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DEG, LLC v. Township of Fairfield

March 25, 2009

DEG, LLC, PLAINTIFF-APPELLANT,
v.
TOWNSHIP OF FAIRFIELD AND ZONING OFFICER, GLENN PLUMSTEAD, IN HIS OFFICIAL CAPACITY, DEFENDANTS-RESPONDENTS.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 398 N.J. Super. 59 (2008).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

The Court considers whether the Township of Fairfield was entitled to relief from a settlement in which it agreed to issue a certificate of nonconforming use for a sexually oriented business that was precluded by zoning ordinances.

In June 2005, DEG leased a commercial property in Fairfield for the purpose of operating a sexually oriented business. However, DEG's application for a permit to operate the business on the property was denied because Fairfield's ordinances prohibited such uses in any zone. DEG retained a planning expert to conduct an analysis of alternative avenues of communication to determine where in the relevant market area DEG could legally operate its business. The expert concluded that in a thirty-three municipality area, there was no market area available due to local ordinances and N.J.S.A. 2C:34-7, which prohibits operation of a sexually oriented business within 1,000 feet of schools, school bus stops, child care centers, public playgrounds, places of worship, hospitals, and residential zones.

DEG filed a complaint and order to show cause seeking temporary restraints against Fairfield. DEG alleged that Fairfield's zoning ordinance and N.J.S.A. 2C:34-7 were unconstitutional and that the denial of a permit constituted an invalid prior restraint on DEG's first amendment rights. After a hearing, the trial judge issued an opinion on November 4, 2005, which declared that the zoning ordinance prohibiting sexually oriented businesses anywhere in Fairfield was unconstitutional on its face because it was content-based and did not provide an alternative means of communication. The judge also held that DEG established a reasonable likelihood of proving that N.J.S.A. 2C:34-7, if applied to DEG's location, would violate the First Amendment. The judge ordered Fairfield to issue DEG the necessary permits to operate, despite the pending challenge to the statute. Because Fairfield intended to retain its own expert to challenge the analysis by DEG's expert, the judge set a schedule for discovery and a plenary hearing.

In January 2006, DEG opened to the public as the Essex Adult Emporium. DEG's expert prepared a second report concluding that DEG's business violated N.J.S.A. 2C:34-7 because it was located within 1,000 feet of a residential zone. After months of settlement negotiations, Fairfield and DEG agreed to settle the challenge to N.J.S.A. 2C:34-7. Fairfield's township council approved the settlement on June 12, 2006, and a consent judgment was signed by the trial judge and filed on July 20, 2006. The consent judgment permitted DEG to continue to operate its business at the leased location. Paragraph two of the consent judgment provided that if Fairfield adopted a future ordinance permitting such businesses in a zone other than the one in which DEG was operating, Fairfield was required to issue a certificate of non-conformity to DEG within ten days. Also on June 12, 2006, Fairfield introduced Ordinance 2006-16, which permitted sexually oriented businesses to operate only in a newly created C-3 zone that did not include DEG's location. The ordinance went into effect on June 26, 2006.

On March 22, 2007, DEG applied for a certificate of nonconforming use. Fairfield denied the request. In the interim, Fairfield had retained special counsel to challenge the consent judgment, and obtained an opinion by its own planning expert, which concluded that DEG's expert was incorrect in stating that there were no locations within Fairfield where DEG could legally operate its business. In April 2007, DEG filed a motion in aid of litigant's rights requesting that the trial judge order Fairfield to issue a certificate of nonconforming use. Fairfield filed a cross-motion under Rule 4:50-1, which provides relief from judgments or orders under certain circumstances. On May 30, 2007, the trial judge granted DEG's motion and denied Fairfield's cross-motion. The judge found that there were no grounds for relief from the consent judgment under Rule 4:50-1, the new ordinances did not void the November 4, 2005 opinion, and the consent judgment, which specifically anticipated the enactment of new ordinances, was valid and controlling. The judge enjoined Fairfield from enforcing the new ordinance against DEG and required it to provide DEG with a certificate of nonconforming use.

The Appellate Division stayed the requirement that Fairfield provide a certificate of nonconforming use, but permitted DEG to remain in business on the premises. Then, in a unanimous opinion, the panel declared that Fairfield had the authority to enter into the settlement and affirmed the trial judge's ruling that Fairfield was not entitled to relief under Rule 4:50-1(a)(mistake, inadvertence, surprise or excusable neglect); (b)(newly discovered evidence that probably would have changed the result, was unobtainable through due diligence for use at trial, and was not merely cumulative); or (d)(the judgment or order is void). 398 N.J. Super. 59 (2008). However, the panel ordered a plenary hearing to evaluate whether Fairfield's adoption of zoning ordinances permitting sexually oriented businesses in two zoning districts constituted a significant change in the law that might provide a basis for relief under Rule 4:50-1(e)(inequitable for the judgment or order to have prospective application). The panel also declared that paragraph 2 of the consent judgment violated the Municipal Law Use Law.

