Court Opinion

ID: 4429163
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:19:12.320711+00
Date Added: 2024-06-11T14:50:41.203808
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NOT FOR PUBLICATION WITHOUT THE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-1557-17T4

JAMES LONG and HOMER
WALKER,

          Petitioners-Appellants,

v.

NEW JERSEY TURNPIKE
AUTHORITY,

     Respondent-Respondent.
______________________________

                    Argued February 4, 2019 – Decided March 8, 2019

                    Before Judges Messano, Fasciale and Gooden Brown.

                    On appeal from the New Jersey Turnpike Authority.

                    Matthew Faranda-Diedrich argued the cause for
                    appellants (Royer Cooper Cohen Braunfeld LLC,
                    attorneys; Matthew Faranda-Diedrich, of counsel and
                    on the briefs; Alexander J. Nassar, on the briefs).

                    Christopher R. Paldino argued the cause for respondent
                    (Chiesa Shahinian & Giantomasi, PC, attorneys;
                    Ronald L. Israel, Christopher R. Paldino, and Ryan P.
                    O'Connor, on the brief).
PER CURIAM

          James Long and Homer Walker (petitioners), two E-ZPass toll violators,

filed a petition for rulemaking with the New Jersey Turnpike Authority (NJTA).

They had argued that a $50 administrative fee, which N.J.A.C. 19:9-9.2(b) (the

regulation) permitted, was excessive and violated N.J.S.A. 27:23-34.3(a) (the

authorizing statute). Petitioners now appeal from an October 18, 2017 final

decision by the NJTA, which denied their petition for a rule change and related

relief.

          We reject petitioners' contention that NJTA violated the Administrative

Procedures Act (APA), N.J.S.A. 52:14B-4, or notions of due process or

fundamental fairness, when it initially promulgated the regulation in 2011, and

in 2017, when it considered the petition, but we remand for further proceedings

consistent with this opinion.

          We therefore affirm in part and remand in part.

                                          I.

          In May 2017, approximately six years after NJTA raised the fee from $25

to $50, and almost two years after petitioners had paid their respective fees, they

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filed their petition. 1   The petition, entitled "Petition for Rule Change,

Refund/Disgorgement and Cause of Action for Unjust Enrichment," challenged

the regulation on two grounds. Petitioners' first and primary objection is that

NJTA used the fee to generate revenue for its operating fund and that the fee

was unrelated to the actual costs of enforcement. They therefore contend that

the fee was unreasonable and contravened the authorizing statute.        Second,

petitioners challenge the use of a fifteen-day notice provision to avoid

incarceration and other penalties, which they asserted had violated the

authorizing statute. NJTA has since ceased employing this provision.

      On appeal, petitioners argue six points, which we have renumbered:

            POINT [I]

            THE $50 ADMINISTRATIVE FEE SHOULD BE SET
            ASIDE BECAUSE THE 2011 RULEMAKING
            PROCESS VIOLATED THE REQUIREMENTS OF
            THE ADMINISTRATIVE PROCEDURES ACT, AND
            OTHERWISE LACKED BASIC TENETS OF DUE
            PROCESS AND FAIRNESS.

1
   NJTA's counsel, not counsel for petitioners, pointed out that in December
2017, petitioners filed their Notice of Appeal and petitioners' counsel filed a
proposed class action lawsuit in the United States District Court for the District
of New Jersey. That lawsuit challenges the reasonableness of the administrative
fee and asserts claims for violating the Excessive Fines Clause of the Eighth
Amendment of the United States Constitution, violating the Fair Debt Collection
Practices Act, unjust enrichment/disgorgement, and rescission of E-ZPass
contracts. The federal court stayed that matter pending the outcome of this
appeal.
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                                        3
     1. NJTA's Lack Of Candor To The Public
     During The Rulemaking Process.

     2. The Truth – Profoundly Different Than
     What NJTA Disclosed To The Public.

     3. NJTA's Lack of Candor During The
     Rulemaking Process Violated: (i) The
     APA, (ii) Basic Tenets of Due Process And
     (iii) Fundamental Principles Of Fairness.

