IN THE MATTER OF CAMDEN COUNTY COUNCIL ON ECONOMIC OPPORTUNITY

(NOTE: The status of this decision is .)
 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1191-08T11191-08T1

IN THE MATTER OF CAMDEN

COUNTY COUNCIL ON ECONOMIC

OPPORTUNITY

 

Argued May 27, 2009 - Decided

 
Before Judges Winkelstein, Gilroy and Chambers.

On appeal from the New Jersey Department of Agriculture, #08-07-035.

Julie A. Williamson argued the cause for appellants, Camden County Council on Economic Opportunity, Arnold Byrd, Margaret Henry-Parker, Pandora Brown, Monique Thomas, Faheem El Saleem, Mary Ann Rosado, Thomas Burrell and Evette Benton.

Kristen D. Heinzerling, Deputy Attorney General, argued the cause for respondent, New Jersey Department of Agriculture (Anne Milgram, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Heinzerling, on the brief).

PER CURIAM

Appellant, the Camden County Council on Economic Opportunity (CCC), is a nonprofit agency that provides social services to Camden County residents. The individual appellants are the Executive Director of the CCC, board members, and present and former employees. They appeal from a decision of the New Jersey Department of Agriculture (the Department) terminating their participation in the Child and Adult Care Food Program (CACFP) based on the discontinuance of the CCC's Federal Head Start grant by the United States Department of Health and Human Services (DHHS). Appellants' principal argument on appeal is that the Department "acted arbitrarily, capriciously and unreasonably in determining that [the CCC], its officers, board members and principals were seriously deficient under 7 C.F.R. 226.6(c)(3)[(ii)](S), terminating [the CCC] from the CACFP and listing it and its principals, board members and officers on the ineligible list." In light of the record and prevailing law, we reject appellants' argument and affirm the Department's decision.

Approximately forty years ago, CCC became a grantee of Head Start, a federally funded program providing child development services to economically disadvantaged children and families. In September 2005, the DHHS Office of Head Start, Administration for Children and Families (ACF), conducted a review of CCC's Head Start program. By letter dated January 27, 2006, the ACF advised the CCC of deficiencies in its program, and its obligation to remedy those deficiencies. The ACF conducted follow-up visits in March and May 2006. Based on uncorrected deficiencies, on April 9, 2007, the ACF issued a Notice of Termination to the CCC of its federal funding for the Head Start program.

The CCC appealed. On September 25, 2007, the DHHS Departmental Appeals Board affirmed the ACF's decision to terminate funds for the CCC's Head Start grant. The CCC appealed to the United States District Court for the District of Columbia, which affirmed the ACF's decision. An appeal is currently pending in the United States Court of Appeals.

The United States Department of Agriculture (USDA) administers the CACFP. 42 U.S.C.A. 1766. The program "assist[s] States through grants-in-aid and other means to initiate and maintain nonprofit food service programs for children in institutions providing child care." 42 U.S.C.A. 1766(a)(1). As part of the program, the Department entered into a Federal-State Agreement (FSA) with the USDA Food and Nutrition Service (FNS) to administer the CACFP in New Jersey.

In August 2007, the CCC submitted its yearly renewal application for the CACFP to the Department, which included a Reimbursement Agreement (RA). The RA provides that, to be an eligible institution, the CCC must comply with the conditions of 7 C.F.R. 226. Paragraph 5 of the RA permits the Department to terminate the CCC as a CACFP institution if the Department determines that the CCC failed to comply with the RA or the applicable regulations.

Paragraph 6 of the RA mandates that the CCC submit with its application "[a] statement certifying that all information on the application is true and correct; . . . [a] list of the publicly funded programs in which the institution and its principals have participated"; and "a certification that, during the preceding seven years, neither the institution nor any of its principals has been declared ineligible to participate in any publicly funded program by reason of violating that program's requirements[.]" By signing the RA, the CCC certified that neither its "agency nor any of its principals are on the USDA National Disqualified list [(NDL)], and have not been disqualified from participation in any other []publicly-funded program for violating that program's requirements." Various documents signed by the CCC and submitted with its application contain similar certifications.

On October 31, 2007, the Department notified the CCC that its 2008 CACFP application had been approved. On January 9, 2008, however, the Department issued a Notice of Serious Deficiency to the CCC and required corrective action pursuant to 7 C.F.R. 226.6(c)(3). The Department advised the CCC that it was "seriously deficient due to the termination of the [CCC]'s Early Head Start Program" by the ACF. The deficiencies that may be cause for termination of a participating institution's agreement include: "The fact the institution or any of the institution's principals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements." 7 C.F.R. 226.6(c)(3)(ii)(S).

