Eric Gadsby, by His Parents and Next Friends Carol Gadsby John Gadsby v. Nancy S. Grasmick, Officially, Superintendent, Maryland State Department of Education Maryland State Department of Education

Citations: 109 F.3d 940; 1997 U.S. App. LEXIS 5358Docket: 96-1292

Court: Court of Appeals for the Fourth Circuit; March 20, 1997; Federal Appellate Court

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Eric Gadsby and his parents appeal a district court ruling that dismissed their claim against the Maryland State Department of Education (MSDE) for violating the Individuals with Disabilities Education Act (IDEA). They argue that MSDE should be responsible for covering the costs of Eric's private school placement for the 1993-94 academic year. The Fourth Circuit found that the district court erred in determining that the Gadsbys lacked a valid cause of action against MSDE. Consequently, the appellate court vacated the lower court's judgment and remanded the case for further proceedings.

The opinion outlines the framework of IDEA, originally the Education of the Handicapped Act, which mandates that all children with disabilities receive a "free appropriate public education" tailored to their needs. This includes special education and related services funded by public resources, adhering to standards set by the state educational agency, and aligning with individualized education programs. The law establishes a structure that requires states to submit compliance plans to the Secretary of Education to access federal funds, which are then administered to local education agencies (LEAs) that provide direct services to children with disabilities.

A state seeking funding under the Individuals with Disabilities Education Act (IDEA) must implement policies guaranteeing all children with disabilities access to a free appropriate public education, alongside procedures to ensure compliance with IDEA by both state and local education agencies. The state is required to submit a comprehensive plan to the Secretary of Education that includes: (1) policies for appropriate fund expenditure; (2) personnel development programs; (3) inclusion of children in private schools in IDEA programs; and (4) procedures for annual evaluations of state program effectiveness. A critical aspect of the state’s responsibilities is to establish interagency agreements to clarify the financial obligations of various agencies in providing education to children with disabilities and to address disputes.

Local Education Agencies (LEAs) must apply for IDEA funds, providing assurances that funds will be used appropriately, maintaining necessary records, and committing to develop or revise individualized education programs (IEPs) for each child with a disability annually. If an LEA fails to provide a free appropriate public education, the State Educational Agency (SEA) can directly use available funds to offer services to affected children.

The SEA holds supervisory authority, ensuring compliance with IDEA, administering funds, and stepping in to provide services when LEAs fail to meet their obligations. While the SEA's role is primarily supervisory, it ultimately bears the responsibility for ensuring that all educational programs for children with disabilities across the state meet established educational standards and comply with IDEA.

Agencies outside of educational institutions in a state are not restricted from providing or financing some or all costs associated with a free appropriate public education for handicapped children. The legislative history of 20 U.S.C. 1412(6) emphasizes the need for a single responsible agency for the education of handicapped children to ensure accountability and protection of their rights under the Individuals with Disabilities Education Act (IDEA). IDEA includes procedural safeguards for parents or guardians, requiring any State Educational Agency (SEA) or Local Educational Agency (LEA) receiving IDEA assistance to maintain these safeguards, which encompass several rights for parents: access to educational records, obtaining independent evaluations, receiving written notice of changes regarding their child's education, and the ability to lodge complaints. 

Upon receiving a complaint, parents are entitled to an impartial due process hearing by either the SEA or LEA, with provisions for appeals and legal representation. Additionally, aggrieved parties can appeal SEA decisions in U.S. district court, where appropriate relief may be granted. 

In Maryland, specific statutes and administrative codes govern educational services for children with disabilities. For example, Maryland Code Section 8-409 mandates placement in appropriate nonpublic educational programs if public services are insufficient, with funding contingent on the Maryland State Department of Education's (MSDE) approval of the program, placement, costs, and reimbursement amounts.

MSDE approval is not necessary if the Local Education Agency (LEA) approves and covers the costs of a private placement independently. For funding an out-of-state private placement, the LEA must demonstrate that the out-of-state option is closer to the child's home than any in-state alternatives and that a suitable individualized in-state program is unavailable at a comparable cost. Requests for out-of-state placements must be directed to the Local Coordinating Council (LCC), which assesses the need for such placements. If the LCC recommends an out-of-state placement, final funding approval is given by the State Coordinating Council (SCC). The contributions required from the LEA and State Education Agency (SEA) for approved placements are specified by Maryland Code.

