June 2, 2011
IN THE MATTER OF THE ADOPTION OF N.J.A.C. 13:70-1.32 TO 1.41 AND N.J.A.C. 13:71-1.27 TO 1.36.
On appeal from regulations promulgated by the New Jersey Racing Commission.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 15, 2011
Before Judges Wefing, Baxter and Koblitz.
New Jersey Thoroughbred Horsemen's Association appeals from the promulgation of two sets of regulations on October 6, 2008 by the New Jersey Racing Commission (Commission). The first set of regulations, N.J.A.C. 13:70-1.32 to -1.41, establishes rules of procedure for thoroughbred racing, while the second set, N.J.A.C. 13:71-1.27 to -1.36, establishes identical rules for harness racing ("the rules" or "the regulations").
The regulations govern procedures for: transmitting contested cases for a hearing before the Office of Administrative Law, N.J.A.C. 13:70-1.32 and N.J.A.C. 13:71-1.27; providing interested parties with advance notice of issues the Commission intends to consider, N.J.A.C. 13:70-1.34 and N.J.A.C. 13:71-1.29; the submitting of comments and information to the Commission concerning pending agenda items, N.J.A.C. 13:70-1.35 and N.J.A.C. 13:71-1.30; requesting the Commission to place an issue on its upcoming meeting agenda, N.J.A.C. 13:70-1.36 and N.J.A.C. 13:71-1.31; distributing the Casino Simulcasting Special Fund monies, N.J.A.C. 13:70-1.37 and N.J.A.C. 13:71-1.32; determining the annual allocation of race dates, N.J.A.C. 13:70-1.38 and N.J.A.C. 13:71-1.33; waiving or relaxing the Commission's rules, N.J.A.C. 13:70-1.39 and N.J.A.C. 13:71-1.34; modifying any penalties previously imposed, N.J.A.C. 13:70-1.40 and N.J.A.C. 13:71-1.35; and specifying the qualifications of attorneys entitled to represent clients before the Commission, N.J.A.C. 13:70-1.41*fn1 and N.J.A.C. 13:71-1.36.*fn2
We reject appellant's contentions that the regulations: were adopted in violation of the Open Public Meetings Act (OPMA), N.J.S.A. 10:4-6 to -21; will "perpetuate the Commission's pervasive and institutionalized violations of the OPMA"; will delegate excessive authority to the Commission's Executive Director; fail to define key terms; fail to implement the requirements of the Casino Special Fund legislation; and improperly infringe upon the authority of the judiciary. We do, however, agree with appellant's assertion that the portion of the regulations that permits the Commission to recover misused funds fails to establish the criteria or the procedures for doing so. We also agree with appellant's argument that the portions of the regulations prohibiting all requests for the issuance of an administrative stay pending appeal, and directing that all court-ordered modifications of disbursements be deferred until the next grant cycle, are unsustainable. We therefore vacate those sections of the regulations and remand for revision. In all other respects, we approve the adoption of the regulations in question.
The Commission is empowered "when consistent with [its] primary duty of regulating horse racing, to advocate the growth, development and promotion of the horse racing industry in [New Jersey], and [is vested with] the powers necessary or proper to enable it to carry out" its responsibilities. N.J.S.A. 5:5-22. It is required by N.J.S.A. 5:5-29 to meet publicly to transact its business, and the record indicates that the Commission members have met regularly, at least once every other month, to perform the Commission's statutory duties.
The Commission is also charged with administering a fund (Special Fund), which was established pursuant to the Casino Simulcasting Act (CSA), N.J.S.A. 5:12-205. In particular, the CSA authorizes Atlantic City casinos to simulcast horse races conducted in New Jersey and in other states, N.J.S.A. 5:12-193, and to accept wagers on such races, N.J.S.A. 5:12-194(a)(2), with the proceeds being deposited into the Special Fund, N.J.S.A. 5:12-207. The Commission is authorized to make certain mandatory distributions, N.J.S.A. 5:12-205(a)-(c), after which the monies remaining in the Special Fund are then distributed through a competitive process to New Jersey's four racetracks, and to various horsemen's organizations, in accordance with the criteria set forth in N.J.S.A. 5:12-205(d).
In a published opinion, In the Matter of: Consider Distribution of the Casino Simulcasting Special Fund (Accumulated in 2005) in the Amount of $1,820,699.42 Pursuant to N.J.S.A. 5:12-205(d), 398 N.J. Super. 7, 16-19 (App. Div. 2008), we voided the Commission's 2005 distribution of the discretionary portion of the Special Fund because the Commission had not provided clear notice to applicants about whether, and to what extent, each could comment on the disbursement requested by others. We held that the lack of such clear notice violated the provisions of the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -25:
The record permits an inference that these applicants understood the need to file a written request and had the ability to obtain the requests submitted by other applicants. But the record also demonstrates that there was no common understanding about whether or how one applicant could challenge, object to or present argument relevant to information provided by another applicant. Had the [Commission] followed its obligation under N.J.S.A. 5:12-210 to adopt rules and regulations necessary to effectuate the purposes of the CSA and its obligation to promulgate "rules of practice" required by N.J.S.A. 52:14B-3(2), the applicants would have notice of their obligations and opportunities as competitors.
