WENDY BEETLESTONE, District Judge.
This dispute presents the increasingly prevalent and pressing question of who is responsible for a charter school's past failure to provide a Free Appropriate Public Education ("FAPE") to children with disabilities under the Individuals with Disabilities Education Act ("IDEA") when the charter school has closed its doors. Plaintiffs are three children ("Students") with disabilities under the IDEA and their parents ("Parents") (collectively with Students, "Plaintiffs"). The Students were formerly enrolled at the Walter D. Palmer Leadership Learning Partners Charter School ("Palmer"), a Philadelphia charter school that is now closed and going through liquidation proceedings. After Palmer's closure, Plaintiffs filed IDEA due process complaints with the Pennsylvania Office of Dispute Resolution ("ODR") against Palmer and the Pennsylvania Department of Education ("PDE"), alleging they had been denied a FAPE. The Special Education Hearing Officer dismissed their complaints and Plaintiffs brought this action challenging his decisions.
The case is now before the Court on: 1) Plaintiffs' Partial Motion for Summary Judgment against Defendant PDE; 2) Defendant PDE's Motion for Summary Judgment on all claims against it; and 3) Plaintiffs' Motion for Default Judgment on all their claims against Defendant Palmer.
As a preliminary matter, it is helpful to briefly summarize the legal framework against which this case has unfolded. The IDEA requires states to "make available a free and appropriate public education to all children with disabilities residing within their borders." D.S. v. Bayonne Bd. of Educ., 602 F.3d 553, 556 (3d Cir. 2010). Indeed, certain federal funding to State Educational Agencies
The IDEA also provides procedural safeguards to parents and students should disputes arise. States must adopt procedures affording "[a]n opportunity for any party to present a complaint...with respect to any matter relating to the identification, evaluation, or educational placement of the child, or the provision of a free appropriate public education to such child." 20 U.S.C. §§ 1415(a), (b)(6)(A). "Whenever [such] a complaint has been received [the parents] shall have an opportunity for an impartial due process hearing...." 20 U.S.C. § 1415(f)(1)(A). In Pennsylvania, the Commonwealth's Office of Dispute Resolution ("ODR") is responsible for conducting IDEA due process hearings. See 22 Pa. Code § 14.162. "Any party aggrieved by the [Hearing Officer's] findings and decision...shall have the right to bring a civil action with respect to the [due process] complaint...in a State court of competent jurisdiction or in a district court of the United States...." 20 U.S.C. § 1415(i)(2)(A).
Nevertheless, as a matter of policy, the IDEA contemplates and even encourages parents and educational agencies to resolve disputes without resort to contested hearings. The IDEA provides for mandatory early resolution sessions, which must be convened within 15 days of the filing of a due process complaint. 20 U.S.C. § 1415(f)(1)(B). Parents also have the option of using the IDEA's statutory mediation process. 20 U.S.C. § 1415(e). Successful resolution and mediation sessions culminate in written settlement agreements, signed by the parents and the educational agency, that are "enforceable in any State court of competent jurisdiction, or in a district court of the United States." 20 U.S.C. § 1415(f)(1)(B)(iii); 20 U.S.C. § 1415(e)(2)(F). While the IDEA does not specifically provide for the execution or enforcement of settlement agreements reached outside of the formal resolution or mediation process, parents and educational agencies are free to enter into such agreements. Unlike settlement agreements reached through resolution or mediation, the IDEA does not provide the district courts with subject matter jurisdiction to hear suits to directly enforce these "informal settlement agreements."
This case arises under factual and procedural circumstances that are somewhat unusual. While Palmer was still operating, each of the Plaintiffs entered into individual informal settlement agreements (collectively, "Settlement Agreements") with Palmer, none of which were reached through the IDEA resolution or mediation process. In March of 2015, in the weeks after Palmer shut down, Plaintiffs retained new counsel and filed IDEA due process
On April 27, 2015, the Hearing Officer dismissed the due process complaints, cancelled each of the scheduled hearings, and issued a separate written decision for each of the six ODR files. The decisions dismissing the three due process complaints against Palmer contain identical legal analysis in their "Discussion" sections. Similarly, the decisions dismissing the three due process complaints against PDE contain identical legal analysis in their "Discussion" sections. In none of the decisions did the Hearing Officer make a determination as to whether any of the Students were denied a FAPE. In the Palmer cases, he found that because of the existence of the Settlement Agreements, Plaintiffs' claims were "not a controversy...within the jurisdiction of special education due process, [but rather] a contractual dispute between the parent[s] and Charter School which must go through the receivership/settlement-of-claims process." J.A. 16; 47; 77. Observing that the Settlement Agreements are "binding on both parties," he concluded that "[t]he fact that [Palmer] is no longer functioning does not give the parent[s], to use playground terminology, a FAPE `do-over.'" J.A. 15; 46; 76.
