THE DERON SCHOOL OF NEW JERSEY, INC. et al v. THE UNITED STATES DEPARTMENT OF AGRICULTURE et al

Filing 307

OPINION. Signed by Judge Katharine S. Hayden on 9/3/13. (rg, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

THE DERON SCHOOL OF NEW JERSEY,
INC., et al.,
Plaintiffs,
v.
UNITED
STATES
DEPARTMENT
AGRICULTURE, et al.,

Civ. Action No. 09-3477 (KSH)
OF

OPINION

Defendants.

Katharine S. Hayden, U.S.D.J.
I. Introduction
Plaintiffs, the Deron School of New Jersey, Inc., ELO Incorporated, and KDDS Inc.—
corporate entities that own and operate for-profit schools serving children with disabilities—have
sued defendants the United States Department of Agriculture, the New Jersey Department of
Agriculture, the New Jersey Department of Education, and their respective chiefs for allegedly
discriminating against their students on the basis of disability and harming their businesses in the
process.

The Court held a six-day bench trial, after which the parties submitted written

summations.
Behind the litigation is the history of how the parties negotiated about, adjusted for, and
stopped negotiating about, remedial statutes perceived to be on a collision course. The basic
facts are not really in dispute, and so this opinion will begin with plaintiffs’ description of what
1

the case is about and why they brought it:
“The core facts of this case date back to 1984, when officials of the United States
Department of Agriculture (‘USDA’) met with officials of the New Jersey Department of
Education (‘NJDOE’) to formulate a plan to permit students attending the Deron Schools to
receive federally funded free and reduced-price school lunch even though the entity that owned
the Deron Schools, The Deron Schools of New Jersey, Inc. (‘Deron’), was a for-profit entity and,
therefore, statutorily prohibited from serving as a ‘sponsor’ under terms of the National School
Lunch Act. The plan devised by those officials was an arrangement in which a public entity, the
Montclair Board of Education, provided the meals and took responsibility for compliance with
program requirements at the Deron Schools. From then on, the Montclair Board included
Deron’s two school sites in its food service and received reimbursement for meals served to
income-eligible Deron students. The reimbursement was provided by USDA, through NJDOE
and later the New Jersey Department of Agriculture (NJDOA), which administered the programs
from 1997 on. In the mid-1990s, the arrangement was expanded to include Gramon School
(‘Gramon’) and Glenview Academy (‘Glenview’), whose owners also were for-profit entities.
The arrangement continued, without issue, until 2007.
“Then, without any warning or explanation, 1 NJDOA notified the Montclair board and
directors of the schools [ ] that the ‘workaround’ would be terminated. After unsuccessful efforts
at the State level to have that decision reversed, Plaintiffs filed this action, challenging the
termination of the workaround and seeking its reinstatement.” (Pls.’ Closing Br. 2–4.)

1

The record establishes that over a period of years, beginning in 2000, there was intra-agency
discussion, written and oral, as well as a formal memorandum on the issue of providing
reimbursement for meals served at for-profit schools. For purposes of describing how plaintiffs’
schools learned the Workaround was discontinued as to them, this statement is acceptable.
2

Having heard the testimony of the witnesses, reviewed the exhibits, and considered the
parties’ written summations, the Court, in accordance with Fed. R. Civ. P 52(a), sets forth its
factual findings and legal conclusions.
II. Factual Background
A. Introduction
Fed. R. Civ. P 52(a) directs the Court to make findings of fact. Here, the facts are not in
dispute; rather it is the implications that flow from them. The Court will therefore provide a
narrative, supported by citations to the operative statutes and the trial record, which, particularly
through the live testimony, provided the Court with context about the relevant events.
Plaintiffs called the following trial witnesses: Dr. David Weeks, the CEO of plaintiffs
ELO Incorporated and KDDS Inc.; Kenneth Alter, the owner and director of plaintiff The Deron
School of New Jersey, Inc.; Dr. Vito Gagliardi and Robert Davis, called as experts on matters
relating to the New Jersey public-school system; and Barbara Martin, a former employee of
defendant USDA. Defendants’ fact witnesses were Mary Jane Whitney and Cynthia Long, both
employees of defendant USDA; Elise Sadler-Williams, an employee of defendant NJDOE;
current and former employees of defendant NJDOA, Emily Lomerson, Janet Hawk, and
Katherine Attwood; and as an expert offered to rebut the opinions offered by Robert Davis, Dr.
William Hamm, an economist, testified.
The parties also submitted deposition excerpts from other witnesses. [D.E. 294, 297,
299.]
B. The Parties
Plaintiff The Deron School of New Jersey, Inc. is a New Jersey corporation that owns
and operates two private, for-profit schools for disabled students, Deron I and Deron II. (Joint
3

Stipulation of Facts (“JSF”) ¶¶ 1, 5.) Kenneth Alter is the owner and director of the schools,
which were founded by his parents. (T2:71:7–9, 14–15 (Alter).) 2 Deron serves students who
have been classified as having multiple disabilities. (T2:71:14–19 (Alter).)
Plaintiffs ELO Incorporated and KDDS Inc. are limited liability corporations in New
Jersey that own and operate, respectively, The Gramon School and Glenview Academy, both of
which are private, for-profit schools for disabled students. (JSF ¶¶ 2–3, 5.) The “Weeks family
partnership,” comprising Dr. David Weeks, his wife, and two children, owns the holding
company that owns the schools. Weeks and his wife are co-executive directors of the schools.
(T1:6:19–25, 119:25–120:5 (Weeks).) Their schools have traditionally served children with
emotional difficulties. (T1:93:11–13 (Weeks).) In this opinion, the Court will refer to the
plaintiff corporate entities together as “plaintiffs,” and to Deron, Gramon, and Glenview together
as “plaintiffs’ schools.”
Plaintiffs’ students have disabilities that cannot be adequately addressed by their local
public school districts. (JSF ¶ 59.) A majority of the students come from poor, urban New
Jersey municipalities. (See, e.g., J-39 – J-42 (charts identifying the residences of plaintiffs’
students and whether they qualify for free or reduced-price meals).) 3
Defendant the USDA is the federal agency responsible for overseeing the Meals
Programs. (T4:51:21-23 (Whitney).) Defendant Thomas J. Vilsack is its Secretary. The Court
will refer to these parties as the “Federal Defendants.”

2

Citations to trial testimony will be denoted by the transcript volume, e.g., T1 (volume 1), page
number, line, and witness.
3
References to Joint Exhibits will begin with the prefix “J,” and references to exhibits admitted
respectively by plaintiffs, Federal Defendants, and State Defendants will begin with the prefixes
“P,” “FD,” and “SD.”
4

Defendant NJDOE administered the Meals Programs in New Jersey until 1997, at which
point defendant NJDOA assumed the responsibility. (JSF ¶¶ 19–20.) The heads of those
agencies are named as defendants and together with the agencies will be referred to as the “State
Defendants.”
C. Relevant Statutory Framework
In 1946 and 1966, respectively, Congress enacted the National School Lunch Act, 42
U.S.C. § 1751 et seq., and the Child Nutrition Act, 42 U.S.C. § 1771 et seq., which created the
National School Lunch Program and the School Breakfast Program. Generally, these programs
provide for financially eligible school children to receive free or reduced-price lunch and
breakfast at school. The Court will refer to the programs together as the “Meals Programs” and
individually as the NSLP and SBP. The statutes were enacted in furtherance of Congress’s
declared policy “to safeguard the health and well-being of the Nation’s children,” and “[i]n
recognition of the demonstrated relationship between food and good nutrition and the capacity of
children to develop and learn.” 42 U.S.C. §§ 1751, 1771.
State governments administer the programs to schools under their jurisdiction, and must
observe various restrictions and regulations to receive reimbursement for the meals. A key
restriction is that reimbursement will only be provided for meals that are “served . . . in schools.”
Id. §§ 1753(b), 1773(b). And “school” is defined in the statutes as one that is “public or
nonprofit private.” Id. §§ 1760(d)(5), 1784(3). Additionally, only students who meet incomeeligibility restrictions, which are tethered to government-issued poverty guidelines, are entitled
to subsidized meals. Id. §§ 1758(b)(1), 1773(e)(1)(A).
Less than ten years after enacting the SBP, Congress passed the Rehabilitation Act of
1973, 29 U.S.C. § 701 et seq., finding that “individuals with disabilities continually encounter
5

various forms of discrimination in such critical areas as employment, housing, public
accommodations, education,” and others.

