Judge to decide whether case against district goes to trial

Next week the Stillwater Area School District and community group 834 Voice will meet in court again, perhaps for the last time.

On Aug. 2, attorney for the district Peter Mikhail submitted a motion for summary judgment — meaning he asked the judge to determine if there are enough facts in support of the plaintiff’s claims to warrant a jury trial. If the court agrees with the motion, the case would be dismissed.

On Aug. 21 Fritz Knaak, attorney for 834 Voice, submitted a memo opposing the motion for summary judgment and asking to continue to a jury trial.

The lawsuit is going forward with three claims; an Open Meeting Law claim, a conflict of interest claim related to former board member Kathy Buchholz and her relationship to architect firm BWBR, and a conflict of interest claim related to the district’s current executive director of finance and operations Kristen Hoheisel and her relationship with financial consulting firm R.W. Baird.

Standing to sue

In asking for summary judgment, Mikhail argued in his motion that 834 Voice didn’t meet the legal requirements to be a corporation. He also claimed there were problems with the identities of the plaintiffs of the case, who were originally anonymous.

Mikhail pointed out that according to the May 26 deposition of Hershel Weisberg, speaking on behalf of 834 Voice, the group did not maintain any corporate records, did not have any designated officers and had no controls in place to monitor the use or spending of funds.

Mikhail wrote that the “hasty appointment of board members and officers” after the court ordered disclosure of their identities “does not suffice, cannot rewrite history, and cannot make non-existent members materialize.”

Knaak, however, argued that 834 Voice is in compliance with the Minnesota law governing nonprofit organizations.

“834 Voice was able to successfully bring a case to and have it heard by the Minnesota Court of Appeal with no challenge by the defendants as to the standing of the organization,” Knaak wrote. “It is an active and vibrant entity in fact, not simply on paper, with hundreds of supporters.”

Knaak cited Minn. Stat. 317A to argue that the only two required roles of a nonprofit — president and treasurer — have been filled by a person “exercising the function of the president and treasurer, however designated.”

“Rather than focus on the underlying claims, the defendants have concentrated much of the space and energy in their lengthy memorandum to making a procedural claim that the corporate form of 834 Voice should be penetrated and its existence disallowed,” Knaak wrote. “By doing this, the defendants appear to believe that they can prevent the lawsuit from continuing based on a lack of standing on the part of 834 Voice.”

Mikhail also attacked the standing of the anonymous plaintiffs named in the case, arguing that they were not real individuals, but placeholders until a specific person was selected after the case was filed in court — an action that is not allowed in the rules of civil procedure.

In June of this year, the court ordered the anonymous plaintiffs to release their names. The plaintiffs now identified in the case are Chad Sandstrom, known as Jane Doe, Connor Simonet, known as Mary Roe and Andrea McCready, known as John Smith. “A man now claims to be Jane Doe; a man now claims to be Mary Roe; and a woman now claims to be John Smith,” Mikhail wrote. “The amended complaint identifies John Smith as the ‘parent of an elementary student currently attending Oak Park Elementary School,’ The person now claiming to be John Smith is a woman who does not have any children.”

“When the decision was made to seek legal action against the district regarding their decision to close Withrow, Marine and Oak Park elementary schools, numerous plaintiffs volunteered to be part of this action,” Knaak wrote in his response.

Due to the number of volunteers, Knaak explained that it was decided to select one plaintiff from each of the elementary school attendance areas and it was assumed — due to their active opposition to the closings — that they did have children enrolled in their local school.

“The fact that this was not true of two of them did not come to light until during the discovery process,” Knaak wrote.

Conflict of interest

Should the court find in favor of 834 Voice’s claims of conflict of interest, the plaintiffs have asked for specific district contracts with R.W. Baird and BWBR to be void and any payments returned to the district.

Knaak cited Mins. Stat. 471 to argue that a public official making a contract in an official capacity shall not voluntarily have a personal financial interest in that contract. The statute goes on to state that such a contract would be void.

In the case against Buchholz, Knaak argued that while Buchholz did recuse herself from the vote to select of BWBR as the architect for projects related to the 2015 voter-approved bond, , any increase or decrease in the scope of the project would have had an impact on the amount of money the firm would receive in its fee. Buchholz’s husband, Brian, did not work directly on the district’s project, but is a principal and shareholder in the firm and would receive a financial benefit.

In the claim of conflict of interest against Hoheisel, Knaak argued that her role as the district’s finance director — with its authority to enter into contracts up to $100,000 — makes her a public official under state statute. Hoheisel’s husband, Micheal, is the district’s financial advisor, works for the financial services firm R.W. Baird, and advised the school board on the sale of bonds for the Long-Range Facilities plan.

R.W. Baird received a wire transfer of $115,000 from bond underwriter Piper Jaffray following the closing of the sale, and Knaak argued that Hoheisel was the sole approver of the wire transfer. According to Knaak’s memo, there is no record of the board approving a payment of a fee to R.W. Baird related to the closing of the bond.

While Mikhail defended against these claims, he ultimately argued the court cannot void the contracts with R.W. Baird or BWBR because Knaak has not included the firms in the case.

“This court lacks jurisdiction to issue a declaratory judgment about the validity of a contract when parties to that contract are not before the court,” Mikhail wrote.

The discovery deadline was reached Aug. 1 and the plaintiffs “never took steps to join either R.W. Baird or BWBR in this action,” Mikhail wrote.

Knaak claimed that shouldn’t matter.

“The plaintiffs have not sued either Baird or BWBR because plaintiffs quarrel is not with those entities,” Knaak wrote. “The presence of Baird or BWBR, while they may be interested in the outcome, is no way required in the resolution of the underlying issue.”

Open Meeting Law

Regarding alleged Open Meeting Law violations, Mikhail argued that emails among board members do not constitute a meeting, claiming case law has deemed that written communication is not subject to the Open Meeting Law and that small group meetings of board member were not illegal because there was not a quorum present.

“Although ‘meeting’ is not defined in statute, the court found that prior case law ‘appears to assumed that the Open Meeting Law applied only to an event at which office-holders are assembled in person,’” Mikhail wrote.

Knaak argued that small group meetings were used to develop the decision to close the three schools outside the public eye.

“Board member Amy Burback, for example, referred to the series of meetings as a ‘decision making process’ and that she had seen the information before,” Knaak wrote. “The amount of information, discussion and debate between board members and board members and staff all occurred outside the public’s view as part of a continuous, admitted ‘decision-making process’ that was not supposed to be seen.”

Knaak also argued against Mikhail’s interpretation of the Open Meeting Law.

“The degree to which emails may constitute part of a meeting for purposes of the Open Meeting Law is still generally considered to be very much an open question,” Knaak wrote.

Day in court

According to the court schedule, a hearing on the motion for summary judgment has been scheduled for 1 p.m. Wednesday, Aug. 30, in the Anoka County Courthouse. Judge Daniel O’Fallon will hear arguments on the motion and determine if the case should be dismissed or continue to trial. If the case does continue, a trial has been scheduled for 9 a.m. Oct. 23 in Washington County Court.

Contact Alicia Lebens at [email protected]