-: SJC13412.
Fairhaven Housing Authority, the Commonwealth.
-: Okay, Attorney Randazzo.
-: Good morning, Chief Justice Budd,
Honorable Justices, may it please the court.
My name is Michele Randazzo for the plaintiffs-appellants,
Fairhaven Housing Authority and others.
With the court's permission for consistency
with the party's briefing in this matter,
I will continue to refer to the agency as DHCD as opposed
to its current title
of Executive Office of Housing and Livable Communities.
Thank you.
How far is too far Your Honors?
That's the case that we posit is presented in this case.
Court well knows that administrative agencies only have
as much authority as the legislature
gives to it, and no more.
And the courts routinely serve as the gatekeepers
against administrative agency overreach,
thus inherent in almost every legal challenge
to regulations, rules, policies, guidelines,
challenges to administrative agency action in that regard.
When does the agency cross the line
between what the legislature
has delegated to it as authority?
That's inherent in every case-
-: So here, the legislature has delegated the authority
to strike contract provisions that do not conform
to the guidelines.
Why is that not clear?
-: We're not saying that's not clear, Your Honor.
Here's our read of Section 7A.
First off, it's three sentences long.
The first sentence says, "The agency shall promulgate
guidelines for executive director employment contracts."
Prior to the adoption of this statute,
DHCD had its own regulation.
That said, if a housing authority and an executive director
shall enter into an employment agreement,
DHCD shall prove and shall set standards
for the guidelines for the standards of such approval.
What existed, therefore,
at the time that the legislature enacted Section 7A
were exactly what we call guidelines, parameters,
minimum qualifications,
minimum hours of work, salary ranges.
And the legislatures
considered to have known that landscape when it directed-
-: That didn't work very well, right?
Because we had- -: Exactly.
-: We had the disaster where someone, I can't remember,
he was making, you know,
three or four times the amount he was supposed to make
and it was all hidden, right?
-: Exactly, Your Honor.
That is exactly the point.
And our read of Section 7A
is that it was a mandate to DHCD to do better,
not necessarily to go beyond and actually do what it did.
And I'll talk about the substance in a minute,
but guidelines don't have the force of laws regulations,
we all know that.
As this court said, in the main opinion,
and I think more forcefully in justice bots
for its concurrence in global naps,
agency guidelines can't create or impose obligations
beyond what the statute affords.
-: Unless the statute intends and it does.
So that's what the intent of 7A was.
So put aside for a minute,
the internal management exception issue on regulations,
and I know you'll get to it,
but just put it aside for a second.
What you've got is you've got 7A drafted
knowing about section seven, and you've got
the issue that happened in Chelsea.
So why can't the legislature decide to delegate
to the agency that they are going to deal with salary
at the local housing authority
through not regulations, but guidelines?
And that the delegation gives the agency
the ability to do that.
-: We don't disagree with that, Your Honors,
what we do disagree with
is how far those quote unquote "guidelines" went.
And we think that that's one of the fundamental flaws
with the lower court's dismissal of this case,
so that there's no apparent review
of those actual guidelines.
And I think it's very important we've included them
in the addendum to show exactly what it
is that these guidelines purport to do.
-: How do the guidelines go beyond the authority?
I don't, can you just identify that?
-: Absolutely, they dictate every single term
of an employment contract.
They've drafted an employment contract.
-: So what term are you concerned about that's dictated?
-: Okay, so there's several terms
and I will first start off with-
-: Give me one, any.
-: Mandatory arbitration for any dispute under the contract.
Where is the authority for that under section 7A.
Precluding agents, precluding precluding executive directors
from receiving benefits that they had received
or that their other employees receive
from either throughout their tenure
or as part of a negotiated contract
prior to the enactment of chapter 235 of the Acts of 2014-
-: Now, how is mandatory arbitration, just to stick with one,
violate 7A? Okay.
-: First off, it is not a term that deals with remuneration
and our view of Section 7A
is that is the focus of section 7A.
-: Where does it say that in 7A?
-: The second sentence says, "DHCD shall may review
all employment contracts funded with state dollars,
but shall review all contracts
worth more than $100,000 dollars per annum.
-: But where does it limit the authority to only issue
guidelines with regard to remuneration?
-: So again, as was mentioned by Justice Kafker.
The prelude, if you will, to the legislative amendment.
-: No, I'm just sticking with the text for now,
and then you can get to the (indistinct) later.
But where in the text of 7A does it say that the agency
is limited to promulgating guidelines
that deal with remuneration?
-: Those two words are not in the same sentence together.
-: So let's go back to your example
on mandatory arbitration, how does that violate the 7A?
