June 7, 2010
KAREN GOODE, AS ADMINISTRATRIX OF THE ESTATE OF BRIAN GOODE, APPELLANT,
BOARD OF TRUSTEES, POLICE AND FIREMEN'S RETIREMENT SYSTEM, RESPONDENT.
On appeal from the Final Administrative Decision of the Board of Trustees of the Police and Firemen's Retirement System.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 10, 2010
Before Judges Graves and Sabatino.
Karen Goode, as the administratrix of the estate of Brian Goode, a former police officer, appeals a final administrative decision of the Board of Trustees ("Board") of the Police and Firemen's Retirement System ("PFRS") denying her certain pension benefits. For the reasons noted in this opinion, we are constrained under the applicable law to affirm the Board's administrative decision.
The record presents the following pertinent chronology of events. Brian Goode was hired as a police officer by the Borough of Keansburg ("the Borough") in August 1987. At the time, he was married to his first wife, Tamara. Brian enrolled in the PFRS and designated Tamara as his primary beneficiary for all death benefits. Brian and Tamara divorced in 1991, but he did not change the PFRS beneficiary designation.
In 1992, Brian married appellant Karen Goode. They had three children together. Brian listed Karen as a beneficiary on a $50,000 life insurance policy issued pursuant to Brian's status as a Borough employee. However, for reasons that are unclear, Brian never changed his PFRS designation to substitute Karen for Tamara.
After troubles arose in the second marriage, Karen filed a divorce complaint in September 2003. As part of the pendente lite relief, the Family Part issued an order on February 6, 2004 directing Brian, among other things, to pay Karen unallocated support in the amount of $2500 per month. In addition, the court required Brian to "continue to name [Karen] and the children of the marriage as the beneficiaries of his work related life insurance policy. [Brian] has provided proof of coverage as part of his certification to the court."
Brian did not pursue an interlocutory appeal or otherwise move for relief from that order. Nevertheless, he still did not change the PFRS designation. Karen eventually withdrew her divorce complaint, and instead obtained a bed-and-board divorce, which incorporated by reference the February 24, 2004 pendente lite order.
In 2004, Brian was suspended by the police department without pay after he had provided testimony adverse to the police chief in an investigation by the Monmouth County Prosecutor's Office. He was then terminated from his position in November 2006. He challenged his suspension and termination as retaliatory, both before the former Merit System Board and in a federal lawsuit.
The retaliation matters settled in July 2007. As part of the negotiated settlement with the Borough, Brian was reinstated in good standing but agreed to voluntarily resign effective November 30, 2007, in contemplation that he would be eligible to obtain a twenty-year service pension as of that date. The Borough agreed in the settlement to pay Brian $120,000 within thirty days as a compromise amount for Brian's claims for attorney's fees and to pay for pension contributions to cover Brian's service through the agreed-upon November 30, 2007 resignation date. The settlement agreement specified that the $120,000 payment was not for back pay.
The settlement agreement required the Borough to notify the Division of Pensions and Benefits ("the Division") that Brian had been reinstated and he was in good standing as a Borough police officer. The agreement also stated that Brian was to submit his letter of resignation immediately after the date on which he completed twenty years of service, which the parties believed to be August 29, 2007.*fn1 The parties further agreed that Brian was to be considered on a leave of absence, without pay, but with continued health benefits, between the date of the agreement and his resignation.
Five days after the settlement agreement was placed on the record, Brian died on August 1, 2007 of natural causes. Nevertheless, the Borough Council and Mayor formally approved the settlement by resolution dated August 8, 2007. In simultaneous letters dated August 9, 2007, the Division informed both Tamara and Karen that their respective claims on Brian's benefits were delayed by a request from the Division to the Borough for "information."
Prior to settlement negotiations, the Merit System Board complaint had been transferred to the Office of Administrative Law ("OAL") as a contested case. On September 5, 2007, an Administrative Law Judge ("ALJ") approved the settlement and filed his approval with the Merit System Board.
On September 21, 2007 Tamara was informed by the Division that as there was "no group life insurance payable on [Brian's] account," she was "not entitled to any death benefits." In a letter dated October 11, 2007, Karen was advised by the Division that she was entitled to a "monthly widow's benefit in the amount of $3,080.57 for the rest of her life or until she remarries."
Thereafter, on November 9, 2007 the Merit System Board, after consultation with the Division, informed the Borough that the settlement did not meet the Division's "rules regarding pension credit" and requested clarification of the nature of the $120,000 payment. The Borough's attorney replied by letter on January 10, 2008 that Brian's reinstatement was retroactive to November 13, 2006 (his original termination date) and that $20,000 of the $120,000 represented "mitigated backpay for the leave of absence covering the period from November 13, 2006 to July 31, 2007." Six days later, on January 16, 2008, the Merit System Board approved the settlement as so clarified.
