Can an Arkansas school district give a departing superintendent property worth more than $100 as part of a severance package?

Plain-English summary

Prosecuting Attorney Steven Oliver asked the AG about a school superintendent whose resignation was accepted on August 2, after which the school board (on August 11) authorized the board president to negotiate a severance package, leading to an August 13 agreement that paid the former superintendent money plus tangible property worth more than $100.

The cited statute, A.C.A. § 6-21-110(b) and (c), bars school districts from giving, donating, or transferring without "adequate market value consideration" any school property to an administrator, and bars "giving" school property worth more than $100 to a leaving administrator.

AG Dustin McDaniel's answer turned on consideration. The statute prohibits gifts and donations (transfers without consideration). It does not prohibit transfers supported by consideration. So a "severance package" the parties contracted for, or a "settlement agreement" releasing a bona fide claim against the district, is permitted. A pure post-resignation gift is not.

Whether adequate consideration existed in this specific case was a fact question outside the AG's role. The reviewed employment contract did not on its face provide for severance pay, but the AG could not rule out that the writing was incomplete, that the parties had separately agreed on severance, or that a bona fide dispute existed.

On the second question (school board member liability), the AG was clear:

• Criminal liability: none. A.C.A. § 6-21-110 does not designate the conduct a felony, misdemeanor, or violation, and does not authorize imprisonment or a fine. Under the Arkansas Criminal Code definition of "offense," there is nothing to prosecute. The statute also binds school boards as entities, not individual humans.
• Civil liability: very narrow. A.C.A. § 21-9-301 grants statutory immunity to school directors for negligence (except to the extent of liability insurance). Intentional torts can pierce that immunity (see Dietsch v. Tillery), but a board's intentional authorization of a transfer is not the kind of intentional tort that defeats immunity. The AG could not foresee personal liability absent "truly extraordinary facts."

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What counts as adequate consideration for a severance transfer?
The AG identified two clear categories: (1) a contractual obligation, where the employment contract or a separate agreement provided for severance before the resignation became irrevocable; (2) a settlement, where the district receives a release from prospective litigation and potential liability. Other forms might also qualify; the question is fact-specific.

What if there was no severance clause in the contract?
The contract by itself may not be the whole story. The AG noted that the parties might have orally agreed or amended the contract before the resignation. And if the superintendent had a bona fide claim against the district, a release from that claim is consideration even without a pre-existing severance clause.

Could a prosecutor charge a school board member with a crime for an improper transfer?
Per this opinion, no. A.C.A. § 6-21-110 carries no criminal penalty and the conduct is not designated as a felony, misdemeanor, or violation in the Criminal Code. The statute also binds the school board as an entity, not individuals.

What about an illegal exaction suit?
Such a suit would likely be brought against the district itself, not individual board members. The AG cited Op. Att'y Gen. 94-058 to the effect that, even where a tax levy is challenged as unconstitutional, council/board members acting in their legislative capacities have absolute immunity from damages.

What if the transfer was a pure gift after resignation?
That would arguably violate § 6-21-110, and could also implicate the broader prohibition on appropriating public funds to a private purpose (Chandler v. Board of Trustees). The opinion does not endorse that outcome here; it just frames the legal landscape.

Background and statutory framework

A.C.A. § 6-21-110(b) and (c) restrict school district property transfers to current and departing administrators. The statute distinguishes gifts (no consideration) from transfers backed by consideration. The legislature was concerned about insider self-dealing and pay-on-the-way-out arrangements that do not reflect a true exchange of value.

The Arkansas Criminal Code (A.C.A. §§ 5-1-101 et seq.) defines "offenses" as conduct for which imprisonment or a fine is authorized by statute. A statute not designated as creating a felony, misdemeanor, or violation creates an "offense" only if it imposes punishment by imprisonment or fine. A.C.A. § 6-21-110 does neither, so there is nothing to prosecute.

A.C.A. § 21-9-301 grants statutory immunity to school directors and other specified officials for civil liability arising from negligent acts in their official capacities, except to the extent of liability insurance coverage. The Arkansas Supreme Court has read this immunity to cover negligence but not intentional torts. Dietsch v. Tillery illustrates a narrow category of intentional torts (deliberate misrepresentation and concealment regarding a dangerous condition) that could pierce immunity. Ordinary intentional authorization of a transfer does not fit that category.

