NC court: Charter schools can't use immunity to thwart suits

RALEIGH, N.C. (AP) — The North Carolina Supreme Court ruled on Friday that nonprofit charter schools can’t avoid facing civil fraud claims alleging mismanagement of taxpayer money by arguing they are immune from such lawsuits like a state agency.

The justices reversed a 2019 Court of Appeals decision that had dismissed claims against Kinston Charter Academy, which closed abruptly to 190 students and their teachers in 2013. A 2016 lawsuit by then-Attorney General Roy Cooper sought financial damages for the state and monetary penalties against the academy, its CEO and the chair of its board.

Charter schools are tuition-free public schools that receive state funds on a per-pupil basis and have more flexibility — with instruction and enrollment among them — than traditional K-12 schools. They are overseen by the State Board of Education.

Kinston Charter Academy and leaders were accused by Cooper's office of violating the state’s False Claims Act and deceptive trade laws. State attorneys allege the school provided a bogus upgraded enrollment estimate to state education officials that meant receiving additional funds, even as leaders knew the school would not last the 2013-14 school year.

Academy CEO Ozie Hall and his wife, board leader Demyra McDonald-Hall, unsuccessfully sought to get the lawsuit dismissed by a Wake County trial judge. They in turn asked the Court of Appeals to step in, saying the academy was protected from liability under the doctrine of sovereign immunity, which exempts state government from most lawsuits unless an agency consents to be sued.

A three-judge panel of the intermediate appeals court agreed with the academy, saying it was entitled to such immunity and that it didn’t fit the definition of a “person” who is the target of state litigation...