Opinion
DOCKET NO. A-4352-13T3
06-30-2016
IN THE MATTER OF VERIZON NEW JERSEY, INC.'S ALLEGED FAILURE TO COMPLY WITH OPPORTUNITY NEW JERSEY COMMITMENTS.
Stefanie A. Brand, Director, New Jersey Division of Rate Counsel, argued the cause for appellant New Jersey Division of Rate Counsel (Ms. Brand, attorney; Christopher J. White, Deputy Rate Counsel, and Maria Novas-Ruiz, Assistant Deputy Rate Counsel, on the briefs). Geoffrey R. Gersten, Deputy Attorney General, argued the cause for respondent New Jersey Board of Public Utilities (John J. Hoffman, Acting Attorney General, attorney; Andrea M. Silkowitz, Assistant Attorney General, of counsel; Mr. Gersten and Christopher M. Psihoules, Deputy Attorney General, on the brief). Lawrence S. Lustberg argued the cause for respondent Verizon New Jersey, Inc. (Gibbons P.C., attorneys; Mr. Lustberg, Kevin G. Walsh, and Jonathan D. Klein, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Espinosa, Rothstadt and Currier. On appeal from the Board of Public Utilities, Docket No. TO12020155. Stefanie A. Brand, Director, New Jersey Division of Rate Counsel, argued the cause for appellant New Jersey Division of Rate Counsel (Ms. Brand, attorney; Christopher J. White, Deputy Rate Counsel, and Maria Novas-Ruiz, Assistant Deputy Rate Counsel, on the briefs). Geoffrey R. Gersten, Deputy Attorney General, argued the cause for respondent New Jersey Board of Public Utilities (John J. Hoffman, Acting Attorney General, attorney; Andrea M. Silkowitz, Assistant Attorney General, of counsel; Mr. Gersten and Christopher M. Psihoules, Deputy Attorney General, on the brief). Lawrence S. Lustberg argued the cause for respondent Verizon New Jersey, Inc. (Gibbons P.C., attorneys; Mr. Lustberg, Kevin G. Walsh, and Jonathan D. Klein, on the brief). PER CURIAM
The New Jersey Division of Rate Counsel (Rate Counsel) appeals from the New Jersey Board of Public Utilities' (Board) final agency decision approving without a public hearing the settlement of a dispute with Verizon New Jersey, Inc. (Verizon) related to Verizon's deployment of broadband service to New Jersey residents. On appeal, Rate Counsel argues that the decision should be reversed and remanded because it was "contrary to law, arbitrary and capricious," and because the approval without a hearing violated the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -15, the Telecommunications Act of 1992 (TCA), N.J.S.A. 48:2-21.16 to -21.21, and due process in general. The Board and Verizon disagree, arguing that there was no requirement or need for an evidentiary hearing, due process was satisfied by allowing the public "to provide input on the proposed settlement," and the decision was not "arbitrary, capricious or contrary to law." Verizon further argues that Rate Counsel's procedural arguments were waived by its failure to raise them before the Board. We affirm.
The origins of the parties' dispute dates back to 1992, when Verizon's predecessor petitioned the Board of Regulatory Commissioners to be regulated through an alternative form of regulation known as "Opportunity New Jersey" (ONJ). ONJ included incentive-based regulation and required Verizon to provide broadband digital service throughout its territory in New Jersey by 2010. ONJ's "service capability and technology deployments . . . [were] based upon assumptions regarding technology, markets and economic conditions over an extended period of time." The Board approved ONJ in May 1993, expressing in its order its commitment to ensure Verizon's compliance and the timely completion of the deployment. After a modification in July 1993 and a challenge filed by Rate Counsel, we affirmed the Board's approval. In re N.J. Bell Tel. Co., 291 N.J. Super. 77 (App. Div. 1996).
Broadband Digital Service was defined under ONJ as "[s]witching technologies matched with transmission capabilities support[ing] data rates up to 45,000,000 bits per second and higher, which enables services, for example, that will allow residential and business customers to receive high definition video and to send and receive interactive (i.e., two way) video signals." Fiber technology was the latest technology at the time.
The approved plan was replaced with a new plan in 1996 and again in 2003, but the obligations set forth in the 1993 plan were not altered.
By 2012, Verizon had completed 99.4% of its broadband commitment, but thirty to forty thousand customers were still without broadband. The Board served Verizon with an order to show cause why the Board should not find Verizon failed to comply with the plan for alternative regulation by not meeting the 2010 deadline for deployment of broadband service. Verizon filed an answer, but the Board and Verizon negotiated a stipulation of settlement, resolving the dispute.
Specifically, two towns in the state did not have access to broadband consistent with ONJ.
