Opinion
DOCKET NO. A-1774-12T3
09-05-2014
MICHAEL GULOTTA, on behalf of all owners of Crys Dream, Appellant, v. NEW JERSEY RACING COMMISSION, Respondent.
Michael D. Schottland argued the cause for appellant (Lomurro, Davison, Eastman & Munoz, P.A., attorneys; Mr. Schottland, of counsel; Christina Vassiliou Harvey, on the brief). Judith A. Nason, Deputy Attorney General, argued the cause for respondent (John J. Hoffman, Acting Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Nason, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Grall and Waugh. On appeal from the Department of Law and Public Safety. Michael D. Schottland argued the cause for appellant (Lomurro, Davison, Eastman & Munoz, P.A., attorneys; Mr. Schottland, of counsel; Christina Vassiliou Harvey, on the brief). Judith A. Nason, Deputy Attorney General, argued the cause for respondent (John J. Hoffman, Acting Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Nason, on the brief). PER CURIAM
As a consequence of a positive drug test and without affording the owners a reasonable opportunity to be heard at a meaningful time, the Ontario Racing Commission (ORC) declared a trotting horse ineligible for a specific ninety-day period. Through a grant of reciprocity pursuant to a regulation of the New Jersey Racing Commission (Commission), the Commission's board of judges at the Meadowlands Racetrack enforced the ORC order.
The horse's owners filed an administrative appeal of the Meadowlands ruling, which the Commission referred to the Office of Administrative Law (OAL). They also sought a stay, which the Supreme Court granted without condition after denial by the Commission's executive director and this court.
The Administrative Law Judge (ALJ) concluded that the Commission's grant of reciprocity should be limited to seven days, a period equivalent to what New Jersey would impose prior to a final hearing in the circumstances presented in Ontario. Rejecting that recommendation, the Commission upheld the Meadowlands ruling. In addition, the Commission "disqualified [the horse] from participation" in Meadowlands races that the horse had run while the Supreme Court's stay was in effect and required the owners to forfeit the purse money the horse won in those races for redistribution among the eligible participants. The Commission stayed its ruling pending this decision.
Michael Gulotta is one of the horse's owners. On his own behalf and the behalf of the other owners, he appeals the Commission's order. The central issue, as framed by the ALJ and the Commission, is the Commission's "legal authority . . . to rely upon the ORC['s] suspension [of the horse] as the basis for a reciprocal ruling." The Commission properly recognized that the answer depends, among other things, on "the process that is due when New Jersey grants reciprocity to an official ruling of another racing jurisdiction."
The difficulty is that in identifying the questions the Meadowlands judges and the Commission had to resolve before granting reciprocity, the Commission did not consider an important obligation of every administrative agency in this State — the obligation to execute its delegated authority in conformity to provide "procedural fairness in the administrative process and to [avoid] administrative abuses." Avant v. Clifford, 67 N.J. 496, 521 (1975) (discussing the judiciary's "obligation" to "insure" such fairness and "curb" such abuse). We conclude that those principles preclude the Commission from giving effect in this State to the ninety days' ineligibility imposed by the ORC as a sanction and without affording an adequate hearing at a meaningful time.
I
A
The ninety-day period of ineligibility the ORC imposed is not a suspension based on the horse's condition during the ninety-day period. It is a penalty for a positive drug test mandated by ORC Rule 11.10.01.
ORC Rule 11.10.01 states:
Any horse that tests positive in Ontario for any of the following shall be ineligible to race for a period of 90 days from the date of the identification of the horse with the positive test and will be placed on the Judges' list in accordance with Rule 20.01.01(i):Under this Rule, the horse's condition during the mandatory ninety days' ineligibility is irrelevant. A notice the ORC issued to the industry when the Rule was promulgated makes that clear:
1. Class I
2. Class II
3. Class III
4. TCO2
5. Substance determined to be non-therapeutic.
Any person who violates this rule shall be subject to a fine and/or suspension.
In an aggressive move to improve the welfare of the horse and communicate that Ontario isThe ORC's purpose was to deter negligence by owners in selecting a trainer. As the ORC's notice explains, "[t]he purpose . . . is to encourage owners to conduct proper due diligence" in that endeavor.
serious about owner responsibility and positive test for substances that have no business in the horse, the Ontario Racing Commission has approved rules that make a "positive test" horse immediately ineligible to race for 90 days.
The ORC applied the Rule in this case in conformity with its announced intention to deter. The owners' horse came in first in a harness race held at the Mohawk Racetrack in Ontario, Canada on June 18, 2011. Following the race, the ORC took samples of the horse's urine and blood, and the lab reported the results on June 27. The report indicated that the horse's urine contained a metabolite of a prohibited antidepressant. The horse's blood had not been tested for that substance.
Based solely on the lab report, on June 28, 2011, a board of judges for the ORC at Mohawk Racetrack entered a ruling declaring the horse ineligible to race for ninety days commencing on June 29. The owners were first notified of the positive test on the day the ruling was issued. They met with the board of judges at the Mohawk Racetrack on June 30 and, at that time, were informed that there would be no hearing before the commencement of the ineligibility period.
As the owners later advised the board of judges at the Meadowlands, during the June 30 meeting they told the Mohawk Racetrack judges that they had concerns about the atypically lax security at the Mohawk track during the approximately twenty-five to thirty hours the horse was in mandatory pre-race detention before the June 18 race. They informed the judges that no horse or any other owned by them or trained by their present trainer had ever tested positive for a prohibited substance.
