Court Opinion

ID: 9946137
Source: CourtListenerOpinion
Date Created: 2024-02-29 15:08:10.971566+00
Date Added: 2024-06-11T14:25:27.874887
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-1672-21

MICHAEL MOSCA,

          Petitioner-Appellant,

v.

BOARD OF TRUSTEES,
PUBLIC EMPLOYEES'
RETIREMENT SYSTEM,

     Respondent-Respondent.
___________________________

                   Submitted February 12, 2024 – Decided February 29, 2024

                   Before Judges Mawla and Chase.

                   On appeal from the Board of Trustees of the Public
                   Employees' Retirement System, Department of the
                   Treasury, PERS No. xx3755.

                   Castellani Law Firm, LLC, attorneys for appellant
                   (David Rock Castellani, on the briefs).

                   Matthew J. Platkin, Attorney General, attorney for
                   respondent (Sara M. Gregory, Assistant Attorney
                   General, of counsel; Jeffrey David Padgett, Deputy
                   Attorney General, on the brief).
PER CURIAM

      Petitioner Michael Mosca appeals from a January 20, 2022 final agency

determination of the Board of Trustees ("Board") of the Public Employees'

Retirement System ("PERS") denying him pension participation and service

credit from 2008 to 2015. The Board, in rejecting a contrary decision issued by

an Administrative Law Judge ("ALJ"), concluded Mosca was not a municipal

employee for those years following the adoption of N.J.S.A. 43:15A-7.2 when

he served as municipal prosecutor for the City of Ventnor. Rather, the Board

held Mosca was serving pursuant to a public services contract and his

engagement was not eligible for PERS credit. We affirm.

                                      I.

      We recount the pertinent facts as developed in the administrative

proceedings. No testimony was taken in those proceedings, as the parties cross-

moved for summary disposition.

      Mosca first enrolled in PERS in 1992 when working as an assistant

prosecutor in Atlantic City, a job he held until 2002. In 1996, Mosca served as

housing prosecutor for Ventnor under a professional services contract. This

contract was awarded under the Local Public Contracts Law, N.J.S.A. 40A:11-

1 to -60 ("LPCL") and paid by voucher from Ventnor's vendor budget. After

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Ventnor's municipal prosecutor resigned, then-mayor, Timothy Kreischer,

offered the position to Mosca. When Mosca accepted, the roles of municipal

prosecutor and housing prosecutor were consolidated.

      Mosca served continually in the municipal prosecutor position until his

resignation in 2016, and Ventnor renewed his appointment during the first

reorganization meeting of each year. He was paid biweekly as a W-2 employee

from Ventnor's "Wages and Salary" budget, and Ventnor withheld the

appropriate payroll deductions. Pension contributions were also withheld from

his paycheck.

      In 2007, the Legislature passed several pension reform measures under

P.L. 2007, c. 92 ("Chapter 92"). Among other things, the statute excluded from

PERS membership persons who performed professional services under contracts

awarded pursuant to the LPCL once their current contract expired.

      In response to these initiatives, Kreischer, along with then-City Solicitor

John Abbott, Esq., and then-Chief Financial Officer ("CFO") Barry Ludy,

reviewed Ventnor's staff and removed from PERS enrollment all professionals

they believed no longer qualified. For example, Abbott's own position was

deemed no longer eligible for enrollment, along with that of the City Engineer,

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City Planner, Bond Counsel, and others. However, Ventnor kept Mosca in the

PERS system.

      In May 2012, Michael Bagnell was elected mayor of Ventnor. Bagnell

negotiated all professional services contracts awarded under LPCL, but he never

negotiated with Mosca.     When Janice Callaghan became City Clerk, she

discussed Mosca's employment with Bagnell and requested additional

documentation of his employment status for Mosca's employee file. In August

2014, at Bagnell's request, Ventnor City Administrator, Thomas Russo, issued a

memorandum ("Russo Memorandum") to Callaghan stating it was his belief

Mosca was a Ventnor employee.