HELD: Rule 4:50-1(e) does not relieve the Township of Fairfield from a consent judgment based on its settlement of a zoning dispute over the location of DEG, LLC's sexually oriented business, and the provision of the judgment that directed Fairfield to provide a certificate of nonconforming use did not violate the Municipal Land Use Law.

1. DEG's sexually oriented business constitutes expression protected under the First Amendment to the United States Constitution and Article I, Paragraph 6 of the New Jersey Constitution. However, regulations intended to govern the secondary effects that such businesses may have on the community are permissible so long as those restrictions are limited to time, place, and manner; are content neutral; are designed to serve a substantial government interest; and allow for reasonable alternative avenues of communication. What constitutes reasonable alternative avenues of communication depends on the facts and circumstances of the case. It is a regional inquiry entailing expert assessments of the size of the relevant market, the absolute number of available locations, the relative number of such locations to land mass, and other factors. The municipality bears the burden of proof because of its election to restrict protected speech. (Pp. 14-16).

2. Fairfield had the authority to settle DEG's as-applied constitutional challenge to N.J.S.A. 2C:34-7. A municipality should not be required to incur the financial and other costs attendant upon the defense of a constitutional claim where it reasonably assesses that claim as a substantial one and where it could negotiate concessions that might not be awarded after lengthy and expensive litigation. Fairfield reasonably assessed DEG's claim as a substantial one. The trial judge had already held that DEG established a reasonable likelihood of proving that N.J.S.A. 2C:34-7, if applied to DEG's location, would violate the First Amendment. It was Fairfield's burden to prove that available lots in the relevant market area constituted adequate alternative avenues of communication. Fairfield had the authority to forego attempting to meet that formidable burden in favor of a settlement. (Pp. 16-18).

3. Rule 4:50-1 does not permit parties to a consent judgment to change their minds or to reopen litigation because a settlement is less advantageous than it had previously appeared or the effectiveness of an original legal strategy is questioned. The rule underscores the need for repose while achieving a just result, and it denominates with specificity the narrow band of triggering events that will warrant relief if justice is to be served. Only the existence of one of those triggers will allow a party to challenge the substance of the judgment. (Pp.18-21).

4. Fairfield is not entitled to relief under subsections (a), (b), or (d) of Rule 4:50-1. With regard to Fairfield's arguments based on expert reports, Fairfield originally questioned the opinion of DEG's expert and informed the trial court that it intended to obtain its own expert, but did not do so at that time. That is not the kind of mistake contemplated by the rules, nor does newly discovered evidence include an attempt to remedy a belated realization of the inaccuracy of an adversary's proofs. Nothing prevented Fairfield from obtaining an expert opinion earlier. Further, the consent judgment was not "void" because it allowed DEG to commit an "illegal" act in violation of N.J.S.A. 2C:34-7 by locating its business within the 1,000 foot buffer zone. When it passed N.J.S.A. 2C:34-7, the Legislature did not outlaw sexually oriented businesses, but permitted them so long as they are located more than 1,000 feet from certain uses. Further, the Legislature specifically preserved municipal authority to allow such uses within the buffer zone by permitting a municipality to adopt as part of a zoning ordinance an ordinance allowing the sale, distribution, rental or exhibition of obscene material. N.J.S.A. 2C:34-2(b). The purpose of that exception was to insulate N.J.S.A. 2C:34-7 from constitutional attack in municipalities in which the statute has the effect of barring sexually oriented uses altogether. When a municipality invokes N.J.S.A. 2C:34-2(b), it does not permit the "illegal" location of a sexually oriented business, but renders the location "legal." (Pp. 21-26).