-: Because under section seven,
the board of commissioners of any housing authority
have the authority to determine
the terms and conditions of employment,
including the choices to whether or not
to even enter into an employment contract at all.
Mandatory arbitration, for example,
and you know, this isn't before you on the record
because this was dismissed on a motion to dismiss,
but something like that is a policy decision
by any public sector employer as to whether or not
it was choose to negotiate that term
with an incoming or a continuing executive director
from a employer perspective,
and I represent public sector employers
all across the state, I'd never agree to that.
And there's policy reasons why.
-: This is a different animal
in the sense that we've got going
all the way back to the 1970s,
the Medford Housing Authority and West Broadway
and the nature of the relationship between the housing
and development and the local housing agencies.
-: We of course, acknowledge the pronouncements of this court
from the 1970s, both in the West Broadway Task Force case
and the Medford Housing Authority case.
But I think they also have to be looked
critically in context.
Those cases cited to specific statutory provisions of 121B
as well as regulations that delineated
the different types of authorities in coming
to the conclusion that this agency has oversight authority.
But similar to the Department of Education
and elementary and secondary education,
they have broad oversight authority over schools,
but school districts are not arms of the state entity
and neither are local housing authorities arms of DHCD.
-: But the first sentence is so specific in 7A.
"DHCD shall promulgate guidelines for contracts
to be executed by the LHA and an executive director."
I mean, that's very,
and we know it's passed in response to basically
cute contracting with executive directors.
Then the third sentence provided however,
shall review all contracts and all terms for payments
or monetary renumeration worth more than 100,000 again.
And then you got the killer sentence
may strike contract provisions that do not conform
to the guidelines.
I mean, it's hard to be more specific than that.
-: So to that point, Your Honor,
certainly, if under the guidelines that existed
prior to the challenge guidelines here,
there were salary ranges based on housing authority size.
-: But that didn't work.
But that clearly was avoided.
And the legislature and everyone else
was embarrassed by that.
So they tightened the noose.
-: And that's...
Legislative history I think could show not only that,
but who was the focus of that tightening the noose.
-: Executive director, executive directors.
-: I disagree, Your honors,
I would say that it was in fact DHCD to pay more attention
where they had already previously,
had that authority and a record if developed, which again,
this was on a motion to dismiss might show that in fact,
executive director contracts were submitted to the agency
and routinely, or at least not infrequently,
not acted upon for years, if ever.
-: But they were blown by them.
Because the guidelines weren't specific enough before
that this Chelsea Housing Executive Director agreement
slipped through and no one noticed it.
-: Affirmative criminal misconduct for which he was jailed.
So it's a one bad apple in the bunch.
-: I get it.
But then they said, "We're gonna err on the other side.
We're gonna police this really carefully."
-: And then we go to how far is too far?
-: Well counsel, if the provision that Justice Kafker
just read to you said, shall promulgate regulations,
would you have anything to say?
Would you just lose?
-: Well, if they were promulgate,
our position is that if they wanted to go
as far as they did, at a minimum,
those would've had to have been promulgated as regulations.
-: You need the word regulation.
Michele: Yes.
-: And then in conformance of 30A.
-: Absolutely.
Absolutely, Your Honors.
Because this court has well recognized the value
of the public notice and comment period.
-: 'Cause it involves the public, right?
The 30A regulations deal with matters
that aren't just purely internal, right?
The AG's brief makes that point pretty clearly,
and it takes a huge amount of time
to get through the regulatory process
or at least some amount of time.
And this was an emergency
and they could pass the guidelines right away.
And they weigh internal matters isn't well again,
that within the power of the legislature to do that.
-: Just a couple of factual points.
These guidelines were not passed right away.
It was almost 2 1/2 years after the legislation was passed.
They were changed repeatedly when it was drawn
to their attention that at least one of the provisions
that they had in this mandatory contract
violated other provisions of state law.
-: Who addressed the part about the internal aspects of this?
So I think that that's the key
as to whether or not 30A applies.
-: And that argument of course,
was just raised at this point, was not raised below and-
-: So is it your position that's not proper before us?
-: I think that it would require more fact finding
as this court has said before,
that various pieces that go into an analysis
of whether or not something
is in fact internal management requires,
I would say, more facts than what you have
on the record before you right now.
In order to accept that argument,
respectfully, Your Honors, you'd have to accept
the notion that local housing authorities
and their executive directors
who are constituted under statutory scheme,
elected in most instances by the populace of the community
in which they serve,
that those people are essentially arms of DHCD and-
-: No, they're the opposite actually.
