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RAR Development Associates v. New Jersey Schools Construction Corporation

July 9, 2008

RAR DEVELOPMENT ASSOCIATES, PLAINTIFF-APPELLANT,
v.
NEW JERSEY SCHOOLS CONSTRUCTION CORPORATION AND NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY, DEFENDANTS-RESPONDENTS, AND NEW YORK FOLDING BOX COMPANY, DEFENDANT.



On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9424-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 31, 2007

Before Judges Cuff, Lisa and Lihotz.

Plaintiff, RAR Development Associates, appeals from the summary dismissal of its claims against defendants New Jersey Schools Construction Corporation and New Jersey Economic Development Authority.*fn1 The complaint alleged that the actions of these government agencies caused plaintiff to suffer the loss of a long-term tenant at the end of 2004. This conduct provided the factual basis for counts alleging tortious interference with contract, tortious interference with a prospective economic advantage, and a "taking" without just compensation. The trial court rejected these claims, as well as plaintiff's argument that the State should be estopped from avoiding responsibility for damage it caused.

We agree with the trial court that there was no compensable taking in this case, and that the record does not support plaintiff's tortious interference and equitable estoppel claims. Accordingly, we affirm.

I.

Because the case comes to us by virtue of a summary judgment, we recite the facts applying the Brill*fn2 standard, in the light most favorable to plaintiff. Plaintiff owned property in Newark, consisting of two contiguous lots. Lot 1.02, comprising about one and one-half acres, was vacant. Lot 1.01 contained seven interconnected buildings comprising about 725,000 square feet. Prior to 2003, plaintiff leased about 472,000 square feet to six tenants, who used their respective spaces for manufacturing and storage purposes.

New York Folding Box Company (NYF) held the largest leasehold interest. NYF's use of its space, about 109,000 square feet, dated to at least 1976.*fn3 NYF renewed its lease periodically. Under the terms of a December 30, 1999 amendment to the most recent lease, NYF agreed to continue its occupation of the premises through December 31, 2004. NYF retained an option to renew the lease for an additional five-year term beyond that end date at a specified rental. The amendment required NYF to exercise its renewal right by May 15, 2004.

In March 2002, the State notified plaintiff of its intention to acquire Lot 1.01 for the construction of Newark East Side High School. Representatives of the State visited the buildings' tenants, including NYF, in October of that year to discuss the possible condemnation and to assess their relocation needs.

The State caused an appraisal to be conducted, which resulted in a valuation for the improved property of $17.5 million. On July 10, 2003, the State officially offered that amount to plaintiff for the purchase of the property.*fn4 Plaintiff declined the offer.

In the succeeding weeks, the State notified the tenants that the building would be under its control by January 1, 2005, at which time it expected to proceed with demolition. It informed the tenants that the State's relocation consultant would be available to explain the process and "the rights, benefits and moving reimbursement to which [the tenants] may be entitled under the law." The State advised the tenants to continue paying their rent.

NYF's operation included the use of substantial industrial machinery. NYF advised the State that the movement of this machinery to a new location would require at least one year, during which the presence of two technicians from the manufacturer of the machines would be required to oversee the dismantling, transporting, and reassembling of the machinery. The cost would also be substantial. To minimize the disruption to its business, NYF began searching for a new location.

It found a potential new location in Mt. Olive, and informed the State, which assured NYF appropriate relocation assistance would be given, consistent with the relevant statutory and regulatory provisions. The relocation officer expressed the State's continued hope to acquire the property without litigation, but added that "if negotiations prove fruitless the case will proceed to final condemnation if necessary, with [the State] ultimately owning the property in the very near future."

NYF subsequently changed its new location to one in Stanhope. To facilitate its move, NYF required financing. As a condition of that financing, the lender required NYF to produce a written guarantee from the State that it would pay relocation assistance. NYF obtained an estimate for its relocation costs in the amount of $5,039,100.62, which was approved by the State's relocation consultant. Accordingly, on November 6, 2003, the State issued a written assurance that it would reimburse NYF for relocation expenses not to exceed that sum. The lender approved the loan, and the dismantling of NYF's machinery commenced.

As NYF took these preparatory steps, the State continued to negotiate the acquisition of the property with plaintiff. The negotiations were unsuccessful. The State reevaluated its position and determined to abandon its attempt to acquire plaintiff's improved lot, and instead to acquire only the unimproved lot, upon which it would construct the new school facility. The State informed plaintiff of its decision on April 20, 2004.*fn5

The State notified plaintiff's tenants of its decision and advised them they would be able to remain in the property. Of course, NYF's relocation activities were well underway by that time. Recognizing that there was proper official authorization for NYF's actions, the State agreed to permit NYF to complete its relocation, to be paid for by the State in accordance with its guarantee.

NYF failed to renew its lease by the May 15, 2004 deadline. As contemplated, its move took about one year, and it completed its relocation on November 18, 2004.*fn6 The State paid NYF about $5 million as reimbursement for its moving costs. Plaintiff claimed an inability to replace NYF with another tenant. The State disclaimed any obligation to compensate plaintiff for the loss of future rental payments occasioned by NYF's departure.

Plaintiff filed this action on November 21, 2005. It alleged that the State's actions amounted to tortious interference with plaintiff's lease agreements, and that the inducements given to NYF to vacate the building effected an unconstitutional "taking." The matter came before the trial court on cross-motions for summary judgment. The court granted the State's motion and dismissed the complaint. The court denied plaintiff's cross-motion for partial summary judgment seeking a determination that the State's actions constituted a taking as a matter of law. After denying plaintiff's reconsideration motion, the court entered judgment on July 21, 2006 in favor of defendants, and certified its orders as final on August 28, 2006. This appeal followed.

II.

Plaintiff argues that the trial court erroneously dismissed the tortious interference claims. It argues that NYF would have renewed the rental agreement for an additional five-year term but for the State's decision to subsidize NYF's relocation. The State, plaintiff alleges, should have known that this inducement would cause damage to plaintiff. It follows that the State should bear the burden to cover such damage.

The State argues that the Tort Claims Act does not carve out an applicable exception to the general rule of immunity. Even assuming that the common law immunity from suit does not apply here, the State argues that plaintiff's allegations do not set forth cognizable tortious interference claims. We agree with the State.

As an initial matter, viewing the facts in the light most favorable to plaintiff, we assume that NYF would have renewed its lease with plaintiff for an additional five years but for the State's actions and representations.

To set forth a cognizable claim for tortious interference with contract, plaintiff must demonstrate that the State intentionally interfered with plaintiff's contract without justification, and that the interference caused damage. 214 Div. 1994).

To prevail on a claim for tortious interference with a prospective economic advantage, "plaintiff must show that it had a reasonable expectation of economic advantage that was lost as a direct result of defendants' malicious interference, and that it suffered losses thereby." Lamorte Burns & Co. v. Walters, 167 N.J. 285, 305-06 (2001). As with the tortious interference with contract claim, "malicious interference" ...


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