[Casino Simulcasting, supra, 398 N.J. Super. at 18-19.]
We also held that the Commission's deliberations had not conformed with the OPMA, because although the Commission conducted its voting in public, its deliberations had been held behind closed doors:
In this case, the [Commission] disbursed nearly two million dollars without any public discussion or deliberation. The fact that the members of the [Commission] voted at a public meeting and ultimately explained the result does not cure the problem of private deliberations. [Id. at 16-17.]
We therefore invalidated the 2005 distribution, and directed the Commission to adopt rules of practice and procedure pursuant to the APA before taking further action to distribute the 2005 Special Fund in a public session. Id. at 19. Thereafter, we granted the Commission's request for remand of the 2006 Special Fund distribution.*fn3
On February 6, 2008, the Commission met in closed executive session to discuss the decision we rendered. According to unredacted portions of the meeting minutes, the Commission agreed that its "existing procedure[s] should be codified through a regulation."
The Commission proposed N.J.A.C. 13:70-1.32 to -1.41 and N.J.A.C. 13:71-1.27 to -1.36 on July 21, 2008. 40 N.J.R. 4295; 40 N.J.R. 4300. The stated purpose of the proposed regulations was to "set forth the procedures and practices utilized by the [Commission,]" as required by the Casino Simulcasting Special Fund decision. 40 N.J.R. 4296-98; 40 N.J.R. 4301-03.
On September 2, 2008, appellant submitted twenty-five comments to the proposed rules, and supplemental comments on September 16, 2008. Appellant's comments presented an array of criticisms, which ranged from challenging the adequacy of the impact statements and the amount of discretion accorded to the Executive Director, to the Commission's alleged noncompliance with the OPMA and APA.
On October 1, 2008, the Commission addressed each of appellant's comments, and rejected appellant's claims that the underlying purpose of the proposed regulations was to veil the Commission's violation of the OPMA and APA. The Commission asserted that its proposed rules of procedure conformed to applicable requirements, and it adopted the proposed rules without any further changes on October 6, 2008, to be effective on November 17, 2008. It is those rules that are the subject of this appeal.
Before addressing appellant's substantive challenge to the content of the regulations, we address appellant's claim in Points III and IV that the process by which the Commission adopted the rules violated the provisions of the APA and the OPMA.
We start with Point IV, in which appellant argues first that the Commission violated the OPMA by failing to provide appellant and other interested parties with an advance copy of the draft rules before it voted to publish the rules for public comment in the New Jersey Register. Appellant argues that the April 30, 2008 vote to publish the rules should be declared "a nullity because the public did not know what the Commission voted upon."
The record reflects that at its April 30, 2008 meeting, the Commission reviewed drafts of the regulations that are the subject of this appeal, and, after publicly discussing some of the provisions, voted to release the draft rules for public comment. Counsel for appellant thereafter addressed the Commission, and complained that his client's request for a copy of the draft rules had been improperly denied by Commission staff. The chairman informed appellant's counsel that the Commission had just voted to make the rules public, and that the proposed regulations would be available to everyone once they were published.
Contrary to appellant's assertions, neither the APA nor the OPMA require an administrative agency such as the Commission to provide the public with an advance copy of the proposed rule before the rule is published for public comment. The APA is designed to establish an orderly process for public participation in rulemaking. N.J.S.A. 52:14B-4. It requires an agency to: publish a proposed rule for public comment, N.J.S.A. 52:14B-4(a)(1); notify the public of the time period during which it may submit comments on the proposed rule, ibid.; consider fully all written and oral submissions from the public respecting the proposed rule, N.J.S.A. 52:14B-4(a)(3); publish its responses to the public comments, N.J.S.A. 52:14B-4(a)(4); and, at the completion of that process, publish the newly-adopted rule, N.J.S.A. 52:14B-5. The record demonstrates that the Commission complied with each of these steps. Notably, nothing in the APA establishes a requirement that the public be provided with a copy of the proposed rule before it is published for public comment. We therefore reject appellant's argument that the Commission's failure to provide a copy of the proposed rules prior to publication violated the APA.
We turn to an analysis of whether the OPMA imposes such a requirement. The OPMA recognizes "that secrecy in public affairs undermines the faith of the public in government and the public's effectiveness in fulfilling its role in a democratic society." N.J.S.A. 10:4-7. Consequently, the OPMA seeks to ensure "the right of the public to be present at all meetings of public bodies, and to witness in full detail all phases of the deliberation, policy formulation, and decision making of public bodies[.]" Ibid. To vindicate this right, the OPMA requires adequate notice of any public meetings, and permits a reviewing court to void past actions taken in a noncompliant meeting, or to prospectively enjoin a public entity from future violations of the OPMA. N.J.S.A. 10:4-8, -15, -16.
