NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

PER CURIAM.

As authorized by the Legislature in the County and Municipal Water Supply Act, N.J.S.A. 40A:31-1 to-24 (Act), defendant Village of Ridgewood is a municipal corporation that owns and operates the Ridgewood Water Utility (Utility). In addition to providing potable water to the residents of Ridgewood, the Utility fulfills the potable water needs of the residents of the Township of Wyckoff, the Borough of Glen Rock, and the Borough of Midland Park pursuant to franchise agreements. Under this arrangement, the Utility has a combined service-base that exceeds 20,000 customers.

On February 1, 2010, Wyckoff, Glen Rock, and Midland Park filed an action in lieu of prerogative writs in the Superior Court, Law Division, challenging the validity of three ordinances enacted by Ridgewood that increased the water rates charged by the Utility to its customers by a total of thirty-one percent over the course of 2010, 2011, and 2012. Plaintiffs claimed the water rates established in these three ordinances improperly permitted the Utility to include millions of dollars of Ridgewood's municipal operating expenses, such as the cost of providing health insurance to non-Utility employees, police department salaries and expenses, fire department salaries and expenses, and the fees charged by Ridgewood's corporation counsel.1

Plaintiffs claimed Ridgewood used the Utility as a means of providing a clandestine form of municipal tax relief to its own residents, consequently imposing an improper tax burden on plaintiffs' residents in the form of higher water rates. Stated differently, the net effect of these improper allocations of expenses by the Utility created a de facto lack of uniformity between the rates charged to Ridgewood's residents and those charged to non-residents.

Specifically, plaintiffs claim the Utility rate ordinances Ridgewood adopted in 2010, 2011, and 2012 are: (1) inconsistent with N.J.S.A. 40A:31-10(a), which requires annual rental charges to be "uniform and equitable for the same type and class of use"; (2) in violation of N.J.S.A. 40A:31-10(c), which limits the type of costs that can be included in establishing water rates; (3) in violation of the Equal Protection Clause of the United States and New Jersey Constitutions; and (4) arbitrary, capricious, and unreasonable.

Defendant asserts the rates established by the three challenged ordinances are in accordance with the Act and were set at levels sufficient to pay all of its operational expenses, as authorized by N.J.S.A. 40A:31-10(c)(1), as well as include sufficient revenue to establish a surplus or contingency fund to meet unanticipated expenses, as permitted under N.J.S.A. 40A:31-10(c)(2). According to defendant, the Utility would have faced a budget deficit if it had not enacted the rate increases reflected in these three ordinances. Finally, defendant denies that the methodology used to establish the rates in these three ordinances created a de facto rate disparity favoring the residents of Ridgewood at the expense of the ratepayers who reside in the other municipalities. Defendant maintains that every Utility customer was charged the same rate, regardless of the customer's place of residence.

Plaintiffs' case was certified as a class action on May 13, 2011. After nearly three years of discovery and motion practice, the parties filed cross-motions for summary judgment, with both sides claiming the case was ripe for disposition as a matter of law. Instead of deciding the summary judgment motions, the Law Division judge invoked her authority under Rule 1:13-4(a)2 and sua sponte transferred the case to the Board of Public Utilities (BPU).

Relying on the doctrine of primary jurisdiction, the motion judge concluded the BPU had the experience and expertise to decide whether the water rates charged by the Utility from 2010 to 2012 were uniform as to all customers, regardless of their place of residence. The judge construed the jurisdictional language in N.J.S.A. 40A:31-23(e), which exempts from the jurisdiction of the BPU municipal water facilities that charge the same rates to its customers regardless of where they reside, as implicitly conferring primary responsibility on the BPU to determine the threshold question of whether the rates at issue here were in fact the same as to all of the Utility's customers.

By leave granted, plaintiffs now argue the trial court's interpretation of N.J.S.A. 40A:31-23(e) improperly deprived the Superior Court of subject matter jurisdiction to decide the statutory claims raised in this class action. Plaintiffs argue the Superior Court has express subject matter jurisdiction to determine legal challenges to municipal ordinances under the Prerogative Writ Clause of the New Jersey Constitution, N.J. Const. Art. VI, § 5, ¶ 4. Alternatively, plaintiffs maintain the Law Division has concurrent jurisdiction with the BPU to determine the uniformity of the rates charged by Ridgewood, and the interests of justice and judicial economy favor allowing the parties to proceed in the Law Division.

