Court Opinion

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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Precedential or Non-Precedential: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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Recommended Citation
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http://digitalcommons.law.villanova.edu/thirdcircuit_1997/70

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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