Opinion
DOCKET NO. A-1378-12T2
06-23-2014
WILLIAM HICKMAN, CHRISTINE SELDEN, LOUIS GENTILE - CSI, INC., Appellants, v. NEW JERSEY STATE POLICE, Respondent.
David W. Crosson (Crosson Law Office) and Michael A. Farnan (Farnan Law Office) of the Pennsylvania bar, admitted pro hac vice, attorneys for appellants (Mr. Crosson and Mr. Farnan, on the brief). John J. Hoffman, Acting Attorney General, attorney for respondent (Lewis A. Scheindlin, Assistant Attorney General, of counsel and on the brief; Roshan D. Shah, Deputy Attorney General, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner and Higbee.
On appeal from the New Jersey State Police.
David W. Crosson (Crosson Law Office) and Michael A. Farnan (Farnan Law Office) of the Pennsylvania bar, admitted pro hac vice, attorneys for appellants (Mr. Crosson and Mr. Farnan, on the brief).
John J. Hoffman, Acting Attorney General, attorney for respondent (Lewis A. Scheindlin, Assistant Attorney General, of counsel and on the brief; Roshan D. Shah, Deputy Attorney General, on the brief). PER CURIAM
Petitioners William Hickman, Christine Selden, Louis Gentile, and Corporate Security and Investigations, Inc. appeal from the New Jersey State Police's denial of their private detective license applications pursuant to N.J.A.C. 13:55-1.7(A), alleging that N.J.A.C. 13:55-1.7(A) is unconstitutional. Petitioners previously appealed the denial of their applications to the Office of Administrative Law (OAL), which denied the appeal without prejudice to petitioners' contention as to the constitutionality of N.J.A.C. 13:55-1.7(A). We find that N.J.A.C. 13:55-1.7(A) does not violate either the United States Constitution or the New Jersey Constitution. Therefore, we affirm.
On July 12, 2010, Petitioners William Hickman, Louis Gentile, and Christine Selden submitted applications for New Jersey private detective licenses as principals at Corporate Security and Investigations, Inc. (CSI). The New Jersey State Police (NJSP) denied the license applications because CSI operates as a franchise, and N.J.A.C. 13:55-1.7(A) prohibits private detectives from operating under a franchise agreement.
Petitioners requested a hearing to dispute the denial of their private detective license applications, conceding that CSI is a franchise, but alleging that N.J.A.C. 13:55-1.7(A) is unconstitutional. The NJSP transferred the case to the OAL. On June 7, 2012, the OAL issued an initial decision denying the appeal without prejudice to petitioners' contention as to the constitutionality of N.J.A.C. 13:55-1.7(A), because the OAL does not have jurisdiction to determine facial constitutional challenges. See Abbott v. Burke, 100 N.J. 269, 299 (1985) ("facial constitutional challenges to statutes should be judicially resolved"); Fischer v. Bedminster Twp., 5 N.J. 534, 542 (1950)(finding that the administrative agency did not have jurisdiction to rule as to the constitutionality of the administrative regulation). Once the OAL issued its decision, this case was transferred to the Superintendent of the Division of State Police for a final agency decision. The OAL's decision became final by operation of law because the Superintendent of the Division of State Police failed to adopt, modify, or reject the decision within forty-five days, and the time limit was not extended. See N.J.S.A. 52:14B-10.
Petitioners raise the following points on appeal:
POINT ONE: DOES N.J.A.C. 13:55-1.7(A) VIOLATE PETITIONERS' RIGHT TO EQUAL PROTECTION OF THE LAW AS GUARANTEED BY THE UNITED STATES CONSTITUTION AND THE NEW JERSEY CONSTITUTION?
POINT TWO: DOES N.J.A.C. 13:55-1.7(A) VIOLATE THE "COMMERCE CLAUSE" OF THE UNITED STATES CONSTITUTION?
Petitioners assert that N.J.A.C. 13:55-1.7(A) violates their right to equal protection of the law as guaranteed by the United States Constitution and the New Jersey Constitution. The Private Detective Act of 1939, N.J.S.A. 45:19-1 to -42, together with its implementing regulations, N.J.A.C. 13:55-1.1 to -1.13, governs private detectives operating in New Jersey. Under N.J.A.C. 13:55-1.7(A), "[n]o holder of a license issued under the Act may be a party to a franchise agreement nor accept money or other thing of value for the right to act as an agent of the licensee."