In response to this appeal, defendant now argues that plaintiffs' claims based on a lack of uniformity in the rates support the motion judge's decision to transfer the case to the BPU. Although defendant continues to insist the Utility charged the same rate to all of its customers regardless of their place of residence, it argues the motion judge's decision is supported by the jurisdictional provision in N.J.S.A. 40A:31-23(e).

Because the motion judge's decision to transfer this matter to the BPU was based on an interpretation of the jurisdictional provisions in N.J.S.A. 40A:31-23(e) and the doctrine of primary jurisdiction, both questions of law, we apply a de novo standard of review. In re Civil Commitment of D.Y., 218 N.J. 359, 373 (2014). We hold the motion judge erred in applying the doctrine of primary jurisdiction to transfer this case to the BPU.

Plaintiffs' theory of liability is predicated on being able to prove the ordinances adopted by defendant establishing the water rates in 2010, 2011, and 2012, included cost items that fall outside those permitted in N.J.S.A. 40A:31-10(c)(1) and (2). Plaintiffs do not claim defendant asserted the right to charge higher rates to ratepayers residing outside of Ridgewood as a matter of legal entitlement under the Act. Indeed, defendant claimed before the Law Division and continues to claim before this court that the ordinances challenged by plaintiffs established a uniform and equitable water rate that was applied equally to all of the Utility's customers, regardless of their place of residence.

The record shows plaintiffs plan to satisfy their burden of proof by presenting opinion testimony from a forensic accountant and perhaps other individuals with a background in the management and operation of municipal water utilities. The de facto favorable disparity in the rates charged to defendant's residents, if exposed by this evidence, will constitute a legal basis for invalidating the rate structure established by these ordinances as well as provide a measure of compensatory damages plaintiffs may be entitled to recover.

The declaratory relief plaintiffs seek would be in the form of a judicial declaration that the methodology employed by defendant in determining these water rates was ultra vires because it was inconsistent with the approach sanctioned by the Legislature in N.J.S.A. 40A:31-10(c)(1) and (2); the equitable relief would take the form of an injunction, restraining defendant from employing this or any other similar methodology that creates a de facto disparity between the rates charged to defendant's residents and those charged to plaintiffs' residents. The injunction may also direct defendant to determine the Utility's rate structure in a manner consistent with the provisions of N.J.S.A. 40A:31-10(c)(1) and (2).

There is nothing in the nature of this controversy and the relief plaintiffs seek that falls outside the jurisdiction of the Superior Court or is inconsistent with its function and responsibilities as envisioned by the framers of our Constitution under the Prerogative Writ Clause of the New Jersey Constitution, N.J. Const. Art. VI, § 5, ¶ 4. We also discern no statutory or regulatory basis to support the trial judge's decision to transfer this case to the BPU.

N.J.S.A. 40A:31-23(e) affirmatively exempts from the jurisdiction of the BPU municipal water utilities that charge the same rate to all of its customers regardless of their place of residence. N.J.S.A. 40A:31-10(a) requires water rates to be uniform and equitable. Both sides to this litigation agree the Utility must set its rates in accordance with this standard. Whether plaintiffs have presented sufficient evidence to show defendant has violated this statutory requirement is a question for the Superior Court to settle. We thus reverse the trial court's decision to transfer this case to the BPU and remand for further proceedings.

I

Because this case came before the Law Division by way of cross-motions for summary judgment, both sides submitted statements of undisputed material facts in support of and in opposition to their respective motions. R. 4:46-2(a) and (b). Despite the parties' submissions, the motion judge did not address the factual record before her or determine whether there were material factual issues in dispute precluding a resolution of this case as a matter of law. Instead, the judge focused her entire legal analysis on the jurisdictional question she raised sua sponte.

Therefore, a brief discussion of the factual claims asserted by both sides is necessary in order to provide context for our legal analysis. Plaintiffs retained Gary Higgins, a Certified Public Accountant and partner in the accounting firm of Lerch, Vinci & Higgins, L.L.P., in support of their motion for summary judgment before the Law Division. Higgins reviewed and analyzed Ordinance No. 3236, which was adopted by defendant on December 14, 2009, and became effective on January 1, 2010. According to Higgins in his certification, the ordinance increased water rates by twenty-one percent.3 He also claimed defendant "acknowledged that it cannot seek a rate increase unless [the Utility] is operating at a deficit." According to Higgins, defendant asserted the rate increase in 2010 was necessary to cover "approximately $1.2 million in deficits from the 2008 and 2009 calendar years incurred by [the Utility]."

