In Re Protest of Contract for Retail Pharmacy Design, Construction, Start-Up and Operation, Request for Proposal No. UH-P20-006/ in Re Sumukha LLC Challenge of Post-Award Changes to RFP UH-P20-006

SYLLABUS

This syllabus is not part of the Court’s opinion. It has been prepared by the Office

of the Clerk for the convenience of the reader. It has been neither reviewed nor

approved by the Court and may not summarize all portions of the opinion.

In re Protest of Contract for Retail Pharmacy Design,

Construction, Start-Up & Operation, Request for Proposal No. UH-P20-006

(A-58/59-22) (088018) (088019)

Argued January 16, 2024 -- Decided May 23, 2024

PATTERSON, J., writing for a unanimous Court.

The Court considers whether University Hospital constitutes a “state

administrative agency” whose denial of two public procurement challenges was

directly appealable to the Appellate Division pursuant to Rule 2:2-3(a)(2).

From 1979 to 2013, University Hospital was the primary teaching hospital of

the University of Medicine and Dentistry in New Jersey (UMDNJ). Effective on

July 1, 2013, the New Jersey Medical and Health Sciences Restructuring Act

transferred the rights to all of the centers of UMDNJ, other than University Hospital,

to Rutgers. The Legislature designated University Hospital to “be the principal

teaching hospital of New Jersey Medical School and New Jersey Dental School, and

any other Newark-based medical education program.”

In October 2019, University Hospital issued a Request for Proposal (RFP)

seeking “to enter a contract with one vendor to design, stock, staff and operate an

on-site [p]harmacy at our Newark location.” University Hospital received

responsive proposals from petitioner Sumukha LLC and three other bidders. When

the Hospital awarded the contract to a different bidder, Sumukha challenged the

decision. University Hospital’s hearing officer denied Sumukha’s protest, and

Sumukha filed an appeal in the Appellate Division. While that was pending,

Sumukha filed a second protest challenging the decision to change the pharmacy’s

planned location. When University Hospital failed to respond to that second protest,

Sumukha filed a second appeal in the Appellate Division.

The Appellate Division dismissed the appeal from Sumukha’s first protest in a

published opinion, concluding that University Hospital’s determination was not

directly appealable to the Appellate Division. 474 N.J. Super. 630, 639-44 (App.

Div. 2023). It later dismissed Sumukha’s second appeal. Both dismissals were

without prejudice to Sumukha’s right to file an action in the Law Division. The

Court granted certification and consolidated the appeals. 254 N.J. 497 (2023).

1

HELD: The Court finds no evidence in University Hospital’s enabling statute that

the Legislature intended the Hospital to be a “state administrative agency” under

Rule 2:2-3(a)(2). University Hospital’s decisions and actions may not be directly

appealed to the Appellate Division.

1. Rule 2:2-3(a)(2) states in relevant part that “appeals may be taken to the

Appellate Division as of right . . . to review final decisions or actions of any state

administrative agency or officer.” The Appellate Division’s authority to review a

state administrative agency’s final decision or action is exclusive. (pp. 11-15)

2. The plain language definitions of the words “state administrative agency”

collectively convey that Rule 2:2-3(a)(2) does not apply to all public entities that are

part of state government, but instead addresses executive entities that implement or

administer particular legislation or constitutional requirements on the government’s

behalf. Under separation of powers principles, it is the Legislature, not the

Executive Branch or the agency itself, that defines an administrative agency’s role.

The New Jersey Constitution requires that “[a]ll executive and administrative offices

. . . be allocated by law among . . . twenty principal departments.” N.J. Const. art.

V, § 4, ¶ 1. If the Legislature has not allocated a state governmental entity to an

executive branch department, that entity cannot be a “state administrative agency”

under Rule 2:2-3(a)(2). A state entity’s enabling statute provides other guidance for

a court applying Rule 2:2-3(a)(2). The Legislature has, in some instances, expressly

confirmed that all or certain actions by a particular agency are reviewable through

direct appeal to the Appellate Division. In addition, an enabling statute may grant a

state governmental entity rulemaking authority or the authority to adjudicate

contested cases, powers typically exercised by administrative agencies. An enabling

statute’s provisions regarding the purpose, structure, governance, and authority of a

state governmental entity may also provide compelling evidence of legislative intent.

(pp. 15-21)

3. Based on the plain language of Rule 2:2-3(a)(2), the Court adopts the following

standard to guide a court determining whether a given state entity constitutes a “state

administrative agency” whose final decisions and actions may be directly appealed

to the Appellate Division. First, informed by the entity’s enabling statute, the court

should consider what the Legislature intended the state entity to be. If the entity is

not a principal department of the Executive Branch or allocated by the Legislature to

be within, or “in but not of,” such a department, then it cannot be a “state

administrative agency” under Rule 2:2-3(a)(2). If the entity has been allocated to a

principal department of the Executive Branch, then statutory provisions addressing

the entity’s composition, governance, financing, and degree of independence from

that department are relevant to the inquiry. Second, again informed by the enabling

statute, the court should consider what the Legislature intended and empowered the

public entity to do. In order for a court conducting that inquiry to deem a public

2

entity a “state administrative agency” under Rule 2:2-3(a)(2), it must conclude that

the Legislature intended that the entity administer or implement policy in one or

more areas on behalf of state government. In addition, if the Legislature has

empowered the entity to promulgate rules or adjudicate contested cases -- authority

typically exercised by administrative agencies -- such a provision is a strong

indication that the entity should be considered a “state administrative agency” for

purposes of Rule 2:2-3(a)(2). (pp. 21-23)

4. The Court reviews in detail the text of the Restructuring Act, University

Hospital’s enabling statute. The Legislature neither placed the Hospital in an

executive department nor declared it to be “in but not of” such a department, which

itself is sufficient to conclude that the Hospital is not a state administrative agency.

