Court Opinion

ID: 9711595
Source: CourtListenerOpinion
Date Created: 2023-08-26 04:35:07.222754+00
Date Added: 2024-06-11T18:23:04.166158
License: Public Domain

HANDLER, J.,
concurring.
I concur in the opinion of the majority of the Court. I write separately to emphasize certain principles of administrative law relating to the rulemaking authority of administrative agencies. These principles, which underlie today’s decision upholding the actions of the Casino Control Commission, are codified in our Administrative Procedure Act, N.J.S.A. 52:14B-1 et seq., and its legislative progeny creating the Office of Administrative Law, N.J.S.A. 52:14F-1 et seq.
Most administrative agencies, in the discharge of their regulatory responsibilities, are empowered to make determinations by either promulgating a “rule” or rendering an “adjudication.” This authority must be exercised in accordance with the standards of the Administrative Procedure Act (APA). N.J.S.A. 52:14B-1 et seq.
The Casino Control Commission is fully subject to the strictures of the APA. N.J.S.A. 5:12-69(b); N.J.S.A. 5:12-107(a). Under the APA, an “adjudication” is a “final determination, decision or order rendered in a contested case.” N.J.S.A. 52:14B-2(c). The APA defines a “contested case” as
*338A “rule” is an “agency statement of general applicability and continuing effect that implements or interprets law or policy or describes the organizational procedure or practice requirements of any agency.” N.J.S.A. 52:14B-2(e).
Administrative agencies enjoy a great deal of flexibility in selecting the proceedings most suitable to achieving their regulatory aims. This is contemplated by the law that created the Office of Administrative Law, N.J.S.A. 52:14F-1 et seq., supplementing the APA, and is provided with particularity in the rules adopted under this legislation. N.J.A.C. 1:1-1.4 to 1.7; 1:1-2.-2(c) (June 19, 1980). That choice is ordinarily made in terms of whether a particular matter is to be classified by the agency as a “contested case.” Thus N.J.S.A. 52:14F-7(a) states that “nothing in this ... act shall be construed to deprive the head of any agency of the authority pursuant to section 10 of P.L.1968, c. 410 (C. 52:14B-10) to determine whether a case is contested.” See also N.J.A.C. 1:1-1.4, n.l which underscores this, viz:
L.1978, c. 67, amending the Administrative Procedure Act and establishing the Office of Administrative Law to conduct hearings in contested cases provides, in § 9 (N.J.S.A. 52:14F-7), that it is the prerogative of the agency heads “to determine whether a case is contested ...” It is the statutory obligation of the Director of the Office of Administrative Law, inter alia, to “develop uniform standards ... (regulating) the conduct of contested cases and the rendering of administrative adjudications” (N.J.S.A. 52:14F-5e) and to “advise agencies concerning their obligations under the Administrative Procedure Act... .” (N.J. S.A. 52:14F-5 h).
Indeed, additional procedural choices are available in the form of declaratory rulings and advisory opinions, N.J.S.A. 52:14B-8; N.J.A.C. 15:15-9.1, -9.8, which illustrate further the flexibility reposed in agencies to enable them to effectuate fully their administrative aims. The most basic procedural choice in agency proceedings, however, is between rulemaking and adjudication. That decision is, of course, subject to broad guidelines which are derived from judicial decisions, see, e. g., Cunningham *339v. Dept. of Civil Service, 69 N.J. 13 (1975) and statute, see N.J.S.A. 52:14B-2(b), (e), as well as administrative regulations, see N.J.A.C. 1:1-1.4 to 1.7.
These provisions and guidelines recognize the important authority placed in administrative agencies in fulfilling their regulatory responsibilities. The procedural choice as between adjudication and rulemaking is an aspect of that delegated authority and lies within the informed discretion of administrative agencies. These considerations, therefore, strongly counsel judicial deference to the administrative choice between adjudication and rulemaking.1
The significance of the choice between rulemaking and adjudication is that it affects the procedure that must be followed in reaching an ultimate agenoy determination. In particular, as crystallized by the contentions on this appeal, the choice between rulemaking and adjudication has important ramifications in terms of the kind of agency hearing that must be undertaken in the matter. Thus, the type of hearing required for purposes of developing an evidential foundation for the eventual agency disposition may differ markedly depending upon whether that disposition is rulemaking or adjudication.
