March 30, 2011
ANTONIO RIVERA, PLAINTIFF-APPELLANT,
ELIZABETH BOARD OF EDUCATION, A CORPORATE BODY OF THE STATE OF NEW JERSEY, PABLO MUNOZ, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY AS SUPERINTENDENT OF SCHOOLS FOR THE CITY OF ELIZABETH, AND RAFAEL J. FAJARDO, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY AS THE PRESIDENT OF THE ELIZABETH BOARD OF EDUCATION, DEFENDANTS-RESPONDENTS, AND LUCILLE DAVY, COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF EDUCATION, DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-3814-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 1, 2011
Before Judges Wefing, Payne and Baxter.
Plaintiff Antonio Rivera appeals from a May 28, 2010 Law Division order that denied his motion to enforce litigant's rights. In the motion, he sought to compel defendants, Pablo Munoz and Rafael J. Fajardo, to indemnify the Elizabeth Board of Education (Board) for legal expenses the Board incurred in improperly instituting a defamation lawsuit on behalf of the Board, Munoz and Fajardo. We agree with plaintiff's contention that the judge erred in deferring to the primary jurisdiction of defendant, the Commissioner of the New Jersey Department of Education (DOE). We therefore reverse the order of May 28, 2010, and remand to the Law Division for a determination of whether defendants Munoz and Fajardo should be ordered to provide the indemnification that plaintiff seeks.
In the spring of 2006, defendant Munoz was the Acting Superintendent of Schools for the Elizabeth public school system, and defendant Fajardo was the President of the Elizabeth Board of Education. Fajardo also owned and operated a construction company. During the days leading up to the June 6, 2006 primary election for City Council, three documents were mailed to City residents. The first was a letter, purportedly written and signed by defendant Munoz. The letter directed Fajardo to "inspire parents to commit to putting up political signs in support of our Hispanic candidates" so that the "Hispanics [will] come out and vote for our candidate and . . . ensure a low turnout of the [I]talian vote." The letter was not, in fact, approved, authored or signed by Munoz.
The second was a two-page flier containing pictures of defendants Fajardo and Munoz, and labeling them the "Army of the Undercover Republicans." The flier stated, "The Army of the Undercover Republicans are getting richer at the expense of taxpayers and the youth of our City"; and "[w]hy does an owner of a construction company want more construction of schools when the proficiency level in math and science are not focused on?"
The third document was a flier accusing defendant Fajardo of providing money and support to Lester Dominguez, a candidate for City Council, by improperly and illegally diverting money and resources from the Board to contribute to the candidacy of Dominguez.
On June 30, 2006, the Board, Munoz and Fajardo jointly filed an action against unnamed John and Jane Doe defendants alleging defamation, malicious misrepresentation, invasion of privacy, intentional infliction of emotional distress and violation of campaign advertising laws (the defamation action).*fn1
As part of the Board's investigation of the unidentified, fictitious defendants, the Board, Munoz and Fajardo issued subpoenas to individuals known to have provided campaign assistance to their political opponents. Among those political opponents was plaintiff Rivera.
On September 18, 2006, defendant, Lucille E. Davy, Acting Commissioner of DOE, requested information from the Board, Munoz and Fajardo to determine whether the Board was entitled to spend school funds on the pursuit of the defamation lawsuit. Shortly thereafter, on October 26, 2006, plaintiff filed the within action seeking, among other measures, injunctive relief prohibiting the Board, Munoz and Fajardo from continuing with the defamation lawsuit. As a preliminary measure, on November 3, 2006, the court granted plaintiff's motion to quash the subpoena issued by defendants. Nearly four months later, on February 26, 2007, the judge issued a temporary injunction, enjoining the Board from continuing to use school funds to pursue the defamation lawsuit.
Through an Open Public Records Act (OPRA), N.J.S.A. 47:1A-1 to -13, request, plaintiff learned that the Board had never adopted a resolution authorizing the filing of the defamation lawsuit, or approving the expenditure of school district funds to maintain the lawsuit. Through his OPRA request, plaintiff also learned that the Board had expended $64,369 in legal fees paid to McCarter & English in connection with the lawsuit.
On July 19, 2007, DOE released an audit prepared by its Office of Fiscal Accountability and Compliance (OFAC), notifying the Board of its conclusion that the expenditure of public funds for the lawsuit was improper and "inappropriate." OFAC calculated that approximately eighty percent of the legal fee paid to McCarter & English had come from grants provided by DOE. DOE notified the Board it was therefore deducting that amount, $52,049, from the State aid to be provided to the Board in the upcoming budget cycle. On October 16, 2007, the Board appealed OFAC's finding of inappropriate expenditure of Board funds.
On July 10, 2008, the judge converted the preliminary injunction into a permanent injunction. However, she dismissed the balance of plaintiff's complaint without prejudice to his right to seek reinstatement of his complaint should DOE's final determination, which had not yet been issued, warrant such relief.
