On April 26, 2011, the Maryland Court of Appeals (Court of Appeals) issued a decision in BEKA Industries, Inc. v. Worcester County Bd. of Education. This case involves a number of issues, the most significant of which is the application, extent and waiver of sovereign immunity for county boards of education involved in construction contract disputes.
The Maryland Court of Special Appeals (Court of Special Appeals), the intermediate appellate court, previously determined that county boards of education were entitled to sovereign immunity to contract actions, but held that such immunity could be waived if the contractor proved that the county board of education had funds available to satisfy a judgment against the board. This “funds available” requirement was the final of three requirements to determine whether the county board of education could assert sovereign immunity in defense of a lawsuit based on a contract.
The Court of Appeals rejected the Court of Special Appeals’ conclusion that sovereign immunity was available as a defense in a breach of contract action, and held that because Section 12-203 of the State Government Article of the Maryland Code provides a mechanism to ensure that funds will be available to satisfy a judgment, and waived sovereign immunity for county boards of education as to contract actions.
As such, and of critical importance to construction contractors, it is not necessary to prove that a county board of education has funds available to satisfy a judgment in order to pursue and recover on a breach of contract claim against the board. The Court of Appeals’ decision resolves this important issue in favor of contactors, which had been in doubt since the Court of Special Appeals decision on February 26, 2010.