They have such independent political power
that you need a countervailing force
to monitor and regulate them.
Isn't that what happened in Chelsea?
He had a power base and that's fairly common
for these executive directors, right?
They're political figures from each town often,
and they were concerned about how much power they had
and they needed to be regulated.
-: I'd suggest that we don't have that on the record
before you and I would have any number
of small housing authority
executive directors testified to the exact opposite
if we were in that position.
But I think, again,
our main point is guidelines are guidelines.
The common sense usage of the word is not.
-: What is the guideline
that the agency can strike provisions that do not comply
with the guidelines?
-: So perfect example, Your Honor is,
"Here's our salary range.
If you are a housing authority."
-: If I say the guideline is a maximum
of, you know, I don't know, 198,000?
-: Right, and in fact. -: That would be okay.
-: Yes, I mean, look, four years, I will acknowledge that-
-: What if my guideline was,
I'd like these things to be arbitrated?
-: I disagree. -: Disagree with what?
-: The idea that that is permissible
within the set of guidelines.
-: So tell me why that one doesn't work.
Why can't I have a guideline that says arbitration,
that's what I want.
And then you show me a contract
that doesn't have arbitration.
And I look at 7A and I say, look,
I have the authority to strike contract positions
that do not comply with my guidelines.
So I'm gonna strike that one that says no arbitration.
-: First off, the department is not,
and I don't think that they would argue to be,
have any particular expertise
in the field of public employment contracts, number one.
Number two, the terms that they are asking to include,
well go beyond guidelines.
They've mandated, for example,
that executive directors must be fired
in certain delineated circumstances.
And that in fact, the employment agreement,
this is the language they require,
that the employment agreement will terminate
upon a conviction of any misdemeanor or felony,
regardless of whether it's attached
to the executive director's employment.
-: The issue though is what guidelines means in this statute.
And when the legislature passed 7A,
they were aware of the APA
and didn't use the word regulations.
-: And that has significance, Your Honor.
I mean, there's not a case that that the agency has cited,
nor am I aware of any particular case that says,
because it's easier for an agency to more fluidly,
I think as they characterize it to adopt guidelines
that therefore means that those guidelines
can say whatever the agency wants
precisely because it's easier for them
to do it on the fly.
-: Could you quickly just address the internal management
and exception for discipline exception
and how Commonwealth versus Tuttle
and the sobriety stop points
are somehow different than this situation?
-: Again, and of course,
this court knows that there's sparse case law
in this internal management exemption.
I don't think that the analogs to federal cases
is particularly helpful because the wording is more precise.
But those cases involved efforts by state agencies
to regulate those people, their employees, their personnel.
-: But the public's being stopped at the sobriety,
stop points in total.
-: Because I think Trumble maybe?
I think that the issue there was directing
the state troopers on how they perform
a function that they'd already performed.
And it was giving more definition, if you will,
into how they performed their duties.
These were state troopers,
these were folks that worked for the state,
for the agency that promulgated the regulations at issue.
It's very clear that local housing authorities
and their executive directors are separate legal entities.
They are not arms from the state.
And again, we respectfully request
this court critically look at what is framed as guidelines
because they aren't guidelines,
they're mandates and mandates that go to such an extreme
that they ought to have been at a minimum promulgated
as formal regulations.
There's no other questions.
Thank you, Your Honor.
Thank you, Your Honors.
-: Okay. Attorney Haskell.
-: Thank you, Chief Justice Budd,
and may it please the court.
We would make two basic broad points in this appeal.
One is that what the department has done
in the public housing notices
that are at issue here is fully consistent
with Section 7A and what the legislature intended
for the department to do when it enacted Section 7A.
And then second,
what the department has done is consistent with chapter 30A
in the Administrative Procedure Act.
As to section 7A, it does come down
to the terms of the statute that we've already
spoken about during this argument.
First sentence of section 7A provides the department
shall promulgate guidelines for contracts.
It doesn't say guidelines relating to remuneration terms
of contracts or any other particular terms.
Guidelines for contracts.
And we know that that is intended to mean contractual terms
beyond just compensation from a statute that was enacted
at the same time as part of the same legislation,
specifically chapter 121B, section 26B, subsection D,
the very last sentence of that statute
as part of the same housing reform, or excuse me,
housing authority reform legislation in 2014,
the legislature created a program supervised by DHCD
to identify and correct chronically poor performing
housing authorities, including-
-: They're not saying you can't promulgate guidelines.
They're just saying that if you wanna go
as far as you are going,
you need regulations that comply with 30A.
-: Well, and again, I think as I understand
Ms. Randazzo, I may be misunderstanding it.
