June 20, 2012
BOARD OF EDUCATION OF THE CITY OF MARGATE, ATLANTIC COUNTY, PETITIONER-APPELLANT,
BOARD OF EDUCATION OF THE CITY OF ATLANTIC CITY, ATLANTIC COUNTY, RESPONDENT-RESPONDENT.
On appeal from the Commissioner of Education, Docket No. 590-10/10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 21, 2011 -
Before Judges Axelrad and Sapp-Peterson.
Appellant, Margate City Board of Education (Margate), appeals from the final administrative agency decision of the Commissioner, Department of Education (DOE), dismissing its petition challenging an "extraordinary services" invoice submitted to it by respondent, Board of Education of the City of Atlantic City (Board). The Commissioner dismissed Margate's petition on the basis that it was untimely. After considering the record, in light of the arguments advanced by the parties and prevailing legal standards, we remand the matter to the agency for re-transmittal to the Office of Administrative Law (OAL) for a contested-case hearing and initial decision on all issues, and reference, in turn, to the agency head for a final decision. See N.J.S.A. 52:14B-10.
The Board and Margate have a send-receive agreement (Agreement) that calls for Margate to send its students in grades nine through twelve to the Atlantic City school district, N.J.S.A. 18A:38-8. K.C., a resident of Margate, enrolled in the district commencing March 2006. In December 2008, K.C.'s mother, F.M., filed a due process petition against the Board with the DOE, alleging the Board failed to evaluate K.C. or to provide him with a free and appropriate public education (FAPE). See 20 U.S.C.A. § 1400(d)(1)(A). F.M. alleged she incurred $116,237.41 in placement costs, $3500 for evaluations, $5400 for transportation expenses, and $48,799.23 in counsel fees.
On December 14, 2009, the Board approved a settlement of the litigation with F.M. for $175,000, and passed a resolution memorializing its approval of the settlement. At no time prior to the Board's approval did the Board inform Margate that it had reached a settlement, include Margate in the settlement negotiations, or inform Margate of the terms upon which the Board settled with F.M.
The settlement agreement called for the Board to pay F.M. $105,000 within sixty days of its execution (February 10, 2010) and the balance no later than July 9, 2010. F.M. agreed, among other conditions, to be solely responsible for all remaining educational costs incurred on behalf of K.C., who was nineteen years old at that time. F.M. also waived and released the Board from all claims accruing as of the date of the settlement agreement.
On December 15, 2010, the Board's attorney e-mailed F.M.'s attorney, advising that the settlement payments referenced in the settlement agreement would be paid by Margate. Margate was not copied on this e-mail. The next day, the Board secretary sent an e-mail to Margate, which in pertinent part stated:
Attached is a scanned certified resolution from the December 14, 2009 Atlantic City Board of Education meeting approving the settlement agreement in the negotiated matter F.M. o/b/o K.C. v. Atlantic City Board of Education. Also attached is the settlement agreement.
If you have any questions, please do not hesitate to contact our Solicitors Office[.]
The following day, the Board secretary sent another e-mail to Margate, attaching a scanned copy of the settlement agreement and, the following day, sent another e-mail to Margate, attaching a December 15, 2009 e-mail from the Board's attorney to the Board's business administrator. The relevant portion of the Board attorney's e-mail stated: "As you will recall, this [is] a Margate student, so they will be responsible for any settlement payments. Please make the necessary arrangements to forward the approved Settlement on to Margate and request that payment be made thereunder as soon as possible."
In a letter dated January 21, 2010, to F.M.'s attorney and copied to the Board's attorney, Margate's attorney advised that the Board bore sole responsibility for the settlement payments "under the express terms of the Agreement." The letter stated further:
[T]he claims in the due process matter relate to special education responsibilities of Atlantic City, not Margate. Atlantic City made a voluntary decision to settle the claims against it at its expense. [The Board's attorney] did not copy Margate or its solicitor on the December 15th e-mail that was sent to you, nor did he send any communication to Margate informing it that Atlantic City expected Margate to make the settlement payments.
On January 29, 2010, the Board's attorney wrote to the Atlantic County Executive County Superintendent (ECS). The letter summarized the background leading up to the due process petition, as well as the pre-settlement discussion between the Board and F.M. The Board's attorney ended the letter by requesting a meeting with the ECS, to which Margate's attorney consented, to "determine the responsibility for payment of the [s]ettlement obligations under N.J.S.A. 18A:38-8[.]"*fn1
On February 1, 2010, Margate's attorney sent correspondence to the ECS outlining Margate's position that it bore no responsibility for payment of a settlement in which it had no involvement. On February 3, 2010, the ECS cancelled the meeting, stating that after discussions with the DOE, "it appears that an interpretation of the existing law would be required in order to resolve the issue at hand. That being said, I do not have the authority to make such a determination." The ECS suggested that the matter be referred to the DOE's Office of Controversies and Disputes.