Nonetheless, the OPMA also provides that "[n]othing in this act shall
be construed to limit the discretion of a public body to permit,
prohibit or regulate the active participation of the public at any
meeting . . . ." N.J.S.A. 10:4-12 (emphasis added).*fn4
This language shows that with the exception of
municipal governing bodies and boards of education, the underlying
intent of the OPMA is to ensure access to the governmental process,
not to require public input in that process. There is no requirement
in the OPMA that a public body provide copies of materials it is
reviewing in advance of publishing a proposed rule. We therefore
reject appellant's claim that the Commission's failure to provide a
copy of the proposed rules prior to releasing the rules for public
comment on April 30, 2008 was in violation of the OPMA.
Appellant also argues in Point IV that the Commission violated the OPMA by improperly discussing our Casino Simulcasting Special Fund opinion in closed session during its meetings on February 6, April 30 and August 13, 2008. The minutes of the Commission's February 6, 2008 meeting reveal that the Commission went into executive session during that meeting to receive legal advice from its attorney concerning our opinion, which had been filed only a week or two earlier. As the Commission correctly argues, a portion of the OPMA, namely N.J.S.A. 10:4-12(b), authorizes public bodies to go into closed session to receive advice from legal counsel that is subject to the attorney-client privilege. Because this legal discussion was privileged, the Commission was entitled to redact its minutes accordingly. Ibid. We therefore reject appellant's contentions respecting the Commission's February 6, 2008 meeting.
As to the Commission's April 30, 2008 meeting, the minutes of the executive session clearly explain that counsel for the Commission again addressed the members concerning their legal obligations pursuant to both the OPMA and our Casino Simulcasting opinion. This closed door session, like the February 6 session, fell within the OPMA exception for the rendering of legal advice, as contained in N.J.S.A. 10:4-12(b).*fn5
Appellant also argues that the Commission discussed the regulations in closed session during its August 13, 2008 meeting. The meeting minutes do not bear out appellant's assertion that any such discussion occurred. We reject appellant's claim that at three of its meetings the Commission improperly shielded its discussion of the proposed rule from public scrutiny, and thus reject the claims in Point IV in their entirety.
We turn to Point III, in which appellant argues that: 1) "the Commission's 'response' to the extensive [public][c]omments . . . is entirely devoid of substance"; and 2) the text of the "closed-door [m]inutes" of the April 30, 2008 meeting suffers from the identical infirmity.
As to the first of those two contentions, appellant's argument consists of less than one page and contains no references to the record and no legal argument. As such, it warrants no further discussion. Weiss v. Cedar Park Cemetery, 240 N.J. Super. 86, 102-03 (App. Div. 1990) (noting that an appellate court will not entertain an argument that is unsupported by references to the record and legal argument). Having undertaken our own review of the Commission's responses to the pubic comments, we are satisfied that the Commission's fifty pages of response are marked by a thorough and careful analysis of each comment submitted, and that the Commission's response satisfies the requirements of N.J.S.A. 52:14B-4(a)(4), which requires agencies to publish a summary of all comments received, as well as its response to them.
As to appellant's claim that the minutes of the closed door meeting on April 30, 2008 are uninformative, this argument too is meritless. Suffice it to say, the OPMA does not require a public body to reveal so much detail about its closed door sessions as to eviscerate the very purposes for which the agency is permitted to go into executive session in the first place.
See N.J.S.A. 10:4-14 (requiring public bodies to publish the minutes of executive session meetings only "to the extent that making such matters public shall not be inconsistent with [N.J.S.A. 10:4-12]"). We thus reject the claims advanced in Points III and IV.
Turning now to appellant's substantive claims, we first consider Point I, in which appellant maintains that the "rules in question institutionalize the Commission's longstanding improper and illegal procedures." As examples, appellant points to the minutes of the closed sessions during which the Commission allegedly violated the OPMA: January 18, May 17, July 19, September 26, and November 15, 2006; March 13, April 19, May 9, November 28, and December 12, 2007; and February 6, 2008. According to appellant, the minutes from these executive session meetings showed that the Commission conducted its actual decision-making in closed executive session, and merely "put on the appearance of open government" in the public proceedings.
Appellant's argument concerning these Commission meetings consists of little more than appellant's own interpretation of the executive minutes; however, even if, for the sake of argument, we were to agree that the Commission went into closed session to discuss matters that the OPMA required the Commission to have addressed in a public session, such a conclusion would not automatically require the invalidation of the regulations, as ten of the eleven meetings pre-dated our opinion in Casino Simulcasting Special Fund. It was only when our opinion was filed on January 22, 2008, that the Commission was made aware that its procedures for distributing CSA funds violated the OPMA and APA requirements. Moreover, appellant has neither provided transcripts of the public proceedings corresponding to the executive minutes, nor explained how any of the referenced meetings affected the substance of the regulations that are the subject of this appeal.
