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Charles K. Zisa v. New Jersey State Pba-Lpp


August 23, 2012


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-7250-10.

Per curiam.


Argued December 13, 2011

Before Judges Messano and Espinosa.

Defendant, New Jersey State PBA-LPP (the LPP), is a member-funded benefit sponsored by the New Jersey State Patrolmen's Benevolent Association (State PBA). The LPP provides for the cost of legal defense and related expenses in certain criminal, civil and administrative proceedings. This benefit is provided solely for members of the State PBA who choose to participate in the LPP and is only available to them through their local PBAs.

The LPP Plan Document defines "Member" as a person who is a licensed or certified peace officer and a member of the PBA who has paid the annual fee required for this member benefit. "Member" includes members covered under an expired policy who reapply within thirty (30) days after the inception of this policy. [(Emphasis added).]

Prior to March 2002, a legal protection plan was offered that was administered by two insurance companies. In 2002, the State PBA Board of Delegates approved the LPP, which was administered in-house as of September 2008. Thereafter, as insurance contracts between local PBAs and the insurance company expired, a local PBA had to join the LPP in order to continue to offer the benefit to its members. Each local PBA that chose to join the LPP submitted payment to the LPP for its participating members each year along with a roster of eligible members. It is undisputed that payment was made by each local PBA and not by individual members.

In April 2010, plaintiff Charles K. Zisa, then the Chief of Police in Hackensack, was served with a complaint, alleging he had committed insurance fraud, N.J.S.A. 2C:21-4.6(a), and with notice of disciplinary action, alleging statutory misconduct, N.J.S.A. 40A:14-147, insurance fraud, N.J.S.A. 2C:21-4.6(a), and conduct unbecoming a public employee, N.J.A.C. 4A:2-2.3(a), and imposing immediate suspension. It is undisputed that he was a member in good standing of defendant New Jersey State Patrolmen's Benevolent Association (Local #9) at that time, and as a result, was a member of the State PBA. He had served as a police officer in Hackensack since 1977 and, after twenty-five years, he was "exempt from yearly dues." He was enrolled in Local #9's legal protection plan and received membership cards that were issued through 2001. Membership cards for the legal protection plan were not issued thereafter.

Local #9 became a participant in the LPP effective January 1, 2003. From that year forward, Local #9 provided rosters of eligible members and payment to the LPP. Plaintiff's name was never included on any of these lists of eligible members. No one notified plaintiff that he was not included on the roster of eligible members submitted to the LPP or that his membership had been terminated.*fn1

Plaintiff's attorney forwarded copies of the complaint and notices of disciplinary action and suspension along with a claims form to Kevin Lyons, the LPP plan administrator, requesting that the LPP provide him with legal coverage for his defense in both the disciplinary and criminal matters.

Lyons responded by a letter which stated, "Br. Zisa is not enrolled in the New Jersey State P.B.A. Legal Protection Plan." Plaintiff's counsel sent a second letter to Lyons, asking him to clarify his position by providing the following information: the process by which officers enroll in the LPP, whether plaintiff was ever enrolled in the LPP, and, if so, when and why enrollment was terminated. Lyons testified that he telephoned counsel and advised that he would not provide such information to counsel but would give it directly to plaintiff if he asked for it.

In July 2010, plaintiff filed a verified complaint and order to show cause against the State PBA and Local #9, seeking declaratory judgment that he is entitled to coverage under the LPP for the criminal, civil and administrative claims against him. He subsequently filed an amended complaint, adding a claim for counsel's fees pursuant to Rule 4:42-9.

Defendant State PBA filed an answer with affirmative defenses that included assertions that the court lacked jurisdiction and that plaintiff had failed to exhaust administrative remedies. In August 2010, the court ordered that limited discovery be taken and denied a motion filed by Local #9 to be dismissed from the case.

In October 2010, a Bergen County grand jury returned a nine-count indictment against plaintiff, alleging acts of official misconduct. Plaintiff sent a copy of the indictment to Lyons and, by letter dated December 7, 2010, again asked for coverage under the LPP.

In his reply, Lyons stated:

There has been no change in your status since my May 27, 2010 letter denying coverage because you are not enrolled in the plan and have not been enrolled since the plan became self funded in 2002.

Coverage is denied for the charges attached to your letter for the same reason. This decision, as the earlier one, is not based on whether you are, or were, entitled to coverage for the criminal and administrative charges if you were enrolled in the LPP. The LPP reserves the right to make that determination if necessary.

Section VII of the LPP Plan Document provides for an appeal procedure as follows:

Any member contesting a denial of coverage under this Plan or the member benefits contained herein may submit a request for review by the LPP Committee. The member shall provide a written explanation of the reason why the denial of benefits under the LPP was improper.

Admission to and exhaustion of this procedure is a prerequisite to any suit contesting member benefits provided herein. [(Emphasis added).]

The procedure for seeking redress from an adverse decision by the LPP Committee is set forth in Article XVI, Section II of the State PBA Constitution and Bylaws. Appeals from the LPP Committee are heard by the State PBA Judiciary Committee. The Judiciary Committee's decision may then be appealed to the State PBA Board of Delegates. All appeals must be filed within thirty days of the action from which the appeal is taken.