*340In general terms an adjudication requires a trial-type hearing. This hearing is conducted by an administrative law judge (ALJ), N.J.S.A. 52:14F-5(n), except in those contested cases where the hearing function has not been delegated by the head of the agency, N.J.S.A. 52:14F-8(b). That kind of hearing ordinarily entails the production of competent evidence, frequently testimonial in character, and contemplates the right to confront adverse evidence, usually through cross-examination. In rule-making, however, the “hearing” is not governed by strict procedural requirements or subject to conventional rules of evidence. Frequently, the proceedings permit the incorporation of or reference to evidence developed outside the agency proceedings or the written submissions by interested parties with or without the aid of an ALJ. Compare N.J.S.A. 52:14B-9, 10 and N.J.S.A. 52:14F-5(n) with N.J.S.A. 52U4B-4, 5 and N.J.S.A. 52:14F-5(o).2
Generally, adjudication is the preferred, if not required, mode where there exist disputed issues of fact which must be resolved in order to determine the rights, duties, obligations, privileges, benefits or other legal relations of specific parties. N.J.A.C. l:l-1.5(a)(3), -1.6(a)(1). This may be especially true where the' factual issues most suitably require trial-type procedures or strict rules of evidence for their proper resolution. Contrariwise, where the agency is concerned with “broad policy issues” affecting an entire field or industry, and the proposed final agency action is intended to be applied prospectively, “in futu-ro,” rulemaking is the norm. N.J.A.C. 1:1 — 1.6(a)(3), -1.6(a)(7). And, in addition, where factual issues do not necessarily or *341reasonably require development and determination through adversary techniques or conventional evidence rules, rulemaking procedures are appropriate.
The selection between adjudication and rulemaking is based not only upon the form or effect of the final disposition, such as the number of persons affected or its retroactive or prospective effect. The choice ultimately is a matter of which procedure is best tailored to achieve the goals and functions of the agency in the given case. See N.J.A.C. 1:1 — 1.6(a)(3). These objectives can include, for example, investigative factfinding, gathering general information, reconciling conflicts, resolving disputes, developing continuity, rendering advice, achieving clarity, providing flexibility, responding quickly to a particular situation, or acting emergently. See generally, David L. Shapiro, “The Choice of Rulemaking or Adjudication in the Development of Administrative Policy,” 78 Harv.L.Rev. 921 (1965). Thus, the procedural policy selection — adjudication or rulemaking — must be respon-' sive to the overall agency purpose and function in the context of the particular case, subject of course to the general judicial and legislative guidelines governing administrative agency proceedings.3
In the matter at hand, Bally Manufacturing Corporation argues that the Casino Control Commission acted beyond the limits of its discretion in proceeding by rulemaking instead of adjudication. Bally bases its position on the ground that it was the target of the regulation and the only manufacturer whose rights were affected by the proposed Commission action. It contends that the rights and privileges of a “specific” party were determined, bringing the proceedings within the APA definition of a “contested case,” N.J.S.A. 52:14B-2(b), and obligating the agency to proceed in the adjudicative mode.
*342Although facially attractive, such contentions are overinclu-sive and ignore the extent to which an administrative rulemak-ing proceeding may itself be honed so as to adjust to the exigencies of a given situation. Thus even though one party would be specifically affected by the proposed rule, it does not necessarily follow that the preferred proceeding be adjudication rather than rulemaking. There can be rulemaking that originates with and involves a specific party.
Such a concept of specific rulemaking, as a specialized subset of rulemaking in general, is well established in the lexicon of federal administrative law. See 5 U.S.C.A. § 551(4). See also, e. g., Law Motor Freight, Inc. v. C. A. B., 364 F.2d 139, 142-143 (1 Cir. 1966); Anaconda Co. v. Ruckelshaus, 482 F.2d 1301, 1306-1307 (10 Cir. 1973); PBW Stock Exchange, Inc. v. S. E. C., 485 F.2d 718, 731-733 (3 Cir. 1973), cert. den. 416 U.S. 969, 94 S.Ct. 1992, 40 L.Ed.2d 558 (1975); Hercules, Inc. v. E. P. A., 598 F.2d 91, 118 (D.C.Cir.1978). See generally Davis, Administrative Law Treatise § 5.02 (1958); Davis, Administrative Law Treatise §§ 6.38, 7.2 (2d ed. 1979); Note, 87 Harv.L.Rev. 782, 785-790 (1974). Cf. U. S. v. Florida East Coast Railway Co., 410 U.S. 224, 244-246, 93 S.Ct. 810, 820-821, 35 L.Ed.2d 223, 239-240 (1973); American Airlines, Inc. v. C. A. B., 359 F.2d 624, 630-631 (D.C.Cir.1966) (en banc), cert. denied 385 U.S. 843, 87 S.Ct. 73, 17 L.Ed.2d 75 (1966). The federal experience, though much more extensive, is not wholly alien to this jurisdiction. An agency determination to proceed in its role as legislator by promulgating a rule, rather than its role as a court by adjudicating, even where a specific party is specially involved, has a sound basis in New Jersey administrative law, N.J.A.G. 1-1. 7(a)(3) (“matters which will affect the rights of a specific party, but where there is neither a statutory nor a constitutional right to an adjudicatory hearing, . . . are not contested”), see also Boller Beverages, Inc. v. Davis, 38 N.J. 138, 151-152 (1962) (tentatively recognizing a category of special rulemaking), and in the legislative analog to specific rulemaking, special legislation, see, e. g., Hudson Circle Servicenter, Inc. v. Kearney, 70 *343N.J. 289, 316 (1976) (legislation valid even though only one party is affected, as long as classification has a rational relationship to the purposes of the enactment). Thus, a rulemaking choice to govern particular proceedings is valid even where specific in its impact, if enough other characteristics endemic to rulemaking are present.