29 U.S.C. § 701(a)(5).

Rehabilitation Act, 29 U.S.C. 794(a), provides: “No

Section 504 of the

otherwise qualified individual with a

disability . . . shall, solely by reason of her or his disability, be excluded from the participation
in, be denied the benefits of, or be subjected to discrimination under any program or activity
receiving Federal financial assistance.” Regulations governing the USDA use nearly mirrorimage language to prohibit discrimination. See 7 C.F.R. § 15b.4(a) (“No qualified handicapped
person shall, on the basis of handicap, be excluded from participation in, be denied the benefits
of, or otherwise be subjected to discrimination under any program or activity receiving assistance
from this Department.”).
Operating in the foregoing context is another federal statute—the Individuals with
Disabilities Education Act (“IDEA”)—which provides that states receiving funding under IDEA
must ensure that students with disabilities are provided with a “free appropriate public
education.” 20 U.S.C. § 1412(a)(1)(A). What is appropriate depends in large part on a child’s
special needs: it may require minimal changes to the student’s normal course of education, or it
may require the child to be sent to an out-of-district school that caters toward students with his or
her disability, such as plaintiffs’ schools. A guiding principle in providing a free and appropriate
education, however, is that the child should be placed in the least restrictive environment—that
is, one that alters his or her normal course of education the least. Id. § 1412(a)(5).
D. The Out of District Placement Choice
In New Jersey, if a child does need an out-of-district placement, a process is triggered to
choose the appropriate setting. As David Weeks explained from the perspective of a school
being considered for placement of a public school student with special needs:
6

[A] child study team that’s usually a psychologist, I believe, a social worker and
an educator, a learning theorist . . . trigger[s] all sorts of evaluations. . . .
...
The purpose of these evaluations, I believe, is twofold. One is to
determine if a child is, in fact, eligible for special education services and related
services. And [the] second purpose is to . . . classify the youngster and determine
what sort of services are necessary. Should he be in district or [in an] out of
district program and questions of that sort. They can meet with an IEP team who
will help develop a plan for the youngster.
And if they have decided a youngster to go to [an] out of district school,
such as ours . . . a case manager . . . will take the child and parent to one, two,
perhaps even three different schools that they think might be appropriate for the
youngster.
. . . And I meet with this group that come[s] out after. And we provide a
tour and we discuss what the school has to offer, and we really talk with the
parent and the case manager [about] whether what we have, whether our
programs seem[] to be well-suited to what we understand the needs of the
youngster to be. . . .
If there’s a match . . . we. . . give the team a letter, saying, we will accept
the youngster. Ultimately, we send the state mandated contract of services to the
district where the Board of Education has to sign off on it. And once that’s signed
off, they arrange for transportation and the kid starts shortly thereafter.
(T1:20:17–22:7 (Weeks).)
One of plaintiffs’ experts, Dr. Vito Gagliardi, was a career NJ public-schools employee
and former superintendent of both the Washington Township public schools and the entire Union
County school system. He testified that “[e]very child that is in need of special education is so
unique that there are a combination of factors” that go into the placement decision. (T2:165:21–
22 (Gagliardi).) Once an out-of-district school is recommended for the child, “the
recommendation is then made to either an assistant superintendent or a director of the special
education of the school district. And ultimately to the superintendent of the schools, who must

7

then make the recommendation to the board of education for approval.”

(T2:162:16–20

(Gagliardi).)
If a child is placed in one of plaintiffs’ schools, that school becomes the equivalent of a
contractor providing services, for a fee, to the child’s public school district.

(T1:45:4–5

(Weeks).) Notwithstanding, the child will remain enrolled in and closely associated with his or
her public school district. Weeks testified that “[t]he student belongs to the district. He’s always
a resident student of the district. The district provides the IEP . . . . The district is custodian of
records. The child never leaves being a student of the district.” (T1:46:16–21 (Weeks).)
New Jersey regulations specify that the “educational program of a student with a
disability provided through contractual agreements . . . shall be considered the educational
program of the district board of education.” N.J.A.C. 6A:14-7.5(a). According to Gagliardi:
There’s no question . . . that they remain public school students. The records of
the youngsters, the financing of the program, all administrative fiscal and legal
issues remain the responsibility of the local district board of education.
(T2:156:3–7 (Gagliardi).)
If for some reason that child is placed out of district and somehow becomes
involved in a disciplinary matter . . . . [i]f that youngster would be suspended for
more than ten days, the private school cannot discipline that youngster without
approval from the local board of education[.]
(T2:171:19–25 (Gagliardi).) In addition, the child study team remains heavily involved with the
child’s education, evaluating quarterly progress reports and engaging in other informal
involvement, such as regular calls to the schools. (T1:29:1–10 (Weeks).)
E. Tuition
Under New Jersey regulations related to IDEA, each board of education must ensure that
“[s]tudents with disabilities, who are placed in private schools by the district board of education,
8

are provided special education and related services at no cost to their parents.” N.J.A.C. 6A:141.2(b)(12). As private, for-profit schools, plaintiffs charge tuition for educating their students,
and are permitted to add a 2.5% surcharge. N.J.A.C. 6A:23A-18.6.
The receiving private school gets paid by the sending district. Gagliardi testified that
each year, private schools serving special-needs students submit estimated tuition rates to the
state, which are then made available to public school districts. (T3:78:17–22 (Gagliardi).) At
the end of the year, the actual cost per student that is billed to the students’ public school districts
may differ from the estimate. (T3:78:23–79:1 (Gagliardi).) Any variance between the actual and
tentative rates for a given year is remedied through refunding or rebilling the sending district.
(T1:45:23–46:1 (Weeks).)

Defendants’ expert Dr. William Hamm reviewed the estimated

tuition of plaintiffs and 24 other New Jersey private schools and compared it to their final tuition
for each year that data was available. He found that the average difference at plaintiffs’ schools
was almost $1,400, and at the other schools the difference was $2,900.

(T5:55:21–57:7

(Hamm).) (Hamm testified that more often than not, the final tuition was higher than the
estimate. (T5:56:15–20 (Hamm)).)
If a school is an appropriate match for a student, cost should not sway the placement
decision. Gagliardi testified that “I have never come across a situation where an out of district
placement is recommended by a superintendent and was rejected [by a board of education]
specifically because of what the cost might be. They just want to make absolutely certain, that
we need to spend this money to meet this youngster’s needs in . . . the least restrictive
environment.” (T2:170:18–24 (Gagliardi).) Weeks testified that “the rules are quite clear, that
placement is not based on cost. You don’t place a kid in the cheapest environment. You place a
kid in the most appropriate environment.” (T1:28:11–14 (Weeks).)
9

While cost cannot be the dispositive factor, it is not irrelevant. According to Gagliardi,
Costs of any program is always a concern by the local board of education. They
are the ones in most cases that are running for office, and they want to be
absolutely certain that any costs for a particular program that is usually expensive
is not only necessary, but it is also serving the best needs of a particular
youngster.
(T2:170:4–9 (Gagliardi).) Plaintiffs’ other expert, Robert Davis, a consultant on educational
fiscal matters and former business manager for certain public school districts, gave similar
testimony:
I have asked child study team directors that I’ve worked with [if] all things were
equal and if there were, as you say, the possibility of a youngster being placed in
two or more schools and meeting the legal needs of receiving an education which
is appropriate for their disability, and is a least restrictive environment, would you
consider the costs when you place them there? I think the answer is not only
should they, or could they consider that cost, I think as a public official they have
a fiduciary responsibility on behalf of the taxpayers to provide the most cost
effective placement possible consistent with the statutes.
(T3:103:23–104:9 (Davis).)
F. The Workaround
Plaintiffs’ schools are not required by law to serve meals to their students, but they have
been doing so for decades. (T1:69:16–23; 116:12–23 (Weeks); T2:118:23–119:2 (Alter); JSF ¶¶
35–36.) Because they are neither public nor non-profit-private entities, however, they do not fit
the definition of a “school” under the Meals Programs’ enacting statutes. See 42 U.S.C. §§
1760(d)(5), 1784(3). Because the definition of child under the Meals Programs statutes is any
person “attending . . . [a] public or nonprofit private school,” plaintiffs’ children are not
technically included. Id. §§ 1760(d)(1), 1784(6).
On September 17, 1984, two NJDOE employees—Walter Colender and Kathy Kuser—
met with three employees of the USDA’s Mid-Atlantic Regional Office—Robert Freiler, Barbara
10

