February 3, 2012
J.L. AND S.L., PETITIONERS-APPELLANTS,
DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES, RESPONDENT-RESPONDENT, AND OCEAN COUNTY BOARD OF SOCIAL SERVICES, RESPONDENT.
On appeal from the Division of Medical Assistance and Health Services, Department of Health and Human Services.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 10, 2012 -
Before Judges Baxter and Nugent.
J.L. and S.L. appeal from a June 8, 2010 final agency decision of the Department of Human Services, Division of Medical Assistance and Health Services (Division or DMAHS) that suspended their eligibility for Medicaid as a result of a $20,000 inheritance they received from J.L.'s grandfather. The agency's decision set aside the March 19, 2010 decision of Administrative Law Judge (ALJ) Ronald W. Reba in which the ALJ concluded that the $20,000 inheritance was "earmarked" for the purchase of a family home by J.L. and S.L. in Lakewood, and was therefore an exempt resource for purposes of calculating Medicaid eligibility. We agree with appellants' contention that because the Director of DMAHS failed to establish either an "emergency" or "other unforeseeable circumstances" justifying the Division's untimely rejection of the ALJ's decision in appellants' favor, the Division's decision must be set aside and the decision of the ALJ deemed adopted. We accordingly reverse the final agency decision of June 8, 2010.
J.L. and S.L., a married couple, received Medicaid benefits for themselves and their children.*fn1 In their September 2008 application for the continuation of their Medicaid benefits, the couple disclosed that on July 2, 2008, J.L. had received a $45,000 gift from his brother, T.L.,*fn2 which was to be utilized for the purchase of a home in Lakewood for J.L., S.L. and their children. Indeed, T.L. provided a Gift Letter to appellants' mortgage lender certifying that he had given a "gift" in the amount of $45,000 to his brother J.L. on July 1, 2008 "to be applied towards the purchase of the above property" in Lakewood. J.L.'s brother further certified that "this is a bona fide gift and . . . there is no obligation, express or implied, to repay the sum in cash or other services . . . now or in the future."
On June 25, 2008, appellants received an inheritance in the amount of $20,000 from the estate of C.R., J.L.'s maternal grandfather. C.R. died on August 8, 2007, and because J.L.'s mother predeceased C.R., J.L. succeeded to his mother's share of C.R.'s estate. As is evident from the fact that the bequest was originally intended for J.L.'s mother, and not for J.L., no documents in the estate of C.R. made reference to J.L. purchasing a residence in Lakewood. Nonetheless, the executor of C.R.'s estate agreed to make an advance distribution in the amount of $20,000 to J.L., and issued a check in that amount. The executor understood from J.L. that J.L. intended to apply the $20,000 estate proceeds toward the purchase of a home in Lakewood.
On July 15, 2009, the Ocean County Board of Social Services (Board), which administers the Medicaid program, notified appellants that "due to receipt of lump sum income from inheritance and gifts from [their] family," appellants had been found ineligible for Medicaid effective August 1, 2008 and would remain ineligible for a total of nineteen months. The Board agreed to continue appellants' Medicaid benefits pending the outcome of a hearing before the Office of Administrative Law (OAL).
On March 19, 2010, at the conclusion of the hearing, the ALJ rendered a decision finding that because the $45,000 gift and the $20,000 inheritance "were earmarked for the specific purpose of a down-payment on a marital home," and because appellants had applied the money for that purpose, the proceeds of the gift and inheritance were exempt assets for purposes of calculating Medicaid eligibility. In reaching that conclusion, the ALJ specifically relied upon the provisions of N.J.A.C. 10:69-10.23(a), which provides:
When a [Medicaid recipient] receives nonrecurring earned or unearned lump sum income . . . [or] payments in the nature of a windfall, such as inheritances and lottery winnings, personal injury and worker compensation awards, to the extent it is not earmarked and used for the purpose for which it was paid, . . . that income will be added together with all other income received that month[.] [(Emphasis added).]
The ALJ held that because both the $45,000 gift and the $20,000 inheritance were specifically "earmarked" for the purchase of the Lakewood home, the amounts in question were exempt income for purposes of calculating Medicaid eligibility.*fn3
The ALJ's March 19, 2010 decision was mailed to the parties and to the Division on March 24, 2010. Pursuant to the provisions of N.J.S.A. 52:14B-10(c), the decision became final forty-five days later, on May 7, 2010, because it had not been modified or rejected by the Division within the forty-five day period specified by statute.
On May 19, 2010, twelve days after the forty-five day statutory deadline had elapsed, the Director of DMAHS issued an "Order of Extension, Nunc Pro Tunc," which stated:
The initial decision was received by this agency on March 23, 2010; therefore, the 45-day statutory period for issuing a final decision expired on May 7, 2010.
This extension request was not submitted by that date, and is submitted now nunc pro tunc. Due to an inadvertent oversight, [the Division] did not request an extension to issue the final decision on time. Director John R. Guhl requests a 45-day extension of time for issuing the final decision as he needs additional time to review the record in this case as well as the factual and legal issues surrounding this matter. [(Boldface in original) (emphasis added).]
On May 20, 2010, the Acting Director of the OAL, who was also its Chief ALJ, approved the nunc pro tunc order of extension, thereby extending until June 21, 2010 the date by which the agency was obliged to render a final decision either accepting, rejecting or modifying the ALJ's March 19, 2010 decision. On June 8, 2010, the Director of DMAHS issued the opinion that is the subject of this appeal. The Director accepted the ALJ's conclusion that the $45,000 gift from J.L.'s brother T.L. was an exempt resource because, by virtue of the June 24, 2008 Gift Letter from T.L., the $45,000 gift was clearly "earmarked" for the purchase of the Lakewood home, within the meaning of N.J.A.C. 10:69-10.23. In contrast, the Director concluded that the $20,000 inheritance was not exempt, as there was no proof that the testator C.R. had earmarked the $20,000 inheritance for that purpose.
On appeal, appellants maintain: 1) the initial decision of the ALJ "should be deemed adopted" as the ALJ's authority to issue an extension to the agency after forty-five days is limited to "emergenc[ies] or other unforeseeable circumstances," and the agency's "inadvertent oversight" did not satisfy that standard; and 2) the ALJ's initial decision "correctly interpreted the regulations and should be reinstated."
In their first point, appellants argue that the Chief Administrative Law Judge should have denied the Division's nunc pro tunc request for an extension of time to file the agency decision. Appellants assert that the decision of ALJ Reba should have been "deemed adopted" by the Division pursuant to a provision of the Administrative Procedure Act (APA), N.J.S.A. 52:14B-10(c). That statute provides:
The head of the agency, upon a review of the record submitted by the administrative law judge, shall adopt, reject or modify the recommended report and decision no later than 45 days after receipt of such recommendations. . . . Unless the head of the agency modifies or rejects the report within such period, the decision of the administrative law judge shall be deemed adopted as the final decision as the head of the agency. . . . For good cause shown, upon certification by the director and agency head, the time limits herein may be subject to extension. [N.J.S.A. 52:14B-10(c).]
As the statute makes clear, the APA allows the OAL to grant an extension for "good cause," N.J.S.A. 52:14B-10(c). Nonetheless, the statute is silent on whether such an extension may be granted after the forty-five day period has expired. In Matturri v. Board of Trustees of the Judicial Retirement System, 173 N.J. 368 (2002), the Supreme Court addressed that precise question. The Court observed that "the Administrative Code addresses the question [of] whether a request for an extension may be filed after forty-five days[.]" Id. at 378. The Court pointed to the provisions of the Administrative Code that sharply curtail the authority of the OAL to grant an extension of the forty-five day time period after that period has already expired. Ibid. The Administrative Code provides:
(a) Time limits for filing an initial decision, filing exceptions and replies and issuing a final decision may be extended for good cause.
(b) A request for extension of any time period must be submitted no later than the day on which that time period is to expire.
This requirement may be waived only in case of emergency or other unforeseeable circumstances. [N.J.A.C. 1:1-18.8 (emphasis added).]
Recognizing the mandatory provisions of N.J.A.C. 1:1-18.8, the Court held in Matturri that "[i]f an agency seeks to avoid the application of the automatic approval provision by moving for an extension after forty-five days have elapsed, it must demonstrate 'unforeseeable circumstances' under N.J.A.C. 1:1-18.8(b)." Matturri, supra, 173 N.J. at 378. The Court explained that the purpose of the automatic-approval provision of N.J.S.A. 52:14B-10(c) is to promote the right of administrative agencies to ultimately decide the cases falling within the agency's area of statutory responsibility, yet at the same time to "'thwart undue delay in agency action'" by "'encourag[ing] prompt consideration and disposition of contested cases.'" Matturri, supra, 173 N.J. at 379 (quoting King v. N.J. Racing Comm'n, 103 N.J. 412, 419 (1986)).
In Matturri, the Court was confronted with the question of whether the OAL had abused its discretion when it granted an extension of the forty-five day period after the time period had already expired. Id. at 380. The Court reasoned that if the principles of King were to be applied to the case before it, the decision of the ALJ "should have been deemed adopted" pursuant to N.J.S.A. 52:14B-10(c). Id. at 380. Nonetheless, the Court stopped short of applying the "deemed adopted" provision of that statute because of the unique circumstances presented in Matturri, namely, an administrative agency that rarely met and was composed of "high-ranking officials from two branches of state government." Ibid.
The Court noted that the agency in question, the State House Commission -- the entity that sits as the Board of Trustees of the Judicial Retirement System -- has as its primary responsibility the "control of the sale and leasing of state-owned properties." Id. at 380 n.5. Moreover, its members conducted only four meetings in 2001, five in 2000, four in 1999, and three in 1998. Id. at 380 n.4. The Court noted that the State House Commission's unwieldy structure includes "high-ranking officials from two branches of state government - the Governor, the State Treasurer, the Director of the Division of Budget and Accounting or their designees, and two members from each House of the Legislature appointed by the President of the Senate and the Speaker of the Assembly respectively." Id. at 380. See N.J.S.A. 52:20-1. Of greatest significance, according to the Court, the State House Commission "rarely appears before the OAL in a contested case." Matturri, supra, 173 N.J. at 380.
The Court held that, for all of those reasons, it was "hardly surprising" that the State House Commission "lacked appropriate procedures to assure a timely response to the ALJ decision." Id. at 381. In light of the "unique nature" of the State House Commission, the Court held that it would make "little sense to apply the automatic-approval provision of N.J.S.A. 52:14B-10(c) . . . simply for the sake of agency efficiency." Ibid. The Court refused to find error in the OAL's grant of an extension to the State House Commission to respond to the ALJ's Initial Decision, even though the agency did not request an extension until after the forty-five day statutory period had already expired. Ibid.
The facts here are dramatically different from those the Court addressed in Matturri. Unlike the State House Commission, which rarely appeared before the OAL in a contested case, ibid., DMAHS appeared before the OAL in 222 contested cases for the year 2009 alone. From January through May 2010, the OAL rendered ninety-two initial decisions in DMAHS cases. In light of that data, there can be no dispute about the fact that DMAHS is highly experienced in the handling and processing of initial decisions rendered by the OAL. Moreover, unlike the State House Commission, which typically convenes on only four or five occasions per year, the Division is a full-time agency.
To explain its failure to seek an extension within the initial forty-five day period, as required by N.J.A.C. 1:1-18.8(b), the Division tells us only that its failure to request an extension before the time period expired was "[d]ue to an inadvertent oversight[.]" But the Division tells us nothing more. This conclusory label falls far short of establishing the "emergency or other unforeseeable circumstances" required when an agency submits an extension request after the forty-five day period has already expired. See N.J.A.C. 1:1-18.8(b).
It is clear from the Court's decision in Matturri that it viewed the circumstances there as a virtually unique exception to the general rule that extensions requested after the forty-five day statutory period has already elapsed should generally be denied. Id. at 380-81. No circumstances are presented here that would justify an exception to the "deemed adopted" provisions of N.J.S.A. 52:14B-10(c), when, as here, the extension request was not submitted until after the forty-five day period had expired. For these reasons, we conclude the OAL erred in granting an extension to the Division, and deem the ALJ's decision to be the final decision. In light of that determination, appellants' challenge to the Division's June 8, 2010 decision is moot, as the decision of the ALJ was entirely in appellants' favor. Reversed.*fn4