The Board's appeal of OFAC's July 19, 2007 decision resulted in the issuance of a final determination by DOE on July 1, 2009. In affirming its July 19, 2007 determination, DOE concluded that the use of school district funds to pursue the lawsuit constituted "a misuse of school district funds." DOE's July 1, 2009 final determination letter also notified the Board that OFAC had discovered that McCarter & English had submitted invoices for an additional $256,583 of legal fees between February 15 and June 30, 2007. DOE reserved the right to perform an additional analysis of those invoices to determine whether any of the costs were related to the defamation lawsuit. When the appeal period lapsed without the Board having filed an appeal of the July 1, 2009 final DOE decision, DOE deducted the improperly-spent $52,049 from the Board's remaining fiscal year 2009-10 State aid payments. As we understand the record, DOE has never issued any findings related to the additional $256,583 paid by the Board to McCarter & English.
Through another OPRA request, plaintiff obtained a copy of DOE's July 1, 2009 final administrative decision. Upon learning that DOE had reduced the State aid to the Elizabeth school district by $52,049 to compensate for the misuse of State aid on the defamation lawsuit, plaintiff filed the motion for enforcement of litigant's rights that is the subject of this appeal. His motion sought an order: 1) requiring Munoz and Fajardo to indemnify and reimburse the Board for the $52,049 that DOE had deducted from the Board's State aid revenue as a result of the defamation lawsuit;*fn2 2) compelling an accounting of the $256,583 invoice by McCarter & English to determine if any portion was attributable to the defamation lawsuit, and, if so, requiring Munoz and Fajardo to reimburse the Board accordingly; 3) quashing deposition subpoenas the Board had issued to plaintiff in connection with discrimination complaints filed against the Board by two of its employees, Frank LaFace and Anthony Pace; and 4) permanently enjoining any further efforts by defendants to pursue the defamation lawsuit.
At the conclusion of oral argument on May 28, 2010, the judge held that the court should refrain from acting on the indemnification and accounting requests that were the subject of plaintiff's motion because it was not "the court's prerogative" to address these issues. Instead, according to the judge, plaintiff's remedy lay exclusively with DOE, which had the expertise to resolve the issues plaintiff raised. As to plaintiff's motion to quash the subpoenas defendants had issued to him in the LaFace and Pace matters, the judge found the issue moot, as one case had settled and the trial judge had already quashed the subpoenas in the other. The judge also denied plaintiff's motion to permanently enjoin any further activity in the defamation lawsuit, observing that the permanent injunction issued on July 10, 2008 made such relief unnecessary. The judge signed a confirming order at the conclusion of oral argument.
On appeal, plaintiff maintains he is entitled to reversal of the May 28, 2010 order because, contrary to the judge's determination, the primary jurisdiction doctrine did not require the court to defer to DOE on the issues he had raised. In particular, he maintains the court erred in "abdicating its jurisdiction" to decide the restitution/indemnification issue because the July 1, 2009 DOE decision was final and failed to assert any jurisdiction, or any intention to exercise jurisdiction, over the actions of Munoz and Fajardo. Plaintiff maintains that unless the order in question is reversed, the public will be left with no mechanism for vindicating the important public rights at issue.
In contrast, defendants urge us to affirm the order under review. They insist that "[t]his appeal is not the attempt of a concerned citizen to reign [sic] in public spending," but is instead "part of a continuing course of conduct by the plaintiff and those acting in concert with him, to harass the Elizabeth Board of Education . . . [,] [its] [s]uperintendent of [s]chools and a former Board member who is a political opponent of plaintiff and his supporters." Defendants also argue that if the relief sought by plaintiff is granted "then the consequences for [the State's] school districts would be severe because all school officials and Board members would be subject to personal liability for actions taken in their official capacities." According to defendants, that is "why the [DOE] has not pursued the subject at issue further . . . ."
Moreover, according to defendants, if plaintiff is granted relief, "then our courts will be flooded with school disputes and our Superior Court will become the appeals court for most disputes relating to alleged violations of school laws despite the existence of an established forum[,] [DOE][,] for those disputes." Finally, defendants maintain that "[t]he ability to penalize superintendents and board members for conduct that falls within the scope of their responsibilities certainly has major implications for education policy . . . [because] Board members . . . would be deterred from action, particularly aggressive or innovative action, for fear of being sued and held personally liable."
The doctrine of primary jurisdiction, upon which the judge relied, is designed to promote "proper relationships between courts and regulatory agencies." Campione v. Adamar of N.J., Inc., 155 N.J. 245, 263 (1998). In the context of local boards of education, the applicable statute, N.J.S.A. 18A:6-9, provides:
The commissioner shall have jurisdiction to hear and determine, without costs to the parties, all controversies and disputes arising under the school laws, except those governing higher education, or under the rules of the state board or of the commissioner. For the purposes of this Title, controversies and disputes concerning the conduct of school elections shall not be deemed to arise under the school laws. [N.J.S.A. 18A:6-9 (emphasis added).]