Application of the practical test adopted in the Court’s opinion further supports that

conclusion. Considering, first, what the Legislature intended University Hospital to

be, the Court notes that the Hospital has a significant degree of independence in its

management and operations and that its structure and governance bear little

resemblance to those of a state administrative agency. The first factor in the test

therefore supports the conclusion that the Hospital does not meet the requirements of

Rule 2:2-3(a)(2). Turning to what the Legislature intended and empowered

University Hospital to do, the Court notes that the Legislature did not charge the

Hospital to implement or administer the State’s healthcare policies generally, or any

aspect of those policies. Nor did it give the Hospital authority typically granted to

an administrative agency. Conversely, the Legislature granted the Hospital not only

significant operational independence, but also a unique power that it has not granted

to any state administrative agency -- the power to offer itself for sale. See N.J.S.A.

18A:64G-6.1d. In short, University Hospital is not a “state administrative agency”

under Rule 2:2-3(a)(2). The Court affirms the dismissal of the appeals, without

prejudice to Sumukha’s right to file actions in the Law Division. (pp. 23-31)

AFFIRMED.

CHIEF JUSTICE RABNER and JUSTICES SOLOMON, PIERRE-LOUIS,

WAINER APTER, FASCIALE, and NORIEGA join in JUSTICE

PATTERSON’s opinion.

3

SUPREME COURT OF NEW JERSEY

A-58/59 September Term 2022

088018 and 088019

In re Protest of Contract for

Retail Pharmacy Design, Construction,

Start-Up and Operation, Request for

Proposal No. UH-P20-006.

In re Sumukha LLC Challenge

of Post-Award Changes to

RFP UH-P20-006.

On certification to the Superior Court,

Appellate Division, whose opinion in A-58-22

is reported at 474 N.J. Super. 630 (App. Div. 2023).

Argued Decided

January 16, 2024 May 23, 2024

Robert A. Wiygul argued the cause for appellant

Sumukha LLC (Hangley Aronchick Segal Pudlin &

Schiller, attorneys; Robert A. Wiygul, Jason A. Levine,

and Nicholas J. Bellos of the Pennsylvania bar, admitted

pro hac vice, on the briefs).

Peter Slocum argued the cause for respondent University

Hospital (Lowenstein Sandler, attorneys; Peter Slocum

and Christopher Porrino, on the briefs).

Sara M. Gregory, Assistant Attorney General, argued the

cause for amicus curiae Attorney General of New Jersey

(Matthew J. Platkin, Attorney General, attorney; Melissa

H. Raksa, Assistant Attorney General and Sara M.

Gregory, of counsel, and Francis X. Baker, Deputy

Attorney General, on the brief).

1

Jeffrey S. Chiesa submitted a brief on behalf of

respondent Shields Pharmacy of University, LLC (Chiesa

Shahinian & Giantomasi, attorneys; Jeffrey S. Chiesa,

Ronald L. Israel, and Brian P. O’Neill, on the brief).

JUSTICE PATTERSON delivered the opinion of the Court.

Pursuant to Rule 2:2-3(a)(2), appeals may be taken as of right to the

Appellate Division “to review final decisions or actions of any state

administrative agency or officer.” In these consolidated appeals, the Court

determines whether University Hospital constitutes a “state administrative

agency” whose denial of two public procurement challenges was directly

appealable to the Appellate Division.

University Hospital rejected petitioner Sumukha LLC’s bid to plan,

construct, and operate a retail pharmacy on the Hospital’s property. It awarded

the pharmacy contract to another bidder. University Hospital’s hearing officer

denied Sumukha’s protest of the Hospital’s decision. Sumukha filed a notice

of appeal in the Appellate Division, seeking to challenge University Hospital’s

final decision denying the contract protest. It later filed a second protest

regarding the Hospital’s contract award, which University Hospital also

denied.

The Appellate Division dismissed Sumukha’s appeal of University

Hospital’s denial of Sumukha’s first protest. In re Protest of Cont. for Retail

2

Pharmacy, 474 N.J. Super. 630, 639-44 (App. Div. 2023). The appellate court

concluded that the Legislature did not make University Hospital a state

administrative agency and dismissed the appeal without prejudice to

Sumukha’s right to bring an action in the Law Division challenging the

Hospital’s decision. Id. at 632-33. Sumukha also appealed University

Hospital’s denial of its second protest, and the Appellate Division dismissed

without prejudice Sumukha’s second appeal.

We granted Sumukha’s petitions for certification. We find no evidence

in University Hospital’s enabling statute that the Legislature intended the

Hospital to be a “state administrative agency” under Rule 2:2-3(a)(2). We

hold that University Hospital’s decisions and actions may not be directly

appealed to the Appellate Division, and we affirm the Appellate Division’s

dismissal of Sumukha’s appeals without prejudice to Sumukha’s right to file

an action in the Law Division challenging University Hospital’s public

procurement decisions.

I.

A.

Sumukha, doing business as Bergen Rx Services Corporation, is a

provider of pharmacy services in Newark. University Hospital is a teaching

hospital located in Newark that delivers medical care, including acute care and

3

trauma services. From 1979 to 2013, it was the primary teaching hospital of

the University of Medicine and Dentistry in New Jersey (UMDNJ).

On August 22, 2012, the Legislature passed the New Jersey Medical and

Health Sciences Restructuring Act (Restructuring Act). L. 2012, c. 45.

Effective on July 1, 2013, the Restructuring Act transferred “the rights to all of

the schools, institutes, and centers” of UMDNJ, “other than . . . University

Hospital” to Rutgers, The State University. Id. § 3(a) (codified at N.J.S.A.