There is no dispute that the ORC allows an owner to obtain a de novo hearing by filing an appeal and permits an application for a stay. Pursuant to an ORC directive, a stay may be granted "only" if the ORC's director is "satisfied that granting a stay is in the best interest of racing."
In this case, the owners' Ontario counsel filed an appeal and a request for a stay. In a supporting certification, Ontario counsel highlighted the owners' need to secure recordings from the track's surveillance cameras in the paddock area in order to ascertain whether someone unconnected with the horse or the trainer had tampered with the animal; the otherwise clean records of the horse, its trainer and its Canadian owner; and the owners' need to gather information in defense of the charged violation. Counsel noted that DNA tests could show the urine that tested positive could be the urine of another horse, that an independent lab test of the urine and blood taken by the ORC could show error in the positive result, and that expert opinion and cross-examination was needed to ascertain the reliability of the testing, which had disclosed a metabolite of a drug made for humans.
Ontario counsel contended that the owners, who had paid entrance fees for upcoming races and retained a responsible trainer, were entitled to an evidentiary hearing on a de novo appeal before the penalty took effect. He predicted that the period of ineligibility, which would end on September 26, 2011, would likely expire before the ORC heard and resolved the owners' pending appeal.
The ORC director denied the stay in a ruling that includes a recitation of the standard stated in the directive but no discussion of the evidence or arguments counsel presented. The record does not include any information about the disposition of the owners' appeal, but it does indicate that the trainer's appeal of a proposed suspension of his license based on the same positive drug test was not decided until March 5, 2012.
B
Turning to the events in New Jersey, the owners brought the ORC's ruling declaring this horse ineligible to the attention of the Commission's executive director, because they planned to enter the horse in Hambletonian races to be held at the Meadowlands Racetrack on July 30 and August 7, 2011. Accordingly, Gulotta called the executive director and asked if the Commission would enforce the ORC ruling.
After speaking to Gulotta, the executive director contacted the ORC and obtained a copy of the ruling imposing the period of ineligibility. According to a representative of the United States Trotting Association (USTA), which includes the ORC in its handbook's list of state racing authorities, as of July 14 the Mohawk Racetrack had not entered this horse on its steward's list of ineligibles or otherwise disseminated the information.
On July 11, 2011, Gulotta attempted to enter the horse for a race scheduled at the Meadowlands for July 15. Applying the Commission's reciprocity regulations, N.J.A.C. 13:71-1.10 and N.J.A.C. 13:71-1.12, the Secretary of the Meadowlands Racetrack declared the horse ineligible because, and only because, of the ORC's ruling.
N.J.A.C. 13:71-1.10 applies to licensees, and is inapplicable. N.J.A.C. 13:71-1.12 applies to horses, as well as persons. It provides: "No person or horse ruled off by, or under suspension by, any recognized turf authority, trotting association included, shall be admitted to the grounds of any association." Ibid.
The Commission's harness regulations do not define several terms used in N.J.A.C. 13:71-1.12 — "ruled off," "association" or "recognized turf authority." But pursuant to N.J.A.C. 13:71-4.1(a), absent clear indication based on context, terms not defined in N.J.A.C. 13:71-4.1 must be given the meaning assigned in N.J.A.C. 13:70-2.1.
N.J.A.C. 13:70-2.1 defines "rule off" to mean "the act of debarring from the grounds of an association and denying all racing privileges." A horse declared ineligible to race is not permitted to race.
"Association" means "a person or persons, partnerships or corporate body licensed by the commission to conduct a meeting where horse racing shall be permitted for any stake, purse or reward." Ibid. The Meadowlands Racetrack is operated by the New Jersey Sports and Exposition Authority. This Authority was established by the Legislature as "a public body corporate and politic," N.J.S.A. 5:10-4a, and licensed by the Commission to hold a horse race meeting.
The term "recognized turf authority" is undefined. As previously noted, however, the ORC is included in a list of state racing authorities provided in the USTA's handbook. Moreover, the ORC's authority to regulate racing in Ontario, Canada is undisputed, and N.J.A.C. 13:71-1.12 is not limited to racing authorities in the United States. It applies to an order ruling off or suspending a horse entered "by any recognized turf authority."
On the question of granting reciprocity to determinations of a recognized turf authority in another country, the Commission's interpretation is supported by a parallel rule of the USTA. N.J.S.A. 5:5-30, which authorizes the Commission to promulgate regulations governing racing, provides that "[e]very permit issued under this act shall contain a condition that . . . all harness races shall be subject to the reasonable rules and regulations from time to time prescribed by the [USTA]." (emphasis added); see also Moiseyev v. N.J. Racing Comm'n, 239 N.J. Super. 1, 14-15 (App. Div. 1989) (discussing this mandate and noting that N.J.A.C. 13:71-1.1, which provides for the Commission's regulations to control when in conflict with the rules of the USTA, precludes the agency from finding a conflict "merely by implication").