As I understand Ms. Randazzo argument,
she seems to be arguing that where Section 7A
says guidelines for contracts,
there's some subject matter restriction in there,
guidelines for these parts of contracts, but not others.
And what I would direct the court's attention to
is that very last sentence of 121B, section 26B.
What that says is that under certain circumstances,
the department is authorized to terminate the employment
of an executive director in accordance
with that person's employment agreement with the authority
as approved by the department.
What that last sentence of section 26B indicates,
what it contemplates is that executive director
employment contracts that are approved by the department
are going to have a termination clause
and therefore suggests that the legislature
envisioned the scope of the guidelines
under Section 7A as not being limited
to just compensation or remuneration.
Rather, section 7A ought to be taken at face value
at its plain language.
Guidelines for contracts means guidelines
for all aspects of contracts.
-: I'm assuming we agree with that.
It does not limit it to a particular aspect of the contract.
Why doesn't guidelines mean something
other than rules or regulations?
-: Sure.
Guidelines, as we know,
unlike regulations, is not a defined term.
The Administrative Procedures Act,
we really have two reasons that we would suggest
why this isn't subject to the Administrative Procedures Act,
because it falls under the rubric of rules and regulations.
One is that the Administrative Procedures Act, chapter 30A,
has been on the books for 70 years, the mid 1950s.
The legislature knew it was there when it enacted
section 7A and chose in section 7A
to say something different.
Guidelines that we know from the last sentence
of Section 7A are gonna be enforceable
because the department is going to strike contracts
that don't comply with guidelines-
-: But when they do that,
when they add the last sentence to the first sentence,
do they convert guidelines basically into regulations
without going through the APA?
-: Our view, Your Honor,
is that the better way to view Section 7A
and the way to really harmonize the entirety of Section 7A
with the APA.
That what the legislature intended to do here was create
an exception to the Administrative Procedures Act.
What the legislature here is authorizing the-
-: I mean, normally they do notwithstanding any spec
or to the contrary, we do this,
they kind of don't do that here.
It's a little odd, right?
-: I'm sorry, say that again.
-: I mean, when the legislature tends to create exceptions,
they have ways of doing it, right?
They write notwithstanding any other general
or special audit of the contrary.
Here, you're saying they're creating an exception
to the APA.
but they don't say they're doing that.
-: I understand that.
I hear that, Your Honor,
I don't think that's the only way that the legislature
can create an exception to a preexisting statute
and where the ordinary-
-: Is there anything like this anywhere else?
It seems like it's idiosyncratic.
-: I have to confess, Your Honor,
I can't point the court to a statute that displays
these same features the same way this one does.
And of course,
part of the reason for that is this really,
I don't wanna call it unique,
but this really well developed background context
of the relationship between DHCD
and local housing authorities.
Section 7A was enacted against the backdrop
of you know, West Broadway, Medford Housing Authority,
this very, very robust oversight role for DHCD.
As we argue in our brief,
our view is that the best way to understand
what the legislature was trying to do in section 7A
is force DHCD to wield this authority to review
and strike contracts more vigorously.
And also through the use of guidelines
as opposed to regulations, give the department the ability
to do it with some more flexibility, some more nimbleness.
If executive directors start engaging
in some sort of malfeasance
that nobody had really imagined before,
the department has the ability
to change its guidelines promptly and address that squarely.
-: I know, but promulgate guidelines, first of all,
they used the word promulgate and there's no doubt
that 7A contemplates that seven exists,
and that you've got that Chelsea Housing Authority backdrop.
But what is it about the text of 7A that says the APA
and 30A is out for such a broad range of terms?
-: It's chiefly, Your Honor,
the use of the word "guidelines" juxtaposed
with the express authority in that third sentence
that indicates the guidelines are going to be,
they're going to be mandatory,
they're gonna be binding housing authorities
are gonna have to comply with them.
Guidelines just kind of relies on the notion
that when the legislature chooses a word,
different words have different meanings in the statute.
Guidelines suggest something different than regulations.
We know that in fact, in another section, 120-
-: But isn't that a problem for you?
Because here, the agency has promulgated rules,
like you must have a mandatory arbitration provision
in your contracts with your EDs.
Those don't sound like guidelines.
-: The way the department reads the word "guidelines,"
-: And it's as if it's a rule.
-: And we believe this is the way the legislature intended it
is the difference between guidelines and regulations
isn't the scope or subject matter or content
of what things can be addressed through that pronouncement,
but rather the way that it comes into being regulations,
as we discussed earlier, is a fine term in 30A section one,
if something meets the definition of regulation,
it has to come into being in a certain way
in compliance with 30A.
