In N.G.B. v. New York City Department of Education, 146 F.4th 195, 125 LRP 21666 (2d Cir. July 24, 2025), the Second Circuit applied the Individuals with Disabilities Education Act’s (IDEA) fee-shifting provisions to affirm an award of attorneys’ fees incurred after a rejected settlement offer, concluding that the parents were substantially justified in rejecting the offer despite ultimately obtaining less monetary relief than the amount proposed.
Under IDEA, attorneys’ fees may not be awarded for work performed after a written offer of settlement if the relief finally obtained is not more favorable than the offer. 20 U.S.C. § 1415(i)(3)(D). That limitation does not apply, however, if the parent is the prevailing party and was substantially justified in rejecting the settlement offer. Id. § 1415(i)(3)(E). The case arose after the parents prevailed in a due process hearing and later pursued attorneys’ fees in federal court.
The parents rejected a $17,000 settlement offer on their fees claim. The district court ultimately awarded $14,500 for fees incurred before the offer, reducing the requested amount after finding the claimed hourly rates excessive. It nonetheless permitted recovery of fees incurred after the offer, concluding that the parents were substantially justified in rejecting the settlement.
On appeal, the Second Circuit affirmed. The court held that prevailing parents should not be penalized for declining a settlement offer that they reasonably and in good faith believe fails to provide adequate compensation for the work performed. Quoting its own reasoning, the court explained that “it is inimical to the purpose of the IDEA to force prevailing parents to accept an offer that they reasonably and in good faith believe fails to provide adequate compensation.” The court adopted a standard focusing on whether the parents had a good-faith, reasonable basis for rejecting the offer.
Applying that standard, the court upheld the district court’s finding that substantial justification existed where the parents and their attorney reasonably believed the settlement offer did not account for work the district knew had been or would imminently be performed. The district had missed a court deadline, and the parents’ counsel had notified the district that work would begin on summary judgment. The billing records in the district’s possession were already two months old. The Second Circuit reviewed the district court’s determination for abuse of discretion and found none.
The court aligned its approach with the Third Circuit’s decision in Rena C. v. Colonial School District, 890 F.3d 404 (3d Cir. 2018), which emphasized good faith and reasonableness in evaluating rejection of settlement offers in IDEA fee disputes. It distinguished authority from other circuits, including a Fifth Circuit decision finding no substantial justification where a settlement offer was rejected before the school district knew the parent was represented by counsel and before significant attorney work had been performed. In a footnote, the court declined to follow the Ninth Circuit’s de novo standard of review for such determinations, reasoning that abuse-of-discretion review better avoids appellate micromanagement and satellite litigation over fees.
The decision reflects that rejection of a settlement offer under IDEA does not automatically foreclose recovery of post-offer attorneys’ fees, that courts must assess the reasonableness and good faith of the parent’s decision in light of what the offer covered and what work had been performed or was reasonably anticipated, and that district courts retain substantial discretion in making those determinations.