Luskin’s Inc. v. Consumer Prot. Div., 338 Md. 188, 195 (1995)

(quoting Maryland-Nat’l Capital Park & Planning Comm’n v. Washington Nat’l Arena,

282 Md. 588, 602 (1978)). In the situation where the administrative remedy is deemed to

be primary, it generally “must be pursued and exhausted before a court exercises

jurisdiction to decide the controversy.” Hubbard, 305 Md. at 786. Accord Arroyo v. Bd.

of Educ. of Howard County, 381 Md. 646, 658 (2004) (primary jurisdiction applies where

resolution of issues, under a regulatory scheme, are “‘placed within the special competence

of an administrative body’”) (quoting United States v. Western Pacific R.R. Co., 352 U.S.

59, 64 (1956)).

The Court of Appeals has held that the State Board has “primary jurisdiction over

all State educational provisions.” Patterson Park, 399 Md. at 202. Given the “very nature

of the administrative framework of the Education Article,” the General Assembly “meant

to grant primary jurisdiction to a board of education in questions involving controversies

and disputes that arise under provisions” of the Education Article. Arroyo, 381 Md. at 663.

Accord Clinton v. Bd. of Educ. of Howard County, 315 Md. 666, 675-78 (1989) (where a

claim requires the interpretation and application of provisions of the Education Article, the

14

State Board has primary jurisdiction); Hubbard, 305 Md. at 788 (State Board had primary

jurisdiction over question involving teacher collective bargaining given its visitatorial

power to “decide all controversies and disputes” under the Education Article). 9

As indicated, the circuit court determined that the State Board has primary

jurisdiction over issues involved in the Charter Schools’ breach of contract claim against

the City Board, and therefore, it stayed the circuit court proceedings pending administrative

review of the parties’ dispute (the “Stay Order”). Although the Charter Schools argue that

the court’s ruling in this regard was erroneous because primary jurisdiction does not apply

in this case, we must address first whether this case is properly before this Court, i.e.,

whether this Court has appellate jurisdiction over the case.

The parties do not seek a ruling on the issue whether the Stay Order is an appealable

issue. 10 This Court, however, must address appellate jurisdiction “even if the parties have

9

The State Board exercises that authority by adjudicating appeals from local boards

and by adjudicating petitions for declaratory rulings. Dorchester County v. Hubbard, 305

Md. 774, 788-90 (1986). See City Neighbors, 400 Md. at 346 (“Declaratory rulings are

thus a permissible mechanism by which [the State Board] may exercise its statutory

authority to ‘explain the true intent and meaning’ of the public school laws and decide

‘controversies and disputes’ under those laws.”).

10

The City Board did file, prior to filing its brief, a motion to dismiss the appeal on

the ground that the Stay Order was not an appealable order. This Court denied the motion,

“with leave to seek that relief in Appellee’s brief.” The City Board did not, however,

include a motion to dismiss in its brief or request a ruling on whether the Stay Order was

an appealable order, and the issue was not raised during oral argument. After argument,

this Court requested the parties to address whether the Stay Order was an appealable order.

The City Board filed a memorandum stating its view that the Stay Order was not an

appealable order, but asking the Court, “in the interest of judicial economy and

jurisdictional clarity,” to rule on the merits and hold that the State Board had primary

jurisdiction over the dispute.

15

overlooked the issue or would prefer an immediate appellate determination.” FutureCare

NorthPoint, LLC v. Peeler, 229 Md. App. 108, 118 (2016). See also Renaissance Centro

Columbia, LLC v. Broida, 421 Md. 474, 489 (2011) (court will consider issues of

jurisdiction and exhaustion of an administrative remedy even though not raised by the

parties). “‘Where appellate jurisdiction is lacking, the appellate court will dismiss the

appeal on its own motion.’” Schuele v. Case Handyman and Remodeling Srvcs., 412 Md.

555, 565 (2010) (quoting Gruber v. Gruber, 369 Md. 540, 546 (2002)).