18A:65-94(a)). The Legislature designated University Hospital to “be the

principal teaching hospital of New Jersey Medical School and New Jersey

Dental School, and any other Newark-based medical education program.” Id.

§ 14(a) (codified at N.J.S.A. 18A:64G-6.1a(a)).

On October 25, 2019, University Hospital issued a Request for Proposal

(RFP) seeking “to enter a contract with one vendor to design, stock, staff and

operate an on-site [p]harmacy at our Newark location.” The RFP stated that

the proposed pharmacy would be constructed in the Hospital’s main lobby to

serve “patients, employees and [the] public.” In its RFP, University Hospital

advised potential bidders that its Executive Director’s final decision

concerning all disputes about contract award rescission, contract interpretation,

contractor performance and/or reduction, suspension, or termination “shall be

4

deemed a final agency action reviewable by the Superior Court of New Jersey,

Appellate Division.”

University Hospital received responsive proposals to the RFP from

Sumukha, Shields Pharmacy of University, LLC (Shields), and two other

bidders. Its evaluation committee ranked Shields first with respect to the two

criteria that it used to compare the bids. On September 24, 2020, the

Hospital’s Board of Directors adopted a resolution awarding the pharmacy

contract to Shields.

B.

1.

Sumukha protested University Hospital’s notice of intent to award the

contract to Shields, alleging that Shields had a conflict of interest, that Shields

had understated the labor costs of operating the pharmacy in its bid, and that

the Hospital’s analysis of the competing bids was predicated on

miscalculations.

In a final decision, University Hospital’s hearing officer denied

Sumukha’s protest. The hearing officer concluded that University Hospital

was not bound by statutes or regulations governing procurement and contract

awards for state and local governmental entities, and that Sumukha had failed

to provide any legal or equitable basis for the relief sought. The hearing

5

officer also denied Sumukha’s application for a stay of University Hospital’s

award of the contract to Shields.

Sumukha filed a Notice of Appeal, contesting the hearing officer’s

denial of its first protest in the Appellate Division. The Appellate Division

denied Sumukha’s application for a stay and granted Shields’ motion to

intervene. 1

Prior to oral argument in Sumukha’s first appeal, Sumukha filed a

second protest in connection with University Hospital’s RFP. In that protest,

Sumukha objected to University Hospital’s decision, in consultation with

Shields after the contract was awarded, to change the location of the proposed

on-site pharmacy from the Hospital’s main lobby to an adjacent building.

Sumukha alleged that University Hospital improperly altered the pharmacy’s

location after the award, and that its decision constituted further evidence of

conflicts of interest and favoritism in the pharmacy project.

Sumukha advised University Hospital that if it did not respond to

Sumukha’s protest of the change in the pharmacy’s location, Sumukha would

deem that protest denied. University Hospital did not respond. Sumukha filed

1

After the Appellate Division granted Shields’ motion to intervene, Shields

appeared before the Appellate Division to address the merits of University

Hospital’s decision awarding it the pharmacy contract. Before this Court,

Shields took no position on the question raised by this appeal.

6

a second appeal challenging the denial of its protest of the change in the

pharmacy’s location.

2.

In a published opinion addressing Sumukha’s first protest, the Appellate

Division noted that in the Restructuring Act, University Hospital’s enabling

statute, the Hospital was not allocated to an executive department in

accordance with Article V, Section 4, Paragraph 1 of the New Jersey

Constitution, and that it does not meet the definition of a “state agency” or

“agency” under N.J.S.A. 52:14B-2 for purposes of the Administrative

Procedure Act (APA), N.J.S.A. 52:14B-1 to -31. In re Protest, 474 N.J. Super.

at 639-41. The appellate court observed that in the Restructuring Act, the

Legislature did not confer on University Hospital the authority to promulgate

regulations or make quasi-judicial decisions, and that the Act did not provide

that the Hospital’s decisions would be reviewable as final agency decisions.

Id. at 641-42. The court also noted that the Act gave University Hospital a

greater degree of autonomy than is generally given to state administrative

agencies. Id. at 642-43 (citing N.J.S.A. 18A:64G-6.1d(a), -6.1(e)(7), -6.1e(a)

and (b)). It found no support in the plain language of the Restructuring Act for

Sumukha’s argument that Hospital constitutes a “state administrative agency”

under Rule 2:2-3(a)(2). Id. at 638-43.

7

The Appellate Division accordingly dismissed the appeal regarding

Sumukha’s first protest without prejudice to Sumukha’s right to bring an

action in the Law Division. Id. at 643-44. It did not decide whether

University Hospital must comply with state statutes and regulations governing

public procurement and contract awards, or otherwise address the merits of

Sumukha’s challenge to University Hospital’s award of the pharmacy contract

to Shields. Ibid.

University Hospital then moved to dismiss Sumukha’s second appeal, in

which Sumukha had challenged the denial of its protest of the Hospital’s post-

award change in the location of the proposed pharmacy. The Appellate

Division dismissed that appeal without prejudice to Sumukha’s right to file an

action in the Law Division regarding its second challenge.

3.

Sumukha filed petitions for certification in both appeals and moved to

consolidate the appeals. We granted both petitions and consolidated the

appeals. 254 N.J. 497 (2023). We also granted the Attorney General’s

application to participate as amicus curiae.

8

II.

A.

Sumukha contends that a public entity should be deemed a “state

administrative agency” under Rule 2:2-3(a)(2) if (1) its decisions or actions

would have been challenged by one of the traditional prerogative writs prior to

the 1947 New Jersey Constitution and (2) it is a “state” entity. Applying that

test, Sumukha contends that because public procurement challenges were

traditionally asserted by means of a writ of certiorari, and University Hospital

constitutes a state public entity, the Hospital is a “state administrative agency”

whose decisions are directly appealable to the Appellate Division.