Then, on January 25, 2008, the Borough processed Brian's life insurance policy and forwarded the $50,000 proceeds to Karen as required by the 2004 bed-and-board divorce.
In a letter dated March 13, 2008, the Division changed its initial position regarding Karen's eligibility to receive death benefits under PFRS because Brian was not an "active member of the system at the time of his death," as required by N.J.S.A. 43:16A-9. In addition, the Division determined that Karen was not entitled to the return of Brian's pension contributions because Brian's first wife, Tamara, was still the designated beneficiary on Brian's filed beneficiary form.
Karen appealed the Division's decision and the matter was transferred to the OAL as a contested case. After noting that the parties stipulated to the material facts and they did not request a plenary hearing, ALJ Joseph Lavery issued a decision on March 17, 2009. In his decision, ALJ Lavery recommended that the Division's position be sustained. In particular, ALJ Lavery agreed with the Division that Karen was not entitled to statutory widow's benefits, and that Brian's aggregate pension contributions to the PFRS should be disbursed to Brian's named beneficiary of record, Tamara.
The ALJ acknowledged the harsh consequences for Karen and the children resulting from the circumstances, but nevertheless found that "controlling statutory and case law" did not permit a contrary result. The ALJ also rejected Karen's request to apply principles of equitable estoppel against the government, noting that Karen's "undisputed personal need" could not override the law and that applying the law would not cause a "manifest injustice." The ALJ further noted that Brian had "ample opportunity" to change his beneficiary designation while he was alive but that he had not done so.
After considering Karen's written exceptions, the Board adopted the ALJ's findings of fact and conclusions of law on May 4, 2009.
In her present appeal of the Board's final agency determination, Karen argues that: (1) the Board strayed from legislative intent to provide financial protection to the families of deceased public employees; (2) the Board and the ALJ ignored the parties' intent in the settlement, and improperly relied upon N.J.A.C. 17:4-4.8 to support a finding that the settlement's failure to include back pay precluded an award of PFRS service credit during Brian's suspension from the police force; (3) the settlement "effectively" awarded back pay to Brian, notwithstanding its terms, and therefore, Brian should have been deemed in active service at the time of his death; (4) Tamara was not the rightful beneficiary because Brian divorced her in 1991; (5) equitable considerations "demand" payment of benefits to Karen; and (6) the ALJ improperly proceeded in a summary manner.
By way of remedy, Karen claims a widow's allowance from the PFRS in the form of fifty percent of Brian's final compensation during her widowhood or, alternatively, a disbursement to her of Brian's pension contributions. Also, Karen seeks group life insurance benefits equaling three-and-a-half times Brian's final compensation as a police officer. The Board contends that Karen is legally entitled to none of these remedies, and that its final decision was correct under the governing statutes, regulations and case law.
We consider the arguments raised on appeal mindful of our limited scope of review of the Board's final administrative agency decision. "An administrative agency's final quasi-judicial decision will be sustained unless there is a clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks fair support in the record." In re Herrmann, 192 N.J. 19, 27-28 (2007) (citing Campbell v. Dep't of Civil Serv., 39 N.J. 556, 562 (1963)).
As the Supreme Court noted in Herrmann, "[t]hree channels of inquiry inform the appellate review function[.]" Id. at 28. These are:
(1) whether the agency's action violates express or implied legislative policies, that is, did the agency follow the law; (2) whether the record contains substantial evidence to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.
[Ibid. (quoting Mazza v. Bd. of Trs., Police & Firemen's Ret. Sys., 143 N.J. 22, 25 (1995)).]
"When an agency's decision meets [these] criteria, then a court owes substantial deference to the agency's expertise and superior knowledge of a particular field." Ibid. These well-established standards have routinely been applied to final agency decisions in pension matters. See, e.g., Hemsey v. Bd. of Trs., Police & Firemen's Ret. Sys., 198 N.J. 215, 224 (2009); Gerba v. Bd. of Trs., Pub. Employees' Ret. Sys., 83 N.J. 174, 189 (1980).
The statute establishing the PFRS, N.J.S.A. 43:16A-1 to -68, provides for certain "retirement allowances and other benefits" to be paid to the beneficiaries of police officers and firefighters. N.J.S.A. 43:16A-2. When a police officer dies in "active service," payments to his or her beneficiaries are governed by N.J.S.A. 43:16A-9, which specifies as follows:
(1) Upon the receipt of proper proof of the death of a member in active service on account of which no accidental death benefit is payable [N.J.S.A. 43:16A-10] section 10 there shall be paid to such member's widow or widower a pension of 50% of final compensation for the use of himself or herself and children of the deceased member, to continue during his or her widowhood; . . .