At all times pertinent here, Section 14 of Rule 22 of the USTA provided:
All persons and horses under suspension or expulsion by any State Racing Commission or by a reputable Trotting Association of a foreign country shall upon notice from such
commission or association . . . be suspended or expelled by [the USTA]. Provided, however, that, for good cause shown, the Board of Appeals may, upon consideration of the record of the proceedings had before such State Commission or foreign Association modify or so mold the penalty imposed to define the applicability thereof beyond the jurisdiction of the state Commission or foreign Association. . . .[]
As amended effective March 5, 2013, the parallel USTA rule is permissive. See USTA Rules § 1.06 (stating a generally applicable effective date for the USTA's amended and recodified rules).
§ 22.08 Reciprocity of Penalties. All persons and horses under suspension or expulsion by any racing authority or by a reputable trotting association of a foreign country upon notice from such authority or association to the Executive Vice-President, may be suspended or expelled by the USTA. For good cause shown, the District Board may upon consideration of the record of the proceedings had before such state racing authority or foreign association modify or so mold the penalty imposed to define the applicability thereof beyond the jurisdiction of the state racing authority or foreign association.
Following the Meadowlands secretary's refusal to enter the owners' horse, the owners' New Jersey counsel requested that the executive director schedule a hearing before the board of judges at the Meadowlands for July 14 to consider their several objections to the secretary's determination. That was done.
At the July 14 hearing, the owners took the opportunity they were given to appear, presented evidence and were heard by the judges. The informal hearing was recorded.
In addition to conveying the information they and their Ontario counsel provided in Ontario, the owners advised that the ORC had tested the horse's urine six times and detected a metabolite of the antidepressant each time but had not tested the horse's blood. They also advised that, at their request, the blood and a split sample of the horse's urine taken by the ORC had been sent to the owners' independent expert for testing, but their expert's report would not be available for at least two weeks.
The owners further informed the Meadowlands judges that they had learned that the antidepressant indicated by the metabolite the ORC detected in the horse's urine is used by humans and could be transferred to a horse through physical contact, such as touching, with a human using the drug. In addition, they assured the Meadowlands judges that neither this horse nor any other they owned or their trainer had trained had ever before tested positive for prohibited substances. They also indicated that Ontario counsel had requested, but not yet received, video recordings from the track's surveillance cameras, which might establish that someone unconnected with the horse was responsible.
The owners' New Jersey counsel urged the board of judges to consider N.J.A.C. 13:71-23.5(a)4, which provides that a horse involved in a positive drug test "shall not be entered or [permitted to] start until allowed to do so by the judges" but limits the duration of that ban by providing that "[i]n no event shall such a prohibition extend beyond seven days unless the stable has failed to provide all due cooperation to the Judges." New Jersey counsel contended that until there was a hearing on the merits, the ORC ruling should not be given effect for a longer period of time than the pre-hearing bar imposed for a positive test result in this State. By that time, fifteen days of the horse's ninety days' ineligibility had been served.
The board of judges was not persuaded. On July 14, 2011, they issued Meadowlands Ruling No. 11MDH37, declaring the horse ineligible to race for the ninety-day period from June 29 through and including September 26, 2011 "as issued in the Ontario ruling." When that ruling was entered, the horse had served fifteen of the ninety days' ineligibility imposed by the ORC, and the ORC had denied a stay despite the owners' request for an opportunity to present a defense.
Gulotta filed an administrative challenge to the Meadowlands Ruling and sought a stay from the Commission's executive director. He noted that N.J.A.C. 13:71-1.12 gave effect to the ORC's penalty "by operation of law," and that the Commission would give full force and effect to any stay granted by the ORC.
In denying the stay, the Commission's executive director relied on N.J.A.C. 13:71-3.8, which permits an application for a stay of a "[s]uspension from one or more racing activities for seven days or more." N.J.A.C. 13:71-3.8(a)3. Under its terms, the executive director may deny a stay if a grant "would be adverse to the best interests of racing or inimical to the integrity of the sport." N.J.A.C. 13:71-3.8(b).
Considering the factors courts employ when asked for a stay, Crowe v. DeGioia, 90 N.J. 126, 132-35 (1982), as well as the standard stated in N.J.A.C. 13:71-3.8, the executive director concluded that: the owners had no likelihood of success on the merits; the State's interest in enforcing the Commission's reciprocity rule outweighed the owners' interest in a stay of the Meadowlands ruling; and a "grant of a stay would be adverse to the best interests of racing."
In making those determinations, the executive director did not consider whether the owners, for reasons not attributable to delay or lack of cooperation on their part, had been given a reasonable opportunity to marshal and present evidence to the ORC based on the identity of the horse that tested positive or the unreliability of the test. Nor did the executive director address the fact that the horse had, by the time the stay was denied, already served twenty of its ninety days' ineligibility without a hearing on the merits.
On July 20, 2011, a panel of this court denied the owners' emergent application for a stay. The Supreme Court entered its stay of the Meadowlands ruling on July 22. By that time, the horse had served twenty-two days of the ORC-imposed ineligibility period without a hearing on the merits in Ontario or here. Moreover, the owners had been denied the opportunity to enter this otherwise eligible horse in a July 15 race at the Meadowlands.
In compliance with the Court's stay, the Commission permitted the horse to participate in the Hambletonian Oaks elimination race on July 30 and in the Hambletonian Oaks on August 7, 2011. And, there is no dispute that the horse passed drug tests administered by the Commission in connection with those races on July 29, August 2 and August 6, 2011. In any event, the horse ran both races and won its owners a share of both purses, over $100,000.
