Can the Arkansas Department of Information Systems force school districts to break vendor contracts, and will the AG opine on whether those contracts are valid?

Plain-English summary

State Senator Eddie Cheatham asked the AG about contracts between Nexus Systems, Inc. and six south Arkansas school districts (Star City, Dermott, Dumas, Hamburg, Junction City, and McGehee). He asked whether the contracts were valid and whether the Arkansas Department of Information Systems (DIS) could force the districts to break them.

Attorney General Leslie Rutledge declined to answer the first two questions because doing so would require a factual inquiry into the contracts' precise terms. She said contract construction is generally beyond an Attorney General opinion and suggested that the districts consult local counsel. On the third question, she said the premise that DIS was forcing the districts to break an internet-service contract was mistaken. She explained that the concerns involved eligibility for E-Rate funding, a federal program administered under the FCC's direction, with an application process requiring selection of the most cost-effective contractor's bid and approval by USAC.

Currency note

This opinion was issued in 2016. 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.

What the AG addressed

Questions 1 and 2 (contract validity). The AG declined to answer because doing so would require a factual inquiry into the precise contract terms. She said her advisory function is limited to counseling public servants and entities on the construction and application of Arkansas constitutional and statutory law, and that contract construction is generally beyond an Attorney General opinion.

She referred the districts to their own local counsel, who could assess the relevant facts and law.

Question 3 (DIS power over the contracts). The AG said E-Rate is a federal subsidy program administered under the direction of the FCC. USAC is appointed by the FCC to administer E-Rate and approves applications. Participation requires a highly regulated application process, including selection of the most cost-effective contractor's bid.

The opinion does not say that E-Rate rules required the districts to terminate or modify the Nexus Systems contracts. It says only that DIS did not administer the federal program that may have been impacting the contracts and did not dictate related contracts entered by school districts.

Why the AG's scope matters

This opinion is a useful reminder of the boundaries the Arkansas AG draws around her opinion-writing authority. The office cannot:

• Conduct the factual inquiry needed to assess the precise terms of the contracts.
• Generally construe a contract in an Attorney General opinion.
• Answer the third question as worded when its underlying premise was uncertain.

Local counsel for the affected public body is the right venue for those questions. The AG opinion is reserved for questions a public official can answer simply by reading and applying Arkansas constitutional and statutory text.

Common questions

What is E-Rate?
A federal subsidy program that provides discounts to qualifying schools and libraries on eligible telecommunications or internet services by paying a percentage of the service fee. The program is administered under the direction of the FCC. Its application process requires selection of the most cost-effective contractor's bid and approval by USAC.

Why did the AG decline to decide whether the contracts were valid?
She said deciding validity would require a factual inquiry into the precise contract terms. She suggested that the school districts consult local counsel.

Why did the senator ask if DIS could force districts to break their contracts?
The opinion does not provide the full backstory. It says the premise that DIS was forcing the districts to break a contract with an internet service provider was mistaken, and that DIS did not administer E-Rate or dictate related contracts entered by school districts.

Source

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

Original opinion text

Opinion No. 2015-146
February 17, 2016
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
The Honorable Eddie Cheatham
State Senator
2814 Ashley 239
Crossett, AR 71635-8824
Dear Senator Cheatham:
This is in response to your request for my opinion concerning certain contracts entered into by several Arkansas school districts. As background for your questions, you state:

Several school districts in south Arkansas entered into contracts with Nexus Systems, Inc. It is my understanding all the contracts contain the same wording and only the financial agreements are different for each school district.

You have provided a copy of the contract between Star City Public School District and Nexus Systems, Inc., and you have posed the following questions:

1) Is the contract between Nexus Systems, Inc. and Star City Public School District a valid contract?
2) As mentioned above, since all the contracts have the same wording, are the contracts between Nexus Systems, Inc. and the Dermott, Dumas, Hamburg, Junction City and McGehee School Districts valid?
3) Can the Arkansas Department of Information Systems force all school districts to break their existing contract with Nexus?

RESPONSE

I am not authorized to answer your first two questions, since doing so will entail a factual inquiry into the precise terms of the contracts at issue. Nor do I have the resources to conduct such an inquiry. By statute, my advisory function is limited to counseling various public servants and entities on the construction and application of Arkansas constitutional and statutory law. The construction of a contract is thus generally beyond the scope of an Attorney General opinion.

I must therefore suggest that the school districts involved consult local counsel to whom they usually look for advice in order to address the terms of the specific contracts referenced in your first two questions. Local counsel is particularly well-situated to assess the relevant facts and law and render judgments on the validity of contracts entered by school districts.

With respect to your third question, I am unable to respond to this question as worded because of my uncertainty as to its underlying premise. The question seems to suggest the Department of Information Systems (DIS) is forcing the districts to break a contract with an internet service provider. If that is the premise of the question, I must note it is mistaken.

According to my understanding, the concerns surrounding the school district contract(s) in question involve the districts' eligibility for funding under a subsidy program known as the "E-Rate" program. E-Rate is a federal program administered under the direction of the Federal Communications Commission (FCC). The program provides discounts to qualifying schools and libraries on eligible telecommunication or internet services by paying a percentage of the fee for such services. Participation in E-Rate involves a highly regulated application process that requires selection of the most cost-effective contractor's bid and approval by the Universal Service Administrative Company (USAC), the entity appointed by the FCC to administer E-Rate.

In response to your third question, therefore, DIS does not administer the federal program that may be impacting the contracts that are referenced in your questions. Nor does DIS dictate related contracts entered by school districts.

Sincerely,
LESLIE RUTLEDGE
Attorney General