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Margaret Dolan v. Carmen M. Centuolo

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 9, 2012

MARGARET DOLAN, PETITIONER-APPELLANT,
v.
CARMEN M. CENTUOLO, EXECUTIVE COUNTY SUPERINTENDENT, UNION COUNTY, AND ROCHELLE R. HENDRICKS, ACTING COMMISSIONER OF EDUCATION, NEW JERSEY STATE DEPARTMENT OF EDUCATION, RESPONDENTS-RESPONDENTS.
WESTFIELD BOARD OF EDUCATION, PETITIONER-APPELLANT,
v.
CARMEN M. CENTUOLO, EXECUTIVE COUNTY SUPERINTENDENT, UNION COUNTY, AND ROCHELLE R. HENDRICKS, ACTING COMMISSIONER OF EDUCATION, NEW JERSEY DEPARTMENT OF EDUCATION, RESPONDENTS-RESPONDENTS.

On appeal from the Commissioner, New Jersey Department of Education, Docket Nos. 708-12/10 and 709-12/10.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued April 23, 2012

Before Judges A. A. Rodriguez and Ashrafi.

On January 13, 2011, the Acting Commissioner of Education adopted amendments to N.J.A.C. 6A:23A-1.2 and -3.1 placing caps on salary and other compensation that public school districts can pay to superintendents.

In these two appeals, which we decide in a single opinion, the Superintendent of Westfield Public Schools, Margaret Dolan, (A-2470-10) and the Westfield Board of Education ("the Board") (A-2710-10) appeal from the final decision of an Assistant Commissioner of Education dated January 7, 2011, dismissing their emergent applications for relief. By those emergent applications, Dolan and the Board sought administrative review of a decision of the then Executive County Superintendent of Schools for Union County, Carmen Centuolo, voiding a new long-term contract of employment entered into between Dolan and the Board shortly before the effective date of the new regulations, February 7, 2011.

The Assistant Commissioner of Education dismissed the emergent applications on the ground that the Department of Education lacked jurisdiction over the matter. The Assistant Commissioner concluded that a memorandum dated November 15, 2010, from the Acting Commissioner of Education to all Executive County Superintendents already decided legal issues raised by the emergent applications and that appellants' only recourse was to appeal to this court pursuant to N.J.S.A. 18A:6-9.1 and Rule 2:2-3(a)(2) of the Rules Governing the Courts of the State of New Jersey.

We disagree that the Acting Commissioner's November 15, 2010 memorandum constitutes a final decision on all issues presented by the applications for emergent relief. We conclude that the Department of Education has primary jurisdiction over the dispute raised by the emergent applications, namely, whether the new contract between Dolan and the Board was lawfully approved and executed before the effective date of the salary caps. We reverse and remand to the Acting Commissioner of Education to adjudicate the emergent applications.

I.

Margaret Dolan, Ed.D., has been the superintendent of Westfield Public Schools since 2007. At issue in these appeals is her new five-year contract approved by the Board on November 9, 2010. The contract grants Dolan compensation exceeding the caps placed on superintendents' compensation effective as of February 7, 2011. Dolan and the Board claim that the new contract was lawfully approved and executed before the regulations imposing caps went into effect and the contract must therefore be honored. On December 2, 2010, Executive County Superintendent Centuolo ordered that the contract be voided, apparently based on the Acting Commissioner's November 15, 2010 memorandum directing all Executive County Superintendents not to approve new contracts until the new regulations went into effect.

The context of the dispute presented in these appeals was recounted by our Supreme Court in New Jersey Association of School Administrators v. Schundler, ___ N.J. ___, ___ (2012) (slip op. at 1-8). To summarize, beginning in 2007, the Legislature sought to lower property taxes by enacting new laws that limit the amount of compensation local school boards may pay to high-level administrators. The Department of Education adopted regulatory measures to implement the new laws. In July 2010, Governor Christie announced his administration's intention to propose and adopt additional regulations, in accordance with the Administrative Procedure Act, N.J.S.A. 52:14B-1 to -15, to cap the compensation payable to superintendents and other administrators.

At that time, Dolan's existing contract with the Board ran from September 1, 2007, through June 30, 2011. The Board was required to give Dolan notice of its intent not to renew her employment by June 30, 2010, a year before the end date of the existing contract. In the spring of 2010, the Board determined that it intended to continue Dolan's employment. During the summer of 2010, the Board and Dolan negotiated the terms of a new contract.