(4) In addition to the foregoing benefits payable under subsection (1) or (2), there shall also be paid in one sum to the member's beneficiary, an amount equal to 3 1/2 times final compensation.
(5) a. For the purposes of this section and [N.J.S.A. 43:16A-10(5)], a member of the Police and Firemen's Retirement System shall be deemed to be an active member for a period of no more than 93 days while on official leave of absence without pay when such leave is due to any reason other than illness . . . . [N.J.S.A. 43:16A-9 (emphasis added).]
Karen contends that Brian was in "active service" as of the date of his death, August 1, 2007. We agree with the Board and the ALJ that this contention is untenable under the governing law.
It is undisputed that Brian was not actually performing the responsibilities and functions of a police officer as of the date of his death, and he had not done so for several years.
His protracted separation from police employment without pay cannot be deemed a mere "leave of absence" under N.J.S.A. 43:16A-9 because it continued for much longer than ninety-three days and was not for reasons of illness. The Supreme Court has made clear that public employers and employees who are parties to a negotiated settlement may not use a settlement agreement for the purpose of enhancing statutory entitlements to retirement and pension benefits. Fair Lawn Educ. Ass'n v. Fair Lawn Bd. of Educ., 79 N.J. 574, 582 (1979); see also State v. State Supervisory Employees Ass'n, 78 N.J. 54, 83 (1978). The Borough and Brian could not contract to modify the status of Brian's pension benefits by agreeing that the Borough would rescind his termination, which exceeded ninety-three days, and reinstate him in good standing without back pay. See also N.J.S.A. 43:1-3.3.
We detect no error in the ALJ's reference to N.J.A.C. 17:4-4.8 within his analysis, although reliance on that particular administrative regulation is not essential to concluding that appellant's claims are unavailing under the pertinent statutes. N.J.A.C. 17:4-4.8 provides that service or salary credit shall not be given "if the award of back pay, before mitigation, is less than the value of the normal pension contributions due. If a member waives an award of back pay, then the member cannot receive service or salary credit for the period of the award." N.J.A.C. 17:4-4.8(c). Here, paragraph 4 of the settlement agreement placed on the record on July 27, 2007, while Brian was still alive, clearly stated that, with respect to the $120,000 settlement amount, "[t]he parties agree that these monies are not being paid as recompense for [Brian] Goode's claims for back pay, but rather, constitute payments in order to settle [Brian] Goode's claims for reimbursement for attorney's fees and, if necessary, to pay for pension contributions to cover the full period of service up to [the] time of the resignation . . . [.]" (Emphasis added). Additionally, paragraph 5 of that same instrument specified that "[b]etween the date of this agreement and the [agreed-upon November 30, 2007] resignation date, [Brian] Goode shall be on a leave of absence without pay (but with continued health benefits)." (Emphasis added).
The plain language of the settlement documents unmistakably reflects that Brian was not to receive back pay for the period before the settlement and, for that matter, also would not receive pay for the ensuing four-month period between the settlement and the anticipated November 30, 2007 resignation date. The absence of such compensation is entirely consistent with the Board's legal position that Brian was not in "active service" as of the date of his death. Although we are cognizant that, after inquiry by the Merit System Board, the Borough attempted to effectuate a posthumous interpretation of the settlement treating the $20,000 sum in escrow as "mitigated backpay" for the period from November 13, 2006 through July 31, 2007, the Board did not act unreasonably or misapply the law in not allowing this posthumous interpretation to convert Brian's status as of his death to that of an "active member" in the PFRS system.
Even if the settlement were construed to place Brian on a "leave of absence" beginning on July 27, 2007, when the parties executed it, the ALJ's finding that Brian was not in active service at the time of his death is nonetheless supported by the facts and the applicable statutes. That is so because more than two years elapsed between December 10, 2004, when Brian was suspended, and his death on August 1, 2007, during which time he made no pension contributions because he was not working and not being paid by the Borough. As a matter of law, PFRS membership terminates upon a two-year period during which a member fails to make any pension contributions. See N.J.S.A. 43:16A-3(3) ("if more than 2 years have elapsed from the date of [the member's] last contributions to the system, he shall thereupon cease to be a member.").
For these various reasons, we affirm the findings of the ALJ, as ratified by the Board, that Brian was not in the "active service" as of the time of his death, and that consequently the only pension benefits payable from his PFRS account are his aggregate contributions owed to his beneficiary of record.
With respect to the identity of the appropriate payee, it is unassailable that Tamara, not Karen, was the decedent's beneficiary of record on file with the State as of the August 1, 2007 date of death. The ALJ and the Board acted lawfully and appropriately in carrying out that designation.
