Kids World of America, Inc. v. Georgia (In re Kids World of America, Inc.)

341 B.R. 591, 2006 Bankr. LEXIS 763
CourtUnited States Bankruptcy Court, W.D. Kentucky
DecidedMay 9, 2006
DocketBankruptcy No. 04-35242; Adversary No. 05-03217
StatusPublished

This text of 341 B.R. 591 (Kids World of America, Inc. v. Georgia (In re Kids World of America, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kids World of America, Inc. v. Georgia (In re Kids World of America, Inc.), 341 B.R. 591, 2006 Bankr. LEXIS 763 (Ky. 2006).

Opinion

MEMORANDUM OPINION

THOMAS H. FULTON, Bankruptcy Judge.

THIS CORE PROCEEDING1 comes before the Court on Defendant State of Georgia Department of Early Care and Learning’s (“Defendant”) Motion for Summary Judgment and Plaintiff/Chapter 11 Debtor Kids World of America, Inc.’s (“Plaintiff’) Response. The Plaintiff, a child care provider, filed a Complaint for Turnover of Funds, seeking money allegedly owed to it pursuant to an asserted contract with the Défendant. The Defendant filed the present Summary Judgment motion claiming the Plaintiffs lawsuit is barred by the doctrine of sovereign immunity established by the Eleventh Amendment or that it was entitled to a judgment as a matter of law because it did not enter into a written contract with Plaintiff for the 2005-2006 fiscal year.

Oral arguments were held on the Summary Judgment motion on April 21, 2006. Following the oral arguments, the Plaintiff was permitted to file additional exhibits for consideration by the Court. The Defendant was then permitted to file a response, to which the Plaintiff could file a reply. Upon the filing of the reply, this matter was deemed submitted.

Findings of Fact

The Defendant is a state agency created under applicable Georgia law that runs Bright from the Start, which provides funding for child care and education services to day care providers throughout the state. In order to receive such funding, a child care provider must submit an application to the Defendant, which Bright from the Start may or may not accept, and only then enter into a valid contract for funding. As noted, the Plaintiff is a child care provider with locations in Georgia that applied for and was granted a contract with the Defendant for a Bright from the Start contract for the fiscal year running from July 1, 2004-June 30, 2005.

Providers who have been granted contracts for previous years must resubmit an application to the Defendant for each year they wish to continue to receive funding through the Bright from the Start program. These “Continuation Programs” may be pre-approved if the programs are in “good standing.” Under the terms of the Bright from the Start application, programs in “good standing” are those that “have maintained full classes, met all program and reporting requirements, met child care licensing regulations, met federal nutrition program rules where applicable, have no unresolved audit or reconciliation issues and are not on probation.” If providers are in “good standing,” then they may be “pre-approved for the same number of classes at the same location(s) as the current year.” Providers who wish to add additional classes “must complete an expansion application by the due date but are still pre-approved for the same [593]*593number of classes at the same location(s) as the current year.” On the first page of the application under the heading “Special Note: Funding for New and Expansion Classes ”, it specifically states “[i]n past years, providers have operated partially or fully funded private classes in an effort to receive funding from the Department. Providers are strongly advised that operating private classes or funding classes at provider expense does not guarantee Department funding.” All applicants must submit their applications in February for the fiscal year commencing the coming July.

In February 2005, the Plaintiff applied to Bright from the Start for a “continuation” contract and also applied for funding for additional, or expansion, classes. At or around the time Plaintiff submitted its 2005-2006 application, it was audited by the Defendant (“2005 Audit”). The Plaintiff had undergone a previous audit by the Defendant for the 2002-2003 fiscal year (“2003 Audit”). The 2003 Audit began in April 2003 and concluded in October 2003. Following the successful completion of the audit, the Defendant funded the Plaintiffs 2003-2004 contract and retroactively paid the Plaintiff for services from the beginning of 2003 fiscal year.

The 2005 Audit began in approximately February 2005 and continued through October 2005. Throughout the audit process the Plaintiff was in contact with the auditors regarding documentation and paper work that was required to complete the audit. Numerous emails were exchanged between Ms. Ruth Coon, a representative of the Plaintiff, and Ms. Daphne Haley, Director of the Pre-K Division of Bright from the Start. One such email is dated June 30, 2005, the last day of the 2004-2005 fiscal year. This email from Ms. Coon to Ms. Haley inquires as to whether Ms. Haley had received certain audit information that Ms. Coon had sent and asks if additional information needs to be forwarded. In the email Ms. Coon also states, “I know that the ’06 contract can’t be approved until we get the audit resolved, but I need to start hiring teachers and setting up classrooms. Are you comfortable saying that our contract (with the additional class in Douglasville) will be renewed at the successful outcome of the audit?” In Ms. Haley’s reply, which occurred less then an hour after she received the email, she asks for proof that the withholding taxes were paid, but does not address the question of whether the Plaintiffs contract will be renewed. On July 25, 2005 (“July 25 letter”), Tanya R. Astin, the Audit Coordinator, sent a letter to Ms. Coon confirming that audit information had been received and requested additional clarification regarding certain expenditures. The letter ended with the statement, “[y]our contract will be held and your organization may be ineligible to participate as a GA Pre-K program provider for fiscal year 2006.” (emphasis in original).

The Plaintiff continued to provide childcare and educational services to children in Georgia for the fiscal year 2005-2006. The 2005 audit was completed in October 2005. The Plaintiff now seeks reimbursement for classes it provided to students beginning July 1, 2005, which, it contends, was done under the auspices of the Bright from the Start program. The Defendant responds that it does not have a valid contract with the Plaintiff for the 2005-2006 fiscal year because the Plaintiff was being audited and, thus, could not qualify as a continuation contract. Further, the application package clearly states that additional classes are not automatically approved, and any additional classes must be specifically approved. The Plaintiff counters (1) that it successfully passed the audit, (2) that the Defendant knew it was providing services as a Bright from the Start provider, (3) that it had undergone a similar [594]*594audit in 2003, and, (4) that upon completion of the 2003 Audit, it was reimbursed for classes it provided during the pendency of its audit.

Conclusions of Law

Summary Judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56; Fed. R. Bankr.P. 7056. All evidence, facts, and any inferences are drawn in the light most favorable to the nonmoving party. Shah v. Deaconess Hospital, 355 F.3d 496, 498 (6th Cir.2004).

The Georgia Constitution waives sovereign immunity for written contracts only. GA Const. Art. 1 § 2 ¶ IX.

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Related

Central Virginia Community College v. Katz
546 U.S. 356 (Supreme Court, 2006)
Bhanukumar C. Shah v. Deaconess Hospital
355 F.3d 496 (Sixth Circuit, 2004)
Baker v. Jellibeans, Inc.
314 S.E.2d 874 (Supreme Court of Georgia, 1984)
Board of Regents of University System of Georgia v. Tyson
404 S.E.2d 557 (Supreme Court of Georgia, 1991)

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Bluebook (online)
341 B.R. 591, 2006 Bankr. LEXIS 763, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kids-world-of-america-inc-v-georgia-in-re-kids-world-of-america-inc-kywb-2006.