NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2344-22
R.S.,
Petitioner-Appellant,
v.
NEW JERSEY DEPARTMENT OF HUMAN SERVICES,
Respondent-Respondent. ______________________________
Submitted April 15, 2024 – Decided April 25, 2024
Before Judges Sabatino and Chase.
On appeal from New Jersey Department of Human Services; Office of Program Integrity and Accountability. Docket No. HSL 02080-2022.
Hark & Hark, attorneys for appellant (Richard Quinton Hark, on the brief).
Matthew J. Platkin, Attorney General, attorney for respondent (Melissa H. Raska, of counsel and on the brief; Andrew C. Munger, Deputy Attorney General, on the brief).
PER CURIAM Petitioner R.S.1 appeals from the March 17, 2023 final agency decision of
the Department of Human Services ("DHS"), reversing the Administrative Law
Judge's ("ALJ") decision and placing him on the Central Registry of Offenders
Against Individuals with Developmental Disabilities ("Central Registry") 2,
pursuant to N.J.S.A. 30:6D-77. We affirm.
I.
T.F. is an adult woman with Down syndrome, intellectual disabilities, and
dementia. She resides full-time at a state-run group home. Her individualized
service plan reflects the need for a high level of support for daily living activities
and she has extremely limited verbal communication skills. T.F. is short in
stature, overweight, and typically wears "a size six women's shoe, or a child's
size shoe . . . a medium[] or large top and . . . a size sixteen[] or eighteen in
pants."
1 To protect the identity of the individuals, we refer to them by their initials. R. 1:38-3(f)(8). 2 Placement on the Central Registry prohibits the listed offender from working for, or volunteering in, DHS funded programs, including employment in developmental centers, community agencies, and other programs licensed, contracted, or regulated by DHS. A-2344-22 2 Petitioner was employed at the group home as a residence manager with
duties including "[f]ull financial responsibility (as delineated) of consumer
funds, petty cash, and household accounts."
This matter arises from R.S. filing a Representative Payee Voucher,
requesting $951 to be disbursed from T.F.'s account for the purchase of clothing
on February 18, 2020. The documentary record reflects that, six days later, R.S.
purchased six items from the athletic apparel store Finish Line, totaling $450,
including a pair of slim-cut joggers; a Nike Club hooded sweatshirt; and two
pairs of Nike Air Max sneakers, one in size six and the other in size nine. He
also purchased $143.05 in clothing from J.C. Penney, including multiple pairs
of pants labeled as "slim leg" or "skinny" cuts. R.S. also purchased $343.58 in
items from Walmart, including multiple intimate items such as a pushup and
"strappy" bras, camisoles, hipster-cut underwear, and pajama sets.
After reviewing some of the items R.S. purchased, staff became concerned
they were inappropriate for T.F. and would need to be returned or exchanged.
This was reported to the assistant manager, who relayed the information to R.S.,
but he disagreed. After searching T.F.'s entire room, closets, hampers, and staff
areas, the staff members, including R.S., were unable to locate many of the items
reflected on the receipts, including the intimate items, the size nine Nike
A-2344-22 3 sneakers, the Nike joggers, and the Nike hooded sweatshirt. The staff members
then contacted the home's assistant director to review the receipts and inventory
the items.
By 5:00 p.m. on March 4, several items remained unlocated. R.S. left the
facility at the end of his shift, which per the schedule was 4:00 p.m., but returned
later. Another staff member observed R.S. enter T.F.'s bedroom and then leave
the facility. After R.S.'s off-hours visit, the Nike joggers and sweatshirt were
discovered in T.F.'s hamper and the size nine Nike sneakers were discovered
behind a dry erase board in the staff office's closet. The items appeared to have
been worn and were dirty.
After renewed searches of the entire facility, it was determined items
totaling $180.29, largely the intimate items from Walmart, remained
unaccounted for. Of the remaining purchases made by R.S., items totaling
$110.89 were deemed by staff to be appropriate for T.F.'s use. Items totaling
$614.83 were deemed inappropriate for T.F. and returned to the stores.
The facility's director filed an incident report and initiated an internal
audit. R.S. was terminated and T.F.'s account was reimbursed $180.29 for the
missing items. A police report was made to the Hanover Township Police
Department and staff later provided documentary evidence in the form of the
A-2344-22 4 receipts and inventory lists of the items. A summons was ultimately issued, and
R.S. was charged with theft. He later received a conditional dismissal of the
charge.