Furthermore, procedural safeguards outlined in Title 13A of the Code of Maryland Regulations ensure that parents of children with disabilities are notified of decisions regarding educational placements and have the right to appeal. Specific regulations mandate prior written notice for any proposed changes to a child's educational placement, outline local due process hearing procedures, and provide an opportunity for appeal to the State Hearing Review Board after local procedures are exhausted.

Eric Gadsby, a seventeen-year-old with learning disabilities from Baltimore, was evaluated for special education services by the Baltimore City Public Schools (BCPS) in May 1993, but they failed to develop an individualized education program (IEP) before the 1993-94 school year. Consequently, the Gadsbys enrolled Eric in the Forman School, a private residential institution. BCPS later proposed an IEP that included public school attendance and special education services, which the Gadsbys contested, leading to a scheduled due process hearing. Prior to the hearing, BCPS and the Gadsbys reached a settlement where BCPS would pay a portion of Eric's tuition and apply to MSDE for additional funding, while the Gadsbys agreed to withdraw their hearing request. At no point before the hearing or during negotiations was MSDE informed of the Gadsbys' situation.

On April 19, 1994, BCPS submitted Eric's application for State funding to MSDE, which found serious deficiencies in the application. On May 9, MSDE returned the application without a decision, citing two reasons: (1) a settlement between BCPS and the Gadsbys regarding financial responsibility for Eric's placement at Forman School rendered the State reimbursement statute inapplicable; and (2) prior approval from both the Local Citizens Committee (LCC) and the State Citizens Committee (SCC) was required for all out-of-state residential placements, as outlined in MD. ANN. CODE art. 49D. MSDE referenced a May 1992 directive stating that applications for unapproved programs would not be accepted, and noted that entering agreements for unapproved placements could result in the LEA bearing full costs. MSDE instructed BCPS to either seek LCC approval for the placement or allow the parents to pursue a local level hearing.

MSDE did not notify the Gadsbys of its refusal but BCPS's counsel sent them the rejection letter on May 23. Afterward, BCPS submitted its application to the LCC, which met on June 17, 1994, where the Gadsbys were invited but did not attend. The LCC rejected the application, concluding that Eric did not require the level of care provided by a residential treatment center.

On September 26, 1994, the Gadsbys appealed MSDE's return of BCPS's application under the IDEA. A Hearing Review Board convened to address the appeal. MSDE contended that the application was not properly submitted for review, arguing that the matter was not ripe for a State hearing as it had not formally denied the application. The Gadsbys countered that MSDE's refusal to consider the application equated to a denial. MSDE also claimed it was not a proper party to the appeal, asserting it made no final decision regarding the application and was not a party to the February 1994 settlement agreement concerning Eric's tuition.

The Board determined that BCPS was not a proper party to the appeal due to its settlement with the Gadsbys. It ruled that MSDE's May 9 letter to BCPS, which returned Eric's application, effectively denied it. The Board cited MSDE's clear requirement for prior approval of out-of-state residential placements and referenced a 1992 directive warning that LEA officials entering agreements with parents regarding unapproved placements would not receive state funding. Since the Gadsbys had unilaterally placed Eric at the Forman School, which was not approved by MSDE, the Board found the application denial valid. 

Before a scheduled hearing on November 7, 1994, stipulated facts were submitted, including that Eric was placed at Forman unilaterally, BCPS had violated procedural requirements in developing Eric's IEP, MSDE was not informed of issues regarding Eric's education until BCPS sought funding, and that BCPS did not meet state conditions for funding in its April application. It was also noted that while Eric benefited from the education at the Forman School, the school did not meet state special education standards. 

During the hearing, the Board addressed whether the Individuals with Disabilities Education Act (IDEA) applied to the case. MSDE argued it did not, claiming that IDEA does not mandate reimbursement for private placements. However, the Board concluded that IDEA was applicable as the dispute involved the denial of public educational opportunities and funding. The Board then examined if MSDE had complied with IDEA's notice requirements when rejecting BCPS's application for reimbursement.

The Gadsbys contended that the Maryland State Department of Education (MSDE) violated the Individuals with Disabilities Education Act (IDEA) by not notifying them when it returned the application submitted by Baltimore County Public Schools (BCPS) for their son Eric. The Board determined that MSDE had adequate information to justify its decision and should have provided an explanation to the Gadsbys. The lack of notice was deemed a violation of IDEA's provisions, which ultimately impeded Eric's right to a free appropriate public education, making MSDE liable for his private school placement costs.