On February 10, 2010, the Board made the first lump sum payment of $105,000 to F.M. and, on July 10, 2010, made the final payment of $70,000. On July 19, 2010, the business administrator submitted an invoice for $175,000 to Margate. Accompanying the invoice was a letter from the Board's business administrator stating the $175,000 represented "certain of the costs of the provision of special education and related services to K.C." The letter explained further:
Pursuant to N.J.A.C. 6A:23A[-]17.1(e)(5), certain expenditures made by a receiving district in connection with sending district students cannot be included in the actual cost per student for tuition purposes. Included among those expenditures are "extraordinary services provided to special education students for which a district board of education may bill directly." N.J.A.C. 6A:23A[-]17.1(e)(5)(viii). As such, the $175,000.00 paid by [the Board] for K.C.'s out-of-district special education and related services constitutes such an extraordinary service which could not be included in the per student tuition amounts and, therefore[,] must be directly billed to Margate.
On October 7, 2010, Margate filed a petition of appeal with the Commissioner. In the petition, Margate alleged N.J.A.C. 6A:23A-17.1(e)5.viii does not permit [the Board] to shift to Margate the cost of settling allegations that Atlantic City failed to comply with special education obligations belonging exclusively to [the Board] under N.J.A.C. 6A:14-5.1(b)1, namely[,] the obligations to evaluate K.C. and to develop and implement an IEP*fn2 for him. Margate is not responsible for costs related to [the Board]'s errors and/or costs related to its voluntary decision to enter into a settlement of allegations that it erred. The settlement payment does not constitute an "extraordinary service provided to special education students" under N.J.A.C. 6A:23A-17.1(e)5.viii for which [the Board] can bill Margate directly. [The Board] failed to develop an IEP for any of the unilateral placements or for the period of time for which the petitioner in the due process proceeding is asserted to have sought reimbursement or for any "extraordinary service" allegedly provided to K.C. There is no administrative, judicial or IEP team determination: (a) that K.C. requires placement in a residential placement in order to receive a FAPE; (b) that the unilateral residential placements in which K.C. was placed are appropriate;
(c) that the unilateral residential placements provide special education and related services to K.C.; or (d) that the unilateral residential placements are approved, certified, accredited placements.
The Commissioner transferred the matter to the OAL as a contested case for hearing before an Administrative Law Judge (ALJ). N.J.A.C. 1:1-3.2. The Board subsequently moved to dismiss the appeal as untimely pursuant to N.J.A.C. 6A:3-1.3 (i), which requires an appeal "no later than the 90th day from the date of receipt of the notice of a final order, ruling or other action by the district board of education, individual party, or agency, which is the subject of the requested contested case hearing." The ALJ agreed the petition was untimely, reasoning that Margate's cause of action against the Board accrued on December 18, 2009, when it was placed on notice of the settlement by way of the Board's December 14, 2009 resolution approving the settlement and correspondence from the Board's business administrator setting forth the Board's expectation that Margate was responsible for paying the settlement.
The Commissioner adopted the ALJ's initial recommended decision and found the petition to be untimely:
It is undisputed that in December 2009, Margate received notice of the executed [s]ettlement [a]greement, which is the subject of the case, along with notice of [the Board]'s position that Margate was responsible for making the settlement payments pursuant to the parties['] send/receive relationship. . . .
In addition to receiving notice of the Settlement Agreement in December 2009, the dispute . . . was brought to the attention of the [ECS] in February 2010, at which time Margate denied any responsibility for the settlement payments. . . . Even assuming, arguendo, that the [ninety]-day limitation period did not begin to run until after the [ECS] informed the parties that the Commissioner had jurisdiction over the matter, Margate's October 2010 petition is still untimely.
The present appeal followed. On appeal, Margate contends the Commissioner erred in concluding that its appeal was untimely as the ninety-day time frame in which to challenge the Board's action commenced after the Board submitted the invoice to it for reimbursement of "extraordinary services" provided to K.C. Margate maintains the July 19, 2010 bill for "extraordinary services" is a distinct agency action. We agree.
Ordinarily, as a reviewing court, we "will not reverse the determination of an administrative agency unless it is arbitrary, capricious or unreasonable, or is not supported by substantial credible evidence in the record as a whole." Kaprow v. Bd. of Educ. of Berkeley Twp., 131 N.J. 572, 591 (1993). Moreover, courts extend substantial deference to an agency's interpretation of its own regulations "because the agency that drafted and promulgated the rule should know the meaning of that rule." In re Freshwater Wetlands Gen. Permit No. 16, 379 N.J. Super. 331, 342 (App. Div. 2005) (internal quotations and citation omitted).
The narrow issue to be resolved is whether the Commissioner erred in concluding the ninety-day clock commenced as of December 18, 2009, the date it received notice of the settlement. We are in complete agreement that the Board's December 14, 2009 resolution approving the settlement constituted "a final order, ruling, or other action" by the Board. That resolution, however, in no way imposed an obligation upon Margate. The resolution approved a settlement between the Board and F.M., thereby binding the Board. There was no resolution or other "district board of education" action taken with respect to Margate regarding the settlement. The internal memorandum from the Board's solicitor to the Board's business administrator expressing his opinion that the payment of the $175,000 settlement was the responsibility of Margate, was not a "final order, ruling or other action by the district board of education" under N.J.A.C. 6A:3-1.3(i). See Jersey City v. Roosevelt Stadium Marina, Inc., 210 N.J. Super. 315, 327 (App. Div. 1986), certif. denied, 110 N.J. 152 (1988) (noting that a governmental body, such as a board of education, "must act by formal action . . . [when] giving consent to the settlement of litigation"). Consequently, in the absence of formal action by the Board, notice to Margate of the Board attorney's opinion that Margate bore responsibility for payment of the $175,000 settlement was not an action for which the ninety-day clock commenced to run. Ibid. (holding absent such formal action, consent by a governmental body's attorney to the settlement of litigation "cannot bind the governing body").
In its exceptions to the ALJ's initial decision, Margate argued that the timeliness of its challenge to the Board's demand that it pay the settlement became moot once the Board made the payment and the "extraordinary services," for which payment was subsequently sought in the July 19, 2010 invoice, had not yet been paid as of December 18, 2009. Therefore, Margate maintained the ninety-day clock did not begin to run at that point. Rather, "it argued it was the actual July 19, 2010 bill that it received from [the Board] for reimbursement of the settlement payments that triggered the [ninety]-day limitations period."
In his final decision, the Acting Commissioner stated he was not persuaded by the exceptions filed by Margate. This conclusion, however, was not accompanied by any legal analysis explaining why Margate's position was unpersuasive.
It is well settled that we generally "defer to an agency's interpretation of . . . [a] regulation, within the sphere of [its] authority, unless the interpretation is 'plainly unreasonable.' We do so because 'a state agency brings experience and specialized knowledge to its task of administering and regulating a legislative enactment within its field of expertise.'" U.S. Bank, N.A. v. Hough, ___ N.J. ___, ___ (2012) (slip op. at 25) (quoting In re Election Law Enforcement Comm'n Advisory Op. No. 01--2008, 201 N.J. 254, 262 (2010)). However, conclusory statements, unaccompanied by any legal analysis, do not satisfy an agency's obligation to support its decisions with findings of fact and legal conclusions. Balagun v. N.J. Dep't of Corr., 361 N.J. Super. 199, 202-03 (App. Div. 2003). As such, a conclusion reached without any legal underpinnings is unreasonable and not entitled to our deference. U.S. Bank, supra, slip op. at 26.
As we noted earlier, the only "action" reflected in Resolution No. 09 12A 68, passed by the Board unanimously on December 14, is approval of the settlement agreement and general release negotiated in F.M. ex rel. K.C. v. Atlantic City Board of Education, #EDS-723-09. Thus, there was no "final order, ruling, or other action" taken by the Board against Margate for which it was on notice to seek appropriate review from the Commissioner.
The Board attorney's opinion expressed to the Board's business administrator that Margate should pay the $175,000 settlement was an opinion to which Margate expressed its disagreement based upon its position that it was not required to pay a settlement premised upon the Board's breach of its obligation to provide a FAPE to K.C. In addition, Margate also expressed the opinion that it was not obligated to make payment in connection with a settlement to which it was not a party and in which it had not been invited to participate with regard to any aspect of the litigation and settlement negotiations.
When the Board went to the ECS, the DOE's designated representative, N.J.S.A. 18A:7-1a, it sought guidance on securing payment of the $175,000 settlement from Margate pursuant to "N.J.S.A. 18A:38-8." This statute, however, specifically addresses tuition of pupils determined by tuition rates fixed within "this article." Tuition, pursuant to "this article," refers to Article 2, which is captioned "Pupils Attending Schools In Another District" and is based upon "actual cost per pupil as determined under rules prescribed by the commissioner and approved by the State board." See N.J.S.A. 18A:38-19.
