Opinion
DOCKET NO. A-5928-10T4
02-11-2013
BOARD OF EDUCATION OF THE CITY OF PLEASANTVILLE, ATLANTIC COUNTY, Petitioner-Appellant, v. JAMES RIEHMAN, STATE APPOINTED MONITOR, Respondent-Respondent.
Hunt, Hamlin & Ridley, attorneys for appellant (Ronald C. Hunt, of counsel and on the brief). Schenck, Price, Smith & King, L.L.P., attorneys for respondent James Riehman (Sidney A. Sayovitz, of counsel and on the brief; Leslie A. Saint, on the brief). Jeffrey S. Chiesa, Attorney General, attorney for respondent New Jersey Department of Education (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Daniel F. Dryzga, Jr., Deputy Attorney General, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Fuentes, Grall and Hayden.
On appeal from the New Jersey Department of Education, Agency Docket No. 539-9/10.
Hunt, Hamlin & Ridley, attorneys for appellant (Ronald C. Hunt, of counsel and on the brief).
Schenck, Price, Smith & King, L.L.P., attorneys for respondent James Riehman (Sidney A. Sayovitz, of counsel and on the brief; Leslie A. Saint, on the brief).
Jeffrey S. Chiesa, Attorney General, attorney for respondent New Jersey Department of Education (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Daniel F. Dryzga, Jr., Deputy Attorney General, on the brief). PER CURIAM
The issue raised in this appeal concerns whether the Acting Commissioner of the Department of Education (the Commissioner) acted arbitrarily or unreasonably in determining the scope of a state-appointed monitor's authority under the School District Fiscal Accountability Act (the Act), N.J.S.A. 18A:7A-54 to -60. Petitioner, Pleasantville Board of Education (the Board), appeals from the final decision of the Commissioner, which found that respondent James Riehman, the Board's State-appointed monitor, did not exceed his statutory authority in overriding a Board vote. We affirm.
I.
The facts giving rise to this controversy are not in dispute. On September 24, 2007, a former Board employee filed a civil action alleging that the Board terminated her employment in violation of the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -14. On July 1, 2010, the Board's trial counsel advised the Board in a written memo about circumstances that would undermine the Board's defenses at trial and opined that the Board faced potential damages totaling $500,000 or more. The trial counsel strongly recommended settlement of the litigation for $225,000, with the Board paying $100,000 and the remaining amount paid by the Board's insurance carrier.
At its July 27, 2010 meeting, the Board rejected the proposed settlement. However, on August 9, 2010, Riehman issued a memorandum stating that, based on the information available to him and the trial counsel's analysis, it would be "fiscally irresponsible to risk a large damage award in a case like this . . . ." Consequently, he overturned the Board's decision and approved the settlement of the pending lawsuit.
The Board filed a verified petition of appeal with the Commissioner, contending that Riehman did not have the statutory authority to overturn the Board's vote. The Commissioner referred the matter to the Office of Administrative Law (OAL) for a hearing as a contested case.
On May 31, 2011, the Administrative Law Judge (ALJ) granted the Board's motion for summary decision. In his initial decision, the ALJ determined that Riehman's interpretation of a monitor's fiscal oversight of a school board was so broad that it gave him limitless power over all financial matters, thereby exceeding the legislative intent of the Act. In the ALJ's view, because N.J.S.A. 18A:11-2 gave the Board the power to sue and be sued and the Act did not specify that the monitor had the power to settle legal claims, Riehman "overstepped his bounds when he overturned the Board's decision to reject the proposed settlement."
On July 31, 2011, the Commissioner, finding that Riehman did not exceed his statutory authority under N.J.S.A. 18A:7A-55, rejected the ALJ's initial decision and affirmed the monitor's action. The Commissioner determined that the Act authorized the monitor to oversee the district's fiscal management and expenditures, and, in order to effectuate a balanced budget, gave the monitor the power to override a vote by the Board. He found that Riehman's decision, that accepting settlement for an out-of-pocket cost of $100,000 would be more financially prudent than risking $500,000 in potential legal damages, was clearly within the Act's scope. He concluded that "the Monitor's decision was related to the fiscal management of school funds, and thus falls within the statutory authority of a state monitor." Finally, he underscored that, contrary to the Board's argument, this interpretation did not result in the monitor having unlimited power to overturn all non-procedural actions by the Board. This appeal followed.
II.
