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The Center for Discovery, Inc. v. D.P.

United States District Court, E.D. New York

March 31, 2018

D.P., his parents V.P. and C.P., Defendants.



         Plaintiff The Center for Discovery, Inc. (“CFD”), commenced the above-captioned action against Defendants D.P., his parents V.P. and C.P. (collectively the “Family”), and former Defendant New York City Department of Education (the “DOE”) on July 15, 2016, [1] seeking preliminary and permanent injunctive relief to remove D.P. from its premises pursuant to the Individuals with Disabilities Education Act, 20 U.S.C. § 1415 et seq. (“IDEA”), and Honig v. Doe, 484 U.S. 305 (1988). (Compl, Docket Entry No. 1.) On September 1, 2016, Plaintiff filed a motion to withdraw its request for a preliminary injunction, which motion was granted on September 2, 2016. (Letter Mot. to withdraw Preliminary Injunction, Docket Entry No. 15; Order dated September 2, 2016.) On September 9, 2016, Plaintiff filed an Amended Complaint, requesting permanent injunctive relief, attorneys' fees, and any other relief deemed appropriate. (Am. Compl. 9, Docket Entry No. 16.) On September 27, 2016, Defendants filed an Answer and Counterclaims to the Amended Complaint, asserting six counterclaims. (Answer & Countercls. (“A&C”), Docket Entry No. 18.) On April 7, 2017, Plaintiff moved to dismiss the action without prejudice pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure, and to dismiss Defendants' counterclaims for lack of subject matter jurisdiction and failure to state a claim pursuant to Rules 12(b)(1) and 12(b)(6), respectively, of the Federal Rules of Civil Procedure. (Pl. Mot. to Dismiss (“Pl. Mot.”), Docket Entry No. 31; Pl. Mem. in Supp. of Pl. Mot. (“Pl. Mem.”), Docket Entry No. 31-1.) On May 2, 2017, Defendants opposed the motion to dismiss to the extent the dismissal of the action was without prejudice, and opposed the dismissal of their counterclaims. (Defs. Opp'n to Pl. Mot. (“Defs. Opp'n”), Docket Entry No. 32; Defs. Mem. in Supp. of Defs. Opp'n (“Defs. Mem.”), Docket Entry No. 32-1.) In their opposition filing, Defendants also moved for sanctions and attorneys' fees pursuant to Rules 11 and 41(a)(2), respectively, of the Federal Rules of Civil Procedure, and IDEA. (See generally Defs. Mem.) On June 27, 2017, the Court referred Plaintiff's motion to Magistrate Judge Ramon E. Reyes, Jr. for a report and recommendation. (Order dated June 27, 2017.)

         By report and recommendation dated July 17, 2017 (the “R&R”), Judge Reyes recommended that Plaintiff's motion to dismiss the action and the counterclaims be granted. (R&R, Docket Entry No. 35.) On July 31, 2017, Defendants filed timely objections to the R&R. (Defs. Obj. to R&R (“Defs. Obj.”), Docket Entry No. 36.) Defendants filed supplemental objections on August 11, 2017.[2] (Defs. Suppl. Obj. to R&R (“Defs. Suppl. Obj.”), Docket Entry No. 38.) For the reasons set forth below, the Court adopts the R&R as to the judgment in its entirety but only in part as to its reasoning.

         I. Background

         a. Factual background

         CFD operates a residential school that serves children with developmental disabilities.[3](A&C ¶ 1.) D.P. is a twelve-year old child with autism who has attended CFD since December of 2015. (Id. ¶¶ 2, 17.) V.P. and C.P. are the parents of D.P. and reside in Staten Island, New York. (Am. Compl. ¶ 7; A&C ¶ 7.)

