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New Jersey Thoroughbred Horsemen's Association v. New Jersey Racing Commission

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


March 31, 2009

NEW JERSEY THOROUGHBRED HORSEMEN'S ASSOCIATION AND ARLENE LONDON, PLAINTIFFS-RESPONDENTS,
v.
NEW JERSEY RACING COMMISSION AND FRANK ZANZUCCKI, DEFENDANTS-APPELLANTS.

On appeal from the Superior Court of New Jersey, Chancery Division, Mercer County, Docket No. C-39-08.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: November 19, 2008

Before Judges Cuff, Fisher and Baxter.

On August 6, 2008, a judge entered an order enjoining the New Jersey Racing Commission (Racing Commission) from adopting regulations regarding the proper use of certain identified steroids in horses. The judge ordered this extraordinary relief because the Racing Commission had not adopted rules of procedure governing its administrative rulemaking process. We granted leave to appeal this order and reverse.

At its February 6, 2008 meeting, the Racing Commission decided to proceed with regulations regarding the use of certain steroids in horses. Therefore, it authorized publication in the New Jersey Register of proposed regulations pursuant to N.J.S.A. 52:14B-4(a)(1); N.J.A.C. 1:30-5.2(a)2. Once the regulations were published, the public, including horse owners and trainers, would have had the opportunity to submit comments concerning the proposed regulations.

Before the Racing Commission could proceed, plaintiffs New Jersey Thoroughbred Horsemen's Association (NJTHA) and Arlene London filed a Verified Complaint and sought an order to show cause to enjoin the administrative rulemaking process. The NJTHA is an advocate for the thoroughbred racing community in this State. Plaintiff London is a licensed thoroughbred owner. In their Verified Complaint, plaintiffs contended that the Racing Commission violated the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -15, the Open Public Meetings Act (OPMA), N.J.S.A. 10:4-6 to -21, and the New Jersey Civil Rights Act, N.J.S.A. 10:6-1 to -2. The Racing Commission, established by N.J.S.A. 5:5-22, is authorized to "regulat[e] horse racing, [and] to advocate the growth, development and promotion of the horse racing industry in the State." Frank Zanzuccki is the Executive Director of the Racing Commission.*fn1

Plaintiffs asserted that the NJTHA secured permission from the Racing Commission to contribute substantial funds to partially underwrite a study regarding steroids naturally occurring in the horse and to establish a uniform and scientifically justified testing regimen which recognizes this fact and the differences among colts, geldings, fillies and any other appropriate distinctions common to horses. Nevertheless, plaintiffs alleged that the Racing Commission agreed with horse racing authorities and organizations outside New Jersey to adopt regulations regarding the use of steroids in horses and proposed to hurriedly adopt regulations prior to completion of the study. Moreover, plaintiffs alleged that the Racing Commission was committed to adopting regulations concerning steroid use in horses contrary to the interests of plaintiffs and without any discussion with plaintiffs about the content of these regulations.

Based on these allegations, plaintiffs asserted that the Racing Commission violated the APA because, by discussing and agreeing with third parties to adopt regulations prior to and outside of the procedures prescribed by the APA, the Racing Commission used a procedure that is not prescribed or permitted by N.J.S.A. 52:14B-3(2) and the rules adopted by the Racing Commission pursuant to N.J.A.C. 1:30-2.9(a)2. Plaintiffs further asserted that the Racing Commission abdicated its regulatory authority and failed to engage in rulemaking as required by the APA and N.J.A.C. 1:30-5.1 by holding meetings outside New Jersey with private individuals and public officials and committing itself to a regulatory course without notice to and comment by the regulated community in this State. Plaintiffs also asserted that the out-of-state meetings and various other meetings violated the OPMA and the New Jersey Civil Rights Act. To remedy these various violations, plaintiffs sought a preliminary injunction restraining and enjoining the Racing Commission from any further activity pertaining to the proposal or adoption of regulations concerning the use of steroids in horses.