Higgins also reviewed and analyzed Ordinance No. 3272, adopted by defendant on December 8, 2010. He claimed this ordinance increased the Utility's rate by an additional five percent commencing on January 1, 2011. The third and final ordinance Higgins reviewed was adopted by defendant "in late 2011." Higgins opined that the 2011 ordinance "raised water rates by an additional 5% beginning January 1, 2012[.]" The combined effect of these three ordinances was to increase the Utility's rates by thirty-one percent. As part of her legal analysis, the motion judge quoted a statement made by defense counsel in his brief that claimed: "[t]he three ordinances reflected base water rates of $4.00, $4.20, and $4.41 per thousand gallons, respectively."4

Plaintiffs allege Ridgewood has been improperly allocating millions of dollars of non-Utility expenses "so that ratepayers effectively subsidize the Village's budget." Plaintiffs allege that from 2004 to 2009, "the range of indirect cost allocations forced upon the ratepayers to subsidize the Village Current Fund budget range from $2,134,083 to $2,538,408." Some of the improper allocations include health insurance expenses to non-Utility employees, police department salaries and expenses, fire department salaries and expenses, payments for the Ridgewood Engineering Department, and municipal attorney fees.

All three ordinances were adopted by formal action of the Ridgewood Council, defendant's governing body. In establishing the rates for the challenged years, council members relied upon the Utility's budget books, a 2010 Utility projection report provided by Louis C. Mai & Associates on October 5, 2009, and an interoffice memorandum prepared by the Utility's director of operations, Frank J. Moritz. Relying primarily on Higgins' certification supported by the report he prepared as plaintiffs' expert witness, plaintiffs challenged five categories of expenses defendant included as Utility expenses to justify the rate increases reflected in the ordinances adopted in 2010, 2011, and 2012.

Indirect Health Insurance Costs

Plaintiffs allege from 2004 to 2009, defendant allocated to the Utility $3,162,938 in health insurance costs involving Ridgewood employees who were not related in any way to the operation of the Utility. Higgins opined these funds represented twenty-two percent of the total indirect costs defendant charged to the Utility, "making Health Insurance a substantial component of the indirect cost allocation." Higgins certified that in 2009, defendant charged the Utility $491,247 in indirect insurance costs "for employees who do not directly work for the Water Utility." According to Higgins, "[t]his represents 55% of the total indirect salaries and wages allocated to the Water Utility as compared to the actual percentage of 20% on direct salaries and wages of Ridgewood Water Utility employees."

In addition to the statement of undisputed material facts required under Rule 4:46-2(a), plaintiffs submitted the certification of Joseph Fiorenzo,5 a member of the law firm which represents plaintiffs in this class action. Fiorenzo certified that on September 13, 2011, Katie Chen, Ridgewood's Principal Accountant in the Finance Department, testified in a deposition that indirect healthcare costs defendant charged to the Utility were reduced from a rate of 21.3 percent from 2006 to 2009, to 15.10 percent in 2010, and 11.09 percent in 2011, "after we uncovered and complained about the unjustified and improper charges[.]" According to Fiorenzo, Chen "confirmed" defendant changed the methodology for calculating the Utility's rate as a direct result of plaintiffs' investigations and complaints.

Fiorenzo certified that Chen testified that after "analyzing the Healthcare expenses based upon actual costs," the Utility reduced its healthcare charges by $250,000 in the 2009-2010 budget-year. Assuming Chen's analysis was correct, Fiorenzo characterized this correction in the manner in which healthcare costs were calculated as an admission by defendant that it overcharged the Utility "approximately $500,000 in the four year period from '06 through '09 for this expense alone!"

Police and Fire Departments

Higgins characterized defendant's allocation of expenses to the Utility in the areas of police and fire fighting services as "[o]ne of the most unsubstantiated charges[.]" Higgins certified that "Ridgewood has provided no documentation that any time was spent by the Village Fire and Police Departments on behalf of the Water Utility." Despite this, from 2006 to 2009, defendant charged the Utility a total of $826,000 attributable to fire department services, amounting to an average of $206,000 per year during this four-year period.

Fiorenzo certified that Frank Moritz, the Director of the Utility, testified in a deposition that "there were virtually no services performed by the Ridgewood Police Department for the Water Utility other than generally patrolling duties and enforcement of laws." According to Fiorenzo, Moritz conceded that the Utility's allocations for the Ridgewood Police Department "were completely excessive, inappropriate and unrelated to the actual work performed [by the police]."6

Engineering

Higgins certified that his analysis of this cost item revealed defendant charged the Utility approximately $110,000 per year in "indirect costs" associated with Ridgewood's Engineering Department. Higgins opined that defendant cannot rationally relate these costs to the Utility because the Utility has its own "stand-alone engineering staff." Despite this, defendant charged the Utility $110,000 per year for engineering costs. Plaintiffs seek approximately $436,000 in damages in the form of municipal taxes paid by its residents from 2006 to 2009 related to this alleged phantom service.

