Decision No. 12905

(April 8, 1993)

Lizette A. Cantres, Esq., attorney for Commissioner Sobol, Robert

Wright, Esq., of counsel

Meyer, Suozzi, English & Klein, P.C., attorneys for respondent

BOCES and individual board members, A. Thomas Levin, Esq.,

of counsel

Thuillez, Ford, Gold & Conolly, Esqs., attorneys for respondent

Murphy, H. Neal Conolly, Esq., of counsel

SHELDON, Acting Commissioner.--On December 8, 1992, the Commissioner of Education ("the Commissioner") initiated proceedings on his own motion, pursuant to Education Law ''306 and 310 and Part 277 of the Regulations of the Commissioner of Education (8 NYCRR Part 277). The proceedings arise from a series of contractual agreements with respondent Suffolk County Board of Cooperative Educational Services ("BOCES III"), pursuant to which respondent Murphy, a former district superintendent, received in excess of $963,000 upon his retirement in September, 1992. The Commissioner proceeded by order to show cause, seeking to remove the BOCES III board members from office and to withhold State funding from BOCES III, pursuant to Education Law '306. Under Education Law '310, he also sought restoration of the public funds allegedly misused to compensate respondent Murphy.

On January 19, 1993, the Commissioner recused himself from the '306 and the '310 proceedings, and designated me to preside over both matters as Acting Commissioner. An evidentiary hearing on the '306 issues took place on March 8, 1993. Immediately thereafter, I heard oral argument on the Commissioner's claim for restoration, pursuant to Education Law '310. This decision shall incorporate my determinations in both proceedings.

FACTS

The facts underlying the '310 proceeding are undisputed. Similarly, at the '306 hearing, the parties stipulated to the admission of all evidence. Essentially the same set of facts give rise to both the '306 and the '310 claims. The following recitation, therefore, applies to both matters.

On May 5, 1980, respondent Murphy was appointed district superintendent of BOCES III, pursuant to Education Law '2204. He received a salary from the State as well as "supplementary salary" from BOCES III (Education Law '1950[4][a]). Between 1980 and 1983, Murphy received employment benefits from BOCES III, which were described in various memoranda and board resolutions. On August 26, 1983, respondent Murphy and BOCES III entered into a formal written contract ("the contract") consolidating the previous memoranda. Respondents subsequently amended the contract eight times between 1985 and 1990.

The contract amendments, in part, provided Murphy with additional vacation, personal and sick leave allocations. In the 1987-88 school year, for example, Murphy accumulated 80 additional sick leave days per year, in addition to his basic entitlement of 16 days per year. He received additional vacation days, as well, pursuant to amendments executed in May 1988 and June 1990. During the 1988-89 and 1989-90 school years, Murphy accrued 40 vacation days per year, plus 101 personal and sick days, for a total of 141 days of leave each year. At the conclusion of the 1991-92 school year, respondent Murphy had accumulated 530 days of personal and sick leave and 212.5 days of vacation leave.

The contract granted respondent Murphy an option to "cash in" his unused leave, upon ten days' notice to BOCES III. He exercised this option on May 7, 1992. On June 3, 1992, Murphy received payment for 500 of 530 unused personal and sick leave days and for 200 of 212.5 unused vacation days, each at 1/220th of his combined State and BOCES salary, for a total of $731,402 less applicable withholding. Murphy's combined salary at the time was $229,870.

Respondent Murphy retired on September 30, 1992. On October 3, 1992, he received $117,546.75, less applicable withholding, for his remaining unused leave. In addition, he received a retirement incentive payment of $114,935, less applicable withholding. Upon retirement, therefore, Murphy received $963,883.75.

'310

Pursuant to Education Law '310, the Commissioner seeks "restoration of public funds [allegedly] misused to compensate respondent Edward J. Murphy." On or about January 22, 1993, however, Attorney General Robert Abrams commenced civil litigation against Murphy, BOCES III and the BOCES III board members, seeking precisely this relief ("the litigation"). Respondents contend that my authority to issue a '310 decision in this matter has been preempted by the Attorney General's litigation. They rely on Executive Law '63-c which provides:

Although the Attorney General's invocation of '63-c clearly preempts pending "actions" for similar relief (i.e., those maintained in a judicial forum), the statute does not expressly prohibit concurrent review by an administrative agency. For the reasons that follow, nonetheless, I must sustain respondents' objection and decline jurisdiction over the Commissioner's '310 claim for restoration of funds.