Despite the Supreme Court's stay and the negative tests obtained by the Commission, by letter of August 10, 2011, after both races were run and the purses won, the executive director gave the owners notice of the Commission's intention to require them to forfeit their shares of the purses from the Hambletonian races if the Commission affirmed the Meadowlands ruling. He stressed that the forfeiture would include the owners' share of the July 30 purse that the Commission had already distributed.
In its final decision, the Commission notes that the propriety of the executive director's hold on distribution of the second purse was not before the ALJ or the Commission. We agree that the issue was not properly before the Commission on an appeal from the Meadowlands ruling, which was issued prior to the race and said nothing about purses. Because the Commission ordered forfeiture, however, that determination is in issue on this appeal.
Also by letter of August 10, 2011, the Department of Agriculture for the Commonwealth of Pennsylvania transmitted the results of the independent drug tests on the horse's urine and blood samples that had been taken by the ORC on June 18. The lab confirmed the horse's June 27 positive urine test but reported that the horse's plasma test was negative.
Thereafter, the matter proceeded in the OAL. The ALJ heard oral argument on May 7, 2012 and issued an initial decision on May 29, 2012. With the benefit of three extensions granted by the Chief Administrative Law Judge, the Commission issued its final written decision almost six months later, on November 19, 2012, five days after the last of the three extensions expired and about fifteen months after the ORC period of ineligibility expired.
On March 5, 2012, the ORC issued its final ruling on the trainer's challenge to a proposed suspension of his license based on this horse's June 28 positive drug test results. Thus, the ORC did not decide the merits until five months after the horse's ineligibility period ended on September 26, 2011. The ORC fined the trainer $3000 and suspended his license for 270 days — March 10, 2012 through December 4, 2012. Those penalties are lower than the minimum of the ranges provided in the ORC's guidelines.
The ORC's ruling on the trainer's cases include these findings and reasons. This was the first time one of the trainer's horses tested positive for a prohibited substance. Although there was no blood test confirming the positive urine, all of the urine tests were positive, and a positive urine test is adequate to support liability.
The trainer established that contact with a human could explain the positive test, but he had not identified a person who could have been the donor. Finally, the trainer established the possibility that contaminated groundwater in the vicinity of the horse's Ontario home was the source of a metabolite detected in this horse's urine, but a possibility was not enough to avoid liability.
Mitigation of the penalties and fine was, however, appropriate in light of the trainer's good record, absence of evidence about the drug-enhanced performance and the possibility that the positive test resulted from contaminated groundwater.
II
On appeal, the owners argue that the Commission's enforcement of the ORC's penalty is inconsistent with New Jersey law and public policy and violates their rights to procedural and substantive due process. They also contend that the Commission's decision intrudes on the role of the federal government in violation of Article 1, Section 8 and Article 6, Clause 2 of the United States Constitution - the Commerce and Supremacy clauses. They assert that the Commission's interpretation of N.J.A.C. 13:71-1.12 effectively amended that regulation without rulemaking in violation of N.J.S.A. 52:14B-2(e) and Metromedia, Inc. v. Director of the Division of Taxation, 97 N.J. 313, 328-29 (1984). In addition, they contend the Commission violated the Open Public Meetings Act (OPMA), N.J.S.A. 10:4-6 to -21. And finally, they urge us to deem the ALJ's decision adopted pursuant to N.J.S.A. 52:14B-10(c), a provision of the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -25, because of the delay between the issuance of the ALJ's initial and the Commission's final decisions.
A
Before turning to discuss the owners' meritorious arguments, we identify those that have insufficient merit to warrant more than brief discussion in a written opinion. R. 2:11-3(e)(1)(E).
1. Substantially for the reasons stated in the ALJ's decision of May 29, 2012, which the Commission in part approved and adopted, we reject the owners' preemption claim and their claimed violations of the interstate and international commerce clauses.
2. The owners' claim that the Commission violated the OPMA borders on frivolous. A commissioner moved to enter a ruling identical to the Commission's final ruling and read a brief, albeit inadequate, explanation of the reasons for doing so. The motion was seconded, discussion was invited but none was had and the motion was passed by a unanimous vote of the Commissioners. There is no evidence of prior deliberations, and the issues before the Commission were primarily questions of law. Cf. In the Matter of Consider Distribution of the Casino Simulcasting Special Fund (Accumulated in 2005), 398 N.J. Super. 7, 16 (App. Div. 2008) (where the chairman described a process that included private deliberations about the distribution of a significant amount of money).
3. We also reject the owners' claim that the agency could not apply N.J.A.C. 13:71-1.12 to the ORC ruling without first acting to amend the regulation through the rulemaking procedures of the APA. As the discussion of N.J.A.C. 13:71-1.12 in part I(B) of this decision establishes, the Commission's interpretation is based on definitions already set forth in the agency's regulations and on well-settled policies that are consistent with the Legislature's express preference for the Commission to adopt regulations that conform with the USTA rules.
"Agencies should act through rulemaking procedures when the action is intended to have a 'widespread, continuing, and prospective effect,' deals with policy issues, materially changes existing laws, or when the action will benefit from rulemaking's flexible fact-finding procedures.'" In the Matter of Provision of Basic Generation Serv. for Period Beginning June 1 2008, 205 N.J. 339, 349-50 (2011). The Supreme Court recently confirmed that courts should consider the six characteristics of action requiring rulemaking identified in Metromedia, supra, 97 N.J. at 329-31, when determining whether rulemaking is required. Provision of Basic Generation Serv., supra, 205 N.J. at 350-52.