Colleen Schanstine from the DHS Office of Investigations initiated an
investigation. She visited the group home, viewed T.F.'s room, and met T.F.
who, based on her disabilities, could not be interviewed. Investigator Schanstine
also spoke with multiple individuals, including R.S. R.S. informed her that on
March 4, he had returned because he forgot his "lunch". Investigator Schanstine
also reviewed several documents, including petitioner's employment and
training records, police reports, the facility's financial records, incident reports,
and itemized inventory lists. She concluded as to the incident of Financial
Exploitation of over $100, a preponderance of the testimonial and documentary
evidence substantiated a finding petitioner had exploited T.F. The Office of
Investigations issued a six-page summary of Investigator Schanstine's findings.
The report reiterated the investigator's observations and the testimonial and
documentary evidence substantiating the alleged exploitation of T.F. by
petitioner.
The Director notified R.S. of the agency's intent to place him on the
Central Registry and his right to appeal. Petitioner requested a formal Office of
A-2344-22 5 Administrative Law ("OAL") hearing, and the matter was transferred to the OAL
as a contested case.
At the OAL hearing, the agency called Investigator Schanstine as its only
witness. Investigator Schanstine testified to her eleven-year experience as an
investigator with the Office of Program Integrity and Accountability and the
processes to initiate an investigation. When Investigator Schanstine was asked
about the incident report logged by the facility, petitioner's counsel objected
because it contained statements by an individual not present at the hearing. The
ALJ noted the objection but stated, "[M]any of these documents are full of
hearsay. . . . [W]e survive here in the OAL on the residuum rule and I'm going
to allow . . . it to be testified to."
Investigator Schanstine testified to researching limitations on T.F.'s
ability to communicate by reviewing her individualized service plan and
identifying her legal guardians for notification. She testified to interviewing the
facility's employees, obtaining documents, contacting the police, and reviewing
the receipts, ledgers of T.F.'s account, and documentation of what items were
found in the home and what remained missing.
Investigator Schanstine then testified as to her interviews with the
facility's staff, their discovery of the items not appropriate for T.F., and their
A-2344-22 6 alerting their manager to the situation. She also testified to interviewing the
manager who was called in to audit the purchases and the receipts. She then
testified to interviewing the staff member who observed petitioner returning to
the facility after hours, under the premise he had forgotten his lunch there, and
some of the missing items being discovered later that same evening, after
petitioner departed, and the following morning. Investigator Schanstine also
testified to her contact with the police and her research into the disposition of
petitioner's criminal matter. Petitioner objected to the introduction of the police
report, but stipulated to the fact the incident was reported to police as required
by statute.
Investigator Schanstine then testified to the receipts and lists of items
deemed inappropriate for T.F., which included some items which, given T.F.'s
disabilities, she would not be able to put on herself. She also noted the receipts
had been initialed by petitioner per agency protocol, and when interviewed,
petitioner had said he made the purchases "on his own at whatever time as some
of the purchase[s] were made late at night. And on days that he wasn't working."
She testified per the receipts and inventory lists, $180.29 worth of items
remained unaccounted for.
A-2344-22 7 On cross-examination, Investigator Schanstine testified she did not
personally create the underlying documents on which her investigation relied:
the inventory lists of the items purchased, the purchase receipts, and the return
receipts. However, she did compare them, and they appeared to be accurate.
The ALJ then questioned Investigator Schanstine as to T.F.'s sizes, her
physical stature, and the nature of the undergarments purchased. She also
testified T.F. was unable to communicate verbally in order to participate in an
interview due to the extent of her disabilities.
The petitioner presented two witnesses, co-workers from a second job
petitioner held at St. Clare's hospital in Denville. Both witnesses testified
petitioner arrived at St. Clare's at approximately 5:00 p.m. or 5:30 p.m. on March
4, 2020, and to the best of their knowledge, did not leave for the duration of his
shift.
The ALJ issued his decision on February 3, 2023. After summarizing
Investigator Schanstine's professional experience, her investigatory methods,
and the facts of the case as recounted in her report, the ALJ found petitioner
worked as a caregiver at the facility and T.F. was a service recipient under the
Division of Developmental Disabilities. He further found "while on duty, and
A-2344-22 8 as part of his job, [petitioner] bought items with T.F.'s money in excess of $100."
The ALJ did not specifically comment on the credibility of any of the witnesses.
When applying the law to these facts, the ALJ concluded the agency's case
in chief "offered no direct testimony from any witness nor any evidence to the
events of March 9, 2020." He stated, "there was no residuum of legal and
competent evidence to sustain" the allegations in the case. However, he then
stated "the unfortunate result is that T.F. was taken advantage of and exploited
without any repercussions to the offender." He ended by holding the agency
erroneously determined petitioner exploited T.F. and ordered petitioner's
placement on the registry reversed.