Legal Fees

According to Fiorenzo, the legal fees charged to the Utility by Ridgewood's corporation counsel constitutes one of the "largest indirect expense allocations." This cost item is denoted in the Utility's budget as "Other Expenses" and "encompasses all expenses except for salary and wages[.]" Fiorenzo certified that his examination of Ridgewood's records revealed "over half a million dollars' worth of expenses" attributable to defendant's corporation counsel was allocated as an expense item to the Utility from 2006 to 2009.

Fiorenzo attested to the accuracy of the following yearly breakdown of legal fees charged by defendant's corporation counsel to the Utility: $123,208 for 2006; $111,160 for 2007; $146,272 for 2008; $158,144 for 2009; a total of $538,784 during this four-year period. Fiorenzo certified that based on plaintiffs' review of thousands of attorney bills, the total amount of legal bills for work performed was actually $56,847.62, "at best." According to Fiorenzo, approximately thirty-two percent of this figure represented work performed by the corporation counsel representing defendant in this case. Fiorenzo therefore claimed that defendant improperly allocated to the Utility "at least $480,000" in legal services performed by its corporation counsel exclusively on behalf of Ridgewood.

In summary, accepting the accuracy of all of plaintiffs' claims for purposes of this analysis, defendant has improperly allocated to the Utility approximately $3,895,554 in costs unrelated to the operation of this water facility. Plaintiffs argued before the Law Division that these facts were undisputed and supported by competent evidence in the record. Alternatively, plaintiffs claimed they were prepared to present this evidence at trial if necessary.

In its response submitted to the motion judge pursuant to Rule 4:46-2(b), defendant admitted that "[i]ndependent review by the BPU and/or any other `independent agency' is not required as a matter of law, as the rates are the same for all Ratepayers." Defendant claimed it was not prepared to refute plaintiffs' lengthy factual analysis and noted that "[e]xpert discovery is ongoing[.]" Although defendant conceded "that certain indirect costs are allocated from the Village Current Fund to the Water Utility Fund[,]" plaintiffs' legal analysis attacking the propriety of this methodology was misplaced and erroneous. Defendant claimed the Utility is required to set its water rates at levels sufficient to pay "all operational costs and expenses, and, if desired, to establish a surplus for the anticipation of contingencies, as per N.J.S.A. 40A:31-10." According to defendant, the Utility would have faced a budget deficit if the 2010, 2011, and 2012 rate ordinances had not been enacted.

Because the Utility does not have independent personnel to perform certain functions, such as legal consultants and security personnel, defendant claimed it is required to employ its municipal staff and outside consultants to meet those needs. According to defendant, the percentage allocation for the costs of these services has been in place and largely unmodified for nine years. The water rates the Utility charges its customers were uniformly set and applied without reference to the user's location.

II

This appeal comes before us on a decision reached by the trial court on its own initiative. Neither party questioned the subject matter jurisdiction of the Superior Court to decide whether defendant's ordinances are consistent with the legislation enabling Ridgewood to operate this multi-municipality water utility service. Plaintiffs claim defendant improperly included the costs of traditional municipal services totally unrelated to the operation of the Utility in the water rates established in these three ordinances.

Stated in a manner that fits a conventional prerogative writ paradigm, plaintiffs claim the water rate ordinances adopted by defendant in 2010, 2011, and 2012 are ultra vires because the rate structure includes costs that are not expressly sanctioned under N.J.S.A. 40A:31-10(c)(1) and (2). The de facto effect of this ultra vires rate structure enables Ridgewood to pass a percentage of the costs of providing its residents with traditional municipal services to the ratepayers residing in plaintiffs' municipalities.

The trial judge decided to transfer this litigation to the BPU after the case had been certified as a class action and the parties had engaged in sufficient discovery to bring the matter before the court on cross-motions for summary judgment. As framed by the parties, the single and dispositive legal issue before the court concerned the validity of the methodology utilized by defendant to establish the rate the Utility charged to all its customers for the three-year period from 2010 to 2012.