The Commissioner seeks no relief under '310 other than the restoration of public funds. I have no authority to order such relief. When the Attorney General commences an action under Executive Law '63-c, "the entire cause of action, including the title to the money ... with respect to which the suit or action is brought ... is transferred to and becomes absolutely vested in the state" (Executive Law '63-c[2]; emphasis supplied). The court in which the action is brought may then order disposition of the proceeds "in such a manner as to reinstate the lawful custody thereof" (Executive Law '63-c[3]). If the court chooses not to do so, title to the proceeds remains absolutely with the State, and any political subdivision claiming entitlement thereto must bring a special proceeding against the Attorney General for disposition of the funds (Executive Law '63-c[4]). Executive Law '63-c permits no alternative scheme for disposition of the funds. In this appeal, the funds the Commissioner would have me "restore" are the same funds with respect to which the Attorney General commenced the '63-c litigation. In light of the Executive Law's clear statutory mandate, therefore, I am without authority to issue any order affecting distribution of the funds.

Even if I could order the funds returned, the Legislature has determined to vest the Attorney General with exclusive authority to pursue such relief, at least in judicial fora. Cognizant of the Legislature's intent, I find that it would violate the spirit, if not the letter of the statute, to hold that the Attorney General's '63-c litigation does not preempt this '310 proceeding. The Attorney General's litigation, moreover, would go forward whether I entertained this matter or not. Given the identical nature of issues presented, it would be an inefficient use of public resources to proceed with administrative review.

The claim for restoration of funds before the court in the Attorney General's '63-c litigation raises a number of issues pertaining to the validity of respondent Murphy's contract and the subsequent amendments thereto. Several of these collateral issues will turn entirely on statutory construction. Typically, when there are no disputed questions of fact, the courts will decide such issues in the first instance (Matter of Tombler v Board of Educ., 109 Misc 2d 821, 830). As the parties have stipulated, the facts of this matter are not disputed. I recognize, however, that certain questions remain which may be appropriate for initial resolution in an administrative forum, under the doctrine of primary jurisdiction (id.). On the record before me, I will defer to the court to determine whether primary jurisdiction applies and, if so, to refer appropriate issues for my resolution (Staatsburg Water Co. v Staatsburg Fire Dist., 72 NY2d 147, 156).

In light of the foregoing, the appeal pursuant to Education Law '310 is dismissed.

'306

I turn now to the issues under Education Law '306. At the outset, I must address a number of procedural issues. At the '306 hearing on March 8, 1993, respondents indicated that they intended to file an affidavit pursuant to the State Administrative Procedure Act, challenging my qualification to preside over the hearing. The statute provides that,

Respondent V. Michael Pick executed such an affidavit on March 18, 1993, on behalf of BOCES III and the respondent board members.

For a number of reasons, respondents contend they were denied a fair and impartial hearing in this matter. First, they object to the fact that members of the State Education Department ("SED") initiated, investigated, prosecuted and will decide the matter. It is well established, however, that combining the investigative and adjudicative functions in a single administrative body or officer is not, ipsofacto, a denial of due process (Matter of Seven South Main Street, Inc. v Seaboyer, 57 AD2d 1031, appealdenied, 42 NY2d 809, citingWithrow v Larkin, 421 US 35; see, Matter of Felin Assoc. v Altman, 41 AD2d 825, affd 34 NY2d 895; seealso, 2 NY Jur 2d, Admin Law '131). Respondents also observe that the Commissioner publicly expressed his personal views of this matter prior to the hearing. As indicated, however, the Commissioner properly disqualified himself as hearing officer, in light of his public statements and the possible perception of bias (Matter of 1616 Second Ave. Restaurant v State Liquor Auth., 75 NY2d 158).

Respondents contend that my appointment as hearing officer fails to cure the alleged prejudice which, in their view, taints this proceeding. They argue that I cannot be impartial because I report to the Commissioner and because I was aware of the Commissioner's public statements. They also contend that the SED Office of Counsel's involvement in this matter has been improper. Having considered both arguments, I am persuaded by neither.