As to the meetings subsequent to the issuance of our opinion in Casino Simulcasting Special Fund, there is a similar lack of explanation and factual support for appellant's allegations of an OPMA violation. In particular, appellant's assertion that the Commission violated the OPMA during its February 6, 2008 meeting is, again, supported by little more than its own interpretation of the executive session minutes. As we have already noted, the minutes themselves suggest that the Commission went into executive session to obtain legal advice on a variety of matters, including our published opinion. Such privileged discussions are generally deemed a valid exception to the OPMA. N.J.S.A. 10:4-12(b). See also Burnette v. Gloucester Cnty. Bd. of Freeholders, 409 N.J. Super. 219, 236 (App. Div. 2009) (observing that the "pending litigation exception, set forth in N.J.S.A. 10:4-12(b)(7), empowers a public body to exclude the public to protect any 'material covered by the attorney-client privilege'" (citation omitted)). Appellant has provided no explanation for why this statutory exception did not apply during the February 6, 2008 meeting.
We agree, however, with appellant's argument that the Commission's resolutions approving the use of a closed session lack some of the information required by N.J.S.A. 10:4-13(b), such as a definitive statement of the time and circumstances under which the executive discussions will be made public. However, that technical noncompliance does not, in and of itself, require an invalidation of the Commission's duly adopted regulations.
The OPMA provides that "a public body may take corrective or remedial action by acting de novo at a public meeting held in conformity" with the OPMA. N.J.S.A. 10:4-15(a). The remedial provisions of the statute are designed to ensure maximum flexibility in correcting conduct that falls short of the OPMA's requirements. Polillo v. Deane, 74 N.J. 562, 579 (1977). Thus, when noncompliance occurs, courts should "consider the nature, quality and effect of the noncompliance of the particular offending governmental body in fashioning the corrective measures which must be taken to conform with the statute." Ibid.
The Commission is obliged to adhere to the requirements of the OPMA; however, appellant has failed to explain why the nonconforming aspects of the resolutions require the invalidation of the regulations, and it bears the burden of doing so. See In re Adopted Amendments to N.J.A.C. 7:7A-2.4, 365 N.J. Super. 255, 265 (App. Div. 2003) (observing that "[t]he burden is on the party challenging the validity of the regulation" to demonstrate the need for its invalidation).
Appellant has failed to establish any factual support for its contention that the Commission has engaged in an ongoing violation of the OPMA, or that the current regulations should be invalidated because they "institutionalize" the Commission's routine violations of the OPMA. We therefore reject the claim advanced in Point I.
In Point II, appellant argues that the regulations:
1) fail to propose specific techniques to prevent future violations of the OPMA; 2) inadequately define certain statutory provisions; and 3) fail to administer the Special Fund in accordance with the various requirements of the CSA as set forth in N.J.S.A. 5:12-205. As to the last of the three claims, appellant asserts that the regulations grant the Commission undue discretion in making disbursements, fail to provide a procedure for seeking an administrative stay pending appeal, and fail to set adequate standards for the return of misused funds. We address these arguments sequentially.
A. Failing to Ensure Future Compliance with the OPMA
In support of its argument that the regulations do not
assure future compliance with the requirements of the OPMA, appellant asserts that the Commission failed during the comment period to "identify those past practices which violate the law and propose specific rules to prevent future violations." The Commission responded that its rulemaking had been conducted in conformity with all applicable laws, and disagreed that "a detailed discussion of the [Casino Simulcasting Special Fund] decision [was] necessary or warranted in connection with the promulgation of these rules [because] [t]he court's decision speaks for itself."
Appellant maintains that the February 6, 2008 executive session minutes show that the Commission's intent in promulgating the current regulations was merely to codify its existing procedures. Thus, according to appellant, because the Commission previously violated the OPMA when it distributed the Special Fund in 2005, and the regulations were intended to codify existing procedures, the current regulations essentially institutionalize the Commission's improper practice of "meeting in closed session . . . and then re-enact[ing] its decision in a sham public vote."
An agency's regulations are entitled to deference. N.J. State League of Municipalities v. Dep't of Cmty. Affairs, 158 N.J. 211, 222 (1999). Such regulations are presumptively valid, and the burden of proving otherwise rests with the challenging party. Ibid.
As we have already noted, appellant has not produced adequate evidence to support its allegations that the Commission has routinely violated the OPMA. Appellant's reliance on our Casino Simulcasting Special Fund decision is misplaced. Although we criticized the process by which the Commission distributed discretionary special funds in 2005, and directed the Commission to promulgate the regulations which are currently in dispute, Casino Simulcasting Special Fund, supra, 398 N.J. Super. at 16-18, we did not address whether any of the Commission's previous meetings or existing practices violated the OPMA. The outcome in that matter was based on the narrow set of facts before us.
In the present appeal, appellant is essentially asking us to assume a systemic problem of noncompliance based on a single instance of an OPMA violation. Given the lack of factual support, such an assumption would be contrary to the traditional deference to which administrative entities are entitled. See Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980) (deferring to agency's determination). See also N.J. Ass'n on Corr. v. Lan, 80 N.J. 199, 220 (1979) (noting that "[t]he mutuality of respect among the branches of government . . . is rooted in our constitutional scheme"). We therefore reject appellant's contention that the regulations must expressly adopt procedures to prevent an ongoing violation of the OPMA.
