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Office of Regulatory Affairs v. Eic Inspection Agency Corporation


March 17, 2011


Per curiam.


Submitted January 24, 2011

Before Judges Rodriguez and Grall.

EIC Inspection Agency Corporation (EIC) appeals a final order of the Acting Commissioner of the Department of Community Affairs (Department). The Commissioner assessed EIC a $1500 penalty for violating its obligations under the State's Uniform Construction Code Act, N.J.S.A. 52:27D-119 to -141 (the Act), and the Department's regulations, N.J.A.C. 5:23-1.1 to -12A-6. EIC is an on-site inspection agency authorized to act in lieu of a code or subcode official and subject to civil penalties pursuant to the Act. See N.J.S.A. 52:27D-124(i)(1), -126, -138.

EIC appeals, contending that the Department did not afford EIC "peer review" required by N.J.A.C. 5:23-5.25(d)(6) or present adequate evidence of the violations at the hearing on the contested case in the Office of Administrative Law, N.J.S.A. 52:14B-9 to -12. EIC also asserts that the penalties are unauthorized. We reject those claims for the reasons set forth below.

The purposes of the Act include ensuring "adequate maintenance of buildings and structures throughout the State and to adequately protect the health, safety and welfare of the people." N.J.S.A. 52:27D-120(e). The Commissioner has authority to effectuate the goals of the Act by promulgating regulations and prosecuting violators in administrative proceedings. N.J.S.A. 52:27D-124, -138.

EIC is authorized by the Commissioner to inspect for violations of the Act's elevator subcode; that authorization allows EIC to be retained by a municipal authority to act in lieu of the municipality appointing a local subcode official to inspect elevators. N.J.S.A. 52:27D-124(a), (i), -126(a)-(c); N.J.A.C. 5:23-4.12. An on-site inspection agency's initial authorization is good for one year. N.J.A.C. 5:23-4.12(e). Consequently, an authorized agency must apply annually for reauthorization. N.J.A.C. 5:23-4.12(f). To obtain the essential reauthorization, an applicant must submit information requested by the Department. Ibid.

There are consequences for an on-site inspection agency that submits an incomplete or inaccurate application form for authorization and reauthorization. Upon determining that any "authorization or reauthorization was based on the submission of fraudulent or materially inaccurate information," the Department may, "[i]n addition to any other remedies provided by the regulations," suspend or revoke the on-site inspection agency's authorization. N.J.A.C. 5:23-4.15(a).

EIC's violations are based on the answer it supplied to a single question on several of the forms it submitted for its annual reauthorization. The question at issue is: "Have any legal actions occurred this year involving the agency or its employees?" The Administrative Law Judge and the Commissioner concluded that this question requires an on-site inspection agency to report legal actions filed during the calendar year. From 2001 to 2007, EIC answered that question "no."

A competitor of EIC, Municipal Inspection Corporation, gave the Department the results of a docket search indicating EIC's involvement in eight lawsuits between 2001 and 2007. The Department investigated and at the hearing in the Office of Administrative Law introduced evidence showing: in 2001, a case was filed against EIC and EIC later settled that case for $120,000; in 2002, a case was filed against EIC, and EIC's owner admitted that its insurance carrier provided its defense; and, in 2003, EIC filed an answer to an amended complaint in a third action filed that year. With respect to the other lawsuits, the Department had no evidence to establish that EIC was served with the complaints or participated in the litigation.

The Administrative Law Judge found violations, and the Commissioner found that EIC failed to report the actions filed in 2001, 2002, and 2003, and the Commissioner concluded that the violations were unintentional, not willful, and as a consequence subject to a $500 penalty.

We reject EIC's challenge to the adequacy of the evidence; it was sufficient to establish three violations. This court must accept factual determinations of an agency when "satisfied" that the evidence and inferences drawn from the evidence support them. Campbell v. N.J. Racing Comm'n, 169 N.J. 579, 587 (2001) (internal quotations omitted). Here, the evidence shows that EIC participated in three separate legal actions filed in three separate years that it never disclosed.

We also reject EIC's claim that the Commissioner could not assess a civil penalty without first having the case reviewed by a "review committee" in accordance with N.J.A.C. 5:23-5.25(d)(6). The regulation requires peer review for persons "licensed under the respective subcodes." Ibid. Pursuant to N.J.A.C. 5:23-4.12(a), on-site inspection agencies like EIC do not receive licenses. As noted above, they receive "authorization." N.J.A.C. 5:23-5.25(d), (d)(6). It is true that the Commissioner cannot authorize a private on-site inspection agency unless its management and technical personnel are certified by the Commissioner in accordance with N.J.A.C. 5:23-5. N.J.A.C. 5:23-4.12(d)(2). But the on-site agency itself is not licensed, and the Commissioner did not take this action against an employee of EIC in his or her individual capacity.

