Weeks after it ceased to exist in the eyes of the state, a metro-area charter school is making a case for its survival in bankruptcy court.
The Inver Grove Heights-based Tarek ibn Ziyad Academy filed for bankruptcy June 30, a day before it found itself lacking the state-approved overseer it needs to continue operation. The school since has asked the bankruptcy judge for permission to continue paying employees' salaries and benefits, stressing the value of saving its successful academic program.
Meanwhile, the American Civil Liberties Union asked the court to allow its 2-year-old federal lawsuit against the academy to move toward a resolution. The ACLU accused TiZA of promoting religion. The school has denied those charges, arguing it merely accommodated its primarily Muslim students.
These developments leave TiZA attorneys with a delicate balance to strike: They are championing the school's survival as they argue that its likely demise makes the ACLU lawsuit moot.
"How can TiZA adjust its religious accommodation policies if it doesn't exist anymore?" asked Shamus O'Meara, the school's lead counsel. "It's pretty nonsensical to try to push those claims forward."
At the start of this month, TiZA's overseer - the Washington, D.C.-based nonprofit Islamic Relief USA - became ineligible to continue its role because of a new charter school law that bans out-of-state overseers. Islamic Relief and the state were co-defendants in the ACLU lawsuit before settling out of court.
The state Education Department turned down an application by Twin Cities nonprofit Novation to take over as TiZA's overseer.
TiZA filed for Chapter 11 bankruptcy, which allows an organization to restructure and continue to exist. In court filings, the academy touts the high test scores and other achievements of its overwhelmingly low-income minority students.
"The continued operation of TiZA saves a successful program for the development of students," records say.
And to continue to operate, the school said, it needs to hang onto its staff of about 60. The school, which lists a monthly payroll of about $143,000, is asking the judge to allow it to continue paying its teachers and other employees over the summer.
An attorney for U.S. Trustee Habbo Fokkena argued against granting that request. The ability of the school to reopen in the fall is "clearly in dispute," wrote the attorney, Michael Fadlovich.
He especially objects to a severance clause in employment offers made in the weeks and months before the school filed for bankruptcy: If the school is forced to close, the offers said, employees would receive four months' salary - a liability of about $438,500 by his estimate.
Mark Kalla, TiZA's bankruptcy attorney, did not return a call seeking comment.
TiZA's Executive Director Asad Zaman said the school hasn't worked out a survival plan. Its leaders and legal team still are weighing a court appeal of the Education Department's rejection of Novation's application.
Zaman said he does not plan to re-invent TiZA as a private school, which would require lining up significant private resources.
O'Meara, the school's counsel, is more pessimistic. He said many TiZA employees scattered over the summer, and many students have requested their academic records so they can transfer to other schools.
"The reality is there isn't anyone to fill that school any more," O'Meara said.
Meanwhile, the ACLU, the state and Islamic Relief have asked the bankruptcy court to lift a freeze on all legal actions that went into effect automatically when TiZA filed for bankruptcy.
For one thing, the state and Islamic Relief want to pursue repayment of more than $1.7 million in legal expenses that the federal court ruled TiZA should cover. The ACLU is seeking closure in the long-running case, which still is scheduled for trial in November.
Peter Lancaster, lead counsel for the ACLU, said the trial is unlikely with TiZA closed. Lancaster said the ACLU realizes it might not be able to get TiZA to repay millions in state aid or cover the group's own legal fees even as he questioned why TiZA had not yet filed information on its assets.
But Lancaster said the ACLU still hopes the court will approve the ACLU's settlement with the state and thus unseal records marked confidential during the lawsuit's investigative phase.
"The single most important thing we still hope to accomplish is the release of that information to the public," Lancaster said.
Lancaster and his team have argued the documents release would be "highly useful" to the bankruptcy court as well, throwing light on TiZA's financial dealings.
TiZA and its attorneys have called the issue of the settlement documents a misleading publicity stunt by the ACLU.
Judge Robert Kressel, who presided over the bankruptcy case of former auto mogul Denny Hecker, will rule on the various motions in coming weeks.