On April 26, 2022, the Supreme Court of Ohio handed down a merit decision in this case. Read the analysis here.

On June 30, 2021, the Supreme Court of Ohio will hear oral argument in State, ex rel. Ohio Attorney General v. Robert Burns, et al., 2020-1078. At issue in this case is whether Ohio public officials can be held strictly liable for misappropriated public funds after just “receiving or collecting” the money or if control is also required.

Case Background

From August 2009 – June 2010, Robert Burns served as chief executive officer with the title Director of New City Community School—a Dayton charter school. Burns’ contract granted him managerial and supervisory authority over “all personnel employed by the school.” Burns was also authorized to approve budget expenditures from the Ohio Department of Education on behalf of New City. He shared this authority with New City’s chief financial officer, Carl Shye. Once approved, state and federal grants were deposited directly to New City’s account. During the 2009 – 2010 school year, New City received $432,989.57 in funding, but two years later, the Ohio State Auditor discovered that over $50,000 had been misappropriated.

In 2018 and pursuant to R.C. 9.39, the Ohio Attorney General (“the State”) sued Burns and three other defendants, including Shye, for the misappropriated public money. R.C. 9.39 states, in part, that, “all public officials are liable for all public money received or collected by them or by their subordinates under color of office.” The State contended that Burns and his co-defendants, as public officials, were jointly and severally liable for the funds. Burns argued that he never controlled or had the power to distribute funds from New City’s account and thus did not “receive or collect” public money. Both parties moved the trial court for summary judgment.

Judge Mary Wiseman of the Montgomery County Court of Common Pleas ruled for the State. Judge Wiseman found that Burns took affirmative steps within his official capacity to acquire and bring together public funds to the school. In fact, without Burns filing and signing grant applications, New City would never have received the funds. Therefore, Burns “collected” public money within the meaning of R.C. 9.39 and is strictly liable for the more than $50,000 of misappropriated money. Burns appealed.

The Appeal

In a decision written by Judge Michael Tucker, joined by Judge Jeffrey Welbaum, the Second District reversed the trial court’s decision. Judge Michael Hall dissented.

The majority first found the phrase “received or collected” in R.C. 9.39 to be ambiguous. The trial court read the “or” disjunctively and separately defined the words “received” and “collected.” From the definition of “collected,” the trial court simply concluded that Burns exhibited control over public funds and was thus liable. But because “collect” (“to claim as due and receive payment for”) uses “receive” in its definition, the two words can also be construed as a unified phrase that defines one single action. Because these two differing definitions are reasonable and R.C. 9.39 does not define the phrase, the statute is ambiguous.

When a statute is ambiguous, courts must discern and apply the intent of the legislature. When the General Assembly enacted R.C. 9.39, it intended to codify the common law rule that public officials are strictly liable only for the loss of public funds that they exercise a degree of control over. In this case, Burns did not ever receive the funds nor were they subject to his control. Rather, the funds were directed to and controlled by Shye, New City’s CFO. Burns was not Shye’s supervisor, but rather Shye acted independently from Burns. In the absence of any entrustment or control over New City’s funds, Burns cannot be said to “receive or collect” the funds within the meaning of R.C. 9.39. In dissent, Judge Hall would affirm the trial court’s ruling because Burns was “captain” of the New City ship and is strictly liable for all lost funds.

The State appealed.

Key Statutes and Precedent

R.C. 9.39 (Liability for public money received or collected.)(“All public officials are liable for all public money received or collected by them or by their subordinates under color of office.”)

Seward v. National Surety Corp., 120 Ohio St. 47 (1929) (Holding that any public official who either authorizes or supervises an account from which an illegal expenditure is made is strictly liable. Liability attaches by virtue of the public office held. It is the office holder’s obligation to account for and disburse according to law moneys that have come into his hands by virtue of his being such public officer.)

State v. Herbert, 49 Ohio St.2d 88 (1976) (R.C. 9.39 is a codification of the common law “imposing strict liability on public officials for the loss of public funds with which they have been entrusted” or control.)

Cordray v. Int’l Preparatory School, 2010-Ohio-6136 (Interpreting R.C. 9.39 to mean that, “an officer, employee, or duly authorized representative or agent of a community school is a public official and may be held strictly liable to the state for the loss of public funds.”)

*Votes to Accept the Case

Yes: Chief Justice O’Connor, Justices DeWine, Kennedy, Fischer, Donnelly, and Stewart.

*Justice French did not participate.

State’s Proposition of Law Accepted for Review

A public official is liable under R.C. 9.39 if he or his subordinates have “collected” public money on behalf of his public office. One has “collected” public money if he has personally taken actions essential to the public office’s obtaining or receiving the public money, and the office actually receives the public money.

State’s Argument

This is a statutory interpretation case where the plain text and precedent favor the State’s position, which is that Burns as CEO is liable for lost or misappropriated public funds the government sent to the school. For two primary reasons, the Second District’s contrary decision must be overruled. 

First, the Second District’s statutory analysis is flawed. R.C. 9.39 uses the disjunctive word “or” meaning a public official is subject to liability if he either receives or collects public funds. Contrary to the Second District’s conclusion, this phrase is not ambiguous, and the two terms are separate, independent triggers to liability. With that construction in mind, neither party argues that Burns “received” the funds; New City’s CFO did. Rather, at its core, this case is about whether Burns “collected” public funds. In general use, “collect” means to “gather together” or to “bring together scattered things in one mass or fund.” And Burns did exactly that when he approved expenditure reports and submitted grant applications which secured hundreds of thousands of dollars for New City.