5. Fairfield also cannot rely on subsection (e) of Rule 4:50-1, which provides for relief from a judgment for changed circumstances that call the fairness of the judgment into question, including where "it is no longer equitable that the judgment or order should have prospective application." Everything that occurred in this case was anticipated and bargained for, including the enactment of new zoning ordinances and the grandfathering of DEG. The situation is exactly what the parties foresaw, and the burden of the judgment has not become more onerous as a result of changed circumstances. Moreover, Fairfield's argument is an assault on notions of equity and fairness. Fairfield voluntarily entered into the consent judgment to avoid a lengthy and expensive proceeding, to avert a possible declaration of unconstitutionality of N.J.S.A. 2C:34-7, and to secure the dismissal of DEG's suit. In exchange, it agreed to allow DEG to operate at a location that otherwise would contravene N.J.S.A. 2C:34-7(a), an outcome specifically provided for in N.J.S.A. 2C:34-2(b). It further recognized DEG's entitlement to a certificate of nonconforming use in the event of a zoning change. Although DEG performed its part of the bargain, Fairfield unilaterally denied it the promised certificate. The only inequity presented in this case would be to allow Fairfield's planned amendment of its zoning laws to undermine the consent judgment or form the basis for a court-sanctioned collateral attack on it. The Appellate Division's remand order based on subsection (e) must be vacated. (Pp. 26-32).

6. Nor can Fairfield rely on subsection (f) of Rule 4:50-1, which provides relief for "any other reason" that justifies it. The essence of (f) is its capacity for relief in exceptional situations, but this case does not present an exceptional situation. The consent judgment was not illegal, there was no hint of public corruption involved in the case, and there was no suggestion by Fairfield that DEG engaged in deliberate fraud or deceit. (Pp. 32-34).

7. Finally, the Court reverses the Appellate Division's invalidation of paragraph two of the consent judgment on grounds that it violated the Municipal Land Use Law (MLUL) due to Fairfield's failure to enact an ordinance to memorialize its override of the buffer, pursuant to N.J.S.A. 2C:34-2(b). The Court finds that the language of N.J.S.A. 2C:34-2 regarding the adoption of a zoning ordinance is merely reflective of the fact that under the MLUL a municipality must enact an ordinance if it chooses to rezone. However, the consent judgment was not intended to rezone the area in which DEG was located but only to settle DEG's statutory claim and to acknowledge its prior nonconforming status under the zoning laws so that, if DEG ever abandoned or terminated the use, the premises would lose its protection. (Pp. 34-38).

The judgment of the Appellate Division is REVERSED; the judgment of the trial court is REINSTATED.

JUSTICES LaVECCHIA, ALBIN, WALLACE, RIVERA-SOTO and HOENS join in JUSTICE LONG's opinion. CHIEF JUSTICE RABNER did not participate.

The opinion of the court was delivered by: Justice Long

Argued November 5, 2008

This appeal arises out of a lawsuit filed by the owner of a sexually oriented business against a municipality whose zoning scheme precluded such uses in all zones. After a trial judge declared that the zoning ordinance was unconstitutional on its face and ordered the issuance of the appropriate permits, the business opened. Because the judge also determined that there was a "reasonable likelihood" that N.J.S.A. 2C:34-7*fn1 would be declared unconstitutional as applied, she ordered further discovery and a hearing on that issue. Thereafter, the township settled the as-applied challenge to N.J.S.A. 2C:34-7, permitting the business to continue to operate at its location and acknowledging its entitlement to a certificate of nonconforming use under N.J.S.A. 40:55D-68 in the event of the enactment of a new zoning ordinance that rendered the use invalid. Subsequently, the township enacted two new zoning ordinances allowing sexually oriented uses in other zones. The township then refused to issue a certificate of nonconforming use. The business owner sought to enforce the settlement, and the township defended by applying for relief from the consent judgment under Rule 4:50-1 on the grounds of: (a) -- mistake, (b) -- newly discovered evidence, (d) -- the judgment was void, and (f) -- the catch-all. The trial judge enforced the settlement.

The Appellate Division reversed based on Rule 4:50-1(e), which allows relief from a judgment where "it is no longer equitable that the judgment . . . should have prospective application," and remanded for the development of a record on that issue. In particular, the panel relied on the township's enactment of the new zoning ordinances as a "significant change in law" that implicated Rule 4:50-1(e) and warranted a hearing regarding whether enforcement of the consent judgment would be "equitable" in light of that change. The panel also declared that the consent judgment was violative of the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163. We now reverse on both grounds.

I.

On June 28, 2005, DEG, LLC ("DEG") leased a commercial property located at 276 Route 46 East in the Township of Fairfield for a five-year period. DEG leased the property with the intent of operating a sexually oriented business. At the time DEG entered into the lease, Fairfield's zoning ordinances prohibited sexually oriented uses in any zone.

On July 8, 2005, prior to opening, DEG filed an application for a permit to operate. In the application, DEG indicated that the proposed use was nonconforming because section 45:12.1 of Fairfield's zoning laws prohibited sexually oriented uses "in all zones in the Township." To support its request for a permit, DEG noted on the application that the ordinance prohibiting all sexually oriented uses was unconstitutional.