      Throughout both the Kreischer and Bagnell administrations, the Ventnor

City Board of Commissioners passed several annual resolutions concerning

Mosca.    On December 18, 2008, they passed Resolution 154, titled

"REAPPOINTMENT OF MICHAEL MOSCA, ESQ. AS PROSECUTOR OF

THE CITY OF VENTNOR CITY" for 2009. The resolution acknowledged that

LPCL requires awards to be publicly advertised. It continued, "The Contract is

awarded without competitive bidding as a 'Professional Service' under the

provisions of the Local Public Contracts Law because the law permits the

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waiving of competitive bids under [N.J.S.A.] 40A:5-11." Substantially similar

resolutions were passed for 2010 through 2015.

      Public notices of the resolutions were also published in The Press of

Atlantic City for 2009 through 2015. The notices also explicitly referenced the

LPCL, stated the contracts were available for inspection with the City Clerk,

and named Mosca alongside others awarded contracts for such services as

municipal solicitor, municipal auditor, risk management consultant, public

defender, and municipal engineer. The publications listed the amount awarded

to Mosca as "$31,000," and later, "Not to Exceed $31,000[.]"

      Meanwhile, in 2012, the Office of the State Comptroller reported many

professional services contractors continued to improperly participate in PERS,

in violation of the Chapter 92 mandates. In response, the Division of Pension

and Benefits audited many local employers, including Ventnor.

      In a September 2015 letter from the Pension Fraud and Abuse Unit

("PFAU"), Mosca was informed he would be removed from PERS eligibility

retroactive to January 1, 2008. In a letter sent the next day, the PFAU notified

Mosca that they determined he was "an independent contractor rather than an

employee," and cited the following as support for that conclusion: Mosca's

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purported maintenance of his own law practice with full-time, regular business

hours of operation; resolutions adopted annually; and public notices of the same.

      Mosca appealed from the PFAU's determination. He provided them with

an analysis of his employment under the IRS Employee Test ("twenty-factor

test") for independent contractors as applied to his employment with Ventnor,

which was similar to the conclusions in the Russo Memorandum. In 2016, the

PFAU's Acting Director replied and reiterated that Mosca maintained his own

law practice, that Ventnor had passed and published annual resolutions

appointing him under the LPCL, and that the twenty-factor analysis was

unnecessary because the PFAU had already determined Mosca provided

professional services as an independent contractor under an LPCL contract.

      As such, the Board maintained its determination that Mosca was ineligible

for PERS enrollment, retroactive to January 1, 2008. The Board acknowledged

that while Ventnor's clerk could not produce any written agreements, "[t]he

absence of a formal written contract does not negate the existence of a contract."

      Mosca appealed from the Board's initial determination, and the matter was

transferred as a contested case to the New Jersey Office of Administrative Law .

The parties cross-moved to proceed summarily pursuant to N.J.A.C. 1:1-12.5.

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      In support of his motion, Mosca submitted: a certification by Kreischer

denying the existence of LPCL contracts and confirming Mosca's status as a

regular employee; the Russo Memorandum; a certification by Bagnell stating he

negotiated all professional services contracts when serving as Mayor and never

negotiated one with Mosca; Mosca's own certification that no LPCL contracts

were presented to or agreed to by him and that he continued as municipal

prosecutor because he was in PERS; a certification by Abbott that he personally

assisted then-Mayor Kreischer and then-CFO Ludy in reviewing the PERS

eligibility of Ventnor-affiliated professionals; a certification by Russo as to the

preparation of the August 2014 memorandum; a certification by Callaghan that

the Russo Memorandum was an official City record prepared to confirm Mosca's

employment status and PERS eligibility, and that no contracts were drafted or

tendered to Mosca. Mayor Bagnell also certified that the clerk included Mosca

in error "as part of the annual bulk resolutions . . . [which were] passed . . . as a

part of general business, where many items on the agenda were passed

simultaneously without further consideration or discussion."

      In support of its motion, the Board relied on the resolutions and

publications as conclusively establishing Mosca's service under an LPCL

professional services contract.     It characterized Mosca's allegation that the

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                                         7
resolutions were passed in error to be "post hoc and self-serving statements that

are 'factually inaccurate,' as each resolution was passed and was specific to

Mosca's annual appointment," and that the assertions of error "cannot create an

issue of material fact and certainly does not entitle Mosca to summary decision."