The word “or” is important for yet another reason: it distinguishes different terms that have different meanings, unlike the conjunctive word “and.” This is confirmed by R.C. 9.39 because to collect something is quite different than to receive something. For example, if you post a link to a charity’s website on Facebook, you would be “collecting for charity,” while the charity itself would merely “receive” the funds. It was improper for the Second District to treat two distinctive, different words as one.

The Second District also erred in concluding that to “collect” public funds under R.C. 9.39, a public official must also exercise control over those funds. First, the statute makes no mention of the word control and courts should give effect to the words employed in a statute, not insert words the legislature did not use. Second, it is possible to collect funds without controlling them and therefore, it is incorrect to impose an inherent control requirement. Third, the common law principles codified in R.C. 9.39 consider control, but it is merely sufficient for liability, not necessary. Finally, imposing a control requirement weakens R.C. 9.39’s incentive for public officials to safeguard public funds and thus, entirely undermines the purpose of the statute.

In sum, Burns “collected” public funds which alone makes him liable under R.C. 9.39, regardless of whether it was Burns, Shye, or a subordinate who misused the money. Ohio has chosen a strict liability regime to ensure public funds are safeguarded and statutes protecting the public’s money should be strictly construed in favor of the public.

Burns’ Argument

For over 150 years, the common law rule codified in R.C. 9.39 only held public officials strictly liable for loss of public funds they control. By suing Burns—a public official who exercised no control over New City’s funds—the State attempts to distort this well-established rule beyond recognition. Burns never had any responsibility for or authority over the fiscal management of New City, nor did the CFO, Carl Shye, report to him. Shye, who reported to New City’s Board of Directors, ultimately pled guilty in federal court to the embezzlement of federal funds from several community schools in Ohio, including New City.

The historical use of the phrase “collect or receive” confirms that Burns cannot be liable under R.C. 9.39. Since 1902, the General Assembly has consistently used the phrase “collect or receive” to describe public money under the custody and control of public officials. For the same period, Ohio courts have only held public officials liable for the loss of public funds they controlled. The General Assembly knew exactly what it was doing when it chose the phrase “collect or receive” and it never intended R.C. 9.39 to displace the long-standing common law rule that control is a necessary element to hold a public official strictly liable. Ironically, for decades, the State Auditor and Attorney General have issued guiding opinions that expressly rely on the control of public funds requirement that the State now tries to refute.

Under the proper interpretation of R.C. 9.39, Burns did not “receive or collect” the public funds at New City. Burns simply approved budgets on a website and did so only with the approval of New City’s CFO. Burns never received, possessed, disbursed, or controlled any of New City’s funds nor did he have the authority to do so under statute, common law, or his employment contract. While the word “collect” is crucial, R.C. 9.39 also requires that public officials act “under color of office.” But Burns took no action under “color of office” that could subject him to liability. First, Shye, not Burns, was responsible for control of the school’s funds. Second, per statute, Shye reports to New City’s board, not to Burns. Third, Ohio has historically assigned custody and control of public funds to treasurers and fiscal officers like Shye, not directors like Burns who exercise no control at all. There is no statutory or common law rule in Ohio that imposes a duty on public officials who apply for public funds to safeguard those funds once they are released to the public office and controlled by a different public official.

As a matter of policy, strict liability is imperative to protect public funds. But the policy underlying R.C. 9.39 will be severely distorted if it is used to blindside public officials with strict liability for monetary loss they have no control over. The State’s analogy about posting a charity link on Facebook highlights the unfairness of its own position. While the person who posts the link may be said to “collect” for charity, it would make little sense to impose strict liability upon that passive collector if the charity lost or misappropriated the funds. This is precisely why control always has and should continue to be an element of R.C. 9.39 liability. The Second District’s decision should be affirmed.

Burns’ Proposed Counter Proposition of Law

Public officials are liable under R.C. 9.39 only for public funds they control.

Amicus in Support of Burns

Buckeye Association of School Administrators, et al.

Amici are three Ohio organizations—the Buckeye Association of School Administrators, the Ohio Association of School Business Officials, and the Ohio School Board Association—that represent and advocate on behalf of school administrators, treasurers, and boards. Amici have an interest to ensure regulations are clear and consistent. The trial court in this case strayed from established law and created uncertainty that damages Ohio public schools.

Until this case, there was no Ohio case law holding a public official strictly liable for funds he never controlled. In 2019, the General Assembly decided that mere negligence, not strict liability, was the proper standard for holding school treasurers liable for lost funds. But the State’s argument in this case defies the legislature’s intent by casting R.C. 9.39 so broadly that administrators who do not control funds are strictly liable while treasurers, who actually control the funds, are only liable in negligence. The State’s argument that all it takes is a passive “receipt” or “collection” of money to be held strictly liable is untenable. The State’s argument would radically expand strict liability to any school employee—including those who prepare grant applications, principals, and all unrelated administrative employees. The Second District’s decision must be affirmed.

Student Contributor: Brandon Bryer