In the companion decisions regarding Plaintiffs' complaints against PDE, the Hearing Officer made two distinct decisions. First, he denied PDE's motion to dismiss for lack of jurisdiction. In reaching this conclusion, he considered provisions of the IDEA and its implementing regulations and concluded that it was "clear" that the IDEA confers ODR Special Education Hearing Officers with jurisdiction over State Educational Agencies, including PDE. J.A. 21; 52; 82. Second, he determined sua sponte that Plaintiffs' claims against PDE were not ripe for adjudication because they had not sought to enforce the Settlement Agreements with Palmer through the liquidation or settlement-of-claims process first. While he allowed for the possibility that PDE may eventually have some liability to the Students as a result of Palmer's failure to provide them with a FAPE, the Hearing Officer concluded that such a determination could not be made until the claims against Palmer arising out of the Settlement Agreements were fully adjudicated through the liquidation or settlement-of-claims process. Accordingly, on the grounds that they were not ripe, he dismissed the claims against PDE without prejudice to re-file if and when Plaintiffs could show that they were unable to obtain complete relief in the receivership proceedings. The Hearing Officer's decisions were made solely on the pleadings. After dismissing the complaints, he cancelled the scheduled due process hearings.
On July 10, 2015, Plaintiffs initiated the instant matter appealing the Hearing Officer's decisions pursuant to 20 U.S.C.
For its part, PDE moves for summary judgment on all claims against it on the grounds that: PDE did not violate or fail to comply with its obligations under the IDEA; PDE is not an LEA, nor does it assume the obligations of an LEA; ODR has no jurisdiction over PDE; Plaintiffs' claims are moot; Plaintiffs failed to exhaust their administrative remedies; and that Plaintiffs are not entitled to attorneys' fees because they are not the prevailing party. To the extent Plaintiffs would have this Court reach the merits of their IDEA and state law claims, PDE argues this Court lacks subject matter jurisdiction because the Hearing Officer's decisions were not made on the merits, and so these claims are unexhausted.
Palmer began operating as a charter school in Philadelphia on July 1, 2000. After a long-running, heavily litigated dispute involving Palmer's enrollment of students beyond its enrollment cap and the amount of funding it was legally entitled to from the Philadelphia School District and PDE — the details of which are only tangentially relevant to this litigation — Palmer began to encounter financial difficulties in the fall of 2011. The situation worsened considerably over the next several years, such that Palmer's Board of Trustees unanimously decided to cease operations effective December 31, 2014. By letter dated December 26, 2014, Palmer informed its students and their parents of the decision to close the school. In September of 2015, Palmer filed a petition for court supervision of voluntary dissolution in the Orphans' Court Division of the Court of Common Pleas of Philadelphia County, Pennsylvania.
To the extent relevant to the disposition of the motions before the Court, the individual histories of the Students and their Parents' complaints against Palmer are summarized here.
H.F., who is currently 11 years old and is in the sixth grade, began attending preschool at Palmer in September of 2008. Plaintiffs and PDE stipulate that "[a]t times, Palmer Charter School failed to provide H.F. with a free and appropriate public education." Stipulated Facts ("S.F.") at 5, ¶ 36.
In September of 2013, H.E. (H.F.'s mother) told Palmer she planned to file a
Notwithstanding the terms of the H.F. Settlement Agreement, Palmer never provided H.F. with any compensatory education.
After the Hearing Officer issued his decisions, PDE's Bureau of Special Education initiated its own investigation into the Students' education and determined that Palmer had denied them a FAPE. Accordingly, PDE concluded that from the period starting March 17, 2013 and ending October 14, 2014, H.F. was owed 2,025 hours of compensatory education but did not attached a dollar value to those hours.
D.E., who is currently 11 years old and in the sixth grade, began attending Palmer as a second grader in September of 2012. When he enrolled at Palmer, he had already been "identified as a student with Emotional Disturbance and a Specific Learning Disability." J.A. 132, ¶ 6. Plaintiffs and PDE stipulate that "[a]t times, Palmer Charter School failed to provide D.E. with FAPE." S.F. at 9, ¶ 82.