POINT [II]

ALTERNATIVELY, THE $50 ADMINISTRATIVE
FEE SHOULD BE SET ASIDE BECAUSE (i) IT
VIOLATED THE AUTHORIZING STATUTE WHEN
IMPLEMENTED IN 2011, (ii) IT WAS OTHERWISE
AN ABUSE OF NJTA'S RULEMAKING POWER,
AND (iii) NJTA HAS CONSISTENTLY APPLIED
THE REGULATION IN A WAY THAT CLEARLY
VIOLATES THE AUTHORIZING STATUTE.

     1. The 2003 Version Of The Authorizing
     Statute Set Two Guiderails On NJTA's
     Discretionary Setting Of The Fee –
     Reasonableness and Actual Cost.

     2. A $50 Fee Is Not "Reasonable" Because
     It Is Grossly Disproportionate To Identical
     Fees Charged By Other Tolling
     Authorities.

     3. As Admitted By NJTA, When The
     Regulation Was Enacted, Expected
     Revenues From The $50 Fee Far Exceeded
     NJTA's Actual Cost of Collecting and
     Processing Violations.

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                         4
     4. NJTA's Enforcement Scheme For
     Collecting Fees Has Consistently Violated
     The Authorizing Statute.

POINT [III]

THE $50 ADMINISTRATIVE FEE SHOULD BE SET
ASIDE BECAUSE NJTA HAS FAILED TO ADAPT
IT TO CHANGING CONDITIONS AT ANY TIME
SINCE    2011, IN  VIOLATION   OF   THE
AUTHORIZING STATUTE.

POINT [IV]

THE $50 ADMINISTRATIVE FEE SHOULD BE SET
ASIDE BECAUSE NJTA'S 2017 NOTICE OF
ACTION VIOLATED THE REQUIREMENTS OF
THE ADMINISTRATIVE PROCEDURES ACT, AND
OTHERWISE LACKED BASIC TENETS OF DUE
PROCESS, AND WAS OTHERWISE DEFECTIVE.

     1. The 2017 Final Action Constituted A
     Rule Under The APA, Particularly Because
     No Other Rulemaking Had Previously
     Been Validly Accomplished.

     2. The 2017 Final Action Was Improperly
     Issued Without Compliance With The
     APA, And Was Otherwise Invalid.

     3. Even If Not A Rule, The Figures And
     Explanations Offered In The 2017 Final
     Action Violate The Authorizing Statute
     And Otherwise Are An Abuse Of
     Discretion.

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                        5
            POINT [V]

            THE $50 ADMINISTRATIVE FEE SHOULD BE SET
            ASIDE BECAUSE IT IS BASED ON A NON-
            UNIFORM AND IRRATIONAL APPLICATION OF
            THE AUTHORIZING STATUTE.

            POINT [VI]

            THIS COURT SHOULD INVALIDATE THE
            REGULATION AND ORDER A DISGORGEMENT,
            OR AT A MINIMUM THIS COURT SHOULD
            REMAND    FOR   FURTHER     PROCEEDINGS
            CONSISTENT WITH THE APA'S REQUIREMENTS.

                                      II.

      The doctrine of laches bars petitioners from attacking NJTA's 2011

rulemaking under the APA.        More than six years elapsed between the

promulgation of the regulation and the filing of the petition in 2017. The

conditions that existed during that timeframe have changed significantly, and it

would be inequitable to allow a 2011 APA challenge after this substantial

passage of time.

      "Laches is an equitable defense that may be interposed in the absence of

the statute of limitations, and has been defined as an inexcusable delay in

asserting a right." Nw. Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 140 (2001)

(citations and quotation marks omitted). It "involves more than mere delay,

mere lapse of time. There must be delay for a length of time which, unexplained

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and unexcused, is unreasonable under the circumstances and has been

prejudicial to the other party." Ibid. "Factors considered in determining whether

to apply laches include '[t]he length of delay, reasons for delay, and changing

conditions of either or both parties during the delay.'" Id. at 141 (alteration in

original) (quoting Lavin v. Bd. of Educ. of Hackensack, 90 N.J. 145, 152

(1982)). "The primary factor to consider when deciding whether to apply laches

is whether there has been a general change in condition during the passage of

time that has made it inequitable to allow the claim to proceed." Ibid.