An agency should invoke the rulemaking process where "all or most of the relevant features of administrative rules are present and preponderate in favor of the rule-making process." Metromedia, supra, 97 N.J. at 331. Thus, proceeding by way of adjudication in a contested case, rather than by promulgation of a rule, is improper only when "several relevant features that typify administrative rules and rule-making weigh in favor of action that is quasi-legislative in character, rather than quasi-judicial or adjudicatory . . . ." Id. at 332.
The Commission rejected the owners' claim that it did not have official notice of the horse's ineligibility from the ORC as required by USTA Rule 22 § 14 on determining that its executive director obtained the ORC ruling notice from the ORC. That determination is supported by the record.
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Here, three factors favoring rulemaking over adjudication are absent. The agency's interpretation did not set forth an administrative "directive" or "policy" that "was not previously expressed" in any agency rule or effect "a material and significant change from a clear, past agency position on the identical subject matter." Id. at 331-32. It was based on existing regulations and entitled to deference.
The Commission presumably intends to uniformly apply this interpretation of N.J.A.C. 13:71-1.12 to all similarly situated owners. There is, however, no indication that such owners comprise "a large segment of the regulated or general public." Metromedia, supra, 97 N.J. at 331.
Finally, the interpretation, which was applied to the past events material to this case, was not designed "to operate only in future cases." Ibid. In fact, the Commission applied it to these owners based on past events.
B
Our courts review of an administrative agency's action is limited. Russo v. Bd. of Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011). Agency action that is not "arbitrary, capricious, or unreasonable" must be sustained. Brady v. Bd. of Review, 152 N.J. 197, 210 (1997). Our courts take this deferential approach based on the separation of powers mandated by Article III, paragraph 1 of the New Jersey Constitution, which leads courts to avoid interference that usurps the functions entrusted to other branches. In the Matter of Senior Appeals Examiners, 60 N.J. 356, 363 (1972).
Nevertheless, when "an agency action is clearly inconsistent with its statutory mission or with other State policy," George Harms Constr. Co. v. Turnpike Auth., 137 N.J. 8, 27 (1994), or "offends the State or Federal Constitution," Brady, supra, 152 N.J. at 211, our courts intervene. In that circumstance, judicial intervention is a responsibility imposed by the New Jersey Constitution, which requires "review, hearing and relief" in lieu of "prerogative writs" in the Superior Court "on terms and in the manner provided by rules of the Supreme Court," N.J. Const. art. VI, § 5, ¶ 4. See Carls v. Civil Serv. Comm'n, 17 N.J. 215, 223 (1955) (noting that this provision virtually immunizes judicial review from legislative curbs); see also Clifford, supra, 67 N.J. at 521-22 (discussing the breadth of common law prerogative writs).
In reviewing a claim that an agency has failed to fulfill "its procedural due process obligations" under the United States Constitution, New Jersey courts exercising their "function of review . . . of the action of administrative agencies . . . have not been satisfied with enforcement of naked constitutional right, but have gone further to strike down arbitrary action and administrative abuse and to insure procedural fairness in the administrative process." Avant, supra, 67 N.J. at 519-20.
As noted at the outset of this opinion, in considering its legal authority to grant reciprocity to the ORC's order, the Commission overlooked its obligation to fulfill its statutory responsibility without offending the basic tenet of fundamental fairness in administrative proceedings. Adopting the ALJ's determination that the procedural protections the ORC afforded included appeal rights that are as protective as those afforded under the APA, the Commission passed the question without considering the owners' complaint — that the Meadowlands ruling granting reciprocity was issued fifteen days after the horse's service of the ninety days' ineligibility commenced.
The Commission determined that the owners' interests must be considered "within the context of reciprocity and the limited scope of the issues to be resolved at a hearing" involving reciprocity in New Jersey. The Commission proceeded to identify and list four factual questions within that "limited scope": 1) the existence of the official ruling; 2) the common identity of the horse or licensee named in the ORC ruling and horse or licensee before the Commission; 3) the duration of the period of suspension or ineligibility period specified in the ruling; and 4) the continuing effect of the ruling in the issuing jurisdiction — that is, whether the issuing jurisdiction has stayed the order.
In developing the foregoing list, the Commission relied on Maryland Racing Commission v. Castrenze, 64 3 A.2d 412, 419-20 (Md. 1994). The Commission failed to recognize, however, that the Maryland Court expressly noted that it was not required to consider whether "defective notice in the foreign jurisdiction may be a defense in the Maryland proceeding" because the appellants, who were contesting the Maryland Racing Commission's grant of reciprocity to a license suspension elsewhere, had not raised the issue before the Court." Id. at 418 n.7. As adequate notice is a requirement of procedural due process, the Maryland Court's decision provides no support for the conclusion that the inadequacy of procedural due process in the issuing jurisdiction is irrelevant to a grant of reciprocity. Moreover, this court has held otherwise. Hartman v. N.J. Racing Comm'n, 352 N.J. Super. 490, 500 (App. Div. 2002).
