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Shalley v. Borough of Sea Bright

May 14, 2009


On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3619-04.

Per curiam.


Argued March 30, 2009

Before Judges Lisa, Sapp-Peterson and Alvarez.

Plaintiffs filed an application with the Borough of Sea Bright Planning/Zoning Board (Board) for use and bulk variances to permit the operation of a Stewart's restaurant. The Board denied the application. Plaintiffs did not file an action in lieu of prerogative writs seeking to reverse the Board's decision. Instead, they filed this claim seeking damages for lost profits against the Board, the Borough of Sea Bright, and Gregory Harquail, Sea Bright's mayor.*fn1 Plaintiffs alleged that defendants, acting under color of law, violated their constitutional rights. Plaintiffs also alleged that defendants tortiously interfered with their contractual rights or prospective economic relations. As a result of several orders entered by the trial court over the course of the litigation, all of plaintiffs' claims were dismissed by summary judgment. Plaintiffs appeal from those summary judgment orders and from an order denying their motion to adjourn the trial date and reopen discovery to allow them to obtain a damages expert.

On appeal, plaintiffs argue that their claims should have withstood summary judgment because defendants' conduct in denying their land use application was malicious and shocking to the conscience, thus satisfying all elements of their claims of deprivation of constitutional rights and tortious interference. They further argue that plaintiff Garret Shalley (Shalley) was wrongfully precluded from testifying as to damages or, alternatively, the trial date should have been adjourned to allow plaintiffs to secure the services of an expert witness on damages. Finally, plaintiffs argue that the New Business Rule is inapplicable to this case. We reject plaintiffs' arguments and affirm.


The property that is the subject of this dispute is on Ocean Avenue in Sea Bright. At all relevant times, it was owned by John Regan. The property is in a B-1 zoning district, in which restaurants are a primary permitted use. The property contains a structure, which previously was used as a gas station and beauty salon.

In 1994, Regan obtained preliminary and final approval to operate a Dunkin' Donuts restaurant in the portion of the building previously used as a beauty salon. Two principal uses are not allowed under Sea Bright's land use ordinance on the same site. Accordingly, a variance to permit two principal uses was required. The variance approval contained conditional language that precluded cooking on the premises. The intended Dunkin' Donuts use never materialized.

In 2001, Shalley entered into a "handshake" agreement with Regan by which he would lease the former beauty salon portion of the building and operate a Stewart's restaurant. Under the verbal agreement, Shalley was required to pay no rent until his proposed restaurant opened. Defendants informed Shalley that the proposed plan would require either a request for interpretation as to whether a use variance was required or an application for a use variance. Plaintiffs chose the latter course.

After conducting two public hearings, the Board voted unanimously on August 13, 2002 to deny the application. The memorializing resolution was adopted on September 24, 2002. The Board denied "the requested use variances, bulk variances and waivers in order to permit a Stewart's Restaurant with cooking on site" because plaintiffs "failed to properly address the concerns of the Board with regard to the parking and internal traffic flow on the proposed site." The Board also found no legitimate basis for allowing a gravel rather than paved and lined parking lot. The Board found the proposed number of parking spaces inadequate. The Board found that plaintiffs failed to produce sufficient evidence to establish special reasons for granting the requested variances and that they failed to satisfy the negative criteria, namely that the proposed use would not be detrimental to the public good and would not impair the intent and purpose of the zone plan and zoning ordinance.

Plaintiffs maintained that, because the Board had already approved the Dunkin' Donuts in 1994, the only difference in their proposed use was to allow on-site cooking because "[a]ll zoning issues such as traffic, parking[,] etc., were already approved." Thus, plaintiffs contended that all that was necessary from the Board was to approve an amendment to the previously approved plan to allow cooking on the premises. They pointed out to the Board at the public hearings that cooking is permitted at many other restaurants and snack bars throughout the zone.

Shalley contended that when the Board denied his application, Regan terminated their verbal agreement. Accordingly, Shalley contended there was no purpose in his seeking any further administrative review or pursuing an action in lieu of prerogative writs to reverse the Board's action, because he no longer had an interest in the property. Thus, on August 10, 2004, Shalley, his mother, Mary Shalley, and the limited liability corporation they formed, Stewart's of Sea Bright, LLC, filed this action seeking lost profits and damages.


In a count brought pursuant to 42 U.S.C.A. § 1983, plaintiffs alleged that defendants violated their rights under the Due Process and Commerce Clauses. Under 42 U.S.C.A. § 1983, a person has a claim for damages against a governmental entity which acts to deprive such person of his or her constitutional rights. The statute provides, in pertinent part:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State . . . subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress . . . .

[42 U.S.C.A. § 1983.]

The two preliminary tasks involved in any § 1983 action are to first ensure that the state actor acted under color of state law, and second, to identify a right, privilege or immunity secured by the Constitution or other federal law. Rivkin v. Dover Twp. Rent Leveling Bd., 143 N.J. 352, 363, cert. denied, 519 U.S. 911, 117 S.Ct. 275, 136 L.Ed. 2d 198 (1996). Here, plaintiffs claim that, in denying their application, the Board deprived them of their substantive due process rights and their alleged rights under the Commerce Clause. We first address the substantive due process claim.

The principle of substantive due process found in our federal and state constitutions protects individuals from the arbitrary exercise of the powers of government and from the threat of governmental power being used for the purposes of oppression. Felicioni v. Admin. Office of the Courts, 404 N.J. Super. 382, 392 (App. Div. 2008). To prevail on a substantive due process claim arising from a municipal land use decision, a plaintiff must establish that he or she has a property interest protected by due process, and the governmental body's deprivation of that property interest shocks the judicial conscience. United Artists Theatre ...

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