December 29, 2009
IN RE: JOSEPH MARO, HOLDER OF SOLICITOR'S PERMIT NO. 14369
On appeal from the Department of Law and Public Safety, Division of Alcoholic Beverage Control.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: December 2, 2009
Before Judges Axelrad and Espinosa.
Appellant Joseph Maro, an alcohol solicitor, appeals from a Final Conclusion and Order Denying Reconsideration and Granting Summary Decision, dated January 7, 2009, issued by the Director, Division of Alcoholic Beverage Control (ABC or Director). The Director analyzed the amendments to the ABC's regulations, N.J.A.C. 13:2-16.ll, effective February 16, 1999, that prohibited a holder of a solicitor's permit to solicit any order from a retail licensee in which an immediate family member has an interest or participates in its operation. The Director concluded that the "grandfather" clause contained in subpart (e) was not applicable to appellant who had thereafter changed his employer, cancelled his solicitor's permit and obtained a new permit. The Director found such action terminated any existing business relationship with two alcoholic beverage retailers in which appellant's brothers held ownership interests and created a new relationship, which was prohibited by the regulations. We affirm.
We need only summarize the factual and procedural history of this case as it is set forth in detail in the agency's final determination. In l982, appellant began his employment with Gallo Wine Sales and held Solicitor's Permit No. 3869. His biggest accounts were Canal's stores in southern New Jersey. On October 28, 1997, Folmar Corporation (50% of which was owned by appellant's brothers, Michael and Robert Maro) acquired Plenary Retail Distribution License No. 0316-44-002-03 for Canal's in Hainesport by a person-to-person transfer. Appellant continued to solicit this location, just as he had since l984.
On September l4, 2004, Pound Cake, L.L.C. (66 2/3% of which was owned by Michael and Robert Maro) acquired Plenary Retail Distribution License No. 0811-44-018-005 for Canal's in Williamstown by a person-to-person transfer. Appellant continued to solicit this location, just as he had since l982.
In the interim between Folmar becoming a licensee and Pound Cake becoming a licensee, the ABC promulgated amendments to N.J.A.C. l3:2-16.11, effective February l6, 1999, as follows:
(c) As of February l6, 1999, no holder of a solicitor's permit shall offer for sale or solicit any order for the purchase or sale of any alcoholic beverage to any retail licensee in which an immediate family member of the solicitor has any direct or indirect financial interest or participates in the operation of the retail licensee.
(d) The term immediate family member as used in this chapter means husband, wife, son, daughter, grandson, granddaughter, brother, sister, father, mother, brother-in-law, sister-in-law, father-in-law, mother-in-law, son-in-law, or daughter-in-law.
(e) The provisions of (c) and (d) above do not apply to any solicitor who has been issued a solicitor's permit on or before February l6, 1999. [N.J.A.C. l3:2-16.11.]
In 2005, appellant was offered a solicitation job with R&R Marketing, including a higher salary than he could make at Gallo. Appellant claimed he contacted the ABC in December 2005 and "he was assured by [Hattie] Harris that his 'license was grandfathered' and the job change would not affect his right to sell to those stores [in which his brothers held an interest]." Harris certified that she was a Customer Service Representative who did not answer legal questions, she did not recall meeting with appellant to discuss the grandfather provision of his solicitor's permit, and such a question was not within her job duties.
Appellant notified the ABC that his employment with Gallo ended in January 2006. Gallo also informed the agency that appellant was no longer employed by Gallo under Permit No. 3869. Appellant applied for a solicitor's permit for his new employment, disclosing that his brothers held financial interests in Canal's Hainesport (Folmar) and Canal's Williamstown (Pound Cake). The ABC issued appellant Solicitor's Permit No. l4369 on January 11, 2006 with no conditions. Through R&R, appellant continued soliciting many of the same Canal's locations, including the two in which his brothers held financial interests. On his 2006-2007 renewal application, appellant again indicated that certain family members had financial interests in retail licenses and he serviced those accounts, but he did not include a list of those relatives and accounts, as required. On his 2007-2008 renewal, appellant again answered this question affirmatively and included a separate page indicating his brother, Michael Maro, held an interest in Canal's Hainesport.
During an investigation of R&R Marketing in 2007, the ABC's Enforcement Bureau examined the employment of several of R&R's solicitors. On May 27, 2008, the Director issued his Final Conclusion and Consent Order Accepting Monetary Compromise in Lieu of Disciplinary Proceedings, which among other terms, required R&R to reassign appellant's Pound Cake account and deferred its decision on whether appellant could continue to solicit the Folmar account, pending the institution of a potential separate disciplinary proceeding. Appellant requested reconsideration, arguing he qualified for the grandfather provision of the amendments for both accounts. In consideration of appellant's waiver of the requirement for the issuance of disciplinary charges, the Enforcement Bureau stayed the requirement that R&R Marketing reassign the two accounts pending the agency's decision on reconsideration. The Enforcement Bureau further agreed that, should it prevail regarding Folmar, it would not seek to suspend appellant's solicitor's permit for violating N.J.A.C. 13:2-16.11.
