“Good-Faith Reasonableness” Becomes the Test for Substantial-Justification
Under the IDEA’s Attorneys’-Fees Cap
A Detailed Commentary on N.G.B. v. New York City Department of Education, 2d Cir., 2025

1. Introduction

The Court of Appeals for the Second Circuit has issued a precedential decision in N.G.B. v. New York City Department of Education, No. 23-764-cv (decided 24 July 2025), clarifying the standard by which federal courts determine whether a prevailing parent under the Individuals with Disabilities Education Act (IDEA) was “substantially justified” in rejecting a school district’s settlement offer for attorneys’ fees.

The appellant, the New York City Department of Education (DOE), challenged a district-court ruling that allowed the parent-plaintiff, N.G.B., to recover post-offer fees although DOE’s $17,000 offer exceeded the district court’s ultimate pre-offer lodestar calculation. The Second Circuit unanimously affirmed, holding that:

A prevailing parent may reject a settlement offer without forfeiting post-offer fees so long as the rejection is grounded in a good-faith, objectively reasonable belief that the offer inadequately compensates the parent’s counsel.

By adopting what the panel repeatedly characterises as a “good-faith reasonableness” standard, the court harmonises the IDEA with Supreme Court precedent interpreting identical language in the Equal Access to Justice Act (EAJA) (Pierce v. Underwood, 487 U.S. 552 (1988)), and with persuasive authority from the Third Circuit (Rena C. v. Colonial Sch. Dist., 890 F.3d 404 (3d Cir. 2018)).

2. Summary of the Judgment

• Procedural Posture: DOE appealed a Southern District of New York order that (i) reduced counsel’s hourly rates and hours; (ii) nevertheless ruled the parent “substantially justified” in declining DOE’s offer; and (iii) therefore awarded post-offer fees. Standard of review: abuse of discretion.
• Holding: The district court applied the correct legal standard—good-faith reasonableness—and did not abuse its discretion in finding substantial justification.
• Key Findings:
  • DOE’s offer was based on two-month-old billing and ignored significant summary-judgment work of which DOE was aware.
  • CLF (the Cuddy Law Firm) could reasonably expect that a court might award higher rates; one recent S.D.N.Y. case had done so.
  • The mere fact that DOE’s lump-sum offer exceeded the court’s ultimate pre-offer lodestar did not make the offer per se reasonable.
• Result: District-court fee award affirmed; good-faith reasonableness standard established as governing in the Second Circuit.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

The panel drew on a mosaic of Supreme Court, circuit, and district authority:

• Fox v. Vice, 563 U.S. 826 (2011) and Hensley v. Eckerhart, 461 U.S. 424 (1983): Confirm broad discretion and “rough justice” principles in fee determinations, counselling appellate deference.
• Pierce v. Underwood, 487 U.S. 552 (1988): Defined “substantially justified” under the EAJA as “justified to a degree that could satisfy a reasonable person.” The Second Circuit imported this interpretation.
• Rena C. v. Colonial Sch. Dist., 890 F.3d 404 (3d Cir. 2018): Held parents are substantially justified in refusing offers omitting reasonable fees. The Second Circuit found that reasoning “persuasive” and consistent with statutory purpose.
• Ninth Circuit cases (Beauchamp, 816 F.3d 1216), D.C. District Court cases (Dicks, 109 F. Supp. 3d 126; Daniel, 174 F. Supp. 3d 532), and others were catalogued to illustrate a growing judicial consensus.
• The panel distinguished the Fifth Circuit’s decision in Gary G. v. El Paso ISD, 632 F.3d 201 (5th Cir. 2011), where the parent had no accrued fees at the time of the offer.

