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In re O'Reilly

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


June 9, 2008

IN THE MATTER OF THOMAS J. O'REILLY.

On appeal from the Board of Trustees of the Public Employees' Retirement System, Department of Treasury, Docket No. 2-10-216024.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 7, 2008

Before Judges Wefing, Parker and Koblitz.

Petitioner Thomas J. O'Reilly appeals from a final administrative order from the Board of Trustees (Board) of the Public Employees' Retirement System (PERS) denying his application for enhanced retirement benefits under the Prosecutors Part of PERS, N.J.S.A. 43:15A-155 to -161.

Petitioner has held a number of positions within the Attorney General's Office since 1978 when he was initially appointed to the Department of Law and Public Safety (Department), Division of Criminal Justice (DCJ), in the Attorney General's Office. On July 1, 2002, petitioner filed for early retirement, effective July 1, 2003. In a letter dated July 15, 2002, he requested enrollment in the Prosecutors Part and outlined his responsibilities in his various positions since 1978.

The "Prosecutors Part" of PERS was created in January 2002 when the Legislature enacted N.J.S.A. 43:15A-155 to -161 to enhance the retirement benefits for employees in DCJ. These employees are defined as "prosecutors" under N.J.S.A. 43:15A-155. Benefits available under the statute are similar to those available to members of the Police and Firemen's Retirement System (PFRS). See N.J.S.A. 43:16A-1 to -68 (for benefits under PFRS).

N.J.S.A. 43:15A-155, referred to as Chapter 366, defines those eligible to receive benefits under the Prosecutors Part as follows:

(1) a county prosecutor, first assistant prosecutor or assistant prosecutor as defined in [N.J.S.A. 16A:158-1 et seq.]; (2) the Director of the Division of Criminal Justice in the Department of Law and Public Safety; (3) an assistant director, deputy director, assistant attorney general or deputy attorney general in that department and assigned to that division pursuant to [N.J.S.A. 52:17B-97 et seq.]; or (4) a criminal investigator in the Division of Criminal Justice in the Department of Law and Public Safety who is not eligible for enrollment in [PFRS].

In February 2003, then-Attorney General Peter Harvey advised the Division of Pensions and Benefits (Division) of his initial determination of the employees eligible for a Prosecutors Part pension, including petitioner who was then serving in the title of Senior Executive Service III in the Attorney General's Office. Attorney General Harvey specifically stated his criteria for inclusion of employees in the Prosecutors Part, even though they may not currently be assigned to DCJ:

The employee is detached from his/her assignment in the Division of Criminal Justice to another division or office within the Department of Law and Public Safety and performs law enforcement functions on behalf of the Attorney General under the Criminal Justice Act of 1970, N.J.S.A. 52:17B-97, et seq. Additionally, the employee, prior to being detached from the Division of Criminal Justice, must have been eligible for enrollment in the Prosecutors Part [p]ension according to P.L. 2001, Chapter 366.

Defendant requested enrollment in the Prosecutors Part on July 15, 2002, two weeks after he initially filed for early retirement. On September 18, 2002, the Board approved petitioner's early retirement without indicating whether it was under the Prosecutors Part. On June 17, 2003, two weeks before his scheduled early retirement on July 1, petitioner extended his retirement date to June 30, 2004.

On September 22, 2003, the Division notified petitioner that he was eligible for Prosecutors Part benefits. The notice stated:

The Division of Pensions and Benefits has identified you as a Prosecutors Part member.

As such, we have updated your PERS account to reflect Prosecutors Part service credit, as of June 30, 2003, totaling 29 years, 6 months. Please note that this figure only reflects your service in the Prosecutors Part.

On April 23, 2004, petitioner extended his retirement date to June 30, 2005. On July 21, 2004, the Division reiterated its approval for petitioner's retirement in the Prosecutors Part.

Between 2004 and 2006, petitioner extended his retirement eight times. Each time it was approved by the Board. His last request for an extension, which expressly stated it was for the Prosecutors Part, was on August 15, 2006, extending the retirement date to September 30, 2006.

On January 3, 2006, however, the Board sought advice from then-Attorney General Zulima Farber as to whether petitioner's employment as an administrator in the Attorney General's Office met the statutory requirements of N.J.S.A. 43:15A-155. In the meantime, petitioner received a letter dated December 21, 2005 notifying him that his application for retirement, effective January 1, 2006, under the Prosecutors Part, was approved.