"Under the doctrine of primary jurisdiction, when enforcement of a claim requires resolution of an issue within the special competence of an administrative agency, a court may defer to a decision of that agency." Campione, supra, 155 N.J. at 263 (citation omitted). "Although the court may retain jurisdiction over the dispute, it defers action until receipt of the agency's views." Id. at 264. Deferring to the primary jurisdiction of an administrative agency enables the decision to be made by "'the forum or body which, on a comparative scale, is in the best position by virtue of its statutory status, administrative competence and regulatory expertise to adjudicate the matter.'" Boss v. Rockland Elec. Co., 95 N.J. 33, 40 (1983) (quoting Hinfey v. Matawan Reg'l Bd. of Educ., 77 N.J. 514, 532 (1978)). Thus, the doctrine of primary jurisdiction will apply where "the case is properly before the court, but agency expertise is required to resolve the questions presented." Boldt v. Correspondence Mgmt., Inc., 320 N.J. Super. 74, 83 (App. Div. 1999).
Nonetheless, despite the laudable goals the doctrine of primary jurisdiction is designed to achieve, its application is not without limit. First, and foremost, as the language of N.J.S.A. 18A:6-9 makes abundantly clear, DOE's primary jurisdiction applies only when the issue in dispute "aris[es] under the school laws." Defendant's broad reading of the statute incorrectly proceeds from the mistaken premise that the doctrine of primary jurisdiction, and a court's obligation to waive its own jurisdiction, applies whenever the court is presented with a controversy involving local boards of education. Such an expansive reading is incorrect. Archway Programs, Inc. v. Pemberton Twp. Bd. of Educ., 352 N.J. Super. 420, 424-25 (App. Div. 2002). As we have observed in Archway, "the sweep of the Department's interest and the Commissioner's jurisdiction does not extend to all matters involving boards of education." Ibid. Claims against boards that "do not arise under the school laws but rather from statutory or common law" are "typically and appropriately adjudicated in the courts." Id. at 425. Indeed, the language in N.J.S.A. 18A:6-9, which confers jurisdiction on DOE over "all controversies and disputes arising under the school laws," makes it clear that unless the dispute in question "involves an interpretation of [a] specific statute in Title 18A (Education)," deferring to DOE's primary jurisdiction should be avoided. S. Orange - Maplewood Educ. Ass'n v. Bd. of Educ. of S. Orange & Maplewood, 146 N.J. Super. 457, 463 (App. Div. 1977).
Notably, when DOE rendered its final decision on July 1, 2009, the agency grounded its conclusion in specific regulations pertaining to Abbott school districts,*fn3 of which Elizabeth is one. In particular, DOE's July 1, 2009 decision relied on N.J.A.C. 6A:10A-7.2,*fn4 which addressed Fiscal Year 2006-07 cost efficiency requirements pertaining to Abbott districts; and DOE concluded that expenditures pertaining to the defamation lawsuit ran afoul of the requirements of that regulation.
Here, in contrast, defendants point to no specific portion of Title 18A or its implementing regulations that is, or would be, implicated on the issue that was before the Law Division at the time it waived its jurisdiction on May 28, 2010, namely, whether defendants Munoz and Fajardo should be required to indemnify the Board. That glaring omission by defendants strongly supports a conclusion that the doctrine of primary jurisdiction did not warrant the Law Division's surrender of its own jurisdiction. The present matter is entirely dissimilar to DOE's July 1, 2009 decision, which involved an issue well within DOE's area of expertise -- whether expenditures by a board of education comply with the efficiency requirements established by the applicable Abbott regulations.
Moreover, the question of whether a board member should be required to indemnify a board of education for improper expenditures he authorized does not require the expertise of DOE. The decision is purely one of law, whether there was a breach of duty and whether any such breach requires indemnification. Such questions are within the common law and non-Title 18A questions that trial judges routinely decide. We perceive no need for the trial court to have deferred to DOE's primary jurisdiction on such an issue. Where the matter involves a "question of law outside the purview of the school laws," the Commissioner's jurisdiction is not exclusive. Archway, supra, 352 N.J. Super. at 426.
We do recognize, however, that there are instances where "legal relief" is sought from a court at the same time as a "closely related administrative proceeding pends in the Department." Ibid. In such instances, the trial court "should normally stay its hand, even while retaining jurisdiction where appropriate . . . ." Ibid. While we recognize that DOE reserved the right in its July 1, 2009 final decision to review the additional $256,583 invoiced by McCarter & English, DOE has never pursued that investigation further, nor has it expressed any interest in resolving the indemnification issue that is the subject of this appeal. Consequently, the present matter is not an appropriate instance for a court to temporarily stay its hand while a "closely related administrative proceeding pends in the Department." Ibid.
We therefore conclude that the judge erred when she waived the jurisdiction of the Law Division and referred the indemnification issue to DOE. The judge should have decided the question presented.
Reversed and remanded.