Dolan and the Board reached agreement on a new contract in early fall 2010. The contract would rescind the existing contract and instead run Dolan's new term as superintendent from November 9, 2010, to June 30, 2015, a few months short of five years.*fn1 The contract provided for salaries starting at $195,718 in 2010-2011 and increasing to at least $203,625 in 2014-2015.

Additional increases would be conditioned on the local tax levy at the relevant time. The proposed salaries exceeded the maximum annual salary under the anticipated new regulations, which would be $165,000 in Dolan's circumstance. N.J.A.C. 6A:23A-1.2.

The legislation that was enacted in 2007 and its implementing regulations required that Dolan and the Board obtain the Executive County Superintendent's approval of the new contract of employment before it was executed by the parties.

N.J.S.A. 18A:7-8j;*fn2 N.J.A.C. 6A:23A-3.1;*fn3 see N.J. Ass'n of Sch. Bus. Officials v. Davy, 409 N.J. Super. 467, 477 (App. Div. 2009). Dolan claims that she contacted Executive County Superintendent Centuolo in September 2010 to discuss the timetable for approval of her new contract. She alleges that Centuolo told her the regulations then in effect would apply to the new contract and not the anticipated new regulations and their cap on compensation.

On October 18, 2010, the Board sent the proposed new contract to Centuolo for review and pre-approval. In an October 20, 2010 email, which has not been included in the appellate record, Centuolo allegedly directed that some revisions be made to the proposed contract. Several days later, according to Dolan, she spoke again with Centuolo at a meeting, and Centuolo allegedly told her the terms of the new contract were acceptable and it "would be approved." At some point thereafter, the Board's attorney contacted Centuolo and the two allegedly reached agreement on changes to the proposed contract. The appellate record does not reveal whether Centuolo received and specifically approved an amended version of the contract.

Dolan asserts she called Centuolo on November 8, 2010, to remind her that the Board planned to vote the following day to approve the new contract. According to Dolan, Centuolo assured her that nothing else was required for its approval. On November 9, 2010, the Board voted to approve Dolan's new employment contract and rescinded her existing contract.

The next day, November 10, 2010, then Acting Commissioner of Education Rochelle Hendricks conducted a conference call with all Executive County Superintendents in the State. As a follow-up to that conference call, Hendricks issued a memorandum dated November 15, 2010, directing all Executive County Superintendents to compile data on superintendent contracts. The memorandum also gave the following directive to all Executive County Superintendents:

Until this review process is completed and submissions are fully analyzed . . . no superintendent contracts are to be approved.

Furthermore, given pending regulations with respect to Superintendent contracts . . . contracts expiring subsequent to February 7, 2011 should not be renegotiated or extended prior to the effective date of the new regulations.

On November 18, 2010, Dolan delivered her Board-approved new contract to Centuolo. Two weeks later, the Board received a letter dated December 2, 2010, from Centuolo stating that she had not pre-approved Dolan's contract as required by N.J.S.A. 18A:7-8j and N.J.A.C. 6A:23A-3.1 and directing the Board and Dolan to void the new contract.

On December 15, 2010, Dolan and the Board separately filed verified petitions and emergent applications before Acting Commissioner Hendricks seeking rescission of Centuolo's December 2, 2010 letter and directing that the new contract be approved. The primary argument of both petitioners was that Centuolo had in fact pre-approved the new contract before the Board voted and before the Acting Commissioner's November 15, 2010 memorandum was issued ordering a freeze on such approvals pending the new regulations. Additionally, Dolan, but not the Board, asserted that the Acting Commissioner's November 15 directive constituted improper rulemaking and an unenforceable ultra vires act. The Board's verified petition challenged application of the November 15, 2010 memorandum to Dolan's new contract without arguing that the memorandum was contrary to law.

By letter-decision dated January 7, 2011, Assistant Commissioner Barbara Gantwerk dismissed the two petitions. The letter stated that the November 15, 2010 memorandum halting contract review was the final agency decision addressing the issues raised in the petitions, and therefore, the Department of Education lacked further jurisdiction over the matter.

The Attorney General filed a motion on behalf of respondents for reconsideration of the finding of no jurisdiction, arguing that the "sole issue . . . is whether [Centuolo] approved the proposed employment contract before it was approved by the Westfield Board of Education." The motion for reconsideration was denied by the new Acting Commissioner, Christopher Cerf. In the meantime, Dolan and the Board filed notices of appeal before this court from the January 7, 2011 dismissal of their petitions.

II.

Appellants raise three primary issues: (1) whether Assistant Commissioner Gantwerk erred when she concluded there was a final agency decision disposing of the dispute; (2) whether Acting Commissioner Hendricks exceeded her authority when she halted review of superintendent contracts; and (3) whether Acting Commissioner Hendricks's November 15, 2010 directive violated principles of separation of powers under our State constitution. Because we reverse on the basis of the first issue, we do not address in this opinion the other two issues.

