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SD Supreme Court: Students Lack Standing to Sue Mid-Central for GEAR UP Corruption

Another opportunity to hold someone, anyone, accountable for the GEAR UP scandal has collapsed. The South Dakota Supreme Court ruled yesterday that Alyssa Black Bear and Kelsey Walking Eagle–Espinosa, two students whose schools (Todd County High School and St. Francis Indian School) served by the federally funded and, in South Dakota, deeply corrupted GEAR UP program, lack standing to sue the now-defunct Mid-Central Educational Cooperative and its many connected actors and estates.

Black Bear and Walking Eagle–Espinosa lost in circuit court because Judge Bruce Anderson found their claims were preëmpted by federal law. Both sides appealed, and our justices found the students can’t press this case:

The students have alleged claims as third-party beneficiaries of the contracts between MCEC and SDDOE, and MCEC and AIII. They have also alleged tort claims for theft and negligent supervision and control of various employees and officers of the various defendants. In resisting summary judgment, the studentssubmitted affidavits claiming they did not receive all of the educational services that were part of the GEAR UP program. They also presented facts evidencing possible theft or mishandling of GEAR UP funds by certain defendants. However, these facts are insufficient to show that the students are aggrieved parties who suffered an invasion of a legally-protected interest, as all of their claims are premised on their ability to enforce the contracts as third-party beneficiaries [South Dakota Supreme Court, ruling, Black Bear and Walking Eagle–Espinosa v. Mid-Central Education Cooperative et al., 2020.03.18, pp. 6–7].

As the court reads the contract, the state Department of Education did not contract with Mid-Central to provide educational benefits to students and to be accountable to those students and their communities. The department contracted with Mid-Central “to provide consultant services to the SDDOE” and “to staff various positions and GEAR UP programs and provide matching funds through cost sharing.”

Think of the court’s logic this way: Suppose the state contracts with a construction company to rebuild Highway 12. Suppose the company’s bookkeepers embezzle millions of dollars from that contract to buy themselves boats and basketball hoops and trips to Disneyland, leaving not nearly as much money as appropriated for the purpose of laying really good concrete from Aberdeen to Mina. Aberdonians with a cabin at Mina Lake can’t sue the contractor and its corrupt employees for stealing money and leaving us with a crappy road, because we individually or even as a class weren’t parties to the contract. Only the state can sue the contractor to enforce that contract.

And as we know from GEAR UP, the chances of the state holding its favored contractors accountable for corruption are slim.

The court also ruled that the students established no legal right to the GEAR UP funds and provided no evidence that the mismanagement and embezzlement that took place at Mid-Central actually harmed their education. The court notes that GEAR UP’s goals include increasing participation in postsecondary education and that both plaintiffs attend college. The plaintiffs say in their appeal, “the effect of the loss of GEAR UP funds due to Appellees’ actions and omissions on the efficacy of the GEAR UP program cannot be known, but can be assumed,” but the court declines (and rightly so) to accept assumptions as satisfaction of burdens of proof.

4 Comments

  1. grudznick 2020-03-19

    I am positive all of the answers for the Gearing Ups could be found within the legislatures if people really wanted. This is where Mr. Nelson, he of the oafish galoot style, and grudznick agree. Why do the legislatures not just ask the people who worked on the Gearing Ups?

  2. Debbo 2020-03-19

    Damn. That’s really too bad. I understand the ruling, but it sucks that the GEAR-UP crooks are getting away with it.

    If white collar crimes were strictly enforced, the need for building more prisons would be real.

  3. Donald Pay 2020-03-20

    When there are contracts in which money is given by the state to a second party and the benefits are supposed to be provided to third parties, you can structure those contracts to require the third party beneficiaries have some amount of control and an oversight mechanism over the second party. Generally, you would have that oversight at the state, but it could be simply that a student/parent committee hires someone unconnected with either the state or the second party, and responsible to the students, to oversee things.

  4. Cory Allen Heidelberger Post author | 2020-03-22

    We could have done that with the contract, Donald, but the court noted that the state included no such explicit provisions in this contract, thus leaving these plaintiffs and all third parties unable to gain standing. And why would the DOE hand Rick Melmer’s chums back in Platte a lucrative contract like this and want anyone but the pals in Pierre to have any power to hold MCEC accountable?

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