Here, the proceedings of the agency have the essential features of legislation necessary for rulemaking to be a valid procedural choice. The rule promulgated by the Casino Control Commission has future or prospective effect. It does not purport to resolve an extant dispute or determine adversary claims. It does not constitute a disposition of particular interests through a retroactive determination. See N.J.A.C. 1:1 — 1.5(a)(3); N.J.A.C. l:l-1.6(a)(4) through 1.6(a)(9); N.J.A.C. l:l-1.7(a)(2) through 1.7(a)(4). The rule is worded generally and could impact directly upon others. Many entities are potentially as well as actually affected — companies which may develop and manufacture an improved slot machine with a strong market appeal, the casino industry and the public in general. The general classification is genuine and not a sham. Moreover, the subject matter of the proceeding is- complex, technical and highly sensitive, involving difficult regulatory and economic determinations which are likely best developed through the flexible process that is rulemaking. See N.J.A.C. 1:1-1.6(a)(3), -1.7(a)(4), -1.7(a)(5). Therefore the administrative determination to employ the procedural policy choice of specific rulemaking is reasonable, sound and valid.
The validity of the procedural policy choice, however, does not end the inquiry posed in this case. While a full blown hearing in the adjudication sense may not be required, the agency must still determine the appropriate type of hearing that is to be conducted within the relevant procedural mode selected. Thus, even though the procedural choice, as here, involved rulemaking, the hearing procedures to be followed must still be ascertained *344and settled.4 The hearing requirements are to be determined not only as a matter of statutory right, but by evaluating the objectives to be achieved, the interests that are affected by the contemplated regulation and the evidential foundation that must reasonably be developed as a predicate to valid agency action. These considerations implicate principles of fair play and administrative due process and they are relevant in rule-making proceedings just as in adjudicatory proceedings, although the contours of the fairness standards may differ.
As earlier noted, in the hearing of a contested case involving adjudication in its classic sense certain procedural features must be present. These include reasonable notice, the right to present evidence and to confront adverse evidence, factual findings based upon sufficient and reliable evidence derived exclusively from the record, the opportunity to present argument on all *345major issues and a final decision similarly confined exclusively to the record. See N.J.S.A. 52:14B-9,10; N.J.A.C. 15:15-10.2 to 10.6; N.J.A.C. 1.1-6.1 et seq. See generally D. L. & W. R. Co. v. City of Hoboken, 10 N.J. 418, 424 (1952) (findings of fact required); In re Plainfield-Union Water Co., 11 N.J. 382, 389 (1953) (parties must have opportunity to refute adverse evidence); Mazza v. Cavicchia, 15 N.J. 498, 511 (1954) (establishing principle of exclusiveness of record); Winston v. Bd. of Ed. of So. Plainfield, 125 N.J.Super. 131, 138 (1973), aff’d 64 N.J. 582, 586 (1974) (secret hearing examiner’s report invalid).
In contrast, the requirements for a hearing in the general rulemaking mode may be considerably different. The statute does not require more than written notice and the opportunity to comment by affected parties, see N.J.S.A. 52:14B-4, 5. It does not follow, however, that such broad or loosened hearing requirements will necessarily suffice in all rulemaking. When specific parties are particularly affected by a proposed rule, fair play and administrative due process dictate that an agency must conscientiously concern itself with and make reasonable efforts to accommodate the rights and interests of the affected individual and genuinely account for the individualized effect of its proposed action. Boller Beverages, Inc. v. Davis, supra, 38 N.J. 138; Cunningham v. Dept. of Civil Service, supra, 69 N.J. 13. See also Philadelphia Co. v. S. E. C., 175 F.2d 808 (D.C.Cir.1948), vacated as moot, 337 U.S. 901, 69 S.Ct. 1047, 93 L.Ed. 1715 (1949); American Airlines, Inc. v. C. A. B., supra, 359 F.2d 624; Walter Holm & Co. v. Hardin, 449 F.2d 1009 (D.C.Cir.1971); Appalachian Power Co. v. E. P. A., 477 F.2d 495, 500-501 (4 Cir. 1973); Davis, supra; Note, supra, 87 Harv.L.Rev. at 785-790. Cf. N.J.A.C. l:l-1.7(a)(3). See generally, Estreicher, “Pragmatic Justice: The Contributions of Judge Harold Leventhal to Administrative Law, 80 Columbia L.Rev. 894, 909-926 (1980); Davis, “Facts in Lawmaking,” 80 Columbia L.Rev. 931 (1980). This refinement of the principles applicable generally to rule-making is exemplified by ratemaking procedures which, although rulemaking in mode, require an evidentiary hearing as *346part of the broader proceeding. See, e. g., Public Service Coordinated Transport v. State, 5 N.J. 196, 214 (1950). This is particularly true where’ the factual inquiry involves a subject matter that is controversial or unsettled, or there are material and essential facts that are genuinely contested. Cf. N.J.A.C. 1:1 — 1.6(a)(1). The principle extends not only to the type of hearing but also to the thoroughness of the record that is to be developed. See, e. g., United Hunters of N. J., Inc. v. Adams, 36 N.J. 288 (1962). It is thus noteworthy that administrative law judges, who are especially skilled in the conduct of adjudicatory hearings, may also be employed in rulemaking proceedings. N.J.S.A. 52:14F-5(o).
