D.R. v. Bd Ed E Brunswick ( 1997 )


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  •                                                                                                                            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    Precedential or Non-Precedential: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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    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    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).
    15