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Kentwood Academy v. Davy

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


June 4, 2010

KENTWOOD ACADEMY, PETITIONER-APPELLANT,
v.
COMMISSIONER LUCILLE DAVY, STATE OF NEW JERSEY DEPARTMENT OF EDUCATION, RESPONDENTS-RESPONDENTS.

On appeal from a Final Decision of the New Jersey Commissioner of Education.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 10, 2010

Before Judges Reisner and Yannotti.

Kentwood Academy (Kentwood) appeals from a final determination of the New Jersey Commissioner of Education (Commissioner), which upheld the revocation of Kentwood's preliminary authorization to operate a State-approved private school for students with disabilities. We affirm.

I.

The following facts are pertinent to our decision. In 2003, Kentwood filed an application with the New Jersey Department of Education (Department) seeking preliminary authorization to operate a new, State-approved private school for disabled students in Sussex County, New Jersey. On June 15, 2004, the Department approved the first part of Kentwood's application, in which it provided information concerning the school's administration and its educational programs. The Department directed Kentwood to complete a needs assessment survey in order to verify the need for the new school by establishing a minimum of sixteen "possible referrals" of public-school students.

The sixteen-student standard for referrals was required by the regulations that were in effect when Kentwood first sought State approval for its school. However, in August 2004, the Department adopted an amendment to its regulations, which provided that a new private school for disabled students must document a minimum of [twenty-four] public school placement students in order for the school to receive preliminary approval by the Commissioner, which is an increase from [sixteen] pupils included in the current rule. For final approval, new private schools must meet a school year average daily enrollment of [twenty-four] public school placement students and must maintain a minimum average daily enrollment of [twenty-four] public school placement by the end of the third year . . . .

[36 N.J.R. 1313(a) (March 15, 2004), adopted at 36 N.J.R. 3895(a) (August 16, 2004), codified at N.J.A.C. 6A:23-4.1.]

In September 2004, Kentwood submitted its needs assessment survey to the Department. In October 2004, Diane Richards (Richards), Kentwood's owner, wrote to the Department and noted that Kentwood had been assured that the changes in the regulations would have no effect on Kentwood's application. Richards also wrote that Kentwood had not been told that it would have to meet the new requirement for a minimum average daily enrollment (ADE) of twenty-four students.

By email dated November 5, 2004, the Department advised Richards that Kentwood's needs assessment survey did not demonstrate the need for the school and there was a moratorium on new applications. However, in a letter dated January 10, 2005, the Department informed Kentwood that it could proceed with the approval process by conducting another needs assessment survey. The Department stated that, if a school is granted preliminary approval, the regulations required a minimum ADE by the end of the second year of operation. In addition, the Department stated that:

[c]urrent regulations require a minimum needs assessment of [twenty-four] possible referrals, for students with similar educational needs and within appropriate age ranges. Since you initiated the needs assessment process when the regulations required [sixteen] referrals, however, you must document a need for [sixteen] referrals. The required minimum ADE, by the end of the second year of operation would then be [sixteen].

The Department wrote again to Richards in February 2005, and reiterated that "[a] minimum of [sixteen] possible referrals is required to verify need of the new program." However, in a letter dated March 11, 2005, the Department informed Richards that its prior letters were in error and Kentwood would be required to comply with an ADE of twenty-four students, as required by the regulations that were then in effect.

On May 20, 2005, the Department granted Kentwood preliminary approval for its school. Kentwood was authorized to operate during the 2005-06 and 2006-07 school years with two classrooms, with a maximum of nine students per classroom. Richards then wrote to Acting Governor Richard J. Codey, seeking a determination that it was only required to meet an ADE of sixteen students. Thereafter, the Acting Commissioner of Education responded on behalf of the Acting Governor, and advised Kentwood that an ADE of twenty-four students was required. In July 2006, Kentwood requested that the Department approve a third classroom. The request was denied.

On August 7, 2006, the Department placed Kentwood on conditional approval status (CAS), after a site inspection revealed what the Department said were certain areas of "systemic noncompliance with regulations and serious deficiencies in [Kentwood's] educational program[.]" The Department ordered Kentwood to develop a correction action plan to address the identified areas of noncompliance. Kentwood was told that it would not be able to accept placement of any new students until it had done so.

Kentwood appealed the Department's decision to place it on CAS to the Commissioner and sought a stay of the decision. The Commissioner referred the matter to the Office of Administrative Law (OAL) and, on October 4, 2006, an Administrative Law Judge (ALJ) issued an interim decision staying Kentwood's placement on CAS pending a final decision on Kentwood's administrative appeal.