The Fourteenth Amendment to the United States Constitution provides: "[n]o State shall make or enforce any law which shall . . . deny to any person within its jurisdiction the equal protection of the laws." U.S. Const. amend. XIV, § 1 (Equal Protection Clause). "The Equal Protection Clause 'is essentially a direction that all persons similarly situated should be treated alike.'" Brown v. Twp. of Old Bridge, 319 N.J. Super. 476, 505 (App. Div. 1999)(quoting Cleburne v. Cleburne Living Center, Inc., 473 U.S. 432, 439, 105 S. Ct. 3249, 3254, 87 L. Ed. 2d 313, 320 (1985)); accord Secure Heritage, Inc. v. City of Cape May, 361 N.J. Super. 281, 299 (App. Div. 2003).
"Equal Protection claims under the fourteenth amendment are analyzed under a three tier approach." Barone v. Dep't of Human Servs., 107 N.J. 355, 364 (1987); accord Secure Heritage, supra, 361 N.J. Super. at 299. "A statute that regulates a 'fundamental right' or a 'suspect class' is subject to 'strict scrutiny.'" Barone, supra, 107 N.J. at 364-65. "If a statute regulates a 'semi-suspect' class or substantially affects a fundamental right in an indirect manner, it will be examined under an 'intermediate scrutiny.'" Id. at 365; accord Secure Heritage, supra, 361 N.J. Super. at 299. "If neither strict nor intermediate scrutiny applies, the statute will be subject to a 'rational basis' test." Barone, supra, 107 N.J. at 365; accord Secure Heritage, supra, 361 N.J. Super. at 299-300.
Although the case at bar involves an agency regulation as opposed to a legislative statute, the constitutional equal protection analysis is the same for a regulation and a statute. See Guaman v. Velez, 421 N.J. Super. 239, 262-68 (App. Div. 132, 149-52 (App. Div. 1984).
"A suspect class is one 'saddled with such disabilities, or subjected to such a history of purposeful unequal treatment or relegated to such a position of political powerlessness as to command extraordinary protection from the majoritarian political process.'" Barone, supra, 107 N.J. at 365 (quoting San Antonio Indep. School Dist. v. Rodriguez, 411 U.S. 1, 28, 93 S. Ct. 1278, 1294, 36 L. Ed. 2d 16, 40 (1973)). "Fundamental rights are those which are 'explicitly or implicitly guaranteed by the Constitution.'" Barone, supra, 107 N.J. at 365 (quoting San Antonio, supra, 411 U.S. at 33, 93 S. Ct. at 1297, 36 L. Ed. 2d at 43).
Because petitioners are not members of a suspect or semi-suspect class, and because there is no fundamental right to attain a private detective license, to which petitioners concede, the regulation at issue must be analyzed under the rational basis standard. "To withstand this level of review, the statute must be rationally related to the achievement of a legitimate state interest." Barone, supra, 107 N.J. at 365; accord Secure Heritage, supra, 361 N.J. Super. at 300.
The rational basis standard is extremely deferential. There is a "strong presumption in favor of constitutionality," and courts are reluctant "to declare a statute void." Barone, supra, 107 N.J. at 369-70. "'A statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it.'" Id. at 367 (quoting McGowan v. Maryland, 366 U.S. 420, 426, 81 S. Ct 1101, 1105, 6 L. Ed. 2d 393, 399 (1961)). "'The problems of government are practical ones and may justify, if they do not require, rough accommodations—illogical, it may be, and unscientific.'" Barone, supra, 107 N.J. at 367 (quoting Metropolis Theatre Co. v. City of Chicago, 228 U.S. 61, 69-70, 33 S. Ct. 441, 443, 57 L. Ed. 730, 734 (1913)). "As long as the classification chosen by the Legislature rationally advances a legitimate governmental objective, it need not be the wisest, the fairest, or the one we would choose." Barone, supra, 107 N.J. at 370. A statute will only be invalidated under the rational basis test if the classification is "wholly unrelated to the legislative objective" or "arbitrary." Secure Heritage, supra, 361 N.J. Super. at 300.
The New Jersey Constitution provides: "[a]ll persons are by nature free and independent, and have certain natural and unalienable rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing, and protecting property, and of pursuing and obtaining safety and happiness." N.J. Const. art. I, ¶ 1. Although this provision "does not contain the express [term] 'equal protection,'" its "expansive language" guarantees that constitutional right. Caviglia v. Royal Tours of Am., 178 N.J. 460, 472 (2004); accord Sojourner A. v. N.J. Dep't of Human Servs., 177 N.J. 318, 332 (2003).