Respondents contend I cannot serve as an impartial hearing officer because I was appointed by, report to, and serve at the pleasure of the Commissioner. That is not correct. The Executive Deputy Commissioner of Education is appointed by the Board of Regents and serves at the pleasure of the Board (Education Law '101; 8 NYCRR 3.9). Although the Executive Deputy Commissioner normally reports to the Commissioner, I have been designated Acting Commissioner of Education for purposes of deciding this appeal. As Acting Commissioner, I do not report to the Commissioner nor, indeed, have I had any communication with the Commissioner regarding the merits of this matter since my appointment. I, and the staff advising me, have not discussed the merits of this matter with the Commissioner or his Counsel, or with anyone involved in the investigation or prosecution of the appeal. I have not been influenced by the Commissioner, nor have I been influenced by anything outside the record. Respondents have submitted no evidence other than their own speculation regarding my alleged inability to preside over this hearing in an independent and impartial manner. Their challenge to my personal qualification to serve as hearing officer is therefore rejected.

If true, respondents' perception regarding the role of SED's Office of Counsel could, indeed, be considered a conflict of interest. In fact, however, respondents misstate the facts. In his affidavit, respondent Pick states,

Despite respondents' perception to the contrary, this is precisely what occurred. Following my appointment as hearing officer, two attorneys from the Office of Counsel were selected to advise me. One of those attorneys handled the administrative details associated with the proceeding, while the other advised me on the substantive issues presented. For purposes of this proceeding, those two attorneys reported directly to me. With respect to this matter, their isolation from the Office of Counsel was absolute. Indeed, an affidavit submitted by the Commissioner's Counsel, in response to respondent Pick's affidavit, demonstrates the success of the wall of separation within the Office of Counsel. In her affidavit, the Commissioner's Counsel stated that a third SED attorney, not associated with the Office of Counsel, would be supervising the work of the two attorneys advising me in this matter. In fact, that third attorney had no involvement in this case. That Counsel was unaware of this fact further demonstrates the separation between her office and my advisors. Accordingly, I find no conflict of interest involving the Office of Counsel.

In light of the foregoing, I will not disqualify myself as hearing officer.

The Regulations of the Commissioner of Education require that an appeal be instituted "within thirty days from the making of the decision or the performance of the act complained of" (8 NYCRR 275.16). The foregoing is applicable to '306 proceedings, pursuant to Part 277 of the Regulations (8 NYCRR 277.1; Application of Board of Educ. of City School Dist. of City of New York, 28 Ed Dept Rep 451, 453). The Commissioner contends that the respondent board members should be removed from office for allegedly providing respondent Murphy with excessive leave benefits. As alleged in the order to show cause, these actions occurred between April 30, 1985, the date of the first contract amendment, and June 11, 1990, the date of the eighth and final amendment. None of the actions allegedly providing a basis for removal occurred in the 30 days preceding the commencement of this '306 proceeding. Respondents contend, therefore, that the instant proceeding is untimely.

Although the acts underlying these '306 charges date back to 1985, they were not known to the public or the Commissioner before December 7, 1992. The Commissioner brought this proceeding immediately thereafter, on December 8, 1992. In prior decisions, the Commissioner of Education has found '306 appeals to be timely when commenced within 30 days after the petitioner's good faith discovery of the alleged misconduct (Application of Mody, 30 Ed Dept Rep 402; Application of Board of Educ. of City School Dist. of City of New York, 28 Ed Dept Rep 451, 453, supra). Because the order to show cause was issued within 30 days after discovery of the alleged misconduct, I find this '306 proceeding to be timely.

Respondents contend the Commissioner should have known of respondent Murphy's compensation package by virtue of reports submitted annually to the State Education Department. These documents ("BEDS," "SA-111," "ES-31" and "SBM 4") reported Murphy's annual salary. With one exception, however, they did not reflect additional benefits provided pursuant to the contract and its amendments. The final relevant "ES-31" report does show excess "salary" to Murphy of $869,972.33. I note, however, that this report is dated November 16, 1992, fewer than 30 days before the Commissioner initiated these proceedings. I express no opinion whether the Commissioner should be charged personally with knowing the contents of every report ever submitted to the State Education Department. It is unnecessary to reach that issue, however, because, in this case, the final "ES-31" report is the only SED document which could have alerted the Commissioner to the extent of Murphy's compensation package. Because the Commissioner issued his order to show cause within 30 days after that report, respondents' argument must fail.