      Based on the parties' submissions, an administrative law judge (ALJ)

rendered his initial decision on November 3, 2021. The ALJ described the

proffered evidence as follows:

            [T]he Board's documentary evidence of legally adopted
            municipal resolutions that purport to memorialize and
            enact a certain legal arrangement between a vendor,
            . . . Mosca, and . . . Ventnor is met with evidence from
            witnesses who claim that that evidence cannot be relied
            upon to prove the existence of . . . Mosca's status as a
            vendor or as an independent contractor operating under
            a LPCL-authorized no-bid contract rather than as an
            employee.

      He continued that Mosca had also presented his own certification. Given

the witness certifications, the lack of requests for proposals ("RFPs") or other

written contract documents, and the lack of evidence of any understanding

between Mosca and Ventnor officials that he was anything other than an

employee, the ALJ concluded Mosca did not provide his services under the

LPCL, the resolutions were adopted in error, and Mosca was therefore eligible

for PERS enrollment for the years in question. The Board filed exceptions to

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                                       8
the initial decision, requesting the final determination reject in part, adopt in

part, and modify the ALJ's factual findings, and reject the ALJ's legal conclusion

as to Mosca's PERS eligibility.

      The Board issued its final decision on January 20, 2022. It found that each

year from 2008 to 2015, Mosca was appointed as municipal prosecutor under

the "no[-]bid" professional services language of the LPCL; therefore, the

language of the resolutions and notices reflected that Mosca's appointment as

municipal prosecutor was for professional services. The Board noted if Mosca

was a general hire, there would be no need for his hiring to be published in the

newspaper, and no need for him to be rehired every year. It also rejected the

ALJ's reliance on certifications by the Ventnor mayors, which were prepared

years after the resolutions were passed, and instead found the resolutions' plain

language controlled. The Board noted that just because no written contract was

produced did not mean there was no contractual agreement.

      The Board also rejected the ALJ's attempt to minimize the language in the

appointing resolutions because it "ignores well-established legal precedent."

Instead, it found that the 2008 to 2015 resolutions constituted binding

professional services contracts because "a municipal resolution itself can

constitute a binding agreement for professional services." Therefore, the Board

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                                        9
found the plain language of the resolutions lawfully enacted between 2008 and

2015 conclusively established Mosca was working under a professional services

agreement in violation of N.J.S.A. 43:15A-7.2(a). The Board further added

Mosca "maintained his own private law practice, while purportedly an employee

of Ventnor, with regular business hours of 9:00 a.m. to 5:00 p.m." Finally, the

Board concluded that in applying Chapter 92 to these modified factual findings,

Mosca was ineligible for PERS enrollment.

      On appeal, Mosca argues: 1) the Board impermissibly modified the ALJ's

findings of fact in rendering its final decision; 2) he was a regular employee of

the municipality, not a professional services vendor or independent contractor,

and is therefore eligible for PERS enrollment; and 3) in the alternative, his PERS

membership should be reinstated under the doctrine of equitable estoppel.

                                       II.

                                       A.

      The Legislature adopted a publicly funded pension system for State

employees and qualifying municipal employees in order to provide "deferred

compensation for services rendered." Uricoli v. Bd. of Trs., 91 N.J. 62, 71

(1982). The Legislature hoped to "encourag[e] qualified individuals to enter

and remain in public service." Ibid. (quoting Masse v. Bd. of Trs., 87 N.J. 252,

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                                       10
261 (1981)). However, due to decreases in State revenue and other policy

considerations, lawmakers enacted the Chapter 92 reforms, which became

effective January 1, 2008.

      Among other things, Chapter 92 changed pension eligibility rules to

exclude individuals who worked under a professional services contract and

independent contractors. N.J.S.A. 43:15A-7.2. Local Finance Notices ("LFN")

provided guidance to local employers on the implementation of the new law.

LFN 2007-28 directed local employers' Pension Certifying Officers to apply the

twenty-factor test and to "document that all professionals serving as employees

are not contractors." Specifically, the LFN provided:

                  A professional who is an employee must be a
            bona fide employee that meets the Internal Revenue
            Service "employee test" in order to be a member of
            PERS for those services.
                  ....

