Decided: October 14, 1983.
HARRY F. HELDUSER, III, PLAINTIFF-APPELLANT,
IRWIN I. KIMMELMAN, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, DEFENDANT-RESPONDENT. WILLIAM H. POWELL, III, PLAINTIFF-APPELLANT, V. IRWIN I. KIMMELMAN, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, DEFENDANT-RESPONDENT
On appeal from decision of Attorney General of New Jersey.
Botter, Polow and Brody. The opinion of the court was delivered by Botter, P.J.A.D.
[191 NJSuper Page 495] These consolidated*fn1 appeals were filed by suspended members of the state police, Harry F. Helduser, III, a state trooper, and William H. Powell, III, a detective, who seek reimbursement of counsel fees and costs incurred in defending themselves against criminal charges on which they were tried and acquitted. Relying on N.J.S.A. 59:10-1 et seq. and N.J.S.A. 59:10A-1 et seq., appellants contend that the charges against them arose from incidents occurring in the course of performing their duty, and, having been cleared of criminal wrongdoing, the State should reimburse them for the cost of defending themselves. The indictment under which Helduser was tried charged him with homicide for having shot and killed a 21 year old motorist, Sang Ngoc Le, whom he had pursued and attempted to stop for speeding. The indictment under which Powell was tried involved misconduct in office and unlawful possession and distribution of marijuana. These charges resulted from evidence collected during an internal affairs investigation by the state police showing that Powell had diverted more than 250 pounds of marijuana from larger quantities entrusted to him by police authorities to be transported to a site for destruction.*fn2 The Attorney General denied the requests for reimbursement made
[191 NJSuper Page 496]
by counsel for Helduser and Powell, and these appeals followed.*fn3 We now affirm.
Helduser's demand for reimbursement of counsel fees in the sum of $122,504.33 was made for the first time on October 27, 1981, after a jury acquitted him in his third trial on the homicide charge arising out of events that occurred on April 4, 1978. In the first trial Helduser was convicted of manslaughter, but that conviction was reversed on appeal to this court. A second trial ended in a hung jury. Helduser contends that his revolver discharged accidentally while he was in his motor vehicle abreast of the driver's side of the victim's vehicle. He contends that the gun discharged when the victim "swung his car into [Helduser's] vehicle and rammed it."*fn4 Helduser's explanation of the shooting is refuted by substantial evidence contained in the state
[191 NJSuper Page 497]
police investigation which resulted in the indictment returned by the Cumberland County Grand Jury. The reports of the investigation and statements of witnesses showed that the motorist slowed or stopped his car at an intersection and that Helduser drew up alongside the victim's vehicle, pointed his gun at the motorist, and fired the gun through the motorist's window, striking him in the head. Evidence gathered in the investigation would permit the conclusion that Helduser fired the gun intentionally or accidentally. But the evidence also showed that he violated state police regulations in using the gun in these circumstances. In addition, there was proof that Helduser's revolver was in an unsafe condition and that a gunsmith had warned him of this. It had a "hair trigger" which allowed the gun to discharge with very slight pressure, possibly because the hammer and trigger had been chrome or nickel plated.*fn5 Thus, evidence gathered in the investigation would permit the conclusion that Helduser's conduct constituted intentional wrongdoing or criminal recklessness and also violated state police regulations.
The record submitted by the Attorney General on the appeal in the Powell case also contains ample evidence of his wrongdoing in the diversion and sale of marijuana entrusted to him. Evidence of his criminal conduct was first called to the attention of the state police by Powell's former partner in a business which he conducted, with knowledge of his superiors, while a member of the state police. The investigation produced corroboration of Powell's misconduct although he was later acquitted of the charges. Powell's request for reimbursement of counsel fees in the sum of $25,885.00 was made for the first time in October 1981 after the criminal proceedings had terminated.