Under a summary judgment standard, the Director found that neither of appellant's relationships - with Folmar or with Pound Cake - was grandfathered under N.J.A.C. 13:2-16.ll(e). He rejected appellant's argument that N.J.A.C. 13:2-16.ll(e) was "clear and unambiguous" in stating that subsections (c) and (d) "do not apply to any solicitor who has been issued a solicitor's permit on or before February l6, l999." The Director noted appellant's reliance on statements in the proposed adoption that he claimed supported his position that because he held a solicitor's permit prior to that date, any relationships he had with retailers prior to that date were grandfathered, regardless of which wholesaler he worked for after that date. It was the Director's opinion, however, that appellant's "reading... ignores both the responses to comments on the adoption of the amendments" and various sections of the regulations that clearly indicate that an individual permit is linked to a specific employer. The agency's responses to comments on the grandfather clause include that it was the "clear intent... to exempt only those solicitors and their existing business relationships with immediate family members which have been established before the effective date of the amendment[s]" and that "[e]xisting solicitors will be barred from establishing new business relationships with 'immediate family member' retailers where such relationships did not exist prior to the effective date of the amendment[s]." 31 N.J.R. 545(a). The Director also referenced N.J.A.C. 13:2-16.2, which provides that a solicitor's permit authorizes its holder to solicit alcohol sales only on behalf of the licensee represented by the solicitor and designated by the permit; N.J.A.C. l3:2-16.8, which provides that solicitor's permits only cover the designated employment and are "not transferable as to employer or employee or employment"; and N.J.A.C. 13:2-16.10, which provides that a solicitor must surrender the permit to the Director for cancellation within ten days of termination of employment.*fn1
The Director was not persuaded by appellant's equitable estoppel argument. He found it was unreasonable for appellant to rely on a verbal statement made by a customer service representative, particularly when appellant could have availed himself of a written advisory opinion from the Director. See N.J.A.C. l3:2-36.1. As to appellant's manifest injustice arguments, the Director noted that this was not a disciplinary matter in which appellant was being charged with violating the terms of his solicitor's permit but, rather, he was being removed from two accounts of R&R Marketing in which a business relationship did not exist as of February 16, 1999. The Director was likewise not convinced that it would be "personally and financially devastating" if appellant were prohibited from servicing his brothers' accounts, noting it appeared under appellant's collective bargaining agreement that he would be reassigned to accounts of comparable value. Accordingly, the Director denied appellant's motion for reconsideration of the prior order directing reassignment of the Pound Cake account and granted the Enforcement Bureau's motion for summary decision that R&R reassign the Folmar account. This appeal ensued.
Appellant renews the arguments that were rejected by the agency. He contends the plain language of the grandfather clause, N.J.A.C. 13:2-16.ll(e), and the legislative history of the amendments support his position that the grandfather clause protected both the Folmar and Pound Cake accounts because he held a solicitor's permit on February l6, 1999. Appellant urges alternatively that if the regulations are held to apply to him, the doctrine of manifest injustice should provide an exception because the ABC renewed his solicitor's permit twice without restrictions since his change of employers despite his disclosure of his brothers' interests in both stores, he relied on the assurance of a customer service representative of the ABC that his license was grandfathered and his changing of employers would not affect his status, and as an innocent party and unintended target of the amendments he will suffer dire financial consequences if he is prohibited from servicing these two accounts. We are not persuaded by appellant's arguments and affirm substantially for the reasons set forth by the Director in his comprehensive written decision.
Our review of a final decision of an administrative agency is limited. In re Herrmann, 192 N.J. 19, 27 (2007); In re Carter, 191 N.J. 474, 482 (2007). Absent a "clear showing" that it is arbitrary, capricious or unreasonable, or that it lacks fair support in the record, an administrative agency's final quasi-judicial decision should be sustained, regardless of whether a reviewing court would have reached a different result in the first instance. Herrmann, supra, l92 N.J. at 27-28. Our review is governed by three key determinations: (1) whether the agency followed the law or whether its action violated express or implied legislative policies; (2) whether there is substantial evidence in the record to support the findings on which the agency based its decision; and (3) whether the agency clearly erred in reaching an unreasonable conclusion when it applied the legislative policies to the facts. Mazza v. Bd. of Trs., 143 N.J. 22, 25 (1995).
In assessing these criteria, we defer to the agency's expertise and knowledge in its particular field. Greenwood v. State Police Training Ctr., l27 N.J. 500, 513 (1992). When evaluating the action of the ABC, we accord substantial deference to the Director. Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, l0 (2009). When enforcing the State's alcohol statutes and regulations, the Director has "powers of supervision and control which set him apart from any other formal appellate tribunal." Ibid. (internal citation and quotation marks omitted).
