[197 NJSuper Page 362] This motion presents significant issues regarding the procedures to be followed in the settlement of Mount Laurel litigation when the entry of a "judgment of compliance" is a precondition of a municipal defendant's willingness to settle.
This suit was filed by the Public Advocate on behalf of himself, the Morris County Fair Housing Council and the Morris County branch of the N.A.A.C.P., against twenty-seven municipalities in Morris County alleged to have zoning ordinances which are unconstitutional because they fail to provide a realistic opportunity for the construction of low and moderate income housing. See Borough of Morris Plains v. Dep't of Public Advocate, 169 N.J. Super. 403 (App.Div.1979), certif. den. 81 N.J. 411 (1979). The Public Advocate dismissed its action, without prejudice, against fifteen of the original defendants, while continuing to proceed against twelve others.
Morris Township is one of the remaining defendants. It is also the defendant in two separate Mount Laurel actions brought by developers.
Morris Township has reached a proposed settlement with the Public Advocate and one of the developers, Charles Development Corporation. However, Morris Township's willingness to settle is contingent upon the court approving the settlement and entering a judgment of compliance. As envisioned by the parties to the settlement, such approval would represent a judicial recognition that Morris Township has taken the steps required to comply with Mount Laurel and it would have the practical effect of foreclosing the second developer, Hubschman, from pursuing his Mount Laurel claim. The matter has been brought before the court by the three parties to the settlement agreement on a joint motion to establish procedures for review of the settlement by the court.
The Supreme Court of New Jersey has adopted a special rule of repose which becomes operative when a municipality rezones as a result of Mount Laurel litigation. The rationale for this special rule is set forth in Southern Burlington Cty. N.A.A.C.P. v. Mount Laurel Tp., 92 N.J. 158 (1983) (Mount Laurel II):
That balance [of all the policies involved in the Mount Laurel doctrine] also requires modification of the role of res judicata in these cases. Judicial determinations of compliance with the fair share obligation or of invalidity are
not binding under ordinary rules of res judicata since circumstances obviously change. In Mount Laurel cases, however, judgments of compliance should provide that measure of finality suggested in the Municipal Land Use Law, which requires the reexamination and amendment of land use regulations every six years. Compliance judgments in these cases therefore shall have res judicata effect, despite changed circumstances, for a period of six years, the period to begin with the entry of the judgment by the trial court. In this way, municipalities can enjoy the repose that the res judicata doctrine intends, free of litigious interference with the normal planning process. [at 291-292; footnote omitted]
This passage from Mount Laurel II does not expressly state that a judgment of compliance shall be binding upon non-parties. However, this seems to have been the Court's intent. There often will be numerous property owners in a municipality with land suitable for lower income housing as well as various organizations which may pursue Mount Laurel litigation on behalf of lower income persons. Therefore, if a judgment of compliance entered at the conclusion of Mount Laurel litigation were binding only upon the party who had filed the action, such a judgment would afford a municipality very limited repose. Yet, the Court said that upon issuance of a judgment of compliance a municipality would be "free of litigious interference with the normal planning process." Id. at 292. This degree of insulation from Mount Laurel claims can be realized only if a judgment of compliance is binding upon non-parties.
Furthermore, this reading of Mount Laurel II is consistent with the effect given judgments in other representative litigation. Although the general black letter law is that a judgment is binding only upon the parties (1 Restatement, Judgments 2d, § 34(3) at 345 (1982)), a judgment may be binding upon non-parties if their interests have been represented by a party. Id. § 41(1) at 393. One widely recognized form of action in which a judgment may be binding upon non-parties is a traditional class action. Id. § 41(1)(e); see Penson v. Terminal Transport Co., 634 F.2d 989, 992 (5 Cir.1981); Telephone Workers Union Local 827 v. New Jersey Bell Telephone Co., 584 F.2d 31, 34 (3 Cir.1978); Harker v. McKissock, 12 N.J. 310, 317 (1953). A second is a suit by a public official or agency
which is authorized by law to represent the public or a class of citizens. 1 Restatement, Judgments 2d, § 41(1)(d) at 393 (1982); see Nevada v. United States, 463 U.S. 110, 103 S. Ct. 2906, 77 L. Ed. 2d 509 (1983); Southwest Airlines Co. v. Texas International Airlines, Inc., 546 F.2d 84, 94-102 (5 Cir.1977) cert. den. 434 U.S. 832, 98 S. Ct. 117, 54 L. Ed. 2d 93 (1977); Rynsburger v. Dairymen's Fertilizer Coop., Inc., 266 Cal.App. 2d 269, 72 Cal.Rptr. 102 (Ct.App.1968). Another is a taxpayers' action brought on behalf of residents, citizens and taxpayers of a jurisdiction. Roberts v. Goldner, 79 N.J. 82 (1979); In re Petition of Gardiner, 67 N.J. Super. 435, 447-449 (App.Div.1961). Non-parties may be bound in a variety of other contexts as well. See Southwest Airlines Co. v. Texas International Airlines, Inc., supra. Indeed, in Rynsburger v. Dairymen's Fertilizer Coop., Inc., supra, the court broadly stated that "[i]f it appears that a particular party, although not before the court in person, is so far represented by others that his interest received actual and efficient protection, the decree will be held to be binding upon him." 266 Cal.App. 2d at 278, 72 Cal.Rptr. at 107.