On March 29, 1995, the Gadsbys initiated legal action against BCPS's Superintendent Walter G. Amprey, MSDE's Superintendent Nancy S. Grasmick, and MSDE in the U.S. District Court for Maryland to enforce the Board's ruling. Amprey moved to dismiss the case on April 21, claiming BCPS had met its obligations under a settlement agreement and was not involved in the Board proceedings. On April 24, MSDE and Grasmick counterclaimed to overturn the Board's decision.

On August 2, 1995, the district court granted Amprey's motion to dismiss and reversed the Board's decision, stating there were no material facts in dispute. The court recognized BCPS's obligation under IDEA to provide Eric a free appropriate public education but noted that the Gadsbys and BCPS had privately resolved their disagreement, thus not allowing MSDE to assess Eric’s eligibility for a residential placement. The court concluded MSDE's refusal to consider the application was procedural regarding BCPS's eligibility for state funding, not about Eric's educational needs. Therefore, MSDE was not required to notify the Gadsbys of its decision, and the Board's ruling was legally incorrect. Consequently, the court dismissed the case, and on August 14, 1995, the Gadsbys filed a motion to amend the order, claiming the court overlooked their challenge to Maryland's residential placement approval process.

On February 6, 1996, the district court denied the Gadsbys' motion to alter or amend a previous order, stating that the Gadsbys merely reargued previously litigated matters. The court implicitly rejected their facial challenge to Maryland's procedural mechanism for approving residential placements, clarifying that its previous ruling focused solely on whether the Baltimore County Public Schools (BCPS) could receive a subsidy from the Maryland State Department of Education (MSDE), not on Eric's entitlement to a residential placement under the Individuals with Disabilities Education Act (IDEA). Consequently, the court concluded that IDEA's procedural requirements did not apply to MSDE's refusal to consider Eric's application, leading to the denial of the Gadsbys' motion.

On the same day, the court reversed and vacated the Board's decision, dismissing all of the Gadsbys' claims with prejudice, prompting a timely appeal from them. On appeal, the Gadsbys argued they were entitled to reimbursement for the remainder of Eric's tuition at Forman School, asserting that Maryland failed to provide Eric a free appropriate public education as required by IDEA and that MSDE violated IDEA's notice provisions by denying reimbursement without notifying the Gadsbys.

The district court had granted Walter G. Amprey's motion to dismiss, which was treated as a summary judgment because it considered matters outside the pleadings. The court's decision was based on stipulated facts from the Board hearing. The appropriate legal standard for summary judgment was outlined, indicating it is granted when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.

IDEA mandates that states provide a free appropriate public education (FAPE) to children with disabilities, which includes the development of an Individualized Education Program (IEP) by the Local Education Agency (LEA) for each eligible child. In this case, the LEA did not create an IEP for Eric Gadsby before the 1993-94 school year, violating IDEA's requirements. The central issue is the remedy for this violation. IDEA allows parents to pursue a civil action if they disagree with decisions made by state educational agencies (SEAs) and grants district courts the authority to provide appropriate relief. The statute does not specify available remedies or responsible entities for violations of FAPE. 

In School Committee of Town of Burlington v. Department of Education, the Supreme Court determined that district courts can order reimbursement for parents who have incurred costs for private special education when the proposed IEP is deemed inadequate. The Court emphasized that this authority is grounded in the broad discretion granted under IDEA. It acknowledged that parents face a dilemma if they disagree with an inappropriate proposed IEP, as they might have to either accept a detrimental placement or pay for an alternative. Not providing reimbursement in such cases would undermine the rights of the child and the parents in the IEP development process. 

Furthermore, in Florence County School District Four v. Carter, the Supreme Court reaffirmed that the inadequacy of a private school's provision of FAPE does not prevent courts from ordering school districts to reimburse parents who unilaterally place their child in private education after rejecting an inappropriate IEP.

1401(a)(18) mandates that educational services for children with disabilities be provided at public expense and under public supervision, with an Individualized Education Program (IEP) created by a Local Education Agency (LEA) representative. The Court determined that these requirements are incompatible with private school placements, as applying 1401(a)(18) to such situations would undermine the unilateral withdrawal rights established in *Burlington*. The Court also ruled that a private school's non-compliance with state education standards does not automatically preclude equitable reimbursement, clarifying that parents are not barred from reimbursement even if they chose an unapproved program. The Court dismissed concerns from the school district regarding the financial burden on LEAs, noting that adherence to the Individuals with Disabilities Education Act (IDEA) would alleviate such concerns.

In this context, the remedy of reimbursing Eric's private school tuition was deemed appropriate under IDEA, following the LEA's failure to create a proper IEP at the start of the school year. The Gadsbys sought reimbursement for Eric's tuition and argued that the Maryland State Department of Education (MSDE) has a responsibility under IDEA to ensure a free appropriate public education for all disabled students, which includes contributing to reimbursement costs as mandated by state law. MSDE contended that its obligation to reimburse is contingent upon the LEA's compliance with state requirements, asserting that since the LEA did not comply, it had no duty to approve reimbursement. The central issue is whether the Gadsbys can pursue reimbursement from MSDE based on the LEA's failure to develop an appropriate IEP for Eric.

BCPS's application for Eric's out-of-state private placement did not meet State law requirements. Additionally, the Gadsbys have settled with BCPS for part of their costs, releasing BCPS from further liability. The primary issue is determining whether a State Education Agency (SEA) can be held liable for failing to provide a free appropriate public education (FAPE) to a child with a disability. If liability is established, the next consideration is how Maryland's laws affect the Maryland State Department of Education's (MSDE) potential liability, specifically whether MSDE can evade reimbursement costs by citing BCPS's non-compliance with state regulations related to the Individuals with Disabilities Education Act (IDEA). Furthermore, the analysis will address the conditions under which an SEA is liable for reimbursing private school tuition costs when parents have a right to reimbursement under established cases, Burlington and Carter. The examination of MSDE's liability for failing to develop an Individualized Education Program (IEP) for Eric hinges on statutory interpretation, starting with an analysis of the relevant statutory language. If the language is clear, it will be enforced as written; if ambiguous, legislative intent will be sought through other sources. The interpretation must also consider the statute's overall design, purpose, and any pertinent legislative history, ensuring a holistic approach to statutory construction.

An SEA (State Educational Agency) may be held accountable for failing to provide a child with a free appropriate public education (FAPE) under the Individuals with Disabilities Education Act (IDEA). The statutory language grants district courts broad authority to provide appropriate relief for violations but does not specify which governmental entity is responsible. However, under 20 U.S.C. § 1412(6), the SEA is tasked with ensuring compliance with IDEA's requirements, indicating that the SEA can be held liable for non-compliance. Further support for this conclusion is found in 20 U.S.C. § 1414(d)(1), which mandates that if a Local Educational Agency (LEA) is unable or unwilling to provide FAPE, the SEA must provide the necessary services directly. Case law reinforces this, as seen in Todd D. by Robert D. v. Andrews and Kruelle v. New Castle County School District, which affirm the SEA's responsibility in such situations.

The legislative history of § 1412(6) emphasizes a clear line of accountability for educating children with disabilities, thereby establishing that the SEA is ultimately responsible for ensuring FAPE and can be held liable for the state's failure in this regard. The subsequent issue is whether the Maryland State Department of Education (MSDE) can avoid liability for reimbursement costs related to BCPS's (Baltimore County Public Schools) failure to comply with state laws and regulations aligned with IDEA, specifically regarding the approval for a student's placement prior to seeking reimbursement for tuition costs.

Section 1413 of the Individuals with Disabilities Education Act (IDEA) mandates State Education Agencies (SEAs) to create policies for the allocation and compliance of funds to Local Education Agencies (LEAs). This includes ensuring that funds are used according to IDEA's requirements and establishing interagency agreements to clarify financial responsibilities and resolve disputes. The State of Maryland is obligated to regulate IDEA funds accordingly. A central issue is whether the Maryland State Department of Education (MSDE) can evade liability for Eric Gadsby's private school tuition costs because Baltimore County Public Schools (BCPS) did not adhere to Maryland laws regarding tuition reimbursement under IDEA. The Supreme Court's decision in Carter indicates that parents can still seek reimbursement even if they chose a non-approved private program, as it would be unjust to penalize them for selecting a suitable education option when the public system failed to provide an appropriate education. 

Furthermore, while unilateral placement in a non-approved out-of-state private program does not meet Maryland's approval requirements, the Gadsbys might still be entitled to reimbursement if they satisfy the criteria established in Burlington and Carter, regardless of prior approvals. The question remains whether an SEA can be liable for private school tuition reimbursement when parents place their child in a private program due to a failure to provide a free appropriate public education. The Gadsbys contend that the SEA should be liable in such cases, while MSDE asserts that only the LEA, responsible for developing Individualized Education Programs (IEPs), should bear that liability. The nature of reimbursement as an equitable remedy, which is determined by district court discretion, complicates this issue, as there is no explicit statutory language designating which entity is responsible for payment. IDEA delineates specific roles for SEAs and LEAs, with SEAs ultimately ensuring compliance and overseeing federal funding distributions.