In contrast to the federal equal protection analysis, under the New Jersey Constitution, the courts use a "more flexible balancing test." Barone, supra, 107 N.J. at 368. "The crucial issue in each case is 'whether there is an appropriate governmental interest suitably furthered by the differential treatment' involved." Ibid. (quoting Borough of Collingswood v. Ringgold, 66 N.J. 350, 370 (1975)). "'In striking the balance, [the New Jersey Supreme Court] [has] considered the nature of the affected right, the extent to which the governmental restriction intrudes upon it, and the public need for the restriction.'" Barone, supra, 107 N.J. at 368 (quoting Greenberg v. Kimmelman, 99 N.J. 552, 567 (1985)).
"By deviating from the federal tiered model, we are able to examine each claim on a continuum that reflects the nature of the burdened right and the importance of the governmental restriction." Sojourner, supra, 177 N.J. at 333. Nonetheless, the New Jersey model is similar to the United States model. "To a large extent, the considerations guiding our equal protection analysis under the New Jersey Constitution are implicit in the three tier approach applied by the Supreme Court under the Federal Constitution." Barone, supra, 107 N.J. at 368 (citing Greenberg, supra, 99 N.J. at 567). "Both tests consider the nature of the individual rights affected by the governmental action being challenged, the importance of the governmental interests being furthered, and the degree to which the challenged restriction is necessary to achieve those interests. Therefore, the two tests will often yield the same result." Barone, supra, 107 N.J. at 368. "At the same time, however, 'the New Jersey Constitution is not a mirror image of the United States Constitution,' and there may be circumstances in which the State Constitution provides greater protections." Ibid. (quoting Greenberg, supra, 99 N.J. at 568).
Under the New Jersey model, "'[s]tatutes carry a strong presumption in favor of constitutionality, and the proponent of invalidity bears the heavy burden of overcoming that presumption.'" Secure Heritage, supra, 361 N.J. Super. at 300 (quoting Brown v. State, 356 N.J. Super. 71, 79-80 (App. Div. 2002)). However, "the means selected by the Legislature [must] 'bear a real and substantial relationship to a permissible legislative purpose.'" Caviglia, supra, 178 N.J. at 473 (quoting Taxpayers Assn. of Weymouth Twp. v. Weymouth Twp., 80 N.J. 6, 44 (1976)); accord Barone, supra, 107 N.J. at 368.
The purpose of the Private Detective Act of 1939 is
to regulate the business of private detective and private detective agencies and to provide such regulations as will establish the business of private detectives on that high plane which will deserve the confidence and respect of the citizens of the State of New Jersey, and at the same time protect all persons engaged in the business of private detective against interlopers, racketeers and irresponsible persons who would use their business as private detective to cover up criminal activities and malicious impositions on the public.In Schulman v. Kelly, the Court noted that "[i]t is clear that the business of private detective has an inherent potential for abuse, and that its strict regulation, including control of those persons who desire to enter that business, is clearly within the public interest." Supra, 54 N.J. at 371.
[Schulman v. Kelly, 54 N.J. 364, 370-71 (1969).]
The NJSP alleges that N.J.A.C. 13:55-1.7(A) was adopted with the intent of "assur[ing] the State's exclusive control of [the private detective] industry in New Jersey." The NJSP also asserts that
[i]n line with this legislative policy, an individual or entity issued a private detective license by the State of New Jersey must answer to NJSP, the designated licensing authority, for their actions and the manner in which they operate their licensed private detective agency. Proper regulation is paramount to business considerations. Centralized regulation by the State ensures adequate protection of the public, as well as the private detective.The NJSP additionally notes that
Standard franchise agreements generally contain provisions which would infringe upon the exclusive control of the State. In addition, private detective franchises are subject to laws in other jurisdictions. These laws may potentially conflict with New Jersey's regulations, thereby further eroding New Jersey's ability to regulate the private detective agencies operating within its borders.
