Opinions of the United 1997 Decisions States Court of Appeals for the Third Circuit
3-26-1997
D.R. v. Bd Ed E Brunswick Precedential or Non-Precedential:
Docket 95-5634
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No. 95-5634
D.R., by his parents and guardians M.R. and B.R.
v.
EAST BRUNSWICK BD. OF EDUC.
Appellant
On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 94-cv-04167)
Argued June 5, 1996
Before: SCIRICA AND ROTH, Circuit Judges and O'NEILL1, District Judge
(Opinion Filed: March 26, 1997)
Herbert D. Hinkle, Esq. (Argued) Law Offices of Herbert D. Hinkle 2651 Main Street Suite A Lawrenceville, NJ 08648
Attorney for Appellee
1 Honorable Thomas N. O'Neill, Jr., United States District Court Judge for the Eastern District of Pennsylvania, sitting by designation. Martin R. Pachman, Esq. (Argued) Martin R. Pachman, P.C. 60 East Main Street Freehold, NJ 07728
Attorney for Appellant
OPINION OF THE COURT
ROTH, Circuit Judge:
This action was brought before the United States
District Court for the District of New Jersey pursuant to the
Individuals with Disabilities Education Act ("the IDEA" or "the
Act"), 20 U.S.C. § 1401 et seq. It raises an important question
regarding the enforceability of settlement agreements made
between parents and school boards with the intent of enforcing
the IDEA. On appeal, the East Brunswick Board of Education ("the
Board") challenges the district court's order granting summary
judgment against it. The district court held the Board liable
for the cost of providing personal aides for D.R., a disabled
person, pursuant to the requirements of the IDEA. The Board
claims that the district court erred when it set aside a binding
settlement agreement voluntarily entered by the parties. The
district court acknowledged that enforcement of the settlement
2 agreement would have required it to reach an opposite conclusion.
We review the district court's decision granting
summary judgment de novo, "applying the same standard as the
district court." Pennsylvania Coal Ass'n v. Babbitt, 63 F.3d
231, 236 (3d Cir. 1995); see W.B. v. Matula, 67 F.3d 484, 493 (3d
Cir. 1995) (applying plenary review standard to summary judgment
order in context of IDEA dispute). In making this de novo
review, we recognize that we must give "due weight" to the
underlying state administrative proceedings. Board of Education
v. Rowley, 458 U.S. 176, 206 (1982). The Third Circuit has
interpreted the Supreme Court's instruction in Rowley to require
that a court "consider -- although not necessarily to accept --
the administrative fact findings." Carlisle Area School v. Scott
P., 62 F.3d 520, 529 (3d Cir. 1995), cert. denied, --- U.S. ---,
116 S.Ct. 1419 (1996). In addition, we must "view the underlying
facts and all reasonable inferences therefrom in the light most
favorable to the party opposing the motion." Babbitt, 63 F.3d at
236.
The district court had subject matter jurisdiction over
the appeal from a final decision by an administrative law judge
("ALJ") pursuant to 20 U.S.C. § 1415(e)(1) & (2). We have
jurisdiction to review the district court's final order granting
summary judgment pursuant to 28 U.S.C. § 1291.
We conclude that the settlement agreement was
improperly voided by the district court. On the facts of this
3 particular case, the settlement agreement was voluntarily and
willingly entered by the parties. It is therefore a binding
contract between the parties and should have been enforced as
written. Pursuant to the terms of the agreement, the parents of
the child are responsible for all additional services not
contemplated by the parties at the time of settlement. We will
therefore reverse the opinion of the district court and grant
summary judgment in favor of the Board. However, we emphasize
that our holding is limited to the facts of this case and should
not be read to extend beyond this case and this agreement.
I.
D.R. is a multiply handicapped individual classified by
the New Jersey Board of Education as in need of special
education. He was diagnosed at age two with Athetoid Ataxic
Cerebral Palsy and moderate retardation. D.R. is now twenty-one
years old, but his adaptive behavior is estimated to be at the
preschool level. The parties agree that D.R. has difficulty
performing simple daily tasks by himself. He has difficulty
walking, dressing, and toileting without assistance. In the
classroom, he often regresses into a hypnotic rocking behavior
and must be constantly monitored by an assistant in order to
engage him in classroom activity.