On August 30, 2006, Attorney General Zulima Farber advised that in her opinion to determine eligibility under N.J.S.A. 43:15A-155, the Pension Board cannot utilize the criteria devised by Attorney General Harvey and promulgated under N.J.A.C. 17:2-8.2.

N.J.A.C. 17:2-8.2, adopted by PERS on June 21, 2004, provided in pertinent part:

Employees of the Department of Law and Public Safety who are not assigned to the Division of Criminal Justice shall be eligible for enrollment in the Prosecutors Part provided they satisfy one of the following criteria:

1. The employee is assigned to a unit that has a specific delegation of authority under the Criminal Justice Act of 1970, N.J.S.A. 52:17B-97 et seq., and the employee performs law enforcement functions on behalf of the Attorney General as an assistant attorney general, deputy attorney general or investigator . . . ; or

2. The employee is detached from his or her assignment in the Division of Criminal Justice to another division or office within the Department of Law and Public Safety and performs law enforcement functions on behalf of the Attorney General under the Criminal Justice Act of 1970, N.J.S.A. 52:17B-97 et seq. Additionally, the employee, prior to being detached from the Division of Criminal Justice, must have been eligible for enrollment in the Prosecutors Part according to P.L. 2001, c.366.

In other words, in the opinion of Attorney General Farber, only individuals actually assigned to DCJ or detached from DCJ but performing DCJ functions, are eligible for the Prosecutors Part, irrespective of PERS interpretation of the statute in its adoption of the regulation.

On September 15, 2006, former Attorney General John J. Farmer, Jr., wrote to the Director of the Division on behalf of petitioner and stated:

This Division has confirmed on two prior occasions what should be clear to all: Tom's eligibility for the Prosecutors Part Pension should be beyond question. As Donald Belsole, Tom's counsel, has outlined in detail, for well over two decades, Tom has been a significant member of the law enforcement community and a guiding force behind many of the State's most successful and far-reaching criminal justice programs. During my tenure, Tom took the lead in ensuring the success of State Police reform, clearly the most significant law enforcement issue to arise in many years. In addition, Tom was instrumental in developing pilot programs to combat youth violence in Paterson and Newark, and in coordinating the State's response to the 9/11 terror attacks and to the subsequent anthrax attacks. It is no exaggeration to state that Tom was one of the most significant criminal justice policy formulators throughout my tenure as Attorney General, on both a state and a national level.

On two prior occasions, when Tom was considering retiring, the Division of Pensions and Benefits approved him for inclusion in the Prosecutors Part Pension. On September 22, 2003, the Division of Pensions and Benefits wrote to Tom indicating, in part, that: "The Division of Pensions and Benefits has identified you as a Prosecutors Part member". On July 21, 2004, the PERS Board of Trustees approved Tom for a Chapter 366 Retirement. At the request of Attorney General Peter Harvey, he put off his retirement. Thereafter, in order to assist then-Attorney General Farber, he again extended his retirement date.

On these facts, I am frankly astonished to learn that the Division of Pensions and Benefits is considering rescinding its prior decisions. Such reconsideration would be patently unfair to Tom as an individual. It would discourage other career employees from accepting assignments outside the Division of Criminal Justice or from remaining on the job to assist future Attorney Generals. It will render the operation of the regulations governing the Prosecutors Part Pension necessarily arbitrary and capricious. Beyond all of this, it would be a tremendous disservice to Tom at the end of a career which should be honored. Tom is the ablest administrator I have met in government at any level, and perhaps the single most important formulator of criminal justice policy over the past two decades.

Petitioner presented his position, along with his employment history, to the Board for its consideration at its September 20, 2006 meeting.*fn1

On September 20, 2006, the Board denied petitioner's application for Prosecutors Part benefits. On October 2, 2006, the Board advised petitioner that it approved his retirement under PERS. The Board stated that it accepted the advice by-then-former Attorney General Farber; determined that "N.J.A.C. 17:2-8.2 is inconsistent with the clear and unambiguous requirements of N.J.S.A. 43:15A-155, et seq., and is therefore ultra vires and unenforceable." The Board "[d]irected that the offending regulation, N.J.A.C. 17:2-8.2, be rescinded."*fn2

Petitioner sought reconsideration of that decision or, alternatively, a hearing before the Office of Administrative Law (OAL). At its December 20, 2006 meeting, the Board reaffirmed its September 20, 2006 decision. On March 22, 2007, the Board rendered a Final Administrative Determination, and denied petitioner's request for a hearing before the OAL because in its view, the material facts were undisputed.