N.J.A.C. 13:55-1.7(A) also prohibits franchise operations by private detective units because such operations increase the
risk that unlicensed detectives will operate in the State of New Jersey. For example, detectives operating under the franchise name and licensed only in Florida may seek to conduct operations, either directly or indirectly, through their franchise location in New Jersey. These unlicensed detectives would not be subject to NJSP's licensing power and regulations. Considering the power granted to private detective agencies under New Jersey law, this would be an untenable result.
The potential issues with franchise agreements are recognized by case law. In Westfield Centre Service, Inc. v. Cities Service Oil Co., the Court noted:
[t]hough economic advantages to both parties exist in the franchise relationship, disparity in the bargaining power of the parties has led to some unconscionable provisions in the agreements. Franchisors have drafted contracts permitting them to terminate or to refuse renewal of franchises at will or for a wide variety of reasons including failure to comply with unreasonable conditions. Some franchisors have terminated or refused to renew viable franchises, leaving franchisees with nothing in return for their investment. Others have threatened franchisees with termination to coerce them to stay open at unreasonable hours, purchase supplies only from the franchisor and at excessive rates or unduly expand their facilities.Similarly, in New Jersey American, Inc. v. Allied Corp., the court stated:
[86 N.J. 453, 461-62 (1981).]
the peculiar tension in the franchise relationship is that a true franchisee
devotes much of its capital to investments that are only valuable to it if it remains a licensee. In addition to the value of such tangible investments as a building designed to meet the style of the franchise, special equipment useful only to produce the franchise product, and franchise signs, a franchisee may lose such intangibles as business good will if it is forced to move from its business premises or change its name and product line upon termination by the franchisor. The franchisee's often substantial specific investment thus creates an opportunity for post-contract opportunistic behavior by the franchisor.
[875 F.2d 58, 62 (3rd Cir. 1989).]
N.J.A.C. 13:55-1.7(A) is rationally related to the achievement of the legitimate state interest in regulating the private detective industry in order to promote public safety. Therefore, the regulation does not violate petitioners' right to the equal protection of the law guaranteed by the United States Constitution and the New Jersey Constitution.
Petitioners additionally assert that N.J.A.C. 13:55-1.7(A) discriminates against out-of-state interests in violation of Article I, Section 8 of the United States Constitution (the Commerce Clause). The Commerce Clause delegates to Congress the authority to regulate interstate commerce. Edwards v. California, 314 U.S. 160, 166, 62 S. Ct. 164, 172, 86 L. Ed. 119, 124 (1941). "Although the Constitution gives Congress the power to regulate commerce among the States, many subjects of potential federal regulation under that power inevitably escape congressional attention 'because of their local character and their number and diversity.'" Philadelphia v. New Jersey, 473 U.S. 617, 623, 98 S. Ct. 2531, 2535, 57 L. Ed. 2d 475, 481 (1978)(quoting South Carolina State Highway Dept. v. Barnwell Bros., Inc., 303 U.S. 177, 185, 58 S. Ct. 510, 514, 82 L. Ed. 734, 739 (1938)). "In the absence of federal legislation, these subjects are open to control by the States so long as they act within the restraints imposed by the Commerce Clause itself." Philadelphia v. New Jersey, supra, 473 U.S. at 623, 98 S. Ct. at 2535, 57 L. Ed. 2d at 481.
One purpose of the Commerce Clause is to prevent economic protectionism and isolation among the states. Ibid. "The opinions of the Court through the years have reflected an alertness to the evils of 'economic isolation' and protectionism, while at the same time recognizing that incidental burdens on interstate commerce may be unavoidable when a State legislates to safeguard the health and safety of its people." Philadelphia v. New Jersey, supra, 473 U.S. at 623-24, 98 S. Ct. at 2535, 57 L. Ed. 2d at 481.
"Thus, where simple economic protectionism is effected by state legislation, a virtually per se rule of invalidity has been erected." Philadelphia v. New Jersey, supra, 473 U.S. at 624, 98 S. Ct. at 2535, 57 L. Ed. 2d at 481; accord Chamber of Commerce v. State, 89 N.J. 131, 160 (1982). "But where other legislative objectives are credibly advanced and there is no patent discrimination against interstate trade, the Court has adopted a much more flexible approach." Philadelphia v. New Jersey, supra, 473 U.S. at 624, 98 S. Ct. at 2535, 57 L. Ed. 2d at 481-82. "Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits." Philadelphia v. New Jersey, supra, 473 U.S. at 624, 98 S. Ct. at 2535, 57 L. Ed. 2d at 482 (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct. 844, 847, 25 L. Ed. 2d 174, 178 (1970)); accord Chamber of Commerce, supra, 89 N.J. at 160. "The burden to show discrimination rests on the party challenging the validity of the statute." Chamber of Commerce, supra, 89 N.J. at 161 (quoting Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S. Ct. 1727, 1736, 60 L. Ed. 2d 250, 262 (1979)).