That's why the legislature chose the word guidelines.
And if the court, you can see the statute site in our brief-
-: Thought your argument was better the other way,
which its guidelines for executive director contracts.
That's not sort of a traditional area of regulation
where you go through a 30A process.
'cause the public, you know, is super concerned about it.
You're basically dealing with executive director contracts
in response to a well pronounced problem, which is Chelsea,
it was a disaster.
I mean, isn't that, I understand it's idiosyncratic,
but the guidelines are connected to something narrow,
which is executive director contracts.
It's not like you're passing regulations for the entire way
that the housing authority conducts its business.
'Cause the public caress a lot about that.
They care about what you're charging for rent
and who gets in.
But how much the executive director gets paid?
It's not really a public problem till it we get to Chelsea.
-: Let me address that, Your Honor.
It goes to something that I alluded to a little bit earlier
that in our view, there are really two reasons
why the department complied with 30A here.
One is that 30A just plain doesn't apply
because Section 7A creates an exception.
That's what I was speaking about earlier.
But there's another reason and the other reason
is that these guidelines that are contemplated by Section 7A
fall within that internal management's exception
to the definition of regulation under 30A section one.
-: Is that a fact question? -: As Your Honor knows-
I'm sorry?
-: Is that a fact question?
-: No, it's not, Your Honor,
because what it really goes to is the nature
of what the pronouncement does.
You know, similar to the way this court and Carrie analyzed
the Department of Correction pronouncement about dog sniffs,
the appeals court, Judge Sachs
recently analyzed that DOC pronouncement about
money transfers.
It's not something that requires fact finding and evidence,
it's just something that requires analysis of the terms
of the agency's authority, in this case,
section 7A and how the scope
of that authority fits
with the definition of regulation under 30A section one.
-: Under your interpretation,
how can we read section 7A and Section 7A in harmony?
Is that possible?
-: It is, Your Honor.
And we think that in superior court,
Judge Connolly reached exactly the right harmony there
by reading Section seven to retain housing authorities'
ability to set term sufficient
the terms and conditions qualifications of employment
within the limits imposed by the department
pursuant to its authority under Section 7A.
Now, in fairness,
in some instances like the arbitration clauses,
the department hasn't left any discretion
to local housing authorities.
It's said, "Hey,
you need arbitration clauses in these contracts."
-: It's a little inconsistent with the shall determine,
-: I'm sorry?
-: It's a little inconsistent
with section seven's shall determine.
And I recognize that 7A was meant to reform
the bad old days,
but I'm just wondering what's retained of section seven?
-: We do think that something,
certainly something is retained under Section seven.
In some particular areas like arbitration clauses,
it may not be that broad,
but in other areas, it certainly is broader.
For instance, compensation.
The DHCD sets maximum compensation.
It doesn't tell local housing authorities
what they need to pay these folks.
And so returning, I guess to-
-: Can you return to the internal management
and discipline exception and tell us why this is more like
the Commonwealth versus Trumble if I'm saying it correctly,
case dealing with the sobriety checkpoints
as opposed to the prisoner cases in the public
going into the prisons.
-: The key passage in Trumble, Your Honor,
we believe is where this court wrote that the state police
sobriety checkpoint handbook didn't purport
to directly regulate the conduct of the public.
And that quite squarely describes
what these public housing notices guidelines
for executive director contracts are doing.
They aren't regulating the conduct of the public directly.
And we believe that Trumbull
is on all fours with our position in this case.
We know that matters like contracting
are internal management and fall within the scope
of internal management.
In fact, on that point,
I would direct the court to the associated industries
of Massachusetts case from the 1960s that indicated
that workers' compensation insurance rates
set by the commissioner upon a certain insurers proposal
are not regulations that need to be subject to notice
and hearing because they only affect the rights
of the insurer and those
who choose to do business with them.
Very similarly, the guidelines for contracts here
only affect the rights of a local housing authority
and those who choose to work for them.
-: Is there any problem with the way you raised this issue
in the litigation?
-: No, Your Honor.
And well, first of all-
-: This wasn't raised before Judge Connolly, right?
-: That's right, Your Honor.
-: So isn't that the problem.
That's our view,
Your Honor, we don't believe that this was squarely argued
or raised in the blue brief.
If you read the blue brief,
you won't see citations to Trumble or Carry
or any of the law in this area.
Candidly, it was in response
to this court's amicus announcement
that we chose to put in an amended brief that did
a full thorough workup of this issue.
And for that reason,
we believe it is squarely before the court.