This paper reviews federal and state court interpretations of federal and state laws concerning the responsibilities of local school districts in providing free and appropriate education for handicapped children. Particular attention is paid to the building principal's responsibility in carrying out the mandated policies at the operational level, and his or her consequent liability (as a school employee rather than as an officer of the state) for any procedural failings. The cases selected focus on problems at the operational level related to student placement, program reevaluation, discrimination, transportation, misdiagnosis, the length of the school year, and students' needs for unusual assistance. Among the factors considered by the courts in judging these cases are the protection of students' due process rights, the efforts made by school districts to place students in the least restrictive environment possible, and the extent to which schools and school employees are protected from financial liability in cases involving improper placement of students. (PGD)