In its final determination, the Board rejected the function-based analysis urged by petitioner and former Attorneys General David Sampson, Peter Harvey, John J. Farmer, Jr. and Robert J. DelTufo, who was not only a former Attorney General, but Director of DCJ when petitioner served as its chief. The Board stated:

In adopting the August 30, 2006 advice of former Attorney General Farber, the Board acknowledged that the criteria for determining eligibility for enrollment set forth in N.J.A.C. 17:2-8.2 were inconsistent with the clear and unambiguous requirements of N.J.S.A. 43:15A-155, et seq., and were therefore ultra vires and unenforceable.

Former Attorney General Farber advised that the criteria set forth in the regulation contradicted the unambiguous language of N.J.S.A. 43:15A-155 because they extended eligibility for enrollment in Prosecutors Part to employees of the Department of Law and Public Safety who were not assigned to the Division of Criminal Justice.

The Board found that, on January 7, 2002, the effective date of Chapter 366, petitioner was employed in a permanent position in the Attorney General's Office, reporting directly to the Attorney General. In the Board's view, because petitioner was not assigned to DCJ, he was ineligible for enrollment in the Prosecutors Part.

While the Board acknowledged and appreciated petitioner's significant contributions during his career, "including contributions in the area of criminal justice policy," the Board explained that N.J.S.A. 43:15A-155 did not permit those considerations in determining eligibility for Chapter 366 benefits. "[T]he clear and unambiguous requirements set forth in the statute hinge on whether the employee of the Department . . . was assigned to the Division of Criminal Justice" and petitioner was not so assigned. Therefore, petitioner did not meet the definition of "prosecutor" set forth in N.J.S.A. 43:15A-155. The Board approved his retirement application for regular PERS benefits, as opposed to the enhanced benefits in the Prosecutors Part.

Finally, the Board rejected petitioner's equitable estoppel argument, finding that the doctrine was inapplicable because petitioner did not detrimentally rely on any Board action with respect to his decision to retire in October 2006. According to the Board, at the time petitioner made his irrevocable decision to retire, he was fully informed that his retirement was based on regular PERS service credits and that he was ineligible for Prosecutors Part benefits.

It is from the March 22, 2007 final determination that petitioner appeals and argues that the Board's decision (1) was arbitrary and capricious; and (2) is equitably estopped.

Petitioner first argues that the Board's decision was arbitrary, capricious and unreasonable. By strictly construing the language of the statute, petitioner contends that the Board failed to identify and effectuate the Legislature's intent in creating the Prosecutors Part, which was to provide enhanced benefits to individuals employed in the Department who handled criminal justice matters on behalf of the Attorney General.

Our review of an agency's decision is limited. In re Taylor, 158 N.J. 644, 656 (1999). We will not reverse the agency's decision unless: "(1) it was arbitrary, capricious, or unreasonable; (2) it violated express or implied legislative policies; (3) it offended the State or Federal Constitution; or (4) the findings on which it was based were not supported by substantial, credible evidence in the record." Univ. Cottage Club of Princeton N.J. Corp. v. N.J. Dep't of Envtl. Prot., 191 N.J. 38, 48 (2007). We give substantial deference to the agency's interpretation of a statute or regulation it is charged with enforcing. In re Freshwater Wetlands Gen. Permit No. 16, 379 N.J. Super. 331, 341-42 (App. Div. 2005). We are, however, "in no way bound by the agency's interpretation of a statute or its determination of a strictly legal issue." Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973).

The question squarely before us is whether petitioner satisfies the statutory definition of "prosecutor" set forth in N.J.S.A. 43:15A-155, to qualify for Prosecutors Part benefits. Since the statute was enacted, petitioner has not held any of the positions listed in it, although he did serve in DCJ prior to its enactment. The Board's conclusion that petitioner was not entitled to Prosecutors Part benefits was consistent with the statutory language.

