Court Opinion

ID: 9711596
Source: CourtListenerOpinion
Date Created: 2023-08-26 04:35:07.228179+00
Date Added: 2024-06-11T18:23:04.381984
License: Public Domain

PASHMAN, J.,
dissenting.
I am in general agreement with the majority’s conclusions regarding the scope of the Commission’s authority to prevent economic concentration and the exemption of the Commission’s regulations from the Sherman Act. In implementing the policy announced in N.J.S.A. 5:12 — l(b)(12), the Commission is not confined to addressing the kind of economic concentration pro*347scribed by antitrust laws. Instead, the Commission may promulgate regulations designed to curb any economic concentration in the casino industry or ancillary service industries in New Jersey that threatens the economic stability of casino operations. Because the Commission is a State regulatory agency, any regulation that is validly promulgated under the Casino Control Act will be “state action” exempt from the scope of the Sherman Act.
In spite of my agreement on these issues, I must .dissent from the majority’s holding that Bally was not entitled to an eviden-tiary hearing before the Commission made its final decision. Since I would find the regulation invalid for lack of an adequate hearing, I decline to decide whether the fifty percent rule is arbitrary and capricious in violation of Bally’s due process rights.
In reaching its conclusion that Bally was not entitled to an evidentiary hearing, the majority characterizes the Commission’s action as “a policy decision based on undisputed facts” and concludes that the proceeding was rule making exempt from the requirement of an evidentiary hearing. Labeling the proceeding rule making only begs the question. The majority disregards the significance of facts which it apparently concedes: that the Commission was reacting to Bally’s domination of the domestic slot machine market and that at present only Bally is adversely affected by the Commission’s decision. When agency action directly affecting a single party masquerades as a general rule, I believe that principles of procedural due process require an evidentiary hearing.
Ordinarily, a rule making proceeding is directed at a general factual setting or a class of similarly situated persons. In such a case, an individual’s complaint of hardship will not entitle him to an evidentiary hearing, see Heir v. Degnan, 82 N.J. 109, 119 (1980), and his interests will be subordinated to the welfare of the general public, Willapoint Oysters v. Ewing, 174 F.2d 676, 693 (9th Cir.), cert. denied, 338 U.S. 860, 70 S.Ct. 101, 94 L.Ed. *348527 (1949). If every person adversely affected by a legislative act or agency rule had a right to a hearing, our form of government could not function. See Bi-Metallic Investment Co. v. State Board of Equalization, 239 U.S. 441, 445, 36 S.Ct. 141, 142, 60 L.Ed. 372 (1915).
However, where agency action has an exceptional and immediate effect on a particular person, due process entitles the affected person to a hearing no matter what form of proceeding the agency chooses. Philadelphia Co. v. Securities and Exchange Commission, 175 F.2d 808 (D.C.Cir.), vacated as moot, 337 U.S. 901, 69 S.Ct. 1047, 93 L.Ed. 1715 (1949); see Londoner v. Denver, 210 U.S. 373, 28 S.Ct. 708, 52 L.Ed. 1103 (1908); Cunningham v. Department of Civil Service, 69 N.J. 13 (1975). As a leading commentator has reasoned, the affected person “should be entitled to a hearing, regardless of . . . the nature of the facts in dispute.... From the point of view of the individual concerned, ... it is the fact that a judicial decision affects him particularly, upon individual grounds, that makes the decision of substantial impact. Even if agency action is legislative under the time test [in that it is prospective in application], if it is particular in its applicability, its effect is much the same as that of an adjudicatory decision.” B. Schwartz, Administrative Law 204 (1976). Justice Handler has ably supported this principle in his concurring opinion. Ante at 345-46.
Rate making proceedings are the most obvious illustration of this rule. Even though setting utility rates is a legislative rather than a judicial function, Public Service Coordinated Transport v. State, 5 N.J. 196, 214 (1950), when a public utility commission determines the rates that a particular company may charge, due process requires that the agency make its decision only after an evidentiary hearing. Railroad Commission v. Pacific Gas & Electric Co., 302 U.S. 388, 393, 58 S.Ct. 334, 337, 82 L.Ed. 319, 322 (1938). This rule is incorporated into the administrative law of this State. See N.J.S.A. 48:2-21(b).
*349The right to an evidentiary hearing, routinely accepted in rate making proceedings, has also been recognized in other contexts where an agency rule exceptionally affects the interests of a single person or small group of persons. In Philadelphia Co. v. Securities and Exchange Commission, supra, the Securities and Exchange Commission issued an order changing the scope of an exemption from the requirements of the Public Utility Holding Company Act of 1953. At the time the rule became effective, Philadelphia Co. was the only company that would have been affected by the changed exemption. The Commissioner promulgated the rule after soliciting written comments and hearing oral arguments, but without affording Philadelphia Co. the evidentiary hearing the company had requested. The Court of Appeals for the District of Columbia Circuit held that the Commission’s rule was invalid for lack of an adequate hearing, including the right of the affected party to hear the Commission’s evidence, cross-examine witnesses, and introduce evidence on its own behalf, as due process requires. Id. at 817. The court stated: “It is elementary that the action of an administrative tribunal is adjudicatory in character if it is particular and immediate, rather than, as in the case of legislative or rule making action, general and future in effect.” Id. at 816. The Commission’s order was particular, since it applied to Philadelphia Co. alone; and it was immediate in effect, because it would influence ongoing reorganization proceedings. As to other companies who in the future might come within the ambit of the order, the court noted that the rule might well be legislative in character. Id. at 817. Nevertheless, Philadelphia Co. was entitled to an evidentiary hearing since the action of the Commission particularly and immediately affected its interests. In response to the Commission’s contention that none of the relevant factual issues was in dispute, the court observed that “[wjhether or not material issues of fact exist we can determine only after an appropriate hearing and a proper record.” Id. at 819.