At age 4, D.R. began attending day school at the
Cerebral Palsy Center ("CPC") in New Jersey, where he remained
until January of 1992. While at CPC, D.R. resided with his
4 parents in East Brunswick, New Jersey. During the first semester
of the 1991-92 school year, D.R.'s parents became convinced that
he was not progressing at CPC and should be enrolled in a
residential program. In December 1991, D.R.'s parents filed a
petition with the New Jersey Department of Education requesting a
due process hearing under the IDEA. The petition alleged that
the CPC program was not appropriate for D.R. and that he would
benefit from a transfer to the Benedictine School, an out-of-
state residential school in Ridgely, Maryland.
The Board, however, disagreed that residential
placement was necessary for D.R. His parents then in early
January 1992 unilaterally placed him at the Benedictine School.
The Benedictine School informed D.R.'s parents at that time that
their son's acceptance in the program was on a "trial basis" that
would last for five weeks. They were told that the proposed
program might be modified depending on D.R.'s adaptation to his
new circumstances. The Board now complains that it was never
informed of the "trial" nature of D.R.'s acceptance at
Benedictine nor that the program in which he was placed was
subject to modification.
Before D.R.'s trial period was complete, his parents
and the Board met at a mediation conference and entered a
settlement agreement. The parties agreed that: 1)The East Brunswick Board of Education will compensate placement costs at the Benedictine School for D.R. at an annual rate of $27,500 prorated for the balance of the 1991-2 school year including summer of 1992 and beginning January 1, 1992;
5 2)For the 1992-93 school year the Board will contribute 90% of any increase over the 1991-92 rate.
3)The Board will be absolved of any other or further costs based upon this placement, related service, or transportation in connection therewith.
App. 408.
During D.R.'s first semester at Benedictine, the school
"practically" provided one-to-one assistance. Classes were small
in size, with a high ratio of assistants and teachers to
students; weekend and residential staff was able to provide the
personal help that D.R. needed with daily functions. Later in
the adaptation process, however, the school felt that it could
not continue to expend such resources on D.R. without neglecting
its other students. The school informed D.R.'s parents that D.R.
would not be allowed to re-enroll for the 1992-93 school year
unless personal aides were provided.
In April of 1992, the Board received a cost estimate
from the Benedictine School for the 1992-93 school year. The
tuition totalled $62,487 -- more than double the amount provided
by the settlement agreement. In addition to the amount that the
Board had agreed to pay in 1992-93, the estimate charged the
Board for the services of a special classroom aide and a special
residential aide, each at a cost of $16,640.
The Board refused to pay any portion of the cost of the
personal aides. It asserted that, under paragraph 3 of the
settlement agreement, the cost of the aides were "related
6 service[s]" for which the Board was not liable. D.R.'s parents
disagreed and requested a hearing before a New Jersey
Administrative Law Judge. They sought an order that D.R. was in
need of residential placement, that personal aides were
necessary, that the current placement at Benedictine was
appropriate, and that the Board was required to pay for the cost
of the placement and the necessary aides.
At the hearing, the Board moved for dismissal on
grounds that the settlement agreement was binding and that under
the agreement the Board was not liable for the cost of the aides.
The ALJ agreed. She dismissed D.R.'s petition, finding the
settlement agreement to be binding and determinative.
D.R.'s parents did not appeal this ruling but instead
requested a hearing before the New Jersey Department of
Education. In response, the Board argued that only a few weeks
earlier, the same parties debated the same issues before a
different ALJ who had dismissed the petition. The ALJ agreed
with the Board and concluded that D.R.'s second petition was
barred by the doctrine of res judicata.
D.R.'s parents appealed the ALJ's decision barring
their claim on grounds of res judicata to the U.S. District Court
for the District of New Jersey. Both parties moved for summary
judgment. On the basis of the pleadings and briefs submitted,
the court concluded that the settlement agreement was binding.
D.R. by M.R. v. East Brunswick Bd. of Educ., 838 F. Supp. 184,
7 195 (D.N.J. 1993). It found that the language of the agreement
was unambiguous and required only that the Board pay for 90% of
any increase in the cost of an array of services provided the
previous year. Because personal aides were not within the array
of services previously provided, the district court held that the
Board would not be liable for the cost of the aides under the
terms of the settlement agreement, unless D.R.'s personal
circumstances had changed since the parties entered the
agreement. Id. at 190-91 & 194.
The district court therefore remanded the case to an
ALJ to determine whether D.R.'s personal circumstances changed
following the closing of the agreement. Id. at 195-96. If the
ALJ found that D.R.'s circumstances had changed such that the
services provided by the agreement no longer satisfied the
requirements of the IDEA, the court instructed that the agreement
could not bind the parties and should be invalidated. Id. at
194. The Board would then be liable under the IDEA for the cost
of the personal aides for the 1992-93 school year.