On approximately June 13, 2014, C.E. (D.E.'s mother) told Palmer she planned to file a due process complaint for failure to provide her son with a FAPE. On October
Notwithstanding the terms of the D.E. Settlement Agreement, Palmer never provided D.E. with any compensatory education, and never made the required payments into the special needs trust fund. Neither did Palmer pay D.E.'s settlement attorney the fees called for by the D.E. Settlement Agreement. PDE subsequently determined that from the period starting March 17, 2013 and ending June 19, 2014, D.E. was owed 1,832.1 hours of compensatory education but did not attached a dollar value to those hours.
T.T., who is currently 8 years old and in the third grade, began attending Palmer as a kindergartener in September of 2013. When he enrolled at Palmer, T.T. had already been identified as a student with disabilities under the IDEA. J.A. 128, ¶ 6, S.F. at 13, ¶ 127. Plaintiffs and PDE stipulate that "[a]t times, Palmer Charter School failed to provide T.T. with FAPE." S.F. at 14, ¶ 130.
After M.T. (T.T.'s mother) told the school in November of 2013 of her intention to file a due process complaint for failure to provide her son with a FAPE, the parties entered into a Settlement Agreement ("T.T. Settlement Agreement") on June 9, 2014, resolving all educational claims through the date of the agreement. The T.T. Settlement Agreement was reached informally between the parties, and not through an IDEA resolution or mediation session. The T.T. Settlement Agreement set a timeline to transfer T.T. into "an Approved Private School placement," which all agreed was necessary. J.A. 62, ¶ 1. Additionally, T.T. was entitled to "a total of $13,000 worth of compensatory education." J.A. 62, ¶ 4. Unlike the H.F. and D.E. Settlement Agreement, the T.T. Settlement Agreement is silent as to the number of hours of compensatory education owed. Palmer agreed to reevaluate T.T. "within three months of the date of the execution of th[e] Settlement Agreement," J.A. 62, ¶ 3, to provide $8,500 in attorneys' fees to T.T.'s settlement attorney and also to reimburse M.T. for travel expenses in the amount of $500. In exchange, M.T. and T.T. released all claims against Palmer and its successors that could have been asserted in an IDEA due process hearing prior to the T.T. Settlement Agreement. M.T. has since removed T.T. from the Delta School and placed him in another private school.
Two initial questions are presented in deciding the motions. These are first, whether the Hearing Officer had jurisdiction to adjudicate the FAPE denial claims, and second, whether the claims against PDE were ripe for adjudication. Because, as set forth below, both questions are answered affirmatively, the case will be remanded to the Special Education Hearing Officer for a determination in the first instance: 1) whether Palmer denied Students a FAPE; and 2) if so, what remedy they are owed by PDE. As such, the Court declines to reach Plaintiffs' IDEA and state law claims for relief, and denies PDE's Motion for Summary Judgment.
In the decisions below, the Special Education Hearing Officer did not conduct an IDEA due process hearing, but instead rested his decisions wholly on the pleadings. More specifically, he did not make any finding as to whether Students were denied a FAPE. Had the Hearing Officer done so, those factual determinations would have been entitled to due weight and deference. Bayonne Bd. of Educ., 602 F.3d at 564 (quoting P.P. ex rel. Michael P. v. W. Chester Area Sch. Dist., 585 F.3d 727, 734 (3d Cir. 2009)) ("[A] district court must give `due weight' and deference to the findings in the administrative proceedings."). Instead, the Court reviews the Hearing Officer's decisions de novo, as they are conclusions of law that would not be aided by the Special Education Hearing Officer's administrative expertise. See Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 266 (3d Cir. 2014), cert. denied sub nom., Allston v. Lower Merion Sch. Dist., ___ U.S. ___, 135 S.Ct. 1738, 191 L.Ed.2d 702 (2015); P.P. ex rel. Michael P., 585 F.3d at 735 (hearing officer's conclusions of law "are subject to plenary review."). The burden of persuasion is on the party challenging the hearing officer's decision. Ridley Sch. Dist. v. M.R., 680 F.3d 260, 270 (3d Cir. 2012) (citations omitted).
Turning to the question of whether it was proper for the Hearing Officer to dismiss the complaints against Palmer for lack of jurisdiction and decline to adjudicate the FAPE denial claims, the Court's
Nevertheless, in framing the issues before him, the Hearing Officer conflated the FAPE denial claims that had been asserted in the due process complaints, and grievances about the Settlement Agreements, which had not:
J.A. 14, ¶ 5; 19, ¶ 6; 45, ¶ 5; 50, ¶ 6; 75, ¶ 5; 80, ¶ 6. Paraphrased in this way, Plaintiffs' complaints would seem to be a request that the Special Education Hearing Officer enforce the terms of the Settlement Agreements — but as has been seen, enforcement of the Settlement Agreements is not what Plaintiffs sought. Instead, they asserted that they had been denied a FAPE, and sought adjudication of that assertion.
