KENNEY, GROSS, KOVATS & PARTON

MALACHIJ. KENNEY(1944-2011)
MICHAEL 3. GROSS
DOUGLAS J.KOVATS
CHRISTOPHER B. PARTON
DANIEL R. ROBERTS
GADRIELLE A. PETTINEO

ATTORNEYS AT LAW
THE COURTS OF RED BANK
130 MAPLE AVENUE, BUILDINGS
RED BANK, NEW JERSEY 07701
TEL.
FAX.

732-530-7500
2-53O-1739

cbpanon(jenneygross. corn

January 11,2017
Mark Neary, Esq., Clerk
Supreme Court of New Jersey
Hughes Justice Complex
25 West Market Street
P0 Box 970
Trenton, New Jersey, 08625-0970
Re: Middletown Board of Education v. Division of Pensions and Benefits
Appellate Division Docket No. A-003524-14T3
Appellants Petition for Certification to Supreme Court

Dear Mr. Neary:

This firm represents Appellant, the Middletown Township Board of Education,
in
this matter. Enclosed for filing pursuant to R. 2:12-7, you will please find
an original and
four (4) copies of Appellants Petition for Certification to the Supreme Court
of New
Jersey in this matter, together with four (4) copies of Appellants brief to the Appell
ate
Division and Appellants Appendix filed with the Appellate Division, as well as Proof
a
of Service.
Please return one file-stamped copy in the provided envelope, and charge
all fees
to our Superior Court account 52426.
Thank you for your attention and assistance in this matter.
Respectfully submitted,
KINNEY,

GRoss, KOVATS & PARTON

Christopher B. Parton
CBP
ends, as noted
cc:
as noted on ProofofService

CERTIFICATION OF SERVICE
MIDDLETOWN BOARD OF EDUCATION V.
DIVISION OF PENSIONS AND BENEFITS
DOCKET NO. A-003524-l4T3
PETITION FOR CERTIFICATION
CHRISTOPHER B.
as follows:

PARTON, ESQ.,

of full age,

1. I am a partner in the Red Bank,

Kenney, Gross, Kovats & Parton.

hereby certifies

New Jersey law firm of

2. On Wednesday, January 11, 2017, I

personally mailed
the within Petition for Certificatio
n, with
attachments as required by R. 2:12
7 to the following
recipients:
Mark Neary, Esq., Clerk
Clerk of the Supreme Court
Hughes Justice Complex
P0 Box 970
Trenton, NJ 096250970
(4 copies, md. App.Div. Brief &
Appendix)
Jeff Ignatowicz, DAG
Hughes Justice Complex, 6th Floor
25 West Market Street
Trenton, New Jersey 09625
(2 copies)
3. I hereby certify that the foregoi
ng statements made by
me are true.
I am aware that if any of the fore
going
statements made by me are willfully
false, I am
subject to punishment.

January 11,

2017

Christopher B.

Parton, Esq.

____

MIDDLETOWN TOWNSHIP BOARD

OF EDUCATION,

SUPREME COURT OF NEW JERSEY

DOCKET NO.

APPELLANT,

CIVIL ACTION

v.

Sat Below:
Hon. Allison Er Accurso, J.A.D.
Hon. William E. Nugent, J.A.D.
App.Div. Docket No. A352414T3

DIVISION OF PENSIONS AND

BENEFITS,
RESPONDENT.

APPELLANTS

PETITION FOR CERTIFICATION

KENNEY, GROSS, KOVATS & PARTON

130 Maple Avenue, Building B
Red Bank, New Jersey 07701
(732) 5307500
cbparton@kenneygross. corn
Attorney ID Number 024991997

Counsel for Appellant

Christopher B:

On the Brief

Parton,

Esq.

TABLE OF CONTENTS
Table of Authorities

iii

Statement of the Matter Involved

Questions Presented

1
4

Reasons Why Certification Should Be Gran

ted

A. The Standard for Certification

B. Application to this Matter
1. Is an evidentiary hearing required
before such an assessment can be
levied?

2. Can a local Board of Education be

required to rebut actuarial evidence
that has never been provided?

13

3. Can estoppel be applied against a

state agency when the other party
is also a subdivision of the State?

15

Conclusion

Attachments pursuant to R.

19

2:127:

Appellate Division Decision,

Dec. 22, 2016 (11 pages)
Notice of Petition for Certification,
January 5, 2017 (3 pages)
KENNEY
GROSS
No VATS

& PARTON
ATTORNEYS AT LAW

ii

TABLE OF AUTHORITIES

New Jersey Rules of Court

R. 2:113

15

R.

2:124

419

R.

2:127

ii,
20

Decisional Law
United States Supreme Court
In re Murchison, 349 U.S.
623, 99 L.Ed. 942 (1955)

133,

75 S.Ct.

14

Supreme Court of New Jersey

Bandel v.

ATTOLNEYSATLAW

122 N.J.

235

(1991)

Fair Lawn Educ. Assoc. v.

Educ., 79 N.J. 574 (1979)

Fair Lawn Rd.

In re Route 280 Contract,

89 N.J.

Mahony v.

KENNEY
GROSS
KOVATS
& PARTON

Friedrich,

Danis,

95 N.J.

50

5
of

(1982)

(1983)

1617
5
56

Nicoletta v. North Jersey Dist. Water

Supply Co., 77 N.J. 145 (1978)

13

Piscataway Assoc. Inc. v. Tp.

73 N.J. 546 (1977)

Ruvolt v. Nolan,

63 N.J.

171

of Piscataway,

(1973)

17

Superior Court of New Jersey, Appellate Division

Anske v. Palisades Park,
342 (App.Div. 1976)
iii

139 N.J.Super.

18

Superior Court of New Jersey, Appellate Divisio

n
Bernards Tp. v. Bd. of Trustees,
2013 WL 2258039 (App.Div. 2013)
(unpublished, see Pa336338)
I/N/c Arthur Snellbaker,
26 (App.Div. 2010)

PFRS,

414 N.J.Super.

(contd)

89,
11

10
12

I/N/c Town of Harrison and FOP Lodge No.