An order entered on March 12, 2008, required the Racing Commission and its Director to show cause on April 22, 2008, why a preliminary injunction should not issue. In a written opinion dated June 17, 2008, the judge found that the Racing Commission and its Director have not adopted... the procedures whereby the public may obtain information or make submissions or requests before a regulation is drafted and proposed and thereafter advertised. Defendants have also failed to adopt or cite a rule which provides definite standards to the term "sufficient public interest" as it applies to the granting of an extension of the comment period or to the holding of a public hearing on the proposed rule. Such rules describing agency procedures are important because such rules "provide notice of the agency's procedures to interested parties and assure that proceedings before the agency are conducted uniformly and fairly."

The judge held that the Racing Commission must adopt rules of practice on these procedures and standards before it could take further action on the proposed steroid rules. The judge did hold, however, that pre-proposal notice is discretionary rather than mandatory.

The judge also held that the meetings and discussions with organizations and public officials in other states regarding the regulations of steroid use in horses and the decision by the Racing Commission to propose a regulation governing steroid use violated the terms of OPMA. The judge decided to enter a preliminary injunction because plaintiffs' rights under the APA and OPMA "would be violated without any recourse" and the Racing Commission and its Director could proceed to adopt the proposed rules "despite violating these rights." Therefore, by order dated June 17, 2008, the judge enjoined and restrained [the Racing Commission] from any further activity pertaining to the proposal or adoption of regulations addressing the use of steroids until the New Jersey Racing Commission establishes procedures and standards that are in compliance with the [OPMA], the APA and due process requirements. The Commission is hereby required to abandon the current proposal and commence the issue ab initio once appropriate procedures are adopted and followed.

The Racing Commission promptly filed a motion for reconsideration. It argued, but the judge disagreed, that her reliance on In the Matter of Consider Distribution of the Casino Simulcasting Special Fund, 398 N.J. Super. 7 (App. Div. 2008) was misplaced. Moreover, the judge noted the action by the Racing Commission to adopt rules governing the practices and procedures of the agency in compliance with the Casino Simulcasting Special Fund opinion and then expressed reservations about the sufficiency of these proposed rules. She noted that because the proposed rules did not appear "to address how members of the public could obtain information or make requests, or describe the forms and instructions used by the Commission," the rules may be insufficient. On the other hand, noting that the rules were in the proposal stage, "it would be inappropriate at this stage to make a ruling on this issue."

The judge did reconsider her ruling that the Racing Commission did not have definite standards to define the term "sufficient public interest," and as to that contention advanced by plaintiffs, the judge held that the Racing Commission had not violated N.J.S.A. 52:14B-4(a)(3). The judge also reconsidered her decision that meetings between the Director of the Racing Commission and other executives of racing agencies from other states violated the OPMA. The judge noted that neither the Executive Director nor the single Racing Commission member in attendance at the out-of-state meeting of racing officials could take any action to bind the Racing Commission, and that plaintiffs had submitted no evidence of secret meetings prior to the February 6, 2008 meeting of the Racing Commission. Nevertheless, the judge refused to vacate the preliminary injunction imposed on June 17, 2008. It is from this August 6, 2008 order that the Racing Commission sought leave to appeal.

On appeal, the Racing Commission argues that the judge lacked jurisdiction to consider plaintiffs' challenge to the proposed rules. It also argues that the judge erred in finding that the Racing Commission violated the APA. In response, plaintiffs contend that the judge had jurisdiction of their complaint. They also argue that "ousting the trial court's jurisdiction" would delay a decision on the merits, and there is no final agency decision to invoke the jurisdiction of this court or an administrative record to assist this court's review. As to the merits, plaintiffs argue that the trial judge acted properly to provide interim relief because the Racing Commission deliberated in secret, the agency has no rules of procedure, and interim relief was required to prevent irreparable harm.

At the heart of this matter is plaintiffs' challenge to regulations proposed to address the use of steroids in horses that compete in this State. Admittedly, any regulation governing the use of steroids in horses that race in this State will affect horsemen in New Jersey. The Racing Commission, however, is subject to the APA and any regulations promulgated by this agency must conform to the procedures established by the APA, and the validity of any regulation is subject to judicial review.