The stipulation resolved Verizon's compliance obligations under ONJ by creating a "new broadband request process known as a bonafide [sic] retail request or 'BFRR'" for customers without broadband access. Under this new plan, a request had to be made by at least thirty-five consumers in a census tract who have no access to broadband or 4G wireless service before it would be provided. The consumers were required to sign a one-year service contract and provide a hundred-dollar deposit, which would later be credited toward their service bill. Verizon would then provide service to the area within nine months.
The Board set a forty-five day period for public comment on the stipulation. In response, it received over 2800 comments, including comments from Rate Counsel, which opposed the stipulation because it did not hold Verizon to its obligations under the previous plans for alterative regulations. The comments from Rate Counsel did not include a request for a public hearing.
Rate Counsel objected to substituting "4G-based wireless transmission medium" because it was not the same service as "a 100% wireline network for broadband," unless "the price of wireless broadband service was capped at the rates charged for Verizon 'DSL' service pricing."
At its April 23, 2014 meeting, the Board discussed the comments it received before voting unanimously to accept the stipulation. In its comprehensive, fifteen-page April 29, 2014 order, the Board set forth the history of the deployment and discussed in detail the comments it received from individuals, municipalities, county organizations, chambers of commerce, trade unions and other associations and organizations, Rate Counsel, and Verizon. The Board found
the comments generally reflect[ed] misunderstandings regarding ONJ and the stipulation; a misinterpretation of ONJ; and/or inaccurate information concerning rates and charges and the impact of competition. A review of the comments clearly indicate[d] confusion regarding the scope of [the original plan], Verizon's FIOS offerings, and Verizon's cable franchise.
The Board considered five main concerns addressed in the comments: 1) a financial benefit to Verizon regarding the deployment of ONJ; 2) the definition of broadband in the stipulation requiring a minimum speed of DSL; 3) opposition to Wireless 4G to meet Verizon's ONJ obligation; 4) whether the stipulation limits competition; and 5) the thirty-five customer threshold.
Regarding the financial benefit to Verizon, the Board stated there were no surcharges on consumer bills, rate increases, or tax abatements dedicated to ONJ. The Board next stated that it "considered DSL acceptable to meet the ONJ broadband requirement," and that "ONJ did not specify wireline and did anticipate developments in technologies[, and t]here [was] no prohibition in ONJ from the use of wireless service for broadband." In response to comments that the stipulation limits competition, the Board stated that, when ONJ was adopted in 1993, Verizon was the only broadband provider so "the issue of competition [was] misplaced." Finally, the Board noted that the thirty-five-customer-threshold provision in the stipulation "generated mass misunderstanding," and explained that many commenters incorrectly believed that Verizon only had to serve thirty-five customers in a census tract. Instead, it explained, the provision meant that once thirty-five customers in a census tract signed up, "broadband must be deployed to the entire census tract." According to the Board, the stipulation was "an effort to achieve the same goals as reflected overall in the comments, to facilitate and improve access to broadband."
The Board noted the stipulation's BFRR process would enforce Verizon's ONJ obligations. In addition, "if Verizon fails to comply with the stipulation, the Board may take appropriate action to enforce it." Finally, the Board stated, "The stipulation avoids a potentially protracted proceeding and will allow Verizon to continue to advance deployment of broadband capabilities throughout its service territory, which will benefit New Jersey. The Board believes that the stipulation will provide advanced technologies to consumers throughout Verizon's service territory."
The Board determined that "[n]o contested-case or evidentiary hearing [was] required here," stating:
The Board is cognizant that a "contested case" is defined as "a proceeding . . . in which the legal rights, duties, obligations, privileges, benefits or other legal relations of specific parties are required by constitutional right or by statute to be determined by an agency by decisions, determinations, or orders, addressed to them or disposing of their interests, after opportunity for an agency hearing . . ." See N.J.S.A. 52:14B-2(b). The Board is also aware that the [APA (citation omitted)] "does not create a substantive right to an administrative hearing. The act merely prescribes the procedure to be followed in the event an administrative hearing is otherwise required by statutory law or constitutional mandate." In re Application of Modern Indus. Waste Serv., Inc., 153 N.J. Super. 232, 237 (App. Div. 1977).
In addition, there are no "material disputed adjudicative facts" at issue arising from the Order to Show Cause and its proposed resolution. In re Pub[.] Serv[.] Elec. [&] Gas Co[.]'s Rate Unbundling, Standard Costs [&] Restructuring Filings, 330 N.J. Super. 65, 119 (App. Div. 2000) [(hereinafter PSE&G)], aff'd, 167 N.J. 377, cert. denied, 534 U.S. 813, 122 S. Ct. 37, 151 L. Ed. 2d 11 (2001) [(citation omitted)]. Also, "[i]t is only when the proposed administrative action is based on disputed adjudicative facts that an
evidentiary hearing is mandated." In re Solid Waste Util. Customer Lists, 106 N.J. 508, 517 (1987); see also State Div. of Motor Vehicles v. Pepe, 379 N.J. Super. 411, 419 (App. Div. 2005) ("No disputed issue of material facts existed. Hence, no evidentiary hearing was required.").