116, 440 N.J.Super. 228 (App.Div. 2015)

Matter of School Board of Morris,

N.J.Super. 332 (App.Div.) certif.
den. 156 N.J. 407 (1998)

7,
11
12,
15

Miller v. ad. of Trustees, TPAF,

179 N.J.Super. 473 (App.Div. 1981)

KENNEY

GROSS

ICo VATS
& PARTON
AtTORNEYS AT LAW

iv

310

16
19

STATEMENT OF THE tTTER INVOLVED

This matter presents the Court with the ques

tion of
whether a state agency owes due process to
another state
agency,

or whether it can simply assess monies with

out

regard for proof, process or timing.

Both parties are public entities.

Appellant is one of

New Jerseys largest public school districts,

educating

10,000 students and supported by 76,000

taxpayers.

Respondent is the state agency operating New

Jerseys
pension programs,

notably including the Teachers

and Annuity Fund

Pension

(TPAF)

Respondent reviewed and then tacitly acce

pted an
October 2007 sidebar agreement entered betw
een Appellant
and its teachers

union for the payment of sick leave.

After six and a half

2014,

(6k)

years of silence,

in February

Respondent abruptly served Appellant with

a onepage

invoice for $5,429,900 for additional

employer liability.
In doing so,
claim,
KENNEY
GROSS
Ko V AN

&PARTON

Respondent for the first time quantified its

and concluded that the 2007 sidebar agre

ement was an

unauthorized early retirement incentive.

In February 2014

and since,

Respondent ignored its own 6year silence on

the issue,

as if its brier document request and revie

w from

ATTORNEYS AT LAW

2007,

unmentioned since August 2008 and never

quantified,

had been ongoing all the whi

le as the school district bui
lt
six budgets and relied upon
Respondents obvious
abandonment of the issue.

Since the February 2014 assessm

ent and continuing to
this date,

Respondent has never provided

Appellant with any

accounting for the alleged

disruption of actuarial
assumptions underlying the asse
ssment.
asked repeatedly for an accoun
ting,
Respondent has provided neithe
r.

Appellant has

and for a hearing.

The closest Respondent

ever came was a June 2014 list

ing each retiree and the
total alleged liability for him
or her. Pa253. No dates,
formulae, assumptions,

or calculations were ever provid

ed.

The record, provided and swo

rn by Respondent,
completely devoid of any exp
lanation of,
analysis of the assessment.

is

support for,

or

Even correspondence from

Respondents actuary, not pro

vided until this appeal,
omitted the mysterious dat
a.

GROSS

KOVATS
&PARTON
AflORtYS AT LAW

Pa335.

Respondent simply

imposed its assessment,

rejected Appellants many req

uests

for documentary support,

and rejected Appellants reques

ts

for an administrative hearing

to establish the proofs
any)

underlying the assessment in

this matter.

Appellant

remains unaware of the calcul

ations and assumuptions,
any, behind the assessment.

(if

if

At its worst,

Respondent, by its agents,

represented

that there was no interest levied as part of

the original
assessment,

but when pressed,

thirty percent

(30%)

it reduced the assessment by

by removing interest charges from

2007 through 2014 in the amount of $1.6 milli

on,

still

without explaining or accounting for those char

ges.
On December 22,

2016,

the Appellate Division,

earlier case law from itself and from this Cou

rt,
stamped Respondents determination.

Pa87.

ignoring
rubber-

The decision below

ignored Appellants uncontested points rega

rding the lack
of due process.

Despite these glaring omissions,

Respondent and the Appellate Division hold that

Respondent
shall be assessed for millions of dollars with
out an
accounting,

a hearing,

any due process or explanation,

for

an agreement entered ten years ago in 2007.

The Supreme Court is the last tribunal able
to right
the wrongs done in this case,
Certification to do so.

and the Court must grant

The Court is faced with an agency

action that is legally wrong,

GROSS
No VATS

&PARTON

facially capricious,

completely unreasonable,

and utterly unsupported by any

record which only Respondent could have gene

rated.

ATrORNEYS AT LAW

absolute minimum, this matter must be remand

ed for the
development of a record substantiating any
assessment.

At an

However,

given the passage of time and the other factors

of

this case,

outright rejection and reversal of the decision

below is the only just course of action.

QUESTIONS PRESENTED

1. Is an evidentiary hearing required before such

an
assessment can be levied? Or alternatively, can
a
state agency assess a local school district
millions
of taxpayer dollars without substantiating, item
izing,
or even explaining that assessment?
2. Can a local Board of Education be required
to rebut
actuarial evidence that has never been prov
ided?
3. Can estoppel be applied against a state agen
cy when
the other party is also a subdivision of the
State?

REASONS WHY CERTIFICATION SHOULD BE GRJN

TED
A.

The Standard for Certification

Appellant seeks the Courts review
of a Final Judgment

of the Appellate Division.

Petitions for Certification in

such instances are governed by R. 2:12-4,

which provides:

KENNEY

GRoss

Kov&rs
&PARTON
AflORNEYSATUW

Certification will be granted only if the appe

al
presents a question of general public impo
rtance
which has not been but should be settled
by the
Supreme Court or is similar to a question
presented on another appeal to the Supreme
Court;
if the decision under review is in conf
lict with

any other decisions of the same or a higher

court
or calls for an exercise of the Supreme Cou
rts
supervision and in other matters if the inter
est

of justice requires.

Certification will not be

allowed on final judgments of the Appellat

e
Division except for special reasons.
4

The Court has routinely held that where a

Final
Judgment of the Appellate Division is not supp
orted by
established principles of law,
granted.

Bandel v.

Certification is to be

Friedrich,

122 N.J.

235,

237

(1991).

The same is true where the judgment below

implicates an
unsettled question of general public importanc
e.
Route 280 Contract,

89 N.J.

In re

(1982)

The Court will also grant Certification in

the
interests of justice, where the result reach
ed below is
palpably wrong,
N.J.

50,

52

unfair or unjust. Mahony v.

(1983) (Handler, J.

concurring)

Danis,
There,

95
Justice

Handler cautioned that the interests of justi

ce standard
must be used sparingly,

but the unfair or unjust standard

includes cases where the rights of inno

cent persons,
unwary public,

Finally,

are jeopardized.

Ibid.

cases pertaining to allocation or disruption

of the public fisc,

Respondent below,

a principle heavily relied upon by

will fall within the R.