         The DOE, following the recommendation of the Committee on Special Education (“CSE”), sent CFD an admissions package on behalf of D.P in October of 2015. (A&C ¶¶ 4, 63- 70.) The admissions package included a detailed Individualized Educational Program (“IEP”) describing D.P.'s disability, needs, and specific goals. (Id.) D.P.'s placement at CFD was “consistent with the placement procedures described in [IDEA].” (Id.) D.P.'s IEP disclosed that he had “engaged in aggressive, tantruming [sic] and self-injurious behaviors” which were a “manifestation of [a]utism.” (Id. ¶¶ 21-22.) These self-injurious behaviors included “[p]ulling-out [his] teeth.” (Id. ¶ 68.) The IEP also “specified that ‘[D.P.] requires a BIP [Behavior Intervention Plan] to address his aggressive behaviors.'” (Id. ¶ 67.) Following review of the application, CFD “notified the DOE it could provide D.P. the services set forth in the IEP . . ., and that it was offering admission.” (Id. ¶ 70.) The DOE, V.P. and C.P. all agreed to accept the offer of admission, and D.P. began attending CFD on or about December 7, 2015. (Id. ¶ 71.)

         D.P.'s placement at CFD was made “pursuant to a contractual relationship between CFD and the DOE” and another contractual relationship “between CFD and the State of New York through the [New York State Education Department (‘NYSED')] and the Office for People with Developmental Disabilities (‘OPWDD').” (Id. ¶¶ 73-74.) As part of these contractual relationships, “CFD has charged the DOE and the State [of New York] for services rendered . . . and has received payments.” (Id. ¶ 74.)

         During his time at CFD, D.P. exhibited self-injurious behaviors between December of 2015 and April of 2016, including self-extracting four teeth. (Id. ¶ 84.) D.P.'s behaviors, however, “were improving as of April [of] 2016 and he has not extracted another tooth to date.” (Id. ¶¶ 85, 140.) Nevertheless, CFD's administration indicated that they “wanted to discharge D.P.” (Id. ¶¶ 85- 86.) In or about April of 2016, CFD requested V.P. and C.P. “to cooperate in applying for D.P. to be admitted as a psychiatric inpatient to Spring Harbor Hospital in Westbrook, Maine.” (Id. ¶ 94.) V.P. and C.P. agreed but the hospital denied D.P. admission. (Id. ¶ 95.) On May 25, 2016, CFD attempted to have D.P. admitted to Westchester County Medical Center over the protests of his parents. (Id. ¶ 97.) V.P. and C.P. went to the medical center where a psychiatrist told them that D.P. was “not medically appropriate” to be admitted. (Id. ¶ 107.) Accordingly, V.P. and C.P. attempted to return D.P. to CFD, to no avail. (Id. ¶¶ 108-17.)

         On August 11, 2016, CFD gave the DOE and the Family two written proposals to add services to D.P.'s IEP: (1) “24-hour 1:1 paraprofessional aide”; and (2) “three hours daily of 1:1 applied behavior analysis (‘ABA') provided by a clinician certified as a Board Certified Behavior Analyst (‘BCBA').” (Id. ¶ 125.) CFD explained that “if these services were added to D.P.'s [IEP], then there would no longer be an issue of danger to self or others.” (Id. ¶ 127.) The Family did not oppose the addition of these services, but did object to the ABA service being added to the IEP. (Id. ¶¶ 129-31.) V.P. and C.P. objected because they believed (1) the “service was not necessary for D.P.'s continued placement at CFD, ” (2) were concerned that CFD's “assertion that the additional funding for the service . . . was already assured [was inaccurate], ” and (3) that CFD would use any “problems with obtaining funding” to seek judicial relief “to remove D.P. from the school.” (Id. ¶ 132.) The Family alleges on “information and belief” that CFD wanted to add the ABA service to the IEP so that it could “receive an enhanced rate for maintaining D.P.'s placement” or “seek[] a change of placement through the CSE process.” (Id. ¶ 136.) On August 12, 2016, the DOE held a special meeting with the Family and CFD present, and the two proposals were added to D.P.'s IEP despite the protests of V.P. and C.P. (Id. ¶¶ 123, 137.)

         b. Procedural History

         On July 15, 2016, CFD commenced this action against the DOE, V.P., C.P., and D.P, seeking a preliminary injunction to remove D.P. from school.[4] On September 1, 2016, CFD moved to withdraw its previously filed motion for a preliminary injunction, which motion was granted. (Letter Mot. to withdraw Preliminary Injunction.) CFD filed an Amended Complaint on September 9, 2016, requesting an order either that “D.P. be permanently removed from CFD in the event Defendant DOE continues to renege on its promise to pay for the additional safety services needed” or that “DOE . . . pay for the additional services needed by D.P. to remain at CFD . . . .” (Am. Compl. 9.)

