Nov. 1, 2016 – A private school in Milwaukee that receives public subsidies under the state’s school choice program asked the court to invalidate a settlement agreement that required the school to pay a surety bond. Recently, a state appeals court said no.

Travis Tech was participating in the Milwaukee Parental Choice Program (MPCP), created in 1989. The program subsidizes private school for low-income families in Milwaukee. The Department of Public Instruction (DPI) administers the program.

DPI can impose sanctions on private schools or bar them from participation if they do not meet program requirements. For instance, every school must annually file a financial report. For four consecutive years, Travis Tech did not submit its annual financial report by the deadline set by state statute, which is September 1.

In 2014, DPI notified Travis Tech of a preliminary decision to bar the school from participation in the MPCP program and to withhold future subsidy payments. When DPI declined to vacate the decision, DPI and Travis Tech began settlement discussions.

The sides reached a settlement agreement. Travis Tech agreed to pay a surety bond equal to 25 percent of the total MCPC payment for that school year.

Travis Tech also agreed that DPI would withhold any payment until the school obtained the bond, and agreed to waive its right to judicial review if DPI barred participation in the program based on a failure to comply with the agreement. Two days after signing the agreement, Travis Tech requested release from surety bond requirement.

DPI declined to release the school from the bond requirement and refused to extend the deadline for obtaining the bond. Ultimately, DPI notified Travis Tech that it was barred from participation in the program, based on its failure to obtain the bond as required. It noted that Travis Tech released its appeal rights under the settlement agreement.

Travis Tech sought judicial review, arguing DPI could not require the school to obtain a surety bond and any provision that forced Travis Tech to waive its right to appeal was unenforceable. The Milwaukee County Circuit Court ruled in favor of Travis Tech.

But in Ceria M. Travis Academy Inc. v. Evers, 2015AP2314 (Oct. 31, 2016), a three-judge panel for the District I Court of Appeals reversed, concluding that DPI was within its authority to require a surety bond and Travis Tech waived its right to appeal.

Travis Tech had argued that under the administrative code, the superintendent can only require a surety bond if he or she “determines that a school is not financially viable.” DPI did not find that Travis Tech was not financially viable, the school’s lawyer argued.

But the panel noted Travis Tech agreed to the bond. “Travis Tech argues that parties can never stipulate to provisions that abrogate any part of statutory law. We disagree,” wrote Judge Joan Kessler. “Nothing in the Administrative Code prohibits parties represented by counsel from entering into a Settlement Agreement, including one such as this, which provides benefits to both parties.”

Travis Tech also argued that even though it waived its right to appeal under the settlement agreement, that waiver provision was unenforceable.

The panel disagreed, noting that a party can waive a statutory right so long as the party waiving the right has actual knowledge of the rights that party is waiving.

“This record establishes that Travis Tech had actual knowledge of its right to judicial review, and had actual knowledge of and understood the consequences if it failed to perform its obligation under the Agreement,” Judge Kessler explained.

The appeals court panel said the parties must be returned to the legal status that existed before the circuit court invalidated the agreement between the parties.