Nevertheless, applying these principles to the matter at hand, the rulemaking procedure employed and followed by the Commission in this case was adequate, fair and proper. All that was reasonably necessary in the context of this case was for interested parties, even the party specifically affected, to be given an opportunity to present their positions. Nothing more than written presentations to the Casino Control Commission by Bally was required for the simple, yet cogent, reason, as fully explicated by the majority, ante at 333-334, that no material issue of fact existed for which an evidentiary hearing, a more thorough record, or further findings of fact could prove helpful or more fruitful in informing the agency as a basis for its ultimate determination.
These principles, I believe, underlie the opinion of the majority of the Court and I, therefore, join its decision.

The provision for agency determination in classifying proceedings as between a contested case which entails adjudication and a case to be resolved through rulemaking is parallel to federal administrative agency practice and mirrors the rule of discretionary choice embedded in federal administrative law. See SEC v. Chenety, 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947), rehearing denied 332 U.S. 783, 68 S.Ct. 26, 92 L.Ed. 367 (1947); David L. Shapiro, “The Choice of Rulemaking or Adjudication in the Development of Administrative Policy,” 78 Harv.L.Rev. 921 (1965). Of course these federal principles are not binding on this Court’s interpretation of the New Jersey act. We are not today presented with a situation which calls for us to evaluate any federal principles which may be discordant with the aims and wording of our own statutory enactment. Nevertheless, it is well to note that in New Jersey a high degree of discretion in making the appropriate procedural choice lies with the administrative agency itself, N.J.S.A. 52:14F-7, N.J.S.A. l:l-2.2(a), and that discretion in these matters is also reposed in the Office of Administrative Law. N.J.A.C. l:l-2.2(c).

In this case, even if the choice by the Casino Control Commission were to proceed by way of adjudication, the hearing would not be required to be conducted by an administrative law judge. This, because the Commission has determined not to delegate the hearing function. The Commissioners, who are the decisional officers of the agency, have elected to conduct the hearing themselves. Hence, under N.J.S.A. 52:14F-8(b), with respect to such cases, the agency is exempt from the jurisdiction of the Office of Administrative Law and the assignment of an administrative law judge to conduct its hearings. See, e. g., In re Orange Savings Bank, 172 N.J.Super. 275 (App. Div.1980).

Although not done in this case, it would be prudent for an agency to provide a written explanation or statement of reasons for its procedural policy choice. Cf. N.J.A.C. l:l-2.2(c).

N.J.A.C. 1:1-1.6(a)(3) reflects this approach. It recognizes, for example, that even though a case may be fairly classified as “contested” and amenable to adjudication, it may also partake of features that are uncontested in the sense they are “quasi-legislative” and susceptible of “rulemaking.” In that hybrid situation the agency proceeding may involve dual approaches. The rule states:
Contested cases resolve questions relating to the rights, entitlements, and obligations of specific parties even in large, but defined, groups. They do not deal with broad policy issues affecting entire industries or large and undefined classes of people. In some instances an agency’s matters may be contested cases (judicial) in part and uncontested cases (legislative or regulatory) in part. It is necessary in each such matter to determine whether the issues can be fruitfully separated or whether the needs of fairness, efficiency, and thoroughness require the issues to be handled in a single, integrated proceeding.
The case here arguably involves the converse situation to that described in N.J.A.C. l:l-1.6(a)(3), namely, one in which a matter is essentially uncontested in the sense that it is quasi-legislative or involves rulemaking but also has certain aspects that reasonably require adjudicative procedures for their proper resolution. While this kind of agency matter is within the contemplation of the APA and the rules of the OAL, for the reasons set forth in the majority opinion, as well as in this concurrence, the present case does not call for the hybridization of adjudicative and rulemaking procedures; rather the rulemaking procedures that were actually employed by the agency were sufficient.