The matter was scheduled for a hearing before the ALJ; however, on December 12, 2006, the parties entered into a partial stipulation of settlement, which stated that Kentwood was in compliance with all regulations and was not on CAS. The stipulations also stated that Kentwood could accept, and school districts could refer, students to Kentwood. The stipulation additionally stated that the Department would issue a letter to sending district boards of education, stating that Kentwood had addressed the Department's prior concerns, was not on CAS and the districts were "free to refer students to Kentwood Academy going forward."

Thereafter, the Department issued a memorandum, dated March 6, 2007, to the County Superintendent of Schools, and the County Supervisor of Child Study, which noted that the County officials had been previously informed that Kentwood had been removed from CAS. The Department instructed the officials to inform all local education agencies in their respective counties of Kentwood's status and stated that the documentation Kentwood had provided to the Department "was sufficient to address the areas of noncompliance warranting conditional approval."

However, on March 14, 2007, an Assistant to the Commissioner sent Richards and the County officials a letter indicating that Kentwood's ADE for the 2005-06 school year was 8.4279 students and that its authorization to operate its State-approved program would be revoked as of July 1, 2007. Kentwood objected to the revocation determination. The parties resolved the dispute by entering into a final stipulation of settlement (FSS), dated May 15, 2007.

The FSS provided that Kentwood would have until March 31, 2008, to establish the ADE of twenty-four public school placement students and the ADE shall be determined based on Kentwood's enrollment in the period from April 1, 2007, through March 31, 2008. The FSS additionally provided that, within two weeks of the execution of the agreement, the Department would issue a letter to all sending districts, a copy of which was attached to the stipulation.

The attached letter indicated that the Department had rescinded its March 14, 2007 letter, and stated that Kentwood would have until March 31, 2008, to establish the ADE of twenty-four public-school placements. The FSS further provided that, prior to February 13, 2008, the Department would not issue any letter to the sending districts regarding Kentwood's compliance with the ADE requirement. The Commissioner approved the FSS on June 19, 2007.

By letter dated May 21, 2008, the Department notified Kentwood that it failed to establish a twenty-four student ADE in the period from April 1, 2007, through March 31, 2008, as required by the FSS. The Department informed Kentwood that its preliminary authorization to operate as a State-approved private school for disabled students would be revoked effective July 1, 2008.

On May 28, 2008, Kentwood filed a petition of appeal with the Commissioner and sought a stay of the revocation of its authorization to operate as a State-approved private school pending a decision on its appeal. The Commissioner referred the matter to the OAL. An ALJ issued an initial decision granting Kentwood's emergent motion for a stay but, on June 12, 2008, the Commissioner reversed that determination and refused to stay the revocation.

The Commissioner reaffirmed that decision on July 16, 2008, and Kentwood thereafter filed a notice of appeal. The Department's revocation determination was later stayed pending disposition of the appeal and, by order dated December 11, 2008, we remanded the matter to the OAL for a full hearing on Kentwood's administrative appeal. We retained jurisdiction.

An ALJ issued an initial decision on June 9, 2009, in which he concluded that the Department was justified in revoking Kentwood's preliminary authorization to operate as a State-approved private school for disabled students, effective July 1, 2008. The Commissioner issued a final determination on July 27, 2009, adopting the ALJ's initial decision, with modifications.

II.

On appeal, Kentwood raises the following arguments for our consideration: 1) Kentwood should be held to an ADE requirement of sixteen students because it filed its application for preliminary approval before the Department amended its regulations to increase the ADE to twenty-four students; 2) the FSS is unenforceable because the Department breached a material term of the agreement and entered into the agreement in bad faith, and because Kentwood did not enter the agreement knowingly and voluntarily; and 3) Kentwood should be approved as a private school for the disabled because it is currently in compliance with the State's ADE requirement.

We have carefully reviewed the record and conclude that Kentwood's arguments are without merit. We accordingly affirm substantially for the reasons stated by the Commissioner in her final decision dated July 27, 2009. R. 2:11-3(e)(1)(D). We add the following comments.

"In light of the executive function of administrative agencies, judicial capacity to review administrative actions is severely limited." George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 27 (1994) (citing Gloucester County Welfare Bd. v. N.J. Civil Serv. Comm'n, 93 N.J. 384, 390 (1983)). "Courts can intervene only in those rare circumstances in which an agency action is clearly inconsistent with its statutory mission or with other State policy." Ibid.