B. Failure to Define Statutory Terms
Appellant next argues that N.J.A.C. 13:70-1.37 and N.J.A.C. 13:71-1.32 are deficient because they fail to define several of the terms in the statute that describes the distribution of the Special Fund, N.J.S.A. 5:12-205(d). The statute provides:
From any amounts remaining after the payments required by subsections a., b. and c. of this section are made, the New Jersey Racing Commission shall compensate, in such amounts as that commission deems appropriate, the following entities in the following order of priority:
(1) any racetrack in this State which can demonstrate to the satisfaction of that commission that its financial well-being has been negatively affected by casino simulcasting;
(2) any racetrack in this State which that commission finds to be financially distressed;
(3) any horsemen's organization which will use the money to fund a project which that commission determines will be beneficial to the racing industry; and
(4) all racetracks located in this State on an equal basis. [N.J.S.A. 5:12-205(d).]
Appellant complains that the current regulations fail to adequately define "negatively affected" as used in subsection (d)(1) of the statute, and "financially distressed" as used in subsection (d)(2). Relying on our decision in Casino Simulcasting Special Fund, the Commission responds that it is not required to define these terms through rulemaking. We agree.
The APA requires rulemaking only when the determination represents an "agency statement of general applicability and continuing effect." N.J.S.A. 52:14B-2. The determination of the extent to which a racetrack has been "negatively affected" by casino simulcasting or is "financially distressed" is not amenable to bright-line rules, because such determinations would vary depending upon the prevailing economic conditions. As we observed in Casino Simulcasting Special Fund:
The questions the [Commission] must address in making the annual distribution, unlike the decision to select appropriate procedures for making the decision, do not require rulemaking in accordance with the APA . . . [because] [a]s subsection d makes clear, the [Commission] must make this decision annually in light of the amount available and the quality of the applications received. [Casino Simulcasting Special Fund, supra, 398 N.J. Super. at 19-20.]
Appellant has not explained why we should now reach a different result. We therefore conclude that the regulations are not defective on the grounds they fail to adequately define the terms "negatively affected" and "financially distressed" as used in N.J.S.A. 5:12-205(d).
C. Commission's Discretion to Make Disbursements from the Special Fund
Appellant next argues that the discretion afforded to the Commission to make Special Fund distributions under the newly adopted N.J.A.C. 13:70-1.37(e) and N.J.A.C. 13:71-1.32(e) contravenes N.J.S.A. 5:12-205. We disagree.
The CSA specifies that "[m]oneys deposited in the special fund shall be annually disbursed in their entirety . . . ." N.J.S.A. 5:12-205 (emphasis added). The regulation in dispute gives the Commission discretion to make the individual disbursements "in such amounts as the Commission deems appropriate." Appellant commented below, and reasserts on appeal, that the statute prohibits the Commission from exercising any discretion to withhold funds.
Contrary to appellant's assertion, there is no actual conflict between the statute and the regulation. The statute requires that the entirety of the Special Fund be distributed, but permits the Commission to apportion the fund. N.J.S.A. 5:12-205. The disputed regulation similarly grants the Commission discretion in apportioning the fund, but does not seek to authorize the Commission to retain any of the funds. N.J.A.C. 13:70-1.37(e); N.J.A.C. 13:71-1.32(e). There is no conflict between the two because the statute addresses the entire Fund, while the regulation speaks to the Commission's power to apportion the whole among the various applicants.
Second, appellant's argument that the Commission is not entitled to exercise discretion is contrary to the plain language of the statute, because "[s]ubsection (d) gives the [Commission] broad discretion to exercise its expertise in distributing" any surplus special funds. Casino Simulcasting Special Fund, supra, 398 N.J. Super. at 19.
Finally, "[t]he grant of an express power is always attended by the incidental authority fairly and reasonably necessary or appropriate to make it effective." N.J. State League of Municipalities, supra, 158 N.J. at 223 (quoting Cammarata v. Essex Cnty. Park Comm'n., 26 N.J. 404, 411 (1958)). The power to withhold funds from one recipient is a logical corollary to the Commission's discretion to distribute the funds among several recipients. See In re Mattera, 34 N.J. 259, 272 (1961) (observing that "[r]esponsibility for a result implies power reasonably necessary to achieve it"). We therefore reject appellant's contention that this portion of the regulations affords the Commission excessive discretion.
D. Failure to Grant an Administrative Stay Pending Appeal Appellant next argues that N.J.A.C. 13:70-1.37(f) and
N.J.A.C. 13:71-1.32(f) are arbitrary and capricious for three reasons. First, appellant maintains that subsection (f) "impairs the jurisdiction of the courts" by contradicting Rule 2:9-7, which requires an application for a stay of administrative action to be made, in the first instance, to the agency whose order is being appealed. Rule 2:9-7 provides:
On or after the filing with the Appellate Division of a notice of appeal or of a notice of motion for leave to appeal from a state administrative agency or officer, a motion for ad interim relief or for a stay of the decision, action or rule under review shall be made in the first instance to the agency whose order is appealed from and, if denied, to the Appellate Division.
The disputed subsection of the regulation, as proposed and adopted, provides that [t]he Commission's Order of Disbursement of [Special Fund] monies shall constitute a final decision of the agency and any appeal of such Order shall be made to the Appellate Division of the Superior Court of New Jersey upon notice to the Commission and all other recipients of [Special Fund] monies.