In the regulations promulgated pursuant to N.J.S.A. 18A:38-19, the DOE expressly excludes "extraordinary services" from the term "actual cost per student" and permits direct billing to the sending district for such services. N.J.A.C. 6A:23A-17.1(e)(5). Thus, it is clear the Board, in its January 29, 2010 letter to the ECS, could not have obtained reimbursement for "extraordinary services" provided to K.C. based upon N.J.S.A. 18A:38-8. Moreover, the ECS's conclusion that the issue presented called for a "legal" interpretation presumably was based upon the Board's mistaken attempt to include the settlement agreement as part of tuition under N.J.S.A. 18A:38-8.
Rather than seek guidance from the Commissioner, as suggested by the ECS, the Board made its first payment under the settlement agreement and, over the next five months, neither sought judicial relief to enforce the settlement agreement against Margate -- apparently because Margate was not a party to the settlement agreement -- nor did the Board file a petition before the Commissioner, presumably because the ECS advised that the matter was not ripe for consideration because no payment had been made.
The Board's response to Margate's exceptions filed with the ALJ illustrates that the Board viewed the invoice as more than simply a bill. The Board stated: "As a result of Margate's refusal to accept responsibility, and only because of that refusal, Atlantic City was forced to attempt to collect the funds from Margate in any form it could, whether it was through the ECS or through a reimbursement bill." (emphasis added).
The clear import of this asserted position by the Board was its recognition of its failure to obtain Margate's agreement to pay the $175,000 through the informal route initiated by its attorney, its inability to obtain relief from the ECS by seeking to obtain payment pursuant to N.J.S.A. 18A:38-8, and the absence of any direct remedy available to it through the courts by way of an enforcement action against Margate. Therefore, the July 19, 2010 invoice represented another "form" through which to recover the $175,000 it paid to settle F.M.'s claims against it, namely, by, for the first time, characterizing the settlement as "extraordinary services" pursuant to N.J.A.C. 6A:23A-17.1(e)(5)(viii).
Chapter 23A of Title 6A of the New Jersey Administrative Code, N.J.A.C. 6A:23A-1.1 to -22.15, sets forth the regulatory scheme for fiscal accountability, efficiency and budgeting. The purpose of this statute is to assure the financial accountability of boards of education through enhanced State monitoring, oversight and authority, and to ensure that each district board of education adopts an annual budget that provides adequate resources to meet the State Constitution's mandate for a thorough and efficient system of free public schools for all children. . . . The rules also establish mechanisms to ensure the efficient expenditure of budgeted funds in a manner consistent with a district's approved annual budget.
N.J.A.C. 6A:23A-17.1(e)(5) provides that "[e]xpenditures that are excluded from the actual cost per student for tuition purposes" includes "[e]xtraordinary services provided to special education students for which a district board of education may bill directly." In the general definitions section, N.J.A.C. 6A:23A-1.2, there is no definition for "extraordinary services." Rather, N.J.A.C. 6A:23A-1.2, containing general definitions for Chapter 23A, references "extraordinary costs," which is defined as particular expenditures beyond what is customary and usual in the operation of a public school district, that are beyond the control of the school district, that are necessary to achieve a "[thorough and efficient]" [e]ducation as determined by the Commissioner, and where said expenditures either were not included in the original budget of the prebudget year or increased by more than four percent of the amount included in the original budget of the prebudget year.
The prefatory language of N.J.A.C. 6A:23A-1.2 expressly provides that "the words and terms used in this chapter shall have the following meanings, unless the context clearly indicates otherwise." The Board sought reimbursement based upon extraordinary services, not extraordinary costs. The only definition of "extraordinary service," the term referenced in N.J.A.C. 6A:23A-17.1 and in the Board's July 19, 2010 billing letter, is set forth in N.J.A.C. 6A:23A-18.1, which provides "extraordinary service means the services of a one-to-one aide for a student." N.J.A.C. 6A:23A-18.1. (internal quotations omitted).
In submitting an invoice for "extraordinary services," the Board is making a claim that such services were provided, namely, "the services of a one-to-one aide" for [K.C.]" While the settlement may have involved a Margate student, that does not necessarily establish that the $175,000 settlement represents "extraordinary services" within the meaning of N.J.A.C. 6A:23A-18.1, as the Board claims. Prior to reimbursing the receiving district for "extraordinary services" provided, Margate was both obliged and entitled to verify that Atlantic City's payment was for "extraordinary services" provided to its student, as contemplated by the regulation. See N.J.S.A. 18A:19-2 and 3. Because we are persuaded that the Board's characterization of the $175,000 in its July 19, 2010 direct billing implicates a distinct substantive issue not previously advanced by the Board, Margate's petition was not untimely.
The matter is remanded for further proceedings in accord with this decision. We do not retain jurisdiction.