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NO. 10-0929 IN THE SUPREME COURT OF TEXAS ALPHONSO

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NO. 10-0929 IN THE SUPREME COURT OF TEXAS ALPHONSO Powered By Docstoc
					                                      NO. 10-0929

                                        IN THE
                              SUPREME COURT OF TEXAS
                            _______________________________


    ALPHONSO CRUTCH LIFE SUPPORT CENTER CHARTER SCHOOL, INC,
                                         Petitioner,

                                          v.

                 ROBERT SCOTT, COMMISSIONER OF EDUCATION
                                                    Respondents,
                __________________________________________________

                             Petition for Review From the
                        Third Court of Appeals at Austin, Texas
                                  No. 03-09-00423-CV
               ____________________________________________________

                       PETITIONER'S BRIEF ON MERITS
      __________________________________________________________________

Counselors for Petitioner

Law Offices of Gary L. Bledsoe & Associates           Law Offices of Ron Wilson
Gary L. Bledsoe                                       Ron Wilson
State Bar No. 02476500                                State Bar No. 00785583
316 West 12th Street, Suite 307                       316 West 12th Street, Suite 307
Austin, Texas 78701                                   Austin, Texas 78701
Telephone: (512) 322-9992                             Telephone: (512) 322-9992
Facsimile: (512) 322-0840                             Facsimile: (512) 322-0840




                            ORAL ARGUMENT REQUESTED
                         IDENTITY OF PARTIES AND COUNSEL
The undersigned counsel of record certifies that the following listed persons have an interest in
the outcome of this case. These representations are made in order that the Judges of this Court
may evaluate possible disqualifications or recusal.
                                          A. Parties:

Petitioner:                              Alphonso Crutch Life Support Center

Respondent:                              Robert Scott, Commissioner of Education

                                         B. Attorneys:

For Petitioner:                          Gary L. Bledsoe
                                         Law Offices of Gary L. Bledsoe & Associates
                                         316 West 12th Street, Suite 307
                                         Austin, Texas 78701
                                         Telephone No. (512) 322-9992
                                         Facsimile No. (512) 322-0840

                                         Ron Wilson
                                         Ron Wilson & Associates, P.C.
                                         316 West 12th Street, Suite 307
                                         Austin, Texas 78701
                                         Telephone No. (512) 322-9992
                                         Facsimile No. (512) 322-0840

For Respondent:                          Beth Klusmann
                                         Assistant Solicitor General
                                         Office of Attorney General
                                         P.O. Box 12548 (MC 059)
                                         Austin, Texas 78711
                                         Telephone No. (512) 936-1914
                                         Facsimile No. (512) 474-2697

                                         Mishell B. Kneeland
                                         Assistant Attorney General
                                         Office of Attorney General
                                         P.O. Box 12548 (MC 059)
                                         Austin, Texas 78711
                                         Telephone No. (512) 936-1914
                                         Facsimile No. (512) 474-2967
                                                 TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL……………………………………….…...…........ii

INDEX OF AUTHORITES……………………………………………………………...…......iv

STATEMENT OF THE CASE…………………………………………….………………........x

ISSUES PRESENTED………………………………………………………..….….................vii

STATEMENT OF FACTS……………………………………...………………........................1

ARGUMENT………………………….………………………………………….…………....15

I. The students attending Alphonso Crutch had a right to an adequate education that was
stripped away without due process as required by the Fourteenth Amendment and the
Texas Constitution....................................................................................................................15
         A. Both the School and its students have liberty and property interests, and are entitled
         to due process of law........................................................................................................24

         B. TEA’s Record Review process falls short of what is required under due process...37

PRAYER……………………………………………………………….……………….….......50

CERTIFICATE OF SERVICE………………………………………….…………….……......51
                                             INDEX OF AUTHORITIES


Cases:

Aetna Life Ins. Co. v. Lavoie,
      475 U.S. 813 (1986).........................................................................................................38

Allen v. State of Tex.,
       249 S.W.3d 680 (Tex. App.—Austin 2008, no pet.)........................................................45

Blair v. Texas Dept. of Human Serv.,
       837 S.W.2d 670 (Tex. App.—Austin 1992, no writ).......................................................37

Bd. of Regents of State Colleges v. Roth,
       408 U.S. 564 (1972)........................................................................................................27

Bolling v. Sharp,
       347 U.S. 497 (1954)....................................................................................................17,27

Brown v. Bd. of Educ.,
     347 U.S. 483 (1954)....................................................................................................15-17

Caperton v. A.T. Massey Coal Co., Inc.,
      129 S.Ct. 2252 (2009).....................................................................................................38

Cent. Power and Light Co. v. Sharp,
       960 S.W.2d 617 (Tex. 1997)............................................................................................35

Cherokee Nation of Okla. v. Leavitt,
      543 U.S. 631 (2003)........................................................................................................28

City of Arlington v. Centerfolds, Inc.,
       232 S.W.3d 238 (Tex. App.—Fort Worth 2007, pet. Denied)..........................................44

City of Dallas v. MD II Entertainment, Inc.,
       974 S.W.2d 411 (Tex. App.—Dallas 1998, no pet.).........................................................36

Coggin v. Longview Indep. Sch. Dist.,
      337 F.3d 459 (5th Cir. 2003)............................................................................................35

Dotson v. Grand Prairie Indep. Sch. Dist.,
      161 S.W.3d 289 (Tex. App.—Dallas 2005, no pet.).........................................................35
Edgewood Indep. Sch. Dist. v. Meno,
     917 S.W.2d 717 (Tex. 1995)........................................................................................15,18

Edwards Aquifer Auth. v. Day,
     274 S.W.3d 742 (Tex. App.—San Antonio 2008, pet. Denied).......................................49

Ferguson v. Thomas,
      430 F.2d 852 (5th. Cir. 1970). …....................................................................................25

Francisco v. Bd. of Dental Examiners,
      149 S.W.2d 619 (Tex. Civ. App.—Austin 1941, writ ref’d)...........................................41

Freeman v. Ortiz,
     153 S.W. 304 (Tex. 1913)...............................................................................................38

Fusari v. Steinberg,
      419 U.S. 379 (1975)........................................................................................................38

Geeslin v. State Farm Lloyds,
      255 S.W.3d 786 (Tex. App.—Austin 2008, no pet.).......................................................44

Goldberg v. Kelly,
      397 U.S. 254 (1970)...................................................................................................28,38

Goss v. Lopez,
      419 U.S. 565 (1975)...................................................................................................27,28

Grosjean v. American Press Co.,
      297 U.S. 233 (1936).........................................................................................................25

House of Tobacco, Inc. v. Calvert,
      394 S.W.2d 654 (Tex. 1965).......................................................................................40,41

Jaenicke v. State of Tex.,
      109 S.W.3d 793 (Tex. App.—Houston [1st Dist.] 2003, pet. ref’d)...........................44,46

Jernigan v. Finley,
      38 S.W. 24 (Tex. 1896)....................................................................................................33

Joint Anti-Fascist Refugee Comm. v. McGrath,
       341 U.S. 123 (1951)....................................................................................................26,38

Jones v. Clarksville,
      46 S.W.3d 467 (Tex. App—Dallas 2001, no pet.)............................................................35
Lambright v. Tex. Parks and Wildlife Dep’t,
     157 S.W.3d 499 (Tex. App.—Austin 2005, no pet.).........................................................43

Love v. City of Dallas,
       40 S.W.2d 20 (Tex. 1931)..........................................................................................33,.34

LTTS Charter Sch., Inc. v. C2 Construction, Inc.,
     2011 WL 2420204. ….....................................................................................................16

Mathews v. Eldridge,
      424 U.S. 319 (1976)..............................................................................................25,38,41

Mellinger v. City of Houston,
       3 S.W. 249 (Tex. 1887)...................................................................................................25

Neeley v. West Orange-Cove Consol. Indep. Sch. Dist.,
      176 S.W.3d 746 (Tex. 2008)..................................................................................16,18,19

Office of Pub. Util. Counsel v. Pub. Util. Comm’n,
       185 S.W.3d 555 (Tex. App.—Austin 2006, pet. Denied)................................................44

Rector v. Tex. Alcoholic Beverage Comm’n,
      599 S.W.2d 800 (Tex. 1980)............................................................................................38

Reliant Energy, Inc. v. Public Util. Comm’n of Tex.,
      62 S.W.3d 833 (Tex. App.—Austin 2001).......................................................................43

Richards v. Mena,
      907 S.W.2d 566 (Tex. App.—Corpus Christi 1995, writ dism’d)...................................21

Richardson v. City of Pasadena,
      513 S.W.2d 1 (Tex. 1974)................................................................................................38

San Antonio Indep. Sch. Dist. v. Rodriquez,
      411 U.S. 1 (1973).............................................................................................................33

State v. Ball,
       296 S.W. 1085 (1927)......................................................................................................38

State v. Epperson,
       42 S.W.2d 228 (Comm’n of Appeals 1931).....................................................................37


State Bd. of Ins. v. Deffenbach,
       631 SW2d 794 (Tex. App.—Austin 1982, writ ref’d n.r.e.)............................................43
Steddum v. Kirby Lumber Co.,
      221 S.W. 920 (Tex. 1920)...............................................................................................38

Texas Educ. Agency v. Leeper,
      893 S.W.2d 432 (Tex. 1994).......................................................................................35,36

Tex. Hosp. Ass’n v. Tex. Workers Compensation Comm’n,
      911 SW2d 884 (Tex. App.—Austin 1996, writ denied)..................................................44

Texas Workers Compensation Comm’n v. Patient Advocates of Tex.,
      136 S.W.3d 643 (Tex. 2004).......................................................................................36,42

Univ. of Tex. Medical Sch. at Houston v. Than,
       901 S.W.2d 926 (Tex. 1995).......................................................................................28,37

Vick v. State,
        268 S.W.3d 859 (Tex. App.—Texarkana 2008, pet. ref’d)....................................36,37,46

Vogt v. Bexar County,
       23 S.W. 1044 (Tex. Civ. App. 1893)................................................................................38

Wieman v Updegraff,
      344 U.S. 183 (1952)........................................................................................................28
      .
Williams v. State of Tex.,
      89 S.W.3d 325 (Tex. App.—Texarkana 2002, pet. ref’d)................................................45

Texas Education Code (`TEC`):
§ 7.057.....................................................................................................................08,09,23,34,35
§12.104.......................................................................................................................................17
§12.105.......................................................................................................................................16
§12.106(a) .................................................................................................................................16
§25.085.......................................................................................................................................17
§28.0211......................................................................................................................................17
§28.0213.....................................................................................................................................17
§28.006.......................................................................................................................................17
§28.025.......................................................................................................................................17
§33.081...................................................................................................................................17,24
§37.0021......................................................................................................................................17
§42.002.......................................................................................................................................22
§42.003 ......................................................................................................................................22
§42.253.......................................................................................................................................22
§ 42.258...................................................................................................................07,23,34,35,36
§43.001.......................................................................................................................................34


Administrative Code:
19 TAC….....................................................................................................................42,48,49,50
19 TAC 97.1037...........................................................................................................42,48,49,50

19 TAC 97.1037(e)(8) and (e)(10)..............................................................................................49

19 TAC 157, Subchapter EE. 19 TAC 97.1037(d)(1)(D)......................................................49,50

19 TAC 157.1157........................................................................................................................49

Texas Constitution:
Article I §17 …...........................................................................................................................35
Article I §19...........................................................................................................................23,36

Article 7 §1 …..................................................................................................15,18,19,33,36,39

United States Constitution:
14th Amendment.........................................................................................................15,22,23,37

Texas Government Code:
§ 403.055...............................................................................................................................23,36




Other Sources:
Charter Schools in Texas: Facts and Figures. Texas Association of School Boards (2010).......2

“The Economic Impact of the Achievement Gap in America's Schools, McKinsey and
Company (2009)..........................................................................................................................20
http://www.mckinsey.com/app_media/images/page_images/offices/socialsector/pdf/achievement_gap_
report.pdf

Civil Practice and Remedies Code §106.001...................................................................21,22,24
33 TexReg 143............................................................................................................................42

33 TexReg 9462......................................................................................................................42,43

35 TexReg 11228....................................................................................................................42,44
                                 STATEMENT OF THE CASE


Nature of the Case:               After Petitioner prevailed in district court on Respondent’s
                                  Plea to the Jurisdiction the Respondent filed an interlocutory
                                  appeal to the 3rd Court of Appeals. The 3rd Court granted
                                  Respondent’s relief in part and denied it in large part. This is
                                  a partial appeal from the decision of the 3rd Court on whether
                                  a charter school or public school has a right to due process of
                                  law when it has a claim of entitlement to funding but the
                                  Texas Education Agency denies it funding to the extent it
                                  threatens to shut down the charter and at the very least
                                  prevents it from being able to comply with statutory
                                  requirements applying to public schools to educate students,
                                  pay staff, provide security, etc.      This appeal implicates
                                  statutory and constitutional rights.


