McNaughton v. Charleston Charter School for Math & Science, Inc.

THE STATE OF SOUTH CAROLINA
In The Supreme Court
Cynthia L. McNaughton, Respondent,
v.
Charleston Charter School for Math and Science, Inc.,
Appellant.
Appellate Case No. 2012-212451
Appeal From Charleston County
Kristi Lea Harrington, Circuit Court Judge
Opinion No. 27490
Heard September 24, 2014 – Filed January 28, 2015
AFFIRMED
Thomas Bailey Smith, of Smith Law Firm, P.A., of
Mount Pleasant, for Appellant.
Nancy Bloodgood and Lucy Clark Sanders, both of
Foster Law Firm, L.L.C., of Charleston, for Respondent.
CHIEF JUSTICE TOAL: The Charleston Charter School for Math and Science
(Appellant) appeals the trial court's decisions denying Appellant's motions for a
directed verdict and judgment notwithstanding the verdict (JNOV) on
McNaughton's wrongful termination/breach of contract claim; permitting the jury
to award special damages; and granting attorney's fees to McNaughton under
section 15-77-300 of the South Carolina Code. We affirm.
FACTS/PROCEDURAL BACKGROUND
In late 2008, Cynthia McNaughton, who was in her early to mid 50's at the
time, was accepted into the South Carolina Department of Education's Program of
Alternative Certification for Educators (PACE program), which enables
individuals who earned a college degree—but did not complete a traditional
teacher preparation program—to become certified South Carolina public school
teachers.1 Before beginning the PACE program, McNaughton worked as a graphic
designer and previously taught art and theater design in Florida for seven years.
When McNaughton began the PACE program, she hoped to make teaching her
"exit career," and to work as a certified teacher for eleven or twelve years, at which
point she planned to retire.
In August 2010, Appellant's principal (the principal) hired McNaughton to
teach 6th, 7th, and 8th grade art, along with the yearbook class. When she was
hired, Appellant knew that McNaughton was participating in the PACE program,
and that her completion of the program was contingent upon her fulfillment of
further requirements, including the completion of an induction teaching year.
McNaughton signed an employment agreement, which stated that McNaughton
"agree[d] to be a full-time teacher at Charleston Charter School for Math and
Science for the school year 2010–2011."2 The employment agreement further
stated that it was "contingent on funding and enrollment" (the contingency clause).
A "Wage Payment Notice" indicated that Appellant would pay McNaughton a
yearly salary of $34,040.3
1
PACE is an intensive, selective program, and typically takes three years to
complete after acceptance into the program. PACE Overview, S.C. State Dep't of
Educ., http://ed.sc.gov/agency/se/Educator-Services/Alt-
Licensure/pace/PACEOverview.cfm (last updated Oct. 16, 2014). Individuals in
the PACE program teach for a year as an "induction teacher," as well as complete
other courses and requirements. If someone completing the PACE program stops
the program (i.e., loses her teaching job) before completing the program, she "may
be allowed to reapply" and possibly start the program over from the beginning.
PACE FAQ, S.C. State Dep't of Educ., http://ed.sc.gov/agency/se/Educator-
Services/Alt-Licensure/pace/PACEFAQ.cfm (last updated April 16, 2014)
(emphasis added).
2
Appellant admitted that by virtue of the employment agreement, McNaughton
was not an at-will employee.
3
McNaughton would have earned approximately $35,000 her first year as a
certified teacher, and $36,000 her second year.
McNaughton received positive feedback from her students and their parents.
According to the principal, McNaughton was a talented art teacher, especially
when it came to designing cross-curricular lessons. Neither the principal nor any
other faculty member experienced any problems with McNaughton's performance
as a teacher, and McNaughton was never disciplined for any matter.
However, on December 1, 2010—in the middle of the school year—the
principal informed McNaughton that Appellant was terminating her employment.
