Opinion ID: 1955260
Heading Depth: 1
Heading Rank: 3

Heading: In those circumstances in which the Public Advocate is authorized to bill insurers for Rate Counsel's fees, what should be the scope of and method for review of those bills?

Text: The ISO record serves best to illustrate these issues. Recall that in the ISO case the trial court referred to the Appellate Division all issues with respect to the validity of the bills. The Appellate Division resolved certain generic questions about whether the Advocate's Act covered deregulated rate filings and whether forms filings could be considered proceedings initiated for the purpose of obtaining rate relief. However, the court remanded the ISO case and the other cases to the Law Division to develop a factual record on which to predicate any further judgment on whether the fees of the Advocate were reasonable. We affirm this disposition of these cases, but we believe that the statutory scheme contemplates a simpler, non-bifurcated process primarily managed by the Department of Insurance itself. We draw on the history that preceded the creation of the Division of Rate Counsel in the Department of the Public Advocate to reach this conclusion. The amicus brief of the American Insurance Association recounts the evolution of public rate counsel's function. At common law, the Attorney General could intervene in suits involving the public interest. Alexander v. New Jersey Power & Light Co., 21 N.J. 373, 380, 122 A. 2d 339 (1956). When the Attorney General exercised that right by appointing special counsel to represent the public in insurance-rate proceedings, compensation was presumably from the Attorney General's own budget. See In re Insurance Rating Board, 55 N.J. 19, 20, 258 A. 2d 892 (1969). Before enactment of the Advocate's Act, the only statutory provision for rate counsel compensation was for the Attorney General to appoint private counsel to represent the public interest in utility rate proceedings. L. 1951, c. 357 (formerly codified at N.J.S.A. 48:2-31.1 to -31.3). By establishing the Division of Rate Counsel, the 1974 law brought rate counsel under the aegis of state government, N.J.S.A. 52:27E-16 to -17, and extended jurisdiction to other businesses and industries, including insurance companies, N.J.S.A. 52:27E-18. Unlike the current section providing for compensation of rate counsel, N.J.S.A. 52:27E-19, the predecessor statute, which dealt only with utilities, included a review mechanism. L. 1951, c. 357 § 2(b) (formerly codified at N.J.S.A. 48:2-31.2). Under the former law, reasonableness challenges were heard by the Board of Public Utility Commissioners, whose final determination was subject to the same review as any final action of an administrative agency. Ibid. Cases in which the Public Advocate's authority is present constitute the functional equivalent of a bill proffered by public interest counsel for services rendered in connection with a rate proceeding. The only difference now is that a department of state government performs the function of rate counsel. The question is, who should review the public agency's bills and how? An easy answer would be to say that the bills are non-reviewable, that they constitute a form of administrative policy-making not subject to judicial review. See, e.g., Mount Laurel v. Department of the Pub. Advocate, 83 N.J. 522, 416 A. 2d 886 (1980) (holding that because Public Advocate's function as enforcer of public interest is executive, discretionary power is broad); Borough of Morris Plains v. Department of the Pub. Advocate, 169 N.J. Super. 403, 404 A. 2d 1244 (App.Div.), certif. denied, 81 N.J. 411, 408 A. 2d 805 (1979) (allowing the Public Advocate broad discretion to intervene in land use limitation when adhering to statutory guidelines). The agency discretion, however, is different in this context. We believe that a better analogy is to those cases in which the Legislature has authorized fees and charges necessary to defray governmental costs. Such fees are not an open-ended grant of power to tax, but rather a well-circumscribed regulatory measure designed to defray the expenses of a particular governmental operation. See Public Serv. Elec. & Gas Co. v. Department of Envtl. Protection, 101 N.J. 95, 109, 501 A. 2d 125 (1985). Such bills or expenses incurred in administering a program may be reviewed, but the standard is the familiar standard governing the review of agency action. The Public Advocate does not resist this standard, recognizing in its brief that well-established principles of administrative law provide the appropriate contours of the right to challenge the Public Advocate's assessments. Because the bills are reviewable, the next question is, who should exercise review power? In the utility setting the allowance of one-tenth of one percent of the utility's revenues in a calendar year, with certain other caps, produces a rough measure of adequacy. N.J.S.A. 52:27E-19a. There is no similar measure in the insurance field. Such measures simply do not fit in the case of rating