The Cost of Doing Business: Will Perez v. Sturgis Public Schools Yield Increases in Special Education Litigation and Costs?

By Kevin M. French

April 27, 2023

In a rare unanimous decision, the United States Supreme Court held, on March 21, 2023, that students and parents who have entered into a settlement agreement resolving their claims under the Individuals with Disabilities Education Act (“IDEA”) do not need to exhaust the administrative process under IDEA before seeking to recover monetary damages against school districts under the Americans with Disability Act (“ADA”). Perez v. Sturgis Public Schools Perez may be viewed as an example of the legal adage “bad facts make bad law”. The Court’s decision will likely encourage parents to seek to recover money damages in special education disputes, especially in cases where there have been significant violations of a student’s right to a free public education (“FAPE”) and claims of discrimination. As a result, parents may have increased motivation to proceed with litigation under the ADA, even when they have settled their IDEA claims.

As recited in the Court’s Opinion, from ages 9 through 20, Perez, who is deaf, attended schools in Michigan’s Sturgis Public School District. Due to his disability, the school district provided him with aids to translate classroom instruction into sign language. In the lawsuit, Perez alleged that the assigned aids were either unqualified or absent from the classroom resulting in discrimination on the basis of disability. Perez further alleged that the school district misrepresented his educational progress by awarding him inflated grades and advancing him from grade-to-grade regardless of his progress. Perez believed he was on track to graduate from high school with his class, but, months before graduation, the school district revealed that it would not award him a diploma.

Thereafter, Perez filed a complaint with the Michigan Department of Education alleging that the school district had failed its duties under the IDEA and other laws. Shortly before an administrative hearing, the parties reached a settlement under which the school district agreed to provide Perez all forward looking equitable relief sought, including additional schooling at the Michigan School for the Deaf. After settling his administrative complaint, Perez filed a lawsuit in federal district court under the ADA seeking backward-looking relief in the form of compensatory damages.

In response to Perez’s federal lawsuit, the school district filed a motion to dismiss, contending that the exhaustion requirements under IDEA, in 20 U.S.C. §1415(l), barred Perez from bringing an ADA claim without first exhausting all of the IDEA’s administrative dispute resolution procedures. The district court agreed and dismissed Perez’s complaint. On appeal, the Sixth Circuit Court of Appeals affirmed the district court’s decision. Thereafter, Perez appealed to the United States Supreme Court.

Applying principals of statutory construction, the Supreme Court reviewed the relevant sections of the IDEA and concluded that the administrative exhaustion requirement did not preclude Perez’s claim for compensatory damages under the ADA. The court determined that the statute’s administrative exhaustion requirement applies only to suits that seek relief also available under the IDEA. In light of the Courts holding, Districts will no longer be able to use the IDEA’s exhaustion requirements to shield themselves from claims for money damages. The Court declined, however, to address other issues raised by the parties, including whether the IDEA’s exhaustion requirement is subject to a judge-made “futility” exception and whether the compensatory damages Perez is seeking in his ADA lawsuit are, in fact, available under the ADA. Accordingly, the Court reversed the Sixth Circuit decision and remanded the case for further proceedings.

The Perez decision will likely impact settlement discussions. However, to establish entitlement to compensatory damages plaintiffs will need to prove intentional discrimination. Had the settlement of Perez’s claims under the IDEA included a release of all claims, including claims under the ADA, Perez would have been precluded from subsequently pursuing a claim for compensatory damages. Best practice counsels that a settlement agreement include not only matters in dispute, but any other matters that may arise out of or related to the dispute.

With Perez in hand, counsel for students and parents will likely demand monetary compensation as part of the settlement of any dispute under the IDEA. However, the standard to establish compensatory damages under the ADA and Section 504 is high as plaintiffs will need to show intentional discrimination.

The Appel, Yost & Zee Education Group will continue to monitor and update clients on these matters as they develop. Should you have any questions about this case, please do not hesitate to reach out to William J. Zee, Kevin French or any of the attorneys in the Appel, Yost & Zee Education Group.