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December 2, 1980

Melanie STANGER et al., Plaintiffs,
Gordon AMBACH et al., and Behavior Research Institute, Inc., Defendants. BEHAVIOR RESEARCH INSTITUTE, INC., Defendant and Third-Party Plaintiff, v. Howard F. MILLER, as Director of the Budget of the State of New York, Third-Party Defendant

The opinion of the court was delivered by: BRIEANT


Defendant and third-party plaintiff Behavior Research Institute, Inc. ("BRI") has presented a motion, which has been joined in by the plaintiffs, for a preliminary injunction (1) enjoining defendant Gordon Ambach, Commissioner of the State Education Department, and the third-party defendant Howard F. Miller, Director of the Budget of the State of New York, from using the "Standards for Activities Reimbursable for State Aid Purposes" (the "Standards") in the setting of tuition and maintenance rates for BRI, (2) enjoining third-party defendant Miller from disapproving for inclusion in BRI's tuition rate, on educationally related grounds, staff positions initially approved by the State Department of Education, and (3) enjoining defendant Ambach and third-party defendant Miller from reducing the tuition and maintenance rates of BRI to a level below that necessary to comply with New York State's minimum staffing requirements.

 BRI has asked also that this Court declare that defendant Ambach and third-party defendant Miller have wrongfully refused to reimburse BRI for $ 97,548.12 of tuition and maintenance rates for the school years 1976-77, 1977-78, 1978-79, and 1979-1980.

 Other claims by BRI in its third-party complaint have not been pursued in their briefs by either BRI or the plaintiffs, and will not be addressed by the Court.

 Third-party defendant Miller has moved to dismiss the third-party complaint of BRI on the grounds that certain portions of the complaint are barred by the Eleventh Amendment to the United States Constitution, that BRI lacks standing to raise claims based on an alleged failure to provide appropriate education to plaintiffs, and that this Court should abstain from exercising jurisdiction over BRI's claims. Plaintiffs also moved orally that third-party defendant Miller be joined as necessary defendant in the main action.

 BRI is a private residential school for severely handicapped children, located in Providence, Rhode Island. It specializes in the care and training of severely autistic children. In 1967-77 New York students began to be placed there by local school districts with the approval of the New York State Education Department, pursuant to the Federal Education for All Handicapped Children Act, 20 U.S.C. § 1401 et seq., and the newly enacted Article 89 of the New York Education Law.

 By late 1978, BRI served approximately thirteen New York students. Financial disputes and disputes over the training program between BRI and state officials led the State Education Department to initiate a change of placement for the New York students at BRI to a public New York state facility. Plaintiffs, who are severely autistic children in attendance at BRI, commenced this action by their parents to enjoin their transfer from BRI, claiming that they were being denied their statutory right to a hearing prior to the transfer, and that the transfers would be inequitable, unfair, and severely detrimental to the progress of the children, in part because of the disruptive effect of any sudden change.

 On February 15, 1979, this Court temporarily restrained the State Education Department from withdrawing funding for plaintiffs at BRI. Upon consent of the parties, the temporary restraining order was converted into a preliminary injunction on February 20, 1979, which continues to be in effect.

 In June 1980, BRI was informed that it was continued as an approved school for placement for 1980-81. Since then, the difficulties between the state defendants and BRI have revolved around their inability to agree upon a budget for BRI for the 1980-81 school year.

 On July 16, 1980 BRI was granted leave to implead third-party defendant Miller in the action and to file a third-party complaint. Jurisdiction in this Court is founded on 28 U.S.C. §§ 1331(a), 2201 and 2202. A hearing on BRI's application for a preliminary injunction was heard before the Court on September 25, 1980; BRI, plaintiff children and third-party defendant Miller have submitted briefs and supplemental briefs. The facts underlying this motion are not in dispute.

 At the outset, the Court will address third-party defendant Miller's motion to dismiss. The Court finds it unnecessary to consider whether or not BRI has standing to raise the claims pleaded in its third-party complaint, because plaintiffs have requested and have been granted leave to join in BRI's motion. Plaintiffs clearly have standing to challenge the procedures involved in the determination of BRI's budget, as that budget determination is a "matter relating to ... the provision of a free appropriate public education ..." for them. See U.S.C. §§ 1415(b)(1)(E) to (e)(4); Concerned Parents & Citizens for the Continuing Education at Malcolm X v. The New York City Board of Education, 629 F.2d 751 (2d Cir., 1980). See also New York Education Law §§ 4401(3), 4401(5) and 4405(3)(d); Dubendorf v. New York State Education Department, 97 Misc. 2d 382, 412 N.Y.S.2d 260, 268 (Sup.Ct.Monroe Co.1978).

 Third-party defendant Miller also argues that even if plaintiffs have standing they may not proceed with this motion because they have failed to exhaust their administrative remedies, as required by 20 U.S.C. §§ 1415(b)(2) to (e). Plaintiffs are not required, however, to exhaust their administrative remedies if to do so would not in any way further the purposes behind the exhaustion doctrine. See McKart v. United States, 395 U.S. 185, 193-94, 89 S. Ct. 1657, 1662-1663, 23 L. Ed. 2d 194 (1969); Diapulse Corporation of America v. Food & Drug Administration, 500 F.2d 75, 77-78 (2d Cir. 1974). No administrative process is pending that will be or has been prematurely interrupted by this action. In addition, Education has already recommended and Budget has approved a budget, and both departments have decided that the challenged "Standards" should be used in their formulation of the budget for BRI. See 395 U.S. at 193-94, 89 S. Ct. at 1662-1663; 500 F.2d at 77-78.

 This Court in its discretion also declines to abstain. Abstention is "the exception, not the rule," and is inappropriate here. Colorado River Water Conservation District v. United States, 424 U.S. 800, 813-16, 96 S. Ct. 1236, 1244-1245, 47 L. Ed. 2d 483 (1976). BRI's third-party complaint alleges violations of federal and state statutes, which a United States district court appropriately may address. Further, federal jurisdiction is not being invoked here to restrain state criminal or quasi-criminal proceedings, state nuisance proceedings, or state tax collection. See id.

 Third-party defendant Miller has also argued that the Eleventh Amendment bars BRI's request for a declaration that Education and Budget wrongfully withheld monies from BRI for prior school years.

 Since this third-party complaint was filed, the State has voluntarily paid BRI more than $ 67,000 of the $ 97,548.12 claimed. While approximately $ 30,000 of the claimed money is still in dispute, BRI has represented that future events "may obviate the need for any judicial resolution of this issue" and has requested that the Court "defer ruling on the matter." Therefore, this Court will defer consideration of this claim at this time.

 Before addressing the merits of the balance of BRI's motion, it may be helpful to describe briefly the procedure for setting tuition and maintenance rates in New York, and to relate the progress of the parties to date in following those procedures.

 New York Education Law contains the following definitions in § 4401:

3. "Maintenance expense." For purposes of this article "maintenance expense" shall mean the dollar amount charged for room and board and allocable debt service as determined by the commissioner for the living unit of the residential facility by a residential school and such reasonable medical expenses actually and necessarily incurred by a handicapped child while actually in attendance at a residential school, provided that such medical expenses shall be for diagnostic, evaluative, educationally related, and emergency care services as defined by regulations of the commissioner. Such dollar amount, which shall not include expenses which are otherwise reimbursable to a residential facility by ...

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