Trial Court:                      The Honorable John K. Dietz, 53rd District Court, Travis
                                  County, Texas.


Trial Court Disposition:          The trial court denied the Commissioner’s plea to the
                                  jurisdiction.


Parties in Court of Appeals:      Appellant: Robert Scott, Commissioner of Education.


                                  Appellee: Alphonso Crutch Life Support Center


Court of Appeals:                 Third Court of Appeals at Austin, Texas


Court of Appeals’ Disposition:    The Court affirmed the district court's order denying the

                                                  10
Commissioner's plea to the jurisdiction with respect to the School's ultra vires claims and equal

protection claim, and reversed the district court's order with respect to the due process of law

and improper funding claims of the school. Scott v. Alphonso Crutch LSC Charter School,

Inc. No. 03-09-00423-CV. S.W.3d, 2010 WL 3271738 (Tex. App.- August 20, 2010) (Waldrop J.,

joined by Jones, CJ and Pemberton, J.).




                                                11
                             STATEMENT OF JURISDICTION

Sec. 22.001. JURISDICTION. (a) The supreme court has appellate jurisdiction in the
following: (2) a case in which one of the courts of appeals holds differently from a prior
decision of another court of appeals or of the supreme court on a question of law material to a
decision of the case. Jernigan and Love clearly hold differently than the 3rd Court of Appeals.

             (3) a case involving the construction or validity of a statute necessary to a
determination of the case. The 3rd Court wrongly interpreted TEC 42.258 insofar as whether it
provided for due process of law to Crutch.
              (4) a case involving state revenue as this one involves funding from the
Texas Foundation School Program to educate public school students;
              (6) any other case in which it appears that an error of law has been committed by
the court of appeals, and that error is of such importance to the jurisprudence of the state that,
in the opinion of the supreme court, it requires correction, but excluding those cases in which
the jurisdiction of the court of appeals is made final by statute. The opinion of the Court of
Appeals cannot be read to sanction TEA's method of funding charter schools.




                                               12
                                   ISSUES PRESENTED


ISSUE ONE: Are there other Constitutional provisions, laws or rules that will have a bearing

on whether the School was entitled to due process of law?

ISSUE TWO: Was Alphonso Crutch entitled to Due Process of Law Under the 14th

Amendment to the United States Constitution or the Due Course or Due Process of Law

Provisions found in the Texas Constitution or various Texas Statutes?




                                              13
                                            FACTS

      The State of Texas has provided for the creation of public charter schools to be part of its

system of public education. The State has limited the number of charters available, making the

existing charters very valuable assets. Alphonso Crutch Life Support Center, Inc. (“Crutch”,

“the School”) is a non-profit organization located in Houston, Texas, that engages solely in the

business of providing education to students through the Texas charter school system. It is

estimated that there are 215 charters permitted under Texas State law and/or regulations of

Texas Education Authorities. Recently there has been a major effort to take charters back, and

more often than not the charter holders who are victims of the State's efforts have been

predominately African-American schools or those run by African-American management. The

Texas Education Agency (“TEA”) reported in December, 2010 that a number of open

enrollment charters that serve minority students currently owe the State large sums of money.

See khou.com report of Jeremy Rogalski. Except for extenuating circumstances, Crutch

generally met the academic accountability of TEA each year of its existence prior to the onset

of the program of the disputed withholding by TEA of money due to Crutch. One of the years

where Crutch was not deemed academically acceptable was a year when it was initially

determined and publicly disclosed by TEA that Crutch did meet the requirements, but TEA said

later that it made a mistake in its calculations. Even in 2008-2009 the record shows a report by

Laura Davidson that Crutch met or was above standard in all categories of reading and

performance.

      Attempts to Take Crutch's Charter have proven unsuccessful when there are impartial

hearing officials. In 2002, TEA attempted to revoke Crutch's charter, but it was unsuccessful.

                                               14
CRA 253-54, 1030. After losing that action before a TEA Administrative Law Judge, TEA

attempted again to take the charter in 2005, but abandoned that attempt a short time before a

formal hearing scheduled on proposed charter non-renewal before the State Office of

Administrative Hearings in 2006. CRA 254, 1030. After losing it's attempts to revoke Crutch's

charter, TEA has continued its effort to close the school in other ways. CRA 254, 1030. After

dropping the non-renewal action in early 2006, TEA immediately stopped making

payments to Crutch.

A. Crutch I. The Texas Association of School Boards reports that open enrollment charter

schools receive funding equivalent to a total of $4,916 less per student than traditional public

schools. Charter Schools in Texas: Facts and Figures. Texas Association of School Boards

(2010). Due to the withholdings by TEA, Crutch was able to spend far less per student than

both traditional public schools and other open enrollment charters. As discussed below, Crutch

was able to spend about $4600 less per pupil than other charters before funds were fully and

finally stopped by TEA, and about $9,000 less per pupil than students in traditional public

schools (Crutch could only spend about $2,000 per student). Crutch has faced harmful

withholdings by TEA, while non-minority schools such as Wimberley ISD have not faced

similar withholdings when a debt is allegedly owed. One action taken by TEA was to conduct a

flawed attendance audit in 2005 of the 2003-2004 school year that concluded that the school

should refund $1.6 million to TEA. CRA 254, 1031. TEA made this refund decision without

providing to Crutch any kind of prior hearing that would satisfy the requirements of meaningful

due process to Crutch. CRA 254, 1031. Crutch countered TEA's audit with information

showing that the $1.6 million was not owed.

                                              15
         Without granting the auditors of the school who are McConnell, Jones, Lanier, Murphy

(“MJLM”), an opportunity to meet with their auditors as is standard practice in the auditing

field, TEA decided that the refund number was closer to $1.8 million and they decided

arbitrarily to withhold essentially all of the School’s future funds until the refund was paid in

full. TEA then filed an action to non-renew Crutch's charter. After a contested TRO hearing, the

Travis County District Court restrained TEA from executing its decision to recapture the $1.8

million, and ultimately after a lengthy hearing a different Court temporarily enjoined TEA from

proceeding to engage in the intended recapture of funds. TEA was prohibited from withholding

more than $50,000 per month based on the school’s then student enrollment. CRA 255, 1031,

CRA 254, 1031. TEA appealed that decision. CRA 254. The Court’s December 15, 2005 order

ordered the parties to mediation by May 31, 2006, and it ordered that trial should begin by June

12, 2006, with a backup trial setting in July. CRA 251. However, TEA appealed. Though TEA

agreed to comply with the Court's order, it nevertheless withheld approximately $750,000 more

than permitted by the Court's Order. CRA 44, 312. During the time from the original

withholding efforts until the present, there were many withholdings of Crutch funds. Nearly all,

if not all, of them were done without any notice to Crutch. TEA simply makes an entry in the

general ledger that they are withholding. There is no indication of what it is for and no offer is

made for a review of any kind. Here is a partial list of the ledger adjustments (withholdings) at

issue:

               9/4/05       $1,693,269
               9/5/05          9,882
               12/2/05       267,186
               4/20/06         8,673 (Some adjustments were for unknown reasons, so
               2008          337,000 CPA Bassie requested documents regarding

                                               16
             2008          1,036,000 them in record review but none produced)
             Total         $3,352,010 approximately

      The general ledger shows zero monies being paid Crutch for 19 months from September

of 2005 until December of 2008. It shows $1,289,336 in payments to Crutch for 3 school years

when the School had approximately 300 students each year. Some of the money said to be

provided to Crutch was paid to monitors that TEA sent to Crutch and Crutch never saw the

money. TEA indicated to this Court in Crutch I, a matter not within Crutch's knowledge, that

the original $1.8 million in Crutch that was never subject to due process review has been

completely withheld. When a Commissioner was persuaded to provide a grant to Crutch the

School was unaware that the grant was too placed in the stacked group of payments owed TEA

so they had to pay back the grant. This was not discovered until a meeting years later.

      B. The current matter relates to the recovery of $337,000 from a settle-up process and

over $1 million from an audit/investigation that occurred in 2007-2008 which was used by TEA

to completely stop funding to Crutch in 2008. Part of the recent funds TEA has withheld from

the School as a result of the 2007 audit of the 2005-2006 school year are for repayment of

funds never received by the School. CRA 262, 1038. CPA Bassie says at a minimum TEA has

overstated amounts paid to Crutch for 2005-2006 by $731,134.23). Somehow the amount to be

recovered for this audit was not based on what the School received but on a faulty submission.

The School was not paid on an incorrect PEIMS submission submitted by their independent

contractor. RR Ex 3 no. 18. The incorrect submission was caught by the Superintendent who

requested and received an extension to submit a corrected submission out of time. Because the

re-submission date was approved this meant that the School would be paid for the 5th and 6th



                                               17
week periods from the average of the 1st 4--6 week submissions and not on the incorrect

submission involved in the audit calculations providing the basis for the $1 million recovery.

RR Ex 3 no. 18. TEA timed it's audit filing so the response would be due immediately after the

2007 Thanksgiving Holiday. These were the matters addressed in the Johnson record review.

Crutch's accountant Everett Bassie submitted affidavit testimony for consideration in the plea

to the jurisdiction proceedings stating that during the 2005-2006 school year Crutch was

entitled to funding in the amount of $1,860,518.TEA withheld $1,343,679, so only $516,793

was paid to the school. CCRR Ex. 1 The amount withheld in excess of the amount authorized

by the injunction, according to Mr. Bassie, was $749,002. Mr. Bassie further stated that TEA

provided no funding to the school from February 21, 2006 through August 31, 2006 and that

total adjustment for that year was $1,979,010.00. CRA 878-80. Mr. Bassie, an experienced and

accomplished CPA, stated that, for the 2006-2007 school year, in what is called a settle-up TEA

incorrectly adjusted Crutch's funding by an amount of $337,549. In other words we have a CPA

who directly challenged the validity of the settle-up. No process of any kind was offered to

Crutch until months after the withholding. Mr. Bassie stated firmly that the adjustments were

incorrectly withheld. The School was paid only $5,400 out of an expected amount of

approximately $60,000 each month for February 2008 and March 2008 combined (a stipend for

Special Education was to be included starting in April 2008 so the amount after April would

have been greater). CRA 255-56. TEA did not work with the school in any way to attempt to

address any hardships TEA's actions caused the school after the negotiated May 2008 payment,

the funding essentially ceased. CRA 256, 600. It is also important to note that the School had

many impoverished children in attendance at the School land it was entitled to substantial

                                              18
Compensatory Education funds. Odysseus Lanier agreed with this. For that School year the

amount they were entitled to exceeded $500,000. RR Ex 2. Mr. Bassie provided them with this

information, and even though TEA had authorized payments late in the school year for other

Schools it decided not to do so for Crutch. The School would have been entitled to those funds

from the beginning of the school year but TEA decided not to provide the funding for the

benefit of the children in attendance at Crutch.