This mistaken reading of Plaintiffs' complaints led the Hearing Officer down the wrong path. Rather than rendering a decision "on substantive grounds based on a determination of whether the child received a free appropriate public education," 20 U.S.C. § 1415(f)(3)(E)(i), he found that "Parent[s'] claim[s]...against the Charter School [are] not [ ] controvers[ies] within the jurisdiction of special education due process[, but rather]...contractual dispute[s]...which must go through the receivership/settlement-of-claims process." J.A. 15-16; 46-47; 76-77. While this is a correct statement of the law — Hearing Officers do lack jurisdiction to enforce settlement agreements —
Next, the Court addresses whether the Hearing Officer erred as a matter of law in making the sua sponte determination that Plaintiffs' claims against PDE were not ripe for adjudication because Plaintiffs had not yet been denied payment in Palmer's liquidation proceedings. Given the determination that the Hearing Officer should have adjudicated the due process claims and acted beyond his jurisdiction in requiring the Plaintiffs to seek relief first in Palmer's liquidation proceedings, the question devolves to whether PDE can be held liable for Palmer's FAPE violations. In dismissing Plaintiffs' claims against PDE without prejudice, the Hearing Officer explicitly reserved decision on the question of whether PDE might be liable for Palmer's FAPE violations. His decision cites an in-depth and well-reasoned recent opinion of this Court, Charlene R. v. Solomon Charter School, 63 F.Supp.3d 510 (E.D. Pa. 2014), which held that if a parent-plaintiff seeking to enforce an IDEA settlement agreement reached during a resolution meeting with a charter school could establish that the charter was now insolvent and that there was no other way to satisfy their IDEA claims, the parent could enforce the terms of the settlement agreement against PDE. Id. at 518-19.
A review of the summary judgment record reveals that there is no dispute that Palmer is insolvent, and Plaintiffs have virtually no chance of receiving compensatory education through Palmer's receivership process. Plaintiffs and PDE have stipulated that Palmer "permanently closed" on December 31, 2014. S.F. at 3, ¶ 17. Palmer's petition for court supervision of voluntary dissolution was filed in the Orphans' Court Division of the Court of Common Pleas of Philadelphia County, Pennsylvania on September 1, 2015. At the time of filing, Palmer owed $9,894,469.64 in principal and accrued interest to its bondholders, its only secured creditors. Palmer had insufficient funds to cover the secured claims of its bondholders, "even after disposing of all personal property [of Charter School] and monetizing all other assets and streams of income due [to Charter School]...the Bondholders...w[ould] be left with a substantial loss." J.A. 105, ¶ 42; S.F. at 3, ¶ 24. "[T]here w[ould] little, if any, money available to address the claims of [Palmer's] remaining [unsecured] creditors." J.A. 106, ¶ 45; see also S.F. at 4, ¶ 25. Palmer's unsecured creditors include the three students and their families who are Plaintiffs in this litigation, as well as PDE, who seeks indemnification for those claims. They also include entities owed substantially more, namely, the School District of Philadelphia, which is seeking $15,936,994.26, former employees seeking $500,000 in unpaid wages and overtime, as well as various vendors and suppliers, some of whom have secured judgments in amounts not disclosed against Palmer. Plaintiffs and PDE further indicate that they "are unaware of insurance coverage available to cover any liabilities" to Plaintiffs' claims. S.F. at 4, ¶ 26.
Furthermore, Plaintiffs aver, and PDE points to nothing contradictory in the record, that Palmer never provided the Students
In light of these undisputed facts, resolving the legal question of the ripeness of Plaintiffs' claims against PDE suggests a closer analysis of the Charlene R. decision is warranted. Charlene R. was before the Court on the defendant's (PDE's) motion to dismiss. There, the parent had entered into a settlement agreement to resolve IDEA claims against a charter school that ceased operations a mere two weeks after the agreements were executed. 63 F.Supp.3d at 512. Because the settlement agreement — unlike those at issue here — was reached during the formal IDEA resolution process provided for by 20 U.S.C. § 1415(f)(1)(B), parents then sought to enforce that agreement against the charter school by commencing a civil action in the district court pursuant to 20 U.S.C. § 1415(f)(1)(B)(iii)(II). PDE was subsequently joined as a defendant, and Plaintiffs asserted that the contractual obligations of the now-defunct charter school under the settlement agreement flowed to PDE. 63 F.Supp.3d at 512.
The Charlene R. court examined the extent to which SEA's retain liability under the IDEA to provide a FAPE where LEA's fall short. Finding no binding precedent directly addressing the question, it considered Kruelle v. New Castle County School District, 642 F.2d 687 (3d Cir. 1981), in which the Third Circuit held that in passing the IDEA, Congress "`considered the establishment of a single agency on which to focus responsibility for assuring the right to education of all handicapped children to be of paramount importance.'" 63 F.Supp.3d at 514 (quoting Kruelle, 642 F.2d at 696). The Kruelle Court found persuasive the following language from the Senate Report on the IDEA:
Kruelle, 642 F.2d at 696 (quoting S. Rep. No.168, 94th Cong., 1st Sess. 24 reprinted in (1975) U.S. Code Cong. & Ad. News 1425, 1448). This Court agrees with Charlene
Although the Supreme Court has not directly addressed the issue of "[SEA] liability stemming from the failure of a LEA to provide a FAPE," id. at 515, several circuits have reached the same conclusion as Kruelle regarding "SEA liability for private school tuition reimbursement incurred by parents who remove children not receiving a FAPE from a LEA, and subsequently place the child in a private school." Id. (citing Gadsby v. Grasmick, 109 F.3d 940, 943, 952 (4th Cir. 1997)) ("This language suggests that, ultimately, it is the SEA's responsibility to ensure that each child within its jurisdiction is provided a free appropriate public education. Therefore, it seems clear that an SEA may be held responsible if it fails to comply with its duty to assure that IDEA's substantive requirements are implemented."); St. Tammany Parish Sch. Bd. v. State of Louisiana, 142 F.3d 776, 784 (5th Cir. 1998) (quoting Gadsby);Pachl v. Seagren, 453 F.3d 1064, 1070 (8th Cir. 2006) (citing Gadsby). Reasoning from these cases, as well as the structure of 20 U.S.C. § 1412(a)(11)(A)
Charlene R., 63 F.Supp.3d at 516. Thus, where the LEA has ceased to exist, a
There is no genuine dispute as to the fact that Palmer is insolvent, has ceased to exist, is in court supervised dissolution, and has insufficient assets to provide a FAPE or compensatory education to Plaintiffs. Therefore, the only entity that Parents can look to for vindication of their children's rights to a FAPE is PDE, and so the case against PDE is ripe for adjudication now.
Beyond asking the Court to determine whether the Hearing Officer erred, Plaintiffs seek the entry of summary judgment with regard to what they assert is PDE's undisputed liability to provide each of the students with a specified number of compensatory education hours reflecting Palmer's failure to provide a FAPE to the students prior to the execution of the Settlement Agreements and following the execution of the Settlement Agreements. Citing Palmer's failure to respond to the instant litigation or to the administrative proceedings below, Plaintiffs move separately for the entry of default judgment against Palmer. As a remedy, Plaintiffs seek the equitable rescission of the Settlement Agreements. For its part, PDE objects that because these claims were not fully litigated in front of the Hearing Officer, Plaintiffs have not exhausted their administrative remedies, and so this Court lacks subject matter jurisdiction over the merits of their IDEA claims and state law claims for equitable rescission.
Because the Hearing Officer dismissed the due process complaints on procedural grounds, there is no substantive decision on the merits for the Court to review. Accordingly, the Court declines to reach the merits of Plaintiffs' IDEA and state law claims.
PDE's claims for summary judgment can be dealt with briefly. PDE's arguments that summary judgment should be granted in its favor because it is not responsible for an LEA's IDEA obligations and because Plaintiff has not demonstrated that PDE violated or failed to comply with its IDEA obligations are unavailing given the Court's holding that PDE retains ultimate responsibility to ensure that a child's right to a FAPE is secured where a charter school cannot or will not fulfill that obligation. Further, while PDE's contention that Plaintiffs' claims are moot because it has expressed a willingness to provide compensatory education to Plaintiffs is a reason to hope for a settlement of this matter, it is not a reason to grant summary judgment in PDE's favor. Finally, PDE's argument that Plaintiffs failed to exhaust their administrative remedies by not enforcing their claims in Palmer's dissolution proceedings was addressed by the Court in its March 28, 2016 Order on PDE's Motion to Dismiss, ECF No. 39, which remains applicable.
An appropriate order follows.