Given the Commission's conclusion that a substantial property right of the owners was implicated by the Commission's decision to grant reciprocity to the ORC's ruling restricting their ability to race their horse for ninety days, it was required to consider their objections to the process afforded by the ORC. Pursuant to Barry v. Barchi, 443 U.S. 55, 59, 99 S. Ct. 2642, 2646, 61 L. Ed. 2d 365, 372 (1979), a case the Commission cited in its final decision, the procedures were constitutionally inadequate.
In Barry, the Supreme Court considered a case involving a New York steward's immediate imposition of a fifteen-day suspension of a trainer's license. 443 U.S. at 59, 99 S. Ct. at 2646, 61 L. Ed. 2d at 372. The suspension was based on the horse's positive post-race drug test on June 22, and the trainer was notified of the test on June 24. Ibid. The suspension was imposed on July 8 and commenced on July 10. Id. at 60, 90 S. Ct. at 2646, 61 L. Ed. 2d at 372.
The statute authorizing the fifteen-day suspension in Barry provided for a postsuspension hearing and expressly provided that the suspension must remain "in full force and effect" pending the hearing. Id. at 59 n.7, 99 S. Ct. at 2646 n.7, 61 L. Ed. 2d at 372 n.7. Additionally, the statute did not specify a time within which the postsuspension hearing must be held or completed and it allowed thirty days for issuance of a decision following the hearing. Id. at 61, 99 S. Ct. at 2647, 61 L. Ed. 2d at 373.
The Supreme Court found that the trainer's property interest in his license was sufficient to invoke the protection of the Due Process Clause. Id. at 64, 99 S. Ct. at 2649, 61 L. Ed. 2d at 375. Because New York law required proof of a positive drug test and some involvement by the trainer, be it by omission or commission, the Court concluded the trainer had an expectation of continued enjoyment of his license absent proof of culpable conduct. Id. at 64-65, 99 S. Ct. at 2649, 61 L. Ed. 2d at 375.
Recognizing the State's substantial interest in the integrity of racing and the trainer's substantial interest in avoiding an unwarranted suspension, the Court concluded that prior to imposition of an "interim suspension, pending a prompt judicial or administrative hearing that would definitely determine the issues," the Due Process Clause required no more than a showing of "probable cause to believe that a horse has been drugged and that a trainer has been at least negligent in connection with the drugging." Id. at 64, 99 S. Ct. at 2649, 61 L. Ed. 2d at 375. And the Supreme Court found a sufficiently reliable basis for probable cause available from the testing official's affirmation of the test result and the inference of negligence reasonably available from the extensive obligations New York imposes upon licensed trainers for the condition of horses under their care, and from the fact the trainer was given an opportunity to present his side of the story to investigators prior to the suspension. Id. at 61, 99 S. Ct. at 2647, 61 L. Ed. 2d at 373. Because the State had afforded that process, the Court found that its pre-suspension hearing provided the process due for an "interim suspension" pending a prompt final hearing. Id. at 64, 99 S. Ct. at 2649, 61 L. Ed. 2d at 375.
After considering Barry, the Commission concluded that the hearing before the board of judges in New Jersey was adequate. We agree that under Barry, it was adequate for an interim suspension pending a final hearing resolving the issues conducted without appreciable delay. By the time the board of judges at the Meadowlands issued its ruling, the horse had served fifteen days' ineligibility.
In Barry, the Supreme Court recognized that suspension of a trainer's license for fifteen days had "severe" consequences for the trainer who had a property interest in the license important to his livelihood. In this case, the Commission recognized that the disqualification of the horse after it won shares of two purses represented a potential deprivation of their substantial property interest in the purses. Albeit in a different context, a New York court has determined that a lifetime disqualification of a horse amounts to a "destruction, in effect, of property." Bokman v. N.Y. State Racing & Wagering Bd., 433 N.Y.S.2d 931 (N.Y. App. Div. 1980). As a practical matter, the impact of a suspension of a trainer's license and a suspension of an owner's ability to enter his or her otherwise eligible horse in any race is not significantly different. Both actions affect a property right that the person reasonably expects to enjoy absent proof of a disqualifying circumstance. Barry, supra, 443 U.S. at 64-65, 99 S. Ct. at 2649, 61 L. Ed. 2d at 375.
In Barry, the Supreme Court concluded that the severe consequences for the trainer required a prompt postsuspension hearing giving the trainer "opportunity to be heard must be 'at a meaningful time and in a meaningful manner.'" Id. at 66, 99 S. Ct. at 2650, 61 L. Ed. 2d at 376 (quoting Armstrong v. Manzo, 380 U.S. 545, 552 (1965)). Recognizing that the possible defenses were limited, the Court noted that the horse might not have been drugged or that its trainer might not have been negligent. The Court explained that the State's procedure for a hearing,
neither on its face nor as applied in this case, assured a prompt proceeding and prompt disposition of the outstanding issues between Barchi and the State. Indeed, insofar as the statutory requirements are concerned, it is as likely as not that Barchi and others subject to relatively brief suspensions would have no opportunity to put the State to its proof until they have suffered the full penalty imposed. Yet, it is possible that Barchi's horse may not have been drugged and Barchi may not have been at fault at all. Once suspension has been imposed, the trainer's interest in a speedy resolution of the controversy becomes paramount, it seems to us. We also discern little or no state interest, and the State has suggested none, in an appreciable delay in going forward with a full hearing. On the contrary, it would seem as much in the State's interest as Barchi's to have an early and reliable determination with respect to the integrity of those participating in state-supervised horse racing.