B.

University Hospital proposes a different test to determine whether there

is a right to direct appeal under Rule 2:2-3(a)(2). It contends that such a

determination requires the court to (1) consider what the state entity at issue is;

(2) consider what that state entity does; and (3) find that a state entity is a

“state administrative agency” only if the entity administers an aspect of

government on behalf of the sovereign. University Hospital argues that it does

not meet that standard.

9

C.

Amicus curiae the Attorney General views the Appellate Division’s

decision to comport with the plain language, structure, and purpose of Rule

2:2-3(a)(2); to be consistent with this Court’s past application of the term

“state administrative agency”; and to properly construe the Restructuring Act’s

provisions regarding University Hospital.

III.

A.

The New Jersey Constitution charges this Court to “make rules

governing the administration of all courts in the State and, subject to the law,

the practice and procedure in all such courts.” N.J. Const. art. VI, § 2, ¶ 3.

“Inherent in this Court’s ‘power to make rules concerning the administration,

practice and procedure of the courts of this State’ is the broad power to

interpret court rules.” State v. Tier, 228 N.J. 555, 561 (2017) (quoting State v.

Leonardis, 71 N.J. 85, 108-09 (1976)).

“Our review of the meaning or scope of a court rule is de novo; we do

not defer to the interpretations of the trial court or Appellate Division unless

we are persuaded by their reasoning.” Ibid. In that review, we apply

“ordinary principles of statutory construction to interpret the court rules.”

DiFiore v. Pezic, 254 N.J. 212, 228 (2023) (quoting State v. Robinson, 229

10

N.J. 44, 67 (2017)). “We begin with the plain language of the rule, and

‘ascribe to the [words of the rule] their ordinary meaning and significance . . .

and read them in context with related provisions so as to give sense to the

[court rules] as a whole.” Ibid. (alterations and omission in original) (quoting

Wiese v. Dedhia, 188 N.J. 587, 592 (2006)).

B.

1.

Rule 2:2-3(a)(2) was adopted following a procedural reform initiated by

the framers of the 1947 New Jersey Constitution. The Constitution superseded

the traditional prerogative writs by which litigants had long challenged

decisions or actions -- the writs of certiorari, mandamus, quo warranto, and

prohibition -- and provided that “in lieu thereof, review, hearing and relief

shall be afforded in the Superior Court, on terms and in the manner provided

by rules of the Supreme Court, as of right, except in criminal causes where

such review shall be discretionary.” N.J. Const. art. VI, § 5, ¶ 4. The

Constitution thus conferred on the Court the authority to allocate claims that

had previously been maintained by prerogative writ to a division of the

Superior Court for review. See ibid.

Shortly after the adoption of the 1947 Constitution, the Court

promulgated a court rule that addressed, among other issues, challenges to

11

decisions or actions of state administrative agencies that had historically been

asserted by writ of certiorari. As Justice Nathan Jacobs observed in the wake

of the constitutional reform, “[u]nder the old practice review of determinations

by State Administrative Agencies was generally by application for writ of

certiorari,” but a court rule “replaces this by providing that review of final

decisions of State Administrative Agencies shall be by appeal to the Appellate

Division.” Nathan L. Jacobs, Procedure in Lieu of Prerogative Writs, 2

Rutgers L. Rev. 34, 37 (Special Issue, 1948); see also Cent. R.R. Co. v. Dep’t

of Pub. Utils., 7 N.J. 247, 258 (1951) (noting that the constitutional mandate of

Article VI, Section 5, Paragraph 4 of the New Jersey Constitution “was

complied with, resulting in the adoption by this court of Rule 3:81 and

subsequent amendments thereto”).

The term at the center of this appeal, “state administrative agency,”

appeared in the original version of the court rule. Effective on September 15,

1948, Rule 3:81-8 provided that “[r]eview of the final decision or action of any

State Administrative Agency shall be by appeal to the Appellate Division.”

Rule 4:88-8, which replaced Rule 3:81-8, included the same language. See R.

4:88-8 (“Review of the final decision or action of any state administrative

agency . . . shall be by appeal to the Appellate Division.”); Close v. Kordulak

Bros., 44 N.J. 589, 596 (1965) (noting that Rule 4:88-8 replaced Rule 3:81-8).

12

Effective on September 5, 1972, the Court adopted Rule 2:2-3, which

addresses appeals to the Appellate Division from final judgments, decisions,

and actions. At issue is subsection (a), concerning appeals as of right, which

states that,

[e]xcept as otherwise provided by R. 2:2-1(a)(3) (final

judgments appealable directly to the Supreme Court),

and except for appeals from a denial by the State Police

of an application to make a gun purchase under a

previously issued gun purchaser card, which appeals

shall be taken to the designated gun permit judge in the

vicinage, appeals may be taken to the Appellate

Division as of right

(1) from final judgments of the Superior Court

trial divisions, or the judges thereof sitting as

statutory agents; the Tax Court; and in summary

contempt proceedings in all trial courts except

municipal courts;

(2) to review final decisions or actions of any

state administrative agency or officer, and to

review the validity of any rule promulgated by

such agency or officer excepting matters

prescribed by R. 8:2 (tax matters) and matters

governed by R. 4:74-8 (Wage Collection Section

appeals), except that review pursuant to this

subparagraph shall not be maintainable so long as

there is available a right of review before any

administrative agency or officer, unless the

interest of justice requires otherwise;

(3) in such cases as are provided by law.

[R. 2:2-3(a) (emphases added).]