In Chamber of Commerce v. State, the Court invalidated a New Jersey statute which prohibited the transportation of out-of-state individuals to New Jersey for the purpose of "interfering by force or violence with lawful employer/employee bargaining, or replacing employees who are lawfully on strike or locked out." Supra, 89 N.J. at 138, 161-63. The Court held that this statute violated the Commerce Clause because the State failed to proffer a valid reason for treating out-of-state individuals differently from in-state individuals. Id. at 161. The Court noted that "[t]he statute creates artificial barriers cutting across a national labor market in a fashion inconsistent with the existence of a national free trade zone." Ibid.
Similarly, in Philadelphia v. New Jersey, the Court struck down a New Jersey statute that prohibited the importation into New Jersey of most solid or liquid waste generated outside the state, finding that it violated the Commerce Clause. Supra, 473 U.S. at 618, 628-29, 98 S. Ct. at 2532, 2537-38, 57 L. Ed. 2d at 478, 484-85. The purpose of the statute was to decrease the volume of waste being disposed of in New Jersey landfills in order to protect the environment and decrease the rate at which existing landfills were filled and scarce open lands were appropriated for landfill development. Philadelphia v. New Jersey, supra, 473 U.S. at 625, 98 S. Ct. at 2536, 57 L. Ed. 2d at 482. The Court stated that New Jersey could not pursue these goals by discriminating against articles of commerce generated outside the state since there was no valid reason to treat them differently from articles of commerce generated inside the state. Philadelphia v. New Jersey, supra, 473 U.S. at 626-27, 98 S. Ct. at 2537, 57 L. Ed. 2d at 483. The Court noted that New Jersey could decrease the amount of waste being disposed of in New Jersey landfills by imposing the same restrictions on waste generated inside New Jersey as waste generated outside New Jersey. Ibid.
In contrast, in Glassboro v. Gloucester County Board of Chosen Freeholders, the Court found that the appellants had a low probability of success on the merits regarding their claim that the trial court order violated the Commerce Clause. 98 N.J. 186, 195 (1984). The order prohibited the disposal in a New Jersey landfill of waste generated in Philadelphia and other municipalities both inside and outside of New Jersey. Id. at 192. The order only permitted continued use of the landfill by municipalities which had inter-district agreements allowing waste flow to the landfill and municipalities which would face irreparable injury if their waste could not be disposed of in the landfill. Ibid. The trial court had signed this order to decrease the flow of waste into the landfill, which was rapidly approaching its maximum capacity. Id. at 187. The Court noted that unlike the situation in Philadelphia v. New Jersey, in this case "there [was] no state action . . . that itself imposed a total and absolute ban on out-of-state waste solely because of its origin." Id. at 193-94. "The trial court's order in this context endeavored to effectuate a balanced and fair regulatory approach that was not in purpose or effect discriminatorily focused against interstate commerce as such." Id. at 194. The Court found that the burden on interstate commerce was not excessive in relation to the local interest in protecting "the public health, safety, and welfare by establishing a scheme intended to provide for regional planning and coordination of solid waste disposal." Id. at 194-95.
As described above, N.J.A.C. 13:55-1.7(A) was enacted with the purpose of ensuring that the private detective industry would be well-regulated in order to promote public safety. Protecting the safety of the public is a "legitimate local public interest." See Glassboro, supra, 98 N.J. at 194. N.J.A.C. 13:55-1.7(A) "regulates even-handedly to effectuate [this] legitimate local public interest, and its effects on interstate commerce are only incidental." N.J.A.C. 13:55-1.7(A) prevents all parties to franchise agreements from becoming licensed private detectives in New Jersey, regardless of whether the franchises are out-of-state franchises or in-state franchises. Therefore, it does not violate the Commerce Clause because "the burden imposed on [interstate] commerce is [not] clearly excessive in relation to the putative local benefits."
Thus, N.J.A.C. 13:55-1.7(A) does not violate either the United States Constitution or the New Jersey Constitution, and we therefore affirm the denial of petitioners' license applications.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION