Pre-hearing Settlement Offers Can Limit Liability for a Successful Party’s Attorney’s Fees, but Only if an Offer Includes Reasonably Calculated Attorney’s Fees.

Author: Eric Stevens

Pre-hearing settlement offers are one tool a local educational agency (“LEA”) can use to limit its potential liability for attorney’s fees should a parent, legal guardian, or student partially prevail in a due process hearing. Parents who obtain a favorable ruling after a due process hearing are entitled to reasonable attorney’s fees. If partially successful, they are still entitled to an award of some attorney’s fees. Most due process filings are settled as only a fraction progress through a full hearing to a decision, but of those that are fully adjudicated by the Office of Administrative Hearings (“OAH”), students are fully or partially successful about 63% of the time. However, a pre-hearing settlement offer can limit liability for attorney’s fees incurred after the offer is made if the offer is “more favorable” than the relief ultimately obtained by a parent.

The recent decision in S.H. v. Mount Diablo Unified School District, (N.D. Cal. 2018) 118 LRP 3307, demonstrates an exception to this “more favorable” settlement rule. The U.S. District Court for the Northern District of California found that an LEA’s pre-hearing settlement offer did not protect it from post-offer attorney’s fees in part because the offer did not include a reasonable amount of attorney’s fees. Therefore, parent “was substantially justified in rejecting the settlement offer” and the offer could not serve to cap parent’s award of attorney’s fees.

The LEA’s pre-hearing settlement offer included $10,000 for attorney’s fees. The Court concluded that this was an unreasonable offer for three reasons: (1) it was less than half the attorney’s fees parent had allegedly incurred at the time the offer was made ($22,000); (2) the LEA made no effort to learn the amount of fees incurred as of when the offer was made; and (3) there was no evidence to suggest that the LEA based the offer on its estimate of what parent would recover if parent was successful. As a result, the Court awarded $71,020 as reasonable attorney’s fees.

In the 2016/2017 school year, 4,467 requests for due process hearings were filed with OAH, but only 134 resulted in a final decision—less than 3% of filings. This is not surprising considering the uncertain outcomes in contested hearings and strong incentives in the IDEA to reach settlement. The S.H. v. Mount Diablo case demonstrates these incentives in action. By creating an opportunity to cap any subsequent award of attorney’s fees, the IDEA encourages LEAs to make settlement offers early in due process proceedings. But it also encourages LEAs to carefully calculate these offers or, as in S.H. v. Mount Diablo, a rejected offer may be of no help at all.

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