“In Maryland, appellate jurisdiction, except as constitutionally created, is statutorily

granted.” Id. As this Court recently explained: “Except in a case involving one of the

narrow exceptions under [Md. Code (2013)] § 12-303 [of the Courts & Judicial

Proceedings Article], the collateral order doctrine, or Rule 2-602(b), a party may appeal

only from a final judgment on the merits.” FutureCare, 229 Md. App. at 118. We will

address first whether the Stay Order is a final judgment, and then we will address the

Charter School’s claim that the order is appealable pursuant to the collateral order

doctrine. 11

“[T]o constitute a final judgment, a trial court’s ruling ‘must either decide and

conclude the rights of the parties involved or deny a party the means to prosecute or defend

rights and interests in the subject matter of the proceeding.’” Md. Bd. of Physicians v.

Geier, ___ Md. ___, No. 11, Sept. Term, 2016, slip op. at 15 (filed Jan. 23, 2017) (quoting

Schuele, 412 Md. at 565). Here, the Stay Order did not conclude the rights of the parties

11

The other two exceptions are not applicable here, and the Charter Schools do not

argue to the contrary.

16

or adjudicate all of the claims in the action. Thus, the issue is whether the Stay Order

denied the Charter Schools the ability to litigate its breach of contract claim and resulted

in the Charter Schools being put effectively out of court. See Schuele, 412 Md. at 571 (an

order compelling arbitration of a controversy is appealable as a final judgment because it

“‘has the effect of putting the parties out of court’”) (quoting Town of Chesapeake Beach

v. Pessoa Constr. Co., 330 Md. 744, 750-53 (1993)).

Here, City Board argues that the Stay Order did not have the effect of putting the

Charter Schools out of court because it merely “directed that the parties first go to the State

Board,” which is “a jurisdictional issue regarding which body should hear threshold issues

in the case in the first instance.” We agree. Once the State Board makes a determination

on the commensurate funding issues presented, the breach of contract case can return to

the circuit court and proceed on the merits. The Stay Order effectively operates as a

postponement of trial, not as an order resulting in the Charter Schools being put effectively

out of court.

Other courts have reached a similar conclusion. For example, in Crystal Clear

Commc’ns, Inc. v. SW Bell Tel. Co., 415 F.3d 1171, 1173 (10th Cir. 2005), a federal trial

court issued an order similar to the one here, staying a lawsuit filed by several payphone

providers against Southwestern Bell Telephone Company, pending the resolution of certain

issues by federal and state agencies. The United States Court of Appeals for the Tenth

Circuit noted that, although a decision to stay litigation ordinarily does not constitute a

final judgment, there is an exception for a stay order that puts a party “effectively out of

court.” Id. at 1175 (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460

17

U.S. 1, 10 n.11 (1983)). The Court held, however, that the order in that case, staying the

proceedings in court pending resolution of certain issues by the agencies pursuant to the

primary jurisdiction doctrine, with contemplation of return to court, was not a final

decision. Id. at 1176-78.

That is not to say that a stay order pending administrative review can never qualify

as a final judgment. In Occidental Chem. Corp. v. Louisiana Pub. Serv. Comm’n, 810 F.3d

299, 305, 307 (5th Cir. 2016), the United States Court of Appeals for the Fifth Circuit

addressed whether an order by a federal court indefinitely staying proceedings to allow the

Federal Energy Regulatory Commission to act on an administrative complaint was a final

judgment when the court retained jurisdiction for a later determination on the merits. The

Fifth Circuit held that the order in that case “functioned as a final decision” because it

resulted in Occidental being “effectively out of court” for a protracted and indefinite

period, and therefore, the order was appealable.

Here, there is no indication that the State Board will delay in deciding the

commensurate funding issue. Although the State Board declined to weigh in on the issue

while the matter was simultaneously being pursued in court, that reasoning no longer is

applicable. Because there is no indication that there will be a substantial delay in obtaining

an administrative ruling, if there is a proper request, the Stay Order does not place the

Charter Schools “effectively out of court.” 12 The Stay Order merely postpones resolution

12

As the Charter Schools acknowledge, they can file a “petition for declaratory

ruling by the State Board on the interpretation of a public school law or regulation of the

State Board that is material to an existing case or controversy.” Code (continued . . .)

