STATE OF MINNESOTA COUNTY OF WASHINGTON DISTRICT COURT TENTH JUDICIAL DISTRICT 834 VOICE, Jane Doe, Mary Roe and John Smith, Plaintifis, Independent School District No. 834, Stillwater, Minnesota, Denise Pontrelli, individually and ‘As Superintendent of the aforesaid School District, and George Hoeppner, Kathy Buchholz, Amy Burbach, Thomas Lehman, Paula O’ Laughlin, Shelley Pearson, and Michael Ptacek, as members of the School Board of Independent School District 834 and individually, Defendants. Case Type: Other Civil Court File No COMPLAINT Plaintiffs, for their claim for relief against the Defendants herein, state and allege as follows: -—~———— INTRODUCTION 1. Independent School District 834 (hereinafter, “the District”) is located in a geographic area entirely located in Washington County, Minnesota lying between the Forest Lake school district on the north and the South Washington County district on thesouth. The District currently has nine elementary schools. For several decades, northern residents of the District have sent their children to two elementary schools in the location known as Withrow in the City of Hugo and Marine-On-St. Croix. Residents in the central portion of the City of Stillwater have sent their students to Oak Park Elementary School. 2. OnMarch 3, 2016, the members of the School Board of the Defendant School District voted 5-2 to support the closure of these three elementary schools in the District. Itis undisputed that these three elementary schools were among the very best elementary schools in the State of Minnesota, a distinction they have held for decades. 3. At the hearing on March 3, the School Board limited testimony by individuals wishing to testify against the closure proposal to three minutes each, No such restriction was placed upon the Superintendent and staff testifying on behalf of the proposal to close the schools, No opportunity to cross examine or otherwise challenge the testimony and documents presented in favor of the school closure was afforded to opponents of the proposal during the hearing, 4. Opponents to the proposal were able to provide unrebutted evidence that the proposed school closures would result in a significant decline in residential property values in the areas surrounding those schools. 5, Evidence was also presented which fully refuted much, if not all, of the materials presented by the Superintendent and school district witnesses purportedly justifying the proposed closures. 6. Unrebutted evidence was also submitted by opponents to the closures that clearly established that substantial hardships would occur to students in the schools being closed,including, but not limited to, reduced educational opportunity and substantially increased transportation times and costs. 7. Anopinion poll of the voters in the Schoo! District commissioned shortly before the vote of the School Board indicated that nearly 60% of the voting residents in the School District opposed the aforesaid elementary school closures. 8. n 2015, Independent School District conducted an election for the purpose of raising $97.5 million dollars for capital expenditure needs in the School District. 9. The School District or others acting on its behalf publicly represented that monies from the bond sale would be directed at all three of the elementary schools. These representations were made in order to induce voters to vote in favor of the bond election. 10. Many individuals voted for the bond election in the belief that one or more of these elementary schools would directly benefit from the bond sale proceeds as had been represented to them by the School District or others working on its behalf. 11. The representations that bond sale proceeds would be used for the three elementary schools were knowingly false, or made in reckless disregard of the truth inasmuch as the School District and members of the School Board were already planning to close one or all of the three elementary schools that it ultimately voted to close. 12. Altematively, to the extent that the misrepresentations of the use of the funds for the elementary schools to be closed were based, ultimately, on a change of circumstances that required a reallocation of bond sale proceeds, that redirection would have required another election permitting that reallocation, which did not, in fact, occur. 13. Inreviewing the facts and evidence prior to the public hearing and meeting,members of the Board and the Superintendent met on several occasions and discussed and debated via third party transmission, the proposal to close the three elementary schools by utilizing the Superintendent or others as an active intermediary to conduct, “Serialized” meetings of the Board, at which the Superintendent passed information of board member positions between them, as well as conveyed information with the express purpose of avoiding doing so at a scheduled public meeting. 14. Priorto the meeting, numerous e-mails were circulated among the school board members discussing the upcoming vote and stating arguments in favor of the plan to close the elementary schools in Withrow, Marine-On-St. Croix and the Oak Park elementary school in Stillwater. 15. ‘The manner in which the Superintendent and Board discussed the proposal to close the three elementary schools violated the Minnesota Open Meeting Law on at least one occasion and, on information and belief, more than three occasions. 