NJ Appeals Court Rules Commencement of Agency Appeal Does Not Estop Civil Retaliation Suit

In a recent decision, the Appellate Division of the New Jersey Superior Court declined the Borough’s request to set a bright-line rule that completion of discovery or the commencement of a disciplinary appeal precluded a related retaliation suit. Instead, the court held that the imposition of estoppel involves a “fact-sensitive consideration of the status of the administrative action and the basis for withdrawal.”

The Facts of the Case

The case, Hunt v. Borough of Wildwood Crest, revolves around the Borough of Wildwood Crest (the Borough) appeal of a final decision issued by the New Jersey Civil Service Commission (the Commission), allowing Thomas Hunt to withdraw his agency appeal challenging his termination as a police sergeant with the Wildwood Crest Police Department. In Hunt’s agency appeal, he asserted that he was terminated in retaliation for engaging in union activities. He had also filed a civil rights complaint in the United States District Court for the District of New Jersey, asserting retaliatory discharge.

NJ Appeals Court Rules Commencement of Agency Appeal Does Not Estop Civil Retaliation Suit

The day after Hunt commenced his administrative appeal, the New Jersey Supreme Court decided Winters v. North Hudson Regional Fire & Rescue. The court held that the Commission’s final decision, on a question of retaliatory discharge, precludes a plaintiff from filing a lawsuit for damages on the same basis in court.

As explained in the opinion, “If an employee and employer engage the system of public employee discipline established by law and the employee raises a claim that employer retaliation at least partially motivated the decision to bring the charge or the level of discipline sought, then both the employee and employer must live with the outcome, including its potential preclusive effect on related employment-discrimination litigation as a matter of the equitable application of estoppel principles.”

After three additional hearing days, Hunt sought to withdraw his agency appeal in favor of pursuing his retaliation lawsuit in federal court, citing the Winters decision. The Commission granted the request. On appeal, Wildwood Crest argued that the Commission erred in allowing Hunt to withdraw his apeal, asserting that such withdrawals not only violate Winters, but also lead to “fragmented litigation, forum shopping, judicial inefficiency, undue expense, and a waste of judicial resources.”

The Court’s Decision

The Appellate Division was unpersuaded by the borough’s arguments. The Court refused to rule that the commencement of disciplinary appeal proceedings were sufficient to preclude the plaintiff’s federal suit.

“We decline the borough’s urging to expand Winters’ application of collateral estoppel to bar claims that could have been presented when withdrawal is made at the commencement of an administrative proceeding because discovery was undertaken and motion practice conducted,” the court stated.

In distinguishing the case from Winters, the court noted that Hunt not only requested the case be withdrawn prior to a final decision, but very early into the process when many witnesses were left to be called over several days of hearings. Accordingly, it determined that Wildwood Crest was not prejudiced.

“This case is unlike Winters, where the agency issued a final decision and Winters lost his challenge, because here there was no finality,” the court stated. It also highlighted that Hunt withdrew his appeal shortly after the Winters decision was announced and was “not motivated by forum shopping or avoiding a potentially bad result.”

The court further concluded that the Civil Service Commission also did not err in declining to dismiss Hunt’s appeal with prejudice, noting that a dismissal with prejudice functions as an adjudication on the merits.

As explained by the court, “The withdrawal pursuant to N.J.A.C. 1:1-19.2, made early in the hearing prior to presentation of all evidence on any issue, does not foreclose Hunt’s later presentation of the claims arising from alleged retaliation in the United States District Court. The Borough has failed to demonstrate how the Commission’s actions in accepting the withdrawal were contrary to law, unreasonable, arbitrary, capricious or unsupported by the evidence.”

For more information about this case or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

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