The primary objective in interpreting a statute is to "'effectuate the legislative intent in light of the language used and the objects sought to be achieved.'" McCann v. Clerk of City of Jersey City, 167 N.J. 311, 320 (2001) (quoting State v. Hoffman, 149 N.J. 565, 578 (1997)). We look first to the language of the statute, Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123, 128 (1987), because that language "is the surest indicator of the Legislature's intent." Alan J. Cornblatt, P.A. v. Barow, 153 N.J. 218, 231 (1998). "If the language is plain and clearly reveals the meaning of the statute, the court's sole function is to enforce the statute in accordance with those terms." State, Dep't of Law & Pub. Safety v. Bigham, 119 N.J. 646, 651 (1990). "A clear and unambiguous statute is not open to construction or interpretation[.]" Watt v. Mayor & Council of Borough of Franklin, 21 N.J. 274, 277 (1956).

Moreover, "[a]n administrative agency may not under the guise of interpretation extend a statute to include persons not intended, nor may it give the statute any greater effect than its language allows." Kingsley v. Hawthorne Fabrics, Inc., 41 N.J. 521, 528 (1964). We must reject a statutory interpretation that is contrary to the statutory language. In re Adoption of N.J.A.C. 7:26B, 128 N.J. 442, 450 (1992).

While pension statutes "should be liberally construed and administered in favor of the persons intended to be benefited thereby," Geller v. Dep't of Treasury, Div. of Pensions & Annuity Fund, 53 N.J. 591, 597-98 (1969), "eligibility is not to be liberally permitted." Smith v. State, Dep't of Treasury, Div. of Pensions & Benefits, 390 N.J. Super. 209, 213 (App. Div. 2007). "Instead, in determining a person's eligibility to a pension, the applicable guidelines must be carefully interpreted so as not to 'obscure or override considerations of . . . a potential adverse impact on the financial integrity of the [f]und.'" Ibid. (quoting Chaleff v. Bd. of Trs., Teachers' Pension & Annuity Fund, 188 N.J. Super. 194, 197 (App. Div.), certif. denied, 94 N.J. 573 (1983)). Indeed, a pension fund owes a fiduciary duty to its members, a duty that would be thwarted if it were to accept the membership of one who is not eligible. Mount v. Trs. of Pub. Employees' Ret. Sys., 133 N.J. Super. 72, 86 (App. Div. 1975).

Petitioner argues that the Attorney General's broad power to assign and re-assign personnel within the Department justifies an interpretation of the statute, beyond its express words, to include persons assigned by the Attorney General to administrative units outside the DCJ within the meaning of prosecutor. This argument, however, is inconsistent with the principles of statutory interpretation.

Petitioner did not meet the statutory definition of "prosecutor" at the time N.J.S.A. 43:15A-155 was adopted or at any time during which he submitted applications for early retirement. He was not, therefore, eligible for the enhanced benefits.

Petitioner further argues that the Board should be equitably estopped from denying him Prosecutors Part benefits because in postponing his retirement he relied in good faith on (1) the advice of former Attorneys General Samson and Harvey that he was eligible for Prosecutors Part benefits; (2) the Board's prior approval of his eligibility for Prosecutors Part benefits; and (3) the language of N.J.A.C. 17:2-8.2(b), which was in effect when he applied for retirement. Moreover, petitioner argues that after he was identified as eligible for Prosecutors Part benefits, he was required to, and did, make "additional contributions to the retirement fund."

The Board determined that equitable estoppel was inapplicable because petitioner did not detrimentally rely on any Board action in his decision to retire. The Board maintains that when petitioner made his irrevocable decision to retire, in October 2006, he was fully informed that his retirement was based on regular PERS service credits and that he was not eligible for Prosecutors Part benefits. According to the Board, continued employment could not be viewed as detrimental because petitioner continued to earn service credit. We disagree.

