Cross motions for summary judgment in this case raise important questions as to the meaning and constitutionality of statutes establishing and governing the New Jersey State Firemen's Association as well as local firemen's relief associations throughout this state. Those associations hold and administer substantial funds ("The Firemen's Relief Fund") contributed by a 2% tax on fire insurance premiums charged by non-New Jersey insurers on policies insuring property within this state. In 1987 that tax produced over $7,000,000 for the state and local associations. As set out in the most recent information provided, the local relief associations hold approximately $35,000,000 and the State Association approximately $3,800,000.
Plaintiff is a member of the fire department of the Borough of Fort Lee. He became a member in December 1986, when the governing body of the municipality approved his application for membership.
After that approval, plaintiff's application for membership in the Fort Lee Firemen's Relief Association, which would make him eligible for the benefits provided by the statutes referred to above, was processed through the Fort Lee relief association, and forwarded to the State Association. The State Association
rejected the application on the grounds that plaintiff had "OS blindness" in one eye and a lack of depth perception in the other eye.
That action did not affect plaintiff's membership in the Fort Lee fire department. It simply denied him membership in the relief association. Thus, he remained a fireman but he and his dependents (if any) were ineligible to receive welfare, and possible death benefits, available to firemen who are also members of the relief association. Plaintiff thereupon filed this suit which not only challenged the State Association's power to reject his application, but also went considerably beyond that limited claim and challenged the legitimacy of virtually the entire program of administering the Firemen's Relief Fund through the State Association and some 521 local associations.
That challenge by plaintiff raises interrelated issues dealing with statutory interpretation, the validity of certain rules of the State Association, and the constitutionality of the statutory plan which created both the State Association and the local associations. He claims that the State Association has no power to deny membership or benefits to any municipal fire fighter, whether based on a physical examination, a "quota" system, or for any other reason. Rules that purport to qualify the right to membership, he claims, are invalid. So too, he says, are certain rules discussed below which declare benefits payable by the association to be "gratuities or voluntary payment" and which call for the forfeiture of all benefits by anyone who challenges a decision of the Executive Committee.
Plaintiff submits two constitutional claims:
First, he contends that the payment of tax money to the state and local associations constitutes a donation or appropriation of money to a private entity. He says that payment violates our state constitution*fn1 since the funds "are not being expended for
a public purpose," are being managed and controlled by a private association without governmental control, and because the statutory scheme under which such payments are made is vague and "lacking in adequate standards for control over the tens of millions of dollars" involved. Plaintiff seeks a declaration of unconstitutionality and a direction that all funds held by or under the control of the State Association be declared property of the State of New Jersey.
Second, plaintiff claims that the statutory delegation of rule-making authority to the State Association lacks "adequate standards." He contends that it grants "final and unfettered determination" over participation in a governmental function to a private body without public accountability, is vague, "unreasonable, arbitrary and capricious," and thus represents an unconstitutional delegation of legislative authority contrary to Article IV, section 1, paragraph 1 of the New Jersey Constitution.
Before discussing those claims, some preliminary discussion -- first of the statutory scheme and then of certain regulations adopted by defendant -- is required.
A. THE APPLICABLE STATUTES.
The statutes regulating "local firemen's relief associations" are contained in N.J.S.A. 43:17-1 through 43:17-39. They constitute "Article 1" of Chapter 17 of Title 43.
The related statutes dealing with the "New Jersey State Firemen's Association" appear as Article 2 of that chapter, and consist of N.J.S.A. 43:17-40 through 43:17-47. Both articles were originally adopted in 1885. (L. 1885, c. 122) and have continued in existence with some amendments, but with the overall structure essentially unchanged, from then until now.
Article 1 provides, in N.J.S.A. 43:17-1, that in any municipality where "there now are or hereafter may be organized" one or more fire companies "under the supervision or control" of the municipal governing body, the members of those fire companies may become incorporated as the "Firemen's Relief Association" of that municipality.*fn2 Each municipality is to have just one relief association so that if there is more than one fire company in a municipality, the different companies are required to unite in the formation of just one association. N.J.S.A. 43:17-7.
N.J.S.A. 43:17-3 sets out the object of local relief associations:
(T)o establish, provide for and maintain a fund for the relief, support or burial of indigent exempt firemen and their families, and of any persons and the families of any persons who may be injured or killed while doing public fire duty, or may become indigent or be disabled or may die as the result of doing such duty or may be prevented by the injury or by sickness arising from their doing such duty, from attending to their usual occupation or calling.
N.J.S.A. 43:17-9 is a key section and deals with the membership of local relief associations. It reads as follows:
The membership of such corporation (the local relief association) shall consist, without any formal election thereto, of the officers and members of such fire . . . companies . . . as shall be under the supervision or control of the governing board or body of the municipality. . . .
Local relief associations are governed by what is termed a "board of representives" (N.J.S.A. 43:17-11) consisting of representatives from the constituent fire companies within the municipality together with the municipal fire chief. Applications for relief assistance, however, are handled by a different body called the "board of visitors or trustees," (N.J.S.A. 43:17-24)
some of whom are elected by the constituent fire companies and some of whom are chosen by the board of representatives. N.J.S.A. 43:17-13. That board (hereinafter "the trustees" or "board of trustees") is empowered to approve or deny requests for assistance. However, according to N.J.S.A. 43:17-35, they are required to take that action pursuant to "rules and regulations" established by the State Association.*fn3
The actions of the trustees must also be reported annually to the Secretary of State, by a sworn statement setting out, among other things, the receipts and expenses of the association during the year and an accounting of funds then on hand. A copy of that statement is also to be sent to the State Association, whose executive committee is required to "determine whether the local association has complied with the requirements of this chapter relating thereto." N.J.S.A. 43:17-31.
As noted, N.J.S.A. 43:17-41 through 43:17-47 provide for the organization, existence and operations of the State Association. N.J.S.A. 43:17-42 provides that each local association shall select three delegates to the convention of the State Association, and those delegates, together with the municipal fire chief, are to elect the officers of the State Association. Those elected officers, plus others designated in the organization's constitution, make up the "executive committee" of the Association.*fn4
N.J.S.A. 43:17-45 deals with the supervisory powers of the executive committee of the State Association over the local associations and is the counterpart of N.J.S.A. 43:17-35. Section 45 states that
The executive committee. . . . shall have the supervision and power of control of the funds and other property of all firemen's relief associations, shall see that the same are properly guarded and legally invested and expended and shall examine the annual reports of each association.
The executive committee is required to file with the Commissioner of Insurance a list of local associations which have complied with the law and,
Only associations so reported shall be entitled to the pro rata share of the monies in the commissioner's hands arising from the two percent on premiums. [ N.J.S.A. 43:17-45].
The "two percent on premiums" referred to in N.J.S.A. 43:17-45, of course, refers to the tax levied on non-New Jersey insurance companies respecting policies they write on property located in this state. The tax is imposed by N.J.S.A. 54:18-1, and its allocation and use are governed by that statute together with N.J.S.A. 54:17-4.
In brief, the statutes provide that, except for certain payments to the New Jersey Firemen's Home,*fn5 the proceeds of the two percent tax are to be paid to the State Association, or directly to the various local associations in proportion to the premium amounts which emanate from each municipality. In the early years of the program, foreign insurance companies actually made payments directly to the local associations. In recent years, however, all payments have been made to the State Association. An organization known as the Insurance Service Organization compiles data as to premiums charged by
foreign insurance companies in each municipality, and based on that data an allocation formula for the entitlement of each municipality is created. After receiving the total funds, the State Association deducts a prescribed amount and then distributes the balance to the local associations pursuant to the allocation formula, but with a minimum of at least $2,500 to each municipality. At present, the state share of the total fund is 52% with the remaining 48% distributed to the local associations. From its 52% the state administers a burial fund through which, subject to certain qualifications and possible exceptions discussed below, the family of a deceased member who has met certain requirements is entitled to a death benefit of $3,200.*fn6 The local association administers the "relief," or welfare, portion of the program.
B. RULES ADOPTED AND NOT ADOPTED BY THE STATE ASSOCIATION.
The division of responsibility between the state and local relief associations (together with the accompanying division of receipts between the two) results from an exercise by the State Association of the rule making power given it by N.J.S.A. 43:17-35 and 43:17-45. Another example of the exercise of that power is the State Association's adoption of a set of regulations entitled "General Relief Fund Rules" ("the Rules"). The document is in some respects a curious one. Both for what it says and for what it does not address at all, it represents the focus of part of plaintiff's attack.
The Rules begin with a preamble stating that the "fundamental and primary purpose" of the State and local associations is "to provide relief for indigent fire persons, their widows, widowers and ophans. That sentiment, however, is followed by an extraordinary statement:
Any and all benefits and claims payable hereunder have always been gratuities or voluntary payments with the Association, and not property rights or the subject of judicial process, and are hereby so declared and determined. Accordingly, legal proceedings in any Court for or against any such benefit or claim hereunder shall be considered and is hereby determined to be contrary to the purposes of this Association, and any such proceedings shall forthwith operate as a bar and forfeiture of any and all benefits or claims or monies otherwise payable hereunder.
The Rules establish an Advisory Committee to pass upon death benefit claims submitted to the State Association and provide for a right of review by the Executive Committee. After doing that, however, they then set out another statement, as unwarranted and inappropriate as the one quoted above:
The remedies provided herein are believed to be so complete that it is hereby determined that any claimant who instituted legal proceedings in any court without the consent of the Executive Committee shall thereupon be barred and forfeit any and all claims he, she, or they might have had. (Art. II, Sec. 10)
Article IV, Sec. 2 of the Rules purports to list criteria for membership, one being the passing of a physical examination. However, the Rules do not contain any criteria concerning that examination nor do they describe what standards are to be applied in determining whether one passes or fails such an examination.
The Rules also contain a lengthy and complex description of a so called "quota system", limiting membership, and thus eligibility for death benefits in certain municipalities. See, Art. V, Sec. 1 through 5. The system had developed because the State Association, at one time, felt that the large number of eligible fire fighters in the state jeopardized the stability of its fund. To counter that, it imposed numerical limits on the number of fire fighters who would be admitted to membership in different sized municipalities. If a municipality had more fire fighters than its imposed quota number, the additional fire fighters had to wait for openings within the quota before they could become eligible for death benefits. Generally the system operated to limit more densely populated municipalities.
At one time the quota system apparently represented a serious problem in the operation of the association and the
payment of death benefits. However, there is today a "shortage" of fire fighters and thus, for all practical purposes, the quota system is not applied. Plaintiff says the association has no power to establish any such quota, and death benefits should be available to all fire fighters appointed by any municipality. So long as the quota system remains in the Rules, he says, it can be imposed at any time. Accordingly, he asks for a declaration of its invalidity.
The Rules are also significant for what they do not say. Despite the direction of N.J.S.A. 43:17-35, the State Association has not promulgated rules and regulations, or even guidelines, to be followed by local associations in dealing with relief claims. There is no definition or test for "need." There are no limits or guidelines respecting income or assets. There is no list of eligible or ineligible expenses, or any indication as to what criteria is to be applied in deciding whether to accept or reject a claim.*fn7 Questioning of counsel has also made clear that few if any local associations have adopted any rules of their own. In most cases applications for benefits are decided on a case by case basis and are subject to arbitrary determination by officials of the 521 local associations acting without any published or otherwise established criteria.*fn8