13

Rule 2:2-3, like its prior iterations, thus requires a court to determine

whether the state entity that issued the disputed decision or action is a “state

administrative agency.” If it is such an agency, the court must then consider

whether the decision or action of that agency is “final.” R. 2:2-3(a)(2); see

also In re CAFRA Permit No. 87-0959-5, 152 N.J. 287, 299 (1997) (discussing

criteria for assessing the finality of administrative action); D.J. Miller &

Assocs. v. Dep’t of Treasury, 356 N.J. Super. 187, 191 (App. Div. 2002)

(“[S]ome actions or inactions of State agencies and officers do not constitute

‘administrative’ agency action or inaction that is subject to review by the

Appellate Division under Rule 2:2-3(a)(2).”).

Under Rule 2:2-3(a)(2), the Appellate Division’s authority to review a

state administrative agency’s final decision or action is exclusive. Prado v.

State, 186 N.J. 413, 422 (2006); Pascucci v. Vagott, 71 N.J. 40, 52 (1976).

Consequently, an appeal of such a decision or action “must lie in the Appellate

Division unless the matter is a condemnation or inverse condemnation appeal

arising from state agency action and, therefore, [is] cognizable in the Law

Division in the first instance.” Infinity Broad. Corp. v. N.J. Meadowlands

Comm’n., 187 N.J. 212, 227 (2006). Nonetheless, “the Appellate Division

retains the discretion, in an appropriate case, to retain jurisdiction in an appeal

from the action of a state agency, but to refer the matter to the Law Division or

14

to the agency for such additional fact-finding as it deems necessary to a just

outcome.” Ibid.

2.

When the Court adopted Rules 3:81-8, 4:88-8, and 2:2-3(a)(2), it chose

the term “state administrative agency” to describe a discrete category of

entities whose final decisions and actions are subject to direct appellate review

in the Appellate Division. That term is not identical to the term “state

agency,” defined for purposes of the APA to include the principal executive

departments “and all boards, divisions, commissions, agencies, departments,

councils, authorities, offices or officers within any such departments now

existing or hereafter established and authorized by statute to make, adopt or

promulgate rules or adjudicate contested cases, except the office of the

Governor.” N.J.S.A. 52:14B-2. It is also distinct from the terms “public

agency” and “agency,” defined for purposes of the Open Public Records Act

(OPRA), N.J.S.A. 47:1A-1 to -13, to include categories of public entities

enumerated in OPRA’s definitional provision, N.J.S.A. 47:1A-1.1. We thus

construe a term distinct from those that have been defined by the Legislature.

To determine the meaning of “state administrative agency” within Rule

2:2-3(a)(2), our inquiry begins with the Rule’s plain language. The word

“agency” denotes “[a]n official body, esp. within the government, with the

15

authority to implement and administer particular legislation.” Black’s Law

Dictionary 77-78 (11th ed. 2019). A “state agency” is defined as “[a]n

executive or regulatory body of a state.” Id. at 78. The word “administrative”

means “[o]f, relating to, or involving the work of managing a company or

organization.” Id. at 54. An “administrative action” is defined as “[a] decision

or an implementation relating to the government’s executive function or a

business’s management.” Id. at 55. Those words collectively convey that

Rule 2:2-3(a)(2) does not apply to all public entities that are part of state

government, but instead addresses executive entities that implement or

administer particular legislation or constitutional requirements on the

government’s behalf.

Under separation of powers principles, it is the Legislature, not the

Executive Branch or the agency itself, that defines an administrative agency’s

role. As this Court recognized shortly after the adoption of the 1947

Constitution, “the legislature may delegate to an administrative body the

exercise of a limited portion of its legislative power with respect to some

specific subject matter,” but “such delegation of legislative power must always

prescribe the standards that are to govern the administrative agency in the

exercise of the powers thus delegated to it.” State v. Traffic Tel. Workers

Fed’n of N.J., 2 N.J. 335, 353 (1949).

16

The New Jersey Constitution requires that “[a]ll executive and

administrative offices, departments, and instrumentalities of the State

government, including the offices of Secretary of State and Attorney General,

and their respective functions, powers and duties . . . be allocated by law

among and within not more than twenty principal departments.” N.J. Const.

art. V, § 4, ¶ 1. As the Court has observed, that constitutional mandate is

satisfied “when the Legislature creates an agency and places it ‘in’ a

department of the Executive Branch,” or declares that agency to be “in but not

of” such a department. In re Plan for Abolition of Council of Affordable

Hous., 214 N.J. 444, 462 (2013).

A provision in an enabling statute regarding the allocation of the state

entity is therefore directly relevant to the procedure for an appeal. If the

Legislature has not allocated a state governmental entity to an executive

branch department, that entity cannot be a “state administrative agency” under

Rule 2:2-3(a)(2). N.J. Const. art. V, § 4, ¶ 1; see also Vas v. Roberts, 418 N.J.

Super. 509, 517 (App. Div. 2011) (rejecting the contention that the Legislature

itself constitutes a “state administrative agency,” given that “agencies whose

actions have been held to be reviewable in the first instance by the Appellate

Division are those located within the principal departments in the executive

branch of state government”).

17

A state entity’s enabling statute provides other guidance for a court

applying Rule 2:2-3(a)(2). The Legislature has, in some instances, expressly

confirmed that all or certain actions by a particular agency are reviewable

through direct appeal to the Appellate Division. See, e.g., N.J.S.A. 10:5-21

(final orders of the Director of the Division on Civil Rights); N.J.S.A. 39:10-

20 (final determinations by the chief administrator of the Motor Vehicle

Commission); N.J.S.A. 24:6I-7(e) (denials of permit applications by the

Cannabis Regulatory Commission); N.J.S.A. 13:20-26 (decisions or actions of

the Highlands Water Protection and Planning Council); N.J.S.A. 45:4B-5(f)

(declaratory rulings of the Joint Committee of Architects and Engineers “shall

be deemed a final decision or action subject to review in the Appellate

Division of the Superior Court”); N.J.S.A. 49:5-17(a) (“Any person aggrieved

by any act, determination, rule, regulation, or order or any other action of the

[Chief of the Bureau of Securities] pursuant to [the New Jersey Corporation

Takeover Bid Disclosure Law] may appeal to the Appellate Division of

Superior Court.”); N.J.S.A. 4:1-34 (persons or entities “aggrieved by any act,

proceeding, rule, order, regulation, decision or determination of the director of

the Office of Milk Industry . . . shall be entitled to judicial review . . . in the

Appellate Division”).