The principal told McNaughton that Appellant needed to use the funds designated
for McNaughton's salary to hire and pay a new math teacher because some of the
students had performed poorly on a recent math achievement test.4 McNaughton
was surprised to learn of her termination and immediately became concerned that
she would be unable to find another job as an induction teacher, especially in the
middle of the school year.
At trial, the principal testified in detail about Appellant's budget and funding
decisions. For each school year, Appellant projects an annual budget, then
reconciles it on a monthly basis. According to the principal, in November 2010,
she told Appellant's board of directors (the board) that Appellant was in a solid
financial position. Soon after this statement, in December 2010, the principal
made the decision to hire the new math teacher and terminate McNaughton's
employment. Despite the fact that the principal asked the board for approval to
hire new social studies and special education teachers in November 2010, for
which the board approved a $72,000 budget change, the board minutes do not
indicate that she consulted the board on her decision regarding McNaughton's
employment or the creation of the new teaching position.5
4
Because of these results, the math department chair approached the principal in
October, and they devised a plan to hire an additional math teacher in order to
provide the students with twice the amount of math instruction that they had
previously received. The plan involved placing the students in a computer-based
math remediation class instead of art class for the spring semester.
5
The principal testified that hiring and firing decisions are the principal's
responsibility and do not require the board's approval. Although Appellant's
charter states that the board's responsibilities include employing and contracting
with teachers, the principal maintained that she was responsible for carrying out
The principal conceded that when McNaughton was terminated, there was
funding available to pay McNaughton's salary, but that the funding was instead
used to hire and pay the new math teacher. In fact, on cross-examination of the
principal at trial, McNaughton's attorney pointed out multiple lines in the budget
that had not been used as of November 2010, and ultimately were never used for
their intended purposes. For example, in November 2010, Appellant had $25,054
designated for "teacher salary supplement" and $18,000 for "administrative staff
services"—funds which were untouched at that time, and remain unused for their
designated purposes throughout the school year.
Because McNaughton felt her termination was "unjust," she reviewed
Appellant's grievance and termination policy and began the grievance procedure.6
When McNaughton met with the principal in mid-January 2011 as the first step of
the grievance procedure, the principal informed McNaughton for the first time that
she had been "laid off." According to McNaughton, the principal also told her that
Appellant had the legal right to move funding around as it chose, and that because
McNaughton was an at-will employee, the principal "could do whatever she
wanted." McNaughton testified that her grievance procedure ended when the
chairwoman of the board notified McNaughton that she had no "standing" to
continue the grievance procedure.
The principal wrote McNaughton a letter of reference to assist with
McNaughton's job search. However, McNaughton was only able to find a job
teaching two days a week, which did not grant her enough teaching hours to
remain in the PACE program. McNaughton applied for jobs in graphic design as
well as entry level jobs, but was unsuccessful. McNaughton also applied for and
received unemployment benefits.
the charter, and the decision to hire the new math teacher and to terminate
McNaughton's employment was in the best interests of the students.
6
After reading Appellant's grievance and termination policy and learning more
about Appellant's finances, McNaughton questioned the circumstances of her
termination. Despite calling McNaughton's termination a "lay-off" and writing a
letter of reference for her, the principal never offered McNaughton other available
positions, even when Appellant hired a new art teacher for the 2011–2012 school
year.
McNaughton testified that as a result of losing her job, she was forced to
purchase COBRA health insurance for $250 per month (until she could no longer
afford it and discontinued it), withdraw the available funds from her state
retirement fund, and defer her student loans (which resulted in $2,500 additional
interest). In addition, McNaughton testified that she was unable to refinance her
home, and that her bank foreclosed upon her mortgage.