The Board raises the following arguments in its appeal:
POINT I:
THE COMMISSIONER ERRED BY NOT FINDING THAT THE STATE MONITOR'S VETO OF THE BOARD'S DECISION NOT TO SETTLE A CLAIM CONFLICTS WITH THE BOARD'S POWER CONFERRED UPON IT BY N.J.S.A. 18A:11-2, IN THE ABSENCE OF ENABLING LEGISLATION.
POINT II:
THE COMMISSIONER ERRED IN NOT FINDING THAT THE STATE MONITOR ABUSED HIS DISCRETION BY OVERTURNING A VOTE OF THE BOARD WHEN THEY REJECTED THE PROPOSED SETTLEMENT OF A CLAIM.
We begin with a review of well-settled principles governing this matter. Our role in reviewing an agency decision is limited. In re Stallworth, 208 N.J. 182, 194 (2011) (citing Henry v. Rahway State Prison, 81 N.J. 571, 579 (1980)). "We accord a strong presumption of reasonableness to such decisions and do not substitute our judgment for the wisdom of agency action if that action is statutorily authorized and not arbitrary or unreasonable." A.M.S. ex rel A.D.S. v. Bd. of Educ. of Margate, 409 N.J. Super. 149, 159 (App. Div. 2009). As long as an agency decision is contemplated under its enabling legislation, the action must be accorded a presumption of validity and regularity. Reilly v. AAA Mid-Atlantic Ins. Co. of N.J., 194 N.J. 474, 485 (2008).
However, we are not bound by the agency's statutory interpretations "because it is the responsibility of a reviewing court to ensure that an agency's administrative actions do not exceed its legislatively conferred powers." In re Application of Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 413, 422 (2008). Nonetheless, we must give "great deference" to an agency's interpretation of a statute it is charged with enforcing. N.J. Ass'n of Sch. Adm'rs v. Schundler, 211 N.J. 535, 549 (2012).
Next, we proceed to a brief examination of the Act's statutory scheme. The Legislature passed the Act in 2006 to address the mounting problem of some school districts' failure to correct serious deficiencies identified in their annual audits. Assembly Appropriations Comm. Statement to Assembly Bill No. 2684 (Mar. 13, 2006). The Act authorizes the Commissioner to appoint a monitor "to provide direct oversight of a board of education's business operations and personnel matters" when a school district receives an adverse opinion by its independent auditor or demonstrates two or more fiscal shortcomings as delineated in the Act. N.J.S.A. 18A:7A-55(a). Once appointed, the monitor has the authority, inter alia, to:
(1) oversee the fiscal management and expenditure of school district funds, including, but not limited to, budget reallocations and reductions, approvals of purchase orders, budget transfers, and payment of bills and claims;
. . . .
(5) . . . override a chief school administrator's action and a vote by the board of education on any of the matters set forth in this subsection, except that all actions of the State monitor shall be subject to the education, labor, and employment laws and regulations . . . .
[N.J.S.A. 18A:7A-55(b).]
The monitor is not a free agent but must report regularly to the Commissioner and is subject to his supervision. N.J.S.A. 18A:7A-55(c). Once appointed, the monitor continues to provide oversight until the Commissioner determines that "the necessary local capacity and fiscal controls have been restored to school district operations." N.J.S.A. 18A:7A-55(e). The salary of the monitor and necessary additional staff is fixed by the Commissioner and paid by the school district. N.J.S.A. 18A:7A-55(f).
The Commissioner appointed a monitor to the Pleasantville school district effective July 1, 2007, with a projected term ending June 30, 2009. The Commissioner in June 2009 notified the Board that she was appointing a monitor for another term. The Board filed a petition with the Commissioner challenging the appointment, which the Commissioner denied. We affirmed in an unreported decision, Pleasantville Board of Education v. New Jersey Department of Education, No. A-1011-09 (App. Div. Jan. 13, 2011).
III.
In this appeal, the Board argues that the Commissioner erred in finding that the monitor had the authority to override the Board's decision because such power conflicted with the Board's general statutory powers contained in N.J.S.A. 18A:11-1 and -2. In particular, the Board notes that the statutory power of a board of education to "[s]ue or be sued by its corporate name," N.J.S.A. 18A:11-2(a), necessarily includes the authority to decide whether to settle litigation. The Board submits that in order to limit its general powers under N.J.S.A. 18A:11-1 and -2, the Legislature must adopt enabling legislation specifically subordinating the power of school boards to the monitor, which has not occurred. Finally, the Board maintains that the monitor's decision to override the Board, even if authorized, was arbitrary and capricious. We do not find these arguments persuasive.