         On September 27, 2016, Defendants filed six counterclaims against CFD: (1) breach of contract as between CFD and New York State and the DOE; (2) breach of the duty of good faith and fair dealing as between CFD and New York State and the DOE; (3) violation of the New York Education Law and the Regulations of the Commissioner of Education; (4) breach of contract between CFD and Defendants to provide “three hours per day, seven days of the week, of 1:1 BCBA services to D.P.”; (5) negligence; and (6) intentional and negligent infliction of emotional distress. (A&C ¶¶ 56-194.) As to the first two claims, Defendants based their arguments on the theory that they were third-party beneficiaries of contracts between the CFD and New York State and the DOE.

         On April 7, 2017, CFD filed its Motion to Dismiss the Action pursuant to Rule 41(a)(2) as it is “seeking no Federal relief against the remaining Defendants D.P., V.P., and C.P.” (Pl. Mem. 1, 4.) CFD also moved to dismiss the Family's six counterclaims pursuant to Rules 12(b)(1) and 12(b)(6). (Id. at 6-8.) The Family objects to the dismissal of the action unless it is “with prejudice, affirms that the counterclaims remain pending, and subjects the CFD to [six] terms and conditions.”[5] (Def. Mem. 8-9.) CFD subsequently agreed to voluntary dismissal of the action with prejudice but objects to the imposition of any additional conditions in the order. (Pl. Reply in Supp. of Pl. Mot. (“Pl. Reply”) 1, Docket Entry No. 33-1.)

         c. The R&R

         Judge Reyes recommended that Plaintiff's motion to dismiss the action be granted with prejudice, and that the motion to dismiss the counterclaims be granted without prejudice for failure to state a claim pursuant to Rule 12(b)(6), but denied for lack of subject matter jurisdiction pursuant to Rule 12(b)(1).

         In recommending dismissal of the action with prejudice, Judge Reyes first determined that Defendants' counterclaims were all “compulsory[, ] as they arise ‘out of the transaction or occurrence that is the subject matter of the opposing party's claim, '” (R&R 7 (quoting Fed.R.Civ.P. 13(a)), - namely “[Plaintiff's attempt to remove D.P. and its pursuit of a preliminary injunction, ” (id. at 8). Accordingly, Judge Reyes found that Defendants would not be prejudiced by the dismissal of the action because the Court could retain jurisdiction over the compulsory counterclaims through supplemental jurisdiction. (R&R 6 n.7, 8.)

         Judge Reyes also noted that both parties agreed the action could be dismissed with prejudice. (Id. at 8.) However, Judge Reyes declined to impose any additional conditions on the dismissal. As to the Rule 11 sanctions, Judge Reyes determined that Plaintiff's reliance on Honig to commence this action rather than seeking to exhaust its administrative remedies was not frivolous. (Id. at 17.) In addition, Judge Reyes found attorneys' fees to be unwarranted because Plaintiff's arguments were not frivolous, there was no proof of bad faith, and Defendants were not “a prevailing party” under IDEA. (Id. at 18-21.) Judge Reyes declined to impose the other conditions due to mootness and ripeness concerns. (Id. at 23.)

         Judge Reyes recommended dismissal of all of Defendants' counterclaims pursuant to Rule 12(b)(6) without prejudice. In dismissing the counterclaims, Judge Reyes first determined that all the claims were ultimately brought pursuant to IDEA. (See Id. at 10-14.) Accordingly, Judge Reyes determined that Defendants could not seek compensatory or punitive damages for claims based on IDEA. (Id.) Judge Reyes also found that Defendants had failed to adequately plead the elements of the Fourth, Fifth, and Sixth counterclaims for breach of contract, negligence, and infliction of emotional distress, respectively. (Id. at 13.) Defendants did not adequately allege, inter alia, a duty of care as to the Fifth Claim, and outrageous or extreme conduct as to the Sixth Claim. (Id. at 12-13.) Judge Reyes also dismissed the Fourth counterclaim because Defendants failed to explain the basis of the contract claim. (Id. at 13.) The Fourth counterclaim was also mooted because Plaintiff has “been providing D.P. with the services stated in his IEP.” (Id. at 14.)