Under the APA, an agency engaged in rulemaking must give notice, principally by publication of the proposed regulations in the New Jersey Register. N.J.S.A. 52:14B-4(a)(1); N.J.A.C. 1:30-5.2(a). This notice must occur at least thirty days before the intended action and must include a statement of the terms or substance of the intended action and the time, place and manner in which comments may be presented. N.J.S.A. 51:14B-4(a)(1); N.J.A.C. 1:30-5.1(b)9. In addition to publication in the New Jersey Register, the agency must mail notice to all parties who have notified that agency of its desire to receive advance notice of agency rule-making activities. N.J.S.A. 52:14B-4(a)(1); N.J.A.C. 1:30-5.2(a)3. The agency must also provide notice of the rule-making activity to the news media maintaining a press office in the State House Complex and through electronic means. N.J.S.A. 52:14B-4(a)(1); N.J.A.C. 1:30-5.2(a)4-5. In addition, each agency shall publicize the intended action and adopt rules to prescribe the manner in which it will publicize the intended action in order to provide notice to those persons most likely affected by the intended agency action. N.J.S.A. 52:14B-4(a)(1); N.J.A.C. 1:30-5.2(a)6.

The agency is also required to prepare a statement for public distribution at the time the notice appears in the New Jersey Register which summarizes the proposed rule and contains a clear and concise statement of its purpose, the effect of the rule, the legal authority for the rule, a description of the socio-economic impact of the proposed rule, a regulatory flexibility analysis, and a jobs impact analysis. N.J.S.A. 52:14B-4(a)(2); N.J.A.C. 1:30-5.1(c). The agency must afford all interested persons a reasonable opportunity to submit comments, including data, opinions or arguments. N.J.S.A. 52:14B-4(a)(3); N.J.A.C. 1:30-5.4(a). If sufficient public interest is demonstrated in the proposed rule, the comment period may be extended. N.J.S.A. 52:14B-4(a)(3); N.J.A.C. 1:30-5.4(c)1. In addition, the agency shall conduct a public hearing at the request of the Legislature or a committee of the Legislature, or when sufficient public interest is shown. N.J.S.A. 52:14B-4(a)(3); N.J.A.C. 1:30-5.5(a). The agency must provide at least fifteen days advance notice of any public hearing. N.J.S.A. 52:14B-4(a)(3); N.J.A.C. 1:30-5.5(b). No rule is valid unless adopted in substantial compliance with the APA. N.J.S.A. 52:14B-4(d).

An agency may also use informal conferences and consultations to obtain the views and advice of interested persons about contemplated rule-making activities. N.J.S.A. 52:14B-4(e); N.J.A.C. 1:30-5.3(a). An agency is, however, not obliged to do so. Steven L. Lefelt et al., 37 New Jersey Practice § 2.15 at 69 (2d ed. 2000). In addition, an interested party may petition an agency to adopt a new rule or amend an existing rule. N.J.S.A. 52:14B-4(f); N.J.A.C. 1:30-4.1(a).

The effect of this procedure is to provide notice and an opportunity to be heard to affected persons and parties of proposed agency action. Woodland Private Study Group v. New Jersey 109 N.J. 62, 73 (1987). This is the process commenced by the Racing Commission that was interrupted by plaintiffs when they sought injunctive relief in the trial court. This action by plaintiffs not only interrupted the established rule-making process but also usurped the judicial review function assigned to the Appellate Division.

Rule 2:2-3(a)(2) assigns jurisdiction to the Appellate Division to review final decisions or actions of any State administrative agency and to review the validity of any rule promulgated by such agency or officer. Stated differently, review of the validity of a rule adopted by an administrative agency, such as the Racing Commission, has been exclusively allocated to the Appellate Division. Pressler, Current N.J. Court Rules, comment 3.1 on R. 2:2-3 (2009). Moreover, this exclusive allocation may not be circumscribed by an action in lieu of prerogative writs or a declaratory judgment action filed in the trial court. This court's jurisdiction does not turn on the theory of the challenging party's claim or the nature of the relief sought. Sod Farm Assocs. v. Twp. of Springfield, 366 N.J. Super. 116, 132-33 (App. Div. 2004); Mutschler v. N.J. Dep't of Envtl. Prot., 337 N.J. Super. 1, 9 (App. Div.), certif. denied, 168 N.J. 292 (2001). This court's jurisdiction extends to claims that are declaratory in nature, Equitable Life Mortgage & Realty Investors v. New Jersey Division of Taxation, 151 N.J. Super. 232, 238 (App. Div.), certif. denied, 75 N.J. 535 (1977), and to claims that are joined with claims within the jurisdiction of another court or division of this court, Pascucci v. Vagott, 71 N.J. 40, 52-54 (1976).