Generally, application of equitable estoppel requires proof of "a misrepresentation or concealment of material facts, known to the party allegedly estopped and unknown to the party claiming estoppel, done with the intention or expectation that it will be acted upon by the other party and on which the other party does in fact rely in such a manner as to change his position for the worse." Carlsen v. Masters, Mates & Pilots Pension Plan Trust, 80 N.J. 334, 339 (1979). The reliance must be "reasonable and justifiable" and the burden of proof is on the party asserting the estoppel. Foley Mach. Co. v. Amland Contractors, Inc., 209 N.J. Super. 70, 75-76 (App. Div. 1986). It is not essential that the act was fraudulent or intentionally misleading. Miller v. Bd. of Trs., Teachers' Pension & Annuity Fund, 179 N.J. Super. 473, 477 (App. Div. 1981).

The doctrine may be applied against a governmental entity "where the interests of justice, morality and common fairness clearly dictate that course." Gruber v. Mayor & Twp. Comm. of Twp. of Raritan, 39 N.J. 1, 13 (1962). The doctrine is rarely invoked against a governmental entity, however, Cipriano v. Dep't of Civil Serv., 151 N.J. Super. 86, 91 (App. Div. 1977), particularly when estoppel would interfere with "essential governmental functions." Vogt v. Borough of Belmar, 14 N.J. 195, 205 (1954). Application of estoppel principles to government actions should be "most strictly limited." Buoviaggio v. Hillsborough Twp. Comm., 122 N.J. 5, 17 (1991).

In Skulski v. Nolan, 68 N.J. 179, 200 (1975), the Supreme Court established the following guidelines for determining the propriety of continued entitlement to pension benefits in cases where estoppel may be applied: "(1) the applicant's subjective good faith belief that he was entitled to benefits; (2) the extent of the applicant's change of position in reliance on the initial pension grant; and (3) the extent to which the applicant's reliance has foreclosed alternate opportunities for pension benefits."

Here, it appears from all the evidence presented that petitioner relied on the opinion of Attorney General Harvey and his inclusion in Harvey's list of eligible employees; the language of N.J.A.C. 17:2-8.2 then-in-effect; and, most significantly, the Board's approval of his eligibility for Prosecutors Part benefits three times: on September 22, 2003; on July 21, 2004; and on December 21, 2005. The detriment to petitioner is that, had he retired under the existing regulation and approval in 2004, he would have collected Prosecutors Part benefits; he continued employment outside DCJ in reliance on the Attorney General's opinion and the regulation, which provided that his DCJ-related job responsibilities made him eligible for the enhanced benefits. In our view, this constitutes detrimental reliance.

In essence, the Board changed the rules mid-stream. Attorney General Harvey identified thirty individuals who would qualify for the enhanced benefits, even though their job titles were outside DCJ. We cannot determine from the record before us which, if any, of those thirty individuals have retired with Prosecutors Part benefits or whether they were similarly situated to petitioner.

The Board argues that petitioner failed to demonstrate detrimental reliance because he made his irrevocable decision to retire when he knew of Attorney General Farber's opinion that Attorneys General Sampson's and Harvey's opinions were "ultra vires" and that N.J.A.C. 17:2-8.2 was invalid. That argument ignores petitioner's representations that he only continued his employment at the behest of the Attorneys General in reliance on his already-approved eligibility for the enhanced benefits. At that point, he could not turn back the clock to 2004 when he had been approved and retire with full Prosecutors Part benefits.

Because the Board disputes petitioner's reliance on these various factors, we are persuaded that the matter should be presented for a hearing before the OAL to determine (1) whether petitioner detrimentally relied on the opinion of Attorney General Harvey; the then-existing regulation, N.J.A.C. 17:2-8.2; and the Board's approval of his eligibility for Prosecutors Part benefits in three different years; and (2) whether petitioner was treated differently than any of the other thirty individuals on Attorney General Harvey's list who may have retired with Prosecutors Part benefits.

As we have indicated previously, we are convinced that the statute, as adopted by the Legislature, excludes petitioner and any other employee of the Attorney General's Office not employed under the titles stated in N.J.S.A. 43:15A-155. It is for the Legislature to amend the statute -- retroactively or prospectively -- if it chooses to do so. We cannot, however, dispose of petitioner's case on the basis of statutory interpretation alone. There were too many intervening elements -- including the Board's adoption of an apparently valid regulation which remained in effect for several years and under which the Board determined petitioner's eligibility for the Prosecutors Part in three separate years.

Reversed and remanded for a hearing before the OAL and reconsideration by the Board in accordance with this opinion. We do not retain jurisdiction.


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