LAWRENCE O'REILLY v. BOARD OF TRUSTEES OF THE PUBLIC EMPLOYEES RETIREMENT SYSTEM

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

LAWRENCE O'REILLY,

Appellant,

v.

BOARD OF TRUSTEES OF

THE PUBLIC EMPLOYEES'

RETIREMENT SYSTEM,

Respondent.

________________________________

January 8, 2015

Argued November 19, 2014 Decided

Before Judges Fuentes, Ashrafi, and O'Connor.

On appeal from the Board of Trustees of the Public Employees' Retirement System, Department of Treasury.

Samuel J. Halpern argued the cause for appellant.

Jeff S. Ignatowitz, Deputy Attorney General, argued the cause for respondent (John J. Hoffman, Acting Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Mr. Ignatowitz, on the brief).

PER CURIAM

Lawrence O'Reilly appeals from a final decision of the Board of Trustees (Board) of the Public Employees' Retirement System (PERS) denying his application for retirement benefits under the Prosecutors Part of PERS, N.J.S.A. 43:15A-155 to -161. We reverse and remand for re-determination of O'Reilly's pension benefits.

I.

The Prosecutors Part refers to statutory pension benefits available to certain government employees enrolled in PERS from January 2002 through May 2010.1 Pursuant to N.J.S.A. 43:15A-155, those eligible for enrollment in the Prosecutors Part are county prosecutors and assistant county prosecutors and certain specified employees of the State Department of Law and Public Safety. The latter include the Director of the Division of Criminal Justice, certain criminal investigators in that division, and pertinent to this case

an . . . assistant attorney general or deputy attorney general in [the Department of Law and Public Safety] and assigned to [the Division of Criminal Justice] pursuant to [the Criminal Justice Act] [L.] 1970, c. 74 (C. 52:17B-97 et seq.) . . . .

[Ibid.]

The issue in this case is whether O'Reilly qualifies for the enhanced Prosecutors Part pension because, in his employment as an Assistant Attorney General or a Deputy Attorney General, he was "assigned" to the Division of Criminal Justice (hereinafter "Criminal Justice") from the law's effective date of January 7, 2002, until November 10, 2006, when he was concededly re-assigned to other duties in the Division of Law.

O'Reilly retired from his State government position on March 1, 2009. The Board had previously informed him that he would not be granted the enhanced Prosecutors Part pension because he was not assigned to Criminal Justice when the law took effect and thereafter. O'Reilly objected to that decision, and his matter was referred to the Office of Administrative Law for a hearing. An Administrative Law Judge (ALJ) conducted a hearing in September and October 2011 and issued a written decision on May 24, 2012. By letter dated July 19, 2012, the Board rejected O'Reilly's exceptions and adopted the ALJ's findings and conclusions as its final decision.

II.

The evidence presented to the ALJ showed the following facts. O'Reilly began his career in State government in 1975. While so employed, he enrolled in law school and obtained his law degree in 1982. He became employed by the Department of Law and Public Safety (hereinafter "the Department") in 1986 and was assigned during the next twenty-three years to different divisions and offices within the Department. In October 1988, he was formally assigned to Criminal Justice. In fact, for about six months in 1990, O'Reilly served as the Acting Director of Criminal Justice.

Although O'Reilly remained on the Criminal Justice payroll until June 1992, he was transferred to the newly-created Environmental Prosecutor's Office on February 25, 1992. In his oath as a Special Deputy Attorney General assigned to that office, O'Reilly swore to "serve under the authority and supervision of the Director, Division of Criminal Justice or his designee." In the Environmental Prosecutor's Office, O'Reilly worked on both criminal prosecutions and civil enforcement of environmental matters. He had access to grand jury information and other Criminal Justice resources. He was directly supervised by the State Environmental Prosecutor, but was concurrently supervised by the Director of Criminal Justice.

The Environmental Prosecutor's Office was dissolved in March 1994. O'Reilly continued to perform the same functions but now as an Assistant Attorney General assigned to the Office of the Attorney General. In March 1996, he explained his role as follows in a letter to a Superior Court Judge: "As the Assistant Attorney General in charge of environmental coordination, I am responsible for overseeing environmental matters in the Division of Criminal Justice (DCJ), which investigates and prosecutes criminal matters, and the Division of Law (DOL), which represents the DEP [Department of Environmental Protection] in civil and administrative matters."

