In a recent decision by the Illinois Supreme Court, Restore Construction Company, Inc. v. Board of Education of Proviso THSD 209, the Court affirmed an Illinois Appellate Court decision (which we previously reported on here) requiring a school district to pay for construction services provided by a contractor despite the contracts never being competitively bid or officially approved by the Board of Education. The court’s decision rested on two primary reasons. First, the District was operating under a Financial Oversight Panel (“FOP”), which had the authority to approve contracts and there was no evidence of any actions by the FOP that would warrant depriving the contractor of payment. Second, despite the District’s failure to follow proper procedure, the contracts were within the Board’s power to approve, and the services were provided in good faith and accepted by the District, so the Board could not invoke its own failure as a means to avoid paying the contractor.
On May 10, 2014, a fire caused significant damage to a school building that the District needed to repair before the upcoming school year. Shortly thereafter, the Superintendent executed two contracts with the Restore to provide emergency mitigation, remediation, and repair services. Restore proceeded to provide services valued at over $7,000,000 pursuant to the two contracts. For the work provided, the District’s insurance paid approximately $5,800,000. When Restore requested the full payment amount, the District argued that the contracts were void because they were not competitively bid and were entered into without proper approval by the Board. Restore filed suit, arguing that it was entitled to the payment because the services were provided pursuant to an implied contract.
The Illinois Supreme Court disagreed with the District’s position on two points. First, the court noted that the District, due to past financial troubles, was operating under the FOP, which had the authority to make, cancel, modify, and execute contracts and other agreements necessary, beneficial, or convenient to the District consistent with the District’s financial plan. As a result, the actions of the FOP, not the Board, were dispositive as to approval of the contracts. The court noted that the FOP was fully apprised of the services provided by Restore and that no action by the FOP would prevent Restore from collecting the outstanding payment.
Second, the court concluded that the District could not use the allegedly invalid contracts as a shield to avoid paying for the work performed. The court distinguished between a situation in which a school district has no power to contract and a situation where a contract is entered into irregularly or illegally. Here, the District had the power to enter into contracts for such services but did not follow the required procedures. Nevertheless, Restore performed its obligations in good faith, and the District willingly accepted the benefits of the services. To allow the District to benefit from its own failure would have been unjust.
This decision serves to show that a school district cannot reap the benefits of its own failure to follow the law and, thus, may be required to pay for services rendered even when a contract is not properly approved by its school board.
Contact an attorney in our Corporate practice group if you have questions regarding this case or school district contracts.