The opinion notes the broader public-purpose constraint on public funds. Chandler v. Board of Trustees states that the State cannot appropriate public funds to a private purpose. But contracted-for severance pay, including settlement of a bona fide dispute, has been recognized as connected to the maintenance of the school system and does not violate the public-purpose constraint (Gray v. Mitchell).

Citations

• A.C.A. § 6-21-110(b), (c) (Repl. 2013) (no-gift rule for school administrators)
• A.C.A. §§ 5-1-101 et seq. (Arkansas Criminal Code)
• A.C.A. § 5-1-105(a) (definition of "offense")
• A.C.A. § 21-9-301 (Supp. 2013) (statutory immunity for school directors)
• Ark. Const. art. 2, § 8 (due process)
• Ark. Const. art. 5, § 27 (no extra compensation for public officers)
• Ark. Const. art. 14, §§ 2, 3 (public school funds restrictions)
• Chandler v. Board of Trustees, 236 Ark. 256, 365 S.W.2d 447 (1963) (public purpose doctrine)
• Gray v. Mitchell, 373 Ark. 560, 285 S.W.3d 222 (2008) (contracted severance to former superintendent permissible)
• Autry v. Lawrence, 286 Ark. 501, 696 S.W.2d 315 (1986) (statutory immunity for negligence)
• Dietsch v. Tillery, 309 Ark. 401, 833 S.W.2d 760 (1992) (intentional torts can defeat immunity)
• Taylor v. Cockran, 644 F.Supp. 753 (E.D. Ark. 1986) (absolute immunity for legislative functions)
• Op. Att'y Gen. 94-058 (no personal liability of council members)
• Op. Att'y Gen. 2008-186 (settlement of bona fide disputes)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Official summary

In the event that a school administrator severs employment with a school district, may the district transfer school-owned property having a value in excess of one-hundred ($100.00) dollars as part of a settlement agreement or severance package? Q2) In the event the answer to question number one is "no," have the school board members subjected themselves to criminal and/or civil liability for violating A.C.A. 6-21-110(b), (c)?

RESPONSE: 1) In my opinion, the answer depends on whether the district receives adequate consideration, which may take one of several forms, in exchange for the property transferred. Whether there was adequate consideration in this case is a question of fact I am not equipped or charged to answer. 2) In my opinion, school directors cannot be held criminally liable for any violation of the statute at issue and will not be civilly liable absent extraordinary facts.

Original opinion text

STATE OF ARKANSAS

THE ATTORNEY GENERAL
Dustin McDaniel

Opinion 2014-098

December 18, 2014

The Honorable Steve Oliver
Prosecuting Attorney
18th Judicial District East
501 Ouachita Avenue, Suite 404
Hot Springs, Arkansas 71901

Dear Mr. Oliver:

This is my opinion on your questions about the legality and consequences of a school district's conveying money and other property to its former superintendent as part of a "severance package" or "settlement agreement."

You state that the superintendent offered his resignation, and that the school board accepted it, on August 2; that the board voted on August 11 to authorize the board president to negotiate a severance package for the superintendent; and that the parties reached agreement on August 13 that the superintendent would receive from the district both money and tangible property.

You cite a law that prohibits school districts from giving, donating, or transferring without "adequate market value consideration" to an administrator any school property, and from "giving" to a leaving administrator school property valued at more than $100.

Your questions are:

1. In the event that a School Administrator severs employment with a school district, may the district transfer school owned property having a value in excess of one hundred dollars ($100.00) as part of a settlement agreement or severance package?

2. In the event the answer to question number one is in the negative, have the School Board members subjected themselves to criminal and/or civil liability for violating A.C.A. of 1987, § 6-21-110 (b), (c)?

RESPONSE

In my opinion, the answer to your first question depends on whether the district receives adequate consideration, which may take one of several forms, in exchange for the property transferred. In my opinion, school directors cannot be held criminally liable for any violation of the statute at issue and will not be civilly liable absent extraordinary facts.

DISCUSSION

Question 1 – In the event that a School Administrator severs employment with a school district, may the district transfer school owned property having a value in excess of one hundred dollars ($100.00) as part of a settlement agreement or severance package?

The statute you cite prohibits any gift, donation, or transfer without adequate consideration to a current administrator, and any gift worth more than $100 to a "leaving or retiring" administrator. As gifts and donations are transfers made without consideration, the statute does not purport to prohibit any transfer supported by consideration.