A Mount Laurel case may be appropriately viewed in line with these authorities as a representative action which is binding upon non-parties. The constitutional right protected by the Mount Laurel doctrine is the right of lower income persons to seek housing without being subject to the economic discrimination caused by exclusionary zoning. Mount Laurel II, 92 N.J. at 208-214; see Pascack Ass'n, Ltd. v. Washington Tp., 74 N.J. 470, 480 (1977). The Public Advocate and organizations such as the Fair Housing Council and N.A.A.C.P. have standing to pursue Mount Laurel litigation on behalf of lower income persons. Mount Laurel II, 92 N.J. at 336-338; Home Builders League v. Berlin Tp., 81 N.J. 127, 132-133 (1979). Developers and property owners with land suitable for lower income housing are also conferred standing to pursue Mount Laurel litigation. See Mount Laurel II, 92 N.J. at 279-281. In fact, the Court held that "any individual demonstrating an interest in, or
any organization that has the objective of, securing lower income housing opportunities in a municipality will have standing to sue such municipality on Mount Laurel grounds." Id. at 337. However, such litigants are granted standing not to pursue their own interests, but rather as representatives of lower income persons whose constitutional rights allegedly have been violated by exclusionary zoning. It follows that a judgment of compliance entered as a result of Mount Laurel litigation would be binding upon non-party lower income persons as well as other potential representatives of their interests such as Hubschman.
The second issue presented by this motion is whether a judgment of compliance can be entered as part of a court approved settlement or only after a full trial in which there has been an adjudication of the validity of a zoning ordinance on Mount Laurel grounds. None of the six cases decided by the Supreme Court in Mount Laurel II provided the occasion for consideration of this issue.
Our courts have long endorsed the policy of encouraging the settlement of litigation. Judson v. Peoples Bank & Trust Co., 25 N.J. 17, 35 (1957); Honeywell v. Bubb, 130 N.J. Super. 130, 136 (App.Div.1974). Settlements permit parties to resolve disputes on mutually acceptable terms rather than exposing themselves to the adverse judgment of a court. Settlements also save parties litigation expenses and facilitate the administration of the courts by conserving judicial resources.
These policies favoring settlement are operative in Mount Laurel litigation. The Court observed in Mount Laurel II that "[t]he length and complexity of [ Mount Laurel ] trials is often outrageous, and the expense of litigation is so high that a real question develops whether the municipality can afford to defend or the plaintiffs can afford to sue." 92 N.J. at 200. Consequently, the Court expressed a desire "to simplify litigation in this area" and "to encourage voluntary compliance with the constitutional obligation." Id. at 214. In a similar spirit, it
said that "the Mount Laurel obligation is to provide a realistic opportunity for housing, not litigation." Id. at 352. The settlement of Mount Laurel litigation is a mechanism for addressing these concerns; it will avoid trials, save litigation expenses, provide a vehicle for consensual compliance with Mount Laurel and result in the construction of housing for lower income persons rather than interminable litigation.
Moreover, it appears that entry of a judgment of compliance frequently will be a precondition to settlement of Mount Laurel cases. Municipalities are understandably hesitant to rezone or to take other affirmative steps to comply with Mount Laurel if their zoning will remain vulnerable to attack. They want assurance that whatever expenses may be incurred in complying with Mount Laurel will be offset, at least in part, by savings in litigation expenses. Municipalities also seek the opportunity to engage in the long term planning required to implement compliance with Mount Laurel -- including the addition of necessary water and sewer service, police and fire protection, schools, parks and streets -- without fear that those plans will have to be changed as a result of new litigation.
While there are substantial considerations favoring settlement of Mount Laurel litigation, it also must be recognized that the improvident entry of a judgment of compliance would be harmful to the lower income persons on whose behalf the litigation is brought. As noted previously, such a judgment ordinarily will insulate a municipality from further Mount Laurel litigation for a period of six years. Therefore, there must be assurance that a settlement is consistent with the best interests of lower income persons before a judgment of compliance is issued.
The risks of improvidently approving a settlement and issuing a judgment of compliance are most acute in Mount Laurel litigation brought by developers. A plaintiff developer and defendant municipality have complementary objectives in settlement negotiations which are likely to result in an agreement
which does not advance the goals of Mount Laurel. A municipality's objective is to be assigned a small fair share of lower income housing. A developer's objective is to secure approval of his project. If a judgment of compliance is entered approving a settlement which advances both of these objectives, the result would be the construction of a small number of lower income housing units while insulating the municipality from further Mount Laurel litigation for six years.
The danger of entering a judgment of compliance which does not adequately protect the interests of lower income persons is substantially reduced when a Mount Laurel claim has been brought by the Public Advocate or other public interest organization, since it may be assumed that generally a public interest organization will only approve a settlement which it conceives to be in the best interests of the people it represents. However, even a public interest organization may incorrectly evaluate the strengths and weaknesses of its claim or be overly anxious to settle a case for internal organizational reasons.
The question is whether these dangers require that a judgment of compliance only be entered after a case has been fully litigated or whether procedures can be established by which the court can receive reasonable assurance that a proposed settlement will result in satisfaction of a municipality's Mount Laurel obligation. In addressing this question it is appropriate to consider the procedures which are used for the approval of settlements in class and other representative actions.
Rule 4:32-4 provides that "[a] class action shall not be dismissed or compromised without the approval of the court . . . ." To afford interested parties an opportunity to be heard, the rule further provides that "notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs." Although R. 4:32-4 only applies by its literal terms to ...