We have limited authority to review an administrative agency's final decision. In re Taylor, 158 N.J. 644, 656 (1999). On appellate review, we may consider whether a final administrative decision: (1) "offends the State or Federal Constitution"; (2) "violates express or implied legislative policies"; (3) "contains substantial evidence to support the findings on which the agency based its action"; or (4) contains "a conclusion that could not reasonably have been made on a showing of the relevant factors." Ibid.; accord Kaprow v. Bd. of Educ. of Berkeley Twp., 131 N.J. 572, 591 (1993); D.L. v. Bd. of Educ. of Princeton Reg'l Sch. Dist., 366 N.J. Super. 269, 273 (App. Div. 2004). "[A]n appellate court will reverse the decision of the administrative agency only if it is arbitrary, capricious or unreasonable or it is not supported by substantial credible evidence in the record as a whole." Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980).

We are not bound by the agency's legal conclusions, G.S. v. Dep't of Human Servs., 157 N.J. 161, 170 (1999), but we usually defer to the "'agency's interpretation of statutes and regulations within its implementing and enforcing responsibility . . . ,'" Wnuck v. N.J. Div. of Motor Vehicles, 337 N.J. Super. 52, 56 (App. Div. 2001) (quoting In re Appeal by Progressive Cas. Ins. Co., 307 N.J. Super. 93, 102 (App. Div. 1997)).

Dolan and the Board contend that the November 15, 2010 memorandum was not a final administrative decision as to the factual basis for relief claimed in their petitions, that is, that Centuolo pre-approved the new contract before the Board's vote and the Acting Commissioner's directive freezing approvals. We agree with the contention that the November 15 memorandum was not a final decision on the factual claim presented in the administrative petitions, but we do not decide here whether Centuolo's alleged oral and informal approval of the terms of Dolan's new contract, if proven, was sufficient as a matter of law to comply with the requirements of N.J.S.A. 18A:7-8j and N.J.A.C. 6A:23A-3.1.

To exercise jurisdiction over a dispute, an administrative agency must have specific legislative authority. Archway Programs, Inc. v. Pemberton Twp. Bd. of Educ., 352 N.J. Super. 420, 426 (App. Div. 2002). By statute, N.J.S.A. 18A:6-9, "the Commissioner of Education has primary jurisdiction to hear and determine all controversies arising under the school laws," Bower v. Bd. of Educ. of E. Orange, 149 N.J. 416, 420 (1997). "Our courts have long recognized the sweep of the Commissioner's reviewing powers . . . ." Bd. of Educ. of E. Brunswick v. Twp. Council of E. Brunswick, 48 N.J. 94, 101 (1966); see N.J.A.C. 6A:2-1.2a (listing Commissioner's broad powers).

As a general matter, however, contractual disputes do not fall within the Commissioner's jurisdictional mandate unless they implicate the agency's special expertise. Archway Programs, supra, 352 N.J. Super. at 425-26; Picogna v. Bd. of Educ. of Cherry Hill, 249 N.J. Super. 332, 335 (App. Div. 1991);

S. Orange-Maplewood Educ. Ass'n v. Bd. of Educ. of S. Orange & Maplewood, 146 N.J. Super. 457, 463 (App. Div. 1977). Earlier in this dispute, the Attorney General, on behalf of Centuolo and the Acting Commissioner, agreed with appellants' contention that the matter should be administratively determined in accordance with N.J.A.C. 6A:23A-3.1f, which provides: "Any actions by the Executive County Superintendent undertaken pursuant to this subchapter may be appealed to the Commissioner pursuant to the procedures set forth at N.J.A.C. 6A:3." Chapter 23A, subchapter 3 of the regulations states the Executive County Superintendents' duties with respect to reviewing and pre-approving superintendent contracts. The Attorney General moved for reconsideration of the dismissal because the "sole issue" was a factual dispute - whether Centuolo had pre-approved the contract. On appeal, the Attorney General on behalf of the same parties has reversed course and now argues the dismissal was proper because appellants' claims are "purely legal [issues] that do[] not require a hearing to resolve disputed facts."

"When resolution of a legal question turns on factual issues within the special province of an administrative agency, those mixed questions of law and fact are to be resolved based on the agency's fact finding." Campbell v. N.J. Racing Comm'n, 169 N.J. 579, 588 (2001). The Commissioner's plenary jurisdiction over school laws includes authority to review any challenged action of an Executive County Superintendent discharging the statutory duty to review and approve superintendent employment contracts. N.J.A.C. 6A:23A-3.1f.

In this case, Dolan and the Board raised essentially two arguments in their emergent applications: that Centuolo had pre-approved the new contract and that Acting Commissioner Hendricks's November 15, 2010 directive freezing contract review was illegal and of no effect. Contrary to the January 7, 2011 letter-decision of Assistant Commissioner Gantwerk, the November 15 memorandum did not adjudicate the first issue. Not only did that memorandum not address the matter of the Board's new contract with Dolan, it is silent as to contract approvals that pre-dated issuance of the memorandum.

The final decision of an administrative agency is appealable as of right to the Appellate Division. R. 2:2-3a(2); see N.J.S.A. 18A:6-9.1; N.J.A.C. 6A:4-1.1. But "an agency action does not become final until all avenues of internal administrative review have been exhausted." Bouie v. N.J. Dept. of Cmty. Affairs, 407 N.J. Super. 518, 527 (App. Div. 2009). In addition, the "administrative determination must be final as to all parties and all issues." In re Donohue, 329 N.J. Super. 488, 494-95 (App. Div. 2000).

Here, the emergent applications present a factual issue as to Centuolo's actions that could potentially resolve this dispute without determining the authority of the Acting Commissioner to freeze new contract approvals after November 15, 2010. Resolution of that factual issue is within the primary jurisdiction of the Department of Education.

In Campione v. Adamar of N.J., Inc., 155 N.J. 245, 263 (1998), the Court stated:

The doctrine of primary jurisdiction, like that requiring exhaustion of administrative remedies, promotes proper relationships between courts and regulatory agencies. Boss v. Rockland Elec. Co., 95 N.J. 33, 40 (1983) (citing United States v. Western Pac. R.R. Co., 352 U.S. 59, 63-64, 77 S. Ct. 161, [165,] 1 L. Ed. 2d 126[, 132] (1956)).

Under the doctrine of primary jurisdiction, when enforcement of a claim requires resolution of an issue within the special competence of an administrative agency, a court may defer to a decision of that agency. Ibid.

In Archway Programs, supra, 352 N.J. Super. at 426, we stated: "[I]n appropriate instances where legal relief is sought while a closely related administrative proceeding pends in the Department, a trial court should normally stay its hand . . . out of deference for the primary subject matter jurisdiction of the Commissioner and the Department . . . ." The same deference applies to rules of appellate review from agency decisions.

Here, the Acting Commissioner had primary jurisdiction to determine in the first instance the effect of Executive County Superintendent's alleged approval of Dolan's new contract before issuance of the November 15, 2010 memorandum. We make no determination at this stage whether an evidentiary hearing is required to resolve that issue. We also make no legal determination in the first instance whether Centuolo's and the Board's alleged actions were sufficient to comply with statutory and regulatory provisions in effect at the time for approval of superintendent contracts.

Dolan and the Board have not alleged they obtained Centuolo's approval in writing or otherwise formally before the Board approved the new contract at its meeting of November 9, 2010. They claim that Dolan and the Board's attorney had conversations with Centuolo and exchanged emails that are proof of Centuolo's pre-approval. The Acting Commissioner is the head of the agency with experience and expertise in interpreting the relevant statute and regulation pertaining to pre-approvals of superintendent contracts. The Acting Commissioner should decide in the first instance whether such informal approval of a superintendent's proposed contract as appellants have alleged would meet the requirements of the applicable statute and regulation.

Although not raised by any of the parties, we also note that N.J.A.C. 6A:23A-3.1a(3)(c) required that the Executive County Superintendent pre-approve a proposed contract before public notice was issued of the Board's intent to consider and take action on the contract.*fn4 Significantly, N.J.S.A. 18A:11-11 required that public notice of the Board's intention to take action regarding a new superintendent contract be provided at least thirty days before the meeting at which the action was taken.*fn5 Here, the appellate record does not contain the public notice issued by the Board indicating its intention to take action on Dolan's new contract on November 9, 2010.

The proposed contract was not presented to Centuolo for review until October 18, 2010, less than thirty days before the Board meeting. The date of Centuolo's alleged informal approval of the revised contract is not revealed in the record but certainly is less than thirty days before the Board meeting and vote. The Acting Commissioner may consider whether the statutory and regulatory requirements for public notice were met by the manner of alleged pre-approval and Board action in these circumstances.

We reverse the Assistant Commissioner's January 7, 2011 final decision dismissing the two applications for emergent relief on jurisdictional grounds and remand for consideration of those applications on their factual and legal merits. We do not retain jurisdiction.


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