18

In addition, an enabling statute may grant a state governmental entity

rulemaking authority or the authority to adjudicate contested cases, powers

typically exercised by administrative agencies. See, e.g., N.J.S.A. 5:12-

107(a)(1) (providing that the Casino Control Commission “shall promulgate

regulations for the conduct of hearings it is authorized to conduct” and shall

refer certain matters to the Office of Administrative Law); N.J.S.A. 11A:2-

6(a), (d) (authorizing the Civil Service Commission to “render the final

administrative decision on appeals concerning permanent career service

employees or those in their working test period” and to “[a]dopt and enforce

rules . . . to effectively implement a comprehensive personnel management

system”); N.J.S.A. 18A:4-15 (stating that the State Board of Education “shall

make and enforce, and may alter and repeal, rules for its own government and

for implementing and carrying out the school laws of this state under which it

has jurisdiction”). Indeed, rulemaking authority was granted to UMDNJ itself

prior to the Restructuring Act; under N.J.S.A. 18A:64G-6(q) (2006), now

repealed, UMDNJ’s board of trustees had “the power and duty” to “[a]dopt

bylaws and make and promulgate such rules, regulations and orders, not

inconsistent with the provisions of this act as are necessary and proper for the

administration and operation of [UMDNJ] and to implement the provisions of

this act.”

19

An enabling statute’s provisions regarding the purpose, structure,

governance, and authority of a state governmental entity may also provide

compelling evidence of legislative intent. In Infinity Broadcasting, we

considered the Meadowlands Commission a state administrative agency given

the enabling statute’s declarations that the Commission is “a political

subdivision of the State established as an instrumentality exercising public and

essential governmental functions,” and that the exercise of the Commission’s

powers “shall be deemed and held to be an essential governmental function of

the State.” 187 N.J. at 222 n.2 (quoting N.J.S.A. 13:17-5). In Hartz Mountain

Industries, Inc. v. New Jersey Sports & Exposition Authority, the Appellate

Division concluded that the New Jersey Sports and Exposition Authority, by

virtue of its enabling statute, had “indicia of a state agency,” including that the

Authority’s “legislative purpose is stated in terms of the development of sports

and exposition and ancillary facilities throughout the State”; that it was

“constituted as a body corporate and politic within the Department of

Community Affairs” with a membership that included state officers serving as

ex officio members and gubernatorial appointees; and that “[i]ts permissible

projects include[d] a wide range of sport, entertainment, exposition,

educational and related uses throughout the State.” 369 N.J. Super. 175, 187

(App. Div. 2004) (citing N.J.S.A. 5:10-2, -4(a) and (b), -6(a)).

20

Accordingly, courts applying Rule 2:2-3(a)(2) to state public entities

should refer to the entity’s enabling statute to determine the Legislature’s

intent.

3.

Based on the plain language of Rule 2:2-3(a)(2), we adopt the following

standard to guide a court determining whether a given state entity constitutes a

“state administrative agency” whose final decisions and actions may be

directly appealed to the Appellate Division. 2

2

We do not agree with Sumukha’s argument, untethered to the language of

Rule 2:2-3(a)(2), that any challenge to a state entity’s final decision or action

that would have been asserted by prerogative writ prior to the 1947

Constitution may be brought by direct appeal to the Appellate Division under

Rule 2:2-3(a)(2). Under pre-1947 New Jersey practice, the prerogative writs

were invoked to contest a vast array of official decisions and actions, many of

which were issued by entities that did not constitute state administrative

agencies. See generally 19 N.J. Practice, Skills and Methods §§ 4:2 to 4:6, at

848-55 (rev. 3d ed. 2005). Even the traditional writ of certiorari, which

Sumukha contends would have been the prerogative writ used before 1947 to

assert a claim analogous to its procurement challenge, was not confined to

settings involving state administrative agencies. See McKenna v. N.J.

Highway Auth., 19 N.J. 270, 274-75 (1955) (noting that the writ of certiorari

was “extensively used to review the validity of ordinances and of by-laws,

which are clearly merely legislative in character and to review various other

acts of officers, boards and tribunals where it is difficult to discover the

judicial nature of the proceedings held subject to the review” (internal

quotation and alterations omitted)); Application of LiVolsi, 85 N.J. 576, 594

n.18 (1981) (stating that the function of the writ of certiorari was to “review

the actions of inferior tribunals such as administrative agencies” (citing

McKenna, 19 N.J. at 274-75)). The historical use of a prerogative writ to

21

First, informed by the entity’s enabling statute, the court should consider

what the Legislature intended the state entity to be. If the entity is not a

principal department of the Executive Branch or allocated by the Legislature to

be within, or “in but not of,” such a department, then it cannot be a “state

administrative agency” under Rule 2:2-3(a)(2). See N.J. Const. art. V, § 4,

¶ 1; In re Plan for Abolition of Council of Affordable Hous., 214 N.J. at 462.

If the entity has been allocated to a principal department of the Executive

Branch, then statutory provisions addressing the entity’s composition,

governance, financing, and degree of independence from that department are

relevant to the inquiry. See Infinity Broad., 187 N.J. at 222-26; Hartz

Mountain, 369 N.J. Super. at 187; Cohen v. Bd of Trs., UMDNJ, 240 N.J.