      Between    2011 and      2017, a number of important            rulemaking

considerations have substantially changed. The contract supporting the E-ZPass

system, pricing under that contract, and the responsibilities and costs for which

NJTA bears direct accountability have changed. Moreover, evaluation of the

2011 rulemaking is extremely difficult since the pricing parameters for

collection of E-ZPass toll violations are different, expenses from external to

internal NJTA budget items have shifted, and because of the general evolution

associated with toll collection costs for NJTA roadways. Therefore, laches bars

a challenge to the 2011 rulemaking, particularly when – in our view – the

primary focus of petitioners' appeal from the denial of their 2017 petition is on

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NJTA's refusal to make a new rule and its determination that the $50

administrative fee should remain unchanged.

      Notwithstanding the application of this equitable doctrine, on the merits,

we conclude petitioners' arguments – that in 2011, NJTA violated the APA, due

process, and fundamental fairness – are without sufficient merit to warrant

further attention in this opinion.   R. 2:11-3(e)(1)(E).   We add these brief

remarks.

      NJTA complied with N.J.A.C. 19:9-6.5 (governing NJTA's rulemaking

requirements) and N.J.S.A. 52:14B-4 (imposing additional requirements under

the APA). The NJTA published the proper notice in the New Jersey Register of

the rulemaking in 2011, which contained a sufficient explanation of the basis

for the regulation. NJTA afforded all interested persons the proper period for

public comment. The NJTA received no comments about the proposed fee

increase or requests for a hearing. Four months after publishing the notice,

NJTA published the adoption of the fee increase from $25 to $50 in the New

Jersey Register.

                                      III.

      As to the 2017 final action by NJTA, we see no APA violations.

Petitioners certainly have the right to petition NJTA to adopt a new rule, or

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amend an existing rule. N.J.A.C. 19:9-6.2 and N.J.S.A. 52:14B-4(f) permit that

right and provide procedural safeguards applicable to such petitions. Here,

NJTA met those requirements. Moreover, NJTA satisfied N.J.A.C. 19:9-6.3(c)

by timely deliberating and issuing its written decision.

      NJTA denied the petition and gave a written statement of reasons, which

it had the right to do. According to that decision, NJTA concluded the $50 fee

"continues to be reasonably related to the actual cost of processing and

collecting toll violations." 49 N.J.R. 3623(b) (Nov. 20, 2017). In fact, NJTA

explained that the costs associated with its toll collection system "well exceed

$50[] per violation." Ibid. In support of those assertions, and others in its

written decision, NJTA prepared a "2017 Toll Collection Budget Chart," which

it contends estimates that the 2017 costs per violation is $80, not $50. Ibid.

Petitioners, however, disputed the NJTA's calculations and analysis.

      We are constrained to conclude this record is insufficient to support the

calculation of the $50 fee as matching "the actual cost of processing and

collecting the violation" mandated by N.J.S.A.27:23-34.3(a). Accordingly, a

remand is required. Just because the administrative fee significantly exceeds

the toll, does not mean that it is automatically unreasonable. Presumably, the

need for a sophisticated system to capture toll violators exceeds the

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comparatively modest cost of any given toll. Prudently, the Legislature decided

taxpayers should not bear this burden and shifted the expense to those who

commit toll violations and fail to address their lapse. If the cost of collection is

$50, the sum does not shock the court's sense of fairness. Nevertheless, although

NJTA abided by the proper procedures necessary to increase the administrative

fee, we conclude the record remains unclear as to the reasonableness of the fee

itself.

          We owe no deference to a regulation that runs contrary to its authorizing

statute. In re Regulation of Operator Serv. Providers, 343 N.J. Super. 282, 327

(App. Div. 2001). The fee imposed must properly be based on the average cost

of processing and collection of unpaid tolls and may not be an arbitrary

estimation. The basis for the fee must substantiate the need to mitigate the cost

of collection, and not to assess a disguised fine. Compare Fee, Black's Law

Dictionary (9th ed. 2009) (defining fee as "a charge for labor or services"), with

Fine, Black's Law Dictionary (9th ed. 2009) (defining fine as "a pecuniary

criminal punishment or civil penalty").

