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Decision No. 15,740

Appeal of BRETT P. HOUDEK from action of the Board of Education of the Patchogue-Medford Union Free School District regarding financial practices, and application for the removal of Michael Mostow as Superintendent.

Decision No. 15,740

(April 14, 2008)

Guercio & Guercio, LLP, attorneys for respondent Board of Education, Gary L. Steffanetta, Esq., of counsel

Lamb & Barnosky, LLP, attorneys for respondent Mostow, Mara N. Harvey and Robert H. Cohen, Esqs., of counsel

MILLS, Commissioner.--Petitioner seeks a determination that the Board of Education of the Patchogue-Medford Union Free School District (“respondent board” or “board”) failed in its fiduciary duty to protect the financial assets of the district.  He also seeks the removal of Superintendent Michael Mostow (“superintendent” or “Mostow”).  The appeal must be dismissed and the application for removal must be denied.

In 2000, district voters approved a Construction Bond Proposition (“2000 Bond”) for $149.7 million for the construction of additions and/or alterations and improvements to all district school buildings.  The 2000 Bond provided for financing of “original equipment, furnishings, machinery, apparatus, and ancillary or related work” required in connection with all projects, including technology infrastructure improvements.

At the September 18, 2006 meeting of the board, the district’s architect and the district’s director of technology discussed the district’s technology plan, the district’s need for technology and whether excess funds from the 2000 Bond could be used to purchase computer technology.  A motion was passed authorizing the district to expend up to $2.79 million on technology.  At the board’s October 16, 2006 meeting, a motion to preclude the use of 2000 Bond funds for computer and video upgrades was defeated.  After that motion was defeated, the superintendent initially indicated a new motion would be needed to permit the purchase.  According to the superintendent, counsel informed him that, with the defeat of the contrary motion, no further motion was required.  The superintendent then publicly announced his intent to immediately issue purchase orders for the computers.  Neither petitioner nor any other member of the board voiced an objection at that time.  Computers were ordered through a state contract and the funds were encumbered and eventually paid out.

Petitioner alleges that the superintendent directed that $400,000 from 2000 Bond funds be improperly transferred to a new code or line item without reporting this action to the board for informational purposes or approval.  He further alleges that the superintendent willfully violated Local Finance Law (“LFL”) §165(a) by directing that those excess funds be used for the purchase of computer equipment for school libraries, a purpose not originally contemplated or authorized under the 2000 Bond.  Additionally, he claims that the superintendent willfully violated board policy by issuing purchase orders for equipment in excess of $10,000 without prior board approval, failed to follow proper purchasing procedures, and willfully violated the board’s September 18, 2006 motion that had restricted funding sources for computers.  Petitioner maintains that the superintendent’s actions conflict with the stated goals of his employment contract, and that he failed to take corrective action when petitioner requested that he restore $400,000 to the 2000 Bond.  Petitioner additionally alleges that the board failed in its fiduciary duty to protect the assets of the district by sanctioning the superintendent’s actions.

Petitioner seeks removal of the superintendent and restoration of $400,000 to the 2000 Bond fund from the district’s general fund.  He also seeks an order directing a review of expenditures from the 2000 Bond and restoration of any misspent funds to the district’s general fund, and compelling four members of the board to undergo additional financial training.  He also requests that the superintendent be denied reimbursement for his legal fees.

Respondent board contends that the appeal must be dismissed because petitioner lacks standing and the petition is untimely, fails to join necessary parties and fails to state a claim upon which relief may be granted.  Respondent board denies that it failed to fulfill its fiduciary duties, denies that it violated LFL §165 or §170.2(1) of the Commissioner’s regulations (8 NYCRR §170.2[1]), and denies that funds were improperly transferred into a new code.  It asserts that, commencing in July 2006, the district’s business office began making bookkeeping changes regarding the management of the 2000 Bond including assigning codes or line items to otherwise unassigned Bond funds.  It further asserts that the purchase of computers was a reasonable expenditure under the 2000 Bond and that the purchasing process was proper.  Respondent board also contends that the Commissioner lacks jurisdiction to grant the relief requested.

The superintendent asserts that the petition is untimely and must be dismissed against him because of improper service.  The superintendent denies that he willfully violated any law or board policy, and asserts that he acted lawfully and upon advice of counsel.  He requests that the Commissioner certify that he acted in good faith pursuant to Education Law §3811.

I must first address several procedural issues.  The purpose of a reply is to respond to new material or affirmative defenses set forth in an answer (8 NYCRR §§275.3 and 275.14).  A reply is not meant to buttress allegations in the petition or to belatedly add assertions that should have been in the petition (Appeal of E.R., 45 Ed Dept Rep 487, Decision No. 15,389; Appeal of Ramroop, 45 id. 473, Decision No. 15,385; Appeal of C.R., 45 id. 303, Decision No 15,330).  Therefore, while I have reviewed the reply, I have not considered those portions containing new allegations or exhibits that are not responsive to new material or affirmative defenses set forth in the answer.