Martin, and Sallie Ellner—to discuss the Deron schools receiving the benefits of the Meals
Programs under the “sponsorship” of the Montclair Public School District. (JSF ¶ 41.) Soon
after that meeting, USDA employees wrote an internal memorandum and “draft position paper”
reflecting that an agreement had been reached, known thereafter as the “Workaround.” (JSF ¶¶
43–44.) The USDA’s memorialization of the meeting, which Ellner wrote, stated in part:
Derone 4 School and the Montclair S.D. have reached an agreement wherein, in
order to receive reimbursement under the NSLP for children attending the Derone
School, the Montclair District will completely take over the entire food service
from the Derone School; this will include the purchasing of food and the
placement of District personnel in the Derone School kitchen and cafeteria. Free
and reduced price applications will be disseminated and evaluated by the Derone
School, but the Montclair District will check the determinations. Montclair S.D.
will claim all children who participate, including those from other districts.
(J-2.)
According to the USDA memo, this arrangement was satisfactory and “would fulfill the
requirement of Section 504, which addresses the handicapped.” (Id.) Ellner, who is not a
lawyer, wrote in the accompanying position paper that Deron would become a “site” for food
service, but not a participating “sponsor” of the Meals Programs:
FNS Instruction 113-6, Civil Rights Compliance and Enforcement in the School
Nutrition Programs, denotes the requirement necessary to ensure Federal, State
and local compliance with the provisions of Title VI of the Civil Rights Act of
1964. One of the protected categories delineated is that of the handicapped,
which is addressed by Section 504 of the Rehabilitation Act of 1973. The
Department’s regulations on Section 504 include the following requirements:
...
“A recipient shall operate each assisted program or activity so that when viewed
in its entirety, it is readily accessible to and usable by qualified handicapped
persons.” Agency guidelines state that one method of fulfilling this requirement
is by means of “referrals to an accessible site.”
...
4

The memorandum and position paper misspelled Deron.
11

It is clear that in order to comply with Federal regulations , the Montclair S.D.
cannot withhold the benefits of participation in the NSLP from its handicapped
students. In this particular situation, the only way these students can participate in
the Program is to receive their meals at the Derone School. As stated above,
”referrals to an accessible site” is an acceptable method of compliance with
regulations.
...
. . . [T]he Montclair District must amend its agreement with the State Agency to
include the Derone School as an additional feeding site.
(Id. (emphasis in the original).) At her deposition in 2011, Ellner testified that “these kids were
in Deron not by choice, but because their disabilities required them to be there” and “the people
at [the] meeting concluded the Montclair workaround was required in order to meet these
students’ civil rights.” (Ellner Dep. 18:13–16; 22:25–23:6.) 5
Thus, in the mid-1980s income-eligible students in the Deron schools began receiving
meals through the Meals Programs. (JSF ¶ 35.) Alter explained the logistics: “Montclair
provided lunches to us. In the beginning, they made [ ] a fresh lunch and I remember actually
having to go pick it up in Montclair and drive it over when their vans broke down. At sometime
later, they switched to providing us with freezers.” (T2:87:17–22 (Alter).) Deron paid none of
the costs out-of-pocket, and, therefore, the arrangement had no effect on tuition. (T2:88:6–9
(Alter).)
After the Workaround began, NJDOE, and later NJDOA, regularly sent letters to private
schools that encouraged for-profit schools to find a third-party sponsor to establish a Meals
Programs protocol at their schools. (P-6, P-7, P-11, P-12 (letters from 1993, 1994, 1998, and

5

This testimony establishes that the Workaround came about because certain of the meeting
participants deemed that it was required. Whether that was the correct legal conclusion is, of
course, the basis of this lawsuit.
12

1999).) Weeks testified that he learned about Deron’s arrangement and contacted an NJDOE
official, who advised him to find a participating sponsor. (T1:53:18–54:1 (Weeks).) For two
years, the Morristown public schools acted as the sponsor for Gramon and Glenview, after which
the schools entered into an arrangement with Montclair that was nearly identical in operation to
Deron’s. (T1:54:2–57:8 (Weeks).)
G. The 2002 Memorandum
In 2000, the USDA was contacted about an issue concerning the Meals Programs that had
come up at the non-profit Katherine Thomas School in Rockville, Maryland. Several children
from the Washington, D.C. public schools had been placed at Katherine Thomas, which did not
participate in the Meals Programs. Concerned D.C. public school officials inquired about how
they could arrange for those children to obtain meals. Barbara Martin of the USDA, testified that
she and others at the USDA’s headquarters discussed whether the children were eligible for the
Meals Programs. (T3:196:18–197:25 (Martin); P-17.) Although the Katherine Thomas School
inquiry triggered agency discussions, Martin testified that there were other related “situations
which the headquarters office was looking at.” (T3:196:20–21 (Martin).)
An official response from the USDA was over a year in the making. In May 2001,
Martin wrote an email to a representative from the D.C. public schools and others indicating that
the USDA had reached a tentative conclusion:
We discussed this issue in general terms at our Program Directors’ meeting in
Denver last week. It appears we are going to say that schools are the entities
eligible to participate in the NSLP and if the school that the child is enrolled in
does not have the program -- there is no responsibility (through the NSLP) to feed
the child.
(P-21; T3:206:3–13 (Martin).)

13

On November 1, 2002, the USDA disseminated its position in a formal memorandum to
its regional directors. (J-6.) That memo provided that meals served in schools that were not
permitted to participate in the Meals Programs were not reimbursable. It left no ambiguity as to
the status of for-profit schools: “Meals may not be claimed for reimbursement by the placement
school, the home district, or another participating school (even if the home district or another
participating school provides the meal), if the meal is served in[] Schools that are not eligible to
participate.” (Id.) The memorandum also made clear that no exceptions would be made for
schools that serve disabled children. In a question-and-answer format, the memo provided:
Are there special considerations for pupil placement for students with
disabilities?
As previously mentioned, the key to whether the meals served to these children
may be claimed for reimbursement depends on whether the school at which the
meal is served participates in the NSLP/SBP.
(Id.) On November 26, 2002, the USDA Mid-Atlantic Regional Office—the office that covers
New Jersey—sent the memo to state child nutrition directors in the region. (JSF ¶ 26; J-9.)
H. The 2007 Notification
And then—nothing happened. For more than four years after the USDA issued the
memo, plaintiffs continued feeding their students through the Workaround. (JSF ¶¶ 35–36.)
That changed in 2007. According to the testimony of Janet Hawk, a former NJDOA employee,
New Jersey public schools sent letters each year to parents to inform them about the availability
of the Meals Programs. Around 2007, the NJDOA transitioned to a web-based system for
schools to complete the paperwork, and the new system was programmed such that Montclair
personnel could not alter the letterhead for the mailings going to the parents of plaintiffs’
students. Montclair contacted the NJDOA about getting alternate letterheads, which alerted the
14