Whether a particular transfer is supported by adequate consideration is a question of fact. My office, in its opinions function, is neither equipped nor charged to act as a finder of fact. The opinions process is not an adversarial proceeding that tends, due to the parties' opposing interests, to elicit all relevant facts. While you provided some background in your opinion request, it is not clear that I have all relevant facts, and I accordingly cannot render an opinion on whether the transfer at issue here was supported by adequate consideration. I will, however, discuss how applicable law might apply to some possible fact situations.

The transfer at issue likely was supported by adequate consideration if the "severance package" was contracted for between the superintendent and the district. You included with your request copies of written employment contracts, including one entered into in January 2014, between the superintendent and the district. I have reviewed only the later contract, which does not appear to contain a provision for severance pay. I do not know, however, whether the writing contains all terms of the parties' agreement or whether the contract may have been amended. I accordingly cannot conclusively determine that the parties did not agree, before the superintendent irrevocably resigned, that he would receive a "severance package" upon his departure.

Your question also refers to a "settlement agreement" and thereby to another way in which the transfer might have been supported by adequate consideration. The phrase implies that a bona fide dispute existed between the superintendent and the district and that the district, in exchange for the transfer, received consideration in the form of a release from the prospective burden of litigation against the superintendent and potential liability to him. The facts you supplied are not inconsistent with the possibility that the superintendent's resignation was conditioned on the later negotiation of consideration in exchange for the abandonment of a claim.

Your use of "severance package" and "settlement agreement" suggests consideration, so it seems likely that there was no violation of the statute in this instance. It is possible, however, that the transfer was not supported by adequate consideration. If there was no agreement for a "severance package," and no bona fide dispute to settle, then the transfer to the former superintendent, after his resignation, may have amounted to a transfer without consideration, which is prohibited by the statute.

Again, because I may not be in possession of all the relevant facts, I can offer no opinion on whether this transfer contravened the statute.

Question 2 – In the event the answer to question number one is in the negative, have the School Board members subjected themselves to criminal and/or civil liability for violating A.C.A. of 1987, § 6-21-110 (b), (c)?

I assume for purposes of answering this question that a statutory violation occurred, but my assumption for this limited purpose should not be taken to imply that a violation actually occurred.

In my opinion, school directors cannot be held criminally liable for any violation of the statute at issue and will not be civilly liable absent extraordinary facts.

The Arkansas Criminal Code governs criminal prosecutions and contemplates prosecutions only for "offenses." An offense is conduct for which imprisonment or a fine is authorized by statute. The Code authorizes imprisonment and fines with respect to offenses that are designated as felonies, misdemeanors, or violations. Conduct that is not so designated is an offense only if the statute describing the conduct provides for imprisonment or a fine.

The conduct proscribed by the statute at issue is not designated a felony, misdemeanor, or violation, and does not provide for imprisonment or a fine. Additionally, the statute expressly binds school boards and other public educational entities, not individual human beings like school directors. I conclude that the statute does not define an "offense" and that a school director cannot be prosecuted for violating it.

With respect to civil liability, school directors and other specified public officials are immune by statute, except to the extent of liability insurance coverage, from civil liability for acts of negligence but not for intentional torts. While the directors surely intended to authorize the transfer, I doubt that such intent is of a kind that would prompt a court to hold the statute's immunity to be unavailable, and I do not necessarily perceive here a tort, much less an intentional tort. A predecessor in this office discussed the statute in a similar context:

It has been stated that the intent of [the statute] was to grant immunity to municipal agents and employees for acts of negligence committed in their official capacities. See Autry v. Lawrence, 286 Ark. 501, 696 S.W.2d 315 (1986). It is unclear the extent to which this statutory immunity would apply to a potential "illegal exaction" suit, which is the most likely form of action an opponent would choose to challenge an unlawful or unconstitutional tax. Such actions are usually brought against the municipal entity itself, and not against the individual council members. In any event, it has been held that council members in their individual capacities are entitled to absolute immunity from damages when functioning in their legislative capacities, as is the case here. See Taylor v. Cockran, 644 F.Supp. 753 (E.D. Ark. 1986). In short, I can foresee no potential personal liability of directors, even in the unlikely event that the tax levy was held unconstitutional.

My predecessor's reasoning and conclusion seem broadly applicable to the situation you describe. I conclude that no director would be personally civilly liable in connection with the situation you describe, at least absent truly extraordinary facts of which I am unaware.

Assistant Attorney General J. M. Barker prepared this opinion, which I approve.

Sincerely,

DUSTIN McDANIEL
Attorney General

DM/JMB:cyh