DHS filed exceptions to the initial decision, arguing the ALJ incorrectly
applied the residuum rule. It argued the facts of the case, supported by the
physical presence of the missing items discovered after petitioner's off -hours
visit to T.F.'s room, as well as the receipts and inventory lists, substantiated the
hearsay evidence in Schanstine's report. It also noted petitioner had the
opportunity to subpoena those interviewed in the course of the investigation but
did not, and his attorney cross-examined Schanstine at the hearing before the
ALJ. It also emphasized petitioner called two witnesses on his own behalf,
A-2344-22 9 undercutting his argument the State violated his due process rights. The agency
also noted the ALJ's decision did not include any credibility findings.
The Director issued a final agency decision on March 17, 2023. She stated
the ALJ's Initial Decision was flawed and incorrect by finding no evidence of
the exploitation, because the documentary evidence accompanying Investigator
Schanstine's report, including receipts not subject to exclusion by the hearsay
rule, were entered into evidence at the hearing as joint exhibits. The Director
conceded Schanstine's report contained hearsay but determined the hearsay
statements were minimally relevant and "strongly buttressed by legally
competent evidence."
Accordingly, the Director rejected and reversed the ALJ's findings and
conclusions. She noted the ALJ declined to assess the witnesses' credibility, did
not cite to any specific instance of hearsay as objectionable, and ignored the
physical, documentary evidence submitted at the hearing. She affirmed the
agency's initial determination petitioner committed an act of exploitation as
defined in N.J.A.C. 10:44D-1.23 and placed him on the Central Registry.
3 "Exploitation" means the act or process of a caregiver using an individual with a developmental disability or his resources for another person's profit or advantage. A-2344-22 10 This appeal followed, wherein petitioner contends the final agency
decision should be reversed because it relies solely on hearsay uncorroborated
by a residuum of competent evidence.
II.
Our review of a final decision of an administrative agency is limited.
Circus Liquors, Inc. v. Governing Body of Middletown Twp., 199 N.J. 1, 9
(2009). "[A]n appellate court reviews agency decisions under an arbitrary and
capricious standard." Zimmerman v. Sussex Cnty. Educ. Servs. Comm'n, 237
N.J. 465, 475 (2019). See also Melnyk v. Bd. of Educ. of the Delsea Reg'l High
Sch. Dist., 241 N.J. 31, 40 (2020). "An agency's determination on the merits
'will be sustained unless there is a clear showing that it is arbitrary, capricious,
or unreasonable, or that it lacks fair support in the record.'" Saccone v. Bd. of
Trs., Police & Firemen's Ret. Sys., 219 N.J. 369, 380 (2014) (quoting Russo v.
Bd. of Trs., Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011)).
A reviewing court is not, however, bound by an agency's interpretation of
a statute or its determination of a strictly legal issue outside its charge. Allstars
Auto Grp., Inc. v. N.J. Motor Vehicle Comm'n, 234 N.J. 150, 158 (2018); Dep't
of Child. & Fam. v. T.B., 207 N.J. 294, 302 (2011). See also Greenwood v.
State Police Training Ctr., 127 N.J. 500, 513 (1992) (agencies have no superior
A-2344-22 11 ability to resolve purely legal questions, and a court is not bound by an agency's
determination of a legal issue).
III.
Petitioner argues administrative decisions may not be based on hearsay
alone but instead require a residuum of legal and competent evidence. Petitioner
also argues "the identity of those whose adverse views formed the foundation of
the judgment against [petitioner] did not come to court." Citing Weston v. State,
60 N.J. 36, 51-52 (1972), he claims he was not given the opportunity to make a
record, and the agency's failure to call witnesses with personal knowledge of the
events meant it failed to carry its burden of proof.
The Administrative Procedure Act ("APA") governs contested cases
before an ALJ. N.J.S.A. 52:14B-1 to -31. The APA requires findings of fact to
be based "exclusively on the evidence and on matters officially noticed."
N.J.S.A. 52:14B-9(f). In a contested case in the OAL, the parties "shall not be
bound by rules of evidence[,] whether statutory, common law, or adopted
formally by the Rules of Court. All relevant evidence is admissible, except as
otherwise provided[.]" N.J.S.A. 52:14B-10(a)(1).
The Uniform Administrative Procedure Rules also govern evidentiary
matters in contested cases. N.J.A.C. 1:1-15.1 to -15.12. They permit
A-2344-22 12 discretionary exclusion under an N.J.R.E. 403-like analysis but mandate
application of privilege rules. N.J.A.C. 1:1-15.1(c); N.J.A.C. 1:1-15.4. Subject
to exclusion on either of those grounds, the regulations state "hearsay evidence
shall be admissible in the trial of contested cases." N.J.A.C. 1:1-15.5(a)
(emphasis added). The weight accorded to the admitted hearsay evidence is
subject to the judicial determination of "the nature, character[,] and scope of the
evidence, the circumstances of its creation and production, and, generally, its
reliability." Ibid. The regulation continues, "[n]otwithstanding the
admissibility of hearsay evidence, some legally competent evidence must exist
to support each ultimate finding of fact to an extent sufficient to provide
assurances of reliability and to avoid the fact or appearance of arbitrariness."