Whether the trial court correctly construed provisions of the Act or other legal authority in reaching the decision to transfer this case to the PBU is a question of law subject to plenary review. Town of Kearny v. Brandt, 214 N.J. 76, 92 (2013) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)). We conclude the trial court misconstrued the jurisdictional provision in N.J.S.A. 40A:31-23(e), causing it to erroneously transfer this case to the BPU.

When the Legislature adopted the Act in 1989, it made the following statement to clarify its purpose:

As defined under the Act, a "local unit" is any "county or municipality." N.J.S.A. 40A:31-3(c). Local units are empowered to construct or operate water supply facilities "either separately or in combination with one or more other local units, a private water company subject to regulation by the Board of

Public Utilities as a public utility, or the State." N.J.S.A. 40A:31-4. Local units operating a water supply facility

In establishing a "rate structure" for supplying water services, a municipality operating a water utility is permitted to

The Legislature amended the Act in 2005 to clarify and limit the role of the BPU in overseeing the operations of water facilities that are owned and operated by municipalities. We quote here the pertinent part of one of the 2005 amendments:

The second 2005 amendment reads as follows: "Nothing in subsection e. of this section shall be construed to exempt any supplying local unit or units supplying billed customers outside of the supplying local unit or units, from the jurisdiction, regulation and control of the Board of Public Utilities, with respect to service and reliability." N.J.S.A. 40A:31-23(f) (emphasis added).

Thus, subsection (e) exempts Ridgewood from the "jurisdiction, regulation and control" of the BPU as long as the rates it charges to customers residing in Ridgewood are the same as those it charges to customers who reside outside of Ridgewood. The statute does not address the question raised in this appeal, to wit, who decides whether the rates are in fact the same to all customers, regardless of where they reside. Despite the absence of clear direction from the Legislature, the trial court decided to transfer this threshold question to the BPU, invoking the doctrine of primary jurisdiction.

We hold the trial court misapplied the doctrine of primary jurisdiction to transfer this issue to the BPU. As recently reaffirmed by the Supreme Court,

The absence of regulatory authority establishing a legal framework for the BPU's involvement in determining "rate uniformity" as a prerequisite to the right of a local unit to assert exemption from its jurisdiction under N.J.S.A. 40A:31-23(e) is indicative of the agency's assessment of the limits of its authority in this context, especially when contrasted with the express oversight authority granted by the Legislature to the BPU in the areas of "service and reliability" in N.J.S.A. 40A:31-23(f). Distilled to its essence, plaintiffs are asking the trial court to consider evidence of municipal costs allegedly included by Ridgewood to formulate the water rates it charged all customers as reflected in the rate ordinances adopted in 2010, 2011, and 2011, and thereafter determine whether these items qualified as costs permitted under N.J.S.A. 40A:31-10(c)(1) and (2).

We do not find any legal or public policy basis to conclude the BPU has greater expertise at performing this type of statutory analysis than the Superior Court. Indeed, it is the function of the Superior Court to engage in this kind of analysis. The legality of the expenses used by Ridgewood to determine these water rates is purely a matter of statutory construction and an assessment of the probative value of the competent evidence plaintiffs have presented to meet their burden of proof. The Legislature has expressly deprived the BPU of jurisdiction over rates charged by "local units," provided these rates are uniformly applied to all of the water facility's customers. N.J.S.A. 40A:31-23(e). Defendant has steadfastly asserted the rates reflected in the ordinances challenged by plaintiffs are uniform and applied equally to all the Utility's customers.

In Muise v. GPU, Inc., 332 N.J.Super. 140 (App. Div. 2000), a case cited by the trial judge in support of her ruling, this court recognized that "certain questions about the provision of safe and adequate electric service are within the [BPU]'s exclusive jurisdiction, whereas customer damage claims against defendants for the negligent failure to provide such service are not." Id. at 165. We also noted in Muise that the plaintiffs' claims were based on common law negligence, affording those aggrieved a concomitant constitutional right to a jury trial. Id. at 168-69.

Here, plaintiffs' right to bring an action in lieu of prerogative writs to challenge the validity of a municipal ordinance is also constitutionally protected under the Prerogative Writ Clause of the New Jersey Constitution, N.J. Const. Art. VI, § 5, ¶ 4. As the record we have described shows, the evidence plaintiffs have presented consists primarily of expert testimony from a forensic accountant as well as from other individuals associated with the operation of the Utility. This is not a case requiring the particular expertise associated with the jurisdiction of the BPU. Absent an unambiguous direction from the Legislature, we discern no legal or public policy basis to defer to the BPU's jurisdiction a function historically associated with and inherently performed by the Superior Court.

Reversed and remanded.