1. Because of the recipients' need to rely upon timely receipt of the monies disbursed and the statute's requirement of annual distributions, the Commission shall not grant any request to stay or escrow the amounts disbursed pending appeal.
2. In the event that the court alters the amount disbursed to an interested party on appeal, the Commission shall effectuate any such modification in the next annual disbursement of [Special Fund] monies. No recipient shall be required to return a prior year's disbursement of [Special Fund] monies unless the amount available in the next annual disbursement is insufficient to cover the modifications ordered by the court or unless exigent circumstances warrant otherwise. [N.J.A.C. 13:70-1.37(f); 13:71-1.32(f).]
Second, appellant asserts that the regulation improperly denies access to interim judicial remedies, because it precludes any applications for an administrative stay pending appeal. Third, appellant argues that subsection (f) abridges the court's ability to direct the immediate refund of improperly distributed funds, because the new regulations defer any court-ordered modifications until the next annual disbursement.
The Commission rejected these arguments during the comment period, reasoning:
After careful consideration of the financial needs of the recipients and the annual availability of [Special Fund] distributions . . . "the Commission will not grant any request to stay or escrow the amounts disbursed pending appeal because of the recipients' need to rely upon timely receipt of the monies disbursed and the statute's requirement of annual distributions." In reaching this decision to provide by rule that it will not grant a stay, the Commission carefully considered and weighed the equities and interests involved. Its decision to do so is neither inconsistent with nor contrary to law.
The Commission [also] disagrees . . . that N.J.A.C. 13:70-1.37(f) wrongfully requires that any adjustment of amounts disbursed shall be made in the next annual distribution [of Special Fund] monies. The proposed rule is consistent with the Commission's actions in connection with past appeals of [Special Fund] distributions. In these appeals, the Commission did not stay the distribution [of Special Fund] monies. Past appeals have also shown that the appeal process for challenges to [Special Fund] distributions takes a minimum of several months before they [sic] contested issues are resolved. The Commission does not view the proposed requirement of remedying any changes in disbursement at the next annual disbursement of [Special Fund] monies to be unduly burdensome. . . . [G]ood cause exists for the provision in the proposed rule for not granting a stay "because of the recipients' need to rely upon timely receipt of the monies disbursed."
[40 N.J.R. 6620(a)(quoting 40 N.J.R. 4297).]
The Commission maintains that the rule will "expedite the process because it notifies the recipients of CSSF monies up front that any request for a stay will be denied," and a party seeking "emergent relief may proceed directly to the Appellate Division."
We have carefully considered the Commission's rationale for refusing to consider a request for an administrative stay pending appeal, namely, that such refusal promotes efficiency and avoids delay because it permits the applicant to proceed directly to the Appellate Division on such a request. We are mindful that our scope of review is narrow, and we are obliged to defer to an agency's expertise. N.J. State League of Municipalities, supra, 158 N.J. at 222; Henry, supra, 81 N.J. at 579-80. Nonetheless, even affording this section of the regulations the presumption of validity that N.J. State League of Municipalities requires, we are constrained to conclude that this section cannot be sustained.
While we do not agree with appellant's argument that the Commission's refusal to grant an administrative stay pending appeal impairs the jurisdiction of the courts, we do agree with appellant's other arguments on this subject. The Commission's blanket refusal to even consider a request for the issuance of an administrative stay pending appeal means that no matter how meritorious the request might be, the Commission will not even entertain it. Thus, this section of the regulations permits the Commission to refuse to utilize the very discretion that administrative agencies are expected to exercise and apply. Such a blanket refusal strikes us as both arbitrary and unreasonable. We therefore invalidate this section of the regulations and remand for the adoption of a regulation setting forth the procedures to be followed when an applicant seeks an administrative stay pending appeal, and the criteria that will be applied whenever such requests are presented.
As we have noted, appellant also argues that the Commission exceeded its authority by requiring that any court-ordered modifications be deferred to the next annual disbursement. The CSA directs the Commission to disburse all available funds in a given year. N.J.S.A. 5:12-205. The CSA includes no express provisions regarding the return of Special Funds, except as applied to the Atlantic City Racetrack. See N.J.S.A. 5:12-206 (providing that "[i]f the Atlantic City Racetrack becomes ineligible during a calendar year to receive [Special Funds], the monthly payments shall terminate and the Atlantic City Racetrack shall reimburse the New Jersey Racing Commission for the amount previously received in that calendar year"). There is, therefore, nothing in these statutory provisions that expressly prevents the Commission from deferring any court-ordered modifications until the following distribution year.
Nonetheless, appellant maintains that this portion of the regulation is unfair because the "parties who received the illegal disbursements are still solvent and have a sufficient allocation to cover the refund." During rulemaking, the Commission explained that its rationale for deferring court-ordered modifications to the following year was to provide financial stability to fund recipients, and was in full accord with the Commission's past practice. The Commission also argues that the challenged provision is rooted in the Commission's experience in administering the fund. We cannot agree with the Commission's assertion that it has the authority to, in effect, countermand a judicial order by unilaterally deciding when to implement the court-ordered modification of the annual disbursement. We therefore conclude that this portion of subsection (f) is likewise arbitrary and capricious. In sum, we agree with appellant's challenge to the portion of the regulations that fails to grant an administrative stay pending appeal, and defers court-ordered modifications of disbursements to the next grant cycle. We remand this section of the regulations to the Commission.