Article XVI, Section I of the State PBA's Constitution and

Bylaws provides:

No court proceedings will be instituted or maintained by any member or Local Association against this Association or any Local Association without first seeking redress from and within this Association. .

. . The provisions of this section will constitute an adequate administrative remedy and a condition precedent to the institution of any court action by this Association, by a Local Association or any individual member thereof.

In February 2011, the motion judge entered an order declaring that plaintiff is "a duly enrolled member of the LPP and is therefore entitled to the applicable limited coverage of the Plan" and denied plaintiff's motion for attorneys' fees. Neither plaintiff nor Local #9 appealed from this order. In its appeal, the State PBA argues that the order should be reversed because the trial court lacked jurisdiction to intervene in the internal operation of the LPP and because plaintiff failed to exhaust the internal appeals process. We agree.

New Jersey courts are loathe to interfere with the internal management of an unincorporated, voluntary association. Deference has always been afforded to the internal decision making process of the private association. The courts recognize an association's right to adopt, administer and interpret its own rules without judicial intervention. [Danese v. Ginesi, 280 N.J. Super. 17, 23 (App. Div. 1995) (internal quotation marks and citations omitted).]

In Danesi, we stated further that jurisdiction will not, as a rule, be exercised over "a matter involving the internal affairs of an association, even in cases where judicial interference is otherwise warranted, unless the complaining member has exhausted such remedies as may be provided by the laws of the association itself[,]" provided "such remedy is certainly available, clearly effective and completely adequate to right the wrong complained of." Id. at 24. (internal quotation marks and citations omitted).

Although the motion judge acknowledged these principles, he reasoned that the exercise of jurisdiction was warranted because the issue here did not involve the operation or internal affairs of the union but rather, the "quasi-contractual obligation of the entities to the claimed beneficiary." The judge also found that the remedies available to plaintiff were not "'certainly available, clearly effective and completely adequate[.]'"

"Deference has always been afforded to the internal decisionmaking process of private associations. These associations must have considerable latitude in rulemaking in order to accomplish their objectives and generally, their private law is binding on those who wish to remain members." Loigman v. Trombadore, 228 N.J. Super. 437, 449 (App. Div. 1988). At the crux of plaintiff's request for declaratory judgment was his challenge to the determination that he was not an eligible member. This question is one that is reserved to fraternal and social organizations, such as defendant, as a matter of law. See Falcone v. Middlesex Cnty. Med. Soc'y., 62 N.J. Super. 184, 199 (Law Div. 1960), aff'd, 34 N.J. 582 (1961). "It is well settled that in this . . . class of organizations membership may be increased or decreased at will, without regard to standards, arbitrariness or otherwise, and without judicial interference." Ibid.; see also Loigman, supra, 228 N.J. Super. at 449.

The nature of the organization here stands apart from organizations such as medical societies, in which the organization's control over the practice of medicine implicates a need to protect the public welfare. See Falcone v. Middlesex Cnty. Med. Soc'y, 34 N.J. 582, 592 (1961). Further, this is not a case in which judicial intervention is required because there has been a violation of civil rights or other public policy. See Leeds v. Harrison, 9 N.J. 202, 215 (1952); James v. Camden Cnty. Council, 188 N.J. Super. 251, 257-58 (Ch. Div. 1982). Therefore, we are satisfied that no public policy requires judicial intervention into the determination whether plaintiff was a member of the LPP. Because plaintiff chose to be a member of the State PBA and the LPP, he was bound by their "private law" governing the question whether he was an eligible member.

The motion judge found further, however, that judicial intervention was appropriate and plaintiff could be excused from exhausting defendant's internal appeals procedure because a remedy was not "'certainly available, clearly effective and completely adequate to right the wrong complained of[.]'" There was no evidence that the appeals procedure was inadequate to result in a determination that plaintiff was an eligible member. The premise for the motion judge's conclusion was the erroneous statement made by Lyons in his deposition testimony that an appeal could have been initiated as informally as by a telephone call, despite the fact that the LPP Plan Document required written notice of the reason an adverse determination was improper. The court reasoned that, if such informality was sufficient to provide defendant with notice, the filing of an order to show cause should have been sufficient to initiate review within the State PBA. The judge found the fact that no review was initiated thereafter to be persuasive that the appeal process was inadequate.

However, when a party is required to invoke internal or administrative remedies before initiating litigation, the filing of a complaint is not a satisfactory substitute for pursuing the procedure required. If that were the case, the requirement to pursue such alternative resolution procedures would impose an unwarranted burden upon the organization to counter challenges on two fronts, internally and in the courts, negating any saving in the allocation of resources that would otherwise be gained by the requirement that an internal appeals process be exhausted prior to litigation.

Because we are satisfied that judicial intervention here was inappropriate, we need not address the merits of the court's determination that plaintiff was "a duly enrolled member of the LPP and is therefore entitled to the applicable limited coverage of the Plan[.]" We reverse, without prejudice to plaintiff's right to file an administrative challenge under the State PBA's Bylaws.*fn2

Reversed. We do not retain jurisdiction.

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