Kreyco Inc. v. Franklin Township Board of Education ( 2024 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3589-22
KREYCO INC., d/b/a
LANGUAGE LEARNING
NETWORK,
Plaintiff-Appellant,
v.
FRANKLIN TOWNSHIP
BOARD OF EDUCATION,
Defendant-Respondent.
_________________________
Submitted May 7, 2024 – Decided July 16, 2024
Before Judges Natali and Puglisi.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-1541-23.
Melissa J. Hordichuk (Access to Justice Project),
attorney for appellant.
Parker McCay, PA, attorneys for respondent (Alicia
D'Anella and Emily Strawbridge, on the brief).
PER CURIAM
Plaintiff Kreyco Inc., d/b/a Language Learning Network (Kreyco) appeals
from the Law Division's June 12, 2023 order granting defendant Franklin
Township Board of Education's (Board) motion to dismiss the complaint.
Kreyco brought this action for specific enforcement of certain provisions of a
services agreement (Agreement) between the parties. In dismissing the
complaint, the trial judge found Kreyco's claims "hinge[d] on the application of
multiple provisions of the school laws,[1] and therefore at least the impact of
those statutory provisions must be decided by the Commissioner [of Education
(Commissioner)] before the court can take any action." The issue before us on
appeal is whether the trial court or the Commissioner had jurisdiction to interpret
and enforce the contractual provisions at issue. Because portions of the
complaint implicated the interpretation of certain provisions of the school laws,
we affirm in part; but because other claims were purely contractual in nature,
we reverse and remand in part for further proceedings.
In July 2022, the Board issued a request for proposals (RFP) pursuant to
N.J.S.A. 18A:18A-4.5, seeking synchronous world language instruction services
for September 1, 2022 through June 30, 2023. The RFP's "Term of Contract"
1
N.J.S.A. 18A:1-1 to :76-4.
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provision stated the Board "reserve[d] the right to terminate, at any time during
the contract period, with a thirty[-]day notice."
Kreyco was awarded the contract and the parties entered into the
Agreement, effective August 30, 2022, with an annual contract amount of
$765,000. The Agreement was signed by the Board's purchasing manager, Ryan
Ellis, the next day.
The termination clause in the Agreement provided, in pertinent part:
6.1 Termination: This Agreement may be terminated
. . . by [Kreyco], at its sole option, in the event [the
Board]: (i) fails to pay an [i]nvoice within the time
herein prescribed; or (ii) fails to cure a breach of any
term of this Agreement to [Kreyco]'s satisfaction within
thirty (30) days of [the Board]'s receipt of a
[s]uspension [n]otice.
Although the RFP did not reference an acceleration clause, the Agreement
contained one, which provided in pertinent part:
6.2 Acceleration: In the event . . . [Kreyco] terminates
this Agreement as a result of [the Board]'s late payment
or uncured breach, . . . [the Board] shall be responsible
for all future monthly installments required in
Attachment A of this Agreement, in addition to any and
all past due [i]nvoices for [s]ervices rendered, and any
fees, costs, and expenses payable to [Kreyco] pursuant
to the terms herein, which shall be due and payable to
[Kreyco] within thirty (30) calendar days of [the
Board]'s termination. In the event . . . [Kreyco]
terminates as a result of [the Board]'s late payment or
breach . . . [the Board] shall forego any financial credit
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that may have otherwise been payable by [Kreyco] at
the end of the [t]erm, pursuant to the terms herein.
The implementation of the Agreement did not go smoothly. The start date
of Kreyco's instruction was delayed because the Board did not permit timely
access to the online platform necessary to conduct the virtual classrooms. In
addition to other disagreements, the parties disputed which entity was
responsible for enrolling Kreyco's instructors in the State's Provisional Teachers
Program (PTP). See N.J.S.A. 18A:26-2(a).
In November 2022, Kreyco advised the Board that one of the instructors
was "consistently dealing with unruly, verbally abusive, and out-of-control
students in all sections of her Spanish class" and, despite her repeated requests
for the Board's support in controlling the classroom with on-site staff, the Board
failed to respond in breach of several provisions of the Agreement. The Board
disputed Kreyco's characterization of the students as "out-of-control" and
although the parties exchanged correspondence about the issue, they were
unable to resolve it to Kreyco's satisfaction. Pursuant to the terms of the
Agreement, Kreyco issued a notice of suspension advising it would suspend its
services on December 9, 2022 unless this and other breaches were cured.