Here, the reasons advanced by plaintiffs for injunctive relief revolve around not only the procedure or lack of procedure utilized by the Racing Commission but also the merits of the rule. Claims of deficient procedure affect the validity of any rule promulgated by the Racing Commission and are nothing less than a direct attack on the validity of the rule. It is of no consequence that a party has identified procedures, or the lack thereof, that may invalidate a rule proposed by the Racing Commission. Any action that seeks invalidation of the rule itself or agency action taken in derogation of law or the absence of adequate rules of practice is brought by appeal to the Appellate Division. See Casino Simulcasting, supra, 398 N.J. Super. at 11; Wendling v. N.J. Racing Comm'n, 279 N.J. Super. 477, 485 (App. Div. 1995); Moiseyev v. N.J. Racing Comm'n, 239 N.J. Super. 1, 4 (App. Div.), certif. denied, 117 N.J. 666 (1989).

It is this court that examines the challenged rule substantively and procedurally and directs remedial action by the agency when deficiencies that affect the validity of the rule or rule-making process are found. Thus, in Casino Simulcasting, supra, this court identified the absence of criteria for the distribution of proceeds deposited in a special fund, as well as the absence of any public discussion or deliberation prior to the distribution of the proceeds. 398 N.J. Super. at 17-18. This court directed the Racing Commission to adopt a rule of practice concerning receipt and consideration of applications for proceeds from this fund before the agency could take further action. Id. at 19. In Moiseyev, supra, this court considered a substantive challenge to a rule that allowed a rider or driver to be disciplined due to lack of effort or carelessness. 239 N.J. Super. at 4. In Wendling, supra, this court considered a constitutional challenge to a regulation requiring stable workers to be licensed by the Racing Commission and subjecting to discipline any trainer who employed unlicensed or disqualified personnel. 279 N.J. Super. at 483-84.

In short, plaintiffs are not without a forum to obtain relief if the Racing Commission adopts a rule that does not substantially conform to the APA or proceeds in the absence of further rules that may be required governing its rule-making practice and procedure. The very deficiencies identified by plaintiffs that formed their request for injunctive relief in the trial court are precisely the type of deficiencies that may form the basis of a direct attack on the validity of any rule adopted by the Racing Commission.

Moreover, plaintiffs' precipitous action in the trial court interrupted the established rule-making process. Plaintiffs would have received notice of the terms of the proposed rule, would have had an opportunity to comment on the rule, and the agency would have been required to respond to those comments. Upon adoption, plaintiffs would have had the opportunity to file an appeal in this court to attack the validity of any rule governing the use of steroids in horses adopted by the Racing Commission.

Finally, it is of no consequence that the Racing Commission failed to question the cognizability of plaintiffs' action before the General Equity judge. Like jurisdiction, the proper allocation of matters among the various divisions of the Superior Court may be raised at any time. Selobyt v. Keough-Dwyer Corr. Facility, 375 N.J. Super. 91, 94 n.2 (App. Div. 2005); Bishop v. N.J. Sports & Expo. Auth., 168 N.J. Super. 533, 536-38 (App. Div. 1979). Similarly, the assertion of claims that should be properly instituted in a trial division of Superior Court does not defeat the proper allocation to this court of an attack on the validity of a rule or the rule-making process. Pascucci, supra, 71 N.J. at 52-54.

Accordingly, the June 6, 2008 order, as well as the August 6, 2008 order enjoining the rule-making process initiated by the Racing Commission on February 6, 2008, are vacated. The Racing Commission may proceed to continue or initiate whatever rule-making it considers appropriate within its authority to address the issue of steroid use in horses that race in this State. We express no opinion on the merits of any such rule or on the rules of practice or procedure implemented or to be implemented by the Racing Commission in the discharge of its rule-making authority.

Reversed.


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