The Litigation. As a result of the failure to receive funding, even though it had hundreds of

students enrolled, faculty, staff, and contract obligations, the School was forced to file another

lawsuit (Crutch II). Fearing the School would be able to operate with Federal funding that was

scheduled to become due in Spring of 2008, TEA made a determination as custodian of the

Federal monies that the School was high risk, and the School was unable to draw down the

upcoming Federal funding. CRA 465. Knowing that it was not providing the School any

funding under the Foundation School Program (“FSP”), TEA indicated to the School that they

are responsible for the disbursement of Federal monies in the State and they believed the

School was high risk. TEA said in order to be determined not to be high risk the School had to

submit a budget to it showing that it had adequate revenue to operate without benefit of the

Federal funding. As Dr. Martin Luther King Jr. said, it is one thing to say that a man should pull

himself up by his bootstraps but it is a cruel gesture to say this to a bootless man. The financial

issues caused by TEA’s own withholding were cited as the basis for this determination. CRA

465. In the Fall of 2008 there were approximately 270 students enrolled. CRA 1253. That same

month the utilities were turned off at the School because TEA refused to provide adequate

funding. CRA 1261. In Crutch II the school prevailed on TEA's plea to the jurisdiction after

                                                   19
several days of hearings, but the Court did not rule on Crutch's temporary injunction request.

The Third Court of Appeals held that: (a) Crutch's claim of discrimination could go forward;

(b) Crutch's claim of ultra vires could go forward but it might be advisable to amend the

pleadings to allege violations of specific statutory provisions that are not result oriented; (c) the

claim of due process of law could not be litigated because of TEA’s authority to go back and

adjust the amount of money the school should have received from the State; and (d) the funding

system was constitutional.

What Took Place at the Court Hearing. At the hearing on this matter the Honorable John

Dietz who presided over this matter inquired of TEA [in reference to the construction of

§42.258 of the TEC and §403.055 of the Government Code]:

       So how can you read a statute that gives an agency, if they seek to get a refund from
       Alphonso Crutch, you have to accord them due process. You have to accord them a right
       to appeal to the Commissioner or to the board, but if the agency in its own discretion
       seeks to just withhold money, they can essentially starve the charter school out without
       due process. Now, why would we ever interpret a statue that way?

Opposing counsel responded that you could get a record review but nothing else (it is important

to note that Crutch I funds are involved in the Crutch II recapture efforts (because of TEA's

practice of stacking adjustments, and to date no hearing of any kind has been offered regarding

the Crutch I funds). Importantly, the withholding occurred in February of 2008 but no offer of a

record review was made until May or June of 2008. During the process labeled a record review,

an outside meeting took place without lawyers where Odysseus Lanier (“Lanier”), another

prestigious CPA for the School, actually sat down with TEA auditors and reached a preliminary

agreement whereby TEA would apply its 30% rule, meaning the School would receive 70% of

the funding due it pending resolution (subject to approval of TEA's other unknown officials) of

                                                 20
the issues and TEA could withhold 30% while the amount owed, if any, would be resolved

[Bassie and Lanier believe that TEA owes the School and not vice-versa]. RR Ex 3 no. 14.

However, TEA officials other than the auditors decided that this time the auditor

recommendation would not be accepted. In regards to the review itself, TEA never provided

one or at least one consistent with the rule. RR Ex 3 no. 11.

The Record Review. Once it became aware of what was being withheld and knowing the

consequences of the withholdings, the school timely requested full due process hearings under

§7.057 Texas Education Code (“TEC”) or other applicable law. The requests were made on

more than one occasion. The only concrete response was to offer Crutch a record review. This

offer was made on or about June 25, 2008. A member of the Commissioner's Executive Staff

was assigned to preside over this record review to address the decision made by the

Commissioner himself. One request for a due process hearing was made by the School on April

7, 2008. CRA 440-441. A May 15, 2008 communication also included a separate request for a

hearing under §7.057 of TEC on the issues. The May 15th letter made a request that pending

resolution TEA considered taking $15,000 to $20,000 per month instead of holding all of the

funds. On June 10th the School renewed its request for a full Due Process hearing or one under

Title 19 of the Administrative Code (“TAC”) or TEC §7.057 instead of a record review. CRA

436-437. In a separate request to Deputy Commissioner Adrain Johnson (“Johnson”) from the

School Superintendent dated June 11, 2008, she made a request for relief from the settle-up (as

permitted by law) TEC §42.253 because of the needs of their students and the juvenile court

system that depended on them. CRA 433. The June 10th request pointed out problems with the

record review such as one previous case where there was no evidence to support an accusation

                                                21
against the School but Johnson, as presiding officer of that record review, held that a monitor

should be put in place anyway. On the 16th of June, the School made a request for documents:

       all drafts of the [audit/investigative] report, any and all records pertaining to Alphonso
       Crutch, all attendance, funding, adjustments, audit reports, all allocations relating to the
       investigative reports, and all working papers. CRA 431.

Damage to Employees. The withholding of funds caused a number of employee casualties: (1)

Danielle Johnson, was unable to find food for her family on occasion or have a reasonable

method of transportation for her son to school. CRA 34. (2) Linda Fields, the School Registrar,

lost her house, car and appliances. CRA 36. (3) Laguanda Russell had financial problems and

she was even unable to afford her monthly medications. CRA 37. (4) Ruth Belford was evicted

and lost her insurance. CRA 38. (5) Ruby Williams, suffered migraine headaches and felt she

was on the verge of a nervous breakdown. CRA 39. (6) A teacher at Crutch, Ever Jean Ross lost

her good health and her good credit as a result of not receiving her paychecks. CRA 41. (7) The

school counselor, Deborah Davis, was unable to afford her medications for heart, diabetes and

high blood pressure conditions and she lost her car insurance and had a bank overdraft as well.

CRA 43. (8) The assistant to the counselor, Sharon Johnson, was unable to afford to take herself

or her children to the doctor and fell behind on many bills and had bank overdrafts. CRA 45. (9)

Sabrena White, another employee, lost her day care, had utilities turned off, lost food supply,

defaulted on loans and had vehicle designated for repossession. CRA 46. (10) Josephine

Roberts was unable to assist her son to attend college. CRA 118. These are just a few of the

staff that lots many things because of non-funding from TEA. There are many more

stories of this nature.

Unique Facts Relating to TEA's Handling of this Record Review. The rules applying to

                                                22
record reviews permit deadlines for the exchange of documents, and though some were

requested, none were ever provided. CRA 236. The record review is to be completed in 30 days

under all circumstances (the alleged record review took 6 months). Although this is a

precondition to an appeal, no reasonable amount of time is guaranteed. CRA 236. Further, TEA

has interpreted the provision that permits it to utilize agency expertise to provide it the authority

to engage in unlimited ex parte communications at any time with no notice to the other

participant. CRA 238.

       Because this matter was set for hearing in the Travis County District Court at the same

time as the continuation of the Record Review, a request was made to postpone the Record

Review to a later date or even an earlier date if desired. On the 30 th of July 2008, more than 30

days after the record review process began, TEA offers documents for Crutch to come and

review. CRA 609. Johnson issued a decision in August of 2008, as expected holding against

Crutch. When the parties decided to discuss settlement during the trial court proceedings

(which had to be scheduled over many days because of time needs and schedules of

participants), TEA decided to label the meetings as a record review while the School considered

them to be meetings. It was in these meetings where Lanier had discussions with TEA's

auditors about a resolution to the matter [but not the audit discussion denied after the 2005

audit] and TEA's superiors apparently vetoed the recommendations of the audit group. In

January of 2009, 11 months after funding was first held and nearly 7 months after the record

review was started, a decision was handed down by a new alleged hearing officer Ray Glynn

(“Glynn”) who was appointed to the surprise, dismay and objection of Crutch. Like Johnson,

Glynn was a member of the Commissioner's Executive Staff and to the extent it was a record

                                                 23
review the School objected to his presiding over it. The School's objection to him was

disregarded and he proceeded, indicating that he was prepared in part due to his many

communications with hearing officer Johnson about the subject matter.

Other Relevant Facts. Because of the financial difficulties that the School has encountered

and things that directly stem from TEA's decision not to pay the School, TEA has decided to

take action again against the School's charter and have hired a private law firm with a contract

of up to $125,000 for them to handle an administrative proceeding to shut down the School.

Because of the inability to receive money from either the State or the Federal government (the

latter because TEA disburses much of its funding to the Schools in Texas) the School has not

opened up this year but hopes to open up in the future if it is fortunate enough for the opinion in

this manner to be rendered in its favor.

              Let us remember than from the 2005 school year when the withholdings in Crutch

I began through the time of the withholdings in 2008 that provide the basis for Crutch II,

Alphonso Crutch continued to have hundreds of students in attendance. The State had failed in

its two attempts to shut the School down and the State was aware through its audit requirements

and direct communications that the School had no other sources of revenue. And it was aware

that those students at Crutch were entitled to an education. For this four year period there were

hundreds of students and tens of faculty and staff who attempted to educate them under the

difficult circumstances.

              In summary here is a partial time line:

       DATE                                                 EVENT
       1998        Crutch receives a charter because it meets the application requirements.
     1999-2000     Crutch opens its door as an alternative school serving at risk youth. CRA 257.


                                                       24
       2002          TEA attempts to revoke the School’s charter, but is prevented from doing so after a due
                     process administrative hearing. CRA 257.
     2003-2004       TEA determines through a draft audit/investigation that approximately 1.6 million dollars
                     should be withheld from the school. CRA 279.
  March 15, 2005     McConnell Jones Lanier & Murphy LLP (“MJLM”) finds that TEA’s withholding of
                     approximately 1.6 million for 2003-2004 does not take into account all of the School’s
                     relevant attendance records. (2-30). MJLM finds that the School’s attendance records are
                     95.5% accurate.
 April – June 2005   MJLM requests a customary meeting with TEA's audit/ investigators but it is not accepted
                     or granted. Crutch requests a due process hearing.
   July 21, 2005     TEA states that the School owes approximately 1.8 million.
     July 2005       TEA informs Crutch that it will not begin withholding in the Summer as it had indicated
                     but would do so in the Fall as it had done with other charter holders.
  September 2005     TEA begins massive withholdings to be continued until the full $1.8 million has been
                     recouped. Travis County District Judge grants TRO against TEA continuing with the
                     withholding.
September 25, 2005   The Texas Youth Commission (“TYC”) expresses its support and appreciation for the
                     School. CRA 306.
December 21, 2005    Travis County District Court grants injunction preventing TEA from withholding more
                     than $50,000 per month [the School had indicated that at that time they were receiving
                     $190,000 and if necessary could survive with $50,000 less under those circumstances).
                     Attorney General says they will abide by order. CRA 316.
    2005-2006        CPA Bassie says in his affidavit that the school was then entitled to $155,000 per month in
                     2005-2006 but was paid substantially less for that year.
    2005-2006        CPA Everett Bassie finds that TEA withheld 1.3 million dollars owed to Crutch during this
                     time period. CRA 24. $75,000 was improperly withheld without regard for a Court Order.
                     CRA 444.
March – August 2006 CPA Everett Bassie finds that TEA provided no funds to the School during this time
                    period. CRA 24.
       2007          TEA determines that approximately 1.4 million should be withheld from the School. CRA
                     249. Over $1 million as a result of another audit (CRA 55) and over $337,000 as a result of
                     a settle-up adjustment.2 CPA's disagree.
   February 2008     TEA’s website indicates that the School will receive for no funds for the month. CRA 34.
                     March and April of 2008 TEA withholds funds from Crutch.
   February 2008     The staff at the School faces severe hardship due to the funds withheld by TEA. CRA 224.
                     Assistant Commissioner Johnson reports that he cannot find out why the money is being
                     withheld.
    April 2008       Through a reported news story the School finds out about why funds were being withheld
                     on an implication of misappropriation of over $300,000 from TEA.
       2008          Commissioner Scott agrees to partial funding upon request April and May 2008 only.
       2008          Odysseus Lanier (“Lanier”) of MJLM states that he disagrees with this figure because
                     TEA has already over withheld from the School. CRA 331.
   April 7, 2008     The attorneys request a due process hearing with TEA. CRA 107.
   April 8, 2008     Johnson of TEA asks that the School consider not re-opening in the Fall. CRA 22.
   April 28, 2008    TEA places the State and Federal grants that the School is entitled to on hold. CRA 469.