Respondents also contend, on the issue of timeliness, that the proceeding should be dismissed because it was, in their view, untimely commenced, and the Commissioner failed in his order to show cause to plead "good cause" for the alleged delay (8 NYCRR 275.16). I have examined the records in Application of Mody (30 Ed Dept Rep 402, supra) and Application of Board of Educ. (28 Ed Dept Rep 451, supra), however, and note that neither petition contained allegations of "good cause" pursuant to '275.16. I must conclude, therefore, that the requirement for pleading "good cause" does not apply when a '306 appeal has been commenced within 30 days after the petitioner's good faith discovery of misconduct allegedly providing a basis for removal.

I must similarly dismiss respondents' assertion that this '306 proceeding should be dismissed against those board members for whom the alleged misconduct occurred during a prior term of office. I recognize that prior decisions of the Commissioner may be cited in support of this defense (see, e.g., Application of Summerville, 27 Ed Dept Rep 46). In 1989, however, the Commissioner refused to apply the "prior term of office" rule, stating, "I find that such a rigid rule does not serve the interests of justice, particularly in instances where there are serious charges only recently reported to petitioners" (Application of Board of Educ. of City School Dist. of City of New York, 28 Ed Dept Rep 451, 453, supra). Citing Matter of Bailey (67 NY2d 61), the Commissioner held that where a school official

I find the Commissioner's reasoning applicable to the facts before me. Respondents' "prior term of office" defense is therefore dismissed.

Public school officials can be removed from office, if

Similarly, public funds can be withheld from a district

Pursuant to Education Law ''306(1) and (2), the Commissioner seeks to remove the respondent board members from office, and to withhold public funds from BOCES III. Having initiated this '306 proceeding, the Commissioner bears the burden of proof (State Admin Proc Act '306[1]; Application of Burke, 28 Ed Dept Rep 23; see, Application of Gellatly, 30 Ed Dept Rep 10; Application of Board of Educ. of Cornwall Central School Dist., 25 Ed Dept Rep 250).

The respondent board members can be removed from office, and public funds withheld, only if the Commissioner shows the board members to be guilty of a wilful violation or neglect of duty, or of wilfully disobeying a decision, order, rule or regulation of the Regents or the Commissioner (Matter of Gross v Board of Educ., 46 Misc 2d 987, 989; Matter of Rojek and Spadone, 24 Ed Dept Rep 434; Matter of Young, 24 Ed Dept Rep 313). To be considered wilful, respondents' actions must have been done intentionally and with a wrongful purpose (Application of Griffin, 31 Ed Dept Rep 221, 225; Application of Gellatly, 30 Ed Dept Rep 10, 11, supra; see, People ex rel. Light v Skinner, 37 App Div 44, 46, affd 159 NY 162). Consequently, the Commissioner must show (1) that providing respondent Murphy with additional leave as set forth in the contract and its amendments was actionable misconduct under '306, i.e., it constituted neglect of duty, or a violation of the Education Law or a decision, order, rule or regulation of the Regents or the Commissioner and (2) that the board members knew it was actionable misconduct and (3) that despite such knowledge, the board nevertheless provided respondent Murphy with the additional leave.

The respondent board members argue that this '306 proceeding should be dismissed because the Commissioner's order to show cause fails to identify the wilful misconduct upon which it is based. They further contend, in any event, that the Commissioner has not satisfied his burden of proving wilful misconduct.

The Commissioner's order to show cause specifically recites the pertinent provisions of respondent Murphy's contract, along with the contract date and the dates of each subsequent amendment. The order to show cause additionally sets forth seven "causes of action" advising the board members why, in the Commissioner's view, executing the contract and the amendments constituted actionable misconduct under Education Law '306. Respondents object to the order to show cause, apparently, because it does not contain the word "wilful." As they observe,

It is unclear whether the Regulations expressly require '306 pleadings to contain the word, "wilful." I find, in any event, that the Commissioner's order to show cause provided respondents with adequate notice of the charges against them. Respondents submitted a detailed answer and memorandum of law, and have not demonstrated actual prejudice arising from the Commissioner's alleged omission. Their objection to the order to show cause is therefore dismissed.

