P.A.C.E. v. Kansas City Mo. Sch. Dist., No. 06-3318 (Feb. 27, 2008)
The U.S. Court of Appeals for the Eighth Circuit (AR, IA, MN, MO, ND, NE, SD) has struck down a Missouri law requiring the Kansas City Missouri School District (KCMSD) to use property tax revenue that was set aside to pay off court-ordered desegregation bonds to fund charter schools. The appeal arose out of the court-supervised desegregation of KCMSD, which began with the filing of a lawsuit in 1977. The desegregation bonds provided financing of both capital and operating expenses of K-12 schools associated with desegregation efforts. Although the district was declared unitary and released from court supervision in 2003, some parties to the suit filed a motion in federal district court in February 2006 asking the court to bar the state from acting in a manner inconsistent with earlier court orders, including an agreement between KCMSD and the state that was incorporated in court orders. The moving party, which included KCMSD, a class of plaintiff schoolchildren, and the American Federation of Teachers Local 691, asserted that the recent state legislation violated the court orders by requiring KCMSD to use property tax levy proceeds that were dedicated to repayment of the bonds to fund charter schools. The district court agreed, granted the motion, and issued a final order enjoining the state from requiring KCMSD to divert the funds to charter schools. The state appealed.
The Eighth Circuit affirmed the lower court. Before reaching the merits of the lower court’s decision, the appeals court rejected the state's argument that the district court had no jurisdiction to consider the motion. The district court had addressed this jurisdictional issue and determined that it had ancillary jurisdiction to enforce prior orders in this case. The state first asserted that because the district court declared the district unitary and closed the case in 2003, it had no jurisdiction “to impose remedies some three years after such declaration.” The appeals court found this assertion based on the faulty premise that the district court’s granting of the motion imposed new obligations on the state, when in fact a district court retains ancillary jurisdiction even after a case is closed to “manage its proceedings, vindicate its authority, and effectuate its decrees.” The state also asserted that the district court lacked ancillary jurisdiction because the 1996 agreement was simply a settlement agreement, the terms of which were not made part of a court order. Although prior case law made clear that federal courts do not retain authority to enforce settlement agreements unless the dismissal order states that the court is doing so or the court incorporates the terms of the agreement into an order, in this case the opinions of both district and appeals courts made clear that the 1996 agreement was incorporated into the district court's orders.
The appeals court then held that the lower court acted appropriately in enjoining the state from requiring KCMSD to divert the funds to charter schools. First, the injunction was necessary to effectuate five previous court orders, which painted a picture of the obligation that the district court and the Eighth Circuit had placed on the state to refrain from taking any action that would interfere with the school district's ability to retire the court-ordered bonds. The state's argument that the district court's order somehow imposed new duties on the state was without merit, the appeals court concluded, agreeing with the district court that implicit in the agreement was the parties' expectations that the state would not reclaim the funds that it was transferring. As a result, the Eighth Circuit rejected the state's argument that the district court's order unlawfully modified the agreement.
P.A.C.E. v. Kansas City Mo. Sch. Dist., No. 06-3318 (Feb. 27, 2008)