NJDOA to the fact that Montclair was being reimbursed for meals served in for–profit schools.
NJDOA contacted the USDA and was told that the arrangement was impermissible. (T6:40:3–
43:11 (Hawk).)
In July 2007, Weeks and Alter were notified that their schools would no longer get
federally subsidized meals. Weeks emailed an official of the NJDOE, James Verner, telling him:
“I am sure you would agree that our students should not be discriminated against solely because
of the organizational structure of the school to which they are sent (and over which neither they
nor their families nor their sending districts have any control).” (P-62.) Alter called Verner and
sent a letter to Katherine Attwood, then the Assistant Commissioner of the NJDOE Division of
Finance, which said in part, “Not allowing us to continue in this program after 30 years is purely
discriminatory and hurts the children who are some of New Jersey’s most vulnerable.” (J-14.)
Attwood responded,
[A]ccording to the [federal regulations] and the enclosed memorandum from the
United States Department of Agriculture, profit schools/institutions are not
eligible to participate. . . . [U]nfortunately this decision was . . . based on federal
law over which the department has no jurisdiction. . . . [B]ut we are committed to
trying to enable schools like Deron to continue to be in the program.
(P-75.) Less than a month later, on August 10, 2007, Emma Davis-Kovacs, Director of the
NJDOA’s Division of Food and Nutrition, sent a letter to Montclair’s School Business
Administrator to inform her that after December 31, meals served at the schools would not be
reimbursed through the Meals Programs. (J-15.) The Workaround was discontinued as of
January 1, 2008.
I. Aftermath
Plaintiffs’ students who are income-eligible continue to receive subsidized meals of the
same nutritional quality as they did during the years of the Workaround. (T1:50:21–51:8,
15

116:20–117:9; T2:29:8–32:11 (Weeks); T2:91:20–23 (Alter).) Alter continues to tell students’
parents that his schools participate. (T2:117:22–118:1 (Alter).) Weeks has no reason to believe
his children can tell the difference. (T2:32:13–14 (Weeks).)
What has changed is the underlying process. Now, plaintiffs include the cost of the
meals they serve financially eligible students in the tuition they charge the sending districts, a
practice permitted under New Jersey regulations, which also permit for-profit schools to add a
2.5% surcharge on all allowable expenses. N.J.A.C. 6A:23A-18.6; (T1:84:10–12, T2:31:21–
34:18 (Weeks); T2:118:3–12 (Alter).)
Since the Workaround ended, plaintiffs’ schools’ annual tuition per student has increased
by $11,584. (T3:87:6–7 (Davis).) Of that amount, $390 is attributable to the inclusion of food
costs. (T3:87:7–9 (Davis).) Over all, food costs account for about three percent of the total
increase since 2007, and amount to less than one percent of the total tuition charged by plaintiffs’
schools. (T3:87:10, 111:18–20, 113:8–15 (Davis).)
In that same time period, enrollment at the schools has declined. The following Average
Daily Enrollment statistics, the figure used by auditors to calculate the actual cost per student,
are contained plaintiffs’ financial audits:
Fiscal Year Ending June 2007

Fiscal Year Ending June 2012

Deron I

133.2333

100.2857

Deron II

141.2262

120.2929

Glenview

75.1952

40.9095

Gramon

63.7762

29.9238

(J-16 – J-18, J-46 – J-48.) The drop in enrollment has hurt plaintiffs financially, and they have
tried a few remedial measures, including lay-offs, freezing salaries and pension contributions,
16

adding autism programs, and advertising. (T1:92:25–94:2 (Weeks); T2:92:22–93:5 (Alter).)
Weeks testified that if enrollment continues to drop, the viability of his schools could be
threatened. (T1:94:14–95:11, T2:68:4–17 (Weeks).)
III. Procedural History
In 2009, the schools filed a thirteen-count complaint, bringing some claims on behalf of
themselves and some on behalf of their students. [D.E. 1.] They alleged that defendants’
decision to end the Workaround violated the Rehabilitation Act, IDEA, the Equal Protection
Clause of the Fourteenth Amendment to the United States Constitution and Article I of the New
Jersey Constitution, the Administrative Procedures Act, the Takings Clause of the Fifth
Amendment, the ADA, the New Jersey constitutional guarantee to a “thorough and efficient”
free education for all children; they also brought a claim for equitable estoppel and requested the
Court to issue a writ of mandamus. The complaint survived defendants’ motion to dismiss.
[D.E. 41.]
In August 2011, plaintiffs notified the Court of their intent to abandon these claims: (1)
equitable estoppel as to Federal Defendants only; (2) IDEA as to Federal Defendants only; (3)
APA as to State Defendants only; (4) Takings Clause as to State Defendants only; (5) ADA as to
Federal Defendants only; (6) writ of mandamus as to State Defendants only; and (7) the right to a
thorough and efficient education under the New Jersey Constitution as to all defendants. [D.E.
177.] In that same letter, plaintiffs informed the Court that New Beginnings, one of the thennamed plaintiff schools, which is owned by Weeks, was dropping its claims because it lacked a
sufficient injury to assert that it had standing to sue. After discovery closed, the Court granted
summary judgment to the defendants as to plaintiffs’ claims under the Equal Protection Clauses
of the federal and state constitutions, IDEA, the Takings Clause, equitable estoppel; denied their
17

request for a writ of mandamus; and preserved the claims under the Rehabilitation Act, ADA,
and APA. [D.E. 194 (“Summary Judgment Op.”).] The Court further held that “[t]he APA
claims are analytically distinct from the other claims . . . . Consequently, logic and efficiency
weigh in favor of denying, without prejudice, the Federal Defendants’ motion for summary
judgment on the APA until after the bench trial is decided.” (Summary Judgment Op. 31.)
A six-day bench trial was held on plaintiffs’ Rehabilitation Act and ADA claims, during
which defendants’ challenge to plaintiffs’ standing to bring the claims was fully aired. After
testimony closed, the Court directed the parties to submit written closing arguments. [D.E. 302–
04.]
IV. Analysis
A. Introduction
In their closing statement, plaintiffs argue that they demonstrated that their students have
been discriminated against on the basis of their disabilities. They reason that the evidence
showed that the students are required to attend their schools precisely because of their
disabilities, and a consequence of that placement is that they are not receiving the same federal
benefits as their non-disabled peers. The fact that they are receiving subsidized meals through
tuition paid by their local school districts does not lessen the injury, plaintiffs assert, because
“[t]he law does not permit the government to deny a benefit on the ground that a third party will
step into the breach.

Nor does the law require a person to forgo a benefit, or to suffer

discrimination in its administration, simply because he or she is able to do without it.” (Pls.’
Closing Br. 58.)
Plaintiffs argue they demonstrated that they too have been injured because they now have
to include food costs in tuition, causing it to rise; the increased tuition has made them less
18

attractive to sending districts, causing a decrease in enrollment; and the decreased enrollment has
injured their fiscs 6 and forced them to take protective financial measures. (Pls.’ Closing Br. 48.)
Plaintiffs conclude by asking the Court “to reinstate the workaround or provide another equally
effective accommodation.” (Id. 60.)
Defendants challenge plaintiffs in particular on the question of standing. They argue that
plaintiffs lack standing to sue independently because the evidence shows that the Workaround
did not cause the schools’ declining enrollment and its collateral consequences. (Fed. Defs.’
Closing Br. 23–36.) As to third-party standing, defendants contend that the students have not
suffered any injury: they are receiving the same quality, free and reduced-price meals as they
were getting under the Workaround. (Id. 37.) Substantively, defendants argue that plaintiffs did
not prove each element of their claims because the students’ ineligibility is not based on their
disabilities, but on the for-profit structure of the schools they attend. And to permit them to
receive federally subsidized meals would be to directly contravene the Meals Programs statutes
and would not be a reasonable accommodation, which is the paramount consideration of a
Rehabilitation Act claim. (Id. 6–12.)
After hearing the trial testimony, reviewing the exhibits introduced into evidence, and
reading the closing arguments, several things are clear to the Court. Plaintiffs mounted an uphill legal challenge, both for business reasons and out of genuine concern for their students.
Ultimately they distilled the varied procedural and substantive arguments that have come up