                                                         25
   May 27, 2008     Mr. Johnson offers the School a record review proceeding on the over allocation of State
                    funding. CRA 54.
    June 6, 2008    The School’s attorneys informs TEA that it wrongly requires the repayment of funds that
                    was never received by the School.
    June 9, 2008    Commissioner Scott offers the record review. CRA 446. TEA further states that they are
                    reviewing the situation, and hope to come to an agreement with the School.
   June 10, 2008    The attorney's for Crutch requests a due process hearing and requests the audit working
                    papers and all communications relating to Crutch from TEA. CRA 440.
   June 11, 2008    Ms. Belford, Superintendent makes a formal request to TEA to provide funds for the
                    months that no funds were provided for during 2007-2008. CRA 437.
   June 16, 2008    The attorney's for the School requests both record review, and a meaningful due process
                    hearing (preferably). The attorney's request the audit investigation documents as part of
                    the record review. CRA 435.
   June 25, 2008    TEA grants record review and includes the audit as well. CRA 397.
   June 26, 2008    TEA informs Ms. Belford that TEA will not provide any funds for June, July, or August of
                    2008. CRA 28.
    July 3, 2008    At 4:56 p.m. Johnson denies request for documents.
           th
     July 7 &       Record Review takes place with Mr. Johnson acting as the hearing officer.
    July 30, 2008
    July 18, 2008   The School files suit against TEA, and requests a TRO and Injunction CRA 25.
     July 2008      Request for new setting because of conflict, either earlier or later.
     July 2008      After request for postponement denied, the TRO hearing took place on the 30 th and the
                    record review without Crutch. Records were offered for review for the 1 st time that
                    morning.
    August 2008     Johnson rules on Record Review.
     Fall 2008      Meetings begin while the litigation continues. TEA decides to call them a continuation of
                    the concluded record review. Associate Commissioner Raymond Glynn (“Glynn”)
                    substituted as Presiding Official and stays on case over objection.
    January 2009    Glynn makes his decision on record review.
     April 2011     Although TEA and the School are in the litigation process, TEA attempts to take the
                    School’s charter, and hires outside counsel to work on the case.



Attempts to Take Crutch's Charter have proven unsuccessful when there are impartial

hearing officials. In 2002, TEA attempted to revoke Crutch's charter, but it was unsuccessful.

CRA 253-54, 1030. After losing that action before a TEA Administrative Law Judge, TEA

attempted again to take the charter in 2005, but abandoned that attempt prior to a formal

hearing scheduled on proposed charter non-renewal before the State Office of Administrative

Hearings in 2006. CRA 254, 1030. After losing it's attempts to revoke Crutch's charter, TEA has

                                                          26
continued its effort to close the school in other ways. CRA 254, 1030. After dropping the non-

renewal action in February or March of 2006, TEA immediately stopped making payments to

Crutch.

ARGUMENT

I. The students attending Alphonso Crutch had a right to an adequate education that was
stripped away without due process as required by the Fourteenth Amendment and the
Texas Constitution.

In Brown v. Board of Education, 347 U. S. 483, 493 (1954) the United States Supreme Court

described how important education is in the lives of modern day Americans:

       Today, education is perhaps the most important function of state and local governments.
       Compulsory school attendance laws and the great expenditures for education both
       demonstrate our recognition of the importance of education to our democratic society. It
       is required in the performance of our most basic public responsibilities, even service in
       the armed forces. It is the very foundation of good citizenship. Today it is a principal
       instrument in awakening the child in cultural values, in preparing him for later
       professional training, and in helping him to adjust normally to his environment. In these
       days, it is doubtful that any child may reasonably be expected to succeed in life if he is
       denied the opportunity of an education. Such an opportunity, where the state has
       undertaken to provide it, is a right which must be made available to all on equal terms.

Texas recognizes this in its Constitution, Article VII, § 1:

       A general diffusion of knowledge being essential to the preservation of the liberties and
       rights of the people, it shall be the duty of the Legislature of the State to establish and
       make suitable provision for the support and maintenance of an efficient system of free
       public schools.

It could not be more clear then that Texas too recognizes the need for and value of education.

The Constitution is obligated to provide for means for each school district to meet the

Constitutional obligations for a general diffusion of knowledge and if it places constraints

where one cannot meet its obligation this is a violation of the Texas Constitution. Edgewood

Indep. Sch. Dist. v. Meno,, 917 S.W.2d 717, 730 (Tex. 1995). What this means of course is that

                                                 27
all of the laws in regards to financial recapture of alleged funding that was over allocated must

be interpreted whereas to continue and ensure a school district's ability to perform these

important obligations. TEA has denied access to the necessary funding to accomplish these

responsibilities and this is something that it cannot do. See e.g. Neeley v. West Orange-Cove

Consol. Indep. Sch. Dist., 176 S.W.3d 746 (Tex. 2008). The structure that the Legislature

devises must be efficient, and Charter schools are part of that structure. Open enrollment

charter schools are part of the public school finance system of the State. §12.105 TEC; LTTS

Charter Sch., Inc. v. C2 Construction, Inc., 2011 WL 2420204. The Supreme Court, speaking

through Justice Willett, said that “Chapter 12 of the Education Code, which authorizes the

operation of charter schools, seeks to 'ensure the fiscal and academic accountability of charter

holders while still preserving he innovations of charter schools from excessive regulation.” Id.

Justice Willet acknowledges that TEC 12.105 makes them part of the public school system of

the State, and that along with traditional public schools have the primary responsibility for

implementing the State's system of public education.” Id. And they further indicated that TEC

12.106(a) provides charters with statutory entitlement to funding. The Brown Court talked

about education ensuring good citizenship and the harmful effects of segregation, but one must

wonder what the Crutch students thought about their worth when they saw their school being

denied maintenance, pay for essential items and even being vilified by TEA in the news media.

The Brown Court said:

      Segregation of white and colored children in public schools has a detrimental effect
      upon the colored children. The impact is greater when it has the sanction of the law; for
      the policy of separating the races is usually interpreted as den;opting the inferiority of
      the negro group. A sense of inferiority affects the motivation of a child to learn.
      Segregation with the sanction of law, therefore, has a tendency to [retard] the

                                               28
       educational and mental development of negro children and to deprive them of some of
       the benefit they would receive in a racial[ly] integrated school system.

Brown, 347 U.S. at 492. The ability to receive or pursue an education is a right that an

individual is free or at liberty to seek without inappropriate constraints. This is a Constitutional

liberty interest that can only be taken away after providing due process of law. Bolling v. Sharp,

347 U.S. 497, 499 (1954). If we take a look at the extensive requirements placed on public

education in Texas and the mandate that all young Texans attend school, we can see the

importance of education. §12.104 TEC provides some of the requirements placed on charter

schools:

               (b) An open-enrollment charter school is subject to:
                (2) a prohibition, restriction, or requirement, as applicable, imposed by this
       title or a rule adopted under this title, relating to:
                       (C) reading instruments and accelerated reading instruction programs
       under §28.006;
                       (D) accelerated instruction under §28.0211;
                       (E) high school graduation requirements under §28.025;
                       (F) special education programs under Subchapter A, Chapter 29;
                       (G) bilingual education under Subchapter B, Chapter 29;
                       (H) prekindergarten programs under Subchapter E, Chapter 29;
                       (I) extracurricular activities under §33.081;
                       (J) discipline management practices or behavior management
       techniques under §37.0021;
                       (K) health and safety under Chapter 38;
                       (L) public school accountability under Subchapters B, C, D, E, and J,
       Chapter 39;
                       (M) the requirement under §21.006 to report an educator's misconduct;
               and
                       (N) intensive programs of instruction under §28.0213.

TEC §25.085 requires those between 6 and 18 to attend school. Charters are required to teach

Texas Essential Knowledge and Skills (TEKS)(or an alternative test under Chapter 38 for

various students with disabilities) and to comply with No Child Left Behind requirements that



                                                29
students, including poor students covered under Title I like Crutch has so many of, have yearly

academic progress through the State's yearly assessment test. They are also obligated to

identify students who are abused or neglected. The Texas Supreme Court expressed our State's

concern for education in Edgewood v. Meno, when it said while speaking through Justice

Cornyn:

       [g]iven the prominence of this concern throughout Texas history there can be no dispute
       that education of our children is an essential Texas value. An efficient system of public
       education requires not only classroom instruction, but also the classrooms where that
       instruction is to take place. These components of an efficient system—instruction and
       facilities—are inseparable.

Meno, 917 S.W.2d at 726. Later Justice Cornyn says that “Article VII §1 of the Constitution

and our previous Edgewood decisions mandate that efficiency be measured against both

qualitative and financial standards.” Id. at 730. Cornyn indicated that the districts were entitled

to have substantially equal access to funding up to the legislatively defined level that achieves

the constitutional mandates of a general diffusion of knowledge. Id. at 746. In this case, Crutch

has been denied access to any funding for lengthy periods of time when it has no ability to

assess taxes of its own as do local school districts. In other words, the general diffusion of

knowledge standard was proscribed by actions of officials of the TEA when it was unnecessary

to do so. TEA easily could have addressed any obligation to ensure financial integrity with the

need of those hundreds of students to get an education but they did not do this as they had done

when non-African-American students were involved. As Superintendent Belford indicated, the

school was hampered in many ways in carrying out its responsibilities.

       In Neeley, Justice Hecht indicated that “Article VII, §1, makes it 'the duty of the

Legislature' to provide for public education. The judiciary's role, though important, is limited to

                                                30
ensuring that the constitutional standards are met. We do not prescribe how the standards

should be met.” Neeley, 176 S.W.3d at 753. He went on further to say that:

       But like the constitutional provisions in Mitchell County, Article VII §1 dictates what the
       public education system cannot be: it cannot be so inadequate that it does not provide for
       a general diffusion of knowledge, or so inefficient that districts which must achieve this
       general diffusion of knowledge do not have substantially equal access to available
       revenues to perform their mission, or so unsuitable that it cannot because of its structure
       achieve its purpose.

Id. at 783. Justice Hecht also makes it clear that the Legislature cannot reduce the standard of a

general diffusion of knowledge whereas to avoid the application of Article VII, §1. Id. at 784-

85. As Justice Hecht acknowledges in Neeley, it is the “intent of the legislature that the essential

knowledge and skills developed by the State Board of Education under this sub-chapter shall

require all students to demonstrate the knowledge and skills necessary to read, write, compute,

problem solve, think critically, apply technology and communicate across all subject areas. The

essential knowledge and skills shall also prepare and enable all students to continue to learn in

postsecondary educational training, or employment settings.” Id. at 789. What have these

children been denied? Let's look at what Judge Hecht said in Neeley about what the obligations

are on the State:

       The finance system we have described funds an education system with four integrated
       components: a state curriculum, a standardized test to measure how well the curriculum
       is being taught, accreditation standards to hold schools accountable for their
       performance, and sanctions and remedial measures for students, schools, and districts to
       ensure that accreditation standards are met.


Id. at 764. The Legislature has prescribed the following basic public school curriculum:

       Each school district that offers kindergarten through grade 12 shall offer, as a required
curriculum:


                                                31
          (1) a foundation curriculum that includes:
                     (A) English language arts;
                     (B) mathematics;
                     (C)science; and
                     (D) social studies, consisting of Texas, United States, and world
      history, government, and geography; and
           (2) an enrichment curriculum that includes:
                      (A) to the extent possible, languages other than English;
                      (B) health;
                      (C)physical education;
                      (D) fine arts;
                      (E) economics, with emphasis on the free enterprise system and its
                     benefits;
                      (F) career and technology education; and
                      (G) technology applications.”

    Recently, a report was published with findings illustrating how we should all be concerned

about the educational achievements of others and that it is not just an issue of whether my child

has a better opportunity than the person who resides elsewhere in our school district, state or

nation. What this study revealed was how overall performance is an important indicator for

national performance and economic productivity:

      If the United States had in recent years closed the gap between its educational
      achievement levels and those of better performing nations such as Finland and Korea,
      GDP in 2008 could have been $1.3 trillion to $2.3 trillion higher. This represents 16
      percent of GDP. If the gap between black and Latino student performance and white
      student performance had been similarly narrowed, GDP in 2008 would have been
      between $210 billion and $525 billion higher, or 2 to 4 percent of GDPl. The magnitude
      of the impact will rise in the years ahead as demographic shifts result in blacks and
      Latinos becoming a larger proportion of the population and workforce.