2:12-4 category

of general public importance. Piscataw

ay Assoc.
KENNEY
GROSS
KOVATS
& PARTON

Tp.

or an

of Piscataway,

73 N.J.

546,

AnORNEYS AT LAW

54950

(1977).

Inc. v.

B. Application to This Matter

.

The questions presented in thi

s Petition,
through the lenses of R.
law,

viewed

2:12-4 and the abovecited cas

e

require this Courts review. The

Appellate Division

denied the appeal and accused

Appellant of failing to rebut
Respondents proofs.
was,

But there are no proofs,

and is, no way to rebut them.

denied due process,

injustice,

so there

Appellant has been

and thus subjected to a manifes

t

in a manner that directly affect

s exactly the

unwary public referenced in

Mahony,

supra, 95 N.J. at 52.

This case present precisely

the scenarios for which R.
2:124 exists,

and Certification must be granted

. This

analysis applies to each of the

questions presented,
listed supra at 4.

as

Specifically:

1. IS AN EVIDENTIARY HEARING REQ

UIRED BEFORE SUCH AN
ASSESSMENT CAN BE LEVIED? OR
ALTERNATIVELY, CAN A
STATE AGENCY ASSESS A LOCAL
SCHOOL DISTRICT MILLIONS
OF TAXPAYER DOLLARS WITHOUT SUB
STANTIATING, ITEMIZING,
OR EVEN EXPLAINING THAT ASSESS
MENT?
Meaningful due process and cle
ar evidence is required
to substantiate the broad,
KENNEY

& PARTON
ATrORNEYS AT LAW

easy claim of disruption of

the

Divisions actuarial assumption

s.

This is true generally,

but the Appellate Division has

specifically enforced this
rule in the context of the neg
otiated agreement entered by

a school district.

Where it is argued that a negotia

ted

term or condition of employment und

ermines the actuarial
integrity of a pension plan,

the issue should be carefully

explored by the presentation of evid

ence. Matter of Morris
School District,
certif.

den.

310 N.J.Super.

156 N.J.

407

332,

340

(App.Div.),

(1998).

Where such a meaningful and fair

analysis is not
present,

the Appellate Division is left una

ble to properly

analyze the matter on appeal.

Unfortunately,

Hence,

in Morris,

that was not done in this case,

and we are

left with a record that is wholly

uninformative. Ibid.
Unlike this case,

the Appellate Division in Mo

rris

recognized that only the State age

ncy had access to the
data and proofs underlying the clai
ms.
the Division of Pensions & Benefit
s,
school district,

It was obviously

not an independent

that had the ability and thus

the burden

to substantiate the claim of dis

ruption of the States
assumptions and operation of its
TPAF pension plan.
In Morris,
GROSS
KOVATS

&PARTON
ATTORNEYS AT LAW

the Court ultimately affirmed

a Public

Employment Relations Commission

determination permitting a

change in accumulated sick leav

e payments, because the
Division of Pensions, the same
Respondent as in this case,
had abjectly failed to provide the
tangible evidence

necessary to determine that the change violated any law,

regulation or public policy.

Id.

at 34748.

Respondent has developed a practice of relying on its

typical,

vague claim of disruption of actuarial

assumptions, and simply billing public agencies.

routine is falling out of favor.

This

In Bernards Township v.

Board of Trustees of Police and Firemens Retirement

System,
(Pa336)

2013 WL 2258039
,

(App.Div.

2013) (unpublished)

a municipality contested an ERI assessment and the

complete lack of proofs presented by Respondent.

case,

In that

the Division levied its assessment against the publ

ic

agency three months after the retirement program was

enacted,
case.

as opposed to six and a half years,

Id.,

slip decision at 1

(Pa336)

as in this

The Division also

granted an evidentiary hearing in the Office of

Administrative Law,

unlike in this case.

Ibid.

Although

the Appellate Division did not grasp the concept in

this
case,

in Bernards the OAL and reviewing courts were clear

that the Division, which had the information, had

the
KENNEY
GROSS

KOVATS
&PARTON

burden of producing it and substantiation its

assessment.
While

there was

a hearing

in

Bernards,

at

that

hearing

ATTORNEYS AT LAW

Respondent provided no substantiation,

documents or testimony,

in the form of

for the amount being assessed.

Id.,

sup decision at 2

(9a337)

The AU

admonished Respondent,

noting its burden of proof on the

assessment amount and its
failure to meet that burden.

Ibid.

interlocutory appeal in that mat

ter,

In denying an
the Appellate Division

likewise stated that the Divisio

n bore the burden of
proving the validity and amount
of its assessment.
slip decision at 3

Id.,

(Pa338)

Respondent is criticized and rev

ersed in recent case
law as going so far as to und
ertake unauthorized,
reviews of TPAF,

PERS or PFRS Board decisions.

I/M.O Town of Harrison and FOP Lodg

e No.
N.J.Super.

228,

295

(App.Div.

2015).

116,

de novo

See,

e.g.,

440

Respondent is utterly

unconcerned about process, be it

due process to school
districts and municipalities,

or procedural boundaries

within its own organization.

Where this ignorance results

in an unsupported raid of million

s of dollars from another
taxpayer funded, public agency
,
These facts,

and prior Appellate Division dec

isions,

are directly applicable here.

KENNEl
GROSS
Key AT S

the Courts must step in.

Respondent made a summary

decision without a legitimate rat

ionale.
penalty without showing a bas
is,

ATtORNEYS AT LAW

It imposed a

instead relying upon

alleged but unseen actuarial assu

mptions.
failed to meaningfully investigate
the facts,

Respondent
instead

concluding that because retirem

ents were involved,

must constitute a retirement ince

ntive.
Snelibaker,

414 N.J.Super. 26

the case

In I/M/O Arthur

(Ap.Div. 2010), the CAL and

Appellate Division rejected and

dismissed the Divisions
position.

The assessment was summarily reje

cted.

Id.

at 41.

The other cited case law simply und

erlines the fact that
the Division routinely acts out
side its legal authority,
and the courts routinely reject
its actions in such cases.
The Appellate Division failed to
follow its own lead
in this matter.