6

This opinion would not be complete without acknowledging the short and unhappy life of the
term “fiscal death spiral.” This hyperbolic description of the financial impact on plaintiffs
summoned up the defendants’ scorn in writing and on the record. That plaintiffs failed to
support it and quickly sought a dignified retreat from the term, represents one of the vagaries of
litigation that every lawyer dreads.
19

since the complaint was filed, into the position that the Workaround is an accommodation that
the law requires and the Court must therefore reinstate.
In this, plaintiffs are repeating what Sallie Ellner espoused in her memo of 1984. But the
Workaround came about through mutual brainstorming by Montclair school officials and USDA
personnel, who hit upon a device that served everyone’s interests—not through litigation. Once
well tested jurisprudence is introduced into the situation, it is problematical that this is at its heart
an accommodation case, and even assuming it can be fairly characterized as such, there is a
predicate issue. Plaintiffs’ proofs are tenuous at best on whether increased tuition has had any
meaningful effect on their enrollment. And plaintiffs’ students are still obtaining nutritional,
subsidized meals. This weighs heavily against plaintiffs when the Court considers, as it must at
this juncture and with the full benefit of a trial, the question of plaintiffs’ standing.
The Court recognizes that this threshold issue has consistently been defendants’ rallying
cry. The somewhat intricate nature of how school districts have responded to their mission of
providing an appropriate education for disabled students warranted, in the Court’s estimation, a
fuller exposition of how things work (for want of a better term) than motion practice could offer.
Plaintiffs responded with two good expert witnesses who explained the connection between
public schools and private placement, but neither was able to tether the discontinuation of the
Workaround to declining enrollment.

Indeed, because their experts were knowledgeable,

plaintiffs’ proofs supported defendants’ arguments that far more than a 3% increase in tuition is
involved in how private schools offering specialized educational services will fare in the future.
The somewhat murky testimony on how plaintiffs’ schools’ business practices have been
affected also failed to add up to a persuasive showing of harm. The testimony of those who have
the most knowledge about the effect of the Workaround and post-Workaround on the students—
20

Weeks and Alter—conclusively established that the same meals are being provided and there is
no plan to discontinue them, and that the cost is ultimately borne by the school districts, not
plaintiffs.
B. Standing
The law of standing is familiar: “To establish Article III standing, an injury must be
‘concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and
redressable by a favorable ruling.’” Clapper v. Amnesty Int’l USA, 568 U.S. – , 133 S. Ct. 1138,
1147 (2013) (citation omitted). When a plaintiff sues to vindicate the rights of third parties not
before the Court, there are additional preconditions to suit: “1) the plaintiff must suffer injury; 2)
the plaintiff and the third party must have a ‘close relationship’; and 3) the third party must face
some obstacles that prevent it from pursuing its own claims.” Pa. Psychiatric Soc. v. Green
Spring Health Servs., Inc., 280 F.3d 278, 288–89 (3d Cir. 2002).
a. Plaintiffs’ Independent Standing
At the outset, the Court finds that throughout this litigation plaintiffs have attempted to
demonstrate they have been injured by the cessation of the Workaround in the following way:
with increased tuition caused by including food costs, they have become less attractive to
sending districts relative to other private schools serving disabled students, which has resulted in
a decrease in enrollment and efforts to deal with lost revenue. That this is plaintiffs’ theory has
been borne out by prior motion practice as well as the factual evidence and expert testimony they
elicited at trial. To meet the causation prong of standing, therefore, plaintiffs had to demonstrate
to the Court that “the alleged injury-in-fact is causally connected and traceable to an action of the
defendants.” The Pitt News v. Fisher, 215 F.3d 354, 360 (3d Cir. 2000). While the “causal
connection need not be as close as the proximate causation needed to succeed on the merits of a
21

tort claim,” Toll Bros., Inc. v. Twp. of Readington, 555 F.3d 131, 142 (3d Cir. 2009), plaintiffs
still had to make an evidence-based showing that they have suffered a decline in enrollment
because of defendants’ actions and not “‘the independent action of some third party not before
the court,’” Simon v. E. Kentucky Welfare Rights Org., 426 U.S. 26, 42 (1976). Keeping in mind
that standing is being tested in a trial, not on motion, the Court is guided by the observation of
the Third Circuit that while “[a] plaintiff need not prove causation with absolute scientific rigor
to defeat a motion for summary judgment,” the court added in a footnote that “[o]f course,
plaintiffs must, if challenged, prove their allegations at trial.” Pub. Interest Research Grp. of
New Jersey, Inc. v. Powell Duffryn Terminals Inc., 913 F.2d 64, 72 & n.7 (3d Cir. 1990). At a
minimum, Article III requires a plaintiff “to establish that, in fact, the asserted injury was the
consequence of the defendants’ actions, or that prospective relief will remove the harm.” Warth
v. Seldin, 422 U.S. 490, 505 (1975).
Expert testimony established, without dispute, that annual tuition has increased by
$11,584 since the end of the Workaround.

(T3:87:6–7 (Davis).)

Albeit food costs have

contributed less than $400 to that increase (T3:87:7–9 (Davis)), basic economic principles and
common sense suggest that when the price of something goes up, demand goes down. But
notwithstanding the superficial appeal of the argument, Weeks and Alter were unable to establish
that they actually have lost any students as a result of including food costs in their tuition.
Weeks and counsel for the Federal Defendants had the following exchange:
Q. Okay. Do you know if [ ] any of the declining enrollments that you have
experienced can be attributed to having to feed the kids? Having to incur the food
costs?
A. I don’t actually know that. But I believe firmly as prices go up referrals go
down.
22

(T1:92:18–92:24 (Weeks).)
Q. . . . No sending district has informed you that it refused to send a student to one
of your schools because tuition rose since the end of the workaround, correct?
A. That is correct.
(T2:26:21–25 (Weeks).) When Alter was asked whether he “lost any students as a result of the
end of the workaround,” he responded, “I don’t know specifically.” (T2:99:15–17 (Alter).) At
his deposition, Ron Alter, the founder of the Deron schools was asked, “Do you know whether
any sending district has not sent a student to Deron because of tuition increases?” He answered,
“I do not know specifically that it was because our tuition has increased.” (R. Alter Dep. 72:24–
73:2.)
Plaintiffs’ experts did not bolster their claims either. Gagliardi testified that “cost is
always a consideration for [the] local board of education.” (T2:179:21–23 (Gagliardi).) He
emphasized that sending districts are sensitive to costs and want to ensure that an out-of-district
placement is justified before agreeing to the contract. (T2:163:6–17, 165:3–13, 182:17–25
(Gagliardi).) But he could not testify to what extent cost in general or cost directly attributable to
meals has affected enrollment at plaintiffs’ schools. (T3:35:12–16, 36:7–16 (Gagliardi).)
Robert Davis testified that the increase in tuition attributable to food costs is a
“contributing,” but not sole, factor to plaintiffs’ declining enrollment. (T3:109:11–21; 120:11–
13; 122:7–11; 133:25–134:3; 135:8–9 (Davis).) He said that increased food costs are especially
problematical at plaintiffs’ schools because, unlike non-profits, increased tuition raises the
surcharge that plaintiffs bill to sending districts. (T3:109:11–15 (Davis).) Davis said that he
would not be surprised if a district business administrator thought a $400 made a difference
when considering a private placement; he added, “I would make a decision based on $200.”
23