E. Return of Misused Funds
Next, appellant argues that N.J.A.C. 13:70-1.37(g) and N.J.A.C. 13:71-1.32(g) are deficient because they fail to define "misuse," and are also "unworkable" and discriminatory. The Commission responds that the heightened requirements applicable to the horsemen's organizations are derived from the CSA and are valid.
N.J.A.C. 13:70-1.37(g) and N.J.A.C. 13:71-1.32(g) permit the Commission to order a recipient to return any or all of the [Special Fund] monies disbursed to it if information comes to the attention of the Commission that the recipient is not using the monies for the purposes or projects intended or the recipient is otherwise misusing or unable to account for such monies.
These regulations should not be disturbed unless they are found to be "arbitrary or capricious, plainly transgress the statute [they] purport to effectuate, or alter the terms of the statute and frustrate the policy embodied in it." In re Adopted Amendments to N.J.A.C. 7:7A-2.4, supra, 365 N.J. Super. at 265. Neither of appellant's arguments meet this standard.
Appellant's initial assertions regarding the failure to define "misuse" should be rejected for the same reasons already discussed with regard to the terms "financially distressed" and "negatively affected," namely, that whether a recipient has "misued[d]" a disbursement will vary depending upon the precise facts presented. Appellant's next claim, that the regulation is discriminatory, is equally unavailing. The plain text of the regulation applies to any recipient of Special Funds. As the Commission argues, unlike the statutory provisions applicable to horsemen's organizations, the enabling statute directs the Commission to make mandatory disbursements to racetracks without placing any conditions on their use. N.J.S.A. 5:12-205(d)(3). An administrative agency's interpretation of its own regulations is entitled to deference as long as it is consistent with the enabling statute. See Bd. of Educ. of the Lenape Reg'l High Sch. v. N.J. Dep't of Educ., 399 N.J. Super. 595, 603 (App. Div. 2008) (holding that a reviewing court has an "obligation to defer to a State agency's reasonable construction of a statute it is charged with enforcing and to the agency's interpretations of its own regulations"). The limited applicability of the provisions regarding the return of misused funds is consistent with the CSA, and therefore appellant's argument that the provision is discriminatory should be rejected.
However, appellant's final argument regarding the recovery of funds highlights an ambiguity in the regulation that necessitates a remand. "[A]gencies enjoy a great deal of flexibility in selecting the proceedings most likely to achieve their regulatory aims." N.J. Dep't of Envtl. Prot. v. Stavola, 103 N.J. 425, 437 (1986). Nonetheless, basic principles of fairness obligate an agency to implement regulations that provide adequate public notice of the standards that interested parties will be expected to meet. Id. at 435-36.
While the enabling statute does not expressly provide for the recovery of misused funds, the Commission's authority to withhold and recover funds is not disputed and, arguably, that authority could be reasonably inferred from the Commission's expressly delegated authority to dispense the funds. N.J.S.A. 5:12-205. As currently written, however, the challenged provision does not articulate the process and standards by which misused funds will be quantified or recovered.
As the Supreme Court observed, "where the underlying statute is silent, [administrative agencies] should 'articulate the standards and principles that govern their discretionary decisions in as much detail as possible.'" Lower Main St. Assoc. v. N.J. Hous. & Mortg. Fin. Agency, 114 N.J. 226, 235 (1989) (citation omitted). In accordance with this principle, courts have "invalidated the actions of administrative agencies when there was a significant failure to provide either statutory or regulatory standards that would inform the public and guide the agency in discharging its authorized function." Ibid. The disputed regulation establishes neither the criteria nor the procedures that would guide the Commission's recovery of misused funds. Therefore, we remand this issue to the Commission to define the standards and protocols that will govern its actions in such circumstances.
In sum, appellant's argument that the regulation fails to define "misuse" and discriminates against horsemen's organizations in favor of racetracks is without merit; however, we remand to the Commission to clarify the provisions regarding the procedures governing the recovery of misused funds.
In Point V, appellant argues that N.J.A.C. 13:70-1.34 and N.J.A.C. 13:71-1.29 improperly restrict public participation in the Commission's activities. In relevant part, N.J.A.C. 13:70-1.35(d) and N.J.A.C. 13:71-1.30(d) allow "an interested party to comment verbally prior to Commission action at the scheduled public meeting" only if the Commission so permits. Appellant's challenge to this provision is meritless because, as we have already noted, the OPMA expressly permits a public body such as the Commission to "prohibit or regulate the active participation of the public at any meeting . . . ." N.J.S.A. 10:4-12. Thus, subsection (d) falls well within the Commission's discretion. We therefore reject appellant's contention that this portion of the regulation is invalid because it does not guarantee the right of interested parties to address the commission during its meetings.