On January 14, 2002, Attorney General John Farmer appointed O'Reilly to a tenured civil service title of Assistant Deputy Attorney General. This appointment was made one week after the effective date of the Prosecutors Part legislation, January 7, 2002. Farmer testified at the ALJ hearing that the appointment was to protect O'Reilly's employment at a time when a new administration was about to take office and O'Reilly expressed concerns that his work in an environmental enforcement matter put him in disfavor with certain parties. In the new tenured position, O'Reilly continued to work on the same kinds of matters that had been assigned to him in the preceding years. His new position, however, was specifically designated by N.J.S.A. 52:17B-3.1 as a position within the Division of Law.

According to O'Reilly, at the time of this re-assignment, he discussed his continuing eligibility for a Prosecutors Part pension with First Assistant Attorney General Paul Zoubek, who commented that he would be doing "true Criminal Justice work" in his new position.

In August 2002, O'Reilly began to take on additional duties. He became involved with the State's domestic security task force, which was established in the aftermath of the September 11, 2001 terrorist attacks.

In September 2002, Attorney General Peter Harvey determined that certain Department employees who were "reporting outside the Division of Criminal Justice" were nevertheless eligible for enrollment in the Prosecutors Part. He sent a memorandum on February 24, 2003, to the Director of the Division of Pensions, Department of the Treasury, formally stating his determination and providing a list of forty-two names of Assistant and Deputy Attorneys General and investigators whom Harvey deemed eligible for Prosecutors Part enrollment. Included in the list was O'Reilly, designated an "Assistant Deputy Attorney General" within the office of "Environmental Prosecutor."

On August 8, 2003, Attorney General Harvey issued a second memorandum to the Director of the Division of Pensions explaining the criteria he had used to determine eligibility for Prosecutors Part enrollment. This time, he listed thirty names of Department employees he deemed eligible, including O'Reilly. Harvey's memorandum stated

Employees of the Department of Law and Public Safety who are not assigned to the Division of Criminal Justice will be eligible for enrollment in the Prosecutors Part Pension provided they satisfy one of the following criteria

1. The employee is assigned to a unit that has a specific delegation of authority under the Criminal Justice Act of 1970, N.J.S.A. 52:17B-97 et seq. and the employee performs law enforcement functions on behalf of the Attorney General as an Assistant Attorney General, Deputy Attorney General, or investigator.

2. The employee is detached from his/her assignment in the Division of Criminal Justice to another division or office within the Department of Law and Public Safety and performs law enforcement functions on behalf of the Attorney General under the Criminal Justice Act of 1970, N.J.S.A. 52:17B-97, et seq. Additionally, the employee, prior to being detached from the Division of Criminal Justice, must have been eligible for enrollment in the Prosecutors Part Pension according to [N.J.S.A. 43:15A-155].

[(Footnote omitted).]

On September 22, 2003, the Division of Pensions sent a memorandum-notice to O'Reilly stating that he was enrolled in the Prosecutors Part. In June 2004, PERS adopted a regulation, N.J.A.C. 17:2-8.2, that essentially repeated the criteria for eligibility that Attorney General Harvey had established.

On August 30, 2006, however, Harvey's successor, Attorney General Zulima Farber, issued a legal opinion rejecting Harvey's eligibility criteria and stating that the 2004 regulation adopted by PERS was contrary to N.J.S.A. 43:15A-155 and therefore invalid. The regulation was repealed in 2007.

In the meantime, O'Reilly continued to perform his environmental enforcement and security task force duties until he was formally transferred to the Division of Law to perform other duties on November 10, 2006. In the Division of Law, he was assigned to the Office of Homeland Security and Preparedness until his retirement in March 2009.

Before his retirement, O'Reilly had received notice from the Division of Pensions on November 16, 2006, that the Board would review his past enrollment in the Prosecutors Part and advise him of his eligibility. The Board finally advised O'Reilly that he was not eligible on January 26, 2009, after he filed for retirement. As stated previously, O'Reilly challenged that determination, resulting in this appeal.

III.

