The South Dakota Supreme Court ended its term with a hearing on Mid-Central Educational Cooperative’s handling of federal GEAR UP funds. The lawsuit in question followed investigations into Mid-Central business manager Scott Westerhuis, who murdered his family and set his house on fire before killing himself in 2015.
The case considers if two former GEAR UP students can be considered third-party beneficiaries of the contracts between the South Dakota Department of Education, Mid-Central Educational Cooperative, and the American Indian Institute for Innovation.
Appellants Alyssa Black Bear and Kelsey Walking Eagle-Espinosa filed a complaint against Mid-Central and a laundry list of related parties in 2016. They sued for civil theft, breach of contract, and negligent supervision that resulted in loss of services.
In 2018, a Charles Mix County court granted a summary judgment that the students’ claims are preempted by the federal Higher Education Act.
Attorney John Hinrichs represents the former students. He argues though the initial grant money came from the federal government, the issue at hand is how that money was handled by state departments and contracted organizations. He asserts his clients are entitled to compensation as third-party beneficiaries of the contracts between the state, Mid-Central, and AIII.
Defense attorney Ryland Deinert argues no GEAR UP funds have been proven missing—only Mid-Central Funds—and students weren’t beneficiaries of those contracts.
“We have the United States Department of Education working with the South Dakota Department of Education and then subcontracting with mid-central. If anyone is intended as a third party beneficiary, they would be with the United States Department of Education and the South Dakota Department of Education.”
But Hinrichs argues underserved students are the reason the grants and contracts exist at all.
“They are the primary beneficiaries. The grant language itself and the contracts themselves specifically say that the purpose of this grant is to benefit these students. The state of South Dakota and the Department of Education do not benefit unless my clients benefit.”
The state Supreme Court will decide the case at a later date.