Helduser contends that he is entitled to reimbursement pursuant to provisions contained in N.J.S.A. 59:10A-1 et seq. and [191 NJSuper Page 498] N.J.S.A. 59:10-1 et seq. He argues that N.J.S.A. 59:10A-1*fn6 requires the Attorney General to provide for the defense of a state employee in any action brought against the employee unless the exceptions of N.J.S.A. 59:10A-2 apply.*fn7 Helduser focuses on N.J.S.A. 59:10-2 and argues that its provision for reimbursement of counsel fees governs. This section of the relevant statutes requires indemnification for settlements or judgments and reimbursement for counsel fees when the Attorney General has refused to provide for the defense to which an employee is entitled under N.J.S.A. 59:10A-1 et seq. Helduser emphasizes that under N.J.S.A. 59:10-2 indemnification is required if the employee establishes that the act or omission on which the action was based occurred within the scope of his employment unless the State establishes that his conduct was willful or was motivated by actual fraud or malice. Helduser would require the State to prove this exception to avoid liability. To satisfy his due process rights, he argues that the case should be remanded to the Law Division for an evidentiary hearing.*fn8
[191 NJSuper Page 499]
The Attorney General argues against reimbursement on a number of grounds. His principal contention is that the provisions for indemnification and reimbursement for counsel fees provided in N.J.S.A. 59:10-2 apply only to civil, not criminal actions. Additional reasons for rejecting the claims for reimbursement were contained in letters sent by the Attorney General to appellants' attorneys in December 1981, as follows:
No request was made to the Attorney General, directly or through the Division of State Police, to provide for the defense of the charges against [Trooper Helduser/Detective Powell].
[Trooper Helduser's/Detective Powell's] actions or omissions were not within the scope of his employment;
His actions were of willful misconduct;
The defense of this action by the Attorney General would have created a conflict of interest between the State of New Jersey and the employee;
The Attorney General's authority to represent a State employee is discretionary; and
There was no opportunity for the Attorney General to assume exclusive control over the representation of this employee.
Powell's position on this appeal is similar to Helduser's, but it differs in some respects. Powell contends in general terms that, having been acquitted of criminal charges based upon misconduct related to his employment -- the misappropriation of drugs entrusted to him -- he should be reimbursed by the State for the cost of his defense. He seems to rely upon N.J.S.A. 59:10-2. He argues that reimbursement should not be denied for his noncompliance with "procedural" requirements of the pertinent statutes, such as his failure to make a formal request upon the Attorney General for representation. He contends that had such a request been made, a conflict of interest would have prevented the Attorney General from providing for his defense. He also contends that the provisions in the statute which give the Attorney General the right to exclusive control over the [191 NJSuper Page 500] litigation relate to civil actions not criminal proceedings. Thus, he contends that the Attorney General was not prejudiced by noncompliance with what he terms procedural requirements and, therefore, substantial compliance should be inferred.*fn9
[191 NJSuper Page 501]
In our view the provisions for indemnification of state employees contained in N.J.S.A. 59:10-1 et seq., including the right to reimbursement for counsel fees when the Attorney General has refused to provide for an employee's defense, were intended to apply to civil actions only, and not to criminal actions. We also conclude that those provisions of N.J.S.A. 59:10A-1 et seq. which obligate the Attorney General to provide for the defense of State employees were intended to apply solely to civil actions, leaving the defense of criminal actions entirely to the Attorney General's discretion.
The principal section of the statutes upon which appellants rely, N.J.S.A. 59:10-2, was adopted as part of the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 et seq., enacted by L. 1972, c. 45.*fn10 N.J.S.A. 59:10-2 must be read in conjunction with N.J.S.A. 59:10-1. N.J.S.A. 59:10-1 applies to cases in which the Attorney General has provided for the defense of State employees; N.J.S.A. 59:10-2 applies to cases in which the Attorney General has refused to provide for such a defense. N.J.S.A.
[191 NJSuper Page 502]
59:10-1 provides that State employees or former employees are entitled to indemnification if, pursuant to the provisions of L. 1972, c. 48 (N.J.S.A. 59:10A-1 et seq.), the Attorney General provides for the defense of the employee, except that the State is not authorized to pay for punitive or exemplary damages or damages resulting from the commission of a crime. The indemnification provided by this section is for damages in civil cases only; it makes no reference to counsel fees because it applies only to those cases in which counsel has been provided for the employee's defense. The Legislature could not have intended N.J.S.A. 59:10-1 to apply to criminal actions. Employees would have no need for indemnification in criminal cases in which the Attorney General has provided for their defense. They would have no claim for counsel fees, and the criminal proceedings would not result in a judgment or settlement requiring indemnification. Thus, it is clear that indemnification under N.J.S.A. 59:10-1 applies to civil claims only. The type of indemnification which the Legislature had in mind, indemnification for settlements or judgments on damage claims, is made clear by the next section, N.J.S.A. 59:10-2.
N.J.S.A. 59:10-2*fn11 provides for the right of an employee to indemnification by the State when the Attorney General has
[191 NJSuper Page 503]
refused to provide for his defense "as required by the provisions of [ N.J.S.A. 59:10A-1 et seq. ]." Indemnification is subject to two conditions, in addition to the Attorney General's refusal of the request for a defense to which the employee was entitled.*fn12 The conditions are: (1) that the conduct on which "the claim or judgment was based" occurred within the scope of the employment, and (2) the State fails to prove that the claim was based upon actual fraud, actual malice or willful misconduct. This section further provides that if the State employee was entitled to a defense, the State "shall pay or reimburse him for any bona fide settlement agreements entered into" by him and for "any judgments entered against" him, and "shall pay or reimburse him for all costs of defending the action, including reasonable counsel fees and expenses, together with costs of appeal, if any." The section also excludes payment for punitive or exemplary damages or damages resulting from the commission of a crime.
The language of N.J.S.A. 59:10-2 is appropriate to civil claims for damages not to criminal actions. Indemnification is provided for settlements or judgments, presupposing a civil claim for damages, not a criminal proceeding. The claim must arise from an act or omission in the course of employment, provided it was not an act of willful misconduct, actual fraud or actual malice. All of these terms are particularly relevant to civil claims. As will be seen, they derive from the Report of the Attorney General's Task Force on Sovereign Immunity (1972) which recommended statutory provisions for indemnifying employees "for civil liability arising within the scope of their employment and not caused by actual fraud, actual malice or willful misconduct."
[191 NJSuper Page 504]
Id. at 15 (emphasis supplied).*fn13 The only provision in the statutes in question for reimbursement of counsel fees and costs "of defending the action" is incidental to and part of the provision for indemnifying against such civil claims.*fn14
Other provisions of this law are consistent with this interpretation. N.J.S.A. 59:10-3 provides that a State employee shall not be entitled to indemnification "unless within 10 calendar days of the time he is served with any summons, complaint, process, notice, demand or pleading, he delivers the original or a copy thereof to the Attorney General or his designee." Upon receiving such process or notice, "the Attorney General may, pursuant to the provisions of [ N.J.S.A. 59:10A-1 et seq. ], assume exclusive control of the employee's representation and such employee shall cooperate fully with the Attorney General's defense." Clearly, these provisions are appropriate to civil
[191 NJSuper Page 505]
actions, not criminal actions. The Attorney General could not control the defense of a state employee charged with a crime, particularly if the crime charged was the violation of New Jersey law. See N.J.S.A. 59:10A-2(c) which authorizes the Attorney General to refuse to provide for the defense of an action if he determines that it would create a conflict of interest between the State and the employee.*fn15 As noted above, Powell argues that the provisions authorizing the Attorney General to assume exclusive control of the defense apply to civil actions and not criminal actions. This conclusion is supported by the statement accompanying Senate Bill 993 (1972) which became N.J.S.A. 59:10A-1 et seq. N.J.S.A. 59:10A-4 also authorizes the Attorney General to assume "exclusive control" over the employee's representation and requires the employee to "cooperate fully with the Attorney General's defense." The statement reads:
This bill is a companion bill to Senate Bill No. 969. It is primarily for the purpose of satisfying the needs for representation of State employees and former State employees resulting from the passage of Senate Bill No. 969, the New Jersey Tort and Contractual Claims Act. Although this authority is undoubtedly possessed by the Attorney General under his existing powers, this amendment is intended to explicitly establish that authority and the circumstances under which it will be exercised.
In addition, this amendment makes clear that the Attorney General shall have exclusive control of the litigation and State employees and former State employees must cooperate with him fully or lose their right to indemnification provided in Chapter 10 of the New Jersey Tort and Contractual Claims Act.
The foregoing statement is a useful introduction to our consideration of N.J.S.A. 59:10A-1. N.J.S.A. 59:10A-1, quoted in note 6 above, requires the Attorney General to provide for the defense of a state employee or former state employee in "any action . . . brought on account of an act or omission in the scope
[191 NJSuper Page 506]
of his employment." Although the term "any action" is seemingly all inclusive, other terms used in this section (the "cross-action, counterclaim or cross-complaint" language) generally signify civil actions not criminal actions. The same may be said of N.J.S.A. 59:10A-2. N.J.S.A. 59:10A-2 allows the Attorney General to refuse to provide a defense if (a) the act or omission was not within the scope of employment, or (b) the misconduct was willful or was motivated by actual fraud or actual malice, or (c) the defense by the Attorney General would create a conflict of interest between the State and the employee. Again, this language is particularly appropriate to civil actions based on tortious conduct, see note 14 above, as are the provisions of N.J.S.A. 59:10A-4 which allow the Attorney General to assume exclusive control over the employee's representation.
The last sections to consider are N.J.S.A. 59:10A-3, which plays a key role in Helduser's argument, and N.J.S.A. 59:10A-5. N.J.S.A. 59:10A-3 provides:
In any other action or proceeding, including criminal proceedings, the Attorney General may provide for the defense of a State employee or former State employee, if he concludes that such representation is in the best interest of the State.
N.J.S.A. 59:10A-5 allows the Attorney General to use "an attorney from his own staff" or to employ "other counsel" in providing for the defense of a state employee. The Attorney General may also do so "by asserting the State's right under any appropriate insurance policy which requires the insurer to provide the defense."
Helduser argues that indemnification for the cost of defending a criminal action is required under N.J.S.A. 59:10-2 whenever the Attorney General has refused to provide for the employee's defense as required by the provisions of N.J.S.A. 59:10A-1 et seq. He contends that the Attorney General must defend a state employee in "any" action based on an act or omission committed in the course of his employment, N.J.S.A. 59:10A-1, unless it comes within the exceptions contained in N.J.S.A. 59:10A-2, namely, conduct that is willful, malicious or fraudulent,
[191 NJSuper Page 507]
or cases presenting a conflict of interest between the employee and the State. Helduser argues that the reference in N.J.S.A. 59:10A-3, to "any other action or proceeding, including criminal proceedings," must refer to all actions based on conduct not within the scope of employment. In such cases, including criminal cases, the Attorney General may provide a defense if he concludes that it is in the State's interest to do so. Thus, Helduser argues, the indemnification provisions of N.J.S.A. 59:10-1 and -2 apply to all civil and criminal actions arising from conduct within an employee's scope of employment, subject to the exceptions contained in N.J.S.A. 59:10A-2.
We reject this line of reasoning for several reasons. As previously stated the language of N.J.S.A. 59:10-1 and -2, and the statement accompanying the bill that became N.J.S.A. 59:10A-1 et seq. as well as other legislative history, about which more will be said shortly, all indicate that the indemnification provisions in N.J.S.A. 59:10-1 and -2 apply only to civil actions for damages based upon an employee's tortious conduct. Similarly, N.J.S.A. 59:10A-1 and -2 were intended to govern the Attorney General's duty to defend state employees in civil actions. The reference in N.J.S.A. 59:10A-3 to "any other action or proceeding, including criminal proceedings," was simply to preserve the Attorney General's prior statutory and inherent authority to represent or furnish a defense for state employees. See N.J.S.A. 53:1-22, repealed by L. 1972, c. 45, § 59:12-2, which gave the Attorney General discretionary authority to furnish the defense for members of the state police in criminal proceedings in the interest of the State and the Division of State Police.*fn16 It is unlikely that the Legislature intended
[191 NJSuper Page 508]
N.J.S.A. 59:10A-3 to apply to civil actions based on conduct outside an employee's scope of employment, as Helduser contends. It is difficult to contemplate the Attorney General's use of public funds to defend someone for conduct that is beyond the scope of his employment. More likely, the reference to "any other action or proceeding" was simply a catch-all to cover actions not arising under the Tort Claims Act, including civil actions not seeking damages, as well as criminal actions, in which the Attorney General should have discretionary authority to furnish a defense for a state employee when the state interest would be served.
The history of this legislation supports our interpretation. The Tort Claims Act was based on the Report of the Attorney General's Task Force on Sovereign Immunity (1972) (Task Force Report), referred to above. The report contained the proposed Tort Claims Act, N.J.S.A. 59:1-1 et seq. including N.J.S.A. 59:10-1 to -4. Chapter 9 of the Task Force Report contains the proposed companion legislation that became N.J.S.A. 59:10A-1 et seq. Clearly, the focus was upon the need to defend and indemnify state employees against civil liability for damages. The title to L. 1972, c. 48, N.J.S.A. 59:10A-1 et seq. is "An act concerning the defense of state employees and former employees in relation to claims arising out of or in connection with their employment by the State." (Emphasis supplied) The task force was formed in response to our Supreme Court's decisions in P, T & L Constr. Co. v. Transp. Dep't Comm., 55 N.J. 341 (1970) and Willis v. Conservation and Economic Dev. Dep't., 55 N.J. 534 (1970). Task Force Report at 1. The focus of the report was the "selective abolition" of the State's sovereign immunity by
[191 NJSuper Page 509]
legislation "in contract and tort." As noted above, among the principal recommendations was the indemnification of public employees "for civil liability arising within the scope of their employment. . . ." Id. at 15. Because state employees were subject to civil liability although the State was immune, protecting them against civil liability was considered an important goal in itself even if the State did not yield sovereign immunity in general. Ibid.
Another of the "principal recommendations" of the Task Force Report was the following:
7. The Attorney General of the State of New Jersey should provide for the defense of all State employees sued for negligence within the scope of their employment. [ Id. at 7]
The common practice throughout the other jurisdictions examined is that the Attorney General of the respective states represents state employees in the civil actions brought against them. It is the current practice of the New Jersey Attorney General to provide such representation, and it is essential that he should continue to do so and be provided with a more specific statutory authority under which to act. [ Id. at 16]
Although this summary recommendation concerned the defense of civil actions based on negligence, the report referred to a few statutes that authorized the Attorney General to furnish a defense for certain state employees in criminal cases as well. See note 16 above.*fn17 Asserting that the Attorney General has inherent power to represent state officers and employees, it was recommended that his right to represent state employees should be made clear, since the existing statutory general provision for representation by the Attorney General spoke of state "officers" and not "employees."
Thus, we conclude that the phrase "including criminal proceedings" contained in N.J.S.A. 59:10A-3, together with the repeal of N.J.S.A. 53:1-22 and N.J.S.A. 38A:4-10, was intended merely to express the Attorney General's discretionary authority
[191 NJSuper Page 510]
to furnish a defense for all state employees charged with crimes when he determines that it is the "best interest of the State" to do so. There is nothing in the Task Force Report that indicates an intention to reimburse employees for the cost of defending against criminal charges if the Attorney General has refused their request for representation. The right of the Attorney General to refuse to defend an employee when a conflict of interest between the State and the employee would be created, as provided in N.J.S.A. 59:10A-2(c), could support that refusal in most criminal actions.*fn18 After all, the Attorney General is the chief law enforcement officer of the State. See N.J.S.A. 52:17A-2 and N.J.S.A. 52:17A-4. All crimes are prosecuted in the name of the State of New Jersey by the Attorney General and the county prosecutors. N.J.S.A. 2A:158-4; see Morss v. Forbes, 24 N.J. 341, 388 (1957) (Weintraub, J., dissenting in part). Notwithstanding differences in responsibility between county prosecutors and the Attorney General, see ibid., the Attorney General must be left with broad discretion to avoid a conflict of interest that may be created by his furnishing a defense for a state employee charged with the commission of a crime.*fn19
We do not imply that the Attorney General should not furnish counsel to defend members of the state police or other state officers against criminal charges. Apparently the Attorney General does furnish such services in his discretion. See note 6
[191 NJSuper Page 511]
above. The Attorney General may find it in the State's interest to do so when state officers and employees are unjustly or frivolously accused of crimes or other transgressions. Cf. Van Horn v. Trenton, 80 N.J. 528, 536-537 (1979). However, N.J.S.A. 59:10-2 does not authorize indemnification against counsel fees and costs incurred in defending against criminal charges when the Attorney General does not provide for the employee's defense. This contrasts with the provisions pertaining to municipal police officers, N.J.S.A. 40A:14-155, which were in effect when N.J.S.A. 59:10-1 et seq. and N.J.S.A. 59:10A-1 et seq. were enacted. Accordingly, the Attorney General properly denied appellants' requests for reimbursement, apart from his contention that appellants never asked him to furnish them with a defense.