McNaughton filed a complaint against Appellant, alleging four causes of
action: wrongful termination/breach of contract, breach of contract accompanied
by a fraudulent act, third party beneficiary breach of contract, and grossly
negligent supervision. In her complaint, McNaughton requested actual and special
damages, costs, and attorney's fees pursuant to section 15-77-300 of the South
Carolina Code.7
On June 4 and 5, 2012, a jury trial was held. After McNaughton presented
her case, Appellant made a motion for a directed verdict on all causes of action, as
well as McNaughton's entitlement to attorney's fees and damages. The trial court
granted Appellant's motion on the breach of contract accompanied by a fraudulent
act, third party breach of contract, and grossly negligent supervision claims. The
court denied the motion as to the wrongful termination/breach of contract claim,
attorney's fees, and damages. At the close of all of the evidence, Appellant again
moved for a directed verdict on these issues, which the court denied.
The jury returned a verdict in favor of McNaughton on her breach of
contract claim, finding $20,623 in actual damages and $74,112 in special
damages.8 After the jury verdict was announced, Appellant moved for JNOV
7
S.C. Code Ann. § 15-77-300 (2005).
8
In her closing argument, McNaughton's attorney argued that McNaughton
suffered damages of $17,000 in lost wages for the second semester of the 2010–
2011 school year and $1,000, which would have been contributed to her retirement
account if she had continued working for the remainder of the school year. The
attorney also pointed out to the jury that as a result of her termination,
McNaughton paid for COBRA health insurance after she lost her health insurance,
and her home was foreclosed upon. In addition, the attorney argued that
McNaughton had suffered career damages. She pointed out that McNaughton
could have earned approximately $408,000 over the twelve years she planned to
under Rule 50(b), SCRCP, and a new trial under Rule 59(a), SCRCP, which the
court denied. McNaughton filed a petition for attorney's fees.
The trial court held a separate hearing on the issue of attorney's fees and
awarded $37,894 in attorney's fees pursuant to section 15-77-300. In its order
awarding attorney's fees, the trial court addressed and considered the factors of
section 15-77-300 in detail.
Appellant appealed to the court of appeals. This Court certified the appeal
pursuant to Rule 204(b), SCACR.
ISSUES
I. Whether the trial court erred in denying Appellant's motions for
a directed verdict and JNOV as to McNaughton's wrongful
termination/breach of contract claim?
II. Whether the trial court erred in charging and allowing the jury
to award McNaughton special damages for her wrongful
termination/breach of contract claim?
III. Whether the trial court erred in awarding attorney's fees
pursuant to section 15-77-300 of the South Carolina Code?
LAW/ANALYSIS
I. Wrongful Termination/Breach of Contract
Appellant argues that the trial court erred in denying its motions for a
directed verdict and JNOV on McNaughton's breach of contract claim because
Appellant was entitled to terminate McNaughton's employment pursuant to the
contingency clause in her employment agreement. We disagree.
In ruling on a motion for a directed verdict or JNOV, the trial court must
view the evidence and the inferences that reasonably can be drawn therefrom in the
light most favorable to the party opposing the motions. Sabb v. S.C. State Univ.,
teach as a certified teacher, while she would have earned approximately $192,000
at a minimum wage job—a difference of $216,000.
350 S.C. 416, 427, 567 S.E.2d 231, 236 (2002). The trial court must deny either
motion when the evidence yields more than one inference or its inference is in
doubt. Id. This Court will reverse the trial court only when there is no evidence to
support the trial court's ruling. Id. A jury's factual finding will not be disturbed
unless a review of the record discloses that there is no evidence which reasonably
supports the jury's findings. Townes Assocs., Ltd. v. City of Greenville, 266 S.C.
81, 85, 221 S.E.2d 773, 775 (1976) (citing Odom v. Weathersbee, 225 S.C. 253,
260, 81 S.E.2d 788, 792 (1954)).
Appellant argues that "unless there was ongoing funding for [McNaughton's]
position then the [employment agreement] entitled Appellant to end her
employment without notice and before the school year ended." Therefore, in
reviewing the trial court's rulings on the directed verdict and JNOV motions, we
must determine whether there was sufficient evidence to suggest that—given the
contingency clause—Appellant breached McNaughton's employment agreement
because there was funding actually available for her position at the time of her
termination.
The analysis of this issue hinges on whether the principal's decision to
reallocate the funding initially designated for McNaughton's salary falls within the
confines of the contingency clause, which states that McNaughton's employment
was "contingent on funding and enrollment." Appellant contends that "the only
evidence in this case shows that there was not even an extra penny available to
fund [McNaughton's] position as a teacher." Not only is this contrary to the
principal's statement at trial that there was indeed funding available to pay
McNaughton's salary at the time of her termination, there is also other evidence in
the record to support McNaughton's position.
For example, there was funding available in other line items of the budget,
such as "teacher salary supplement" and "administrative staff services." Further,
despite the principal's testimony that "there was no play" in the line item for
teachers' salaries, the record makes it clear that it was not unusual for the principal
to ask the board for approval to move around funding in the budget—as evidenced
by the board's decision in November 2010 to approve the use of $72,000 to hire
new teachers.
Therefore, because there is evidence to support the jury's finding that
Appellant breached McNaughton's employment agreement, we hold that the trial
court properly denied Appellant's directed verdict and JNOV motions.
II. Special Damages
Special damages, also known as consequential damages, are actual damages.
Capps v. Watts, 271 S.C. 276, 281, 246 S.E.2d 606, 609 (1978); see Fields v.
Yarborough Ford, Inc., 307 S.C. 207, 211, 414 S.E.2d 164, 166 (1992). Unlike
general damages, which must necessarily result from the wrongful act upon which
liability is based and are implied by the law, special damages are damages for
losses that are the natural and proximate—but not the necessary—result of the
injury, and may be recovered only when sufficiently stated and claimed. Sheek v.
Lee, 289 S.C. 327, 328–29, 345 S.E.2d 496, 497 (1986) (citations omitted).
Therefore, where a plaintiff seeks special damages in addition to general damages,
he must plead and prove the special damages to avoid surprise. Kline Iron & Steel
Co. v. Superior Trucking Co., 261 S.C. 542, 547, 201 S.E.2d 388, 390 (1973).
If the plaintiff's proof is speculative, uncertain, or otherwise insufficient to
permit calculation of his special damages, his claim should be denied. Jackson v.
Midlands Human Res. Ctr., 296 S.C. 526, 528, 374 S.E.2d 505, 506 (Ct. App.
1988). However, special damages "'occasioned by breach of contract may be
recovered when such damages may reasonably be supposed to have been within
the contemplation of the parties at the time the contract was made.'" Stern & Stern
Assocs. v. Timmons, 310 S.C. 250, 252, 423 S.E.2d 124, 126 (1992) (emphasis
added) (quoting Goodwin v. Hilton Head Co., 273 S.C. 758, 761, 259 S.E.2d 611,
613 (1979)). Although "the defendant need not foresee the exactly dollar amount
of the injury, the defendant must know or have reason to know the special
circumstance so as to be able to judge the degree of probability that damage will
result . . . ." Id. (quoting 5 Arthur Linton Corbin, Corbin on Contracts § 1014
(1964)).
In other words, special damages may be recovered in a contract action if "the
defendant had notice of the circumstances from which they might reasonably be
expected to result at the time the parties entered into the contract, as the effect of
allowing such damages would be to add to the terms of the contract another
element of damages, not contemplated by the parties." Moore v. Atl. Coast Line
R.R. Co., 85 S.C. 19, 19, 67 S.E. 11, 12 (1910); see also Timmons, 310 S.C. at 251,
423 S.E.2d at 125 ("The party claiming special damages must show that the
defendant was clearly warned of the probable existence of unusual circumstances
or that because of the defendant's own education, training, or information, the
defendant had 'reason to foresee the probable existence of such circumstances.'"
(quoting 5 Arthur Linton Corbin, Corbin on Contracts § 1011 (1964))).
A trial judge has considerable discretion in determining the amount of actual
damages. Santoro v. Schulthess, 384 S.C. 250, 267, 681 S.E.2d 897, 906 (Ct. App.
2009) (citing Austin v. Specialty Transp. Servs., Inc., 358 S.C. 298, 310–11, 594
S.E.2d 867, 873 (Ct. App. 2004)). Based on this discretion afforded to trial judges,
review on appeal is limited to the correction of errors of law. Id. Accordingly, this
Court's task in reviewing a damages award is not to weigh the evidence, but to
decide if any evidence exists to support the damages award. Id.
Appellant first argues that the trial court erred in allowing special damages
because under Shivers v. John H. Harland Co., 310 S.C. 217, 423 S.E.2d 105
(1992), McNaughton was limited to recovering damages for the term of her
contract—her unpaid salary for the remainder of the 2010–2011 school year. In
Shivers, we examined whether an employee's recovery for wrongful breach of an
employment contract was limited to the amount of pay and other benefits he would
have received during the notice period provided for in his contract.9 Id. at 219, 423
S.E.2d at 106.
9
There, the employee's employment contract required at least fifteen days written
notice of either party's termination of the contract. Shivers, 310 S.C. at 219, 423
S.E.2d at 106. The employer discharged the employee for cause under another
provision of the contract without notice, and a jury found the discharge for cause
was wrongful. Id. The employer moved to limit the employee's damages as a
matter of law to the amount of pay he would have received under the fifteen day
notice provision. Id.
Ultimately, we concluded that the trial court was correct in limiting the
employee's damages to the amount of pay and benefits he would have received
during the notice period because those damages placed him in as good a position as
he would have been had the employer performed the contract. Id. at 221, 423
S.E.2d at 108. In coming to this conclusion, we outlined the purpose of contractual
damages:
When an employee[] is wrongfully discharged under a contract for a
definite term, the measure of damages generally is the wages for the
unexpired portion of the term. This measure of damages allows an
employee to receive the benefit of the bargain by putting him in as
good a position as he would have been had the contract been
performed.
Id. at 220, 423 S.E.2d at 107 (internal citations omitted).
Notwithstanding this statement on contract damages, Shivers addressed a
narrow issue involving a notice provision, and therefore does not limit
McNaughton's recovery to the portion of her salary she would have received from
December 2010 until the end of the 2010–2011 school year. Accordingly, we hold
that McNaughton was entitled to recover the loss she actually suffered as a result
of the breach of her employment agreement. See Shivers, 310 S.C. at 220, 423
S.E.2d at 107; Drews Co. v. Ledwith-Wolfe Assocs., Inc., 296 S.C. 207, 210, 371
S.E.2d 532, 534 (1988) (stating that the proper measure of compensation for a
breach of contract "is the loss actually suffered by the contractee as the result of the
breach" (quoting S.C. Fin. Corp. v. W. Side Fin. Co., 236 S.C. 109, 122, 113
S.E.2d 329, 335 (1960))).
Appellant further argues that special damages were never contemplated
because there is no evidence that Appellant would have employed McNaughton for
more than one school year. We disagree, and find this argument irrelevant to the
issue at hand because McNaughton did not contend that she is entitled to damages
based on the extension of her employment agreement beyond one year. Instead, in
arguing that she is entitled to special damages, she relies on her status as an
induction teacher in the PACE program when she was terminated, and the fact that
she planned to teach as a certified teacher in South Carolina for eleven to twelve
years. Based upon the principal's testimony and the record, there is no doubt that
at the time the parties entered into the employment agreement, Appellant was
aware of McNaughton's involvement in the PACE program, and thus was "clearly
warned" of the repercussions of McNaughton losing her job as an induction
teacher. See Timmons, 310 S.C. at 252, 423 S.E.2d at 126; Moore, 85 S.C. at 19,
67 S.E. at 12.
Moreover, McNaughton presented evidence of her status in the PACE
program, her inability to become a certified teacher through the PACE program
after her employment was terminated, and the other financial consequences she
suffered. Had Appellant not terminated McNaughton's employment, she most
likely would have completed the PACE program and become a certified teacher.
The damages McNaughton suffered as a result of the special circumstance of
losing her position in the PACE program after Appellant terminated her was
clearly within the contemplation of Appellant, as required by Timmons.10
Accordingly, we find that McNaughton presented evidence to support the
jury's special damages award, and that the trial court did not err in charging and
allowing the jury to award McNaughton special damages for her breach of contract
claim.
III. Attorney's Fees under Section 15-77-300
Appellant argues the trial court erred in awarding attorney's fees under
section 15-77-300 of the South Carolina Code.
Section 15-77-300 provides, in relevant part:
(A) In any civil action brought by the State, any political subdivision
of the State or any party who is contesting state action . . . the
court may allow the prevailing party to recover reasonable
attorney's fees to be taxed as court costs against the appropriate
agency if:
10
The dissent cites Timmons, apparently for the proposition that special damages
are not appropriate here. The dissent's view is at odds with Timmons, however, as
Timmons permitted a special damages award for the same reason we allow them
here—because the record indicates that Appellant was aware of the damages that
would be occasioned by a breach of contract. See 310 S.C. at 253, 423 S.E.2d at
253 (finding special damages appropriate because the "record below indicates that
[the defendant] was aware of the need for fill dirt and aware of the probable
damage that would result from a time delay prior to her signing the contract").
(1) the court finds that the agency acted without substantial
justification in pressing its claim against the party; and
(2) the court finds that there are no special circumstances that
would make the award of attorney's fees unjust.
(Emphasis added).
"The decision to award or deny attorney's fees under the state action statute
will not be disturbed on appeal absent an abuse of discretion by the trial court in
considering the applicable factors set forth by the statute." Layman v. State, 376
S.C. 434, 444, 658 S.E.2d 320, 325 (2008) (citation omitted). "An abuse of
discretion occurs when the conclusions of the trial court are either controlled by an
error of law or are based on unsupported factual conclusions." Id. (citing Zabinski
v. Bright Acres Assocs., 346 S.C. 580, 601, 553 S.E.2d 110, 121 (2001)).
A. State Action
Appellant argues that McNaughton's request for attorney's fees does not
satisfy the factors of section 15-77-300 for three reasons. First, Appellant contends
that as a charter school, it is not a state actor, and thus, there has been no "state
action" to trigger application of the statute. We disagree.
Section 59-40-40(2)(a) of the South Carolina Code provides that a charter
school "is, for purposes of state law and the state constitution, considered a public
school and part of the South Carolina Public Charter School District, the local
school district in which it is located, or is sponsored by a public or independent
institution of higher learning." S.C. Code Ann. § 59-40-40(2)(a) (Supp. 2013).
Section 59-17-10 of the South Carolina Code provides, in part, that “[e]very school
district is and shall be a body politic and corporate . . . of . . . the State of South
Carolina.” S.C. Code Ann. 59-17-10 (Supp. 2013); Camp v. Sarratt, 291 S.C. 480,
481, 354 S.E.2d 390, 391 (1987). In its order awarding attorney's fees, the trial
court found that under section 59-40-40(2), when read together with sections 59-
40-40(1)11 and 59-40-50,12 a charter school is considered a state entity and is
11
Section 59-40-40(1) provides:
A 'charter school' means a public, nonreligious, nonhome-based,
nonprofit corporation forming a school that operates by sponsorship
subject to the provisions of section 15-77-300. We agree with the trial court's
conclusion.
At trial, the principal testified that Appellant is funded by revenue received
from the Charleston County School District. In addition, Appellant conceded that
it is part of the public school system. Nevertheless, in its brief, Appellant set forth
a list of reasons why it is not a state actor subject to section 15-77-300. For
example, Appellant contends that as an "independent entity [which] is not
supervised by anyone—including the state or the school district," it "stands alone"
and is governed only by its board of directors. Further, Appellant asserts that it
"does not have the authority to perform governmental functions such as taxing
citizens to raise revenue or exercising the power of eminent domain," but that
instead, "it is simply a non-profit corporation formed for the benefit of the public."
Contrary to Appellant's suggestion, state actors need not perform all possible
governmental functions. Rather, Appellant is a state actor because it is classified
of a public school district, the South Carolina Public Charter School
District, or a public or independent institution of higher learning, but
is accountable to the board of trustees, or in the case of technical
colleges, the area commission, of the sponsor which grants its charter.
Nothing in this chapter prohibits charter schools from offering virtual
services pursuant to state law and subsequent regulations defining
virtual schools.
12
Section 59-40-50(B)(4) states that a charter school must:
be considered a school district for purposes of tort liability under
South Carolina law, except that the tort immunity does not include
acts of intentional or wilful racial discrimination by the governing
body or employees of the charter school. Employees of charter
schools must be relieved of personal liability for any tort or contract
related to their school to the same extent that employees of traditional
public schools in their school district or, in the case of the South
Carolina Public Charter School District or a public or independent
institution of higher learning sponsor, the local school district in
which the charter school is located are relieved . . . .
S.C. Code Ann. § 59-40-50(B)(4) (Supp. 2013).
as a public school; is funded by state money; and created by virtue of state law in
furtherance of the state's duty to provide public education pursuant to Article XI,
section 3 of the South Carolina Constitution. See S.C. Const. art. XI, § 3; S.C.
Code Ann. § 59-40-40(1). Charter schools such as Appellant would cease to exist
but for the public funding which they receive. Accordingly, we hold that charter
schools organized under Title 59, Chapter 40 of the South Carolina Code may be
subject to attorney's fees awarded for "state action" under section 15-77-300.
B. Substantial Justification
Section 15-77-300(B)(1) requires that a court awarding attorney's fees under
that section must find that the state actor "acted without substantial justification in
pressing its claim" against the party requesting attorney's fees. Appellant argues
that it did not lack substantial justification in defending McNaughton's breach of
contract claim, and therefore, the trial court erred in awarding McNaughton
attorney's fees.
To find that a party acted without substantial justification in pressing its
claim, the party must have been "justified to a degree that could satisfy a
reasonable person." Heath v. Cnty. of Aiken, 302 S.C. 178, 183, 394 S.E.2d 709,
712 (1990). Action supported by substantial justification "has a reasonable basis in
law and fact." McDowell v. S.C. Dept. of Soc. Servs., 304 S.C. 539, 542, 405
S.E.2d 830, 832 (1991). Also relevant to the substantial justification consideration
"is the outcome of the matter eventually litigated." Layman, 376 S.C. at 448, 658
S.E.2d at 327; Heath, 302 S.C. at 184, 394 S.E.2d at 712.
In its order, the trial court concluded that "[a]fter listening to the testimony
presented during the case, the arguments of counsel, the evidence presented, and
considering the jury's findings," Appellant was not substantially justified in
pursuing its defense against McNaughton "as there was no reasonable basis in law
or fact on which to defend [McNaughton's] breach of contract claim." We find no
abuse of discretion in the trial court's finding that Appellant lacked substantial
justification under section 15-77-300(B)(1). See Layman, 376 S.C. at 444, 658 at
325.
C. Special Circumstances
Appellant also argues that special circumstances exist rendering the award of
attorney's fees unjust. See S.C. Code Ann. § 15-77-300(B)(2). In particular,
Appellant relies on the fact that the principal solicited legal advice before
terminating McNaughton's employment to ensure that the existence of the
contingency clause in her employment agreement did not have legal significance.
Appellant also cites the contingency clause itself, its students' math scores, and the
letter of recommendation provided to McNaughton as special circumstances
making attorney's fees unjust. Appellant contends that because its decision to
terminate McNaughton's employment was made in good faith and in pursuit of its
students' best interests, the trial court should not have awarded attorney's fees.