[(first, second, and eleventh alterations in original).]
The Board concluded the stipulation was "just and reasonable, serve[d] to advance the level of broadband deployment with the understanding that technology has evolved since the original inception of the plan, and [was] consistent with law."
This appeal followed.
We begin by recognizing that "[o]ur review of administrative agency action is limited." Russo v. Bd. of Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011). "An administrative agency's final quasi-judicial decision will be sustained unless there is a clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks fair support in the record." In re Herrmann, 192 N.J. 19, 27-28 (2007). In this regard, our inquiry is limited to
(1) whether the agency's decision offends the State or Federal Constitution;
(2) whether the agency's action violates express or implied legislative policies;
(3) whether the record contains substantial evidence to support the findings on which the agency based its action; and
(4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.
[In Re Taylor, 158 N.J. 644, 656 (1999) (quoting Brady v. Bd. of Review, 152 N.J. 197, 211 (1997)).]
In addition, "an agency's interpretation of its own regulations is [generally] entitled to substantial deference." Hartman v. N.J. Racing Comm'n, 352 N.J. Super. 490, 496 (App. Div. 2002). Similarly, "[o]ur courts normally defer to the agency's choice of proceedings as long as the selection is responsive to the purpose and function of the agency, and suitable to the determination to be made." In re Regulation of Operator Serv. Providers, 343 N.J. Super. 282, 329-30 (App. Div. 2001) (citation omitted). "Administrative agencies enjoy a great deal of flexibility in selecting the proceedings most suitable to achieving their regulatory aims[, and a] high degree of discretion in exercising that choice reposes in the administrative agency." Crema v. N.J. Dep't of Envtl. Prot., 94 N.J. 286, 299 (1983) (quoting Bally Mfg. Corp. v. N.J. Casino Control Comm'n, 85 N.J. 325, 338 (1981) (Handler, J., concurring)).
Our deference to agency decisions is especially applicable to decisions made by the Board.
The Legislature has endowed the [Board] with broad power to regulate public utilities . . . [and] considerable discretion in exercising those powers. In re Elizabeth Town Water Co., 107 N.J. 440, 449 . . . (1987). In reviewing the [Board]'s decision, our scope of review is quite limited, particularly in a case such as this where the judgment exercised by the agency relies heavily on the agency's expertise.The Board's decision is therefore "entitled to presumptive validity." In re Petition of N.J. Am. Water Co., 169 N.J. 181, 188 (2001) (quoting In re Jersey Cent. Power & Light Co., 85 N.J. 520, 527 (1981)). The court's "function is not to substitute our judgment for that of the agency, particularly when that judgment reflects agency expertise." In re PSE&G, supra, 167 N.J. at 384. Where an agency, such as the Board, is authorized to make policy decisions in its areas of expertise, our role is not to determine whether its policy is wise but only whether it is lawful. See In re Adoption of Amendments to Ne., Upper Raritan, Sussex Cnty. & Upper Del. Water Quality Plans, 435 N.J. Super. 571, 583-84 (App. Div.), certif. denied, 219 N.J. 627 (2014). We are not, however, to simply "rubber stamp" the Board's determination. Id. at 584.
[In re Ownership of Renewable Energy Certificates ("RECs"), 389 N.J. Super. 481, 492 (App. Div. 2007) (second and third alterations in original).]
We may, however, "review any order of the [B]oard and . . . set aside such order in whole or in part when it clearly appears that there was no evidence before the [B]oard to support the same reasonably or that the same was without the jurisdiction of the [B]oard." N.J.S.A. 48:2-46. We can reverse the Board's decision only if it is "arbitrary, capricious, unreasonable or beyond the agency's delegated powers." N.J. Am. Water, supra, 169 N.J. at 188 (quoting In re Amendment of N.J.A.C. 8:31B-3.31, 119 N.J. 531, 544 (1990)). The Board's ruling should not be overruled absent "a lack of reasonable support in the evidence." In re PSE&G, supra, 167 N.J. at 385 (quoting Jersey Cent. Power & Light, supra, 85 N.J. at 527).
Applying this standard to our review, we conclude the Board's decision to approve the stipulation without an evidentiary hearing was supported by sufficient credible evidence on the record as a whole, R. 2:11-3(e)(1)(D), and was legally correct, essentially for the reasons expressed by the Board in its order approving the stipulation. We add only the following comments.