Turning to the merits, respondents contend that the Commissioner has not established a basis for their removal or for withholding public funds from BOCES III. On the record before me, I must agree.

A board of cooperative educational services ("BOCES") may, in its discretion, "provide for the payment of supplementary salary to the district superintendent of schools" (Education Law '1950[4][a]). The Commissioner argues that '1950(4)(a) does not authorize a BOCES to provide its district superintendent with sick and vacation leave benefits in addition to those provided by the State. In the Commissioner's view, the district superintendent is an SED employee entitled only to State benefits. In his first and second causes of action, the Commissioner charges the respondent board members with violating Education Law '1950(4)(a) by providing respondent Murphy with allegedly unauthorized leave and by compensating him for such leave remaining to his credit at the time of his retirement.

Because they allege violation of the Education Law, the charges set forth in the first and second causes of action, if true, would constitute actionable misconduct under Education Law '306. The existence of actionable misconduct, however, does not constitute a basis for removal under Education Law '306 unless the petitioner shows the respondent to have engaged in such misconduct "wilfully." In this case, such a showing has not been made.

The Commissioner of Education has held repeatedly that a board member who acts on the advice of counsel lacks the requisite wilfulness to warrant removal from office (Application of Landgrebe, 32 Ed Dept Rep ___, Decision No. 12754, dated July 17, 1992; Application of Griffin, 31 Ed Dept Rep 221, 225; see, Matter of Israel, 20 Ed Dept Rep 67, 68). This defense, however, is not absolute. Common sense dictates that the individual relying on the advice of counsel must in good faith believe the advice to be within the bounds of the law. A school official who acts in a manner which is clearly and indisputably illegal can be held accountable notwithstanding his or her alleged reliance on the advice of counsel. A BOCES board member could not, as an extreme example, deny that embezzling BOCES funds for personal gain constitutes wilful misconduct, simply because an attorney had advised the board member that such conduct was permissible.

At the time of respondents' actions, the controlling legal question, i.e., their authority to grant Dr. Murphy additional leave and to reimburse him for unused leave, had not been settled. Consequently, respondents' reliance on the advice of counsel, if established, could defeat the Commissioner's allegations of wilful misconduct. I will, therefore, entertain the defense.

The record before me contains a letter dated July 26, 1983 to respondent Murphy from BOCES III counsel John H. Gross, expressing the opinion that Education Law '1950 authorizes a BOCES to provide its district superintendent with fringe benefits, by contract. On August 10, 1989, Mr. Gross issued a subsequent memorandum to district superintendents of schools, interpreting an appellate court decision which, in his opinion, authorizes a BOCES to contract with administrative personnel regarding the terms and conditions of employment. A third letter from Gross to respondent Murphy, dated July 30, 1990, essentially reiterated the opinion set forth in Mr. Gross' August 10, 1989 memorandum.

In an affidavit, respondent Sydney Finkelstein states that the respondent board members relied on the advice of counsel, described above, when they executed the contract and performed their obligations pursuant to its terms. Finkelstein further observes that the contract and each amendment was prepared by the BOCES III counsel. The record contains evidence, moreover, that BOCES attorney Gross requested outside counsel to review the contract and its amendments. By letter dated July 6, 1992, attorney Linda U. Margolin confirmed Mr. Gross' opinion that BOCES III had proper authority to execute the contract and the amendments. Given the date of this letter, respondents cannot contend that they relied on attorney Margolin's opinion at the time they executed the contract. The Margolin opinion does, however, provide additional evidence of respondents' good faith regarding the October 1992 payments to respondent Murphy.

The Commissioner has submitted no evidence to dispute respondents' allegations of their good-faith reliance on the advice of counsel. Consequently, I need not determine whether the Commissioner's interpretation of '1950(4)(a) is correct because, even if respondents violated the law, as the Commissioner charges, there is no evidence to suggest that they did so wilfully.

In 1985 an employee of the State Education Department issued a memorandum suggesting that, in fact, SED would permit BOCES to provide its district superintendent with extra vacation and sick leave benefits. Respondents contend they acted in good faith, in reliance on the SED memo. Indeed, prior to the memo, BOCES III had not granted respondent Murphy any additional leave. Respondents and the Commissioner construe the 1985 memorandum quite differently. The Commissioner, however, has not established that respondents' interpretation was taken in bad faith. Respondents' reliance on the memorandum, therefore, provides an additional basis for concluding that their misconduct, if any, was not wilful.