To obtain federal funds, the State Educational Agency (SEA) must submit a state plan to the Secretary of Education detailing compliance with the Individuals with Disabilities Education Act (IDEA). The Local Educational Agency (LEA) requests IDEA funds from the SEA and is responsible for providing services, including developing Individualized Education Programs (IEPs) for disabled students. While specific duties are assigned to each agency, the SEA holds ultimate responsibility for noncompliance under IDEA. 

IDEA mandates procedural safeguards, such as parents' rights to prior written notice of decisions related to their child's IEP and the opportunity for hearings to address complaints. The remedial provision of IDEA grants district courts broad discretion to determine appropriate relief, including the authority to award reimbursement costs against either the SEA or LEA for failing to provide a free appropriate public education (FAPE).

The court must consider various factors when determining liability and reimbursement, including the relative responsibility of each agency for the failure to provide FAPE. Circumstances may dictate that it is unjust to hold the SEA liable if the LEA was primarily at fault or vice versa. Additionally, the court may assess the reasonableness of the reimbursement costs, ensuring that only appropriate expenses are awarded. Ultimately, the district court's role is to evaluate the equities of each case and allocate responsibility accordingly.

Disagreement exists regarding the liability of a State Educational Agency (SEA) for a Local Educational Agency's (LEA) failure to develop an Individualized Education Program (IEP). The court holds that district courts have broad discretion under the Individuals with Disabilities Education Act (IDEA) to grant appropriate relief, which may include reimbursement for private school tuition from the SEA, LEA, or both, after considering relevant factors. The district court erred by ruling that the Maryland State Department of Education (MSDE) could not be held liable because its actions were only related to state law. The court clarifies that an SEA can be liable for tuition reimbursement under IDEA even if state law requirements are not met and regardless of the LEA's failure to create an appropriate IEP.

The case is remanded for the district court to determine appropriate relief, considering the responsibility of each agency in failing to provide a free appropriate public education (FAPE) to the child, Eric. The district court can hold MSDE, the Baltimore County Public Schools (BCPS), or both liable as deemed appropriate. Additionally, the Gadsbys claim that MSDE violated IDEA's notice provisions by not notifying them before denying BCPS's reimbursement application, which they argue denied Eric a FAPE. However, the court disagrees, emphasizing that IDEA includes procedural safeguards to notify parents of decisions affecting their child and to allow them to object. The required notice must explain the actions proposed or refused, along with relevant evaluations and safeguards, as stipulated by IDEA regulations.

Failure to meet the procedural requirements of the Individuals with Disabilities Education Act (IDEA), such as the notice provision, can result in a government entity being deemed non-compliant with its obligation to provide a free appropriate public education (FAPE). However, if such procedural violations do not actually interfere with the provision of FAPE, they are insufficient for establishing liability. In the case of Tice v. Botetourt County School Board, it was determined that violations of the notice requirement did not warrant reimbursement for private placements if they did not affect the child's Individualized Education Program (IEP). Similarly, in G.D. v. Westmoreland School District, a notice requirement was not violated when parents received meeting minutes post-decision without any implementation of changes.

In the matter at hand, the Gadsbys’ claim that the Maryland State Department of Education (MSDE) denied their application for reimbursement without notification does not demonstrate that this failure interfered with Eric's FAPE. The Gadsbys received notice of MSDE’s decision shortly after it was made, well before the next hearing. Therefore, since there was no evidence of interference with Eric's educational provision, the procedural violations do not impose liability on MSDE for the costs associated with Eric's Forman School tuition. Consequently, the district court's judgment in favor of MSDE is vacated, and the case is remanded for further proceedings. 

Additionally, the Gadsbys argue that Maryland's interagency review process for out-of-state placements violates IDEA due to delays in implementing IEPs, referencing Evans v. Evans, where significant delays were found to violate IDEA regulations. However, no specific evidence of undue delay in Maryland's process is established in this case.

The IEP must be implemented "as soon as possible" after its development, review, or revision, as per 34 C.F.R. 300.342(b)(2) and 300.343(a). The Gadsbys did not provide evidence of delays due to Maryland's interagency review process for out-of-state placements, nor did this process affect Eric's IEP implementation, as there was no proposed IEP recommending an out-of-state placement. Consequently, their challenge against Maryland's review process for violating IDEA is not substantiated. BCPS's liability is constrained by its settlement with the Gadsbys, but the district court retains the authority to determine if BCPS is primarily or fully responsible for Eric's Forman School tuition costs. If reimbursement is deemed appropriate, the court may also decide to deny any relief against MSDE based on the situation's specifics.