An individual may not maintain an appeal pursuant to Education Law §310 unless aggrieved in the sense that he or she has suffered personal damage or injury to his or her civil, personal or property rights (Appeal of Samuel, 45 Ed Dept Rep 418, Decision No. 15,371; Appeal of Sweeney, 44 id. 176, Decision No. 15,139; Appeals of Giardina and Carbone, 43 id. 395, Decision No. 15,030).  Only persons who are directly affected by the action being appealed have standing to bring an appeal (Appeal of Polmanteer, et al., 44 Ed Dept Rep 221, Decision No. 15,155; Appeal of Murphy, et al., 39 id. 562, Decision No. 14,311).  District residents, however, have standing to challenge an allegedly illegal expenditure of district funds (Appeal of Samuel, 45 Ed Dept Rep 418, Decision No. 15,371; Appeal of Sweeney, 44 id. 176, Decision No. 15,139; Appeal of Allard, 43 id. 167, Decision No. 14,957).

Respondent board contends that petitioner has failed to establish standing because he failed to affirmatively state in his petition that he is a resident and taxpayer of the district.  However, there is no dispute that petitioner is a former member of the board, serving through June 2007.  In addition, on the last page of the verified petition, he provides a street address in Medford and states in his reply that this address is within the district.  Accordingly, I decline to dismiss the petition for lack of standing (seeAppeal of Levinson, 46 Ed Dept Rep 309, Decision No. 15,517).

     Section 275.8(a) of the Commissioner’s regulations requires that the petition be personally served upon each named respondent.  If a school district is named as a respondent, service upon the school district shall be made personally by delivering a copy of the petition to the district clerk, to any trustee or any member of the board of education, to the superintendent of schools, or to a person in the office of the superintendent who has been designated by the board of education to accept service (8 NYCRR §275.8[a]).

Section 275.8(a) of the Commissioner’s regulations requires that the petition “be personally served upon each named respondent or, if he cannot be found upon diligent search, by delivering and leaving the same at his residence with some person of suitable age and discretion, between six o'clock in the morning and nine o'clock in the evening, or as otherwise directed by the commissioner (emphasis added).”  In this case, the affidavit of service attached to the petition indicates that the process server served the superintendent’s daughter at the superintendent’s home at 7:41 p.m. on July 10, 2007.  There is no additional statement from the process server that he had previously attempted personal service on the superintendent directly, either at home or at the office, or made any attempt at a diligent search for him prior to leaving the petition with his daughter.  Accordingly, I am constrained to find that service upon the superintendent was improper under §275.8(a) (seei.e., Appeal of Boni, 41 Ed Dept Rep 214, Decision No 14,666; Boni, et al, v. Mills, et al., Sup. Ct., Albany Co., Special Term; Bradley, J.; January 7, 2003; judgment granted dismissing petition to review).

In his reply, petitioner notes that a second affidavit of service indicates that a second petition was served upon Nancy Hancock, Assistant Superintendent for Human Resources.  Petitioner contends that Ms. Hancock functions within the superintendent’s office and has been designated by the board of education to accept service on behalf of the district and its officers, including the superintendent, and that the board has failed to allege that Ms. Hancock was ineligible to accept the petition on the superintendent’s behalf.  While service of the petition on Ms. Hancock effects service for the board pursuant to §275.8(a), it does not obviate the necessity for personal service on the superintendent where petitioner seeks his removal.  Since no personal service was made upon the superintendent, the application for his removal must be denied for improper service (seeApplication of Grinnell, 37 Ed Dept Rep 504, Decision No. 13,914).

Petitioner further contends that “any perceived weakness in the service of this petition” should be overlooked because there is no evidence that the superintendent was prejudiced by improper service.  Petitioner’s argument, however, is unavailing.  The Commissioner’s decisions relied upon by petitioner are distinguishable.  In four cases, respondent was not prejudiced because, in contrast to the instant case, the petition was actually personally served.  In three of those four cases, the issue concerned the lack of verification of the served copy of petition, an issue not raised in this appeal (see, Matter of Moser, Jr., 23 Ed Dept Rep 153, Decision No. 11,170; Matter of Brandon, 22 id. 223, Decision No. 10940; Matter of Silver, 19 id. 44, Decision No. 10,206).  In the fourth case, the person accepting service indicated that she was authorized to accept service; moreover, that case involved a child with a handicapping condition, which will not be dismissed on procedural grounds absent a showing of prejudice to respondent (Appeal of a Child with a Handicapping Condition, 32 Ed Dept Rep 405, Decision No. 12,868).  In the fifth case, the only cited case actually involving removal of school officials, service was allegedly defective because two respondents claimed that petitioner herself affected service, even though petitioner provided an affidavit to the contrary.  None of these cases are similar to the instant case or demonstrate that the petitioner’s improper service should be overlooked here, and I decline to do so.