18

of the contract case pending guidance from the State Board on the commensurate funding

issues. Under these circumstances, the Stay Order is not a final judgment.

We thus turn to the Charter School’s argument that the Stay Order is appealable

under the collateral order doctrine. This doctrine is “‘based upon a judicially created

fiction, under which certain interlocutory orders are considered to be final judgments, even

though such orders clearly are not final judgments.’” Geier, slip op. at 16 (quoting Dawkins

v. Balt. City Police Dep’t, 376 Md. 53, 64 (2003)). Application of the doctrine “‘is very

limited’” Schuele, 412 Md. at 572 (quoting Walker v. State, 392 Md. 1, 15 (2006)), and it

“should be applied sparingly in only the most extraordinary circumstances.” Id.

To be appealed under the collateral order doctrine, an order must meet the following

four requirements: “‘(1) conclusively determines the disputed question, (2) resolves an

important issue, (3) resolves an issue that is completely separate from the merits of the

action, and (4) would be effectively unreviewable if the appeal had to await the entry of a

final judgment.’” Id. (quoting Walker, 392 Md. at 15). These requirements are “strictly

applied.” Dawkins, 376 Md. at 59.

The Charter Schools contend that the Stay Order meets each of the four

requirements. We disagree.

Initially, the Stay Order does not meet the third requirement, that it resolve an issue

separate from the merits of the action. Indeed, other courts have found that “the issues

involved in a determination of primary jurisdiction are ‘inextricably bound up’ with a

(. . . continued) of Maryland Regulations 13A.01.05.02(D). The issue in this case, the

interpretation of “commensurate” funding, appears to be encompassed by this provision.

19

determination of the merits” of a case. Crystal Clear, 415 F.3d at 1179-80 (quoting

Richman Bros. Records, Inc. v. U.S. Sprint Commc’ns Co., 953 F.2d 1431, 1447 (1991)).

As the court in Crystal Clear explained:

The entire purpose of the primary jurisdiction doctrine is to allow agencies

to render opinions on issues underlying and related to the cause of action.

See United States v. W. Pac. R.R. Co., 352 U.S. 59, 63-64 (1956). Moreover,

in order to determine whether the doctrine of primary jurisdiction was

implicated in this case, the district court was required to give preliminary

consideration to plaintiffs’ claims to determine the extent to which they fell

under the jurisdiction of the FCC and OCC. See Delta Traffic Serv., Inc. v.

Occidental Chem. Corp., 846 F.2d 911, 914 (3d Cir.1988) (“Only after [the

district court] had ascertained the nature of the claim and related defenses

could it know whether it needed to request the expert and specialized

knowledge of the [agency] as a preliminary step in the resolution of this

matter.” (quotation omitted)). In particular, the district court’s decision

whether to invoke primary jurisdiction required it to consider whether the

issues of fact in the case: (1) are not within the conventional experience of

judges; (2) require the exercise of administrative discretion; or (3) require

uniformity and consistency in the regulation of the business entrusted to a

particular agency. See Marshall v. El Paso Natural Gas Co., 874 F.2d 1373,

1377 (10th Cir.1989). These issues are all highly dependent on the specific

allegations in plaintiffs’ complaint and required the district court to examine

factual and legal issues underlying the dispute. The parties’ briefs on appeal,

filled with detailed factual and legal arguments regarding plaintiffs’ claims,

further underscore the impropriety of reviewing the district court’s stay order

prior to final judgment.

Id. at 1179 (parallel citations omitted). Accord Beach TV Cable Co. v. Comcast of

Florida/Georgia, LLC, 808 F.3d 1284, 1292 (11th Cir. 2015) (order staying action pending

resolution of issue by an administrative agency, pursuant to the primary jurisdiction

doctrine, is not appealable under the collateral order doctrine because “decision whether to

refer a case for administrative action was sufficiently bound up with the merits”).