Here,

as in Snelibaker,

Respondent has

imposed upon Appellant an enormo

us fine, with neither
adequate research as to the pro
gram at issue nor any
support for its vague claim that
a program disrupted its
actuarial assumptions.

Rather,

literally sent Appellant a bill.

been reduced by thirty percent
this litigation

(Pa287)

complete mystery.

Respondent simply and

Although that bill has

(30%)

since the inception of

amazingly its components rem

ain a

Respondents position in thi

s matter

amounts to because I said so,

and that is not sufficient.

GROSS

KOVATS
AI1ORNEYSAT lAW

Per the Notice of Petition for

Certification,
Appellant seeks review of all
aspects of the December 22,
.

2016 decision below.

However, particular emphasis mus

t be

placed upon the absurd determi

nation below on what the

10

Appellate Division clearly considered a throwaway issue

,
the question of due process. Addressed in only two
sentences on the final page of the decision,
process claim was disregarded,

the due

and erroneously dismissed as

Appellants failure to provide actuarial evidence to

contradict the charges.

App.Div.

at 11.

That conclusion and disregard for facts and omissions

clearly established by the record contradict the Appell
ate
Divisions own decision in Morris,
in Snellbaker and Bernards,

supra, the discussions

and is patently unjust.

The

Appellate Division completely misunderstands the history,

holding that Appellant failed in its duty to rebut all
the
actuarial charts and explanations presented by Respondent.
This misunderstanding shows a failure to review the
appendix below.

The appendix plainly shows that in the

three years since the assessment, Appellants many reques

ts
for data and a hearing, wherein these proofs might
be
established, were flatly denied by Respondent.
Pa27l,
KLNN[Y

GROSS
KOVATS
&PARTON

Pa293,

Pa297,

Pa2983l3.

Moreover,

Pa104,

at no time,

continuing to today as this matter reaches the Suprem

e
Court,

has

Respondent

ever

substantiated

its

levy

ATTORNEYS AT LAW

providing its actuarial assumptions or other

11

by

documentation.

Pa233,

Pa267,

Pa298.

Worse yet,

has acknowledged the absence of

such proofs.

Respondent

Pa332,

Pa333.

Presiding Judge Baime framed the

issue in Morris, when
the State claimed disruption of ac
tuarial assumptions:
We are struck by the absence of any
evidence
indicating that implementation
of the plan
might undermine the actuarial
assumptions
underlying the statutorily created
pension
plan.
Where it is argued [by the State]
that a negotiated term or conditi
on of
employment undermines the actuaria
l
integrity of a pension plan, the
issue
should be carefully explored by
the
presentation of evidence.
Unfortunately,
that was not done in this case,
and we are
left with a record that is wholly
uninformative.
Morris,

supra, 310 N.J.Super. at 33940.

For these reasons,

and under the Appellate Division

holding in Norris and Snellbaker

,

the decision below works

a manifest injustice against a pub

lic entity and the
taxpayers who fund it.
significance,

KENNEY
GROSS

ATTORNEYSATLAW

This is a matter of great public

and an issue of procedural due

process, one

Appellant cannot ignore the

irony that the Appellate Division

recites and then immediately igno
res its own, rote standard of revie
w
case law.
The Appellate Division 5tates at
910 that an agency
decision is subject to reversal when
the decision was not supported
by
substantial evidence, and that
such a decision must be founded upon
sufficient credible evidence seen
from the totality of the record.
These standards require
remand or reversal of Respondents
decision,
but are ignored by the Appellate
Division just one page after it cite
s
then. App.Div. at 10li.
Thus, the decision below is not
only in
conflict with other Appellate Divi
sion case law, it is also inte
rnally
inconsistent, requiring Certific
ation pursuant to R. 2:224.
12

of the most fundamental ele

ments of our justice system
. R.
2:124 is fully applicable,
and warrants Certification.
2. CAN A LOCAL BOARD OF EDUCAT
ION BE REQUIRED TO REBUT
ACTUARIAL EVIDENCE THAT HAS
NEVER BEEN PROVIDED?
This question is corollary
to the above issue of due
process.
Appellant frames it as a sep
arate issue because
of its absurdity.
Three years of Respondent
s stonewalling
and now, shockingly, the dec
ision below, App.Div. at 11,
all ignore the central iss
ue in this case: there is no
calculation or substantiatio
n of the additional emp
loyer
liability. There is nothin
g to rebut or contradict.
Judges Nugent and Accurso
conclude below that the BOE
has provided no actuarial evi
dence to contradict the
charges. App.Div.

Gnoss
KOVATS
&PART0N
ATTORNEYS AT LAW

at 11.

This position saddles Appel

lant

with the burden of rebutting

evidence that does not exi
st.
The appendix below speaks
for itself.
Respondent has never
produced evidence on the com
ponents of the assessment.
There is literally nothing
to contradict, so under
the
Appellate Division holding,
Appellant must either pro
ve a
negative, or simply pay up.
Such results are consisten
tly
rejected.
Nicoletta v. North Jersey
Dist. Water Supply
Corn., 77 N.J. 145, 163 (19
78) (making of a record and
statement of reasons is an
essential element of due

13

process);

In re Murchison,

L.Ed.

(1955) (fair trial and a fair tribunal are

942

349 U.S.

133,

75 S.Ct.

623,

99

fundamental requirements of due process)

An extreme but real component of the assessment and

the question now before this Court: how could Appellant
rebut Respondents assessment of additional employer
liability of $69,800 for Mavis Nellis,
individual employees at issue?
retired on July 1,
teaching career.
evidence,

one of the

Ms. Nellis, born in 1934,

2006 at the age of 74,

Pa165.

after a 28.4year

There has never been a hearing,

or any calculation presented by Respondent

stating its assumptions.

Was Mavis Nellis supposed to

continue teaching to age 75? 80? 85?

assumed to be 30 years? 35? 40?

Was her career

Is retirement at age 74

after a 28year career really an early retirement?

The record is devoid of the answers,
Respondent has them,

if they exist at all.

and only
Respondent

refers to its assumptions, but never documents them.

Even in discovery at the Appellate Division stage
,
KENNEY

GROSS
KOVATS

Respondents best effort was a 2page,

actuaries,

which referenced assumptions, but attached no

ATTORNEYS AT LAW

information

2011 letter from its

or

charts.

