Students Lack Standing in Hasidic School Funding Row

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By Patrick Gregory

Sept. 14 — Students alleging that school board members unconstitutionally diverted taxpayer funds to Hasidic Jewish schools lack standing to sue, the U.S. Court of Appeals for the Second Circuit held Sept. 12 ( Montesa v. Schwartz , 2016 BL 296276, 2d Cir., No. 14-3721-cv, 9/12/16 ).

Scholars who spoke with Bloomberg BNA disagreed about the decision, which relates to the East Ramapo School District controversy featured in an episode of WBEZ Chicago’s This American Life radio program.

A majority of the district’s board members allegedly diverted public funds to religious schools by manipulating the Individuals with Disabilities Education Act settlement process.

The district’s student-plaintiffs nonetheless lacked standing to pursue their establishment clause claims because they were “only indirectly affected by” the defendants’ alleged conduct, the decision by Judge Peter W. Hall, joined by Judge Raymond Joseph Lohier Jr., found.

The decision reversed the district court and remanded with instructions to dismiss the students’ claims.

Scholars Divided

A dissent by District Judge Christina Reiss, sitting by designation from the U.S. District Court for the District of Vermont, “got it right,” William P. Marshall, a law professor at University of North Carolina law school, Chapel Hill, N.C., who teaches about freedom of religion, told Bloomberg BNA by telephone Sept. 13.

Reiss disagreed with the majority’s finding that any harm to the students was indirect.

The students alleged that they could show “through budgetary records and academic test scores a direct causal link” between the alleged diversion of money “and the academic harm they suffer,” she said.

The students “alleged a direct injury as a result of the diversion of funds in that that diversion decreased the resources that would otherwise be available to them,” Marshall said.

“I certainly think that” the plaintiffs have “a substantial case,” and “I wouldn’t be surprised to see this case appealed,” he said.

However, the students’ standing claim was an “unusual” one, Douglas Laycock, a professor at the University of Virginia law school, Charlottesville, Va., who teaches about religion and law, told Bloomberg BNA by e-mail Sept. 12.

There’s no guarantee that a judgment for the plaintiffs “would result in more money being spent on their education—and that is a traditional requirement for standing,” Laycock said.

Taxpayer Plaintiffs Remain

Despite the ruling here, the alleged diversion of funds might yet be stopped.

A separate claim by taxpayers against the defendants concerning the alleged diversion remains in district court and wasn’t considered here.

The claim “that public funds are being spent to support religion” is “the core case for taxpayer standing,” in contrast to the direct harm standing asserted by the students, Laycock said.

The taxpayer-plaintiffs can therefore still “fully litigate” the issue of “unconstitutional diversion of funds to religious purposes,” Laycock said.

There, the “likely remedy will be an injunction to end unconstitutional diversion” of funds, Laycock said.

IDEA Settlements

The Individuals With Disabilities Education Act allows school districts to fund the special education of students placed in private schools, and provides for reimbursement of school districts if such placements are approved in impartial hearings.

The defendants’ IDEA settlements allegedly reimbursed Hasidic parents for private school tuition from district funds before such hearings could occur, depriving the district of reimbursement.

The students argued that they had standing because they were directly harmed by the diversion of funds.

But the public students lacked standing because the “alleged harm—the deprivation of educational services—is merely incidental to the IDEA settlement disbursements themselves,” the court found.

Their injury was merely indirect and “similar to that of any other individual who is affected by the District’s budget,” whether “a student, a vendor, a taxpayer, or a citizen,” the court found.

Similarly, if the board “weren’t diverting this money to religious schools, it might just cut taxes” instead of spending the money on the plaintiffs’ education, Laycock said.

Novel Theory

The plaintiffs’ "novel theory of liability” didn’t fit “within the type of ‘direct exposure’ injury” recognized by the court under the establishment clause, the court said.

For example, the students didn’t allege that they were subjected “to a religiously infused law that prohibits them from learning.”

Nor did they allege that they were “confronted by a government-sponsored religious message.”

The plaintiffs didn’t point to a single appeals court case recognizing direct exposure where plaintiffs suffered from “the loss of a favored governmental service or benefit” due to diversion of public funds to benefit a religion, the court said.

Dissent

Reiss didn’t agree that the alleged harm was indirect.

Unlike the students, the general public and taxpayers weren’t suffering the educational harm that arose “directly out of the allegedly unconstitutional acts,” she said.

While the plaintiffs didn’t cite precedent authorizing their establishment clause claim, “it is equally true that there is no precedent prohibiting it,” Reiss said.

Marshall compared the dispute to “claims where people suggest that they’ve been economically harmed by the state promoting another religion,” as in Larkin v. Grendel’s Den, Inc., 459 U.S. 116 (1982).

There, the high court invalidated zoning requirements allowing churches to refuse liquor licenses to bars near them.

That’s “a direct harm to the establishment,” even though it isn’t “suffering a religious injury,” Marshall said.

“It’s suffering an economic injury and that’s the same kind of economic injury that I think the students are saying that they’re suffering here,” he said.

Reiss also said that instead of trying to define the establishment clause’s boundaries at the pleading stage, it should let the parties first create a factual record to inform that decision.

Marshall agreed that the students “should be allowed at least to go beyond the pleading stage to demonstrate in fact that the funds were diverted in the manner that they suggest.”

If “they can show that, it would seem to me that they can get standing,” Marshall said.

Laura D. Barbieri and Arthur Zachary Schwartz, both of Advocates for Justice Legal Foundation, New York, represented the plaintiffs.

David J. Butler, Bryan M. Killian, Randall M. Levine, David B. Salmons and Stephanie Schuster, all of Morgan, Lewis & Bockius LLP, Washington, represented the defendants.

To contact the reporter on this story: Patrick Gregory in Washington at pgregory@bna.com

To contact the editors responsible for this story: Jessie Kokrda Kamens at jkamens@bna.com; Jeffrey D. Koelemay at jkoelemay@bna.com

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