On appeal from the Board of Trustees of the Public Employees Retirement System, Docket No. PERS 2-10-216024.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fuentes, Nugent and Kestin.
In a prior appeal, In re O'Reilly, A-4275-06 (App. Div. June 9, 2008), in an unpublished opinion, we affirmed a determination by the Board of Trustees (Board) of the Public Employees' Retirement System (PERS) that petitioner, Thomas J. O'Reilly, was not eligible, as a matter of statutory interpretation, for inclusion among those claiming certain enhanced pension benefits under the Prosecutors Part of PERS, enacted in L. 2001, c. 366, with an effective date of January 7, 2002. N.J.S.A. 43:15A-155 to -161. The intricate background facts are set out in detail in that opinion. See In re O'Reilly, supra, slip op. at 2-10. We need not rehearse them here.
We held that "[p]petitioner did not meet the statutory definition of 'prosecutor' at the time [the statute] was adopted or at any time during which he submitted applications for early retirement." Id. at 14. We also stated:
We cannot, however, dispose of petitioner's case on the basis of statutory interpretation alone. There were too many intervening elements -- including the Board's adoption of an apparently valid regulation which remained in effect for several years and under which the Board determined petitioner's eligibility for the Prosecutors Part in three separate years. [Id. at 18.]
We rejected the Board's determination that petitioner could not invoke principles of equitable estoppel on the basis that he had not relied, to his detriment, on any Board action in his decisions postponing his retirement. See id. at 14-17. With an understanding that "[t]he doctrine is rarely invoked against a government entity," id. at 15, we viewed the evidence presented as apparently establishing the "most strictly limited" application of waiver or estoppel principles to government actions, id. at 16 (quoting Buonviaggio v. Hillsborough Twp. Comm., 122 N.J. 5, 17 (1991)). Citing Skulski v. Nolan, 68 N.J. 179, 200 (1975), for the standards governing "entitlement to [public] pension benefits in cases where estoppel may be applied[,]" In re O'Reilly, supra, slip op. at 16, we observed:
Here, it appears from all the evidence presented that petitioner relied on the opinion of Attorney General Harvey and his inclusion in Harvey's list of eligible employees; the language of N.J.A.C. 17:2-8.2 then-in-effect; and, most significantly, the Board's approval of his eligibility for Prosecutors Part benefits three times: on September 22, 2003; on July 21, 2004; and on December 21, 2005. The detriment to petitioner is that, had he retired under the existing regulation and approval in 2004, he would have collected Prosecutors Part benefits; he continued employment outside DCJ [the Division of Criminal Justice] in reliance on the Attorney General's opinion and the regulation, which provided that his DCJ-related job responsibilities made him eligible for the enhanced benefits. In our view this constitutes detrimental reliance.
In essence, the Board changed the rules mid-stream. Attorney General Harvey identified thirty individuals who would qualify for the enhanced benefits, even though their job titles were outside DCJ. We cannot determine from the record before us which, if any, of those thirty individuals have retired with Prosecutors Part benefits or whether they were similarly situated to petitioner.
The Board argues that petitioner failed to demonstrate detrimental reliance because he made his irrevocable decision to retire when he knew of Attorney General Farber's opinion that Attorneys General Sampson's and Harvey's opinions were "ultra vires" and that N.J.A.C. 17:2-8.2 was invalid. That argument ignores petitioner's representations that he only continued his employment at the behest of the Attorneys General in reliance on his already-approved eligibility for the enhanced benefits. At that point, he could not turn back the clock to 2004 when he had been approved and retire with full Prosecutors Part benefits. [Id. at 16-17.]
Notwithstanding these impressions, "[b]ecause the Board dispute[d] petitioner's reliance on these various factors," id. at 18, we deemed the matter suitable for a hearing before an administrative law judge to determine the questions of detrimental reliance and "whether petitioner was treated differently than any of the other thirty individuals on Attorney General Harvey's list who may have retired with Prosecutors Part benefits." Ibid. We remanded for such a hearing "and reconsideration by the Board in accordance with this opinion." Id. at 19.