Pa333.

14

The Appellate Division,

in disregarding the lack of

due process and completely misunderstanding the histo

ry,
presents a question significant public importanc
e.

Can a

public agency be forced to rebut evidence it has

never
received?

In rejecting the request for a hearing, the

Appellate Division ignores its own holding in Mor

ris,
creating a conflict in its own case law.

The interest of

justice requires this Court to reject such a callo

us
dismissal of a major issue by the Appellate Divi
sion.
Again,

all criteria of B.

2:124 are present in this case,

and the Court must grant Certification.

3. CAN ESTOPPEL BE APPLIED AGAINST A STATE AGENCY

WHEN
THE DTHER PARTY IS ALSD A SUBDIVISIDN OF THE STAT
E?
The Appellate Division ignores Appellants estop
pel
argument,

citing B.

2:113(e) (1) (D)

and

(E)

and simply

stating that Appellant was aware of Responde

nts concern in
2007.

It is clearly true that Appellant was aware

of this

issue in 2007 and 2008

(Pa3,

Pa82)

However,

after those

information requests, with which Appellant fully

complied,
CROSS
KOVATS
&PART0N

Respondent abandoned this matter from Augus

t 2008 until

February 6,

2014,

at which tine Appellant

was

first made

ATtORNEYS AT LAW

aware of the assessment and levy for costs.

15

Pa88.

Respondent is a public agency,

as is Appellant,

and

Appellant acknowledges that estoppel principles are

rarely
imposed against a public agency.
rarest of instances.

However,

this case is the

Respondents actions are outrageous,

and it is plain as a matter of fact and of law

that
Appellant carried on in the years between the sideb
ar
agreement and the assessment,

in reliance upon the sidebar

and Respondents silence regarding it.

The Appellate Division has addressed this situation

before,

and its ignorance of that precedent below falls

squarely within R.

2:124 in this setting.

In Miller v.

Board of Trustees,

TPAF,

(App.Div.

1981)

179 N.J.Super.

473

the Appellate Division addressed an assessmen

t by

Respondent for an alleged ERI entered by two publ

ic school
districts.

Twelve teachers had retired into TPAF as part

of a three-year program by which their employe

r-boards
inflated their salaries.

Id.

at 475. Years after the

retirements had been approved by TPAF and the

employees had
entered the retirement system,
assessment,

vaguely

(but typically)

KENNEY
LIS

Respondent levied an
citing disruption of

actuarial assumptions. Ibid.

& PARTON
ATTORNEYS AT LkW

The Appellate Division held that even if the progra

ms
under which the employees retired offended the
Fair Lawn

16

decision,

all parties involved had irrevocably changed

their positions on TPAFs approval of their retire

ments.
Those retirements had taken place years before Respondent
suddenly sought reimbursement,

and the Appellate Division

held that Respondent was equitably estopped from imposi

ng
the penalties years later.

Id.

at 47677.

The court

acknowledged that while equitable estoppel again

st a public
agency is disfavored,

Significantly,

the facts required it.

Ibid.

the Miller decision applied estoppel

principles based upon a finding that TPAF and the

Division
were not reasonably diligent.

This was based upon the

interplay with the time element of a number of othe

r
attendant factors,

such as the particular occasion for

administrative reexamination of the matter, the

fraud or
illegality in the original action and any cont
ribution
thereto or participation therein by the beneficia
ry of the
original action,

as well as the extent of any reliance or

justified change of position by parties affected

by the
action. Miller,
Ruvoldt v. Nolan,
KENNEY
GROSS
KOVATS
&PART0N
ATTORNEYS AT LAW

supra, 179 N.J.Super. at 478

63 N.J.

171,

183

(quoting

(1973)

Given the applicability of estoppel as a matt

er of
.

law, the Appellate Division did not remand the

Miller case.

17

Rather,

it summarily reversed the agency decision, vacated

the assessments,

and closed the matter.

In this case,

Id.

at 479.

the same analysis of very similar facts

requires the same result, but the Appellate Division below

refused to even address the issue.

Here,

even more years

passed than in Miller, between program and the assessment.

In both cases,

the passage of time and the number of major,

irrevocable decisions made by Appellant, not to mention the

individual retirees,

make equitable estoppel not only

appropriate, but absolutely necessary.

Moreover,

the

contradictions between Miller and the decision below

require review per R.

As noted,

2:124.

estoppel is rarely applied against public

agencies, but what if both parties are public agencies?

noted in Miller,

As

supra, courts must apply estoppel against

public actors where the interests of justice, morality and

common fairness dictate that course. Anske v.
Park,

139 N.J.Super.

same standard as R.
KENNEY
GROSS
KOVATS
&PART0N

applicable here.
require

this

342,

348

2:124,

(App.Div.

1976).

Palisades
This is the

and the principle is fully

The facts of this matter support and

Courts

review.

ATTORNEYS AT LAW

18

CONCLUSION

The Supreme Courts responsibility under R.

2:124 is

to review final judgments of the Appellate Division where

they present questions of general public importance,
conflicts with other decisions of the same or higher
courts,

or if the interest of justice requires.

Although

these criteria are listed in the alternative, all of them

are applicable here.

An unsubstantiated and dramatically delayed levy

against a public entity is a matter of general public
importance.

The Appellate Division below ignored its own,

directly applicable decisions,

including Morris and Miller.

This case features a tenyear history of grave due proces

s
violations,

denying justice to an unwary public,

and a

public Board of Education left to build years of budget

s
with no basis for believing an assessment of any sort
was
coming,
million.

not to mention an unsubstantiated levy of $5.4

Simply,

element of R.

2:12-4.

Accordingly,

GROSS

this case presents the Court with every

the Supreme Courts review of this matter

KOVATS
&PARTON
ATTORNEYS AT LAW

is

necessary and appropriate,

and Appellant respectfully

asks the Court to grant Certification.

.

19

__________
____

Pursuant to B.

2:127(a),

I hereby certify that this

Petition for Certification presents a substantial question,

and is filed in good faith and not for purposes of delay.

January 11,

KENNEY, GROSS, KOVATS & PARTON

Counsel for Appellant
2017
By
CHRISTOPHER B.