“The Economic Impact of the Achievement Gap in America's Schools, McKinsey and

Company” (2009). The McKinsey report tried to summarize these findings in a clearer

way: “the persistence of these educational gaps imposes on the United States the economic

equivalent of a permanent national recession. The recurring annual economic cost of the


                                               32
international achievement gap is substantially larger than the deep recession the United States

is currently experiencing.” By under-utilizing such a large proportion of the country's human

potential, the US economy is less rich in skills than it could be. The result is that American

workers are, on average, less able to develop, master, and adapt to new productivity-enhancing

technologies and methods than they could otherwise have been.” The State Coordinating Board

commissioned a report that has reached very similar conclusions. The Perryman Group, “A Tale

of Two States-And One Million Jobs??” The Perryman Group found that greater education

provided for more innovation, decreased needs for social services and dependency on

government programs, higher tax receipts, accelerate economic growth and create 1 million

new jobs if it is addressed.

       TEA clearly places an unreasonable burden on the School and its students in violation of

the law. Under Civil Practice and Remedies Code §106.001, an officer or employee of the State

who is acting or purporting to act in an official capacity may not, because of a person’s race or

national origin: revoke or suspend the person’s license, permit, or certificate; deny them a

benefit or impose an unreasonable burden on the person. Richards v. Mena, 907 S.W.2d 566,

569 (Tex. App.—Corpus Christi 1995, writ dism’d). When TEA takes aggressive action to

reject children who are trying to improve their plight in life and make this a better nation for all

of us, they are simply acting out of bounds. Denying these children even the semblance of the

quality education to which they are entitled is not an option morally or legally. TEA did not

have any authority to put deny these children an opportunity in life and to cause further harm to

this nation. Those children had a right to be educated, even if TEA believed they did not

because of the color of their skin. And when non-Black administrators like the ones at

                                                33
Wimberley where the Commissioner decided to proportion recapture so he would not harm the

educational interests of a predominately white student body or work with a group like

American Youthworks that is not predominately African-American so they can receive monthly

payments. See Appendix. TEA works with them to relieve them of the burden of trying to

deliver a proper education with little or no funding. Clearly this is the type of burden that

§106.001 seeks to prevent.

       Another factor to consider is that various statutes and previous decisions of the Texas

Supreme Court support our position and the Court should recognize them in assessing what to

do with the ultimate issue. For example, §42.002 of the Texas Education Code (“TEC”) says

that each district shall be provided sufficient resources to obtain an acceptable rating. TEC

§42.003 says that all children between 5 and 21 are entitled to funds under the program. In this

case we have the dubious circumstance of parent B sending their student to school in 2006

when funds are identified in the program for their child and TEA denying the funds for actions

that allegedly took place in 2003 involving students who are children of parents X, Y, and Z but

not the child of parent B.

       In putting our discussion in its proper perspective we want to take a look at some of the

provisions in law that are relevant to our discussion:

Due Process of Law, §1 Amendment XIV of the United States Constitution(1866):

       All persons born or naturalized in the United States and subject to the jurisdiction
       thereof are citizens of the United States and of the States wherein they reside. No State
       shall make or enforce any law which shall abridge the privileges or immunities of
       citizens of the United States, nor shall any State deprive any person of life, liberty, or
       property, without due process of law, nor deny to any person within its jurisdiction the
       equal protection of the laws.


                                                34
The Preamble to the United States Constitution provides as follows:

          We the People of the United States, in Order to form a more perfect; Union, establish
          Justice, insure domestic Tranquility, provide for the common defense, promote the
          general Welfare and secure the Blessings of Liberty to ourselves and our Posterity, do
          ordain and establish, this Constitution for the United States of America.

Article I, Section 19 of the Texas Constitution provides in pertinent part:

           No citizen of this State shall be deprived of life, liberty, property, privileges or
           immunities, or in any manner disenfranchised, except by the due course of the law of
           the land.

§42.258 TEC provides:

       RECOVERY OF OVERALLOCATED FUNDS.

       (a) If a school district has received an overallocation of state funds, the agency shall, by
       withholding from subsequent allocations of state funds or by requesting and obtaining a
       refund, recover from the district an amount equal to the overallocation.

       (b) If a district fails to comply with a request for a refund under Subsection (a), the
       agency shall certify to the comptroller that the amount constitutes a debt for purposes of
       §403.055, Government Code. The agency shall provide to the comptroller the amount of
       the overallocation and any other information required by the comptroller. The
       comptroller may certify the amount of the debt to the attorney general for collection.

       (c) Any amounts recovered under this section shall be deposited in the foundation school
       fund.

§7.057 of the Texas Education Code provides:

       (a) Except as provided by Subsection (e), a person may appeal in writing to the
       commissioner if the person is aggrieved by:
             (1) the school laws of this state; or
                 (a-1) A person is not required to appeal to the commissioner before pursuing a
                 remedy under a law outside of Title 1 or this title to which Title 1 or this title
                 makes reference or with which Title 1 or this title requires compliance.

       (b) Except as provided by Subsection (c), the commissioner after due notice to the
       parties interested shall, not later than the 180th day after the date an appeal under
       Subsection (a) is filed, hold a hearing and issue a decision without cost to the parties
       involved. In conducting a hearing under this subsection, the commissioner has the same

                                                35
      authority relating to discovery and conduct of a hearing as a hearing examiner has under
      Subchapter F, Chapter 21. This section does not deprive any party of any legal remedy.

      (d) A person aggrieved by an action of the agency or decision of the Commissioner may
      appeal to a District Court in Travis County. An appeal must be made by serving the
      commissioner with citation issued and served in the manner provided by law for civil
      suits. The petition must state the action or decision from which the appeal is taken. At
      trial, the Court shall determine all issues of law and fact, except as provided by Section
      33.081(g).

§106.001 of the Civil Practice and Remedies Code provides in pertinent part:

             (1) refuse to issue to the person a license, permit, or certificate;
             (2) revoke or suspend the person's license, permit, or certificate;
             (3) refuse to permit the person to use facilities open to the public and owned,
      operated, or managed by or on behalf of the state or a political subdivision of the state;
             (4) refuse to permit the person to participate in a program owned, operated, or
      managed by or on behalf of the state or a political subdivision of the state;
             (5) refuse to grant a benefit to the person;
             (6) impose an unreasonable burden on the person; or
             (7) refuse to award a contract to the person.
      (b) This section does not apply to a public school official who is acting under a plan
      reasonably designed to end discriminatory school practices.

   A. Both the School and its students have liberty and property interests, and are
      entitled to due process of law.

      The Constitution indicates that a liberty or a property interest involved may necessitate

the application of due process of law. In terms of property interests we have funding that is

needed for the education of the students and also for the survival of the school. The State

knowingly created charter schools which need the funding each month to educate students who

have a right to an education under State law. In that regard schools like Crutch may no longer

exist if TEA can starve them out of existence as Judge Dietz indicated above. Superintendent

Belford and CPA Bassie both provided evidence that the State's efforts would necessarily lead

to the School's inability to survive and that in the present the withholding of funding had


                                              36
greatly impaired the School's ability to perform its obligations under TEC. Further, the funds

that were to provide for education the children of B were disbursed elsewhere with no prior

hearing of any kind, being based on a bogus audit and hotly disputed settle-up amount.

Importantly, the School's entitlement to Title I monies and Federal monies were too denied it,

revealing the State's clear malice and bias against the African-American students and

administrators of Alphonso Crutch.

       We can look to the Federal Courts to provide a guide to just what is protected by the due

process and due course of law clauses of the United States and Texas Constitutions.

Corporations like Crutch are entitled to due process. Grosjean v. American Press Co., 297 U.S.

233, 244 (1936). What protections are provided by the United States Constitution are

essentially a floor for the amount of protection that must be provided, but the State has the

power to offer more protection. Mellinger v. City of Houston, 3 S.W. 249, 253 (Tex. 1887).

Mathews v. Eldridge holds that an individual's interest in continued benefits gives rise to due

process of law requirements. Mathews v. Eldridge, 424 U.S. 319, 348-49 (1976). The Fifth

Circuit Court of Appeals held that when there is such an expectancy then due process applies.

Ferguson v. Thomas, 430 F.2d 852, 856 (5th. Cir.). Justice Frankfurter's concurring opinion in

McGrath provides us true guidance as to what is involved in serious due process cases like this

one:

       The heart of the matter is that democracy implies respect for the elementary    rights
of men, however suspect or unworthy; a democratic government must           therefore practice
fairness; and fairness can rarely be obtained by secret, one-sided   determination of facts
decisive of rights.

Joint Anti-Fascist Committee v. McGrath, 341 U.S. 123, 170 (1951) (J. Frankfurter,


                                              37
concurring). In McGrath, like in this case, the Attorney General had made unilateral

determinations about various organization without any consideration of due process prior to the

public determination. McGrath, 341 U.S. at 126. Recently, TEA released a list to the media of

allegedly bad charters that had not been run properly many of whom allegedly cheated the State

out of a great deal of money. See Appendix. The problem is that most if not all of them had

never had due process but Commissioner Scott wanted to tell the Texas community they were

all bad charters. Alphonso Crutch was among them. Justice Frankfurter says this history goes

back at least as far as the English courts:

       Lord Loreburn said in dictum, in Such cases the Board of Education will have to
       ascertain the law and also to ascertain the facts. I need not add that in doing either they
       must act in good faith and fairly listen to both sides, for that is a dry lying upon every
       one who decides anything. They can obtain information in any way they think best,
       always giving a fair opportunity to those who are parties in the controversy for
       correcting or contradicting any relevant statement prejudicial to their view.

McGrath, 341 U.S. at 170, n. 17 (concurrence). Justice Frankfurter further says, “[t]his Court is

not alone in recognizing that the right to be heard before being condemned to suffer grievous

loss of any kind, even though it may not involve the stigma and hardships of a criminal

conviction, is a principle basic to our society.” Id. at 168. I think it goes without saying that

TEA's actions inflicted grievous losses on many persons from the School, its Board,

Superintendent, Staff, and for certain the parents and students of the School.

       Property interests are one avenue to due process in this matter but so also are liberty

interests. In Bolling, the African-American students in Washington, D. C. wanted to pursue an

education, but because of their race or skin color, they were only allowed to pursue a certain

limited education. Bolling, 347 U.S. at 500. A unanimous United States Supreme Court said it


                                               38
is a matter of Constitutional liberty for each citizen to be able to pursue education without

unnecessary impediments that are placed there because of one's race:

      Although the Court has not assumed to define “liberty” with any great precision, that
      term is not confined to mere freedom from bodily restraint. Liberty under law extends to
      the full range of conduct which the individual is free to pursue.

Id. at 499-500. In this case, there are unnecessary impediments being placed in Crutch's way

that were not placed in the way of non-African-American schools when they owed the State

money. The School has been publicly maligned by TEA, it was the subject of a flawed,

improper and incomplete audit that is available for public inspection and that has been publicly

discussed by TEA. It is unable to properly pursue what charters are entitled to pursue and its

students are denied the pursuit of education even more so than the students in Bollling v. Sharp.

Thus, both property interests and liberty interests give rise to due process in this case. When a

person's good name, reputation, honor or integrity is at stake because of what the government is

doing to him, notice and an opportunity to be heard is essential. Bd. of Regents of State

Colleges v. Roth, 408 U.S. 564, 576 (1972); Goss v Lopez, 419 U.S. 565, 574 (1975). The Texas

Supreme Court has held that a graduate student has a right to a liberty interest in their graduate

education. Univ. of Tex. Medical Sch. at Houston v. Than, 901 S.W.2d 926, 930 n.1 (Tex. 1995).

The key to the liberty interest according to the Texas Supreme Court speaking through Justice

Enoch was that an allegation of misconduct was involved. Id. supra at 930.

      Claim of Entitlement. There is a hybrid of the matter of the property interest too that

can be inserted into the discussion. When an individual has a claim of entitlement to funding or

property, even if their claim could be ultimately proven wrong, they have the right to due

process of law to try and prove the claim. There are numerous cases that provide in instances

                                               39
where you have a legitimate claim of entitlement as Crutch obviously does here, that you have

a right to due process of law:

          • Goldberg v. Kelly, 397 U.S. 254 (1970) (welfare benefits);
          • Wieman v Updegraff, 344 U.S. 183 (1952) (state employee employment rights);
          • Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631 (2003) (government
            contractors providing service that the government normally performed);

The School maintains that it is entitled to the funds in question as it has continued to provide

services to hundreds of students to try and educate them as required by State Constitution and

Statue, and the results of the audit and settle-up are flawed. Further, because of the process of

stacking this adjustments on top of previous ones the practice will clearly lead to a shut down.