On January 25, 2008, the CCC responded by letter to the Department's allegations, arguing that the ACF's Notice of Termination of CCC's Head Start program "does not debar or make [the CCC] or any principals, board members, employees or former employees ineligible to participate in the Head Start program or any other federally funded programs." The Department rejected the CCC's argument, and issued a Notice of Intent to Terminate. The Department found that because the CCC "did not dispute the fact that [it] and [its] principals have been declared ineligible or denied program funds by reason of violating [ACF's] program requirements," the "[CCC] and its principals are ineligible to participate in the [CACFP] based on ACF's final determination, and will be placed on the National Disqualified List."

The CCC filed an appeal, and the Department's hearing officer held a hearing on August 26, 2008. Although the CCC did not dispute that it was terminated from Head Start, it argued that Head Start had not deemed it "ineligible for a publicly funded program by reason of violating that program's requirements." The CCC contended that termination was improper because the regulations do not require termination when an institution is "denied program funds by reason of violating [the ACF] program requirements."

The hearing officer issued a decision on October 1, 2008, sustaining the termination of the CCC from the CACFP. The decision stated:

It is my belief that the Department acted properly in issuing its Notice of Serious Deficiency and its Notice of Intent to Terminate to [CCC]. The fact the [CCC] remains able to apply for Early Head Start grant funding in no way mitigates the fact that [DHHS] terminated public funding to [the CCC] because [DHHS] had determined that [the CCC] had violated the performance standards of the Head Start [p]rogram. In my judgment, the Department's intended action is consistent with the action it is permitted (and actually required) to take under the current federal CACFP program rules.

Consequently, the Department issued a notice on October 24, 2008, which terminated the CCC's participation in the CACFP; and disqualified the CCC and the individual appellants from future CACFP participation. It further notified the CCC and the individual appellants that they would be placed on the NDL.

Against this procedural background, we address appellants' legal arguments. Their primary argument is that simply because the CCC was terminated from the Head Start Program does not mean that it is ineligible "for any other publicly funded program" pursuant to 7 C.F.R. 226.6(c)(3)(ii). Appellants contend that the Department "erroneously interpret[ed] 7 [C.F.R. 226.6(c)(3)(ii)(S)] as permitting it to terminate a grantee from the CACFP if the grantee has been found to have violated another publicly funded program's regulations."

Our review of a final agency decision is limited. Gerba v. Bd. of Trs., Pub. Employees' Ret. Sys., 83 N.J. 174, 189 (1980). An agency's "interpretation of statutes and regulations within its implementing and enforcing responsibility is ordinarily entitled to our deference." Bueno v. Bd. of Trs., Teachers Pension & Annuity Fund, 404 N.J. Super. 119, 125 (App. Div. 2008) (quotations and citation omitted). We are not, however, bound by the agency's legal opinions. Ibid. (quotation and citation omitted). In sum, our role in reviewing agency decisions is restricted to four inquiries:

(1) whether the agency's decision offends the State or Federal Constitution; (2) whether the agency's action violates express or implied legislative policies; (3) whether the record contains substantial evidence to support the findings on which the agency based its action; and (4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.

[Id. at 124-25 (quotation omitted).]

Applying this standard, we find no reason to disturb the Department's decision.

An institution may not participate in the CACFP when it has been "determined to be ineligible to participate in any other publicly funded program by reason of violation of the requirements of the program[.]" 42 U.S.C. 1766(a)(6)(B). If at any time a participating CACFP "institution or any of the institution's principals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements," the Department must deem that institution to be seriously deficient and initiate termination from the CACFP. 7 C.F.R. 226.6(c)(3)(ii)(S). The question as posed by appellants is whether an agency's termination from a federally funded program renders it "ineligible" for other federally funded programs.

When statutory language "clearly reveals the meaning of the statute, the court's sole function is to enforce the statute in accordance with those terms." State, Dep't of Law & Pub. Safety v. Bigham, 119 N.J. 646, 651 (1990); accord SASCO 1997 NI, LLC v. Zudkewich, 166 N.J. 579, 586 (2001). Yet, when each party's interpretation of a statutory term is plausible, the court must determine the legislative intent in enacting the provision. Jimenez v. Baglieri, 152 N.J. 337, 346 (1998). "In doing so, we look first to the plain language of the statute, seeking further guidance only to the extent that the Legislature's intent cannot be derived from the words that it has chosen." Pizzullo v. N.J. Mfrs. Ins. Co., 196 N.J. 251, 264 (2008). "'In the event that the language is not clear and unambiguous on its face, we look to other interpretive aids to assist us in our understanding of the Legislature's will.'" Sanders v. Langemeier, ___ N.J. ___, ___ (2009) (slip op. at 5) (quoting Pizzullo, supra, 196 N.J. at 264). Because "ineligible" is not defined in the statute, we look to the legislative intent in promulgating the statutory and regulatory provisions at issue. Pizzullo, supra, 196 N.J. at 264.

Representative William F. Goodling "introduc[ed] [the] legislation to combat fraud and abuse in the [CACFP]." 146 Cong. Rec. E. 813 (May 23, 2000). The legislation was proposed as a result of various governmental reports finding widespread fraud and abuse in the CACFP, one of which indicated that state agencies claimed "unclear regulations on the removal of noncompliant sponsors [as] among the reasons why they could not strengthen the amount of control over the fraud and abuse." Ibid. Representative Goodling stated that among the key provisions of the proposal, "state agencies that administer CACFP [are required] to deny approval of institutions determined to have been terminated with cause or that lost their license to operate any federally funded program." Ibid.

Subsequently, in June 2002, the USDA issued an interim rule incorporating into the CACFP regulations, "the changes mandated by the Agricultural Risk Protection Act of 2000 and the Grain Standards and Warehouse Improvement Act of 2000." 67 Fed. Reg. 43448 (June 27, 2002). In particular, the rule "revise[d] the existing language [of the regulations] to expand and clarify the types of problems that would lead a State agency to determine an institution seriously deficient[.]" Ibid. As is set forth in the interim rule, 7 C.F.R. 226.6(c)(3)(ii)(S) was revised to include, as a serious deficiency, "that the institution or any of the institution's principals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements." Ibid. The interim rule provided:

The additional items reflect changes in the CACFP regulations and underscore the importance of particular management functions, the failure of nonperformance of which reviews and audits have identified as common problems among institutions whose participation was ultimately terminated for mismanagement. . . . The NSLA's intent in this area is to require the CACFP State agency to initiate action to terminate an institution's participation based on a final determination made by another public entity or a court.

[Ibid.]

Both the legislative statement and interim rule include the term "ineligible" in the amended regulations. They support the Department's argument that Congress sought to end from participation in the CACFP any institution terminated for cause from another federally-funded program. This policy would "improve [CACFP] operations and monitoring at the State agency and institution levels." Ibid. As the Department has persuasively argued:

[T]he legislative and regulatory history demonstrate that the subject provision aims to prevent fraud, abuse, and mismanagement of programs receiving federal funds, and thus . . . protects federal funds that would otherwise have been distributed to a program that has already been identified as failing to comply with the requirements of another publicly funded program.

Accordingly, the controlling regulations required the Department to terminate the CCC's CACFP participation and disqualify the named individuals as a result of their termination from the Head Start Program.

In support of its argument, appellants urge us to consider two Head Start regulations, namely 45 C.F.R. 74.13 and 74.62, which differentiate between termination and debarment; 45 C.F.R. 74.13 "restricts [Head Start] subawards and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities"; 45 C.F.R. 74.62(d) provides that "[t]he enforcement remedies identified . . . including suspension and termination, do not preclude a recipient from being subject to debarment and suspension[.]"

Appellants' arguments are not persuasive. The Head Start regulations are not at issue here. It is the CACFP regulatory structure that caused the Department to terminate appellants' participation in the Head Start Program. Consequently, because there is no dispute that appellants were terminated from the Head Start Program for cause, the Department's decision was neither arbitrary, capricious, nor unreasonable, but consistent with the governing regulatory scheme.

Affirmed.

 

We do not address, as it has not been raised, whether the appeal is from a final agency decision, in that the final action of the agency was taken by the hearing officer rather than having the matter sent to the Office of Administrative Law as a contested case. See generally N.J.S.A. 52:14B-1 to -24 (the Administrative Procedure Act); N.J.A.C. 2:1-3.10 (governing hearings before the Department).

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A-1191-08T1

June 17, 2009