Fairfield's zoning official denied DEG's application based on the preclusive zoning ordinance.

Around that same time, DEG retained Jason Kasler, a planning expert, to conduct an analysis of the alternative avenues of communication, that is, where in the relevant market area DEG could legally operate its business. In preparing his report, Kasler accounted for the restrictions imposed by N.J.S.A. 2C:34-7 and local zoning ordinances. Kasler used a relevant market area that encompassed thirty-three municipalities, which, when combined, spanned 233.87 square miles and contained 742,306 people. In his report, dated August 11, 2005, Kasler concluded that there were no locations in a number of towns, including Fairfield, for DEG to operate as a result of preclusive zoning ordinances. As for the remaining municipalities, he opined there "is zero percent of the market area available for sexually oriented uses" based on local ordinances and N.J.S.A. 2C:34-7.

On August 30, 2005, DEG filed a complaint and an order to show cause seeking temporary restraints against Fairfield and its zoning official. The complaint alleged that the Fairfield zoning ordinance and N.J.S.A. 2C:34-7 were unconstitutional; that the denial of a permit constituted an invalid prior restraint on DEG's first amendment rights; and that Fairfield violated 42 U.S.C. § 1983. In response, Fairfield argued that DEG was not entitled to temporary relief.

After a hearing, the trial judge issued an opinion on November 4, 2005, which declared that the zoning ordinance prohibiting sexually oriented businesses anywhere in Fairfield was "unconstitutional on its face" because it was content-based and did not provide an alternate means of communication.*fn2 The judge also held, based on the record presented in the application for temporary restraints, that DEG "established a reasonable likelihood of proving that N.J.S.A. 2C:34-7, if applied to this location, would violate the First Amendment." In addition, the judge determined that "at this juncture, the public interest in the uninhibited exercise of free speech outweighs any interest the State or [Fairfield] may have in preventing DEG from opening its adult business." She thus ordered Fairfield to issue DEG the necessary permits to operate, despite the pendency of the challenge to N.J.S.A. 2C:34-7. Because Fairfield questioned the "factual assumptions" underlying Kasler's report and expressed an intention to retain experts to counter Kasler's conclusions regarding N.J.S.A. 2C:34-7, the trial judge set a schedule for discovery and a plenary hearing on the constitutionality of the statute as applied. DEG notified the Attorney General of the pendency of the litigation pursuant to Rule 4:28-4(a)(1). The Attorney General chose not to intervene. In a later communication, she explained that the case lacked statewide importance and that in such cases the matter is left in the hands of local officials.

The parties began settlement negotiations immediately following the hearing on DEG's order to show cause. In the meantime, on January 27, 2006, DEG opened its doors to the public as the Essex Adult Emporium. At that time, its business complied with the zoning laws of Fairfield. As part of the settlement process, Kasler prepared a second report regarding the 1,000-foot buffer requirement contained in N.J.S.A. 2C:34-7. He concluded that DEG's business violated that statute because it was located within 1,000 feet of at least one residential zone.

After months of negotiations, the parties agreed to settle the challenge to N.J.S.A. 2C:34-7. Fairfield's township council unanimously approved the settlement by resolution on June 12, 2006, and the consent judgment was signed by the trial judge and filed on July 20, 2006. The consent judgment permitted DEG to continue to operate its business at the leased location. Paragraph two of the consent judgment stated:

2. In the event that [Fairfield] adopts a future ordinance permitting the sale of adult-oriented products in a zone other than the zone within which DEG is permitted to operate the Store, pursuant to N.J.S.A. 40:55D-68, DEG shall apply for, and [Fairfield's] Zoning Official shall issue to DEG within ten (10) days, a Certificate of Non-Conformity for the Store. In all respects, DEG shall apply for said Certificate in conformance with said statute, with this Judgment evidencing the permissibility of DEG's use, as a pre-existing non-conforming use in the zone in which it is located. [(Emphasis added).]

The remainder of the consent judgment detailed various restrictions on signage and displays, declared that each party would be responsible for its counsel fees, and stated that it "shall not be construed as an ordinance adopted pursuant to N.J.S.A. 2C:34-2 as referenced in N.J.S.A. 2C:34-7(a)."

Also on June 12, 2006, Fairfield introduced Ordinance 2006-16 that permitted sexually oriented businesses to operate only in a newly created C-3 zone that did not include DEG's location. Two weeks later, ...


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