We have a limited scope of review of the decision of an administrative agency. Gerba v. Bd. of Trs. of the Pub. Emps. Ret. Sys., 83 N.J. 174, 189 (1980). We will not disturb an agency decision "unless there is a clear showing that it is arbitrary, capricious, or unreasonable, or that it lacks fair support in the record." Hemsey v. Bd. of Trs., Police & Firemen's Ret. Sys., 198 N.J. 215, 223-24 (2009) (quoting In re Herrmann, 192 N.J. 19, 27-28 (2007)). We accept the factual findings of an agency as long as they are supported by sufficient credible evidence, and we may not substitute our judgment for that of the agency. Greenwood v. State Police Training Ctr., 127 N.J. 500, 513 (1992).

The Criminal Justice Act established the Division of Criminal Justice and provided to it responsibility for "[a]ll the functions, powers and duties of the Attorney General relating or pertaining to the enforcement and prosecution of the criminal business of the State and of any county of the State . . . ." N.J.S.A. 52:17B-101. The Attorney General has broad powers to organize the Department and to assign staff to the various divisions of the Department. See N.J.S.A. 52:17B-3, -27.

The evidence in this case demonstrates that O'Reilly was assigned to various divisions and offices at the discretion of the several Attorneys General under whom he served and generally for the purpose of accommodating the operational needs of the Department. The evidence also supports the ALJ's finding that O'Reilly engaged in significant prosecutorial duties throughout his tenure in the Department from 1988 until November 2006.

Despite that finding, the ALJ concluded that O'Reilly was neither employed by nor "assigned to" Criminal Justice, and therefore, he was not eligible within the language of N.J.S.A. 43:15A-155 for a Prosecutors Part pension. The Board asserts that conclusion is correct. It argues that from January 2002 when the Prosecutors Part legislation took effect until O'Reilly concededly was no longer wielding Criminal Justice authority as of November 2006, he was formally assigned to the Division of Law and his salary was paid through the budget of that division and not through Criminal Justice.

O'Reilly argues that the ALJ and the Board incorrectly interpreted the phrase "assigned to" as meaning the same as "employed by the Division of Criminal Justice." He contends that several prior decisions of the Board and unpublished decisions of this court have determined that the phrase has broader meaning based on the Attorney General's discretion to assign duties to Department employees that come under the direction of Criminal Justice.

The Board responds that the unpublished decisions of this court have previously accepted Attorney General Farber's legal opinion and the Board's determination that the statute requires formal assignment of a Department employee to Criminal Justice. The Board argues that Attorney General Harvey's view of eligibility is contrary to the statute and cannot permanently affect the Board's correct application of eligibility criteria.

The phrase "assigned to the division [of Criminal Justice]" is not defined by the statute or explained by its legislative history. It is also not specifically defined in the Criminal Justice Act. We recognize that pension eligibility "is not to be liberally permitted." Krayniak v. Bd. of Trs., Pub. Emps. Ret. Sys., 412 N.J. Super. 232, 242 (App. Div. 2010) (quoting Smith v. State, Dept. of Treasury, Div. of Pensions & Benefits, 390 N.J. Super. 209, 213 (App. Div. 2007)). In prior unpublished opinions, we accepted Attorney General Farber's strict interpretation of N.J.S.A. 43:15A-155 to require either actual assignment of the employee to Criminal Justice or detachment of a Criminal Justice employee to another office, such as the Office of the Attorney General, while the employee performed Criminal Justice functions. But pursuant to Rule 1:36-3, our unpublished opinions are not precedential and may not be cited to support a proposition of law.

Attorney General Harvey interpreted the phrase "assigned to" Criminal Justice as having broader meaning than actual assignment in the Department's organizational or payroll records. His interpretation of the statute was no less reasonable than that of Attorney General Farber. In fact, PERS accepted Harvey's interpretation and adopted a regulation that implemented the same criteria for eligibility. We are not bound by the statutory interpretations of administrative agencies, but our standard of review requires that we defer to reasonable interpretation of a statute that an administrative agency is charged with implementing. See Norfolk S. Ry. Co. v. Intermodal Props., LLC, 215 N.J. 142, 165 (2013); Richardson v. Bd. of Trs., Police & Firemen's Ret. Sys., 192 N.J. 189, 196 (2007); Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973).

Here, the Division of Pensions, PERS, and the Attorney General on behalf of the Department are responsible for enforcing the pertinent statutes. Until Attorney General Farber's contrary view, all three agencies interpreted the statute to permit O'Reilly's enrollment in the Prosecutors Part, together with a limited number of other Department employees. The fact that a subsequent Attorney General and the Division of Pensions later arrived at a different interpretation of the statute only clouds the issue of what deference we owe in our interpretation of the statute.

Nor do the facts of the case compel affirmance of the Board's decision denying O'Reilly's eligibility. The ALJ acknowledged that O'Reilly took direction from Criminal Justice and had access to grand jury materials and other resources of the prosecutors in Criminal Justice. He noted that O'Reilly "was a deputy who . . . wielded [Criminal Justice] authority that only such a deputy could utilize." However, the ALJ also found that O'Reilly "has not shown that he was actively involved with prosecuting any case or matter that would have required an assignment to [Criminal Justice] pursuant to the provisions of the Criminal Justice Act on January 7, 2002." The ALJ's finding in the latter regard neglected the testimony of two Attorneys General who viewed O'Reilly as doing the work of a prosecutor and requiring the authorization granted only to Criminal Justice attorneys for access to grand jury material.

Both Attorneys General Farmer and Harvey testified on behalf of O'Reilly that he was working on environmental prosecutions, Harvey also adverting to O'Reilly's work in the counter-terrorism and security task force. Both considered his work to be highly important to the criminal functions of the Department, and both considered it significant that he worked under the direction of Criminal Justice or the Office of the Attorney General.

In fact, it was Harvey's belief from his review of O'Reilly's file that O'Reilly had continued as a Criminal Justice attorney throughout the years since his assignment in 1992 to the Environmental Prosecutor's Office. Both Farmer and Harvey expressed a belief that the Attorney General needed to move personnel to different divisions within the Department according to the Department's immediate needs without being concerned that an Assistant or Deputy Attorney General would thus be deprived of pension benefits because of a transfer.

We are reluctant to ignore the decisions of the Attorneys General to assign Criminal Justice duties to O'Reilly, and we see no clear reason to hold that such an assignment does not satisfy the language of N.J.S.A. 43:15A-155. This case does not present a risk that an undetermined number of Department employees who might do sporadic work on Criminal Justice matters will now seek the benefits of a Prosecutors Part pension. Attorney General Harvey reasonably interpreted the statute as including a small number of Department employees who were actually doing the work of Criminal Justice or who had been detached from Criminal Justice to another organizational unit but still continued in their prosecutorial roles.

We decline to follow the holding expressed in our prior unpublished opinion that the term "assigned to" in N.J.S.A. 43:15A-155 requires a formal assignment to Criminal Justice.

At the same time, we cannot ignore the fact that Attorney General Farmer granted to O'Reilly a tenured Assistant Deputy Attorney General position, one of only six such positions available at any particular time. By statute, the tenured positions were only available to "Assistant deputy Attorneys General" assigned to the Division of Law. See N.J.S.A. 52:17B-3.1.2 The statute further required that such appointees "devote their entire time to the performance of their duties in the Division of Law . . . ." Ibid.

In the end, we are troubled by the Board's unduly strict interpretation of the statute, especially since it no longer permits enrollments and a broader interpretation cannot expand significantly the number of Department employees who might seek an enhanced pension. On the other hand, we must not set a precedent that might unduly expand the eligibility pool of Department employees who would seek inclusion in the Prosecutors Part. We need not finally resolve the issue of whether the Board correctly concluded that O'Reilly was not "assigned to" Criminal Justice because an alternative ground supports his claim to the enhanced pension benefits.

IV.

The Board is equitably estopped from rescinding its September 2003 determination that O'Reilly was qualified for enrollment in the Prosecutors Part because he detrimentally relied on that determination.

The doctrine of equitable estoppel is based on the principles of fairness and justice. Knorr v. Smeal, 178 N.J. 169, 178 (2003). The purpose of the doctrine is to prevent a party "from taking a course of action that would work injustice and wrong to one who with good reason and in good faith has relied upon such conduct." Twp. of Middletown v. Simon, 193 N.J. 228, 250 (2008) (quoting Summer Cottagers' Ass'n of Cape May v. City of Cape May, 19 N.J. 493, 503-04 (1955)).

The doctrine is "applied only in very compelling circumstances." Davin, L.L.C. v. Daham, 329 N.J. Super. 54, 67 (App. Div. 2000). It is seldom successfully invoked against a governmental entity because of countervailing policies of public interest and legislative intent. See Cnty. of Morris v. Fauver, 153 N.J. 80, 104 (1998).

Here, the ALJ accepted that O'Reilly's superiors and the Division of Pensions represented to him a fact that would typically induce reliance, namely, that he was eligible for a Prosecutors Part pension. Not only did O'Reilly testify that he was told his work in conjunction with Criminal Justice qualified him for a Prosecutors Part pension, but also Attorneys General Farmer and Harvey testified it was their intention to include O'Reilly among the prosecutors in the Department who were qualified for the enhanced pension benefits. Most important, the Division of Pensions accepted O'Reilly's eligibility and so informed him by its memorandum-notice dated September 22, 2003.

Despite that evidence, the ALJ found that O'Reilly failed to show he actually relied on the representation to his detriment. O'Reilly testified that he devoted a substantial portion of his earnings to pay for his children to attend private school rather than saving those expenses for his retirement, such as through a deferred compensation plan. He also claimed he made critical decisions about how to pay for his children's college education as well as to secure his own financial future. The ALJ rejected O'Reilly's testimony as insufficient proof of detrimental reliance, and the Board adopted that conclusion. That conclusion, however, was not warranted by O'Reilly's unrefuted evidence. An employee's planning for future financial security and, as a result, continuing in current employment will suffice to establish detrimental reliance.

The Board argues that O'Reilly was not eligible to retire until after Attorney General Farber issued her opinion of his ineligibility and the Board adopted that position. The Board argues further that O'Reilly did not extend his retirement date or pass up other opportunities for employment with the understanding that he would receive a Prosecutors Part pension. But if O'Reilly had earlier been informed that he was not eligible, he could have requested a transfer to Criminal Justice in order to receive the benefits that the Legislature intended for prosecutors and Criminal Justice attorneys.

A State employee who works with a promise of future benefits is entitled to receive those benefits when they are due. In the absence of a clear misinterpretation of the law by the authorized representative of the agency who made the promise, the employee should not be subject to varying applications of the law as administrations change and new appointees take charge.

We have previously stated in similar contexts that the "government must turn square corners in its dealings with others, and comport itself with compunction and integrity." Sellers v. Bd. of Trs. of the Police & Firemen's Ret. Sys., 399 N.J. Super. 51, 59 (App. Div. 2008) (internal citations omitted). The Supreme Court has stated that "even with respect to public entities, equitable considerations are relevant in evaluating the propriety of conduct taken after substantial reliance by those whose interests are affected by subsequent actions." Skulski v. Nolan, 68 N.J. 179, 198 (1975).

In Skulski, where disability pensions were granted unlawfully to a large number of Hudson County employees, the Court established the following guidelines for determining whether the former employees should continue to receive the benefits: "(1) the applicant's subjective good faith belief that he was entitled to benefits; (2) the extent of the applicant's change of position in reliance on the initial pension grant; and (3) the extent to which the applicant's reliance has foreclosed alternate opportunities for pension benefits." Id. at 200.

In this case, the earlier decision of Attorney General Harvey and of the Division of Pensions to qualify O'Reilly for a Prosecutors Part pension was not unlawful but was a reasonable alternative interpretation of the applicable statute. O'Reilly relied on that decision and believed in good faith that he was entitled to the enhanced pension benefits. Over a number of years, he planned for his retirement relying on the express representation of his Department head and the Division of Pensions that he was eligible for a Prosecutors Part pension. He continued to work in accordance with his assignments by the Attorney General on matters that were directly related to the work of the prosecutors and investigators in Criminal Justice without requesting formal assignment to that division. In doing so, he allowed the passage of any opportunities there may have been to ensure his eligibility.

These equitable considerations lead us to conclude that the Board erred in denying a Prosecutors Part pension to O'Reilly upon his retirement.

Reversed and remanded for determination of appellant's pension rights. We do not retain jurisdiction.

1 The law creating the Prosecutors Part, L. 2001, c. 366, took effect on January 7, 2002, and new enrollments ended as the result of a subsequent law, L. 2010, c. 1, that took effect on May 21, 2010. See N.J.S.A. 43:15A-156.

2 Attorney General Farmer testified that the cited statute was enacted before the Criminal Justice Act and so the restriction to attorneys in the Division of Law was in place at a time before the Legislature created the Division of Criminal Justice. He did not believe the statute precluded him from designating a Criminal Justice attorney to one of the six tenured positions, and he acknowledged some examples offered by O'Reilly's attorney of such appointments being made in other administrations.