The first and second causes of action are therefore dismissed.

The Commissioner's third cause of action charges that compensating respondent Murphy for allegedly unauthorized leave constituted an illegal gift of public funds in violation of the New York State Constitution. If true, this charge could constitute actionable misconduct under '306 as a violation of "any other act pertaining to common schools" (Education Law '306[1]). For the reasons set forth above, however, I cannot find that respondents' violation of this provision, if any, was wilful. The third cause of action is therefore dismissed.

The Commissioner's fourth, fifth and seventh causes of action charge that compensating respondent Murphy for allegedly unauthorized leave violated sound public policy, violated respondents' duty to act in a fiduciary capacity and constituted an improper use of public funds. The order to show cause does not allege that such misconduct, if true, violates the Education Law or any other act pertaining to common schools, or any decision, order, rule or regulation of the Regents or of the Commissioner. It could, however, constitute neglect of duty. The argument that these board members acted in neglect of duty, indeed, is compelling. Nonetheless, as indicated above, I find no evidence that respondents acted wilfully. The fourth, fifth and seventh causes of action are therefore dismissed.

The Commissioner's sixth cause of action seeks no relief against the respondent board members. It alleges that respondent Murphy violated the terms and conditions of his employment with SED by accepting compensation for allegedly unauthorized leave. Because he is no longer a district superintendent, respondent Murphy is not subject to removal under Education Law '306. The sixth cause of action is therefore dismissed.

The request to withhold public funds must similarly be denied. That drastic remedy should be invoked only when there is clear proof of wilful misconduct or neglect of duty. Withholding public funds would be an inappropriate remedy, in any event, as it would operate solely to the detriment of BOCES III students and taxpayers.

Within the bounds of Education Law '306, I am constrained to dismiss the order to show cause in its entirety. For this reason, I need not address respondents' other procedural defenses. However, one administrative matter remains. Respondents have requested that I grant them a certificate of good faith pursuant to Education Law '3811(1). Such certification is solely for the purpose of authorizing BOCES III to indemnify them for the legal fees and expenses associated with this proceeding. It is appropriate to issue such certification unless it has been established on the record that the requesting board member or trustee acted in bad faith (Application of Sabuda, 31 Ed Dept Rep 461, 463-464). In light of my decision, I will issue such certification for the respondent board members for the limited purpose of '3811(1), with the admonition that it is in no way to be construed as approval of their actions.

CONCLUSION

Although the order to show cause is dismissed, I find it deeply disturbing that this unfortunate episode in public education could have been avoided through the exercise of sound judgment by the respondent board members. It is an understatement of significant proportion to observe that the respondent board members demonstrated poor judgment by executing the contract and the eight subsequent amendments. The attorney for BOCES III and the respondent board members observed in his closing statement that, "there is a constitutional right to be stupid." His point, of course, was that poor judgment is not a basis for forced removal from office. From a legal standpoint, I recognize that this is so (Application of Board of Educ. of Cornwall Central School Dist., 25 Ed Dept Rep 250, supra). From the standpoint of common sense, however, I make the following observations.

It is for the court hearing the Attorney General's '63-c litigation to determine whether BOCES III had legal authority to provide respondent Murphy with additional leave and to reimburse him for the leave he did not use. In the court of public opinion, however, sick leave is intended to cover an individual's absence due to illness while vacation leave is intended to provide periods of rest during the working year. At best, it is offensive to the taxpayers to use either benefit as a means for obscuring or deferring great percentages of a public employee's pay. Admittedly, respondent Murphy's record was exemplary. Does such a record, however, justify the extraordinary grant of as many as 141 days of leave in a single year? If used, such leave would have reduced the superintendent to a part-time employee, making it impossible for him to do his job.

Legal or not, the leave granted to Dr. Murphy was excessive. I admonish respondents to act not only within the bounds of the law but also within the bounds of reason, common sense and respect for the public they are charged to serve. By this standard, in the judgment of this officer, they have been found wanting.

THE APPEALS ARE DISMISSED.

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