In determining whether the agency's action is arbitrary or unreasonable, we consider: 1) whether the agency's decision offends the State or Federal Constitution; 2) whether the action violated express or implied legislative policies; 3) whether there is substantial credible evidence in the record to support the agency's findings; and 4) whether the agency clearly erred in reaching a conclusion unsupported by relevant factors. Ibid. (citing Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963); In re Larsen, 17 N.J. Super. 564, 570 (App. Div. 1952)). Furthermore, when reviewing a decision of an administrative agency, we must give "'due regard . . . to the agency's expertise where such expertise is a pertinent factor.'" Mayflower Securities v. Bureau of Securities, 64 N.J. 85, 93 (1973) (quoting Close v. Kordulak Bros., 44 N.J. 589, 599 (1965)).

Kentwood argues that the Commissioner erred by requiring it to comply with the ADE requirement of twenty-four students. We disagree. As we have previously explained, when Kentwood filed its administrative appeal challenging its placement on CAS, the parties entered into a FSS which stated that Kentwood would have until March 31, 2008, to establish the ADE of twenty-four public school placement students. Although Kentwood had previously taken the position that it was only required to comply with a sixteen-student ADE, it abandoned that argument when it entered into the FSS. We are therefore convinced that there is substantial credible evidence to support the Commissioner's finding that Kentwood agreed to comply with the twenty-four student ADE, as required by the Department's regulations.

Next, Kentwood argues that the Commissioner erred by finding the FSS binding on the parties. Kentwood asserts that, when it entered into the FSS, it did not understand the ADE requirement. Again, we disagree. As the Commissioner noted in her decision of July 27, 2009, the FSS is clear and unambiguous and ADE is a term that is defined in the administrative regulations. N.J.A.C. 6A:23-4.1. In addition, Kentwood was represented by counsel during the extensive negotiations that preceded its agreement to the FSS.

Kentwood also argues that the Commissioner should not have enforced the FSS because Department knew or should have known that Kentwood could not achieve an ADE of twenty-four students by March 31, 2008, as required by the agreement. However, as the Commissioner found in her decision of July 27, 2009, the parties chose the timeframe for Kentwood's compliance with the ADE to ensure that the sending districts were aware that Kentwood was in compliance with the Department's regulations and able to accept the referral of new students.

Moreover, the Commissioner pointed out that Kentwood had been authorized to operate with three classrooms for all but two and one-half months of the compliance period. Furthermore, in responding to the Department's discovery request, Kentwood's owner stated that, "[a]t the time the parties entered into the [FSS], I believed and continue to believe that the [ADE] requirement of twenty-four (24) would be met by the time prescribed in the [FSS][.]"

In addition, Kentwood argues that the FSS should not have been enforced because the Department materially breached the agreement by failing to send the letter to sending districts, as required by the FSS. The Commissioner found, however, that the Department had complied with the FSS because it issued a letter dated May 14, 2007, to the county offices, and directed that it be forwarded to all school districts that received the letter of March 14, 2007, which had rescinded Kentwood's authorization to operate as a State-approved private school for disabled students. The Commissioner noted that, in addition to sending the May 14, 2007 letter, the Department followed up with "all county offices" to confirm that they had received the letter and sent it to all sending districts that had received the March 14, 2007 letter. We are satisfied that there is sufficient credible evidence to support the Commissioner's findings on this point.

Kentwood further argues that it should be allowed to remain a State-approved private school for disabled students because it had an ADE of twenty-four students in the 2008-09 school year. Although Kentwood presented evidence in the remand proceedings that it "projected" an ADE of 26.2666 students for the 2008-09 school year, this was merely a projection and it was prepared before the end of the school year.

Furthermore, this evidence is not relevant to the principal issue presented in Kentwood's administrative appeal, which is whether Kentwood complied with the FSS and met the ADE requirement of twenty-four students between April 1, 2007 and March 31, 2008. The evidence supports the Commissioner's determination that Kentwood failed to do so, and for this reason, the Commissioner properly upheld the revocation of Kentwood's preliminary authorization to operate a State-approved private school for disabled students.

We have considered Kentwood's other arguments and find them to be of insufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Accordingly, we affirm the Commissioner's decision upholding the revocation of Kentwood's preliminary approval to operate a State-approved private school for disabled students. However, we stay the effective date of our decision through June 30, 2010, so that Kentwood's students may complete the current school year or make arrangements to enroll in other schools.

Affirmed.

20100604

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