organizations, which have no gross premium income. Obviously, there is a reservoir of judicial power to review administrative action, but in these cases the usual form of judicial review of agency action is inappropriate. There are too many loose ends in the record, too many unanswered questions. Effective judicial review of agency action requires a developed record. Nor does Rule 4:67-6 appear to provide sufficient procedural guidance. The Appellate Division applied a relaxed form of Rule 4:67-6 to create a mechanism for challenge because N.J.S.A. 52:27E-19b is silent on that issue. The Supreme Court Committee on Civil Practice recommended the rule, adopted July 22, 1983, to bring uniformity and order to enforcement proceedings [of administrative agencies]. 111 N.J.L.J. 671 (1983). But its application here presents the Appellate Division with validity questions without the factual findings necessary for review. In determining who should make such factual findings, [w]e have always stressed the quest for principles of law `designed to assure that a controversy, or its most critical facets, will be resolved by the forum or body which, on a comparative scale, is in the best position by virtue of its statutory status, administrative competence and regulatory expertise to adjudicate the matter.' In re Judges of Passaic County, 100 N.J. 352, 365, 495 A. 2d 848 (1985) (quoting Hinfey v. Matawan Regional Bd. of Educ., 77 N.J. 514, 532, 391 A. 2d 899 (1978)). After all, [l]aw does not serve abstract goals. It serves the needs of parties to resolve disputes. Wunschel v. City of Jersey City, 96 N.J. 651, 664, 477 A. 2d 329 (1984). Cf. Vanderbilt, The Essentials of a Sound Judicial System, 48 Nw.U.L.Rev. 1 (1953) (emphasizing the pragmatic bases of fair trial). And when the determination of [legal issues] must be preceded by `the taking of the necessary evidence and the making of the necessary factual findings,' it is best done by the administrative agency specifically equipped to inquire into the facts. Boss v. Rockland Elec. Co., 95 N.J. 33, 41, 468 A. 2d 1055 (1983) (quoting Roadway Express, Inc. v. Kingsley, 37 N.J. 136, 140, 179 A. 2d 729 (1962)). The question then is which agency is in the best position to develop the record. Having the agency itself, the Department of the Public Advocate, develop the record, seems reasonable. But an aspect of self-interest here requires consideration. In Abbott v. Burke, 100 N.J. 269, 495 A. 2d 376 (1985), when we were confronted with the necessity to create a record on which to premise judicial review of both a statutory scheme and the agency's effectuation of that scheme, we concluded that the mixed questions of law and fact would best be addressed first by the agency primarily involved, the State Board of Education, but we required that an independent hearing officer, from the Office of Administrative Law, conduct the factual hearings. Id. at 301-03, 495 A. 2d 376. As in the past, we molded procedure to the ends of justice. For example, in A.A. Mastrangelo, Inc. v. Department of Environmental Protection, 90 N.J. 666, 449 A. 2d 516 (1982), in which the functions of two agencies of government intersected (as do to some extent here the functions of DOI and Public Advocate), we directed the agencies to conform their procedures to the needs of the statutory scheme. See also Balsley v. North Hunterdon Regional School District Bd. of Educ., 117 N.J. 434, 568 A. 2d 895 (1990) (holding that the Division of Civil Rights, not the Commissioner of Education, has jurisdiction to award attorneys fees under the Law Against Discrimination); Hinfey v. Matawan Regional Bd. of Educ., 77 N.J. 514, 391 A. 2d 899 (1978) (directing that the agency with the dominant interest and expertise hear a hybrid educational and civil rights issue). Here the agency in the best position to resolve the matter, by virtue of its statutory status and absence of self-interest, is the Department of Insurance. As noted, the major encumbrance to following the usual pattern is that the Public Advocate has more than a regulatory interest in the outcome of the proceedings; it also has a financial interest in the outcome of the proceedings. Cf. Balsley, supra, 117 N.J. 434, 568 A. 2d 895 (Division of Civil Rights not judging its own fees). Hence, we believe that the Office of Administrative Law should create the factual record for cases contesting the bills of the Public Advocate. Ideally any challenge to fees should follow closely the proceeding to change charges. Since such a proceeding would be within the ambit of the DOI, the Administrative Law Judge (ALJ) could then transmit factual findings and recommendations to the Department of Insurance. This would assure the court of the DOI's agency expertise on the mixed questions of law and fact presented in the matter, such as whether the proceedings should properly be regarded as ones affecting the public interest by increasing insurance rates. Finally, because the DOI's determination is subject to judicial review, that exercise of judicial authority