The issues involved in that audit also impact whether there is a liberty interest in the funds

involved in Crutch II. In fact, the facts lead to one clear inference. As TEA continued to

withhold the monies from Crutch I and that amount was almost recovered it became evident to

TEA authorities that they needed to stack some more on the amounts to be recovered. Then of

course they added $1.4 million, including $1 million which they had never received. The

stacking of amounts owed is mindful of businessmen years ago who took advantage of poor

and working people by selling them homes under contracts for sale when they could only

afford to pay the interest each month so there was never a chance they would buy a home.

When it is about time for you to start receiving your proper allotment again, then just add some

more adjustments because we are not going to give them a hearing anyway.

       In this case an audit was conducted by TEA that yielded flawed results. It was provided

to the School with a due date to respond around the time of the Thanksgiving Holiday—which

is somewhat standard for TEA to require of it. TEA had continued to periodically withhold


                                               40
funds during this time period, whereby to continue to put a strain on the school financially.

When the audit was provided to the School to respond to it was at a disadvantage because of its

limited financial flexibility. Nevertheless the School did early on provide information that

should satisfy TEA that they were wrong or incorrect. We know that TEA will attempt to come

and show some slick accounting measure or other trick to suggest that our analysis is incorrect,

but this is why we have impartial bodies come to help resolve such disputes. You have two

CPA's saying that the School did not receive the money that was allegedly overallocated

according to the audit and you have a strong, viable and credible explanation from the

Superintendent herself. The School had not been able to pay the contractor who submitted its

requests to the State for payment out of the PEIMS system. The contractor was urged to tender

a final submission for the School, and without the School's knowledge he submitted one with

perfect attendance. The final payments to the school are normally impacted by this final

settlement. However, in this case, before that could happen the School's Superintendent became

aware of this prospect and took swift and affirmative action to ensure that indeed it would not

happen. As a result, the payments that were made to the School were not based in any way on

this submission, but the audit of TEA submits that indeed they were. This issue has never been

addressed in a due process review. However, since TEA decided to withhold this $1.2 million

without such a hearing it has had the effect of zeroing out all money that was to be due the

School under the Texas Foundation School Program or from the State of Texas as a whole.

Approximately 270 students were there in attendance at the School when TEA decided to deny

Crutch any funding at all based on this dispute. As noted above, there were 40 months between

the initial withholding and the end of 2008, and in 19 of those months TEA provided no

                                              41
funding to Crutch (and 2 more were less than $5,000 was paid).

      TEA stacked this money on top of the other funds that were allegedly overallocated or

improperly allocated to Crutch. The system they use at TEA is simply to decide that an

overallocation should be collected upon and then to place it in the ledger with no notice or

meaningful information about the withholding being sent to the individual at the time. Besides

all of the other overallocation items they were collecting from the school's funding for, they

still had the $1.8 million from Crutch I which they now say has been recaptured by them. In

other words they had this recapture list of funds that were to be taken from Crutch's state

allocation and on this list were many items including the $1.8 million from Crutch I, the $1.2

million from the audit in Crutch II and the $337,000 from Crutch II. So in litigation TEA has

been challenged with holding approximately $3.3 million from the school without giving it due

process when the school believes that TEA is wrong in its withholding. In this time period have

educated approximately 900 students over 3 years (300 per year approximately) and received

less than $2 million for doing so. This is about $2000 per student, far less than the amount

needed for Crutch to achieve the state requirement of meeting the accountability standards. The

numbers cannot be exact, but it seems pretty clear that they are very close. The charter school

average of about $6,600 per student according to the Center for Education Reform is far greater

and the Texas Association of School Boards indicates that students at traditional charters

receive $4,916 more than those at charters. Notably, Patterson, a TEA paid monitor, provided a

report to TEA during the crucial period of the withholding, and she marveled at the great job,

later saying, “if the LEA has sustained financial resources needed to retain qualified teachers

through the remaining of the school year, it probably would have received an increased level of

                                              42
student academic achievement.” See Affidavit in Appendix. Bassie says that without

compensatory education funds Crutch was receiving $5,726.90 per student.

      After the School became aware of the intent to withhold its monies, it did make several

requests for a full Due Process hearing. It made the requests in May and June of 2008.

Ultimately TEA did offer a record review which it admits does not rise to the Constitutional

level. Crutch was not given adequate notice by TEA of the withholding of funds the School was

entitled to. In regards to the $337,000, TEA submits that they indicated on their limited access

website what the withholding was for and that it was to take place as early as November of

2007. However, the diligent School Superintendent said unequivocally that this was just not

true. She said she looked at the site regularly, even during that time period, and it simply just

was not there. To show that she was indeed correct the following scenario is revealing. When

TEA decided to take back this $337,000 from Crutch it decided to withhold essentially all of

the funding due Crutch for February of 2008 (and it was intending to continue to withhold until

the $337,000 was paid back which would be about 5 months based on what the School was

then receiving). Crutch asked Johnson to find out why its funds were being withheld because it

did not know. Nothing that had been provided to them provided the answer. Johnson reported

back that he could not find out why. Sometime later there was a television report in Houston

that reported that the School had stolen over $300,000 from the State and would be required to

repay the money. Now both the School and Johnson tried to find out why and they could not,

but it then showed up on television. TEA shared this false information with the news media but

refused to share it with the School when they requested it, and either Johnson was not telling

the truth or someone at TEA did not give him this information. Remember that this is the same

                                               43
governmental entity that showed up on the premises of Crutch with the media when it was to

conduct an audit. Because of the public nature of this lynching that TEA has attempted to

execute on Crutch, the funds, obligations and interests involved and the impact on the school

and others in continuing their life desired pursuits, it is clear that Due Process does apply and

should have been provided.

      The Texas Supreme Court has held that previously that the State can't just

disburse education funding as it pleases. The Texas Supreme Court has had two similar cases

to come before it in regards to the State's right to withhold funds or property that ostensibly is

to go to a school district or other public entity to be used for the education of Texas public

school students in their area. The Court held in Jernigan v. Finley that a Travis County official

had the right to sue a state official for school funds when there was a dispute about their

ownership. Jernigan v. Finley, 38 S.W. 24, 26 (Tex. 1896). Judge Story said in Love v. City of

Dallas that the funding intended for the education of our students cannot be arbitrarily diverted.

Love v. City of Dallas, 40 S.W.2d 20, 28-29 (Tex. 1931). Article VII of the Texas Constitution

mandates that the State provide the equal access to a quality education as discussed, while the

United States Constitution mandates an equal opportunity to an adequate education. San

Antonio Indep. Sch. Dist. v. Rodriquez, 411 U.S. 1 (1973). The Love Court gave direction to

what should take place as here when there is a dispute in regards to the handling of funds:

       The truth is, that government has no power to revoke a grant, even of its own funds
       when given to a private person, or a corporation for special uses. It cannot recall its own
       endowments granted to any hospital, or college, or city, or town, for the use of such
       corporations. The only authority remaining to the government is judicial, t ascertain the
       validity of the grant, to enforce its proper uses, to suppress frauds, and if the uses are
       charitable, to secure their administration through the means of equitable tribunals, in
       cases where there would otherwise be a failure of justice.

                                               44
Love v. City of Dallas, 40 S.W.2d at 28. Love even provided direction to indicate that funds that

are intended for children of one school district should not be used for another. Indeed that is

what TEA is doing here. Id. at 29. The money dedicated to B and his or her children is not only

not being used for them, but most of the funding is being directed to other districts around the

State by being spent from the general fund for the Foundation School Program (“FSP”) as

provided by §42.258(c). Importantly we might add, specific funds for specific actions to be

performed were completely disregarded and TEA simply decided to just take all of the funding

due the School. TEC §43.001 provides that available school funds shall be equitably disbursed

to the districts in the county. See Attorney General's Opinion H-47 (1973).

      To the extent that the State can do more than what is recommended by this Court in

Love, it is clear that Chapter 42 of the Texas Education Code must be read to provide a floor

that limits how they exercise any authority given to them under § 42.258. § 42.258 cannot be

read to say that you must fund schools so that they can meet the needs of the students and pass

the standardized exam, but not so if the district allegedly received over-allocated funds in the

past. TEA had many other remedies to the perceived problem but they chose this one because

they wanted to shut the school down. The State and TEA's duty to ensure that each student

receives a proper education as outlined in the court cases creates an overriding interest that is

greater than the State's interest in the recapture of funds from a charter to whom funds have

been allegedly over allocated.

      Applicable Statutes Actually Provide for Due Process. §42.258 TEC provides us with

this direction if properly interpreted, and §7.057 TEC expressly provides a direct avenue to the



                                               45
Courts and due process of law. The record is very clear that numerous requests were made for a

§7.057 or other full due process hearing but the only thing provided was the record review

which was designed to ensure that TEA's biased officials would be able to win whenever they

wanted to do so. The School did not open this year because of the failure to receive any state or

Federal funding and the TEA wants to use that again as a reason to shut the School down.

Ironically, when TEA seeks to shut the School down directly by acting upon its charter due

process is clearly required. However, when they do so indirectly as here they contend that no

due process is due. TEC §7.057 provides for Due Process when an entity like Crutch is

aggrieved by the school laws of this State. We sought but were denied such a hearing so there is

no waiver. Also, we might add in addition that since Constitutional issues are involved we

should have a direct avenue to the trial courts. Coggin v. Longview Indep. Sch. Dist., 337 F.3d

459, 463 (5th Cir. 2003). Constitutional issues are not properly before administrative tribunals.

Cent. Power and Light Co. v. Sharp, 960 S.W.2d 617, 618 (Tex. 1997); Dotson v. Grand

Prairie Indep. Sch. Dist., 161 S.W.3d 289, 293 (Tex. App.—Dallas 2005, no pet.); Jones v.

Clarksville, 46 S.W.3d 467, 473 (Tex. App—Dallas 2001, no pet.).

      Due Process Challenge is Appropriate Through a Declaratory Judgment Action.

TEA has litigated a very similar issue in past years. In this case we are disputing whether

Crutch is entitled to a due process hearing and the interpretation of various State laws such as

§42.258 and §7.057 TEC. In TEA v. Leeper, the Texas Supreme Court held that when a statute

or rule allegedly violates your constitutional or other rights you have an avenue to go to the

Courts to address the same. Texas Educ. Agency v. Leeper, 893 S.W.2d 432 (Tex. 1994).

Importantly in a similar case when the State argued that it had an obligation to collect funds

                                               46
from a company so it was justified in converting its monies to other uses, the Austin Court of

Appeals held this was an illegal conversion of money as prohibited by Article I, §17 which

prohibits illegal takings. In this case, the State has admitted to a taking in that they contend they

collected all of the funds due under Crutch I so they are entitled to withhold money under

Crutch II. In Leeper, the Supreme Court was concerned about whether or not a parent had a

right to home schooling and if this provided an exception to the compulsory attendance laws

requiring children of certain ages to be in school. Leeper, 893 S.W.2d at 433. In this case we are

saying that the State's interpretation of laws such as TEC §42.258 and Government Code

§403.055 as well as Constitutional provisions Article VII, §1 and Article I, §19 of the Texas

Constitution are inappropriate and causing grievous harm to Crutch and those students, parents

and staff who stand instead with the school. In this case, the School had a right to have the

same type of concern that Judge Dietz illustrated above. The statute as they interpret it gives

the Commissioner so much latitude to where they could shut down any school they wanted or

enhance or deny any others they choose to impact in the most arbitrary manner. Such an

application would clearly violate the Constitution. See City of Dallas v. MD II Entertainment,

Inc., 974 S.W.2d 411, 414 (Tex. App.—Dallas 1998, no pet.). And they can use it as they have

in this case to do executively what they could not do judicially or legally, in violation of Article

II, § 1 of the Texas Constitution. A logical interpretation is that the statute provides due process

whenever utilized. See e.g. Texas Workers Compensation Comm’n v. Patient Advocates of Tex.,

136 S.W.3d 643 (Tex. 2004). These monies become vested in the Charter by fact of Article

VII's requirements so clearly due process must be provided. Government Code Chapters 311

and 312 would suggest that in interpreting a statute a sensible and just result would be required

                                                 47
and one that would be Constitutional. Permitting the Commissioner Education to wreak havoc

on the citizens of this State is just not the thing to permit. We don't know who may be the

Commissioner one day, and today's Wimberley may be tomorrow's Crutch. This is an illegal

conversion of funds. See e.g. State v. Epperson, 42 S.W.2d 228 (Comm’n of Appeals 1931).

