“The record is quite clear that Burns did not control the misappropriated funds: the money was never in his possession, nor did he exert any control over it.”

Justice Donnelly, majority opinion

“The General Assembly could have included a ‘control’ element in R.C. 9.39; however, it did not. Instead, the statute applies to public officials who have ‘received or collected’ funds.”

Justice Fischer, dissenting opinion

On April 26, 2022, the Supreme Court of Ohio handed down a merit decision in  State ex rel. Yost v. Burns,2022-Ohio-1326.  In a 4-3 opinion written by Justice Donnelly, joined by Justices Kennedy, DeWine, and Stewart, the Court held that the Director of a Dayton charter school could not be held strictly liable for funds embezzled by the school treasurer. Justice Fischer dissented, joined by Chief Justice O’Connor. Justice Brunner dissented without opinion. The case was argued June 30, 2021.

Case Background

Robert Burns was chief executive officer of New City Community School (“New City”) a Dayton charter school. His title was “director” and he had a contract from August 1, 2009-June 30, 2010. Burns reported to the school’s governing board which gave him the “general supervision and management authority of the School and all personnel employed by the School.”

Burns had the authority to approve budge expenditures for New City but he had no authority to disburse public money from any of New City’s bank accounts nor did he have supervisory authority over those accounts. Those duties were the responsibility of Carl Shye, the school’s treasurer, who reported directly to the school’s board of directors. Burns had no supervisory authority over Shye.

During an audit while Burns was Director of New City, it was discovered that more than $50,000 had been misappropriated from New City. Ultimately, Shye pleaded guilty to embezzlement in federal court, from New City and other entities.

On July 3, 2018, the Ohio Attorney General filed a complaint against Burns and three other defendants, including Shye, to recover the misappropriated funds, arguing that the defendants were jointly and severally liable as public officials under R.C. 9.39. The trial court granted summary judgment to the Attorney General, finding Burns strictly liable for the funds.

The Second District reversed the trial court’s judgment, holding that Burns had not received or otherwise controlled the funds, and that Shye was not Burns’ subordinate.

Read the oral argument preview of the case here and the analysis here.  

Key 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.”) 

1993 Ohio Atty.Gen.Ops. No. 93-004 (“The language of R.C. 9.39 with respect to the liability of public officials is plain and unambiguous. Public officials are held liable, pursuant to R.C. 9.39, only for public money that they or their subordinates receive or collect.”)  

1994 Ohio Atty.Gen.Ops. No. 94-048 (“a public official will be held personally liable if public moneys that come into his possession or custody in his official capacity are lost.”)  

State, for use of Wyandot County v. Harper, 6 Ohio St. 607 (1856) (holding public official liable for public money that was received under color of office, but only where the defendant received, collected, and physically controlled the funds that were lost, unlike in this case.)  

Seward v. National Surety Corp., 120 Ohio St. 47 (1929) (Holding that it is a public officer’s obligation to account for and disburse moneys that have come into his hands by virtue of his being such public officer. Strict liability was found when the defendant received, collected, and physically controlled funds.) 

Corday 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.”) 

Merit Decision

Analysis

The key issue in this case is whether Burns received or collected public money under color of office, and the majority held that he did not-the person who did that was Shye. The majority strongly relied on the published opinions of the Attorney General in the key precedent section. Those hold that public officials will be held liable for public money they or their subordinates receive or collect, and interpret these undefined words to encompass an element of control.

“In short, a person cannot collect or receive public money, let alone be held strictly liable for the misappropriation of that money, within the context of R.C. 9.39 without controlling it,” Donnelly wrote. So that let Burns off the hook because he never had any control over the misappropriated funds, nor did Shye report to him.

Bottom Line, Majority Opinion

Burns could not be held strictly liable for the misappropriation of public money from New City because he did not collect or receive those funds.

Justice Fischer’s Dissent

Justice Fischer would find Burns strictly liable for the misappropriation of the funds in this case. He notes that among Burns’ duties was approving a final expenditure report detailing the distribution of the funds of New City, and that Burns had to approve those reports in order to release public funds into the school’s bank accounts from three separate grant sources. If Burns did not do this, the schools could not collect its finances. And, Fischer notes, the statute says nothing about the official controlling the funds. He accuses the majority of writing a control requirement into the statute that isn’t there. Rather, a public official in this context should be viewed as a trustee of the funds and should be responsible for the funds to the same extent as the trustee of a private trust fund.

Fischer would find that case law has established that while control of public funds is sufficient for liability to attach under R.C 9.39, control of public funds is not a floor which must be met in order to establish liability.

Quite simply, if the General Assembly meant to require that the funds be “controlled,” it would have used that term instead of “collected or received,” wrote Fischer.

Fischer would also find that the trial court was correct that “collected” had a plain and ordinary meaning and that because Burns’ role in getting the federal funds for the school was absolutely necessary, Burns “collected” those funds.

Chief Justice O’Connor joined Justice Fischer’s dissent. Justice Brunner also dissented, but did not join Justice Fischer’s dissent.

Case Disposition

The trial court erred in finding Burns strictly liable for the misappropriated funds because he did not collect or receive those funds.

Trial Court Judge (reversed)

Montgomery County Court of Common Pleas Judge Mary Wiseman

Second District Court of Appeals panel (Majority Affirmed)

Opinion author Judge Michael Tucker, joined by Judge Jeffrey Welbaum

Dissent : Judge Michael Hall

Concluding Observations

Here’s what student contributor Brandon Bryer and I wrote after argument:

Professor Emerita Bettman

I’m going to call this one for Burns, although this looks like a split decision. Justices Stewart and DeWine seemed most sympathetic to Burns’ position that in order to be held liable, he had to exert some kind of control over the funds, and given the way this was set up, he did not. Seemingly significant to Justices Stewart and DeWine were the same things that the court of appeals majority seemed swayed by- that Burns never received 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 and Burns reported to New City’s Board of Directors.  

The Chief, on the other hand, seemed sympathetic to the Attorney General’s argument that Burns “collected” public money because he took the actions necessary for the charter school to receive the public money (even if it just was a mouse click) and the school did in fact receive the money. Things came to a head toward the end of Burns’ argument when the Chief asked Ms. Cooper if she was saying that if you are collecting something in order to be liable you also have to receive it, and Ms. Cooper said that was exactly what she was saying.  

The Chief and Justice DeWine and to a lesser extent Justice Stewart dominated the questioning, so it’s hard to know exactly who shakes out on which side here, but I’m still calling a win for Burns.

Student Contributor Brandon Bryer

Justice DeWine’s questions spoke directly to the heart of this case. Justice DeWine asked the State, point blank, whether a lawyer in the Attorney General’s office who at one point in time collects funds for the State, would be strictly liable if some unrelated staff member misused those funds in the future. Deputy Solicitor General Carney stood by the State’s position and conceded yes, he even faces strict liability under the State’s reading of the statute. This concession was so shocking that Justice Stewart asked Carney to repeat his “yes” answer. Justices Stewart and DeWine are clearly of the belief that the State’s rule sweeps too broadly and is at odds with the common law understanding of “collect or receive” as codified in R.C. 9.39. Although neither Justices Fischer nor Kennedy spoke at oral argument, I imagine they will both agree. That’s at least four votes against the State’s argument, so ultimately, I believe Burns will prevail.   

This case is a close call, and I gathered that Chief Justice O’Connor agreed with the State’s arguments. If the Chief can persuade some of her colleagues in conference, the State might win. My sense, however, is that Burns has the better of the argument and will prevail.