A party whose rights would be adversely affected by a determination of an appeal in favor of a petitioner is a necessary party and must be joined as such (Appeal of Samuel, 45 Ed Dept Rep 418, Decision No. 15,371; Appeal of Meringolo, 45 id. 128, Decision No. 15,281; Appeal of Kelly, 45 id. 38, Decision No. 15,253).  Joinder requires that an individual be clearly named as a respondent in the caption and served with a copy of the notice of petition and petition to inform the individual that he or she should respond to the petition and enter a defense (Appeal of Samuel, 45 Ed Dept Rep 418, Decision No. 15,371; Appeal of Meringolo, 45 id. 128, Decision No. 15,281; Appeal of Kelly, 45 id. 38, Decision No. 15,253).

Respondent board asserts that the appeal should be dismissed because petitioner failed to join the district’s assistant superintendent for business, its purchasing agent and its claims auditor.  Petitioner does not seek action against these individuals and in fact, stipulates that they were fulfilling their duties.  The assistant superintendent is no longer employed by the district.  Furthermore, the board’s claims that the assistant superintendent’s reputation could be harmed, or that an adverse decision might result in disciplinary action against its employees, are speculative.  Accordingly, I decline to dismiss the petition on that basis.

The appeal and application for removal, however, must be dismissed as untimely.  An appeal to the Commissioner must be commenced within 30 days from the making of the decision or the performance of the act complained of, unless any delay is excused by the Commissioner for good cause shown (8 NYCRR §275.16; Appeal of O’Brien, 44 Ed Dept Rep 43, Decision No. 15,092; Appeal of Spina, 43 id. 354, Decision No. 15,016).  The 30-day limitation period also applies to a removal application made pursuant to Education Law §306 (8 NYCRR §277.1; Application of Lilly, 43 Ed Dept Rep 459, Decision No. 15,050; Application of Bean, 42 id. 171, Decision No. 14,810).

In this case, the petition was served on July 10, 2007, more than 10 to 12 months after the alleged transfer of $400,000 to a newly coded line item during the summer of 2006, and more than nine months after the October 16, 2006 board meeting at which the superintendent publicly announced the intent to issue purchase orders for the computers.  The record reveals that petitioner seconded the motion to preclude the use of 2000 Bond funds for computers at the October 16, 2006 meeting.  After the motion was defeated, the superintendent publicly announced that he would immediately issue purchase orders for the computers using excess funds from the 2000 Bond.  The purchasing process proceeded from that time forth.  In addition, on February 10, 2007, petitioner wrote a letter of complaint to the superintendent about this matter, and by letter dated February 13, 2007, sought a private opinion from bond counsel.  Thus, there can be no question that petitioner had knowledge of the acts complained of, but failed to act in a timely manner.

Petitioner contends in his reply that the entire “matter was an ongoing event” and that “action was requested, and denied, on two separate occasions in June within thirty days” of the filing of the petition.  By email dated June 13, 2007 and at the year’s final board meeting on June 18, 2007, petitioner requested that the superintendent take corrective action to restore funds to the 2000 Bond from the district’s general fund.  Reconsideration requests, however, do not extend the time within which an appeal must be commenced (Appeal of a Preschool Child with a Disability, 43 Ed Dept Rep 343, Decision No. 15,012; Appeal of Williams, 42 id. 260, Decision No. 14,846).  To the extent petitioner claims the matter was ongoing because he did not observe that an actual purchase of equipment had occurred until he reviewed reports prior to the January 22, 2007 board meeting, or, because the superintendent did not forward a letter from the district’s architect to respondent board regarding the expenditure until March 20, 2007, petitioner still did not serve the petition until July 10, 2007, more than 30 days later.  Accordingly, I find the appeal and application untimely and dismiss/deny them on that basis.

Although the appeal is dismissed and the application is denied for the foregoing reasons, one administrative matter remains.  The superintendent has requested that I grant him a certificate of good faith pursuant to Education Law §3811(1).  Such certification is solely for the purpose of authorizing the board to indemnify him for legal fees and expenses incurred in defending a proceeding arising out of the exercise of his powers or performance of duties as superintendent.  It is appropriate to issue such certification unless it is established on the record that the requesting officer acted in bad faith (Application of Lilly, 43 Ed Dept Rep 459, Decision No. 15,050; Application of Zimmerman, et al., 42 id. 205, Decision No. 14,823).  On the evidence in the record before me, I will issue the requested certification for the limited purpose of §3811(1).

In light of this disposition, I need not address the parties’ remaining contentions.