We reject Rate Counsel's argument that the Board's decision could only be reached after a formal evidentiary hearing. The record reveals that the comments the Board received before the stipulation's approval from various stakeholders, including Rate Counsel, did not request a further hearing. By affording a period for public comment, the Board provided a sufficient hearing for the public and interested stakeholders to question the stipulation and to urge the Board to adopt or reject it.
We have observed that
[t]he term "hearing" does not have a fixed meaning in the field of administrative law; it varies with the types of issues considered. Thus, when a statute requires a hearing, the question is not whether a hearing should be held, but rather what type of proceeding is appropriate to the nature of the case.
[In re Bell Atl.-N.J., Inc., 342 N.J. Super. 439, 443-44 (App. Div. 2001) (citation omitted).]
"What is required in each instance, as a hearing appropriate to the nature of the case, is a proceeding that promotes fundamental fairness and fosters the integrity of governmental processes." Id. at 444. The general rule is that "[i]f an agency is exercising its administrative expertise to make a policy determination not involving the adjudication of disputed facts, a trial-type hearing is ordinarily not required." Id. at 445. "On the other hand, if the dispute hinges upon a factual-type determination, then a hearing is required." In re Adoption of 2003 Low Income Hous. Tax Credit Qualified Allocation Plan, 369 N.J. Super. 2, 45 (App. Div.) (citing In re Bell Atl.-N.J., supra, 342 N.J. Super. at 445), certif. denied, 182 N.J. 141 (1981). Here, we conclude that the Board conducted a hearing that met these standards, and we find no basis to reverse its decision.
Neither the APA nor the TCA requires anything more under the circumstances. The TCA requires a hearing when "[a] local exchange telecommunications company . . . petition[s] the [B]oard to be regulated under an alternative form of regulation." N.J.S.A. 48:2-21.18(a). The stipulation, however, did not implicate this provision of the TCA, as Verizon was already subject to an alternate form of regulation dating back to ONJ, and the stipulation did not impact any costs to the rate-paying public. Even if it did, the hearing requirement alone does not resolve the question of the type of hearing that is necessary because "[i]t is clear . . . that the precise characteristics of a required hearing are dictated not so much by the type of exercise in which the agency is engaged, but more so by the nature of the questions presented." In re Bell Atl.-N.J., supra, 342 N.J. Super. at 445.
Unlike the issues presented to the Board in In re Bell Atlantic-N.J., the consideration of the stipulation did not require a plenary hearing in order to satisfy the TCA. The APA, N.J.S.A. 52:14B-9, alone, did not create a "substantive right to an administrative hearing." In re Fanelli, 174 N.J. 165, 172 (2002)(citation omitted). Once it determined that a hearing in the form of soliciting public comment was appropriate, the Board satisfied its obligation under the APA because it considered the comments, which provided a "full opportunity to be heard" by the Board. Tosco Corp. v. N.J. Dep't of Transp. & Marketfair, 337 N.J. Super. 199, 207 (App. Div. 2001) (quoting High Horizons Dev. Co. v. State, Dep't of Transp., 120 N.J. 40, 52 (1990)). We have previously held that use of a similar procedure does not violate any statute or due process. See In re PSE&G, supra, 330 N.J. Super. at 111. ("Agencies are well within their authority to adopt stipulations as fact-finding tools, as long as they evaluate the stipulations and the parties have had an opportunity to argue against them. Furthermore, New Jersey has a strong public policy in favor of settlements." (citation omitted)).
Rate Counsel's reliance on In re Bell Atlantic-N.J. is inapposite because the issues there were distinct from those in this case. In that case, Rate Counsel requested a plenary hearing and we agreed that one was necessary, as the issues that confronted the Board related to reclassification of a service provided by Bell Atlantic, whose petition was supported by its own cost data and other information that we determined should be tested by a plenary hearing because of its impact on the rate-paying public. Id. at 454-55. We stated,
[i]n the context of the Board's responsibility to determine whether [Bell Atlantic]'s proposal to reclassify [its service] met a realistic standard of competitiveness, see N.J.S.A. 48:2-21.16b(1) ("In a competitive marketplace, traditional utility regulation is not necessary to protect the public interest[.]"), the Advocate and others opposing the proposal were entitled to appropriate opportunity to test the factual premises of the proposal and the proofs offered in support thereof. This must be the least meaning of the hearing requirement of N.J.S.A. 48:2-21.19b.
[Id. at 453-54 (third alteration in original).]
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION
"We conclude[d] that the procedures in th[at] matter did not satisfy the statutory requirement for a hearing in that they failed to afford objecting parties an adequate opportunity at least to test the accuracy and sufficiency of all the material showings in support of the proposal" that included "proprietary cost data" relating to Bell Atlantic's claim that there was sufficient competition for the subject service to warrant reclassification, which could impact the cost to the public. Id. at 454-55.