16. No summary or minutes of any discussions via electronic means or through third parties has ever been made of the email exchange or third party intermediary meetings of the Board. 17. The School Board passed the aforesaid Bond election and spent Bond proceeds without properly addressing an acknowledged financial conflict of interest that existed onthe part of a School Board member, as well as the administrator primarily responsible for administering financial matters within the District. The failure of the District to have properly followed the procedures expressly set out under Minnesota law voids all affected contracts.PARTIES 18. Plaintiff'$34 VOICE is a non-profit Minnesota Corporation whose members are entirely comprised of Washington County residents whose children attend elementary school within the boundaries of Independent School District 834, or whose residential properties in Washington County and the State of Minnesota are directly, and negatively impacted by the School Board decision to close elementary schools and who are concemed with the welfare of elementary age students who are attending or will attend in the future the schools identified as Withrow, Marine and Oak Park Elementary Schools. Its members include both residents of the school district and residents elsewhere in ‘Minnesota and Washington County whose children, in the latter case, are entitled to atténd school in Independent School District 834 under the provisions of the Minnesota Open Enrolment law (Minn.Stat.§124D.03) 19. Plaintiff Jane Doe is a Minnesota and Washington County resident and parent of an elementary school student currently attending Withrow Elementary School. 20. Plaintiff Jane Roe is a Minnesota and Washington County resident and parent of an elementary school student currently attending Marine Elementary School. 21. Plaintiff John Smith is a Minnesota and Washington County resident and parent ofan elementary school student currently attending Oak Park Elementary School. 22. Defendant Independent School District 834 (“the District”) is a local unit of government known as an “independent school district” and is established pursuant and is subject to the powers and duties given it under Minnesota law. 23. Defendant Denise Pontrelli is the Superintendent of the District, who has been given the powers and duties of that position in accordance with Minnesota law and subject to the governance and control of the School Board. 24. Defendant George Hoeppner is a School Board member of the District and its Board Chair, elected in November 2007 for a term expiring in December 2018. 25. Defendant Kathy Buchholz is a School Board member of the District who was elected in November 2005 and whose term expires in December 2016. 26. Defendant Amy Burbach is a member and Treasurer of the School Board of the District elected in November 2012, and whose term expires in December 2016. 27. Defendant Tom Lehman is a member and Director of the School Board of the District, elected in November 2010, and whose term expires in December 2018.28. Defendant Paula O’ Loughlin is a member and Clerk of the School Board of the District who was elected in November 2014 and whose term expires in December 2018. clley Pearson is a member of the School Board elected in November 29. Defendant 2014 whose term expires in December 2018. 30. Defendant Mike Ptacek is a member of the School Board of the District elected in November 2008 and whose term expires in December 2016. COUNT 1 ILLEGAL SCHOOL CLOSURES 31. Reallege and incorporate by reference the statements and allegations contained in paragraphs 1 to 30 herein, 32. _ Prior to acting to close the Withrow, Marine and Oak Park Elementary schools, the District, and specifically the School Board, was required to conduct a public hearing on the question of the necessity and practicability of the proposed closings. The time and place of the meeting, the description and location of the schools to be closed and a statement for the reasons for the closings were required to be made part of public notice published two weeks prior to the hearing date. All parties requesting to give testimony at the hearing had to be afforded the opportunity to give such testimony as they wished prior to rendering a decision on the closures.33, After postponing an initially scheduled hearing for the purpose, the School Board conducted a special meeting for the purpose of closing the aforesaid elementary schools on March 3, 2016. ; 34, The District failed to comply with the required procedures provided for in such hearings under Minnesota law. 35, The District limited testimony of those opposing the closures to no more than three minutes per individual testifying, Proponents of the closures were given substantially more time to testify in favor of the proposal. 36. The District provided additional facts and evidence at the hearing on March 3, 2015, that had not been disclosed to the public. No opportunity was given at the hearing on March 3, 2016, to refute or rebut the evidence presented in support of the proposal. 37. No opportunity for cross examination of the evidence presented in favor of the closings was given by the board. 38. The alleged testimony not previously disclosed and presented to the School Board contained both false and misleading statements and information that was subsequently relied upon by the Board in making its decision to close the aforesaid elementary schools. 39, That the School Board heard unrebutted testimony at the hearing on March 3, 2016, that the proposal before it would substantially burden children with greater travel time. a 40. ‘The School Board knowingly and deliberately disregarded the unrebutted testimony of the loss of real estate property values in the event of the passage of the proposal.41, The School Board knowingly and deliberately disregarded credible and substantial rebuttal testimony that effectively refuted the purported evidentiary and factual basis presented to the School Board by the Superintendent and the District’s administrative staff of the alleged basis of the proposal to close the aforesaid three elementary school. 42. By failing to allow opponents an opportunity to rebut evidence or to cross examine witnesses for the District proponents of the school closure proposal, the District and the members of the School Board deprived Plaintiffs of a meaningful public hearing on March 3, 2016. 43. By failing to allow opponents an opportunity to rebut evidence or to cross examine witnesses for the District proponents of the school closure proposal, the District did not conduct a public hearing as required by Minn.Stat.123B.51, subdivision 5. 44, By failing to allow opponents an opportunity to rebut evidence or to cross examine witnesses for the District proponents of the school closure proposal, the District and the members of the School Board deprived Plaintiffs of their right to procedural due process under Minnesota and Federal law. 45, _ By deliberately disregarding testimony as to the loss of property values as the likely result of a decision in favor of closing the three elementary schools, the District and the School Board took the lost value of the real estate owned by Plaintiffs, including persons who are members of Plaintiff 834VOICE, and others, without just compensation therefore, as required under Minnesota and United States constitutions.COUNT2 VIOLATION OF OPEN MEETING STATUTE a MINN STAT. 13D.06 46. — Reallege and incorporate by reference the statements and allegations contained in paragraphs 1 to 45 herein. 47. Minnesota law requires that all District meetings in which public business is transacted must be open to the public unless that access is limited as the result of a small number of very specific exceptions. 48. There was no basis for any exception in the communications and deliberations of the School Board and their communication with District staff regarding the proposal to close three elementary schools in the District. 49. Prior to the public meeting of March 3, 2016, by direct e-mails to one another or through the Superintendent or other District staff, in addition to personal communications with District staff, the School Board conducted serialized, private meetings for which no minutes were taken and no public record made, These serialized meetings were for the purpose of discussing sensitive issues related to the elementary school closing proposal and reaching an agreement on the part of the Board prior to the conduct of the public meeting on March 3, 2016.50. The aforementioned serialized meetings were conducted in the manner of a private discussion whereupon the resolution of the issue regarding the school closures were both debated and resolved, all in violation of Minn. Stat. 13D.06. $1. That, on information and belief, more than three such serialized meetings were conducted. 52. That the District, its School Board and the Superintendent sought to hide their ‘manner of conducting serialized meetings by expressly avoiding the assembling of a physical quorum of the School Board at any one time, which would have triggered the statutory requirement of published notice of the meeting and would have called public attention to their off-the-record deliberations. 53. That Minnesota law provides for the removal of any School Board member who participates in three or more illegal meetings in violation of Minn. Stat. 13D.06 COUNT 3 VIOLATION OF BOND STATUTE Minn. Stat, 475.52, Subdivision 5 54, Reallege and incorporate by reference the statements and allegations contained in paragraphs 1 to 53 herein. 55. School districts are authorized to issue bonds under Minn. Stat. 475.52, subdivision 5, for “capital improvements” for the purpose of the “acquisition or betterment of school facilities”, In 2015, the District held an election for the purpose of bonding for capital improvements in the District.56. Pursuant to the election requirements set forth in Minn, Stat. 475.521, subdivision 2(b) and (c), notice of an election was submitted to the voters of the District. The District solicited support for the bond proposal by developing a list of intended recipients of the bond proceeds, including the funding of a new and additional elementary school in Woodbury, a large improvement on a sports stadium, and listed improvements to all three of the three elementary schools subsequently proposed for closing. 56. Closure of the three elementary schools by the District will prevent it, by its own actions, from expending the funds it represented to voters it would spend on the three elementary schools itis intending to close. 57. Minnesota Statute Chapter 475 does not permit the District to use funds designated for the use of the three elementary schools for other purposes. 58. Closure of the three elementary schools under the proposal before the School Board on March 3, 2016, would require the District to be in violation of Minnesota law. 59, The District cannot violate the law of the United States or Minnesota in the conduct of its business or actions. 60, The act of the District to close the elementary schools in violation of Minnesota Jaw is void.COUNT 4 VIOLATION OF MINNESOTA ELECTION LAW 61. _ Reallege and incorporate by reference the statements and allegations contained in paragraphs 1 to 60 herein. ee 62. _ Plaintiff 834VOICE is comprised of individuals, all of whom are voters in the State of Minnesota. 63. Plaintiffs Doe, Roe and Smith are each and all voters in the State of Minnesota. 64." The District conducted an election for the purpose of obtaining approval from the voters in the District for the issuance of $97.5 million dollars for capital improvements to District facilities. 65. The District, of third parties operating under the District's control and approval, stated in written materials sent to the voters in the District that specific expenditures for capital improvements would be at various schools and District facilities. 66. That the purpose of the written materials sent to the voters in the District that specific expenditures for capital improvements would be at various schools and District, facilities was to induce voters to support the proposal. 67. That the written materials sent to the voters in the District that specific expenditures for capital improvements would be at various schools and District facilities included affirmative statements that bond proceeds would be spent for the Withrow, Marine and Oak Park elementary schools. 68. That voters in the school district were intended to be and were influenced by the statements made in the written materials sent to the voters in the District that specificexpenditures for capital improvements would be at aforesaid three elementary schools. 69. That voters in the District voted for the aforesaid bond election because of the representations made to them that proceeds from the sale of the approved bonds would be used for the Withrow, Marine and Oak Park elementary schools. 70. The District, agents working on its behalf, the School Board or individual members of the School Board knew that the representations that bond proceeds would be used for all three elementary schools noted above were false. 71. Alternatively, the District, agents working on its behalf the School Board or individual members of the School Board knew that the representations that bond proceeds would be used for all three elementary schools noted above, if not knowingly false, were made in reckless disregard of the truth, 72. Inmaking the false representations that bond proceeds would be used for all three elementary schools later proposed for closure, the District, agents working on its behalf, the School Board or individual members of the Schoo! Board, violated the Minnesota Fair Campaign Practices Act, specifically Minnesota Statutes §211B.06. 73. By conducting the bond election in a manner that violates the criminal law, the District and School Board voided the subsequent actions undertaken in furtherance of that, criminal act, specifically by failing to fund the elementary schools in question through their closure. 74. By conducting the bond election in a manner that violates the criminal law, the members of the School Board have engaged in criminal conduct that subjects them to forfeiture of their office.COUNT 5 CONFLICT OF INTEREST a MINN, STAT. 471,89 _ 75. Reallege and incorporate by reference the statements and allegations contained in paragraphs 1 - 74 herein. 76. School Board member and Defendanit Kathy Buchholz is the spouse of Brian Buchholz, a principal and Vice-President of the architecture firm known as BWBR. 77. Defendant and School Board member Kathy Buchholz derives, with her family, an immediate and direct financial benefit from what her husband earns as a principal and executive at BWBR. 78. The District contracted with BWBR for architectural and consulting services as part of its projected use of the bond proceeds for capital improvements noted herein. 79. No competitive bids were required for the contract awarded to BWBR. 80. The amount awarded to BWBR by the District was $4,974, 071 81. Brian Buchholz and, through him, School Board member and Defendant Kathy Buchholz, will directly benefit from the funds paid to BWBR by the District, 82. Of the seven proposals to provide architectural services to the District in order to implement the public improvements from the bond proceeds; three were for lower amounts of money than BWBR. 83. School Board member and Defendant Kathy Bucholz did not properly and adequately disclose the direct financial benefit that she would receive as the result of theaward of the contract to BWBR. 84. School Board member and Defendant Kathy Bucholz did not provide the District with the affidavit required by Minnesota Statute §471.89, subdivision 3. 85. The District and School Board did not pass any resolution in advance of the award of the contract to BWBR setting out the essential facts and determining that the contract price award to BWBR is as low as or lower than the price at which the service could be obtained elsewhere. 86. By operation of Minnesota Statute §471.89, subdivision 1, the contract with BWBR is void. 87. _ By operation of Minnesota Statute §471.89, subdivision 1, any contract with any subcontractor or other service provider that is in any way dependent upon the validity of the contract between the District and BWBR is void. 88. _Atalll times relevant to this lawsuit, Kristen Hoheisel has been employed by the District as the Executive Director of Finance and Operations. 89, Kristen Hoheisel is responsible for advising and making recommendations to the School Board of the District on financial miatter concerning the District, including on matters related to obtaining bond financing, spending money raised in bond elections and financial consultants. 90. Kristen Hoheisel isa local official within the meaning of Minnesota Statute §10A.01, Subdivision 22. 91. Kristen Hoheisel is married to Michael Hoheisel an individual who is the ‘managing principal in the of R.W. Baird, a company that was hired by the District as itsfinancial consulting company to advise it on financial matters, including the issuance of the capital improvement bonds by the District in 2015. 92. Payments to the R.W. Baird by the District for consulting benefit Hoheisel directly through her husband’s association with that company. 93. Payments to R.W. Baird are, in part, made from proceeds of bond sales by the District that were recommended by that same individual and company. 94, Hoheisel recommended the sale of the same bonds for capital improvements that the District was advised to issue by her husband. In fact, both Michael Hoheisel and Kristen Hoheisel appeared together before the School Board of the District at its meeting of July 16, 2016, to advise it on financial matters related to the sale of bonds by the District. 95. Hoheisel benefitted personally from the sale of bonds in 2015 by the District through the payments made to her husband’s company. 96. Hoheisel directly participated in her husband’s efforts to induce the District to issue capital improvement bonds. WHEREFORE, the Plaintiffs pray Judgment of this Court, collectively or alternatively, if the court deems it just and appropriate, as follows: 1. Declaring the actions taken and the conduct of the hearing at the meeting of March 3, 2016 closing the Withrow, Marine-On-St. Croix and Oak Park elementaryschool in the Defendant District violate the provisions of Minnesota Statute Minn.Stat.123B51, subdivision 5 are void. 2. Finding that the actions taken by the School Board at the meeting of March 3, 3016, diminished the value of property within the District without compensating the owners therefore, and that damages be awarded in an amount exceeding $50,000, to be proven at trial or, alternatively, that the District begin condemnation proceedings to determine the appropriate valuation for the taking of that value pursuant to Minnesota Statutes §117. 3. Finding that the members of the School Board of the District have violated the Minnesota Open Meeting Law in excess of three times and ordering that all of the participating board members must immediately forfeit their offices and be prevented from ever holding public office in the future. 4, Finding that the District and the School Board violated the Minnesota Fair Campaign Practices Act in intentionally misstating facts for the purpose of inducing voter conduct and that the actions taken by the Board to close the elementary schools in question and to spend the money originally promised for those schools in another manner than what was promised are void. 5, Finding that the Dist ict and the School Board violated the Minnesota Fair ~ Campaign Practices Act and that the members be ordered removed from their offices for engaging in criminal behavior. 6. Finding that the actions of the District and the Board members in restricting the opportunity for a full and fair public meeting on the question of school closureviolated the due process rights of Plaintiffs, entitling them to recover reasonable costs, including attomeys” fees. 7. Finding that the actions of the District and the Board members in deliberately ignoring the evidence in the record of the proceedings that disproved the assertions made by the District as a justification for closing the three elementary schools violated the due process rights of Plaintiffs, entitling them to recover reasonable costs, including attorneys’ fees. 8. Finding that Plaintiffs are entitled to reasonable costs and attomey fees pursuant to Minn, Stat. 13D.06(a) not to exceed $13,000.00. 9. Finding that Board Member Kathy Buchholz has a conflict of interest for which proper statutory procedures were not followed and that the contract between the District and BWBR is void, ordering any funds already expended to be returned to the District forthwith. 10. Finding that District employee Kristen Hoheisel had an improper and insufficiently disclosed conflict of interest which voids the contract between the District and R.W. Baird and that R.W. Baird be required to disgorge any funds paid it by the District 11. For whatever and further relief to the Court appears just and proper.‘April Dated: April 2016 Frederic W. Knaak, #0056777 HOLSTAD AND KNAAK, PLC 4501 Allendale Drive St. Paul, MN 55127 Telephone: 651-490-9078 Facsimile: 651-490- 1580/fknaak@klaw.us