N.J.S.A. 43:16A-9(2) has been construed to provide that a designated beneficiary is entitled to receive "a return of pension contributions upon the [PFRS] member's death." La Sala v. La Sala, 335 N.J. Super. 1, 8 (App. Div. 2000), certif. denied, 167 N.J. 630 (2001); see also Claffey v. Claffey, 360 N.J. Super. 240, 259 (App. Div. 2003). The statute requires that the member's designation of a beneficiary, or a change in that designation, be made formally in a writing filed with the PFRS:
The designation of beneficiary by a member or retirant shall be made in writing on a form satisfactory to the retirement system, and filed with the retirement system. The member or retirant may, from time to time and without the consent of his death benefit designee, change the beneficiary by filing written notice of the change with the system on a form satisfactory to it. The new nomination will be effective on the date the notice, in proper form, is received by the system, and any prior nomination shall thereupon become void. [N.J.S.A. 43:16A-12.3 (emphasis added).]
Further, a related regulation, N.J.A.C. 17:4-3.6(b), provides that "[i]f a deceased member has an eligible surviving spouse, child or parent, then the deceased member's aggregate contributions at the time of death shall be applied toward the payment of the benefit established at N.J.S.A. 43:16A-9(1)." According to the regulatory history, "the purpose of N.J.A.C. 17:4-3.6 when originally proposed was to ensure that members' most recent expression of beneficiary designation is given effect." 32 N.J.R. 3581(a) (emphasis added).
Although Brian divorced his first wife Tamara in 1991 and married Karen, his second wife, in 1997, he never removed Tamara from his beneficiary designation on file with the PFRS. As the ALJ aptly observed, "[o]ne may speculate as to Brian Goode's reasons for this omission, and perhaps argue, not unreasonably, that he had a spousal obligation to make the change. Nevertheless, absent compliance with the law, post-mortem guesswork to speculate what was in Brian Goode's mind is impermissible." Nor is Tamara's documented status as the listed pension beneficiary affected by the pendente lite order of the Family Part in Karen's divorce action against Brian. For whatever reason or reasons, Brian did not eliminate his first wife as the beneficiary of his pension, and it is not up to the courts or the pension agency to take matters into its own hands.
Moreover, the Family Part's pendente lite order requiring Brian to maintain Karen as the named beneficiary on his life insurance policy presumed that she and their children were already named as beneficiaries. The order expressly stated that "[d]efendant shall continue to name [p]laintiff and the children of the marriage as the beneficiaries of his work related life insurance policy. Defendant has provided proof of coverage as part of his certification to the court." (Emphasis added). Karen was, in fact, the beneficiary of Brian's employment-related life insurance policy through the Borough, and the Borough has already paid her the benefits she was owed under that policy. Karen was never the named beneficiary of Brian's PFRS life insurance policy. The Family Part's order did not provide that Brian's PFRS life insurance policy, or the return of his pension contributions, were payable to Karen. At best, the Family Part's order imposed an ambiguous obligation upon Brian, and not one that could defeat Tamara's status as a designated beneficiary without affirmative conduct by Brian.
We also concur with the ALJ and the Board that Karen is not entitled to statutory benefits under principles of estoppel or equity. As a general rule, estoppel against governmental agencies is highly disfavored and rare. See, e.g., Summer Cottagers' Ass'n of Cape May v. City of Cape May, 19 N.J. 493, 503-04 (1955); Ranchlands, Inc. v. Twp. of Stafford, 305 N.J. Super. 528, 538 (App. Div. 1997), aff'd o.b., 156 N.J. 443, 444 (1998). Even where the equities involved favor a private citizen's position against an agency, the agency is not estopped from denying relief to that citizen unless it is necessary to avoid a "manifest injustice." Casamasino v. City of Jersey City, 158 N.J. 333, 354 (1999). No such manifest injustice has been demonstrated here.
Although we appreciate Karen's argument that the pension laws generally have been designed to help public employees and their families, see Eyers v. Bd. of Trs., Pub. Employees' Ret. Sys., 91 N.J. 51, 56-57 (1982), those policy objectives are tempered by the particular terms of the statutes and regulations that govern entitlement to pensions and pension benefits. As we have already indicated, those codified provisions disallow Karen's claims for payment. Although the Division initially approved death benefits for Karen, it ultimately found her disentitled to such payments after closer examination and appropriate fact-finding by an ALJ. This is not a situation in which the Board is asking a recipient to disgorge payments that have already been received and possibly expended, a scenario that presents much stronger equitable considerations.
In sum, the Board's final decision in denying benefits to Karen was consonant with the governing law, and was neither arbitrary nor capricious.