KENNEY

GROSS
KOVATh
& PARTON
ATrORNEYS AT LAW

20

ARTON,

ESQ.

NOT FOR PUBLICATIO

N WITHOUT THE
APPROVAL OF THE
APPELLATE DIVISIO

SUPERIOR COURT OF
NEW JERSEY
APPELLATE DIVISIO
N
DOCKET NO. A3524
14T3
MIDDLETOWN TOWNSH
IP BOARD
OF EDUCATION,

PetitionerAppella

nt,

V.

DIVISION OF PENSIO
NS AND
BENEFITS,

Respondent-Respond
en

t.

Argued August 16,

2016

Decided

December 22, 2016

Before Judges Nugent

and Accurso.
On appeal from the
Board of Trustees
of the
Teachers Pension an
d Annuity Fund, Depa
rtment
of the Treasury, Do
cket No. TPAF 00344.
Christopher B. Patto
n argued the caus
e for
appellant (Kenney,
Gross, Kovats & Pa
rton,
attorneys; tr. Parto
n, of counsel and
on the
briefs)
Melissa H. Raksa, A
ssistant Attorney G
eneral,
argued the cause fo
r respondent (Christ
opher
S. Porrino, Attorney
General, attorney;
Ms.
Raksa, of counsel; Je
ff S. Ignatowitz,
Deputy
Attorney General,
on the brief)
PER CURIAM
The Middletown Town
ship Board of Educat
ion (BOE) appeals fro
m
the March 13, 2015 fin
al agency decision
of the Board of Tr
ustees

of the Teachers Pens

ion and Annuity Fund (th
e Board of Trustees),
finding that the BCE off
ered its employees an
unauthorized Early
Rtirement Incentive
(ERI) and assessing the
BCE the Funds
consequent increased pe
nsion liability.
We affirm.
During its October 22,
2007 meeting, the BC
E approved a
Sidebar Agreement
with the Middletown
Township Education
Association (MTEA)
The Sidebar Agreement,
which modified the BCE
and MTEAs collective ba
rgaining agreement, pro
videth
.

1. Article 13.2 of the

20052008 Contract is
hereby supplemented to
provide that any MTEA
member who has achieved
tenure or will achieve
tenure on or before
June 30, 2008, and who
submits a letter of res
ignation or retirement
on
or
before
January
31,
2008,
which
resignation or retireme
nt shall be effective
July 1, 2008, shall be com
pensated for accrued
and unused sick days
as follows.
However,
those tenured members
who submitted letters
of retirement or resign
ation after July 1,
2007 and on or before
October 22, 2007, for
an effective date on or
before July 1, 2008,
shall also be eligible
:
a.
Professional
teaching
staff
members shall be paid
at the rate
of two hundred twentyfive dollars
($225.00) per sick day
to a maximum
of
forty
thousand
dollars
($40,000.00);
b.
Noncertified members
shall be
paid at the rate of
one hundred
twentyfive dollars
($125.00) per
sick day to a maximu
m of twenty
thousand dollars ($2
0,000.00);

A]52414T3

2.
Payments made pursuan
t to this Sidebar
Agreement shall be mad
e in three (3) equal
installments on July
15, 2008, July 1, 200
9
and July 1, 2010.
The next day, October
23, 2007, the Division of
Pensions and
Benefits (the Division
) External Audit Supe
rvisor wrote to the
BOEs Certifying Offic
er stating the Divis
ion had received
information that voluntar
y separation programs
are being offered
by the tBOE] to its emplo
yees. The Division Supe
rvisor explained
such arrangements were
generally permissible
provided the terms
and conditions of these
programs and the specifi
c impact upon the
offering employers wo
rkforce are reviewed by
the Division.T The
Division Supervisor reque
sted specific enumerated
information from
the BOE.
The

BOEs

School

Business

Administrator

responded

and
provided the informati
on in a letter dated No
vember 5, 2007.
By
then, six employees, inc
luding five teachers
and a secretary, all
with more than twenty
five years in their
respective pension
systems, had taken adv
antage of the Sidebar
Agreement.
On August
1, 2008, one month aft
er the triggering ret
irement date of July
1, 2008 specified in the
Sidebar Agreement, the
Division informed
the BCE it considered
the Sidebar Agreement
an impermissible ERI.
The Divisions letter
stated:

a35a1qT3

The Division has become

aware of an early
retirement incentive
(ERI)
that you have
recently made available to
your employees.
This ERI was not reviewed
by this office and
you should be aware of the fac
t that ERIs are
not permitted when not
provided through
enabling legislation.
I am attaching a copy
of our fact sheet which
details the law
regarding same.
We ask that you provide a
final list of all indivi
duals that retired
under your ERI (or separation
agreement as you
nay have named it) so we
may forward this
letter to our actuary.
At that point, the
actuary will develop the acc
eleration cost of
this incentive which will
in turn be billed
to you.
Please provide this informatio
n to this office
within ten days of the receip
t of this letter.
Thank you for your cooper
ation.
The BOE provided the inform
ation requested by the Divisio
n
three days later, on August
11, 2008.
The Division did not
communicate with the BOE aga
in until February 6, 2014.
On February 6,

2014, the Divisions Actin

g Director wrote to

the BOEs Certifying Officer

concerning its determinatio
n that the
BOEs severance package was
an unauthorized ERI. According
to the
letter:
Unauthorized early retireme
nt incentive (ERI)
programs are retirement inc
entive programs not
expressly authorized by law
.
However, even
if the ERI program was exp
ressly authorized
by law, employer5 who offer
such a program are
always responsible for the
additional pension
liabilities created as
a result of the
program. Consequently, [th
e BOEJ must be held

A352414T3

financially liable for

the additional pension
costs resulting from the
unauthorized program.
In its letter,

the Division calculated,

at present value, an
additional $5,429,900
in pension liabilities
associated with the
unauthorized ERI. The Di
visions Acting Director
enclosed a bill
due to the Teacher1s Pen
sion and Annuity Fund
reflecting this]
amount (j
In a March 11, 2014 lette
r, the BCE disagreed tha
t the Sidebar
Agreement constituted
an unauthorized ERI.
The BCE also disputed
the Divisions assessme
nt of the additional pe
nsion liability. Cn
April 29, 2014, the Di
vision responded in a
letter and rejected
the BCE1s arguments. Accor
ding to the letter, the
Division advised
the Board of Trustees to
schedule the BCEs ap
peal.
Cn May 29, 2014, the
BOE attempted to have
the Division
reconsider its position
concerning one BOE emplo
yee. The Division
ultimately adjusted the
unfunded liability for
the employee in
question.
During its December 4,

2014 meeting,

the Board of Trustees

affirmed the Divisions

administrative finding
that
the Sidebar Agreement co
nstituted an illegal EE
l and
was required to reimburs
e the Teachers Pension
and
the unfunded liability.
The Board of Trustees
reduced
amount billed to the
BOE to $3,815,600 bas
ed on

the terms of
that the BOE
Annuity Fund
the original
information

A352414T3

concerning

three

BOE employees.

Additionally,

recognizing

the

delay in the Divisions billin

g of the BCE, the Board of Trustee
s
requested the Division establis
h a fiveyear payment plan with
no
interest.
The BOE filed an administrative app
eal.

The Board of Trustees

denied the BOEs request to have

the matter referred to the Office
of Administrative Law for a hearing
. On March 13, 2015, the Board
of Trustees issued its final adminis
trative determination.
In its March 13, 2015 written dec
ision, the Board of Trustees
noted the Division informed the
BOE the day after the approval of
the Sidebar Agreement that it had
received information an ERI was
being offered by the [BCE] . The
Board of Trustees further noted
the BCE proceeded with the ERI
before it contacted the Division
to determine the status of the
Divisions review.
The Board of
Trustees reiterated it had den
ied the BOEs request for an
administrative hearing in part
because of the lack of relevant
factual issues to be adduced
at such a hearing.
Moreover, the
Board of Trustees emphasized the
issue before the Board presented
a purely legal question.
Addressing the BCEs argument
that the Sidebar Agreement did
not constitute an ERI,

the Board of Trustees disagre

ed based on

the following:

A352414T3

(1)
The Sidebar agreement which supplemented
the
20052008,
Collective
Negotiations
Agreement offered to all employees in
the
Middletown Twp. BOE enrolled in the TPAF,
who
had 15 years of service with the district
at
the time of retirement, an enhanced payo
ut in
exchange for submitting an irrevocable lett
er
of resignation or retirement.
The record
indicates that 41 employees received
the
enhanced
sick
leave
payout
and
all
41
employees did in fact retire from the TPAF;
It is the Board and the Divisions
(2)
responsibility
to
administer
regulations
established to safeguard the integrity
of the
various retirement systems administered by
the
State.
Arrangements that are offered to
employees as an incentive to retire
are
generally
impermissible
unless
they
are
provided through permissive legislation.
The
law on this subject is clearly set forth
in
Fair Lawn Ed. Assn. v. Fair Lawn Board
of
Education, 79 N.J. 574 (1979), in whic
h the
Supreme Court of New Jersey held invalid
an
early retirement plan because it posed
a
potential for financial harm to the State

administered retirement system and was

not
authorized by State law; and
Even though the ERI did not increase a
(3)
members retirement benefit, it provided
a
financial incentive to induce those who
were
eligible to retire earlier than they
would
have.
This factor is significant in that the
fundina of the TPAF is predicated upon
the
experience ratings of the total membersh
ip.
The

Board of Trustees

next

explained that the

subject

of

public employee pensions had been pree

mpted by the Legislature.
The decision continued:
Per N.J.S.A. 1SA:6658, the actuary
for the
TPAF establishes probabilities of retire
ment
7

A352414T3

based upon experience of the entire

group and
uses that as a basis to develop
employer
contribution requirements.
When employers
offer employees incentives to reti
re sooner
than when actually anticipated,
as in this
instant matter,
it alters the retirement
pattern of the Fund and impacts
the ability
of
the
retirement
system
to
establish
reasonably accurate experience assu
mptions,
on which funding is based.
In short, the Board of Trustees determi
ned that BCEs Sidebar
Agreement provided a meaningful indu
cement for those eligible to
retire.
The Board of Trustees next address
ed the BCEs argument that
disputed issues of material fact req
uired a hearing.

The Board

of Trustees identified the issues rais

ed by the BCE as whether:
the Sidebar Agreement is an EM; the
delay in the billing from the
Division caused additional costs;
the charges made by the Division
reflect any interest for the years
between 2008 and 2014; and, the
sufficiency of documentary support
for the assessment underlying
the Divisions bill to the BCE.

The decision addressed each issue.

The decision explained the Sideba

r Agreements
incentives were clear and unambiguous.

early retirement

In addition, in recognition

of its delay in billing, the Board

of Trustees established a five
year payment

schedule

with no

additional

interest,

and

agreed

there should be no interest imposed

for the years between 2006 and
2014.

Finally,

the Board of Trustees

found the assessment was

A352414T3

calculated by the
18A:6655.

Funds

actuaries

in accordance with N.J.S.

A.

The Board believed the

accelerated cost represent
ed

the unfunded liability,

which the BCE was requir

ed to pay.

The
Board further noted the BCE
had not provided any actua
rial evidence
to contradict the charge
s.
On appeal, the BOE disputes
the Sidebar Agreement is
an ERI.
It also contends the Div
isions delay in assert
ing its alleged
claim against the BCE est
ops the Division from
collecting the
assessment.
Lastly, the BCE argues
it was deprived of the
opportunity
to
challenge
the
Divisions
determination
and
assessment at a hearing.
The scope of appellate rev
iew of a final adminis
trative agency
decision is limited.
In re Taylor, 158 N.J.
644, 656 (1999)
Generally, courts defer
to the specialized or tec
hnical expertise
of the agency charged
with administration of
a regulatory
system.
In re Application of Vir
tuaWest Jersey Hoso.
for a
Certificate of Need, 194
N.J. 413, 422 (2008)
For those reasons,
an
appellate
court
ordinarily
should
not
disturb
an
administrative agencys
determinations or findin
gs unless there
is a clear showing that
(1) the agency did not fol
low the law; (2)
the decision was arbitrary
, capricious, or unreas
onable; or (3)
the
decision
was
not
supported
by
substantial
evidence. Ibid.
Where
the determination is fou
nded upon
.