   B. TEA’s Record Review process falls short of what is required under due process.

        One question that must be answered is what process is due. The United States Supreme

Court has indicated that the State of Texas must provide as much due process protection as the

Fourteenth Amendment, though the State had the authority to provide more and not less.

        The Due Process Clause of the Fourteenth Amendment commands that no state shall

deprive any person of life, liberty, or property without due process of law. U.S. CONST., Amend

XIV, §1. The phrases "due course of law" and "due process of law" cover the same concept and

are typically referred to as the due process clauses of the state and federal constitutions. George

D. Braden, The Constitution of the State of Texas: An Annotated and Comparative Analysis, 68

(1977). Whatever the United States Supreme Court determines is a denial of due process is

binding upon the Texas courts, although Texas courts are free to go beyond Fourteenth

Amendment requirements. Id. At 68-69. Some previous decisions provide us guidance in this

area:

   • Blair v. Texas Dept. of Human Serv., 837 S.W.2d 670 (Tex. App.—Austin 1992, no writ)
     (held that notice and an opportunity to be heard are essential and what other process is
     dependent upon the private interest that will be affected by such official action; the risk
     of erroneous deprivation through the procedures to be used and the government's
     interest, including the function involved and the fiscal and administrative burdens that
     the additional or substitute procedural requirement would entail)
   • Univ. of Tex. Medical Sch. at Houston v. Than, 901 S.W.2d 926 (Tex. 1995) (held that
     the use of the ex parte communication by the University violated Than's rights)
   • As Justice Frankfurter said in McGrath, it should be a fair proceeding. Justice

                                                48
       Frankfurter quoted Daniel Webster in his opinion. "In a government like ours, entirely
       popular, care should be taken in every part of the system, not only to do right, but to
       satisfy the community that right is done." McGrath, 341 U.S. at 172 n. 19.
   •   Mathews holds that the degree of potential deprivation is to be considered in this
       process, approving of the same point in Goldberg v. Kelly, 397 U.S. 254 (1970). And the
       Court went on further to embrace the ruling in Fusari v. Steinberg which indicated that
       the possible length of wrongful deprivation should be a factor as well. In this case we
       are talking about a school receiving approximately $60,000 to $80,000 per month and
       the withholding was to       approximate $1.4 million. This means that funds would be
       withheld for more than a year from the school (and indeed they have been). The fairness
       and reliability of existing procedures was said too by the Mathews Court to be factors to
       consider an unbiased decision maker is essential.
   •   Caperton v. A.T. Massey Coal Co., Inc., 129 S.Ct. 2252 (2009); see also Aetna Life Ins.
       Co. v. Lavoie, 475 U.S. 813 (1986).
   •   The right to cross examine adverse witnesses and present and rebut evidence. Rector v.
       Tex. Alcoholic Beverage Comm’n, 599 S.W.2d 800 (Tex. 1980); Richardson v. City of
       Pasadena, 513 S.W.2d 1, 4 (Tex. 1974).
   •   Due Process requires a fair and impartial trial before a competent tribunal. Vogt v. Bexar
       County, 23 S.W. 1044 (Tex. Civ. App. 1893). It requires an opportunity to be heard, and
       reasonable opportunity to prepare for the hearing, which, of course, encompasses
       reasonable notice of the claim or charge against an individual so as to advise him of the
       nature thereof, and of the relief sought. State v. Ball, 296 S.W. 1085 (1927); Steddum v.
       Kirby Lumber Co., 221 S.W. 920 (Tex. 1920).
   •   The Court must examine each issue that may affect the attainment of a legal trial
       according to legal procedure. Freeman v. Ortiz, 153 S.W. 304 (Tex. 1913).

       In this case we had a decision maker who had a stake in the outcome because her boss

was the maker of the decisions that were at issue. As a member of the Executive Staff clearly

he did not have the liberty to overturn the decision of his boss. This is true as to Johnson and

Glynn. And Johnson showed his bias by not only prejudging the matter in his April letter, but

also by taking extreme steps like setting the matter for hearing on the 7th of July and denying

any discovery or production of documents in the case. He further denied a reasonable request

for a postponement because of a conflicting court hearing on the same manner and summarily

entered an opinion afterwards. Glynn was designated as the hearing officer without any notice

to Crutch and after receiving objections to his appearing he indicated that he had had extensive

                                               49
contact with the biased Johnson to get prepared. The hearing was never given adequate time,

important documents were never produced, the time for the hearing was untimely because it

was not offered until 4 months after the withholding of money had begun (Johnson's decision

was 6 months after the withholding and Glynn's 11 months). Crutch was never able to put the

witnesses under oath and question them about many important issues.

       The manner of the hearing was not meaningful. A short hearing with no required

production of documents or witnesses with the opportunity to talk to a member of the decision

maker's staff who was able to engage in numerous undocumented and unknown ex parte

conversations surely falls way short of the Constitutional minimums that we are looking for. It

is also important to note the irregularity of payments and helter-skelter actions of the Texas

Education Agency clearly illustrate a violation of Article VII of the Constitution and its

requirement of an efficient system of funding public education and is also a clear example of

discrimination.

       And in this case when we look at the private interests to be affected we see the interest in

educating students, continuing to exist, paying staff as well as other related interests such as the

ability to get the education you are entitled to or as a worker or contractor just to get paid for

your work. When you seek to withhold all or essentially all of a school district's funding as was

done here. you are clearly affecting all of those interests. The Commissioner admitted as much

when he discussed why he did not impose a similar type withholding in reference to the

predominately white Wimberly ISD. And importantly, he worked with the Austin Youthworks.

In Calvert, the Court held that due process is denied when a final action is taken before a

hearing provided. Calvert, 394 S.W.2d at 657-58. This was true with Crutch I and Crutch II's

                                                50
withholdings took place because of the illegal withholdings in Crutch I. In Crutch II the record

review is only a subterfuge intended to suppress Constitutional rights and it has the same

consequence as if no hearing was provided at all. And besides that since no hearing was even

offered until months after the withholding that is another reason to believe the decision clearly

had already been made.

       In this case a record review was offered in June 2008, fully 4 months after the initial

withholding. No discovery was ever permitted though Crutch tried to conduct the same (the

audit and the documents copied at the school were provided after about 30 days of disputes but

the documents sought were never produced and no specific reasons were ever provided for

their not being provided). What was provided was a kangaroo process that was created to

address the problem presented by Crutch I but to be presented in a way to guarantee that TEA

could have its way. The person who is making the complained of decision is permitted under

the rule to designate the person to preside over this proceeding. History has shown involving

Crutch that he simply chooses a member of his Executive Staff to perform these

responsibilities.

       TEA insists they have a right to engage in as many unreported ex parte discussions as

they desire. Further, the rule provides a direct incentive to give the other party the run around.

First, the decision must be made in 30 days or you lose any right for appellate review. This

encourages the litigant to go to hearing unprepared, especially in instances like this one where

Johnson refused to provide the documents to Crutch as requested. But even then if you do go to

hearing and the decision is made with no witnesses under oath or being obligated to appear,

your only recourse is a substantial evidence review by a State Office of Administrative

                                               51
Hearings Administrative Law Judge.

       The only issue that you can raise otherwise at that level concerns procedural

irregularities. This means on matters of substance there is no chance of ever having sworn

testimony or compelled and essential documents before a final decision is made. Time after

time, the U.S. Supreme Court and this Court have held that one is entitled to a hearing at a

meaningful time and in a meaningful manner. Mathews, 424 U.S. at 328; Than, 901 S.W.2d at

926; Calvert, 394 S.W.2d at 654. In Calvert, one of the important items mentioned by the court

was the lack of appellate review for the decisions made regarding a wholesale cigarette license.

Calvert, 394 S.W.2d at 654. The Texas Supreme Court, speaking through Justice Hamilton, said

the resolution of a matter in another case involving a dental license was important and

illustrative:

       The court held that although the State could provide reasonable regulations
       concerning the practice of dentistry, the privilege to so practice once acquired
       became a right protected by the due process clauses of the State and Federal
       Constitutions.

Id. at 657 (discussing Francisco v. Board of Dental Examiners, 149 S.W.2d 619 (Tex. Civ. App.

1941, error refused)).

Other Reasons for Rejecting the Record Review. Respondent's Record Review Process Fails

to Provide the Minimal Protections of Due Process at the Administrative Level. The citations

and exhibits are incorporated herein for all purposes. The agency's Record Review process is

set forth at 19 TAC 97.1037 (the “Rule”). It's purpose is to establish procedures for creating an

administrative record for review by the State Office of Administrative Hearings (“SOAH”) for

certain decisions. App. Att. 1. The Rule establishes a flawed adversarial process to address this


                                               52
point. There should be no dispute among the parties on this issue, as a key staff member of

Respondent, his lead counsel who aided in drafting the rule establishing the agency's Record

Review process, has admitted that the Record Review process was never intended to provide

due process. App. Att.11. However, as argued earlier herein, Petitioner is entitled to due process

protection in regards to Respondent's allegations which are disputed, and which are the subject

of this appeal. These arguments are incorporated into this section for all purposes. What

remains is the question of what process is due.

      Procedural History of the Rule. The Rule was adopted on January 6, 2008, amended on

November 23, 2008, and amended again on December 22, 2010. 33 TexReg 143; 33 TexReg

9462; 35 TexReg 11228; See App. Att. 1. It is clear from a reading of the comments, as

contained in the Texas Register, that both the charter school community and the legal

community had significant concerns about the Rule's ability to provide the protections of due

process. App. Att. 1 (public comments to the Rule). Respondent dismissed those concerns, and

made no changes to the Rule to correct the flaws. Ibid. Respondent's conclusory statement were

insufficient under the State's rulemaking standards. Texas Workers Compensation Comm’n v.

Patient Advocates of Tex., 136 S.W.3d 643 (Tex. 2004).

      There is a concern regarding the stated statutory basis for the Rule. The preamble to the

published rule states that it derives its authority from Texas Education Code §39.302. App. Att.

1. Specifically, the preamble alleges that TEC §39.302 allows for the establishment of

procedures for creating an administrative record for review by SOAH. Id. TEC §39.302 reads

as follows: “Sec. 39.302. Report To District: Comparisons For Annual Performance

Assessment. (a) The agency shall report to each school district the comparisons of student

                                                  53
performance made under Section 39.034. (b) To the extent practicable, the agency shall

combine the report of comparisons with the report of the student's performance on assessment

instruments under Section 39.023. Added by Acts 2006, 79th Leg., 3rd C.S., Ch. 5, Sec. 3.22,

eff. May 31, 2006. Amended by: Acts 2009, 81st Leg., R.S., Ch. , 895 Sec. 59, eff. June 19,

2009.” A careful review of TEC §39.302 that was in effect at the time the Rule was

promulgated (January 6, 2008) can reveal no such authority. This deficiency violates both the

notice and reasonable justification standards for rulemaking. Texas Gov't Code §§2001.024 and

2001.033; Lambright v. Tex. Parks and Wildlife Dep’t, 157 S.W.3d 499 (Tex. App.—Austin

2005, no pet.); Reliant Energy, Inc. v. Public Util. Comm’n of Tex., 62 S.W.3d 833 (Tex. App.—

Austin 2001). The severity of these deficiencies would require that the Rule be republished.

State Bd. of Ins. v. Deffenbach, 631 SW2d 794 (Tex. App.—Austin 1982, writ ref’d n.r.e.).

       The amendment that became effective on November 23, 2008 added the new § (a)(5) to

apply the request for a record review process to a charter school's accreditation finding. 33

TexReg 9462; See App. Att. 1. The amendment that became effective on December 22, 2010,

primarily deleted Section (a)(5) from the Rule because HB 3 added charter schools to the

State's financial accountability rating system, which has a statutorily required appeals process.