         II. Discussion

         a. Standards of reviews

         i. Report and recommendation

         A district court reviewing a magistrate judge's recommended ruling “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1)(C). When a party submits a timely objection to a report and recommendation, the district court reviews de novo the parts of the report and recommendation to which the party objected. Id.; see also United States v. Romano, 794 F.3d 317, 340 (2d Cir. 2015). The district court may adopt those portions of the recommended ruling to which no timely objections have been made, provided no clear error is apparent from the face of the record. John Hancock Life Ins. Co. v. Neuman, No. 15-CV-1358, 2015 WL 7459920, at *1 (E.D.N.Y. Nov. 24, 2015). The clear error standard also applies when a party makes only conclusory or general objections. Benitez v. Parmer, 654 Fed.Appx. 502, 503-04 (2d Cir. 2016) (holding “general objection[s] [to be] insufficient to obtain de novo review by [a] district court” (citations omitted)); see Fed. R. Civ. P. 72(b)(2) (“[A] party may serve and file specific written objections to the [magistrate judge's] proposed findings and recommendations.” (emphasis add)); see also Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 766 (2d Cir. 2002) (“Merely referring the court to previously filed papers or arguments does not constitute an adequate objection under . . . Fed.R.Civ.P. 72(b)”).

         ii. Rule 41(a)(2)

         A plaintiff may seek dismissal of an action pursuant to Rule 41(a)(2) of the Federal Rules of Civil Procedure. Whether to grant dismissal is within the discretion of the Court. Corrado v. New York State Unified Court Sys., 698 Fed.Appx. 36, 37 (2d Cir. 2017). Rule 41(a)(2) provides in relevant part:

Except as provided in Rule 41(a)(1), an action may be dismissed at the plaintiff's request only by court order, on terms that the court considers proper. If a defendant has pleaded a counterclaim before being served with the plaintiff's motion to dismiss, the action may be dismissed over the defendant's objection only if the counterclaim can remain pending for independent adjudication.

Fed. R. Civ. P. 41(a)(2). Any such dismissal is without prejudice unless the dismissal order otherwise provides. Id. Although “[v]oluntary dismissal without prejudice is . . . not a matter of right, ” Corrado, 698 Fed.Appx. at 37 (quoting Zagano v. Fordham Univ., 900 F.2d 12, 14 (2d Cir. 1990)), “[g]enerally . . . ‘a voluntary dismissal without prejudice . . . will be allowed ‘if the defendant will not be prejudiced thereby.'” Riley v. United States, 78 Fed.Appx. 774, 776 (2d Cir. 2003) (quoting Cantanzano v. Wing, 277 F.3d 99, 109 (2d Cir. 2001)); see also Ascentive, LLC v. Opinion Corp., No. 10-CV-4433, 2012 WL 1569573, at *2 (E.D.N.Y. May 3, 2012) (“Although voluntary dismissal without prejudice is not a matter of right, there is a presumption in this circuit that generally motions to dismiss claims without prejudice should be granted.”).

         The Second Circuit has recognized that “[t]wo lines of authority have developed with respect to the circumstances under which a dismissal without prejudice might be improper.” Kwan v. Schlein, 634 F.3d 224, 230 (2d Cir. 2011) (quoting Camilli v. Grimes, 436 F.3d 120, 123 (2d Cir. 2006)). The first “indicates that such a dismissal would be improper ‘if the defendant would suffer some plain legal prejudice other than the mere prospect of a second lawsuit.'” Kwan, 634 F.3d at 230 (quoting Camilli, 436 F.3d at 123). The second line of authority “indicates that the test for dismissal without prejudice involves consideration of various factors, known as the Zagano factors.” Id. (quoting Camilli, 436 F.3d at 123); see generally Zagano v. Fordham Univ., 900 F.2d 12, 14 (2d Cir. 1990). The Zagano factors include: “(1) the plaintiff's diligence in bringing the motion, (2) any undue vexatiousness on the plaintiff's part, (3) the extent to which the suit has progressed, including the defendant's efforts and expense in preparation for trial, (4) the duplicative expense of relitigation, and (5) the adequacy of the plaintiff's explanation for the need to dismiss.” Kwan, 634 F.3d at 230; see also Zagano, 900 F.2d at 14. “These factors are not necessarily exhaustive and no one of them, singly or in combination with another, is dispositive.” Kwan, 634 F.3d at 230.