A352414T3

sufficient credible eviden

ce seen from the totality
of the record
and on that record findings
have been made and conclu
sions reached
involving agency expert
ise,
the agency decision sho
uld be
sustained. Gerba v. Ed.
of Trs. of the Pub. Em
ps. Ret. Sys., 83
N.J. 174, 189 (1980) (citin
g Close v. Kordulak Bras.,
44 N.J. 589,
599 (1965))
Applying those principles,
reasons

given

determination.
by sufficient

by

the

Board

of

we affirm,
Trustees

substantially for the

in

its

final

written

The Board of Trustees det

ermination was supported
credible

evidence

seen

from the

totality of the

record, and the Board of Tru

stees reached its conclusio
n based on
its agency expertise.
The BCEs assertions tha
t the Board of Trustees is
estopped
from taking agency action,
and the BCEs claim that
it was denied
a hearing on disputed iss
ues, are without sufficie
nt merit to
warrant discussion in a
written opinion.
2;113(e) (1) (D) and
(E)
We add only these comments.
The BCE did not justifiably
rely upon any action taken
by the Division. To the
contrary, the
BCE approved the Sidebar Agr
eement without consulting
the Division
or obtaining approval and
then implemented the Sid
ebar Agreement
after receiving a letter
from the Division stating
approval was
required before such a pla
n could be implemented.
.

10

A352414T3

The BCEs argument that it was not

provided a fair opportunity
to challenge the Divisions asse
ssment is belied by the record.
The Division and Board of Trustee
s reduced the assessment based
on challenges presented by the BCE
.
As to the actual actuarial
computations, we agree with the
Board of Trustees the BCE has
provided no actuarial evidence to con
tradict the charges.
Affirmed.
hereby certiFy that the foregoing
is a true copy of the original an
file in my office.
CLERK OF ThEPP

it ON1SICN

11

A352414T3

__

__

__

__

F,

Kenney, Gross, Kova

ts & Parton
130 Maple Avenue, Bu
ilding B
Red Bank, New Jersey
07701
(732) 5307500
Attorneys for Appel
lant
MIDDLETOWN TOWNSHIP BO
ARD
OF EDUCATION,
APPELLANT,

SUPREME COURT OF NE
W JERSEY
APP.DIV. DOCKET NO
.
A003524l4T3
CIVIL ACTION

V.

DIVISION OF PENSIONS
AND
BENEFITS,

NOTICE OF PETITION
FOR CERTIFICATION

RESPONDENT.
To:

Clerk of the Supreme

Court
Hughes Justice Comp
lex
P0 Box 970
Trenton, NJ 08625-097
0
Clerk of the Appella
te Division
Hughes Justice Complex
P0 Box 006
Trenton, NJ 08625006
Jeff Ignatowicz, DA
G
Hughes Justice Comp
lex, 6th Floor
25 West Market Street
Trenton, New Jersey
08625

PLEASE TAKE NOTICE,

that Appellant, the
Middletown Township
Board of Education,
shall petition the
Supreme Court for
Certification for rev
iew of the entire
judgment entered by
the Appellate Divisi
on in this matter
on December 22, 20
16.
KENNEY, GROSS, KO
VATS & PARTON
January 5,

2017
By:

,Z
Christopher B. Parto
n, Esq.

CERTIFICATION OF SERV
ICE
MIDDLETOWN BOARD OF
EDUCATION v.
DIVISION OF PENSIONS
AND BENEFITS
DOCKET NO. A-003524
-14T3
NOTICE OF PETITION FO
R CERTIFICATION
CHRISTOPHER B.
as follows:

PARTON, ESQ., of full

age, hereby certifies

1. I am a partner in
the Red Bank, New Jersey
law firm of
Kenney, Gross, Kova
ts & Parton.
2. On Thursday, January
5, 2017, I personally
mailed the
within Notice of Petit
ion for Certificatio
n to the
following recipients:
Mark Neary, Esq., Cl
erk
Clerk of the Supreme
Court
Hughes Justice Comp
lex
P0 Box 970
Trenton, NJ 08625097
0
Clerk of the Appella
te Division
Hughes Justice Comp
lex
P0 Box 006
Trenton, NJ 08625006
Jeff Ignatowicz, DAG
Hughes Justice Comp
lex, 6th Floor
25 West Market Street
Trenton, New Jersey
08625
3. I hereby certify
that the foregoing sta
tements made by
me are true.
I am aware that if any
of
the foregoing
statements made by me
are willfully false,
I am
subject to punishment.
January 5,

2017

thristopher B.

Parton, Esq.

KENNEY, GROSS, KOVATS & PARTON

ATTORNEYS AT LAW
THE COURTS OF RED BANK
130 MAPLE AVEMJE, BUILDINGS
RED BANK, NEW JERSEY 07701

MAIACHIS. KENNEY (1944-2011)

MICHAEL S. GROSS
DOUGLASS. KOVATS
cumSToPnER B. PARTON
DANIEL Ii. ROBERTS
GABRIELLE A. PETflNEQ

TEL.
vAx.

732-530-7500
732-530-1739

cbpanon(kenneygres& corn

January 5, 2017
Mark Neary, Esq., Clerk
Supreme Court of New Jersey
Hughes Justice Complex
25 West Market Street
P0 Box 970
Trenton, New Jersey, 08625-0970
Re: Middletowu Board of Education v. Div
ision of Pensions and Benefits
Appellate Division Docket No. A-0035244
4T3
Appellants Notice of Petition for Certific
ation to Supreme Court
Dear Mr. Neary:
This firm represents Appellant, the Middlet
own Township Board of Education, in
this matter. Enclosed for filing pursuant
to 2:12-3, you will please find an original
and
two (2) copies of Appellants Notice of Petitio
n for Certification to the Supreme Court of
New Jersey in this matter, together wit a
h Proof of Service.
,.

Please return one file-stamped copy in the

provided envelope.
Please charge all

fees to

our Superior Court account 52426.

Thank you for your attention and assistan

ce in this matter.

Respectfully

submitted,

KENNEY, GROSS, KOVATS & PAR

T0N

CBP
ends, as noted
cc:
as noted on Enclosed
Proofof Service

Christopher B. Patton