to review agency action will guarantee due process of law. This procedure would accord with prior practice, in which the utilities' regulatory agency established the reasonableness of public counsel's fees. L. 1951, c. 357 § 2(b) (formerly codified at N.J.S.A. 48:2-31.2). [1] Our concurring members agree with these principles for judicial administration of the disputed claims, but hesitate to impose them because of an absence of explicit statutory authority. But [w]here a statute is silent or ambiguous, `it is our clear duty to choose that construction which will carry out the legislative intent of the statute as a whole   .' Accountemps Division of Robert Half of Philadelphia, Inc. v. Birch Tree Group, 115 N.J. 614, 622, 560 A. 2d 663 (1989) (quoting Horwitz v. Reichenstein, 15 N.J. 6, 8, 103 A. 2d 881 (1954)). See K. Llewellyn, The Common Law Tradition-Deciding Appeals 374 (1960) (If a statute is to make sense, it must be read in light of some assumed purpose.), quoted in Accountemps, supra, 115 N.J. at 623, 560 A. 2d 663. In the absence of the explicit language, then, we must ask ourselves what the Legislature would have intended. As nearly as we can, we must put ourselves in the place of those who uttered the words, and try to divine how they would have dealt with the unforeseen situation   . Exxon Corp. v. Hunt, 97 N.J. 526, 534, 481 A. 2d 271 (1984) (quoting Judge Learned Hand, concurring in Guiseppi v. Walling, 144 F. 2d 608, 624 (2d Cir.1944), aff'd sub nom. Gemsco, Inc. v. Walling, 324 U.S. 244, 65 S.Ct. 605, 89 L.Ed. 921 (1945)), modified, 475 U.S. 355, 106 S.Ct. 1103, 89 L.Ed. 2d 364 (1986). We cannot assume that our Legislature would have intended that we use a jury-rigged procedure patched together from our existing rules. See Lindahl v. Office of Personnel Management, 470 U.S. 768, 799, 105 S.Ct. 1620, 1637, 84 L.Ed. 2d 674, 697 (1985) ([W]e cannot assume that Congress intended to create such a bizarre jurisdictional patchwork.). When a statute is ambiguous, a court must draw upon `those commonsense assumptions that must be made in determining direction without a compass.' Buckley v. Valeo, 424 U.S. 1, 77, 96 S.Ct. 612, 662, 46 L.Ed. 2d 659, 721 (1976) (quoting Rosado v. Wyman, 397 U.S. 397, 412, 90 S.Ct. 1207, 1217, 25 L.Ed. 2d 442, 455 (1970)). We believe that the essential purposes and designs of the Advocate's Act contemplate a procedure that will resolve fee disputes in the simplest, most direct way practicable. Consistent with the presumed intent, we set forth the procedures herein that will achieve that end. We believe that within this framework the arbitrary or capricious standard for review of any agency action will suffice. This shorthand expression will adequately encompass the appropriate measure for review of the Public Advocate's bills. There are three prongs to such a review. First, did the decision under review violate express or implied legislative policies? Here the inquiry is whether the Public Advocate exceeded his statutory authority in seeking compensation for intervention in the disputed proceedings or, put the other way, whether insurers initiated these proceedings for the purpose of raising or changing rates. Second, does the record have an adequate factual basis to sustain the Public Advocate's charges? Third, are the charges unreasonable under the circumstances of the case, thus constituting a clear abuse of discretion? See Campbell v. Department of Civil Serv., 39 N.J. 556, 562, 189 A. 2d 712 (1963) (summarizing nature of judicial review of agency actions). This is the same standard that we used in the context of regulatory fees in Public Service Electric and Gas Co. v. Department of Environmental Protection, supra, 101 N.J. 95, 501 A. 2d 125. On this score, we add a word about the specifics of the review prompted by these cases. Obviously, the level of funding must encompass the overhead expenses attributable to Rate Counsel's activities. Without secretaries and office equipment and a supervisory lawyers' office, no government law office can function. Conversely, the insurance industry is not expected to fund the entire budget of the Public Advocate nor, indeed, activities not related to the 19b definition of compensated services. And, finally, any discovery must be tailored to the relevant issues. Before us, all parties agreed that there was neither intended nor implied in such review a challenge to management decisions of the Public Advocate or his decisions about how best to deploy his resources. Rather, the factual questions will primarily be whether the bills are for proceedings that never occurred, whether they are false or duplicate, and whether they meet the statutory standard. We suspect that this abstract discussion will readily be digested by an ALJ, who will winnow out any such claims. Certainly the expertise of the ALJ and the agency itself will adequately inform any reviewing court of the nature of Rate Counsel's services, i.e., whether the services were reasonable in connection with proceedings initiated to change rates.