(T3:100:1–9 (Davis).) However, he testified that he did not know “how much of a decrease in
enrollment . . . was attributable to the 3 percent increase in food service costs.” (T3:119:24–
120:3 (Davis).) Moreover, he said several times that factors other than increased costs could
have caused the decline in enrollment at plaintiffs’ schools, and he did not run a test to exclude
them as the sole causes. (T3:122:22–123:2; 125:11–13, 135:20–22 (Davis).) He also testified
that his conclusions were based on his experience in the public education field and conversations
with school officials regarding whether they “look at costs as a factor when all other things are
equal and there are multiple schools which can provide an appropriate education for youngsters’
handicap[s] . . . . Just did [they] consider costs.” (T3:120:25–121:10 (Davis).) But when he was
asked, “[D]id you speak with any superintendent in any district that sends students to plaintiffs’
schools, and did you ever ask them whether or not they are going to or not going to send a
student to one of the schools because of costs,” he said he had not. (T3:150:18–25 (Davis).)
And the conversations he referenced were not limited to districts considering sending students to
plaintiffs’ schools—in fact, it is unclear from his testimony whom he spoke with.
Thus plaintiffs’ evidence from both its fact witnesses and its experts, was at best
inconclusive about the effect of the Workaround’s discontinuation on enrollment.
In contrast, defendants’ expert Hamm testified that sending districts find out about the
tentative tuition rate at the time a placement decision is made, and it often varies substantially
from the final tuition—on average by $1,400 at plaintiffs’ schools and by $2,900 at certain other
private schools. (T5:55:19–57:7 (Hamm).) So sending districts do not know the final cost of the
service they will be paying for. Moreover, it is unlikely that differences less than $400 in
tentative tuition rates would affect a placement decision; anticipated savings could easily be lost
at the end of the year if the final costs vary by thousands of dollars. (T5:144:17–145:4 (Hamm).)
24

In addition to the uncertain price tab, in Hamm’s words, special education is “an essential
product,” not a discretionary expense, because sending districts are required to provide disabled
students with a free appropriate public education in the least restrictive environment. (T5:61:18–
22 (Hamm).) Thus, if a particular school is an appropriate setting, changes in price cannot affect
the decision to place the child there. This point was echoed by plaintiffs’ witnesses. For
example, Gagliardi said, “I have never come across a situation where an out of district placement
is recommended by a superintendent and was rejected specifically because of what the cost
might be.” (T2:170:18–21 (Gagliardi).) And plaintiffs elicited testimony from Weeks and
Gagliardi that established how fact-sensitive the placement process is and how an appropriate
education is one that is uniquely tailored for each individual child. Thus, in closing, plaintiffs
paraphrase Gagliardi’s testimony: “other school options, including nonprofit options, may exist,
but [they] would not necessarily be appropriate.” (Pls.’ Closing Br. 28–29.) If that is the case,
and one of plaintiffs’ schools is deemed to be the appropriate setting for a student, then tuition
does not affect the sending district’s placement decision. “[T]he rules are quite clear, that
placement is not based on cost. . . . You place a kid in the most appropriate environment.”
(T1:28:11–18 (Weeks).) Plaintiffs do not argue that the rules are being broken, and the hint 7
that they might be, can’t substitute for evidence.

7

When questioned about his belief as to why enrollment at his schools was declining, Weeks
provided an answer that indicated he believes that some school districts have made the costs of
placement dispositive: “[W]e have heard repeatedly that the Superintendent of Schools has been
leaning heavily on the Department of Ed about the costs of private schools. And from that I
would extrapolate that there’s implicit direction to Special Ed Child Study Teams to place
youngsters in less expensive schools.” (T1:92:4–9 (Weeks).) “Extrapolated,” and “implicit
direction” is insufficient evidence on this point, which plaintiffs do not press in their arguments.
25

Hamm compared plaintiffs’ tuition with 24 other private schools that are in the “general
area of the plaintiffs’ schools that have similar tuition” 8 for the five years since the Workaround
ended. He then compared the differences to the increase in plaintiffs’ tuition attributable to food
costs for each of those years. Using those data sets, he came up with 444 observations and was
able to determine for each whether food costs caused plaintiffs’ schools to become a more
expensive placement. (T5:65:24–66:20 (Hamm).) His conclusion was that “in 440 out of 444
cases, the plaintiff school’s [tentative] tuition either exceeded the competitors by more than the
increase in food service costs or was still below the competitors and thus, very unlikely to have
made a difference in placement decisions.” (T5:67:8–14 (Hamm).) In over 99% of the cases,
then, food costs did not mathematically affect plaintiffs’ competitive position.
Plaintiffs’ own witnesses acknowledged that enrollment has declined at most New Jersey
private schools that serve disabled children. (T3:109:5–7 (Davis); T2:26:13–20 (Weeks).) Since
2007, the total number of children in New Jersey that need special-needs services has dropped,
as has the number of disabled children that require out-of-district placements. (T5:78:17–79:8,

8

At trial, the parties disputed how to characterize these other schools. Relying on the way
plaintiffs had prefaced the answer to the interrogatory in which they provided the names of these
schools, defendants attempted to pin plaintiffs into conceding that they were “competitor”
schools where their students could attend and receive an appropriate education. (T4:147:3–19
(Sandberg).) Plaintiffs, on the other hand, represented at trial that, although they called the
schools “competitors” in the interrogatory answer, the schools were in actuality those in the
“general area of the plaintiffs’ schools that have similar tuition.” (T4:149:18–24 (Liss).) With
that said, this semantic sparring has no effect on Hamm’s analysis. Plaintiffs were unwilling to
say that they had any competitors (which severely hampers their standing argument) and, without
objection, Hamm—a rebuttal expert—testified that Davis used a subset of these same schools
when preparing his expert report. (T5:57:8–16 (Hamm).)
The real implication of whether or not plaintiffs have competitors went toward a
substantive issue under the Rehabilitation Act: whether plaintiffs’ students lack access to the
Meals Programs benefits solely based on their disability, or whether they have access to the
benefits at non-profit schools where they could receive an appropriate education. For reasons
explained below, the “competitor” issue is not outcome determinative.
26

80:18–22 (Hamm).) Weeks and Alter testified about NJDOE’s intensified effort to educate
disabled children in their local school districts. (T2:45:7–47:23 (Weeks); T2:139:13–140:2
(Alter).) For example, in recent years, NJDOE has been providing training so that public school
can provide appropriate services to disabled children in district. (T2:45:23–46:1 (Weeks).)
Interestingly, plaintiffs are doing relatively better than many other schools in terms of
enrollment: Hamm testified that plaintiffs’ enrollment is down 21% since 2006, whereas all
separate setting schools are down 31% during that same time period. (T5:91:15–22 (Hamm).)
Plaintiffs had to “establish standing in the same manner as would be required to prevail
on the ultimate merits of their case.” ACLU-NJ v. Twp. of Wall, 246 F.3d at 261. “Thus, at the
trial stage, particularly where—as in this case—the defendant contests the bases for standing, the
plaintiff bears the burden of establishing that the elements of standing are satisfied by a
preponderance of ‘the evidence adduced at trial.’” Am. Booksellers Found. For Free Expression
v. Dean, 202 F. Supp. 2d 300, 311 (D. Vt. 2002), aff’d in part, modified in part sub nom., Am.
Booksellers Found. v. Dean, 342 F.3d 96 (2d Cir. 2003) (footnote and citation omitted).
Plaintiffs, therefore, had to demonstrate that the termination of the Workaround caused at least
some decrease in enrollment and the collateral effects about which they complain. They offered
no direct evidence in support. Based on plaintiffs’ reliance, when all is said and done, on general
theories of supply and demand; the absence of specific evidence on cause and effect; and their
failure to refute the defendants’ expert (beyond attacking his credentials), the Court is
constrained to find that plaintiffs’ proofs on causation fall short of the quantum needed to
establish individual standing.

27

b. Third-Party Standing
In order to sue on behalf of person not before a court, the named plaintiff must also be
injured by the defendants’ conduct. Pa. Psychiatric Soc., 280 F.3d at 288; Amato v. Wilentz, 952
F.2d 742, 749 (3d Cir. 1991). Because, as discussed above, plaintiffs have not been injured by
the Workaround’s cessation, they lack third-party standing to sue on behalf of their students.
The Court finds that they lack third-party standing for another reason as well.
Throughout, defendants have challenged plaintiffs’ third-party standing on the ground
that plaintiffs’ students have not been injured. Establishing an injury for Article III purposes
requires “‘a factual showing of perceptible harm.’” Summers v. Earth Island Inst., 555 U.S. 488,
499 (2009) (quoting Lujan, 504 U.S. at 566).