On remand, the ALJ first concluded that during the
1992-93 school year, one-to-one assistance was effectively
provided by the School and was "educationally necessary and
consistent with the IDEA." He then found that because D.R.'s
disability had not changed, his "personal circumstances" had not
changed. As a result, the ALJ again ruled in favor of the Board,
holding that the settlement agreement was binding and that the
8 Board was not liable for the cost of the additional aides.
D.R.'s parents appealed this decision to the district
court, seeking reversal of the ALJ's order. Again, both parties
moved for summary judgment. The district court concluded that
the record supported the ALJ's finding that a one-to-one aide was
"educationally necessary and consistent with the IDEA." Mem. Op.
at 13. It held that this finding dictated the outcome of the
case. Applying the Supreme Court's interpretation of the IDEA,
the district court concluded that states receiving federal funds
under the Act must provide services that are "necessary to
permit the child 'to benefit' from the instruction." Mem. Op. at
5 (quoting Rowley, 458 U.S. at 188-89). The district court thus
concluded that New Jersey could not refuse to provide
educationally necessary services. Such necessary services are
the right of the disabled individual and cannot be waived by a
contract to provide something less.
As a result, the district court held the Board liable
for the cost of the personal aides for the 1992-93 school year,
which amount was to be established by agreement between the
parties. Following the judgment, D.R.'s parents moved for an
award of attorneys' fees and related costs as "prevailing
parties" in the litigation. A few days later, the Board filed a
notice of appeal. The Board then moved to stay the motion for
attorneys' fees filed by D.R.'s parents, pending the outcome of
this appeal. D.R.'s parents did not oppose the Board's motion,
9 and the court granted a stay on the matter of attorneys' fees and
costs.
II.
The district court set aside the settlement agreement
based on its finding that D.R.'s circumstances had changed since
the parties entered the agreement. In finding changed
circumstances, the district court rejected the conclusions of the
state administrative law judge. The court held that, because
D.R.'s circumstances had changed, the personal aides had become
"educationally necessary" for him to obtain an appropriate
education as guaranteed by the IDEA. The court found that the
settlement agreement improperly excused the Board from its duty
to provide educationally necessary services, and it therefore
concluded that the agreement did not meet the IDEA's mandatory
standards. As a result, the district court invalidated the
agreement and placed liability for the cost of the personal aides
on the Board.
We believe that the district court erred when it found
that D.R.'s circumstances changed following settlement. Instead,
we find that the only change that occurred in this case appeared
on the bill sent by the Benedictine School to the Board. There
was no change in D.R.'s individual circumstances; he continued to
need individual assistance in toileting, dressing, grooming, and
eating. The only circumstance that changed was that Benedictine
decided that its staff could not maintain the level of
10 individualized attention that D.R. was receiving at the
negotiated price. The School decided that additional help was
needed to deal with D.R.'s unchanged condition, increasing the
total cost of services provided by the School.
Once a school board and the parents of a disabled child
finalize a settlement agreement and the board agrees to pay a
certain portion of the school fees, the parents should not be
allowed to void the agreement merely because the total cost of
the program subsequently increases. A party enters a settlement
agreement, at least in part, to avoid unpredictable costs of
litigation in favor of agreeing to known costs. Government
entities have additional interests in settling disputes in order
to increase the predictability of costs for budgetary purposes.
We are concerned that a decision that would allow
parents to void settlement agreements when they become
unpalatable would work a significant deterrence contrary to the
federal policy of encouraging settlement agreements. See
McDermott, Inc. v. AmClyde, 511 U.S. 202, ---, 114 S.Ct. 1461,
1468 (1994) ("Public policy wisely encourages settlements.").
Settlement agreements are encouraged as a matter of public policy
because they promote the amicable resolution of disputes and
lighten the increasing load of litigation faced by courts. In
this case, public policy plainly favors upholding the settlement
agreement entered between D.R.'s parents and the Board.
We agree that reaching a settlement agreement during
11 mediation, rather than during litigation, does not lessen the
binding nature of the agreement on the parties. See D.R. by
M.R., 838 F. Supp. at 190. When the parties entered the
settlement agreement at issue in this case, they entered a
contract. In re Columbia Gas System, Inc., 50 F.3d 233, 238 (3d
Cir. 1995) ("In a nonbankruptcy context, we have treated a
settlement agreement as a contract."); see also Halderman v.
Pennhurst State School & Hosp., 901 F.2d 311, 318 (3d Cir.),
cert. denied, 498 U.S. 850 (1990); New York State Elec. & Gas
Corp. v. F.E.R.C., 875 F.2d 43, 45 (3d Cir. 1989). We will
therefore enforce the agreement as a binding contract voluntarily
entered by both parties.2
When D.R.'s parents appealed the ALJ's decision to
dismiss on grounds of res judicata, the district court noted
that, if D.R.'s circumstances had not changed since settlement,
the settlement agreement was binding on the parties. D.R. v.
M.R., 838 F. Supp. at 195. It also held that, if the contract
was to be enforced as binding, the terms of the agreement were
"clear and unambiguous." Id. at 190. Under the agreement and as
a matter of law, for the 1992-93 school year, the Board was
responsible for 90% of any increase in the cost of services
provided during the 1991-92 school year. The additional services
of personal aides were not provided during the 1991-92 term. Nor
2 We emphasize again, however, that in other cases where different facts are at issue, compelling public policy reasons may require a different conclusion.
12 was the cost of personal aides contemplated by the parties in
negotiating the agreement. Thus, the district court held that,
if enforced, the contract clearly required that D.R.'s parents
pay the cost of the aides' services provided during the 1992-93
school year.
We agree that this is the proper reading of the
settlement. Because we conclude that D.R.'s circumstances have
not changed and that the settlement agreement is therefore
binding on the parties, we hold that the district court reading
of the "clear and unambiguous" terms of the agreement applies.
The Board is not liable for the cost of the personal aides
provided for D.R. during the 1992-93 term. As a consequence, it
is not necessary for us to remand the case for the district
court's determination.3
Finally, it is apparent that the motion filed by D.R.'s
parents seeking attorneys' fees and costs as prevailing parties
3 Unlike the situation in Miller Tabak Hirsch v. Commissioner of Internal Revenue, 101 F.3d7 (2d Cir. 1996), cited by the dissent, there is no contention here that the settlement agreement violated federal law when it was executed. The issue before the district court was change of circumstances; if D.R.’s circumstances had not changed, the agreement would be valid. Moreover, the settlement here resolved the dispute between the parties of whether D.R. required residential or day care. The fact that the Board ceded its position that day care was adequate under IDEA by agreeing to a fixed amount of residential care does not mean that the Board was not providing funding that was sufficient to furnish day care for D.R. that would satisfy IDEA. If this type of settlement is not permitted, we will deprive educators of needed room to compromise in resolving IDEA disputes.
13 must fail. "[A] plaintiff 'prevails' when actual relief on the
merits of his claim materially alters the legal relationship
between the parties by modifying the defendant's behavior in a
way that directly benefits the plaintiff." Farrar v. Hobby, 506
U.S. 103, 112 (1992); see also Wheeler v. Towanda Area School
District, 950 F.2d 128, 131 (3d Cir. 1991); E.M. v. Millville Bd.
of Educ., 849 F. Supp. 312, 316 (D.N.J. 1994). D.R.'s parents
have not prevailed on their claim, nor have they obtained the
relief they sought. They are thus not entitled to an award of
attorneys' fees or costs under § 1415 of IDEA. 20 U.S.C. §
1415(e)(4)(B). III.
For the above reasons, we will reverse the district
court's order, and we will grant summary judgment in favor of the
appellant.
SCIRICA, Circuit Judge, Dissenting.
I respectfully dissent.
Both the administrative law judge and the district
court found that one-on-one assistance was "educationally
necessary" for D.R.'s development. Although the ALJ found D.R.'s
personal circumstances had not changed, the district court
reversed, holding the settlement could not satisfy IDEA.
Whether or not the change in Benedictine's funding
policy should constitute a "change in circumstances"
necessitating revision of the original agreement, Benedictine's
14 refusal to afford the same personal care for the same tuition
charge meant D.R. no longer could receive the requisite amount of
care contemplated under the settlement agreement.
The district court held that IDEA creates certain
rights to educational assistance that cannot be waived by the
guardians of a handicapped child and certain duties that cannot
be bargained away by school boards.4 I agree and I would affirm
the judgment of the district court.
4 A settlement agreement that violates a federal public policy or federal statute may be invalidated. Miller Tabak Hirsch & Co. v. Commissioner of Internal Revenue, l0l F.3d 7, l0 (2d Cir. l996). Because the state of New Jersey receives IDEA federal grant funds it must provide its handicapped citizens with the requisite educational assistance under the Act. See Bd. of Ed. of East Windsor Regional Sch. Dist. v. Diamond, 808 F.2d 987, 99l (3d Cir. l986); Equal Employment Opportunity Commission v. Astra USA, Inc., 94 F.3d 738, 744-45 (lst Cir. l996).