IN THE MATTER OF INNOVATIVE SOLUTIONS CORPORATION'S APPEAL OF THE DENIAL OF APPLICATIONS FOR INCENTIVE PAYMENTS UNDER THE NEW JERSEY SMARTSTART BUILDINGS PROGRAM
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5515-18
IN THE MATTER OF
INNOVATIVE SOLUTIONS
CORPORATION'S APPEAL OF
THE DENIAL OF APPLICATIONS
FOR INCENTIVE PAYMENTS
SUBMITTED UNDER THE NEW
JERSEY SMARTSTART
BUILDINGS PROGRAM.
_______________________________
Submitted October 14, 2021 – Decided November 30, 2021
Before Judges Hoffman, Whipple and Geiger.
On appeal from the New Jersey Board of Public
Utilities, Docket No. QC19020243.
Stuart P. Schlem, attorney for appellant Innovative
Solutions Corporation.
Andrew J. Bruck, Acting Attorney General, attorney
for respondent New Jersey Board of Public Utilities
(Sookie Bae, Assistant Attorney General, of counsel;
Matko Ilic, Deputy Attorney General, on the brief).
PER CURIAM
Petitioner Innovative Solutions Corporation appeals from the July 10,
2019, order of the Board of Public Utilities (Board) denying its petition for
financial incentives under the N.J. SmartStart Buildings Program (the
program). We affirm.
Petitioner is a New Jersey corporation whose majority shareholder and
sole full-time employee was Alok Jain (Jain) until Fall 2016, when his son,
Anshul Jain (Anshul), completed his education and joined the company.
Petitioner provides energy efficient light bulbs to individually owned hotels
and motels in New Jersey under the program. The Board offers the program
pursuant to the New Jersey Electric Discount and Energy Competition Act
(EDECA), N.J.S.A. 48:3-49 to -98. The program provides financial incentives
for non-residential customers of New Jersey utility companies who participate
in the program to install energy efficient measures, including energy efficient
light bulbs. TRC Energy Services Corporation (TRC) administers the
program.
To be eligible to receive financial incentives, a participant must submit
an application package to TRC before the participant installs equipment. See
N.J. BD. OF PUB. UTILS., 002-FY14-04/14, NJ SMARTSTART BUILDINGS GAS
COOLING APPLICATION (2014). "The package must include an application
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signed by the customer; a complete (current) utility bill; and technology
worksheet and manufacturer's cut sheets (where appropriate)." Ibid. If TRC
approves the application package, the customer will receive an approval letter
stating the estimated authorized incentive amount and the date by which the
equipment must be installed. Ibid. The equipment may only be installed after
receiving an approval letter. Ibid. All equipment must be purchased within
twelve months of the date of the application. Ibid. After installation, the
customer must submit a finalized invoice, with separate labor and material
costs, and any additional documents requested in the application or initial
approval letter. Ibid. Petitioner's payments were denied after installation, but
we refer to this as denial of the whole application, pre- and post-installation,
for incentives.
Petitioner has participated in the program as an agent or vendor for
hotels and motels throughout New Jersey by obtaining applications from the
hotels or motels and submitting the applications to the program administrator
with the requisite documentation. Petitioner either installs the LED bulbs for
the hotel or motel at no cost to the hotel or motel, or the hotel or motel installs
the bulbs. No money is exchanged between the hotel or motel and petitioner.
Petitioner submitted evidence to TRC that the light bulbs were installed, such
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as an invoice to the hotel or motel, indicating the quantity of light bulbs
installed, the cost for each light bulb, and either no charge for the installation
or that the hotel or motel installed the light bulbs themselves. The hotel or
motel would provide a written statement confirming the installation of the light
bulbs to be submitted to TRC. Upon approval, TRC would pay petitioner the
cost of the light bulbs.
Participants in the program have one year to submit the required
invoices and documentation in order to receive payment after installation.
Between February 3, 2014, and June 29, 2015, petitioner submitted three
applications, which are not on appeal. Unfortunately, during this time, Jain
endured several serious health issues, which affected his physical and mental
well-being, so petitioner did not submit the paperwork for eighteen
applications, which are the subject of this appeal. At various points between
March 27, 2015, and September 23, 2016, TRC denied the eighteen
applications because petitioner did not provide the required documentation or
request an extension prior to the applications' one-year expiration dates. TRC
attached a chart to its ultimate denial letter on January 21, 2019, showing
which required documents were either missing or received for each of the
subject applications.
A-5515-18
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In the Fall 2016, Jain's son, Anshul, completed his education, joined the
business, and assumed Jain's responsibilities. In October 2016, Anshul began
communicating with TRC regarding applications that had been cancelled due
to inactivity. Anshul first inquired about the three earlier applications. TRC
granted an extension on those applications, requesting copies of the
applications and a doctor's note documenting Jain's medical conditions. Two
applications were withdrawn. TRC paid one.