Super. 188, 193 (Ch. Div. 1989).

Second, again informed by the enabling statute, the court should

consider what the Legislature intended and empowered the public entity to do.

In order for a court conducting that inquiry to deem a public entity a

“state administrative agency” under Rule 2:2-3(a)(2), it must conclude that the

Legislature intended that the entity administer or implement policy in one or

more areas on behalf of state government. See Vas, 418 N.J. Super. at 516-17

challenge a category of governmental decisions does not resolve the issue

before the Court; instead, the plain language of Rule 2:2-3(a)(2) controls.

22

(noting the importance of an entity’s authority to implement legislation in

determining whether it is an administrative agency); Black’s Law Dictionary

77-78 (11th ed. 2019) (defining an “agency” in part based on its role in

implementing and administering “particular legislation”). That requirement

distinguishes state administrative agencies from a broad range of entities that

are charged to deliver important services to the public in furtherance of

legislative policy, but not to implement or administer such policy. In some

settings, provisions of the enabling statute defining the state governmental

entity’s mission and powers reveal the Legislature’s intent to cede to that

entity limited authority to implement a particular statute. In other cases, such

provisions signal an intent that the entity serve a purpose that is simply not

administrative.

In addition, if the Legislature has empowered the entity to promulgate

rules or adjudicate contested cases -- authority typically exercised by

administrative agencies -- such a provision is a strong indication that the entity

should be considered a “state administrative agency” for purposes of Rule 2:2-

3(a)(2).

C.

With those principles in mind, we consider the text of the Restructuring

Act, University Hospital’s enabling statute.

23

1.

In the Restructuring Act, the Legislature found “that the present

organization of UMDNJ’s substantial assets is not the best structure to

maximize the effectiveness of the State’s investment in medical, dental,

nursing and health sciences education, associated research and health care.”

N.J.S.A. 18A:64M-2(t). It prescribed the purpose, governance, and funding of

University Hospital. N.J.S.A. 18A:64G-6.1a to -6.1i.

The Act provides in part that

University Hospital shall be the principal teaching

hospital of New Jersey Medical School and New Jersey

Dental School, and any other Newark-based medical

education program. University Hospital is hereby

established as a body corporate and politic and shall be

treated and accounted for as a separate non-profit legal

entity from Rutgers, The State University, and its

assets, liabilities, and funds shall not be consolidated or

commingled with those of Rutgers, The State

University. The exercise by University Hospital of the

powers conferred by this act shall be deemed to be

public and essential government functions necessary

for the welfare and health of the State and the people of

New Jersey and University Hospital shall be an

instrumentality of the State.

[N.J.S.A. 18A:64G-6.1a(a).]

The Legislature mandated that State funding of University Hospital “be

sufficient to maintain the level of community services provided on the

effective date of [the Restructuring Act] and to maintain University Hospital as

24

an acute care facility and trauma center.” N.J.S.A. 18A:64G-6.1a(d). It

created a thirteen-member board of directors, which operates the Hospital.

N.J.S.A. 18A:64G-6.1(a). The Board exercises statutory authority in certain

personnel, contracting, funding, and grant matters, among others. N.J.S.A.

18A:64G-6.1(e).

The Legislature granted to University Hospital authority that is

extraordinary for a New Jersey public entity: subject to statutory

requirements, the Hospital has the power to offer itself for sale. N.J.S.A.

18A:64G-6.1d. University Hospital must obtain approval from the Superior

Court of New Jersey and the Commissioner of Health and Senior Services

“prior to entering into a transaction that results in the acquisition of the

hospital,” and it must comply with provisions of other laws identified in the

statute. N.J.S.A. 18A:64G-6.1d(a), (d), (e). In the event of a proposed sale of

University Hospital, “[t]he Attorney General, in consultation with the

Commissioner of Health and Senior Services, shall adopt regulations pursuant

to [the APA] to carry out the purposes of” the Restructuring Act’s provision

authorizing the Hospital’s sale. N.J.S.A. 18A:64G-6.1d(b). The statute sets

forth criteria to guide the Attorney General’s determination whether “the

proposed acquisition is in the public interest, meaning that appropriate steps

have been taken to safeguard the value of the hospital’s public assets and to

25

ensure that any proceeds from the proposed acquisition are irrevocably

dedicated for appropriate charitable health care purposes” as defined by the

Restructuring Act. N.J.S.A. 18A:64G-6.1d(c). If the statutory requirements

are met, the Hospital may be sold. N.J.S.A. 18A:64G-6.1d.

Even if it does not opt to be sold, University Hospital may enter into a

contract with a third-party nonprofit corporation to operate and manage the

Hospital, subject to statutory requirements including the Department of Health

and Human Services’ approval of the management contract. N.J.S.A.

18A:64G-6.1e. Under the Restructuring Act, a proposed management

agreement between University Hospital and a nonprofit corporation is

evaluated in part based on whether the Hospital, if managed by the nonprofit

corporation, “will continue its public mission and commitment to provide a

comprehensive healthcare program and services to the greater Newark

community, including acute care, and emergency and other essential services

provided by the hospital.” N.J.S.A. 18A:64G-6.1e(a)(1). In the event that

University Hospital enters into a management contract with a nonprofit

corporation, such a contract “shall be liberally construed” to promote goals

identified by the Legislature. N.J.S.A. 18A:64G-6.1i(a). The contracted

manager is afforded broad statutory authority, subject to the requirement that

the Hospital remain “the principal teaching hospital of the New Jersey Medical

26

School, the New Jersey Dental School, and any other Newark-based medical

education program,” as well as to mandates addressing faculty appointments

and the status of bargaining unit employees. N.J.S.A. 18A:64G-6.1i(b), (c).