The parties continued their attempts to work out their myriad issues until
December 30, 2022, at which time Kreyco notified the Board it was terminating
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the Agreement for failure to cure the breach within thirty days. Kreyco also
advised the Board it was enforcing the acceleration clause of the Agreement,
which required the Board to pay a past due balance and future monthly
installments totaling $478,125, within thirty days.
When the Board did not remit payment, Kreyco filed a complaint on
March 23, 2023. Count one of the complaint alleged breach of contract based
on the Board's "failing to accommodate [Kreyco]'s repeated requests for
intervention and support in an unruly and verbally abusive classroom ," failing
to pay an invoice within forty-five days of receipt, failing to respond promptly
to Kreyco's requests, preventing Kreyco's instructors from performing services
by not restoring online access, refusing to enroll a Kreyco staff member into the
PTP, failing to provide a non-hostile work environment, failing to protect
Kreyco and its employees from verbal harassment, and failing to correct verbal
abuse or harassment by students within a reasonable amount of time.
Count two of the complaint alleged the Board breached the covenant of
good faith and fair dealing by attempting to use duress to intimidate Kreyco into
amending the executed Agreement for a lower rate, and by harassing and
retaliating against Kreyco for refusing to amend the Agreement. The complaint
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sought damages for the past due balance and future monthly installments
totaling $478,125 plus interest and attorneys' fees.
On May 8, 2023, the Board filed a motion to dismiss pursuant to Rule 4:6-
2(a) and (e), for lack of subject matter jurisdiction and failure to state a claim
upon which relief can be granted, respectively. The Board argued Kreyco's
claims under the acceleration clause were barred as a matter of law pursuant to
N.J.S.A. 18A:19-3 because they sought damages for services that were not
performed. The Board also argued the Law Division lacked subject matter
jurisdiction, contending Kreyco should have brought their claims before the
Commissioner pursuant to N.J.S.A. 18A:6-9 before filing a complaint. The
Board also argued the Agreement was ultra vires because the purchasing
manager who executed the Agreement on behalf of the Board did not have
authority to consent to the acceleration clause.
On June 12, 2023, Judge Mary F. Thurber issued an order granting
defendant's motion to dismiss. In her accompanying written opinion, the judge
cited Archway Programs, Inc. v. Pemberton Twp. Bd. of Educ., 352 N.J. Super.
420, 430-31 (App. Div. 2002), in which we determined the Commissioner was
required to resolve issues related to the parties' breach and setoff claims before
the court could determine the breach of contract issues.
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Judge Thurber first addressed subject matter jurisdiction by evaluating
Kreyco's claims "to determine if they require[d] interpretation and application
of the school laws." She found "the issue of whether N.J.S.A. 18A:19-3
prohibits [the Agreement's] acceleration clause is a matter to be decided first by
the Commissioner . . . ." She also agreed with the Board "that the issues related
to instructional activities, classroom control, and instructor qualifications are
matters to be decided first by the Commissioner . . . ." Finally, the judge rejected
Kreyco's argument that the Agreement's forum selection clause established
jurisdiction. Citing Peper v. Princeton Univ. Bd. of Trs., 77 N.J. 55, 65 (1978),
she found "[a] court cannot hear a case as to which it lacks subject matter
jurisdiction, and jurisdiction cannot be vested in the court by the parties'
agreement."
This appeal follows, in which Kreyco raises the following issues for our
consideration:2
2
We reject the Board's assertion the trial court's order was interlocutory and
therefore not ripe for appeal. Pursuant to Rule 2:2-3(b), "[f]inal judgments of a
court, for appeal purposes, are judgments that finally resolve all issues as to all
parties." The court's dismissal of the complaint resolved all issues of the parties,
and was without prejudice only to the extent any issues remained unresolved
after the Commissioner's decision.