In December 2016, Anshul asked TRC about twenty-one applications
cancelled due to inactivity, which included the eighteen applications on appeal.
TRC responded, advising how petitioner could appeal and advised "[g]iven the
significant number of rejections and the significant passage of time since they
occurred, the facts will have to be especially extraordinary and well-
supported."
In March 2017, Anshul sent TRC a letter appealing the cancellations and
attached documentation of Jain's medical conditions. TRC denied the appeal
stating:
We begin by noting that we recognize [Jain] had some
significant medical issues that might have justified
some extension of [New Jersey's Clean Energy
Program's] normal deadlines. Indeed, in October
2016, we granted your appeal seeking more time to
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provide information for [three] projects that had been
rejected in September 2016.
That said, the present appeal involves much more
troubling facts. Specifically:
• According to your letter, your father had a series of
health issues between December 12, 2013[,] and
November 20, 2015, a [two]-year-long period that
ended over a year ago.
• The last of the appealed projects was completed on
November 20, 2015, well over a year ago.
• On January 3, 2017, you inquired about how to
appeal the rejections of these projects. We told you
how to, but cautioned that, to succeed, the relevant
facts would have to be extraordinary and well-
supported given the number and age of the
rejections.
• Despite the above, it still took more than [two]
more months for the present appeal to be filed.
• Although there is some indication [Jain] may still
be under continuing care for a continuing issue, it's
been over [three] years since it was known that his
health issues were likely to interfere with his
ability to run the business and more than a year,
and probably substantially longer, since his
condition became reasonably stable.
The [p]rogram has administrative deadlines for many
reasons, including its need for accurate budgetary
forecasting. For good cause shown, where the delays
are relatively minor, the reasons for them are
excusable and reasonable, and the applicant is
proceeding diligently to reduce the delays and their
effects, we will consider granting relatively minor
extensions. The present case is not such a case. The
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delays and requested extensions are much longer than
usual. The health problems that contributed to the
delays do not seem to be of the type that would excuse
such long delays. The attempts to deal with [the]
situation have been dilatory at best. Accordingly, our
present thinking is that we should deny this appeal.
However, if you think we are mistaken or that we
should consider other facts, documents, or arguments,
you should submit them to us by March 27, 2017.
Anshul submitted a follow-up appeal letter with supporting documents.
TRC granted petitioner's appeal to reactivate the applications on March 28,
2017, but stated:
We remain extremely concerned about the dilatoriness
involved in this appeal, as detailed in our March 13,
2016 email below. However, we are compassionate
and sympathetic to your father's medical condition and
the fact that you were a student during the relevant
times. We accordingly have GRANTED this appeal to
reactivate [the applications that are the subject of this
appeal] . . . and to allow further processing of them on
the following conditions, all of which must be
satisfied by April 28, 2017. If any of the following
conditions are not met by April 28, 2017, the
applications will be cancelled.
....
The conditions for further processing and possible
approval are that for each application you must submit
to the Program Manager, in a form acceptable to the
Program Manager, all of the following:
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1. The final invoice actually submitted to the
customer.
2. Documentation that the invoice was paid and of the
date of payment (i.e., copy of customer's cancelled
check or copy of bank statement showing
receipt/deposit of the payment)[.]
3. The date(s) installation commenced and was
completed (e.g., work orders, time sheets,
construction logs).
4. A signed statement from the customer, on the
customer's letterhead, certifying the date(s)
installation commenced and was completed.
5. A valid Tax Clearance Certificate.
6. Any other information or documentation the
Program Manager requires.
Although these requirements were called "enhanced requirements," a
valid Tax Clearance Certificate, an invoice for the purchase of the equipment,
and proof of payment (in the form of a "finalize[d]" invoice) are normally
required for the application. The requirements were "enhanced" in that TRC
required petitioner to submit the "final invoice actually submitted to the
customer," as well as additional proof of payment, "i.e., copy of customer's
cancelled check or copy of bank statement showing receipt/deposit of the
payment," and "[a] signed statement from the customer, on the customer's
letterhead, certifying the date(s) installation commenced and was completed."
A-5515-18
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On April 28, 2017, Anshul sent the program manager an email
containing the requested documents, except for the Tax Clearance Certificates
for two applications. Anshul told TRC, "[a]fter repeatedly contacting the tax
office and the [taxpayer], the state still hasn't given [the Tax Clearance
Certificates] to us yet." Anshul later sent the Tax Clearance Certificate for one
of the applications to TRC on May 1, 2017.
On May 10, 2017, TRC advised Anshul by email that the applications
were denied because of missing required documents, explaining that "none of
the close-out submissions contained the information requested in item [two]
(Proof of Payment) and [four] (Signed statement from customer on their
letterhead)." Further, multiple applications were missing Tax Clearance
Certificates or included Tax Clearance Certificates that were either expired or
had incorrect names that did not match the utility bills for that application.
Also, multiple applications included invoices that listed a different LED
product than originally approved without proof of Energy Star qualification.
On November 30, 2018, petitioner submitted an appeal to the Appeal
Committee of the Board. On December 17, 2018, TRC denied petitioner's
request to re-open the applications by email to Anshul, stating "[w]e have
DENIED your request to re-open this matter because we have given your
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company numerous chances to complete the allegedly open applications, your
responses have been dilatory at best, and your latest response still has not
provided complete, current, and accurate application information." The
program administrator further stated:
This matter has been going on for at least [five] years
-- the application for #24148 was received by the
Program Manager on December 16, 2013. By
contrast, the SmartStart program was designed and is
financed so that applications should be completed in
no more than [one] or [two] fiscal years. Projects that
extend longer, among other things, either tie[]up
financing that could be used for other more productive
projects or, if their commitments have been released,
cause budgetary problems in the years in which they
are paid.
On February 19, 2019, petitioner filed a petition with the Board to
contest the denials of eighteen applications and requested a formal hearing.
On July 10, 2019, the Board denied petitioner's appeal without a hearing. This
appeal followed.
Our review of an agency's final administrative determination is limited.
In re Carter, 191 N.J. 474, 482 (2007). We do not ordinarily overturn such
determinations "in the absence of a showing that it was arbitrary, capricious or
unreasonable, or that it lacked fair support in the evidence." Ibid. (quoting
A-5515-18
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Campbell v. Dep't of Civ. Serv., 39 N.J. 556, 562 (1963)). In reviewing an
agency's final administrative determination, the court considers:
(1) whether the agency's action violates express or
implied legislative policies, that is, did the agency
follow the law; (2) whether the record contains
substantial evidence to support the findings on which
the agency based its action; and (3) 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.
[Mazza v. Bd. of Trs., Police & Firemen's Ret. Sys.,
143 N.J. 22, 25 (1995) (citing Campbell, 39 N.J. at
562).]
We are "in no way bound by the agency's interpretation of a statute or its
determination of a strictly legal issue," Mayflower Sec. Co. v. Bureau of Sec.
Div. of Consumer Affs. Dep't of Law & Pub. Safety, 64 N.J. 85, 93 (1973), but
we give great weight to "[a]n administrative agency's interpretation of a statute
it is charged with enforcing," In re Saddle River, 71 N.J. 14, 24 (1976).
Moreover, we give great deference to an agency's "interpretation and
implementation of its rules enforcing the statutes for which it is responsible ."
In re Freshwater Wetlands Prot. Act Rules, 180 N.J. 478, 488-89 (2004).
"Where an agency's expertise is a factor, a court defers to that expertise,
particularly in cases involving technical matters within the agency's special
A-5515-18
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competence." In re Adoption of Amends. to the Ne., Upper Raritan, Sussex
Cty. & Upper Del. Water Quality Mgmt. Plans, 435 N.J. Super. 571, 583 (App.
Div. 2014).
The SmartStart Buildings Program's terms and conditions state the
process for post-installation approval:
After installation is completed, the [c]ustomer, or an
agent authorized by the [c]ustomer, must finalize and
submit an invoice for the purchase of the equipment
(material cost must be broken out from labor costs),
and any other required documentation as specified on
the equipment application or in the Program
Manager's initial approval letter.
....
The Program Manager reserves the right to verify
sales transactions and to have reasonable access to
[p]articipating [c]ustomer's facility to inspect both
pre-existing product or equipment (if applicable) and
the Energy-Efficient Measures installed under this
Program, either prior to issuing incentives or at a later
time.
[N.J. BD. OF PUB. UTILS., 002-FY14-04/14, NJ
SMARTSTART BUILDINGS G AS COOLING A PPLICATION
(2014) (emphases added).]
When a customer misses the deadline, TRC sends them an expiration
letter, which details the procedure for obtaining an extension. If the
installation is in progress or completed, the customer has thirty days to either
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request an extension or submit the required paperwork. Extension requests
must be in writing from the customer and include the circumstances that led to
the extension request, the percentage of the project completed, and must not be
for longer than six months. Moreover, a program participant may request a
formal hearing regarding an application pursuant to N.J.A.C. 14:1-1.5. The
request must meet the form and content requirements of N.J.A.C. 14:1-5.1(a),
which states:
All petitions shall comply with the provisions of
N.J.A.C. 14:1-4 to the extent applicable; shall clearly
and concisely state the facts and relief sought; shall
cite by appropriate reference the statutory provision or
other authority under which the Board's action is
sought; and in addition, shall contain such information
or statements as are required by provision of the
statute and the applicable provision of these rules, or
such other rules or orders adopted by the Board
pertaining to certain petitions, or as may be required
by the Board in a particular proceeding.
[N.J.A.C. 14:1-5.1(a).]
Under the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -
31, "[i]n a contested case, all parties shall be afforded an opportunity for
hearing after reasonable notice." N.J.S.A. 52:14B-9(a). The APA defines a
"contested case" as a
proceeding . . . in which the legal rights, duties,
obligations, benefits or other legal relations of specific
A-5515-18
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parties are required by constitutional right or by
statute to be determined by an agency by decisions,
determinations, or orders, addressed to them or
disposing of their interests, after opportunity for an
agency hearing . . . .
[N.J.S.A. 52:14B-2.]
However, "where no disputed issues of material fact exist, an
administrative agency need not hold an evidential hearing in a contested case.
The mere existence of disputed facts is not conclusive. An agency must grant
a plenary hearing only if material disputed adjudicative facts exist." Frank v.
Ivy Club, 120 N.J. 73, 98 (1990) (alteration in original) (citations omitted).
Petitioner argues that the Board's decision was arbitrary and capricious
because petitioner "substantially complied with the demands to the extent
possible." Specifically, petitioner contends that each of the subject
applications included the documents required as set forth in the form
applications and that TRC's request that each hotel provide a signed customer
statement on company letterhead is unreasonable because fifteen of the hotels
involved here "were individually owned franchises which did not have
letterheads with logos." Petitioner also argues that it was arbitrary and
capricious for the Board to deny the applications on the grounds that multiple
applications were missing Tax Clearance Certificates or included Tax
A-5515-18
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Clearance Certificates that were either expired or had incorrect names that did
not match the utility bills for a particular application, since those entiti es
changed names after installation was completed. Finally, petitioner argues that
it was arbitrary and capricious for the Board to deny the applications on the
grounds that four of the applications involved light bulbs that either did not
match the products listed in the initial application, or that were no longer
considered Energy Star qualified. Petitioner also argues that had it been
afforded a formal hearing it could have demonstrated that the light bulbs were
Energy Star qualified. We disagree.
A review of the submitted documents shows that at least one of the
required documents is missing for each of the eighteen applications that are the
subject of this appeal. This is true even if the non-letterhead customer
statements that petitioner provided were considered proper proof of payment.
Petitioner submitted customer statements from each of hotels as "proof of
payment"; the statements, however, do not state that payment was made. Even
if these statements were accepted as proof of payment, at least one outstanding
required document for each of the applications remained.
But TRC did, at least in part, deny many of the applications because the
customer statements for those applications were not on company letterheads.
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This enhanced requirement that petitioner submit a signed customer statement
on company letterhead certifying the dates that installation commenced and
was completed was imposed for the purpose of verifying that the hotel, and not
petitioner itself, was the one certifying that installation took place on the
particular date. This requirement was not unreasonable considering that on
March 18, 2017, when TRC imposed this requirement, the applications were
between two and three years old.
It was not arbitrary or capricious to impose "enhanced requirements" in
this case because of the lengthy delays involved. As TRC explained to Anshul
on March 13, 2017, "[t]he Program has administrative deadlines for many
reasons, including its need for accurate budgetary forecasting." The enhanced
requirements also comport with the program terms and conditions, which
provide that "[t]he Program Manager reserves the right to verify sales
transactions and to have reasonable access to Participating Customer's facility
to inspect both pre-existing product or equipment (if applicable) and the
Energy-Efficient Measures installed under this Program, either prior to issuing
incentives or at a later time." Thus, the Board's actions did not violate express
or implied legislative policies, and the record contains substantial evidence to
support the findings on which the Board based its action. Accordingly, the
A-5515-18
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Board's decision was not arbitrary or capricious agency action, see Mazza, 143 N.J. at 25, so we have no reason to interfere with the denials.
Finally, petitioner argues that the Board's failure to conduct a hearing
unfairly prejudiced petitioner because a hearing would have allowed petitioner
to explain its position. As stated above, "where no disputed issues of material
fact exist, an administrative agency need not hold an evidential hearing in a
contested case." Frank, 120 N.J. at 98. Importantly, "bald allegations or
naked conclusions . . . are insufficient to require an agency head to transmit
the matter . . . as a contested case." J.D. ex rel. D.D.H. v. N.J. Div. of
Developmental Disabilities, 329 N.J. Super. 516, 525 (App. Div. 2000).
Petitioner has not identified material disputed adjudicative facts that would
require an evidentiary hearing; rather, petitioner merely asserts that it could
have explained the issues which formed the basis of the Board's action.
Affirmed.
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