In these circumstances, it was necessary that Barchi be assured a prompt postsuspension hearing, one that would proceed and be concluded without appreciable delay. Because the statute as applied in this case was deficient in this respect, Barchi's suspension was constitutionally infirm under the Due Process Clause of the Fourteenth Amendment.
[Id. at 66, 99 S. Ct. at 2650, 61 L. Ed. 2d at 376.]
The procedures the ORC made available to these owners do not pass muster under Barry. While the drug test provided probable cause for imposing a sanction that applies regardless of fault, the test results did not establish that the results were, in fact, reliable or that the specimen tested was, in fact, taken from this horse. Thus, while few defenses were available to these owners, fundamental fairness required that they have an opportunity to present pertinent evidence and be heard promptly and at a meaningful time — once the ineligibility was imposed by the ORC, the owners' interest was paramount.
When the Commission's board of judges at the Meadowlands entered its ruling giving effect to the ORC ruling declaring the horse ineligible, it was fifteen days after the period of ineligibility commenced and the owners had still not been afforded a postsuspension hearing. Thus, the duration of a period imposing severe consequences justified on a showing of probable cause had already been exceeded.
This is not a case in which a horse was declared ineligible because of the continued effect of the drug or pending its owners' ability to show, by submitting the horse for testing, that the animal had become free of prohibited substances. Such suspensions are prophylactic and justified by the State's interest in safety and integrity in racing. In contrast, the ORC declared this horse ineligible immediately as a punishment intended to encourage diligence on the part of owners.
The question before the Commission and now this court, however, is whether its grant of reciprocity prior to the ORC's disposition of the owners' appeal — whether that disposition is by decision or dismissal for the owners' failure to comply with procedural deadlines reasonable in light of the issue to be determined — is consistent with the Commission's obligation to apply its regulations in a manner consistent with our principles of administrative fairness. Where, as here, the persons affected have established at a preliminary hearing that the jurisdiction that entered an order imposing a punishment has not and will not afford the persons affected a reasonable opportunity to be heard at a meaningful time, we conclude that it is not.
Even when full faith and credit applies, as it does to findings and judgments of an administrative agency acting in its quasi-judicial capacity, orders entered without providing an opportunity to be heard are not enforced. See Sonntag Reporting Serv., Ltd. v. Ciccarelli, 374 N.J. Super. 533, 538 (App. Div. 2005); Mancuso v. North Arlington, 203 N.J. Super. 427, 432 (Law. Div. 1985); see also Handlon v. Town of Belleville, 4 N.J. 99, 103-04 (1950) (noting that agency action in the "nature of a judicial act or proceeding [is] conditioned in the mode of its exercise by the fundamental requisites of due process of law"). Indeed, recognizing that the Commission could, in some circumstances, require an owner to forfeit "a purse for allowing a trainer who is suspended in another jurisdiction to run a horse in a race in this State," this court has held that "basic principles of procedural due process and fundamental fairness militate against the imposition of such a sanction against" owners who had no knowledge of and no opportunity to know of the trainer's suspension when they entered their horse in a New Jersey race. Hartman, supra, 352 N.J. Super. at 498. Section 14 of USTA Rule 22, quoted above, is consistent with our holding in Hartman.
Immediate enforcement of the ORC ruling was not the only means by which the Commission could honor its perceived obligation to enforce any order entered by a recognized racing authority before it expired. As previously noted, the ORC's order was pending appeal before the ORC, and the Commission, acting in its quasi-judicial capacity, would have been well within its obligation to administer its reciprocity rule in conformity with the law of this State if it had followed a basic principle of comity applied by our courts. That is, given that an owners' appeal was pending before the issuing body, the Commission could have taken the "proper course under comity principles[, which] is not to exercise jurisdiction but to adhere to the general rule that the court which first acquires jurisdiction has precedence in the absence of special equities." Yancoskie v. Del. River Port Auth., 78 N.J. 321, 324 (1978). There are no discernible equities favoring exclusion of an otherwise eligible horse because the horse is serving a penalty, as opposed to a suspension warranted by a present condition, when the horse's owners have not yet had a hearing on the merits of the alleged wrongdoing warranting imposition of the penalty. See USTA Rule 23 § 12 (providing for an automatic stay of a penalty pending appeal).
There is a separate and independent basis for our determination that reversal of the portions of the Commission's ruling declaring the horse ineligible retroactive to the period of June 29 through and including September 26, 2011 and directing a forfeiture of the owners' share and redistribution of the purses won on July 30 and August 7, 2011 is required. As previously noted, this horse ran those races pursuant to a stay of the Meadowlands ruling entered by the Supreme Court.
The Commission allowed the owners to enter the horse in those races without giving the owners any prior notice of its intention to forfeit the purses in the event the owners did not prevail on appeal. The Commission, as previously noted, gave notice of its intention after this horse had passed every drug test the Commission administered and both of these races were run.
Forfeiture of a share of a purse is a penalty for racing a horse subject to a disqualification, and this horse's owners were entitled to prior notice of the risk that the Commission would invoke that sanction for the horse running races it was permitted to enter while the stay was in place. Hartman, supra, 352 N.J. Super. at 497-99.