35 TexReg 11228; See App. Att. 1. HB 3 was, in part, an extensive amendment to Chapter 39 of

the Texas Education Code, making many of its sections applicable to charter schools (a clear

indication that these sections had not been previously applicable to charter schools). Acts of

2009, 81st Leg. R.S., ch. 895, §§50-59.

       In administrative proceedings, due process requires that parties be accorded a full and

fair hearing on disputed fact issues, and at a minimum, it requires that the rudiments of fair play

                                                54
be observed. City of Arlington v. Centerfolds, Inc., 232 S.W.3d 238 (Tex. App.—Fort Worth

2007, pet. denied). It requires, at a minimum, notice and an opportunity to be heard at a

meaningful time and in a meaningful manner. Tex. Hosp. Ass’n v. Tex. Workers Compensation

Comm’n, 911 S.W.2d 884 (Tex. App.—Austin 1996, writ denied). A fair opportunity for the

parties to prove their respective cases is essential to an administrative hearing comporting with

due process. Id. The basic elements of due process at the administrative agency level are notice,

hearing, and an impartial trier of facts. Geeslin v. State Farm Lloyds, 255 S.W.3d 786 (Tex.

App.—Austin 2008, no pet.). Due process does not require that administrative hearings

measure up to judicial standards, but even they cannot be arbitrary or inherently unfair. Office

of Pub. Util. Counsel v. Pub. Util. Comm’n, 185 S.W.3d 555 (Tex. App.—Austin 2006, pet.

denied).

      Due process requires a neutral and detached judicial officer. Jaenicke v. State of Tex.,

109 S.W.3d 793 (Tex. App.—Houston [1st Dist.] 2003, pet. ref’d). It mandates that an arbiter

conduct himself or herself in and independent, neutral, and detached manner. Vick v. State, 268

S.W.3d 859 (Tex. App.—Texarkana 2008, pet. ref’d). The legal sufficiency of evidence is based

on due process, and it is a question of law. Allen v. State of Tex., 249 S.W.3d 680 (Tex. App.—

Austin 2008, no pet.). The impartial decision-maker should makes his or her rulings on

admissible evidence. Williams v. State of Tex., 89 S.W.3d 325 (Tex. App.—Texarkana 2002, pet.

ref’d). The rules of evidence to not apply to record reviews, so the presiding officer has total

latitude in ruling on evidence and no legal rules to guide him or her in their rulings. Neither

Commissioner Johnson nor Commissioner Glynn had legal training.

      Respondent has been arbitrary, capricious, and unfair in the application of his rules.

                                               55
Respondent applied the Rule to Petitioner retroactively. The final version of was published on

January 4, 2008, and Rule became effective on January 6, 2008. App. Att. 1. The audit upon

which this appeal is based in part was conducted in 2007 and in regards to the 2005-2006

school year. CRA at 9354. On or about November 9, 2007, Petitioner was notified of

Respondent's Findings and Required Actions relating to the audit. CRA at 9307-9311. These

findings were formulated on October 25, 2007. Id. The notice included information relating to

access to an informal process. On or about November 26, 2007, Petitioner submitted its first

response to Respondent's notice. CRA at 9302-9306. Consequently, By November 9, 2007,

Respondent had initiated its process in regards to the audit at issue, and by November 26, 2007,

the process was fully engaged. Also, any argument by Respondent that the Rule should be

applied to Petitioner in all its permutations would be flawed and erroneous. If it was

determined that it would be appropriate to apply the Rule to the present allegations, and

Petitioner does not argue that it is, then only the original version (January 6, 2008) would be

appropriate for analysis.

       To satisfy the minimal requirements of due process, Petitioner would be entitled to an

impartial decision maker. Jaenicke, 109 S.W.3d at 793; Vick, 268 S.W.3d at 859. The Rule does

not provide for this, and Respondent's implementation of the Rule fails to correct for this flaw.

During the process, the decision maker is appointed by Respondent and is an employee of

Respondent. Further, the decision maker confers with staff on important issues, often on an ex

parte basis. These staff members were invariably the individuals who brought or were

prosecuting the allegations against Petitioner. In addition, during the proceeding itself, the

decision maker relies on the very staff member who brought the allegations against Petitioner

                                               56
as both his subject matter and legal experts. As an example, on important legal issues, the

decision maker conferred solely with the attorney prosecuting the allegations for guidance on

these issues.

       Other facts emphasize this point. One of Respondent's presiding records review officers

indicated that the presiding review officer did not make the final decision, rather they reached

out to other agency personnel to make the decision. App. Att. 13. That is, unknown personnel,

who were not involved in the review aspect of the process, make the decision. Id. They would

not have heard or viewed witness testimonial evidence, arguments of counsel, or the reasoning

and decisions of the presiding officer. Ibid. Worse, the very staff members levying allegations

against Petitioner could be involved in the decision making process. There was no proper

division of functions within TEA that would comport with the requirements of due process.

       Further, the assistant commissioner in charge of the records review process at the time,

Adrain Johnson, exhibited a clear bias against Petitioner, and was not impartial. Commissioner

Johnson was the first of Petitioner's presiding records review officer. App. Att. 13.

Commissioner Johnson, without prior notice, or prior hearing, and before completion of the

records review process recommended to petitioner that Petitioner shut down. Id. His mind was

already made up and he was incapable of judging the evidence presented. Petitioner

complained to Respondent about this statement, and the bias it exhibited. Respondent ignored

Petitioner's complaint, and Commissioner Johnson was allowed to continue in his decision

making capacity. In the records review process, Commissioner Johnson played the role of the

decision maker. App. Att. 13. He was not, however, impartial. His statement exhibited a

fundamental violation of due process, a clear conflict of interest, and a clear display of bias on

                                               57
the part of Respondent. Even with a substitute decision maker, given the level of bias, the result

was predictable, Petitioner's funding was not reinstated.

      Without any notice to Petitioner, after the proceeding was well under way,

Commissioner Johnson was replaced with Commissioner Glynn. App. Att. 13. This did nothing

to cure the lack of impartiality. The record and the process had already been tainted beyond

repair by Commissioner Johnson's bias. In addition, Commissioner Johnson aided

Commissioner Glynn in his preparation. Id. This again raised the issue of bias. Also,

Commissioner Glynn failed to cure the deficiencies with the process. Ibid. Instead, he engaged

in ex parte communications with Jim Thompson, a Respondent staff attorney who prosecuted

the allegations against Petitioner. Id. Mr. Thompson, during the process, acted in the capacity of

a prosecutor, on behalf of the agency. Id. It was his responsibility to defend TEA's actions and

decisions, and to lay out TEA's case against Petitioner. Ibid. As an example of ex parte

communications, whenever Commissioner Glynn wanted to contact Petitioner or Petitioner's

counsel, he would do so through Mr. Thompson. Ibid.

      Petitioner had a right to properly prepare for the review. This right was denied by

Respondent. In order to properly prepare for the process, Petitioner requested, among other

things, copies of the underlying documentation upon which Respondent's audits of Petitioner

were based. App. Att. 13. Petitioner had no right to discovery, including no right to depose

witnesses. Respondent refused to provide copies of the documentation. Ibid. Petitioner

complained to Respondent regarding its refusal to provide the requested documentation.

Petitioner had no right to produce additional documents to the SOAH for review on appeal.

App. Att. 13. That is, Petitioner had no right to produce on appeal the documents that the

                                               58
decision maker did not allow into the record. This in itself was a fundamental violation of due

process and due course of law. To properly prepare for the record review, CPA Bassie regarding

some unknown adjustments made in the ledger by Respondent. He never received them. CPA

Lanier testified that the records finally produced by Respondent did not include the kinds of

working papers expected in this type of audit.

      Petitioner had a right to build a competent record on contested facts through an

adversarial process for appellate review. This right was denied by Respondent. Under the Rule,

any appeal would be to SOAH. 19 TAC 97.1037(f); 19 TAC Chapter 157, Subchapter EE.

Although oral testimony was provided, it was not allowed to be given under oath. Under the

Rule, the rules of evidence did not apply, so that documentary evidence would not be properly

authenticated. There are no proper protections against the contamination of the record with

hearsay evidence and other highly unreliable information. This flaw is of particular concern

given that the standard of review on appeal to SOAH is pursuant to the substantial evidence

rule. 19 TAC 157.1157(a). Yet, the Rule states that Respondent's representative may exclude

information that is irrelevant, immaterial, or unduly repetitious, and may take official notice of

generally recognized information within Respondent's area of specialized knowledge. 19 TAC

97.1037(e)(8) and (e)(10). The Rule makes no mention as to the bases and standards

Respondent's representative would rely on in making a determination that any particular

information was irrelevant, immaterial, or unduly repetitious, or for taking official notice of

generally recognized information within its area of specialized knowledge. Having allowed for

appellate review, Petitioner would have a right to the protections of due process in regards to

any appeal. The Rule does not provide for these protections.

                                                 59
       The condition and reliability of the record that is developed is paramount. In developing

the record, the degree and standard of proof is important to the due process issue because it

informs the fact finder about the degree of confidence he or she should have in the conclusions

as to any particular case. Edwards Aquifer Auth. v. Day, 274 S.W.3d 742 (Tex. App.—San

Antonio 2008, pet. denied). SOAH's substantial evidence review is guided by Tex. Gov't Code

§§2001.174 and 2001.175. 19 TAC 157. Pursuant to Tex. Gov't Code §2001.175(e), SOAH's

review is limited to the agency's record.

       Further, timely completion of a record review is a prerequisite for an appeal of

Respondent's proposed order under 19 TAC 157, Subchapter EE. 19 TAC 97.1037(d)(1)(D).

The timing of the records review process was debilitating. For example, Respondent withheld

funding in February and March of 2008, and only after Petitioner's counsels met with the

Commissioner regarding funding did Respondent initiate a records review. App. Att. 13.

Petitioner had not requested a record review. This was in April of 2008. Id. By the time

Petitioner had filed their petition for injunction, Respondent still had not completed the records

review process, and the rule required that it be completed within a 30-day period. 19 TAC

97.1037; App. Att. 13. Because a temporary restraining order was in place, Respondent did not

extend the period for review. It was only after the parties had been encouraged to talk with each

other pending the TRO hearing that Respondent unilaterally decided to implement another

records review. That decision was made in January of 2009. App. Att. 13. Respondent failed to

address the due process described herein. Petitioner again complained about these matters. Id.

The complaint again was ignored. Id. The Rule did not appear to provide for additional record

reviews once the 30 day deadline has passed.

                                               60
                                         CONCLUSION

       Crutch and many persons are hopeful that it will prevail in this case. In that regard, and

in light of the history of TEA's actions towards the school and its students, it is requested that

this Court hold that due process was due the School and that under the circumstances of this

case it cannot now be provided.




                                                 61
Respectfully submitted,

Law Offices of Gary L. Bledsoe & Associates

By:   ____/s/ Gary L. Bledsoe____________
      Gary L. Bledsoe
      State Bar No. 02476500
      316 West 12th Street, Suite 307
      Austin, Texas 78701
      Telephone: (512) 322-9992
      Facsimile: (512) 322-0840

Law Offices of Ron Wilson

By:   ___/s/ Ron Wilson_________________
      Ron Wilson
      State Bar No. 00785583
      316 West 12th Street, Suite 307
      Austin, Texas 78701
      Telephone: (512) 322-9992
      Facsimile: (512) 322-0840

                                   Certificate of Service

       I hereby certify that a true and correct copy of the attached document has been served
this day via regular U.S. mail at the addresses indicated below:

Beth Klusmann                                               Mishell Kneeland
Assistant Solicitor General                                 Assistant Attorney General
Office of the Attorney General                              Office of the Attorney General
P.O. Box 12548 (MC 059)                                     General Litigation Division
Austin, Texas 78711-2548                                    P.O. Box 12548 (MC 059)
                                                            Austin, Texas 78701

June 21, 2011



_____/s/ Gary L. Bledsoe__                                  /s/ Ron Wilson________
Gary L. Bledsoe                                             Ron Wilson




                                             62

				
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