20

We agree with this reasoning. A trial court’s determination whether the primary

jurisdiction doctrine is applicable “is not sufficiently separable from the cause of action”

to be appealable under the collateral order doctrine. Id. at 1291. 13

The Charter Schools contend, however, that Crystal Clear “runs counter to

established Maryland law” and “cannot constitute even persuasive authority.” We

disagree.

County Comm’rs of Frederick County v. Schrodel, 320 Md. 202 (1990), upon which

the Charter Schools rely, is distinguishable. In that case, Frederick County brought an

eminent domain action to acquire property for use as a landfill. Id. at 204. The circuit

court granted the Schrodels’ motion for a postponement of the condemnation trial on the

merits, enjoining the condemnation action until the County obtained a Maryland

Department of the Environment permit to construct a landfill on the property. Id. at 210-

12.

The Court of Appeals concluded that the order was an appealable interlocutory order

under the collateral order doctrine because the order “ha[d] the effect of blocking the

County from prosecuting its condemnation action against the Schrodels unless and until it

obtain[ed] a state permit to construct the landfill on the property,” thereby satisfying “all

13

Although our analysis could end at this point, we further note that the Stay Order

does not meet the fourth requirement, that it be “effectively unreviewable” on appeal. This

requirement is met in “‘very few [and] extraordinary situations. Otherwise, . . . there would

be a proliferation of appeals under the collateral order doctrine.’” Stephens v. State, 420

Md. 495, 505 (2011) (quoting In re: Foley, 373 Md. 627, 636 (2003)). Here, after the State

Board has determined the commensurate funding issue, and the stay is lifted and the breach

of contract suit is resolved, the Charter Schools can challenge the circuit court’s ruling on

appeal.

21

four requirements of the collateral order doctrine.” Id. at 212. First, the Court noted that

the order “conclusively determined that the County must wait until it receives a permit

from the Maryland Department of the Environment before it can go to trial with its

condemnation case.” Id. Second, “the issue of whether a court can lawfully impose such

a condition on the government’s power to acquire property by condemnation is clearly

important.” Id. Third, “the question of whether the County can be required to obtain the

permit before having a trial is obviously distinct from the trial itself.” Id. And fourth, the

Court stated that, “if not appealable until the trial’s conclusion, the claim that the County’s

right to condemn cannot be conditioned on first obtaining all necessary permits would

irretrievably be lost,” as the “government already will have had to comply with a possibly

unlawful condition.” Id.

The Court noted that a stay order ordinarily is not appealable. Id. at 213. In holding,

however, that the interlocutory order in that case was appealable, the Court noted the

unique circumstances of that case, stating:

The circuit court granted no ordinary postponement of the trial. Not only is

the length at least eighteen months, but it is certain that there will never be a

trial if the County fails to obtain the permit. The order in this case assures

that if the County does get the permit, only then can it prepare the property

as a landfill. An important government prerogative has been delayed or

defeated because of an allegedly unlawful condition. The vast majority of

postponement orders, in contrast, merely require a party to wait longer for

trial.

Id. at 214. The Court emphasized “that this is a case where ‘our holding concerning

appealability goes no further than the circumstances presented in this case.’” Id. (quoting

Public Service Comm’n v. Patuxent Valley, 300 Md. 200, 210 (1984)).

22

This case is very different from Schrodel. Initially, as previously explained, unlike

the issue of whether a permit is required before prosecuting a condemnation action, the

issue of primary jurisdiction is “bound up” with the merits of the action. Thus, although

the third requirement of the collateral order doctrine was satisfied in Schrodel, it is not

satisfied in this case. Moreover, the Stay Order here, unlike the order in Schrodel, is more

akin to a mere postponement of trial. Once the State Board makes a determination on the

commensurate funding issue, a determination entrusted to the State Board, Charter Schools

can return to the circuit court and proceed on the merits of its breach of contract claim. The

Stay Order here is not appealable under the collateral order doctrine.

Accordingly, because the Stay Order is not a final judgment, and it is not appealable

under the collateral order doctrine, we must dismiss the appeal.

APPEAL DISMISSED. COSTS TO

BE PAID BY APPELLANTS.

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