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POINT I
THE TRIAL COURT ERRED BY FAILING TO
ENFORCE THE FORUM SELECTION CLAUSE
BASED UPON ITS MISCONCEPTION AND
MISAPPLICATION OF N.J.S.A. []18A:6-9 AND THE
PRIMARY JURISDICTION DOCTRINE.
POINT II
THE TRIAL COURT ERRED IN GRANTING
DEFENDANT'S MOTION TO DISMISS BECAUSE
PLAINTIFF'S BREACH OF CONTRACT CLAIMS
DO NOT ARISE UNDER THE SCHOOL LAWS.
A. N.J.S.A. []18A:19-3 is Irrelevant Because
Title 18A Permits Liquidated Damages, and
Plaintiff has Clearly Articulated a Claim for
Services Previously Rendered.
B. N.J.S.A. []18A:11-1 is Irrelevant Because it
Does Not Expressly Prohibit a Purchasing
Agent from Executing a Contract on the
Board's Behalf.
C. The Trial Court Failed to Cite the Additional
"Specific Education Laws" that are Allegedly
Implicated by Plaintiff's Breach of Contract
Claims.
POINT III
THE TRIAL COURT ERRED IN GRANTING
DEFENDANT'S MOTION TO DISMISS FOR
FAILURE TO STATE A CLAIM BECAUSE THE
COURT'S ANALYSIS RELIED EXCLUSIVELY ON
SUBJECT MATTER JURISDICTION.
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We review de novo a trial court's order granting a motion to dismiss
pursuant to Rule 4:6-2(e). Baskin v. P.C. Richard & Son, LLC, 246 N.J. 157,
171 (2021). "When deciding a motion to dismiss under Rule 4:6-2(e), the test
to determine 'the adequacy of a pleading' is 'whether a cause of action is
"suggested" by the facts.'" Doe v. Estate of C.V.O., 477 N.J. Super. 42, 54 (App.
Div. 2023) (quoting MasTec Renewables Constr. Co. v. SunLight Gen. Mercer
Solar, LLC, 462 N.J. Super. 297, 309 (App. Div. 2020) (internal quotation marks
and citation omitted)).
Reviewing courts "assume that the allegations in the pleadings are true
and afford the pleading party all reasonable inferences." Sparroween, LLC v.
Twp. of W. Caldwell, 452 N.J. Super. 329, 339 (App. Div. 2017). At this early
stage of litigation, a court is not concerned with a pleading party's ability to
prove its allegations. Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J.
739, 746 (1989). Instead, it examines "'the legal sufficiency of the facts alleged
on the face of the complaint,' limiting its review to 'the pleadings themselves.'"
Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., 237
N.J. 91, 107 (2019) (first quoting Printing Mart-Morristown, 116 N.J. at 746;
and then quoting Roa v. Roa, 200 N.J. 555, 562 (2010)).
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Because the determination of whether subject matter jurisdiction exists is
a legal question, it is also reviewed de novo. AmeriCare Emergency Med. Serv.,
Inc. v. City of Orange Twp., 463 N.J. 562, 570 (App. Div. 2020) (citing Santiago
v. N.Y. & N.J. Port Auth., 429 N.J. Super. 150, 156 (App. Div. 2012)).
Turning to the education issues raised in this appeal, the school laws
empower school boards to operate public schools for their respective districts.
The Commissioner is "[t]he chief executive and administrative officer of the
department," who has "general charge and supervision of the work of the
department," N.J.S.A. 18A:4-22(a), and has "jurisdiction to hear and determine
. . . all controversies and disputes arising under the school laws," with certain
exceptions not relevant here. N.J.S.A. 18A:6-9.
A court owes "institutional respect . . . for the Commissioner's first-
instance jurisdiction 'to hear and determine . . . all controversies and disputes
arising under the school laws[.]'" Archway Programs, Inc., 352 N.J. Super. at
424 (second and third alterations in original) (quoting N.J.S.A. 18A:6-9). This
authority is plenary. Ibid. (citing Abbott v. Burke, 100 N.J. 269, 301 (1985)).
Thus, "the Commissioner of Education has primary jurisdiction to hear and
determine all controversies arising under the school laws." Bower v. Bd. of
Educ. of E. Orange, 149 N.J. 416, 420 (1997) (citing N.J.S.A. 18A:6-9).