         iii. Rule 12(b)(6)

         In reviewing a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a court must construe the complaint liberally, “accepting all factual allegations in the complaint as true and drawing all reasonable inferences in the plaintiff's favor.” Kim v. Kimm, 884 F.3d 98, 103 (2d Cir. 2018) (quoting Chambers v. Time Warner Inc., 282 F.3d 147, 152 (2d Cir. 2002)); see also Tsirelman v. Daines, 794 F.3d 310, 313 (2d Cir. 2015) (quoting Jaghory v. N.Y. State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997)). A complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Matson v. Bd. of Educ., 631 F.3d 57, 63 (2d Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)); see also Pension Ben. Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 717-18 (2d Cir. 2013). Although all allegations contained in the complaint are assumed true, this principle is “inapplicable to legal conclusions” or “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Iqbal, 556 U.S. at 678.

         b. Unopposed portions of the R&R

         Neither party objects to the following recommendations: (1) dismissal of the Amended Complaint with prejudice; (2) dismissal of Plaintiff's 12(b)(1) motion on the grounds that the Court retains jurisdiction over Defendants' compulsory counterclaims; and (3) dismissal of Defendants' Fourth counterclaim on mootness grounds. Finding no clear error, the Court adopts these recommendations.[6]

         c. Defendants' objections to the R&R

         Defendants object to the dismissal of the action without the imposition of the special conditions on Plaintiff. (Defs. Obj. 2.) As to the Rule 11 sanctions and attorneys' fees, Defendants argue that Judge Reyes erred by not finding that they were “successful in causing Plaintiff to abandon its attempt to secure a preliminary or permanent injunction removing D.P. from the school.” (Id. at 3.) In addition, Defendants argue that Judge Reyes should have considered their “proof” in the form of their allegations that the action was “commenced for the ulterior, now explicit, purpose of obtaining increased tuition payments from the DOE.” (Id.) Defendants also claim that Judge Reyes erred by not finding Plaintiff's reliance on Honig to be frivolous. (Id. at 9.) Defendants argue, inter alia, that Honig “cannot reasonably be read as allowing a nonpublic school . . . to bring an injunction . . . under the IDEA to expel and physically remove a student, ” and that Judge Reyes' reference to Maryhaven Center of Hope, Inc. v. Hacker, No. 12-CV-5793 (E.D.N.Y. 2012), as “precedent” was in error. (Defs. Obj. 11.) Defendants assert that the lack of case law applying Honig to private schools should create the inference that Plaintiff's argument was “so obvious[ly] [incorrect] to attorneys.” (Id. at 10-12.) Defendants also object to the dismissal of the conditions designed to prevent the removal of D.P. from Plaintiff's school because their concerns are not moot. (Id. at 2.) Defendants assert that Judge Reyes “erred in crediting Plaintiff's counsel's . . . representation that [Plaintiff's] contractual and regulatory compliance obligations with regard to D.P.'s continuing enrollment . . . expired at the end of the 2016-2017 school year.” (Id. at 2.) Defendants argue that Plaintiff has a general contract with the DOE for the period of July 1, 2015 to June 30, 2020 to provide services to students. (Id. at 7-8.) In their supplemental objections, Defendants also argue that the recent dismissal of Plaintiff's Article 78 proceeding has increased the likelihood of retaliation against D.P. (Defs. Suppl. Obj.)

         Defendants also object to dismissal of their counterclaims without prejudice. Defendants argue that Judge Reyes erred in finding compensatory damages unavailable under IDEA, specifically with regards to the contract claims. (Def. Obj. 2-4.) In particular, Defendants object to Judge Reyes' reliance on case law involving public schools which they argue is “irrelevant to [their] claim[s] against [Plaintiff], a nonpublic school.” (Def. Obj. 4.) Defendants also object to ...

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