If the injury has not actualized, it must at

minimum be “imminent.” See Clapper v. Amnesty Int’l, 133 S. Ct. at 1147.
Plaintiffs have asserted that their students’ injury is the fact that they no longer are
receiving meals through the Meals Programs. That the state has stepped into the void left by the
USDA is not a remedy, plaintiffs say, because the students are being treated differently than their
non-disabled peers. And plaintiffs contend that differential, in it and of itself, is a sufficient
injury. (Pls.’ Closing Br. 57–59.)
The Court finds otherwise. Plaintiffs’ theory is that this case is about accommodating
their disabled students so they receive the same Meals Programs benefits as their non-disabled
peers. They have characterized their lawsuit as “a reasonable accommodation case,” and urge
the Court to restore the Workaround or some other effective means of getting the benefits of the
Meals Programs to their eligible students. (T4:39:25–40:6 (Van Deventer).)

At trial, the

evidence showed that an effective means is in place—that, in fact, an accommodation has been

28

arrived at. For example, there was an exchange during cross-examination of Weeks by counsel
for the State Defendants:
Q. And [the meals] are still meeting the same nutritional guidelines established
by the USDA as they did before the workaround terminated in 2007, yes?
THE COURT: So the difference I have now is you didn’t pay the vendor, the
vendor worked for free, [ ] as it were, and now you do pay the vendor;
everything else is as going on as before?
THE WITNESS: That's correct.
THE COURT: All right.
Q. As far as students are concerned, there’s no difference?
A. Correct. Or at least I hope so.
(T2:32:4–14 (Weeks).) Similarly, Alter has not informed his students’ parents that Deron is no
longer participating in the Meals Programs; in fact, he continues to tell them that the school does
participate. “The same meals and everything is the same. The children and the parents don’t
know any different.” (T2:117:25–118:5 (Alter).)

When the students and their parents “don’t

know any different,” it is incongruent for the Court to order the relief sought based on the finding
that an imperceptible change has caused a perceptible injury.
The Court previously expressed concern that plaintiffs’ students are relying on the
“kindness of strangers” for their meals, in its opinion preserving the Rehabilitation Act and ADA
claims on summary judgment. (Summary Judgment Op. 20 (quoting MTD Hrg. Tr. 55:19–
56:20).) The testimony at trial indicated otherwise. The state is not bending the rules or going
out of its way to subsidize the students’ meals: the meals are “allowable costs,” which, under
state regulations, can be included in tuition billed to sending districts. See 6A:23A-18.5(a)(20)
(identifying what food costs are not allowed to be included in tuition); (T2:32:23–34:7 (Weeks);
29

T2:116:4–118:12 (Alter).) Thus, as long as plaintiffs comply with regulatory requirements
concerning nutritional quality and the collection of money from students who are not eligible for
free lunch, their eligible students will continue to receive subsidized meals.
With the meals an allowable cost to be passed on as part of tuition, whether plaintiffs’
students continue to receive them depends on plaintiffs’ discretion. Alter and Weeks did not
testify that they intend to stop serving meals. To do so, they said, would negatively affect their
students and would be bad for business. Weeks said, “I want as much as possible to avoid it,
because I really do believe that our schools would go desperately downhill if we eliminate it.”
(T2:68:7–9 (Weeks).) Alter said he feeds the children out of a moral obligation: “it’s the right
thing to do”; and that Deron’s “students are just so economically disadvantaged and so poor it
would be immoral not to serve meals.” (T2:91:24–25, 118:17–19 (Alter).) There is no evidence,
therefore, that the schools plan to stop serving meals and put their students at risk of an imminent
injury.
Because there is no perceptible effect on the students, this case is a poor fit within the
third-party standing paradigm. To illustrate: in Craig v. Boren, 429 U.S. 190 (1976), a beer
vendor sought declaratory and injunctive relief against Oklahoma laws that permitted the sale of
beer to women 18 and older and to men 21 and older. The vendor claimed the state laws were
unconstitutional because “such a gender-based differential” denied males 18–20 years of age the
equal protection of the laws. Id. at 192. While the female vendor’s own equal protection rights
were not threatened, the Supreme Court held she had third-party standing because the laws at
issue “plainly . . . inflicted ‘injury in fact’ upon” her: she either complied with them and lost the
market share of males between 18 and 20, or broke them and risked punitive consequences. Id.
at 194. Because the laws caused her palpable harm, the Court held that she was “entitled to
30

assert those concomitant rights of third parties that would be ‘diluted or adversely affected’
should her constitutional challenge fail”—namely the ability of “males 18-20 years of age to
purchase 3.2% beer despite their classification by an overt gender-based criterion.” Id. at 195,
196.
Unlike the laws at issue in Craig, which undisputedly caused the vendor harm, here, there
simply is no proof that the termination of the Workaround is the cause of plaintiffs’ drop in
enrollment. Similarly, plaintiffs have not shown that any harm has been inflicted, or imminently
will be inflicted, upon their students, 9 which again is unlike Craig, where males between 18 and
20 were denied constitutional rights and prevented from purchasing beer. Plaintiffs’ students
have not been impaired from receiving what are, effectively, the benefits of the Meals Programs.
By trying to fit their facts into the third-party standing framework, plaintiffs took on a difficult
challenge, and they have not met it.
C. Rehabilitation Act & ADA Claims
Although not required based on the foregoing conclusion on standing, the Court will
address the substantive claims.
To succeed on the merits of both the ADA and Rehabilitation Act claims, plaintiffs had to
establish that their students (1) have disabilities; (2) are otherwise qualified to participate in the
Meals Programs; and (3) were denied the benefits of the programs because of their disabilities.
Chambers ex rel. Chambers v. Sch. Dist. Of Philadelphia Bd. of Educ., 587 F.3d 176, 189 (3d
Cir. 2009). The Rehabilitation Act also requires a showing that the program receives federal

9

In its research, the Court was hard-pressed to find many cases where third-party standing was
challenged on the grounds that the absent party’s rights had not been harmed. This is
unsurprising and further exposes the weaknesses in plaintiffs’ theory.
31

assistance. Id. at 189 n.20. In its summary judgment opinion, the Court narrowed the triable
issues to the second and third elements:
Here, there is no dispute as to the first and fourth elements: the students are
handicapped within the meaning of the Act, and the program is funded by the
USDA and administered by NJDOA. The disputes arise over whether the
students are ‘otherwise qualified’ and whether they have been excluded solely by
reason of their handicaps.
(Summary Judgment Op. 26.) At trial, plaintiffs bore the burden of establishing the elements of
their claims by a preponderance of the evidence. See K.R. ex rel. Riley v. Sch. Dist. of
Philadelphia, 373 F. App’x 204, 208–09 (3d Cir. 2010).
“An otherwise qualified individual is a person who can meet all of a program’s
requirements in spite of a disability, with or without reasonable accommodation.” Millington v.
Temple Univ. Sch. of Dentistry, 261 F. App’x 363, 366 (3d Cir. 2008); see also Southeastern
Cmty. Coll. v. Davis, 442 U.S. 397, 406 (1979). “‘The standard for reasonableness under the
ADA does not differ from the one employed under the Rehabilitation Act.’” Halpern v. Wake
Forest Univ. Health Sciences, 669 F.3d 454, 462 n.5 (4th Cir. 2012) (citation omitted). A
reasonable accommodation is one that would enable plaintiffs’ students to meet the basic
requirements of the Meals Programs. Millington, 261 F. App’x at 366. But an accommodation
is unreasonable if defendants can show that it would require a fundamental alteration to, or the
modification of an essential aspect of, the programs. Id. at 367; Halpern, 669 F.3d at 464.
Plaintiffs contend that their students are qualified to receive the Meals Programs’ benefits with
reasonable accommodation—the Workaround. (Pls.’ Closing Br. 25–27.)
Federal Defendants argue that the Workaround is simply not a reasonable
accommodation. They contend that the participants at the 1984 meeting made a mistake and
created the Workaround without proper authority. (Fed. Defs.’ Closing Br. 11–12; T4:55:23–
32

56:24 (Whitney).)