C
Although our decision to reverse is based on unfairness in the administrative proceedings, it is appropriate to address the owners' request to deem the ALJ's decision adopted pursuant to N.J.S.A. 52:14B-10(c). Their objection is primarily based on extensions of the Commission's time to issue its decision granted by the Chief Administrative Law Judge. After this case was decided, the Legislature amended the statute to further restrict the authority of the Director of the OAL to grant extensions, L. 2013, c. 236 §§ 2, 5 (effective March 18, 2014). But we address the issue under the law in place at the time.
As amended, subsection (c) of N.J.S.A. 52:14B-10 permits "a single extension of not more than 45 days" on a showing of good cause. It further provides that "[a]ny additional extension of time shall be subject to, and contingent upon, the unanimous agreement of the parties." L. 2013, c. 356 § 2. Chapter 356 was approved on January 17, 2014 and took effect sixty days later, on March 18, 2014. See L. 2013, c. 356 § 5. No other extensions are allowed. Prior to the statutory amendment, the Legislature did not limit the number of extensions. L. 2 001, c. 5 § 4.
We apply the law as written at the time. N.J.S.A. 52:14B-10(c) requires an agency to "adopt, reject or modify the recommended report and decision no later than 45 days after" the ALJ's decision. "Unless the head of the agency modifies or rejects" within forty-five days, "the decision of the administrative law judge shall be deemed adopted as the final decision." Ibid. "For good cause shown" by the head of the agency, that time limit may be extended. Ibid.
The grant of an extension is "under the supervision and control of the Director of the OAL," and the director has adopted a regulation implementing N.J.S.A. 52:14B-10(c). Capone v. N.J. Racing Comm'n, 358 N.J. Super. 339, 349, 351 (App. Div. 2003). The regulation, which has not been amended to conform with the recent statutory change, authorizes the OAL's Director to issue extensions. N.J.A.C. 1:1-18.8. The regulation provides that "[e]xtensions for filing . . . final decisions may not exceed 45 days from the original decision due date," and it provides that "[a]dditional extensions of not more than 45 days each may be granted only for good cause shown." N.J.A.C. 1:1- 18.8(f); see Capone, supra, 358 N.J. Super. at 349 (discussing a prior iteration of paragraph (f) that required a showing of "extraordinary circumstances" for a second forty-five-day extension, which was in effect between May 18, 1992, 24 N.J.R. 321(a), and December 17, 2007, 39 N.J.R. 5201(a)).
Most important here, paragraph (f) of N.J.A.C. 1:1-18.8 further provides that "[a]ny order granting an extension must set forth the factual basis constituting good cause for the extension . . . ." On July 11, the Commission was granted an extension from July 13 until August 27 on the ground that the Commission was not scheduled to meet until after July 13. On August 27, the Commission was granted a second extension until October 11 "to obtain legal advice, [because] the initial decision and exceptions [were] currently under legal review." And, on October 9, the Commission was granted an extension that references an October 3, 2012 letter from the owners' attorney consenting to an extension until the Commission's November meeting. Although not mentioned in the order, the attorney's letter of October 3 indicated that consent was given "without prejudice to waive the deemed adopted provision" based on the delay of the final decision authorized by the second extension. The orders set forth no factual basis for a finding of good cause other than what is set forth above.
We agree that the factual basis for the second extension was inadequate to establish "good cause." Having received one forty-five-day extension, the Commission did not provide any explanation for needing an additional forty-five-day extension to complete the legal review. It simply asserted that basis for its request.
The owners argue that the factual basis set forth is inadequate to establish good cause. We agree. The decisions of this court demonstrate that a showing of good cause is not assumed and must be supported by facts warranting a delay of the duration the agency requests. See, e.g., Penpac, Inc. v. Passaic Cnty. Utils. Auth., 367 N.J. Super. 487, 497 (App. Div.), certif. denied, 180 N.J. 457 (2004) (and cases cited therein); Capone, supra, 358 N.J. Super. at 349-50 (and cases cited therein).
On appeal, the Commission does not address the adequacy of its showing of good cause. Instead, the Commission asserts that it complied with the procedures set forth in the OAL regulation and obtained extensions. The Commission's compliance with the process is beside the point raised by the owners. By focusing on its technical compliance, the Commission overlooks the substance of its statutory obligation to decide contested cases promptly or show good cause warranting a delay. The Legislature imposed that obligation plainly and without ambiguity.
This is not the first time an agency, or this agency, has overlooked that obligation. See, e.g., Capone, supra, 358 N.J. Super. at 349-50; N.J. Racing Comm'n v. Silverman, 303 N.J. Super. 293, 303-04 (App. Div. 1997). This court has "observed that 'any State agency's repeated failure to discharge its legislated responsibilities . . . implicates considerations of [the] integrity' of the procedural requirements of the APA." Silverman, supra, 303 N.J. Super. at 303; see also Chapel v. Bd. of Trs. of the Pub. Employees' Ret. Sys., 258 N.J. Super. 389, 397 (App. Div. 1992). The Commission's request for a grant of a second extension supported by nothing other than a bald assertion of a need for legal advice, as well as the grant of an extension on that basis, was inconsistent with the agency's obligation to exercise its authority in conformity with the statutes.
That said, we decline to determine whether the "deemed adopted" statute should be invoked because agency delay is attributable to "bad faith," "inexcusable negligence, or gross indifference." King v. New Jersey Racing Comm'n, 103 N.J. 412, 421 (1986). Instead, we rest our decision to reverse on other grounds.
Reversed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION