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In re Petition of United Parcel Service Inc.

Decided: March 16, 1992.


On appeal from the New Jersey Casino Control Commission.

Michels, O'Brien and Havey. The opinion of the court was delivered by Michels, P.J.A.D.



Petitioner United Parcel Service, Inc. (UPS), a privately owned company, appeals from a final administrative action of respondent New Jersey Casino Control Commission (Commission) that denied its petition for an exemption from the casino service industry licensure requirements pursuant to N.J.S.A. 5:12-92(c) and from an order that denied its motion for rehearing pursuant to N.J.S.A. 5:12-107(d)(1). N.J.S.A. 5:12-92(c) authorizes the Commission to grant exemptions from the casino service industry licensure requirements when an entity proposing to do business with a casino demonstrates that it is regulated by a "public agency." The Commission found that UPS's regulation by the Interstate Commerce Commission was not a sufficient substitute for regulation under the Casino Control Act (Act). We affirm the Commission's decision denying UPS an exemption from the licensure requirements.

Briefly, the procedural history giving rise to this appeal is that on August 8, 1990, pursuant to N.J.S.A. 5:12-92(c), UPS filed a request for an exemption from the casino service industry

(CSI) licensure requirements. UPS contended that it was a common carrier engaged in interstate operations and, as such, was subject to regulation by the Interstate Commerce Commission (ICC), under the Interstate Commerce Act (ICA), 49 U.S.C.A. § 10101 et seq. (Supp.1991). Further, UPS maintained that the ICC regulation constituted a "sufficient substitute" for the regulatory scheme of the Act. Specifically, it noted that the ICC required that UPS rates be established by tariff, reviewed the tariffs to ensure that the rates charged were reasonable, and prohibited UPS from engaging in discriminatory pricing practices such as providing rebates or drawbacks. Additionally, UPS noted that ICC regulations also require a common carrier to demonstrate financial capability in order to receive an ICC certificate. UPS explained that granting an exemption to it would not be adverse to the public interest because the economic relationship between UPS and casino hotel operators was not so close as to afford either UPS or the gaming operator the opportunity to exert improper influence over the business decisions of the other. UPS also emphasized that the services provided by it were not directly related to actual gaming operations, and that UPS personnel were not a constant physical presence at casinos and, indeed, were required to pick-up and deliver goods promptly. Finally, UPS maintained that the local interests advanced by requiring regulation under the Act were insufficient to justify the excessive burden imposed on interstate commerce, and that requiring it to comply with CSI licensure requirements would violate the Commerce Clause of the U.S. Constitution.

On September 12, 1990, a Deputy Attorney General (Deputy) representing the Division of Gaming Enforcement (Division) advised the Commission that the Division did not object to the requested exemption. The Deputy noted that although, unlike the Act, the ICC did not provide for disqualification of enterprises, employees or agents due to criminal convictions, "the existence of established tariffs, coupled with a competitive marketplace, should preclude the possibility of undue influence,

economic or otherwise, over casino licensee customers and protect the public interest so as to satisfy the policies of the Casino Control Act."

On September 26, 1990, the Commission held a hearing on UPS's petition. At the hearing, a Deputy from the Division expressed the view that there was no necessity for regulation under the Act, although he also acknowledged that the ICC did not perform the "good character, honesty and integrity" reviews of potential licensees which are a part of the Act. The Deputy considered that the ICC rate-setting process, coupled with competition with UPS, "will ensure a character and integrity standard because of the fact that simply nobody could exert an undue influence."

Commissioner Waters declined to support a motion in favor of granting the exemption and commented that:

COMMISSIONER WATERS: I can't support the motion. I think it's pretty clear that one of our primary concerns has to do with the way in which another agency regulates an entity to see that it's similar to that which we look for in the State of New Jersey. One of the prime factors I always thought was good character, honesty and integrity issues that needed to be examined by the Division to make sure that no one unsavory in any way received any economic benefit from the industry, not the fact that just might have a transitory relationship and might just be delivering packages and moving on. I don't think the question related to the drivers and their ability to satisfy any character requirements. That's never been the issue as far as I know. I think heretofore and in the case of Sprint and MCI we came to the Conclusion that we were granting the exemption because the system of regulation as carried out by the Board of Public Utilities was virtually equivalent to the CSI licensing requirements of the Act. I know the argument has been made by UPS that this constitutes a burden on interstate commerce. I think that has been dealt with over the years dating back to 1970 that the state if it has a legitimate local interest can end up with requirements that suit that interest and as has been indicated by Federal Express, they are licensed, hasn't constituted any undue burden from that standpoint.

So I think for those reasons I don't quite agree that every one of these things has to be looked at individually if they are in the same industry that there should be a common thread that we can look to to determine licensing, and I think, Madam Chair, you have raised the issue about garbage haulers. If they are engaged in interstate activities, are licensed by the ICC, and I think we all are aware of some of the unsavory people involved in that activity over the years and may still be there. For that reason I would exempt [sic] from licensure anyone of this type. I would certainly want to know what their good

character, honesty and integrity was and whether it would meet the requirements of our Act.

The majority of the Commission endorsed Commissioner Waters' reasoning, and a motion denying the exemption was passed three-to-two. On October 5, 1990, an order denying the exemption and directing UPS to submit a CSI license application before October 26, 1990, was entered. Additionally, UPS also filed a notice of motion for a rehearing on its petition for an exemption from the CSI licensure requirements on the same day.

In support of its motion for rehearing, UPS argued that the Commission had improperly denied the exemption because it had mistakenly believed that approving the UPS request would set a precedent for exempting solid waste collectors, who were also regulated by the ICC. UPS also maintained that the policy issues underlying N.J.S.A. 5:12-92(c) had not been fully addressed, and that the Commission failed to accord due deference to the Division's recommendation to grant the exemption.

On October 26, 1990, the Commission held a hearing on UPS's motion for reconsideration at which time UPS emphasized that the primary basis for seeking a rehearing was that the Commission had been split on whether each exemption petition should be considered on an individual basis, or whether that approach was not practicable. UPS emphasized that the statute itself required a case-by-case analysis. Commissioner Armstrong volunteered that her comment about garbage haulers was not material to her earlier vote to deny the exemption. She explained that she had referred to the industry only because the argument about UPS's employees having minimal contact with casino employees did not seem to her to be a basis for granting the exemption and had intended to point out that garbage haulers also had only minimal contact with casino employees, yet no one questioned that garbage haulers had a long-standing "unsavory" reputation and thus needed to comply with CSI licensure requirements.

At the close of argument, Chairman Perskie, appointed during the period between the first and second hearings, expressed his view that he would have voted for the exemption if he had been a member of the Commission at the time of the initial hearing. However, he believed it was inappropriate to re-visit a decision made before his tenure and concluded that the principle of stare decisis should control. He reasoned that the earlier decision was not grounded in any confusion, any consideration of inappropriate circumstances, or any failure to consider facts that should have been considered. The Commission voted unanimously to deny the motion for reconsideration, and on November 2, 1990, the Commission entered an order formalizing that decision which directed UPS to file a CSI application on or before November 30, 1990.

On November 15, 1990, UPS filed a notice of appeal from the Commission's October 5 and November 2, 1990, decisions and a notice of motion requesting a stay of the Commission's order pending the resolution of the appeal. On November 26, 1990, the Division indicated that it "had no objection to the grant of a casino service industry license exemption to UPS, [and therefore took] no position on UPS's petition for a stay." On November 29, 1990, the Commission denied the stay and directed UPS to file a completed CSI license by the earlier of December 5, 1990, or the date on which UPS was able to appear before the Appellate Division for emergent relief. On December 4, 1990, we granted UPS's emergent application for a stay of the November 2 order pending the outcome of this appeal.

UPS contends generally on this appeal that the Commission's interpretation 0 of N.J.S.A. 5:12-92(c) is unreasonable as "the standard applied by the Commission is neither explicitly expressed nor implied in the language of the statute." Further, UPS argues that "the Commission's argument that regulation by a public agency is equivalent to regulation by an agency with a statutory scheme sufficiently similar . . . to [the] Division of Gaming Enforcement oversight deprives the second prong of the test [in N.J.S.A. 5:12-92(c)] of any meaning."

Pursuant to the 1976 amendment to the N.J. Const. of 1947 art. IV, § 7, para. 2, the New Jersey Legislature enacted the Casino Control Act, N.J.S.A. 5:12-1 et seq., "to authorize casino gaming and establish the regulatory framework for the casino industry." Knight v. Margate, 86 N.J. 374, 380, 431 A.2d 833 (1981); see Honorable R. Benjamin Cohen, The New Jersey Casino Control Act: Creation of a Regulatory System, 6 Seton Hall Legis.J. 1, 2 (Summer 1982); Thomas R. O'Brien and Mary Jo Flaherty, Regulation of the Atlantic City Casino Industry and Attempts to Control Its Infiltration by Organized Crime, 16 Rutgers L.J. 721, 732-35 (Spring/Summer 1985) [hereinafter 1 Regulation of Casino Industry ]. "The statutory and administrative controls over casino operations established by the Act are extraordinary pervasive and intensive . . . . The regulatory scheme is both comprehensive and minutely elaborate." Knight, supra, 86 N.J. at 380-81, 431 A.2d 833 (citation omitted). Furthermore, "[t]he Legislature took considerable pains to determine and expound the State's public policy involving casino gambling." Id. at 381, 431 A.2d 833. As such, the "declaration of policy and legislative findings" provided by the Legislature states, in pertinent part, that:

(6) An integral and essential element of the regulation and control of such casino facilities by the State rests in the public confidence and trust in the credibility and integrity of the regulatory process and of casino operations. To further such public confidence and trust, the regulatory provisions of this act are designed to extend strict State regulation to all persons, locations, practices and associations related ...

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