                   An employee is someone who is paid a salary or
            hourly compensation that is subject to payroll
            deductions, particularly social security, and federal and
            state income withholding taxes.
                   ....

                   Conversely, if the position is determined to be
            that of an employee and there is a professional service
            contract under which the employee provides services,
            employment may continue, but the individual cannot be
            a member of . . . PERS . . . .

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                                      11
           [N.J. Dep't of Cmty. Affairs, Local Finance Notice
           2007-28 7-8 (Dec. 29, 2007).]

     "Professional services" are defined as:

           services rendered or performed by a person authorized
           by law to practice a recognized profession, whose
           practice is regulated by law, and the performance of
           which services requires knowledge of an advanced type
           in a field of learning acquired by a prolonged formal
           course of specialized instruction and study as
           distinguished from general academic instruction or
           apprenticeship and training.

           [N.J.S.A. 40A:11-2.]

     To award professional services contracts and avoid the public bidding

requirement,

           [t]he governing body shall in each instance state
           supporting reasons for its action in the resolution
           awarding each contract and shall forthwith cause to be
           printed once, in the official newspaper, a brief notice
           stating the nature, duration, service and amount of the
           contract, and that the resolution and contract are on file
           and available for public inspection in the office of the
           clerk of the county or municipality, or, in the case of a
           contracting unit created by more than one county or
           municipality, of the counties or municipalities creating
           the contracting unit . . . .

           [N.J.S.A. 40A:11-5(1)(a)(i).]

     The LPCL defines a contract as:

           any agreement, including but not limited to a purchase
           order or a formal agreement, which is a legally binding

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                                      12
             relationship enforceable by law, between a vendor who
             agrees to provide or perform goods or services and a
             contracting unit which agrees to compensate a vendor,
             as defined by and subject to the terms and conditions of
             the agreement. A contract also may include an
             arrangement whereby a vendor compensates a
             contracting unit for the vendor's right to perform a
             service, such as, but not limited to, operating a
             concession.

             [N.J.S.A. 40A:11-2(3)(21).]

                                         B.

      "[A]n appellate court reviews agency decisions under an arbitrary and

capricious standard." Zimmerman v. Sussex Cnty. Educ. Servs. Comm'n, 237

N.J. 465, 475 (2019) (citing In re Stallworth, 208 N.J. 182, 194 (2011)). See

Melnyk v. Bd. of Educ. of the Delsea Reg'l High Sch. Dist., 241 N.J. 31, 40

(2020). "An agency's determination on the merits 'will be sustained unless there

is a clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks

fair support in the record.'" Saccone v. Bd. of Trs., Police & Firemen's Ret.

Sys., 219 N.J. 369, 380 (2014) (quoting Russo v. Bd. of Trs., Police & Firemen's

Ret. Sys., 206 N.J. 14, 27 (2011)).

      Decisions "made by an administrative agency entrusted to apply and

enforce a statutory scheme" are reviewed "under an enhanced deferential

standard." East Bay Drywall, LLC v. Dep't of Lab. & Workforce Dev., 251 N.J.

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                                         13
477, 493 (2022) (citing Hargrove v. Sleepy's, LLC, 220 N.J. 289, 301-02

(2015)).   This court also "afford[s] substantial deference to an agency's

interpretation of a statute that the agency is charged with enforcing."

Richardson v. Bd. of Trs., Police & Firemen's Ret. Sys., 192 N.J. 189, 196

(2007) (citing R & R Mktg., L.L.C. v. Brown-Forman Corp., 158 N.J. 170, 175

(1999)). "Such deference has been specifically extended to state agencies that

administer pension statutes[,]" because "a state agency brings experience and

specialized knowledge to its task of administering and regulating a legislative

enactment within its field of expertise." Piatt v. Police & Firemen's Ret. Sys.,

443 N.J. Super. 80, 99 (App. Div. 2015) (quoting In re Election Law Enf't

Comm'n Advisory Op. No. 01-2008, 201 N.J. 254, 262 (2010)). Thus, a party

who challenges the validity of the Board's administrative decision bears a

"heavy burden of . . . demonstrating that the decision was arbitrary, unreasonable

or capricious." In re Tax Credit Application of Pennrose Props. Inc., 346 N.J.