The trial court rejected these arguments, and found that no special
circumstances existed to make an award of attorney's fees unjust in this case. We
find the trial court did not abuse its discretion in making this finding, but instead,
carefully considered and applied each of the applicable factors in the statute. See
Layman, 376 S.C. at 444, 658 S.E.2d at 325. Accordingly, we affirm the trial
court's decision to award McNaughton's attorney's fees under section 15-77-300.
D. Section 59-40-50
Finally, Appellant contends that section 59-40-50(A) of the South Carolina
Code exempts charter schools from liability under section 15-77-300, and because
Appellant did not elect to be covered by the statute, the trial court erred in
awarding attorney's fees. We disagree.
Section 59-40-50(A) provides:
(A) Except as otherwise provided in this chapter, a charter school is
exempt from all provisions of law and regulations applicable to a
public school, a school board, or a district, although a charter school
may elect to comply with one or more of these provisions of law or
regulations.
S.C. Code Ann. § 59-40-50(A) (Supp. 2013). According to Appellant, because
section 15-77-300 is not specifically listed in Section 59, Chapter 40 as one of the
laws or regulations that applies to charter schools, Appellant cannot be held liable
for attorney's fees under that section. We disagree.
The purpose of 59-40-50(A) is to distinguish between charter schools and
other public schools, school boards, or school districts by providing charter schools
with more flexibility in their operations. While section 15-77-300 is generally
applicable to public schools, school boards, or districts, the provision also covers
other state actors and "political subdivisions of the State." In other words, the
provision was not enacted especially for public schools, school boards, or school
districts, and is not a provision that a charter school may opt out of merely because
of its charter school status as opposed to a traditional public school. Therefore, the
exemption in section 59-40-50(A) does not cover section 15-77-300, and we hold
that a court may find a charter school liable for attorney's fees under section 15-77-
300.
CONCLUSION
For the foregoing reasons, the trial court's decision is
AFFIRMED.
BEATTY, KITTREDGE and HEARN, JJ., concur. PLEICONES, J.,
concurring in part and dissenting in part in a separate opinion.
JUSTICE PLEICONES: I concur in part and dissent in part. I conclude
that there is some slight evidence to support the trial court's denial of
appellant's motions for directed verdict and JNOV on McNaughton's breach
of contract claim, and therefore concur in the majority's affirmance of this
issue. I dissent from those portions of the opinion which uphold the special
damages award and the attorneys' fee award.
In order to recover special damages in this breach of contract suit,
McNaughton was required to prove that appellant
[w]as clearly warned of the probable existence of unusual
circumstances or that because of the [appellant's] own
education, training, or information, the [appellant] had
"reason to foresee the probable existence of such
circumstances."
Stern & Stern Assoc. v. Timmons, 310 S.C. 250, 423 S.E.2d 124 (1992)
(internal citation omitted). In my opinion, appellant's status as an induction
teacher in the PACE program pursuant to a one-year contract was not
sufficient to render appellant liable for McNaughton's losses beyond her lost
salary and benefits for the school year 2010-2011. E.g., Shivers v. John H.
Harland Co., Inc., 310 S.C. 217, 423 S.E.2d 105 (1992) (proper measure of
damages in breach of employment case). There is simply no evidence that
McNaughton met the requirements of Timmons, and the rank speculation
concerning her potential had she successfully completed the PACE program
is not a substitute for such proof.
I also dissent from the majority's affirmance of the attorneys' fees awarded
McNaughton pursuant to S.C. Code Ann. § 15-77-300 (Supp. 2013).
Assuming that appellant is a state actor within the meaning of this statute,
appellant's decision to put McNaughton to her proof here was, in my opinion,
substantially justified, particularly in light of the trial court's direction of a
verdict in appellant's favor on three of McNaughton's causes of action. See
e.g. Cornelius v. Oconee Cnty., 369 S.C. 531, 633 S.E.2d 492 (2006) (state
acts with substantial justification when its position has a "reasonable basis in
law and fact.").
For the reasons given above, I concur in part and dissent in part.