3.2 The Court’s Legal Reasoning

1. Statutory Text: The IDEA fee-cap provision, 20 U.S.C. § 1415(i)(3)(D), bars post-offer fees unless the parent “was substantially justified in rejecting the settlement offer” (§ 1415(i)(3)(E)). Congress did not define “substantially justified,” so courts borrow EAJA precedent.
2. Purpose of the IDEA: Congress designed the fee-shifting mechanism to ensure access to counsel and to prevent disabled children’s rights from turning on parental wealth. Construing “substantially justified” too narrowly would undermine this purpose by pressuring parents to accept “low-ball” offers.
3. Standard Adopted:

   Substantial justification exists when “a reasonable person” could agree with the parent’s decision in light of the facts and law as they appeared at the time of rejection.

   • The court rejected DOE’s proposed “heightened” or “clear-probability-of-success” standard as unsupported by text or policy.
   • The standard maintains symmetry with EAJA, Rule 37, and Bankruptcy contexts, promoting doctrinal coherence.
4. Application to Facts:
   • DOE missed its court-ordered offer deadline and provided no updated billing spreadsheet.
   • CLF had already started (and reasonably continued) drafting summary-judgment papers at DOE’s own insistence on the litigation timetable.
   • DOE’s $17,000 figure could not be assumed to include that work; therefore CLF’s skepticism was reasonable.
   • CLF’s claimed hourly rates—though ultimately reduced—had been awarded in a contemporaneous S.D.N.Y. decision, reinforcing counsel’s good-faith belief.
5. Standard of Review: Applying “highly deferential” abuse-of-discretion review (per Lilly, 934 F.3d 222), the panel found ample record support. De-novo review, used by the Ninth Circuit, was expressly rejected as unduly “micromanaging.”

3.3 Anticipated Impact

• Second-Circuit Precedent: Trial judges now have clear guidance that “good-faith reasonableness” governs substantial-justification inquiries. Fee litigation will more explicitly focus on the contemporaneous information available to the parties at the offer date.
• School Districts’ Strategy: LEAs must prepare timelier, data-informed offers that demonstrably account for all accrued fees, or risk post-offer-fee exposure.
• Parents’ Leverage: Parents (and their counsel) may decline offers that appear stale or incomplete without automatically forfeiting later fees, so long as their decision is objectively reasonable.
• National Persuasive Authority: The decision adds the weight of a major circuit to the emerging consensus, making it harder for courts elsewhere to adopt a stricter test.
• Settlement Dynamics: While the ruling preserves incentives to settle, it discourages symbolic or under-informed offers that do not meaningfully reflect actual exposure.

4. Complex Concepts Simplified

• IDEA Fee Cap (20 U.S.C. § 1415(i)(3)(D)–(E))
  When a school district makes a written settlement offer early enough (typically ≥10 days before a hearing or per Fed. R. Civ. P. 68 in court), the parent cannot recover additional attorneys’ fees after that offer—unless the parent both prevails and was “substantially justified” in saying “no.”
• Substantial Justification
  Means “reasonable under the circumstances.” It does not require the parent to be ultimately correct, only that a reasonable person could have believed the rejection was warranted—comparable to having a “solid, non-frivolous basis.”
• Abuse of Discretion
  An appellate court will reverse only if the trial court’s decision was arbitrary, irrational, or based on an incorrect legal standard. This deference recognises trial judges’ familiarity with the fee record.

5. Conclusion

N.G.B. crystallises the Second Circuit’s approach to one of the IDEA’s thorniest post-judgment questions. By anchoring “substantial justification” to a good-faith reasonableness test, the court aligns fee-cap jurisprudence with EAJA precedent, respects congressional intent to foster meaningful access to justice, and provides pragmatic guidance to litigants.

Going forward, parents remain incentivised to weigh settlement offers carefully, but they are not trapped into accepting hastily calculated sums for fear of economic ruin. Likewise, educational agencies are placed on notice that compliance with procedural deadlines and transparent accounting of accrued fees are essential to sheltering themselves from escalating fee exposure.

In sum, the decision strikes a balance between encouraging early settlement and protecting the core purpose of the IDEA: ensuring that children with disabilities receive a free appropriate public education, with parents able to secure competent legal representation when disputes arise.