They assert that “the law prohibits for-profit private schools from

participating in the Workaround” and that “[t]he exclusion of for-profit schools from the School
Meals Programs is an essential aspect of those programs.” (Fed. Defs.’ Closing Br. 12, 20.) To
allow reimbursement for meals served at for-profit institutions would open the Meal Programs
up to entities that were never meant to participate. (Id. at 20.)
The Statutes permit the USDA to subsidize only meals “served in” public and
non-profit private schools, §§ 1753, 1757, to students “attending” such eligible
schools, § 1760(d)(5).
Notwithstanding the students’ enrollment in and
connections to their sending districts, the meals for which Plaintiffs seek
reimbursement are “served in” ineligible institutions – for-profit private schools –
to students who attend ineligible for-profit private schools.
(Id. at 9 (emphases in the original).)
Plaintiffs make the argument that reinstating the Workaround would not fundamentally
alter or affect an essential aspect of the Meals Programs. They have a point, because the
Workaround’s reasonableness, if reasonable is the equivalent of “workable,” is obvious from the
history of this case—it was in place for over 20 years and no one complained. In fact, the
Workaround was workable enough that it was encouraged through the annual letters sent by
State Defendants suggesting that other for-profit schools find participating “sponsors” to provide
their students with the federally subsidized meals. (See P-6, P-7, P-11, P-12 (annual letters).)
None of defendants’ witnesses could testify that the Workaround had any negative effects on the
practical administration of the Meals Programs. (T5:164:20–23 (Sadler-Williams (NJDOE));
T4:126:13–127:7 (Long (USDA)); T6:53:2–10 (Hawk (NJDOA)).) And it was only through
circumstances completely unrelated to the Workaround, long after its implementation, that the
USDA issued the 2002 memorandum, and even then the Workaround continued for more than
four years.
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But plaintiffs’ argument fails legally for two reasons. First, the essential purpose of the
programs, as stated by Congress, is to provide adequate nutrition to school children “by assisting
the States, through grants-in-aid and other means.” 42 U.S.C. §§ 1751, 1771 (emphasis added).
The terms and conditions of, and procedures associated with, the provision of that aid to the
states is at the heart of the statutes. Congress’s decision to limit reimbursement to meals served
in public and non-profit schools is a clear and pivotal aspect of those conditions. Through their
proposed accommodation, plaintiffs effectively seek an order directing the USDA to waive an
explicit limitation for their benefit, and have offered no authority for such an imposition of their
will on the federal agency. In PGA Tour, Inc. v. Martin, 532 U.S. 661 (2001), the Supreme
Court ruled that under the ADA, a professional golf association had to waive for a disabled
golfer a requirement that participants walk the course of one of its tournaments. The Court held,
however, that it was a peripheral rule, and “the waiver of an essential rule of competition for
anyone would fundamentally alter the nature of petitioner’s tournaments.” Id. at 689.

In

Halpern v. Wake Forest University Health Sciences., 669 F.3d 454 (4th Cir. 2012), the Fourth
Circuit considered whether a university had violated the Rehabilitation Act and ADA for
dismissing a student who was in violation of a professionalism requirement, which he alleged
was caused by his ADHD and other disabilities. In finding that the plaintiff could not establish
his claim, the Fourth Circuit said that he “could not reasonably seek to avoid or lessen the
professionalism requirement.” Id. at 464. Similarly, here, plaintiffs cannot seek to waive or
avoid an explicit limitation on what schools qualify for the aid that the federal government
provides to the states.
Second, to the extent plaintiffs suggest that the Rehabilitation Act’s accommodation
principle takes precedence over the limitations in Meals Programs statutes, that suggestion is
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wrong as a matter of law. “Section 504 may not be used to expand the delivery of benefits
awarded under another statute if that statute otherwise restricts the delivery of benefits.” Brecker
v. Queens B’nai B’rith Hous. Dev. Fund Co., Inc., 607 F. Supp. 428, 436 (E.D.N.Y. 1985), aff’d,
798 F.2d 52 (2d Cir. 1986); see also Knutzen v. Eben Ezer Lutheran Hous. Ctr., 815 F.2d 1343,
1353 (10th Cir. 1987). In Knutzen, plaintiffs were two mentally disabled individuals who
applied for public housing at the defendants’ building, which had received funding and subsidies
under § 202 of the Housing Act of 1959. Knutzen, 815 F.2d at 1345. Because it received that
funding, the defendant was required to provide housing to the “elderly or handicapped.” Id. at
1347. The law specified four groups of persons that qualified as “elderly or handicapped,” and
the Tenth Circuit interpreted § 202 as permitting the defendant to choose to provide housing to
one of the groups, but did not require the defendant to provide housing to all of them. Id. at 1349.
Defendants made housing available to the elderly and the mobility impaired, but categorically
barred the mentally impaired. Id. at 1345. Plaintiffs, who were under 62 and mentally but not
mobility impaired, contended that defendants’ selection criteria violated the Rehabilitation Act.
The Tenth Circuit ruled against the plaintiffs, finding that forcing defendants to consider
plaintiffs for admission would require an expansion of § 202 that was unintended by Congress
and in contravention of its language. Id. at 1353–54.
Here too, Congress’s intent to limit reimbursement to public or non-profit schools
through the Meals Programs is explicit, and the Rehabilitation Act does not trump those
limitations. As the court in Knutzen held, a different holding would “use a general civil rights
statute, § 504, to revoke or repeal . . . a much more specific statute with an articulated program,
in violation of the well-settled rule of statutory construction that a general statute will not be
construed so as to repeal or revoke another more particular statute . . . absent express language
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by Congress stating its intent to revoke or repeal that statute.” Id. at 1353 (citations and internal
quotation marks omitted).
The Rehabilitation Act and the ADA required plaintiffs to show that their students were
qualified to receive the benefits of the Meals Programs, with or without reasonable
accommodation, and that they were denied the benefits because of their disabilities. Chambers
ex rel. Chambers, 587 F.3d at 189. Plaintiffs have voluntarily chosen to be for-profit entities,
and that choice triggers their exclusion from obtaining federally-reimbursed meals. While the
trial testimony demonstrates how tailored the private-placement process is, how the students are
effectively placed by the sending districts in plaintiffs’ schools, and how connected the students
remain to their sending districts, the fact is they are attending for-profit schools, and Congress
has not authorized the reimbursement of meals served there. The Court thus finds that they have
been denied federally subsidized meals, not on the basis of disability, but because they are not
qualified to receive them. 10
D. Administrative Procedures Act
At summary judgment, the Court declined to address plaintiffs’ APA claim until the
bench trial had been completed. (Summary Judgment Op. 31.) However, “a person suing under
the APA must satisfy not only Article III’s standing requirements, but an additional test: The
interest he asserts must be ‘arguably within the zone of interests to be protected or regulated by

10

Moreover, the evidence establishes that the cost of meals served to financially eligible students
is an allowable expense the private for-profit schools can charge as part of the tuition that is fully
paid for by the sending district. And the sending district continues to monitor and provide a free
and appropriate education for plaintiffs’ students, a connection between district and student that
plaintiffs’ evidence established remains unbroken notwithstanding the private placement. Were
plaintiffs’ schools to stop providing the meals and decrease tuition accordingly, that would be a
lawsuit—only plaintiffs would likely be the defendants.
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the statute’ that he says was violated.”

Match-E-Be-Nash-She-Wish Band of Pottawatomi

Indians v. Patchak, - U.S. -, 132 S. Ct. 2199, 2210 (2012) (citing Ass’n of Data Processing Serv.
Orgs., Inc. v. Camp, 397 U.S. 150, 153 (1970)). Since the Court has found that plaintiffs lack
Article III standing, the Court need not address the prudential “zone of interest” standing
requirements or the merits of their APA claim.
V. Conclusion
For the foregoing reasons, the Court concludes that plaintiffs have not proven that they
have standing, or that defendants’ conduct ran afoul of the Rehabilitation Act or the ADA. An
appropriate order entering judgment for defendants and against plaintiffs will be entered.

September 3, 2013

/s/ Katharine S. Hayden
Katharine S. Hayden, U.S.D.J

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