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Although the breadth of this authority is expansive, it is not without
limitation. We recognize "the sweep of the Department's interest and the
Commissioner's jurisdiction does not extend to all matters involving boards of
education," and contract claims are "typically and appropriately adjudicated in
the courts." Archway Programs, Inc., 352 N.J. Super. at 424-25 (citations
omitted). Here, Kreyco's breach of contract claims seek damages under the
Agreement's acceleration clause, but the validity and enforceability of this
clause implicates an interpretation of certain school law provisions.
With regard to this issue, the Board cites N.J.S.A. 18A:19-3, which
requires a claim or demand that equals or exceeds fifteen percent of the bid
threshold amount to be certified that the services have been rendered. The
Board argues this statute prohibits a school district from paying for services
that have not been rendered, which is the relief sought by Kreyco under the
acceleration clause. The Board claims this statute renders the acceleration
clause null and void and precludes Kreyco's claims under that clause.
Kreyco counters by citing N.J.S.A. 18A:18A-41, which expressly permits
liquidated damages in school contracts. This provision also declares it "void,
unenforceable and against public policy for a provision in a contract . . . to limit
a contractor’s remedy for the contracting unit's negligence, bad faith, active
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interference, tortious conduct, or other reasons uncontemplated by the parties
that delay the contractor’s performance, to giving the contractor an extension
of time for performance under the contract." While the damages sought here
are not liquidated damages,3 Kreyco nevertheless argues it is entitled to the
accelerated damages. As presented by the parties, the tension in these two
statutory provisions underscores the need for the Commissioner's expertise to
determine whether the school laws permit or preclude the accelerated damages
relief sought by Kreyco.
The Board also contends the purchasing agent did not have the authority
to bind the Board to the acceleration clause, but we are unconvinced this issue
is to be determined by the Commissioner. The Board points to N.J.S.A.
18A:18A-3 and -5, both of which concern contracts entered into without public
advertising, which is not the case here. Because the Board has not identified a
provision of the school laws that governs or impacts this issue, it remains one
to be decided by the trial court. See Newark Teachers Union v. Bd. of Ed., 149
3
"Liquidated damages is the sum a party to a contract agrees to pay if he breaks
some promise, and which, having been arrived at by a good faith effort to
estimate in advance the actual damage that will probably ensue from the breach,
is legally recoverable as agreed damages if the breach occurs." Westmount
Country Club v. Kameny, 82 N.J. Super. 200, 205 (1964) (citing McCormick,
Damages, § 146, pp. 599-600).
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N.J. Super. 367, 372 (App. Div. 1977) ("The determination of whether any
controversy falls within the jurisdiction of the Commissioner . . . is not a matter
to be decided by the Commissioner.") (citing Dunellen Bd. of Ed. v. Dunellen
Ed. Ass'n, 64 N.J. 17, 31 (1973)).
We are also unpersuaded by the Board's contention the Commissioner
must decide Kreyco's claims regarding student discipline and teacher
certification. While Kreyco's reasons for terminating the contract include the
Board's failure to address classroom behavior and refusing to enroll a Kreyco
staff member into the PTP, the Board has not identified any provision of the
school laws that creates an issue, nor any issue, requiring the Commissioner's
determination in order to resolve those claims. Likewise, Kreyco's claim for
unpaid invoices does not implicate the school laws and therefore should also be
decided by the trial court.
While we agree with the judge's decision that the Commissioner should
decide the issue of statutory interpretation, we part ways with her dismissal of
the complaint. We understand her decision to dismiss the case was to further
the laudable goal of "avoid[ing] piecemeal adjudication or duplicative,
anomalous or contradictory results." Archway Programs, Inc., 352 N.J. Super.
at 240. However, other than the relief sought under the acceleration clause, the
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claims plead in Kreyco's complaint were properly raised in the Law Division
and should not have been dismissed. Accordingly, we reverse the order
dismissing the complaint and remand the matter for reinstatement of the
complaint. On remand, the court should enter an appropriate order referring
the statutory issues to the Commissioner and staying the remainder of the
proceedings pending the Commissioner's decision.
Affirmed in part, reversed and remanded in part. We do not retain
jurisdiction.
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