Administrative Law Judge (ALJ) Masin presided over the twoday hearing held in October 2009. He heard testimony from three witnesses, all introduced by petitioner: an assistant director in the Division of Pensions and Benefits (DPB), petitioner himself, and his wife. The Board offered no witnesses of its own. The assistant director testified regarding the thirty- person list and the differential treatment issue, as well as the Board's and the DPB's procedures in dealing with the advice received from various attorneys general in administering the Prosecutors Part pension and identifying those who were covered by it. Petitioner and his wife testified about their actions and states of mind as the facts developed, and about the choices they made.
From the outset, in her opening statement, counsel for the Board contended that the heart of the Board's case on the detrimental reliance issue was that "[a]s Administrator of the Department of Law and Public Safety, Mr. O'Reilly held a unique position of influence and had unparalleled access to the Attorney[s] General." She stated:
The evidence will reflect that Mr. O'Reilly was not an innocent bystander relying on the advice of Attorney[s] General Samson [and] Har[v]ey to determine whether or not he may be entitled to enhance[d] benefits under Chapter 366. Rather, he intimately infiltrated himself into the decision making process and established the criteria that would ultimately be used to include non[D.]C.J. personnel like him into the definition of [the] statute. His influence over who and who should not be entitled to the Prosecutor Part PERS outside of the [D.]C.J. started early on with an underlying self-serving intent to make sure that his name would ultimately be one of those included on the list.
In his initial decision, Judge Masin posited the issues as framed in our opinion remanding the matter for a hearing. He analyzed the facts as established in the testimonial and documentary evidence, and made formal findings of fact on the reasonable reliance issue, under the heading "Good Faith Subjective Belief":
* [A]s he approached the July 1, 2004 retirement date, . . . O'Reilly knew that the Board of Trustees, the very Board that had to approve his retirement under Prosecutors Part, had adopted [Attorney General] Harvey's criteria under which he had been told he qualified, and had converted the opinion into a regulation that had the force of law. . . .
* [W]hen O'Reilly agreed to Harvey's request to stay on after July 1, 2004, he had every reason to subjectively believe that he qualified. Effectively, the adoption of the regulation completed the set of circumstances that gave O'Reilly the subjective reasons to firmly believe that he could remain in State service, forgo outside employment opportunities, continue to perform valuable and personally fulfilling work, and eventually reap the reward of the enhanced Prosecutors Part pension. . . .
* [I]n deciding to remain after July 1, 2004, he clearly relied upon Harvey's opinion, Harvey's assurance to him, Harvey's criteria, and most especially, the adoption of the regulation by the very Board that now opposes his receipt of those benefits. And thereafter, the Board's approval of his continued requests for Prosecutors Part retirement on three separate occasions only affirmed that this Board viewed him as an eligible person.
These findings, "[b]ased upon the facts and the credible testimony of Mr. O'Reilly," led Judge Masin to reach his formal conclusion on the reasonable reliance issue:
[O'Reilly] relied upon a subjective good faith belief that he was eligible for Prosecutors Part benefits and . . . his reliance was fortified and encouraged by the opinion and criteria of Attorney General Harvey and the Board of Trustees' actions in adopting the Harvey criteria into regulation and actually approving his retirement on three occasions. His reliance upon these factors in deciding to remain with the [Department of Law and Public Safety] was "reasonable and justifiable." Foley Mach. Co. v. Amland Contractors, Inc., 209 N.J. Super. 70, 75-76 (App. Div. 1986). As the opinion, criteria and regulation were ultimately found to be misstatements of the actual criteria for eligibility, they represented a misrepresentation of the qualifying criteria, a misrepresentation upon which O'Reilly undoubtedly relied. The fact that he might personally have held the legally mistaken notion that he qualified is less important than the fact that his belief in such qualification was fortified by these objective factors. Reasonable reliance exists when it is based on a duly adopted administrative regulation.
Treating "Detriment" as a separate issue, Judge Masin analyzed the record in that regard and articulated his findings:
* [O'Reilly's] decision to remain in State service . . . was highly influenced by his understanding that he was eligible for Prosecutors Part Benefits, [and] undoubtedly resulted in his losing considerable income from July 2004 forward. . . .
* [H]is reliance upon the misrepresentation of his eligibility for Prosecutors Part retirement caused him to change his position for the worse and suffer a detriment. Carlsen v. Master, Mates and ...