N.J. Appellate Court Rejects Another COVID “Shutdown” Order Challenge

by: Michael Realbuto
21 Mar 2023

The New Jersey Appellate Division has rejected yet another challenge to one of Governor Phil Murphy’s COVID “shutdown” Orders. At issue in this case was Executive Order 107 (“EO 107”), which became effective on March 21, 2020 and implemented certain social mitigation strategies requiring “every effort to reduce the rate of community spread of [COVID-19.]” Specifically, EO 107 imposed restrictions which “limit[ed] person-to-person contact” in the State. The executive order required residents to “remain home” unless engaging in certain well-delineated activities and additionally “cancelled” all “[g]atherings of individuals, such as parties, celebrations, or other social events[.]”

The business owner challenging the Order operated an event venue in Bergen County “which provides large rooms for purposes of pre-booked social gathering at [its] premises,” including weddings and other events. EO 107 effectively canceled all social events that were, or could have been, scheduled at the owner’s venue from EO 107’s March 21, 2020 effective date until the issuance of EO 152, which permitted resumption of in-person gatherings on June 9, 2020. The owner challenged EO 107 by alleging that it effected a regulatory taking of its property without just compensation by forcing it to suspend its business of hosting social events and thereby denying it economic use of its property.”

The Appellate Division began its analysis by providing a short summary of regulatory takings law:

“A regulatory taking occurs where “the owner of real property has been called upon to sacrifice all economically beneficial uses” of its property.  See Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019 (1992) (emphasis in original). An exception to the State’s duty to pay just compensation for a regulatory taking applies where “the court determines that background principles of property and nuisance law [otherwise] preclude [the owner’s] intended use of the property.”  Mansoldo v. State, 187 N.J. 50, 62 (2006).  In other words, “restrictions that background principles of the State’s law of property and nuisance already place upon land ownership[,]” such as the State’s power “to abate nuisances that affect the public generally” or “forestall other grave threats to the lives and property of others[,]” are not compensable.  Lucas, 505 U.S. at 1029 n.16.

The exception also applies to per se taking claims. See Cedar Point Nursery, 141 S. Ct. at 2079 (quoting Lucas, 505 U.S. 1028-29) (noting “the government does not take a property interest when it merely asserts a ‘pre-existing limitation upon the land owner’s title.'”).  A per se taking occurs where a regulation “appropriates a right” inherent in property ownership, such as the right to exclude, id. at 2072, which plaintiff additionally alleges occurred here.”

Although the owner’s “as applied” challenge to EO 107 would have typically required a trial court evidentiary record to determine if the regulation deprived the owner of all economically viable uses of its property, the Appellate Division sidestepped the issue by concluding that the record before the Court included undisputed facts that allowed disposition of the owner’s claim as a matter of law. The Court reasoned that the owner’s takings claim failed as a matter of law “because the exception to a State’s duty to pay just compensation for a regulatory or per se taking applies here. Cedar Point Nursery, 141 S. Ct. at 2079; Lucas, 505 U.S. at 1029; Mansoldo, 187 N.J. at 62.” The Court opined that the government is relieved of its duty to pay just compensation damages for a regulatory or per se taking if the regulation at issue merely asserts a “pre-existing limitation upon the landowner’s title.” Here, once such limitation that the Court held applicable was the State’s police power to abate the danger powers by an imminent threat to public safety, i.e., to prevent the spread of COVID-19.  Therefore, the Court found that, even if the business owner could establish that it suffered a total deprivation of all economically beneficial uses of its property during EO 107’s effective period, the government has no duty to compensate for the taking because EO 107 constitutes an exercise of the State’s police power.

Back in the Spring of 2020, we became quite familiar with the sweeping mandates and executive orders during the initial months of the pandemic. During that time, members of our firm wrote about the topic and were interviewed on the Eminent Domain Podcast as well. As the legal challenges worked their way through the Courts, we blogged about a rather unfortunate case where a New Jersey kickboxing business owner was denied compensation for the closure and limitations placed on its business under COVID-19 “shutdown” orders signed by Governor Phil Murphy. The sad truth underlying these decisions is that so many of our citizens who have been affected by the government’s actions during the pandemic are essentially left with no remedy, outside of the funding that they may have received as part of the federal CARES act or other similar State or local funding and lending assistance programs.

If you are confronted with a governmental taking and need guidance regarding the proper procedure to follow, please contact McKirdy, Riskin, Olson & DellaPelle, P.C. to speak with an experienced attorney. To view the entire Rockleigh Country Club, LLC v. Hartford Insurance Group, et al. decision, click here.