According to its summary, N.J.A.C. l3:2-16.ll was amended in l999 as a result of an ABC investigation which revealed that a number of solicitors illegally rebated or kicked back a percentage of their commission to their regular retailers and that certain retailers requested that an immediate family member be hired as a solicitor for their specific account. 40 N.J.R. 4316(a). The implication was that a wholesaler who hired a retailer's immediate family member would receive more business than a wholesaler who did not. The ABC was concerned that these practices would foster illegal rebates or their appearance and would undermine free competition, trade stability and the three tiers of distribution. Ibid. The summary further stated that the amendments "provide that any holder of a solicitor's permit and the retail accounts served by the solicitor prior to the effective date of the amendment[s] are not affected by the amendment[s]." Ibid.
The Director concluded that appellant became a new solicitor with his new permit in 2006 upon his change of employment, thus ending his status as a "solicitor who ha[d] been issued a solicitor's permit on or before February l6, 1999" who would have been entitled to grandfather protection for his existing accounts pursuant to N.J.A.C. 13:2-16.11(e). Thus, appellant's existing business relationship with Folmar by virtue of his Gallo solicitor's permit was extinguished in 2006. Appellant's business relationship with Folmar by virtue of his R&R solicitor's permit was a new business relationship governed by the "immediate family" bar of N.J.A.C. 13:2-16.11(c) and (d). Since Pound Cake did not acquire its liquor distribution license until 2004, appellant could not have had an "existing business relationship" with that retailer on the February l999 effective date of the amendments and grandfathering provision.
The Director's interpretation of the amendments and application of the grandfather clause to appellant with respect to the Folmar and Pound Cake accounts is reasonable and is entitled to our deference. A regulation should be construed to "effectuate the legislative intent in light of the language used and the objects sought to be achieved." Merin v. Maglaki, 126 N.J. 430, 435 (1992) (internal citation and quotation marks omitted). It is clear from the agency's proposal, the language of the amendments, and the then-Director's responses to the comments that the intent of the amendments was to preserve the status quo that existed on February l6, l999, by freezing the number of grandfathered solicitors with grandfathered accounts, and not to create a permanent grandfather status for any solicitor who held any permit prior to the effective date of the amendments. See 31 N.J.R. 545(a), supra. The Director's restrictive construction of the grandfather clause is also consistent with the case law. See Young v. Schering Corp., 141 N.J. 16, 25 (1995) ("Exceptions to a [regulatory] scheme... should be construed narrowly."); Paul Kimball Hosp. v. Brick Twp. Hosp., 86 N.J. 429, 440 (1981) (Grandfather clauses "operate to exempt from the requirements of [law] certain defined individuals or entities that, at the time the requirements become effective, meet specific defined criteria."). Moreover, the Director's conclusion that a new business relationship was created when appellant changed employers and obtained a new permit is supported by fact; appellant admitted that he sold different products to the Canal's stores once he began working for R&R.
The Director also concluded that there was no equitable basis to grant an exception to appellant from the plain language and specific goal of the amendments. Appellant was on notice of the proposed amendments, comments and the agency's responses as published in the New Jersey Register, which were clear in their message that the grandfather provision of N.J.A.C. 13:2-16.ll(e) would not apply to any new business relationships established after its enactment. Nevertheless, seven years later, appellant chose to accept a more lucrative job, as a result of which his Gallo solicitor's permit was expressly cancelled and a new solicitor's permit was issued for his employment at R&R. Appellant either knew or should have known that he was relinquishing his grandfather status. If these accounts were as important to appellant as he urges in this case, he should have sought an advisory opinion of the Director prior to taking this major step. Giving appellant the benefit of the doubt, it was completely unreasonable for him to have relied upon the verbal comment of a customer service representative who has neither the background nor authority to answer legal questions.
Appellant's reliance on Oberhand v. Director, Division of Taxation, 193 N.J. 558 (2008), as support for his argument of retroactivity and claim of manifest injustice is completely misplaced and without merit. In fact, appellant actually received a financial benefit in this case, which he was not entitled to receive, due to the ABC's lack of close scrutiny of his 2006 application for the R&R solicitor's permit. As the ABC did not notice appellant's conflict until it commenced its investigation of R&R in 2007, appellant received the financial benefit of servicing the Folmar and Pound Cake accounts substantially beyond the permissible time period. The agency also chose not to suspend appellant's permit for violating N.J.A.C. 13:2-16.ll, or pursue other disciplinary charges for submitting incomplete license renewal applications for 2006-2007 and 2007-2008 regarding family interest disclosure in violation of N.J.S.A. 33:1-25 and N.J.A.C. l3:2-16.9. Instead, the Director reasonably and fairly determined that the Folmar and Pound Cake accounts were barred by N.J.A.C. l3:-l6.ll(c) and (d) and directed their reassignment within thirty days.