Super. 479, 486 (App. Div. 2002); accord Russo, 206 N.J. at 27.

      A reviewing court is not, however, bound by an agency's interpretation of

a statute or its determination of a strictly legal issue outside its charge. Allstars

Auto Grp., Inc. v. N.J. Motor Vehicle Comm'n, 234 N.J. 150, 158 (2018); Dep't

of Child. & Fam. v. T.B., 207 N.J. 294, 302 (2011). See Greenwood v. State

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                                        14
Police Training Ctr., 127 N.J. 500, 513 (1992) (agencies have no superior ability

to resolve purely legal questions, and a court is not bound by an agency's

determination of a legal issue).

      The judicial role in reviewing an administrative action is generally limited

to three inquires:

            (1) whether the agency's action violates express or
            implied legislative policies, that is, did the agency
            follow the law;

            (2) whether the record contains substantial evidence
            to support the findings on which the agency based its
            action; and

            (3) whether in applying the legislative policies to the
            facts, the agency clearly erred in reaching a conclusion
            that could not reasonably have been made on a showing
            of the relevant factors.

            [Allstars Auto Grp., 234 N.J. at 157 (quoting In re
            Stallworth, 208 N.J. at 194).]

      When determining whether a person is eligible for pension benefits, courts

should carefully interpret the applicable guidelines "so as not to 'obscure or

override considerations of . . . a potential adverse impact on the financial

integrity of the [f]und.'" Smith v. State, Dep't of Treasury, Div. of Pensions &

Benefits, 390 N.J. Super. 209, 213 (App. Div. 2007) (alteration in original)

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                                      15
(quoting Chaleff v. Bd. of Trs., 188 N.J. Super. 194, 213 (App. Div. 1983)); see

also Francois v. Bd. of Trs., 415 N.J. Super. 335, 350 (App. Div. 2010).

                                       III.

         The facts demonstrate Mosca's appointment as municipal prosecutor met

the definition of a "professional services contract" under the LPCL. There is no

dispute that Ventnor did not hold public bidding for the municipal prosecutor

position. Additionally, the governing body appointed Mosca each year by

resolution, specifically stating that his contracts were each awarded under

N.J.S.A. 40A:5-11 and were documented by publishing in the Atlantic City

Press.

         Mosca's argument that the absence of a written "professional services

contract" defeats application of N.J.S.A. 43:15A-7.2(a) is unavailing.       The

absence of a writing does not defeat the professional engagement from

qualifying as an enforceable professional services agreement as used in Chapter

92. Cf. Kress v. La Villa, 335 N.J. Super. 400, 409-11 (App. Div. 2000)

(enforcing agreement under theory of "quasi-contract" to prevent unjust

enrichment where the requirements of N.J.S.A. 40A:11-5 were not met). The

resolution appointing him as municipal prosecutor is a writing sufficient to

constitute a contract under the LPCL, N.J.S.A. 40A:11-2(3)(21), and therefore,

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the Board did not err in concluding the "resolution itself constitute[d] a binding

agreement between the parties specifying the term and salary of the position."

      This legal work under a professional services agreement is undoubtedly

the exact type of position the Legislature intended to exclude from PERS in

enacting the Chapter 92 reforms. N.J.S.A. 40A:11-2(6). Each resolution passed

was specific to Mosca's annual reappointment, and titled appropriately,

specifically naming Mosca as the individual awarded the professional services

no-bid contract. Allowing a professional service provider who is awarded a

professional service contract and openly provides professional services to the

public to be considered a PERS-eligible employee is inconsistent with the

express intent behind the Legislature's Chapter 92 reforms.

      The Board did not impermissibly modify the ALJ's findings of fact in

rendering its final decision. Based on the plain language of these resolutions,

the Board was within its discretion to reject the ALJ's findings, especially since

these findings were not based on the ALJ's firsthand assessment of credibility,

but instead on interpretation of a statute, which the agency is responsible for

enforcing. Richardson, 192 N.J. at 196. Given the deference owed to the Board,

the language of the governing statute, and Ventnor's resolutions, Mosca was not

an employee entitled to service credit.

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Affirmed.

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            18