N.J.A.C. 1:1-15.5(b).
This provision, commonly known as the "residuum rule," means hearsay
may be "employed to corroborate competent proof, or competent proof may be
supported or given added probative force by hearsay testimony." DeBartolomeis
v. Bd. of Rev., 341 N.J. Super. 80, 85 (2001) (quoting Weston, 60 N.J. at 51).
By the regulation's plain language, such corroboration goes not to the
admissibility of the hearsay evidence, which is required, but rather to its weight
as assessed by its reliability.
A-2344-22 13 The residuum rule was applied to uphold the termination of a public
employee charged with unbecoming conduct in In re Tenure Hearing of Cowan,
224 N.J. Super. 737, 742 (App. Div. 1988). One of the charges was supported
by "the testimony of the [employee's supervisor], his contemporaneous
memorandum that he had sent to [petitioner] recounting facts learned from
alleged eyewitnesses, and [petitioner's] memorandum in response." Id. at 748.
The supervisor had not witnessed the incident, and Cowan contended t he
evidence against him was inadmissible hearsay. Id. at 749. We agreed it was
hearsay but concluded the "application of the residuum rule does not require that
hearsay evidence of the assault be ignored." Id. at 750.
Investigator Schanstine testified to her direct observations of T.F. and her
room during her in-person visit to the home. Additionally, she testified that R.S.
gave a statement to her where he admitted to buying the clothing, suggesting
they had been worn, and returning to the residence on March 4 after his shift
was over when he claims to have forgotten his lunch. To the extent his
statements were hearsay in that they were offered for their truth, they would
have qualified for an exception to the general exclusionary rule as statements by
a party opponent. N.J.R.E. 803(b)(1).
A-2344-22 14 Further, it is clear the ALJ did not properly consider the additional
competent evidence before him as supportive of the hearsay statements
contained in Investigator Schanstine's report and testimony, such as the receipts,
articles of clothing, agency's financial records, the inventory lists compiled after
the searches of the facility, and the missing items. See N.J.R.E 803(c)(6) (the
business records hearsay exception) and N.J.R.E. 803(c)(8) (the public records
hearsay exception). These were all legally competent evidence entered as joint
exhibits, supporting the hearsay statements contained inside the investigator's
report and as relayed in her testimony. Despite petitioner's contention, Weston
makes clear the residuum rule is bi-directional; the hearsay can support the
weight of other legally competent evidence, or the other evidence can support
the weight of the hearsay statements. 60 N.J. at 51. No matter which way the
hearsay statements in the report are employed, much like the evidence in Cowan,
their "combined probative force" substantiated the finding of exploitation. The
"bootstrapping and buttressing" to which petitioner has objected to in his brief
is precisely what the residuum rule permits.
IV.
An agency may reject and modify an ALJ's initial decision, as was done
here, but its authority to do so is limited. Specifically, the Administrative Code
A-2344-22 15 requires that when an agency rejects an ALJ's decision, it shall clearly state the
reasons for doing so and cite specific evidence supporting its final decision and
interpretation of the law. N.J.A.C. 1:1-18.6-10(b). An agency may only reject
or modify findings of fact as to issues of credibility of lay witness testimony if
it first determines on a review of a record that the findings are arbitrary,
capricious, or unreasonable, or are not supported by sufficient, competent, and
credible evidence. N.J.A.C. 1:1-18.6-10(c).
Here, the ALJ declined to make any credibility findings as to the
testimonial evidence presented and then made conclusory generalizations. The
agency's reasons overturning these errors were clearly and logically outlined in
the comprehensive final determination recounting the initial decision, the
exceptions filed, and a detailed discussion leading to the final determination.
The agency specifically connected the contentions in the report to the supporting
documentary evidence.
The agency then issued its findings of fact and concluded petitioner
committed exploitation and therefore placement of his name on the Central
Registry was warranted. Support for these findings include documentary
evidence, in the form of physical receipts from the vendors, of not only what
was purchased, but also what was returned, clearly showing that the items were
A-2344-22 16 wholly inappropriate and unsuitable for T.F. and that R.S. actually purchased
these items for someone else. The agency permissibly amplified the factual
findings and supported them with the same documentary evidence submitted at
the evidentiary hearing. It also supported its conclusion petitioner committed
exploitation as defined in N.J.A.C. 10:44D-1.2, and his placement on the Central
Registry was proper under N.J.A.C. 1:1-18.6(d).
We have considered all other points raised and conclude they lack
sufficient merit to warrant discussion. R. 2:11-3(e)(1)(D) and (E).
Affirmed.
A-2344-22 17