Thus, the Legislature envisioned not only that University Hospital may

arrange to be sold to another entity in certain circumstances, but that it can

contract to be managed by a nonprofit entity subject to statutory constraints.

N.J.S.A. 18A:64G-6.1d, -6.1e, -6.1i.

2.

Informed by those provisions of the Restructuring Act, we apply the

standard adopted in this opinion to determine whether University Hospital is a

“state administrative agency” under Rule 2:2-3(a)(2). 3

3

Sumukha relies on a footnote in the procedural history of Shim v. Rutgers, in

which this Court commented that “an appeal from a final decision by Rutgers

in respect of a student’s domicile must lie in the Appellate Division pursuant

to R. 2:2-3(a)(2).” 191 N.J. 374, 383 n.4 (2007). Its reliance is misplaced.

The action in Shim, an appeal of Rutgers’ denial of a student’s application for

in-state tuition, was filed in the Law Division. Id. at 383. Neither party

argued in any court that Rutgers’ determination should instead have been

directly appealed to the Appellate Division, and neither the Appellate Division

nor this Court vacated the Law Division’s judgment on the ground that it was

not the proper venue for the dispute. See id. at 378-84; Shim v. Rutgers, 385

N.J. Super. 200, 205-08 (App. Div. 2007). The comment in the Court’s

recitation of the procedural history was not part of the Court’s analysis and

was not germane to its decision in that case. Accordingly, it constituted

dictum, not precedential authority. See State v. Rose, 206 N.J. 141, 183

(2011).

27

Although University Hospital is designated “a body corporate and

politic” and “an instrumentality of the State,” N.J.S.A. 18A:64G-6.1a(a), the

Legislature neither placed the Hospital in an executive department nor

declared it to be “in but not of” such a department, which itself is sufficient to

conclude that the Hospital is not a state administrative agency. See N.J. Const.

art. V, § 4, ¶ 1; In re Plan for Abolition of Council of Affordable Hous., 214

N.J. at 462. University Hospital, unallocated to a principal department of the

Executive Branch, does not meet the constitutional requirement for a state

administrative agency.

Application of the practical test adopted in this opinion further supports

that conclusion. Considering, first, what the Legislature intended University

Hospital to be, the Legislature clearly envisioned that University Hospital

would exercise a significant degree of independence in its management and

operations. The Hospital’s board of directors exercises governing authority in

several important respects, including certain personnel matters, contracting

authority, and control over its funds and grants. N.J.S.A. 18A:64G-6.1e. In

addition, the structure and governance that the Legislature prescribed for

University Hospital bears little resemblance to the structure and governance of

a state administrative agency. The first factor in the test therefore supports the

28

conclusion that the Hospital does not meet the requirements of Rule 2:2-

3(a)(2).

Next, we consider what the Legislature intended and empowered

University Hospital to do.

The Hospital’s mission is critical and clear: it exists “to provide a

comprehensive healthcare program and services to the greater Newark

community, including acute care, and emergency and other essential services

provided by the hospital,” N.J.S.A. 18A:64G-6.1e(a)(1), and to serve as “the

principal teaching hospital of New Jersey Medical School and New Jersey

Dental School, and any other Newark-based medical education program,”

N.J.S.A. 18A:64G-6.1a(a).

Notwithstanding the paramount importance of that mission to public

health, the Legislature did not charge the Hospital to implement or administer

the State’s healthcare policies generally, or any aspect of those policies. See

generally N.J.S.A. 18A:64G-6.1a to -6.1i. Nor did it give the Hospital

authority typically granted to an administrative agency. Unlike UMDNJ as it

was constituted under prior law, University Hospital was not granted

rulemaking authority. See generally N.J.S.A. 18A:64G-6.1a to -6.1i. Nothing

in the Restructuring Act gives the Hospital authority to adjudicate contested

cases. Ibid. The comprehensive statutory scheme for the operation and

29

management of University Hospital reflects no legislative intent that the

Hospital conduct activities typical of an administrative agency. Ibid.

Conversely, the Legislature granted to University Hospital not only

significant operational independence, but also a unique power that it has not

granted to any state administrative agency -- the power to offer itself for sale.

N.J.S.A. 18A:64G-6.1d.

In short, the Legislature’s provisions for University Hospital’s authority

and mission strongly indicate that the Hospital is not a state administrative

agency. The second factor weighs in favor of a conclusion that University

Hospital does not meet the standard of Rule 2:2-3(a)(2).

Accordingly, we hold that University Hospital is not a “state

administrative agency” under Rule 2:2-3(a)(2). Under that Rule, Sumukha is

not permitted to appeal the Hospital’s decisions to the Appellate Division in

the first instance. 4

4

University Hospital’s statement in its RFP that certain final decisions related

to the RFP would be deemed final agency actions reviewable by the Appellate

Division was inaccurate. Clearly, a public entity that does not qualify as a

“state administrative agency” under Rule 2:2-3(a)(2) does not have the

authority to declare itself to be such an agency. University Hospital and other

public entities that are not state administrative agencies under Rule 2:2-3(a)(2)

should avoid giving potential bidders in public procurement incorrect advice as

to the proper procedure to appeal their decisions.

30

We affirm the Appellate Division’s dismissal of the appeals, without

prejudice to Sumukha’s right to file actions in the Law Division. We make no

determination on the question whether University Hospital is subject to state

procurement laws, or on any other issue related to the merits of Sumukha’s

challenges to the Hospital’s decisions.

IV.

The judgment of the Appellate Division is affirmed.

CHIEF JUSTICE RABNER and JUSTICES SOLOMON, PIERRE-LOUIS,

WAINER APTER, FASCIALE, and NORIEGA join in JUSTICE PATTERSON’s

opinion.

31