*350The principle of procedural due process applied in Philadelphia Co. and accepted in other cases, e. g., Appalachian Power Co. v. Environmental Protection Agency, 477 F.2d 495, 501 (4th Cir. 1973); American Airlines, Inc. v. Civil Aeronautics Board, 359 F.2d 624, 631 (D.C.Cir.) (en banc), cert. denied, 385 U.S. 843, 87 S.Ct. 73, 17 L.Ed.2d 75 (1966), is also recognized in the statutory and case law of this State. The definition of “contested case” in the Administrative Procedure Act, N.J.S.A. 52:14B-2(b), quoted by the majority, ante at 332, emphasizes the need to provide an evidentiary hearing to “specific parties” whose interests are affected by agency action. The definition includes those cases where a hearing is “required by constitutional right.” This is such a case.
On previous occasions, this Court has emphasized the need for an evidentiary hearing where administrative action is directed at a specific party or situation, even if the action is rule making. In Boller Beverages, Inc. v. Davis, 38 N.J. 138 (1962), the Court noted that “special rulings,” in which an administrator interprets a statute or regulation for the future guidance of all persons who may be affected, “may partake of both rule-making and adjudication.” Id. at 154. Addressing the proper procedure to be followed in making these rulings, the Court stated that “if the ruling is directed at a specific situation involving a single interest, the dissatisfied party should also be first entitled to a trial type hearing in the agency.” Id. at 155. More recently, in Cunningham v. Department of Civil Service, supra, we held that the “crucial questions” determining the right to an evidentiary hearing are “whether the fact finding involves a certain person or persons whose rights will be directly affected, and whether the subject matter at issue is susceptible to the receipt of evidence.” 69 N.J. at 22.
The majority would have the right to an evidentiary hearing depend on the existence of disputed facts. Ante at 334. I have no quarrel with the general proposition that an evidentiary hearing is “not required on issues of law, policy or discretion.” 2 K. Davis, Administrative Law Treatise § 12.2 at 410 (2d ed. *3511979). But it is inappropriate to decide whether a party has á right to a hearing solely on the basis of a label attached to the matter at issue — a label which is often conclusory. An inquiry into the particularized effect of the proceeding is more consistent with fundamental fairness because it protects against administrative actions that substantially affect the interests of particular persons in the guise of a rule of general applicability. When a rule exerts such a particularized effect, I would be less inclined than the majority to find that there are no disputed facts underlying the agency’s decision.
Applying these principles to the present case, I would find that the Casino Control Commission’s rule is invalid. Although the “fifty percent” rule is phrased in general terms, there is no doubt that at the present it affects only Bally. Only Bally will lose business. The Commission itself acknowledged in a prepub-lication version of its statement of policy that the rule was directed at Bally’s domination of the market. The transcript of the public hearings held before the rule was promulgated furnishes further evidence that this rule has an individualized impact on Bally and was drafted in response to Bally’s market leadership.
The record in this case also indicates that the rule has already affected Bally’s sales. When Desert Palace of New Jersey requested permission to purchase 1,500 slot machines from Bally, the Commission limited the purchase to no more than 843 machines, half the number that Desert Palace would be allowed to have in operation in its casino.
Furthermore, the subject matter of the proceeding — whether Bally’s present market dominance will adversely affect the economic stability of casino operations in New Jersey — is susceptible to development in an evidentiary hearing. It may be true, as the majority asserts, ante at 333, that some of the facts on which the Commission’s decision was based are undisputed. But conclusions to be drawn from these facts concerning the potential harm to the New Jersey casino industry are very much in *352dispute. Nor is this dispute an abstract question of policy; the Commission was obviously reacting to the particular threat it perceived in Bally’s current market leadership. Whether such a threat exists presents a factual question that Bally should have a chance to develop in an evidentiary hearing. Unlike the majority and concurring opinions, I would not allow the Commission, by characterizing the facts as undisputed, to deprive a party whose interests are exceptionally affected of the right to demonstrate that there are disputed facts and to present relevant evidence. Of course, Bally should not be permitted to introduce evidence irrelevant to the issues before the Commission, such as the legality of Bally’s market dominance under antitrust laws. That question is immaterial in light of our construction of the phrase “economic concentration” in the Casino Control Act. In short, under principles of due process, since the Commission’s action had a particular and immediate impact on Bally alone and depended on facts on which evidence would be pertinent, Bally should have been afforded the evidentiary hearing it requested.
It is perhaps rare that administrative action that is framed in general terms will exert an immediate effect on a particular person and no one else. Nevertheless, where, as here, individualized action is taken under the guise of a general rule, the ordinary principle of representative government, that no individual has a right to an evidentiary hearing before legislative action is taken, must yield to an equally fundamental principle— that an individual has a right to participate in government action that exceptionally affects him.
For these reasons, I dissent from the judgment of the majority and would remand to the Commission for an evidentiary hearing.
For affirmance — Justices SULLIVAN, CLIFFORD, SCHREIBER, HANDLER and POLLOCK — 5.
For remandment — Justice PASHMAN — 1.