          We recognize that "[a] regulation adopted by a state agency is presumed

to be reasonable and valid." In re Repeal of N.J.A.C. 6:28, 204 N.J. Super. 158,

160 (App. Div. 1985). "If procedurally regular, it may be set aside only if it is

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proved to be arbitrary or capricious or if it plainly transgresses the statute it

purports to effectuate, or if it alters the terms of the statute or frustrates the

policy embodied in it." Id. at 160-61 (citations omitted). Here, the regulation

needed to meet two requirements; it had to be (1) "reasonable" and (2) "based

upon the actual cost of processing and collecting the violation." N.J.S.A. 27:23-

34.3(a).

      To be sure, we accord an initial presumption of constitutionality to the

authorizing statute and the regulation.      N.J. Sports & Exposition Auth. v.

McCrane, 61 N.J. 1, 8, appeal dismissed sub nom, Borough of E. Rutherford v.

N.J. Sports & Exposition Auth., 409 U.S. 943 (1972). Even so, the existing

record furnished to us on this appeal is patently insufficient for a reviewing court

to make a definitive evidentially grounded assessment of these difficult and

important issues surrounding whether continuing the $50 fee permitted by the

regulation contravenes the authorizing statute.

      For these many reasons, a full evidentiary hearing is vital to explore the

foundation for NJTA's assertion that the $50 fee is a "reasonable administrative

fee considering all of the actual costs associated with the system of collecting

tolls from violators." 49 N.J.R. 3623(b). That is, whether the $50 fee is "based

upon the actual cost of processing and collecting the violation," under the

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authorizing statute. Such a hearing ideally should encompass expert testimony,

cross-examination, and neutral judicial inquiry. At such a hearing, there should

be ample findings of fact, including findings of credibility, and conclusions of

law. That amplified record will enable a reviewing court to set forth a more

informed ultimate resolution of the competing interests at stake.

        The question then becomes what forum is best suited to develop such an

evidentiary record. NJTA does not appear readily equipped to conduct such

full-blown evidentiary hearings. Nor is the Office of Administrative Law the

best suited venue, where discovery rights are limited, see N.J.A.C. 1:1-10.1 to -

10.6, and the rules of evidence are relaxed, see N.J.S.A. 52:14B-10(a). We

instead conclude that the exceptional circumstances of this wide-spreading

litigation warrant referral of the necessary evidentiary hearing and fact-finding

to a trial court, pursuant to the supplementation procedures set forth in Rule 2:5-

5(b).

        To the extent that we have not dealt with the remaining issues raised by

petitioners, we conclude that they are without sufficient merit to warrant further

attention in this opinion. R. 2:11-3(e)(1)(E). We add, however, these brief

comments.

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      Under the facts as we know them, there is no basis to include, as part of

the petition for rulemaking, a claim for damages, refunds, disgorgement, o r

unjust enrichment. N.J.A.C. 19:9-6.1 to -6.7 governs petitions by members of

the public seeking rulemaking, and does not provide for such ancillary causes

of action. Petitioners seek damages on behalf of all motorists similarly situated

to them, but no court has certified such individuals as a class. 2 And NJTA's

counsel points out that in the federal lawsuit, petitioners' counsel did not identify

petitioners as putative class representatives.      Nevertheless, any dispositive

ruling on petitioners' claim for damages is premature. Although we have serious

doubts about the propriety of such damages under these facts (because in part,

petitioners apparently paid the toll violations, failed to make a timely protest,

and then delayed filing the petition for almost two years), the record is

incomplete and must be more fully developed before a ruling is made. On

remand, therefore, the parties may address all issues related to petitioners' claim

for damages.

2
  Although we are not squarely addressing the issue, we question whether class
certification is appropriate given that the facts surrounding each motorist appear
to be different (including places of residence, whether fees were paid, the total
assessed, the roadway used, etc.).
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                                        13
      In   accordance   with   Rule    2:5-5(b),   we   therefore   remand    for

supplementation of the administrative record. We direct the Middlesex County

assignment judge to designate a particular judge in Middlesex County to handle

the remand proceedings.

      Affirmed in part; and remanded in part for further proceedings consistent

with this opinion. We retain jurisdiction.

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