We turn to consider EIC's claim that the Commissioner's imposition of civil penalties for these violations is unauthorized. EIC correctly notes that the regulation addressing its provision of false and materially inaccurate information does not expressly authorize monetary sanctions or refer to a regulation that does. Instead, the regulation permits revocation or suspension of authorization or reauthorization "[i]n addition to any other remedies provided by the regulations." N.J.A.C. 5:23-4.15(a)(1).

Although there is no regulation specifically addressing monetary penalties for on-site inspection agencies, they are clearly authorized by statute. Under N.J.S.A. 52:27D-138:

a. Any person or corporation, including an officer, director or employee of a corporation, who:

(1) Violates any of the provisions of this act or rules promulgated hereunder;

(4) Makes a false or misleading written statement, or omits any required information or statement in any application or request for approval to an enforcing agency or the department;

Shall be subject to a penalty of not more than $2,000; provided, however, that any penalties in excess of $500.00 per violation may be levied by an enforcing agency only in accordance with subsection e. below.

This statutory language is reiterated in N.J.A.C. 5:23-2.31(b), which applies to violations noticed by construction and subcode officials. N.J.A.C. 5:23-2.30(a). In turn, N.J.A.C. 5:23-2.31(b) is referenced in N.J.A.C. 5:23-5.25, which addresses sanctions that may be imposed for violations by code and subcode officials, but it is not mentioned in the regulation that EIC violated, N.J.A.C. 5:23-4.15.

The Administrative Law Judge concluded that there was no regulation authorizing $500 penalties against on-site inspection agencies, but the Commissioner determined that because N.J.A.C. 5:23-2.31 restates N.J.S.A. 52:27D-138, the penalties it authorizes are "other remedies provided by the regulations," within the meaning of N.J.A.C. 5:23-4.15(a)(1).

"An administrative agency's interpretation of statutes and regulations within its implementing and enforcing responsibility is ordinarily entitled to our deference." In re Appeal by Progressive Cas. Ins. Co., 307 N.J. Super. 93, 102 (App. Div. 1997); accord Wnuck v. N.J. Div. of Motor Vehicles, 337 N.J. Super. 52, 56 (App. Div. 2001). There are limits on an agency's regulations and its interpretations of its regulations, but we cannot conclude that the Commissioner's interpretation here exceeds those limits.

Agency action must be consistent with the authorizing statutes. See N.J. Soc. for Prevention of Cruelty to Animals v. N.J. Dept. of Agric., 196 N.J. 366, 385-86 (2008) (discussing the need for compliance with authorizing legislation). Here, as noted above, the authorizing Act expressly authorizes the penalties. N.J.S.A. 52:27D-138. Moreover, N.J.S.A. 52:27D-124(i)(1) and N.J.S.A. 52:27D-126 assign the Commissioner the authority and responsibility to approve on-site inspection agencies and preclude on-site inspection agencies from acting in lieu of construction code and subcode officials without that authorization. Neither the regulation nor the Commissioner's interpretation of it exceed the scope of the authority granted by the Act.

A second limit on an agency's interpretation of its regulations is implicated in this case. It is well-settled that regulations must be sufficiently definite to "inform the public" and "guide the agency in discharging its authorized function." N.J. Soc. for Prevention of Cruelty to Animals, supra, 196 N.J. at 386 (internal quotations omitted). This limitation is founded on principles of due process that guard against arbitrary governmental action. Ibid.

In terms of this case, the question is whether the Commissioner's interpretation is unreasonable and arbitrary because neither N.J.A.C. 5:23-4.15 nor any other regulation expressly applicable to on-site inspection agencies references civil penalties.

The interpretation is sufficiently consistent with the terms of the regulation to provide notice and preclude arbitrary sanctions. Notice of liability for a civil penalty of $500 or less based on an applicant's omission of "any required information . . . in an application or request for approval" is provided in N.J.S.A. 52:27D-138, and reiterated in N.J.A.C. 5:23-2.31(b). The Commissioner concluded that the civil-penalty remedy provided in N.J.A.C. 5:23-2.31(b) is a remedy available for violation of N.J.A.C. 5:23-4.15(a)(1), because it is among the "remedies provided by the regulations" that are referenced in N.J.A.C. 5:23-4.15(a)(1). We recognize that in N.J.A.C. 5:23-5.25(a), which addresses civil penalties for violations by code and subcode officials, the Commissioner included an express reference to the penalties in N.J.A.C. 5:23-2.31. Without question, the Commissioner could have done the same here and thereby eliminated all doubt on the issue, but we cannot conclude that the Commissioner's interpretation of N.J.A.C. 5:23-4.15 is arbitrary because the reference was omitted from that regulation.



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