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New Hanover County school board reaches $5.75 million settlement in Kelly case, pledges ‘programmatic changes’

The settlement ends four years of litigation in a case filed by men who testified they were sexually abused and exploited by former New Hanover County Schools teacher Michael Earl Kelly. In addition to the $5.75 million, paid exclusively by Liberty Mutual and its subsidiaries, the school has agreed to expand training on recognizing and reporting abuse and publishing a report on its efforts to improve Title IX compliance and sexual abuse prevention. The school board expressed "sorrow" over the damage done by Kelly, but its statement did not include an apology or an admission of wrongdoing.

On Friday afternoon, plaintiffs' attorneys and the New Hanover County Schools district issued a joint release, announcing that a settlement had been reached after four years of litigation. Once a formal written agreement is finalized, the lawsuit will be dismissed.

The litigation stems from allegations that the district was negligent, failing to prevent the abuse of students by Kelly for over a decade while he taught first at Laney High School and then at Isaac Bear Early College High School. Kelly was arrested in February of 2018 and pled guilty to 59 felony sex crimes against children in June of 2019. The following month, a civil suit which would ultimately represent 14 young men, was filed by the Rhine Law Firm, P.C. and The Lea/Schultz Law Firm, P.C.

The $5.75 million settlement announced today will allow survivors of Kelly’s abuse to “Get the treatment and closure they so desperately need,” Joel Rhine of the Rhine Law Firm said.

Related: "Minute by minute." Year after year (A deep dive on the lives of Kelly’s victims, four years into the civil suit)

The settlement also includes changes to NHCS policies that victims had asked for since the initial filing, including “expanded training for students, staff, and administrators on sexual abuse and recognizing and reporting such abuse, and a public report of its efforts to improve the school’s policies and practices regarding Title IX compliance and sexual abuse prevention,” according to today’s announcement.

In addition to providing “closure,” attorney Mary Charles Amerson with the Lea/Schultz Law Firm said of the plaintiffs, “the biggest gain for them with this settlement is the programmatic changes in New Hanover County schools. From the very beginning, every single one of them has been concerned about each other, and about this not happening to any more children in this district. And even when the settlement number was shared with each of them, that was their follow-up question. And that is an opportunity for them to know that they've made a difference here, for everyone in the community.”

Board’s statement

In a statement, Board Chair Pete Wildebeor said that the district would not pay out of pocket for the settlement and it would not have an impact on the budget. He also commented on the promised policy changes.

“The Board has been active over the last three years to improve policies, expand our Title IX department, provide student and staff training, and build out our reporting tools and procedures. These additional commitments reflect our recognition that there is more work to do,” Wildeboer said.

The board issued a statement in today's announcement:

“In approving this settlement, Board of Education members expressed their sincere hope that the resolution of this case will support the Plaintiffs’ path toward healing, and have committed to continued efforts to make the New Hanover County Schools a model for proactive prevention efforts, strong policies and procedures for student safety, and a culture of vigilance,” the statement read.

The Board also issued a separate statement, which more directly addressed the impact of Kelly's abuse.

"In addition to the statements in the joint news release, the members of the New Hanover County Board of Education want to publicly acknowledge the suffering that the John Doe plaintiffs have endured as a result of Michael Kelly’s abuse, and to express both our sorrow for that pain and our sincere hope that the resolution provided by the settlement agreement will support these young men in their healing process. The Board also reaffirms its commitment to continue improving its policies and practices in an effort to ensure that nothing like this ever happens again," the board wrote in a statement provided by an NHCS spokesperson.

The settlement is not an admission of liability or wrongdoing by the board, and the board’s statements fall short of the type of apology that advocates have asked for in the five and a half years since Kelly’s arrest. This may be, in part, because the board still faces potential civil liability — and there is still an ongoing criminal investigation.

Unresolved issues

The settlement resolves claims against the board, as well as former top administrators, including former Superintendent Dr. Tim Markley and former Deputy Superintendent Dr. Rick Holliday.

The agreement does not resolve civil litigation against Kelly, which Plaintiffs’ attorney Martin Ramey, of the Rhine Law Firm, said will continue.

The settlement doesn’t foreclose the possibility that additional victims of Kelly not represented by the current civil case could come forward and file their own suit. Currently, the Safe Child Act — a unanimously bipartisan law passed in 2019 — which increased the age limit for filing suits is being challenged; it is set to be reviewed by a three-judge panel that decides constitutional issues but could easily make its way to the state’s Supreme Court. Dozens of potential civil cases against schools around the state could hinge on that decision.

The settlement also does not impact the civil litigation involving the victims of former NHCS teacher Peter Michael Frank, who was sentenced to at least a half-century in prison last June. That case involves similar neglect allegations against the district, based in part on evidence from a search warrant involved in Frank’s arrest that indicated NHCS repeatedly counseled him on “inappropriate relationships with students over his tenure” as a teacher.

Lastly, the conclusion of this civil case does not end the criminal investigation into NHCS administrators on potential charges of obstruction of justice and failure to report abuse. The investigation was launched by the state at the request of District Attorney Ben David and Sheriff Ed McMahon shortly after Kelly’s conviction. Three years later, the State Bureau of Investigation turned over its investigative findings to the office of Attorney General Josh Stein, where they are still under review.

Why now?

The case, John Does v. New Hanover County Board of Education, et. al. dragged on for years, primarily due to the school district’s primary insurers, Liberty Mutual and its related companies. While denying wrongdoing, and also attempting to have the case thrown out,the school district had also sued Liberty over its stance that few, if any, of the district’s relevant insurance policies could be tapped in the event of a judgment or settlement.

While today's joint release does not name the district's insurers, the case history shows Liberty Mutual and its subsidiaries are those who provided policies for sexual abuse and other relevant claims. And while they are paying the entirety of the $5.75 million settlement, it’s not clear what changes the company’s mind after years of stalling.

The company was recently involved in a high-profile attempt to protest the $2.5 billion Boy Scouts of America settlement; Liberty and other insurers claimed that “bogus” claims had inflated that amount unfairly.

Ramey said the resource drain on all parties may have played a role.

“This case was heavily litigated, spanning almost four years, six different complaints, three different actions — we had the underlying action within the 14 plaintiffs, the insurance action, and then an appellate action, an appeal. That's a lot of litigation. I think both parties fought very hard for their clients. And, you know, after that amount of time, and the amount of effort that went into this case, I think both sides felt that it was more appropriate to seek a compromise than continue wasting those resources,” he said.

Below: Joint press release from the plaintiffs' attorneys and the New Hanover County Schools district.

Ben Schachtman is a journalist and editor with a focus on local government accountability. He began reporting for Port City Daily in the Wilmington area in 2016 and took over as managing editor there in 2018. He’s a graduate of Rutgers College and later received his MA from NYU and his PhD from SUNY-Stony Brook, both in English Literature. He loves spending time with his wife and playing rock'n'roll very loudly. You can reach him at BSchachtman@whqr.org and find him on Twitter @Ben_Schachtman.