Appellant also argues that subsection (a) of the same regulation is invalid because it places deadlines on the submission of information to the Commission for consideration at its meetings, but does not specify the format of such submissions. We decline to engage in speculation that the Commission will arbitrarily decline to consider information because of its format. We therefore reject the arguments advanced in Point V.
In Point VI, appellant challenges N.J.A.C. 13:70-1.38 and N.J.A.C. 13:71.-1.33, the regulations that govern the allocation of racing dates. In subsection (a), the regulations specify that the allocation of racing dates "shall be considered and decided at a public meeting of the Commission." Thus, it is beyond dispute that the Commission is not permitted to simply meet in closed session and decide upon the allocation of racing dates, and then merely announce the dates in public. Subsection (a) requires the Commission to not only "decide" the allocation of racing dates in public, but also requires the Commission to "consider" the topic at a public meeting. Thus, both the discussion and the actual decision must be made in public.
Appellant does not challenge that portion of the racing date regulations. Instead, it confines its challenge to the fact that subsection (f) of these two regulations permits only one group -- the racetracks -- to address the members of the Commission at a public meeting concerning the allocation of racing dates. Appellant argues that by limiting the right to publicly address the Commission to only the racetracks, the Commission has prevented a broad array of stakeholders -- appellant, the breeders, the jockeys, the owners and the trainers -- from addressing the Commission on a subject that is vital to the success of New Jersey's racing industry.
As the Commission correctly argues, however, the limitation about which appellant complains does not originate with the regulations. Instead, the Legislature itself has imposed this restriction by limiting the right to apply for race dates, or comment on the applications, to the racetracks themselves. See N.J.S.A. 5:5-43; N.J.S.A. 5:5-44. Only those persons or entities who have applied for a permit authorizing the conduct of racing at their track have a statutory right to be heard. N.J.S.A. 5:5-43 specifies that "[a]ny applicant . . . may be present in person or by agent or counsel and be heard by the commission with respect to such allotment or allotments at the meeting of the commission to be held prior to December 1 of the same year." Thus, the regulations do nothing more than implement the policy choices made by the Legislature. We thus reject appellant's assertion that the regulations concerning the allocation of racing dates are violative of due process because they do not obligate the Commission to consider the comments of any entities other than the racetracks concerning the allocation of racing dates.
Further, as the Commission correctly argues, a portion of the regulations, N.J.A.C. 13:70-1.35(e) and N.J.A.C. 13:71-1.30(e), establishes a procedure for those who have not been designated an "interested party" by the Commission to request the opportunity to be heard at the meeting. Thus, although entities such as breeders, owners, trainers and the horsemen's organizations are not guaranteed the same right as the racetracks to speak at the meeting during which racing dates are allocated, they are afforded the opportunity by regulation to request such an opportunity. Thus, we reject appellant's argument that the regulations concerning the allocation of racing dates permit the Commission to make such decisions behind closed doors and that the regulation is ultra vires because it permits the Commission to receive oral comments about the allocation of racing dates only from racetracks, and not from others.
In Point VII, appellant argues that the regulations confer an excessive degree of authority upon the Executive Director, and effectively insulate the director's decisions from review by the courts, the Governor pursuant to N.J.S.A. 5:5-22.1, and the Commission itself. Appellant points to N.J.A.C. 13:70-1.33(b) and (c), and N.J.A.C. 13:71.28(b) and (c), which authorize the Executive Director to relax the application of the rules when "fundamental fairness" so requires, and permit him or her to exercise discretion in deciding whether to place a matter on the Commission's agenda, unless another portion of the regulations expressly provides otherwise.
Although it is true that a power or duty delegated by statute to an administrative agency "cannot be subdelegated in the absence of any indication that the Legislature so intends," Mercer Council #4, N.J. Civil Serv. Ass'n v. Alloway, 119 N.J. Super. 94, 99 (App. Div.), aff'd, 61 N.J. 516 (1972), we are satisfied that the responsibilities conferred upon the director as described above are supportive in nature, and do not usurp the duties and responsibilities of the commissioners. On similar facts, we rejected the identical argument in In re Amico/Tunnel Carwash, 371 N.J. Super. 199, 215 (App. Div. 2004). We have been presented with no meritorious basis to reach a different result here.
Moreover, as the Commission correctly argues, were the director not vested with the discretion to determine the meeting agendas, "the Commission would be placed in the anomalous position of having to schedule a public meeting to decide the agenda of a future public meeting." We agree with the Commission that such a scenario would be unduly burdensome and would impair the Commission's ability to execute its responsibilities in an efficient manner. We therefore reject the argument appellant presents in Point VII.
In Points VIII, IX, X and XI, appellant argues, respectively, that "the procedural rules fail to define 'Sufficient Public Interest' to hold a public hearing"; "the procedural rules make no provision for the reception of admissible evidence"; "the procedural rules were not accompanied by [the] statements and information required by statutory law"*fn6 ; and "the procedural rules impose improper restrictions on the right to retain counsel." We have carefully considered these arguments and conclude they lack sufficient merit to warrant extended discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed in part. Reversed in part, and remanded for revision.