When we interpret statutes, the ultimate goal is to give effect to legislative intent. TAC Assocs. v. N.J. Dep't of Envtl. Prot., 202 N.J. 533, 540 (2010); Bosland v. Warnock Dodge, 197 N.J. 543, 554 (2009). First, we must look to the plain meaning of the statute to discern the Legislature's intent. Praxair Tech, Inc. v. Dir., Div. of Taxation, 201 N.J. 126, 136 (2009); Marino v. Marino, 200 N.J. 315, 329 (2009). If the text is susceptible to different interpretations, the court considers extrinsic factors to determine the legislative intent. Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 264 (2008); Wingate v. Estate of Ryan, 149 N.J. 227, 236 (1997). We must read statutes dealing with the same subject matter in pari materia and construe them together as a "unitary and harmonious whole." St. Peter's Univ. Hosp. v. Lacy, 185 N.J. 1, 14-15 (2005) (citation omitted). Again, in the context of statutory interpretation, we will give substantial deference to the interpretation of an agency empowered to enforce the statute or regulation at issue. Matturri v. Bd. of Trs., Judicial Ret. Sys., 173 N.J. 368, 381 (2002).
The plain language of the Act authorizes the monitor to "oversee the fiscal management and expenditures of school district funds, including . . . payment of bills and claims." N.J.S.A. 18A:7A-55(b)(1). In order to carry out the Act's mandate, the monitor has the authority "to override . . . a vote by the board of education on any of the matters set forth in this subsection . . . ." N.J.S.A. 18A:7A-55(b)(5). Thus, we are convinced that the clear and explicit language of the Act demonstrates an obvious legislative intention to give the monitor the authority to oversee Board payments of claims, including by overriding a Board vote.
We reject the Board's argument that the Act is in conflict with the Board's statutory power to sue and be sued in N.J.S.A. 18A:11-2(a). "Whenever statutory analysis 'involves the interplay of two or more statutes, we seek to harmonize [them], under the assumption that the Legislature was aware of its actions and intended' for related laws 'to work together.'" N.J. Ass'n of Sch. Adm'rs, supra, 211 N.J. at 555 (quoting State ex rel. J.S., 202 N.J. 465, 480 (2010)). We perceive no disharmony between the Act and the general school board statutory scheme.
The board of a local school district "is a creature of the State and may exercise only those powers granted to it by the Legislature either expressly or by necessity or fair implication." Atlantic City Educ. Ass'n v. Bd. of Educ, 299 N.J. Super. 649, 654 (App. Div.), certif. denied sub nom., Keyport Teachers' Ass'n v. Bd. of Educ, 152 N.J. 192 (1997). Nothing in its statutory language suggests that at the time of the Act's passage the Legislature was not aware of the general statutory powers of school boards. Nevertheless, when a board has fiscal instability requiring the appointment of a monitor under N.J.S.A. 18A:7A-55(a), the Act clearly evinces a legislative purpose to limit the exercise of those powers through oversight by the monitor, and ultimately the Commissioner, until the necessary sound fiscal management has been restored. In light of the unmistakable legislative intent to place certain restrictions on boards who are fiscally unstable, we discern, contrary to the Board's argument, no need for a separate amendment to the other statutes granting boards of education general powers.
The Board further contends that, even if the monitor had the power to override a Board vote, the Commissioner erred in finding that the monitor acted reasonably in overriding the Board's decision not to settle the lawsuit. We disagree. The monitor based his decision, on his estimate, informed by advice of trial counsel, of the potential exposure the Board has in the suit, including the cost and potential award of attorneys' fees. See N.J.S.A. 34:19-5(e) (CEPA authorizes paying the prevailing party's attorneys' fees and costs). The Commissioner found that "the potential exposure for a high damage award in the $500,000 range for a school district that is plagued with financial shortcomings is a valid fiscal rationale for entering into a settlement that would essentially cost the Board $100,000." In our view, the Commissioner's finding was reasonable. Moreover, the record is devoid of any factual support for the Board's argument that the Commissioner's decision was an abuse of discretion.
In sum, we are satisfied that the Commissioner's approval of the monitor's override of the Board's vote was a reasonable interpretation of the Act and had adequate support in the record.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION