August 17, 2010
MARTHA NEWMAN-STEELE, DR. MARK C. NEWMAN, DR. GARY NEWMAN, AND FRAN NEWMAN SESTI, PLAINTIFFS,
THE MAYOR AND COUNCIL OF THE BOROUGH OF TINTON FALLS, THE BOROUGH OF TINTON FALLS, AND THE BOROUGH OF TINTON FALLS PLANNING BOARD, DEFENDANTS, AND PRC TINTON AVENUE DEVELOPERS, LLC, DEFENDANT/AS AN INDISPENSABLE PARTY, AND THE MAYOR AND COUNCIL OF THE BOROUGH OF TINTON FALLS, THE BOROUGH OF TINTON FALLS, AND THE BOROUGH OF TINTON FALLS PLANNING BOARD, THIRD-PARTY PLAINTIFFS-APPELLANTS,
PAUL ABRAMS AND SAYMARK REALTORS, THIRD-PARTY DEFENDANTS-RESPONDENTS, AND ABRAHAM LESER AND TINTON TELECOM, LLC, THIRD-PARTY DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-1444-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: October 7, 2009
Before Judges Cuff, C.L. Miniman and Waugh.
Defendants/third-party plaintiffs Mayor and Council of the Borough of Tinton Falls, the Borough of Tinton Falls and the Borough of Tinton Falls Planning Board*fn1 (collectively the Borough) appeal from an order granting third-party defendants Paul Abrams and Saymark Realtors' motion for summary judgment and dismissing their complaint. It argues that Abrams' agreement with a property owner to provide real estate consulting services was contrary to public policy and breached Abrams' fiduciary duty, as a member of various land use boards, to the residents of the Borough. The Borough seeks disgorgement of all funds received from the property. We disagree and affirm.
The genesis of the various claims that ultimately produced four pieces of litigation lies in efforts to redevelop the former CECOM site in Tinton Falls. The CECOM property is a thirty-nine acre site located in the Borough, which housed, until recently, a massive office building and a sprawling paved parking lot. The property had been used until 1998 by the United States Army to support its activities at Fort Monmouth. In 2002, the property was owned by Tinton Telecom, LLC. The principal was Abraham Leser. At that time, the owner's plans for the property reached a stage that permitted it to begin informal discussions with the Borough officials. The procedural history of the redevelopment efforts and the litigation spawned by the several approvals need not be related in detail, but a brief history of the events and the various efforts to contest the redevelopment of this site is necessary to place the issues raised in this appeal in context.
In 2002, Abrams was a member of the Planning Board, the Board of Adjustment and the Environmental Commission of the Borough. At that time he was also a real estate broker and a principal of Saymark Realtors. In summer 2002, he commenced discussions with Leser and Tinton Telecom, LLC, to serve as a real estate consultant for the redevelopment of the CECOM site. Abrams and Leser signed a consulting agreement on November 19, 2002. Abrams submitted his resignation from the Planning Board, Board of Adjustment and Environmental Commission the next day. The Borough Council accepted his resignation from the Planning Board on November 22, 2002, after determining that his business relationship with the proposed developer of the CECOM site implicated only his Planning Board responsibilities.
On August 28, 2002, acting in his capacity as a principal of Saymark Realtors and as an agent for Leser and Tinton Telecom, LLC, Abrams submitted an offer to purchase the 16.6 acre parcel adjacent to the CECOM site. Plaintiffs, various family members who own the parcel, rejected the offer.
Subsequent offers were submitted on September 26 and November 4, 2002.
During early Fall 2002, the Planning Board was considering a general revision to the Master Plan, including an amendment to allow age-restricted or active adult residential development at the CECOM site. The Planning Board discussed the Master Plan amendment, specifically addressing the CECOM site, at its October 23, 2002 meeting; Abrams recused himself citing a potential conflict of interest. On November 26, 2002, four days after Abrams resigned from the Planning Board, the Board planner recommended active adult residential use at the CECOM site. On December 11, 2002, the Planning Board recommended to the Borough Council an amendment to the Master Plan to allow active adult residential use at the CECOM site.
The proposed Master Plan revision, including active adult residential use at the CECOM site, was presented to the Borough Council at its February 4, 2003 regular workshop meeting. On May 2, 2003, Abrams sent a copy of a proposed ordinance permitting active adult residential housing at the CECOM site to Leser.
A May 21, 2003 memorandum from the Board planner to municipal council members reveals that Abrams had shared with him the CECOM site plans developed for Leser and Tinton Telecom, LLC. A later memorandum from the Board planner to municipal council members reveals the planner knew that Abrams was "trying to put together" a 90-acre parcel for development.
On September 16, 2003, the Borough Council adopted a resolution requesting the Planning Board to conduct a preliminary investigation of the CECOM tract for redevelopment. The Planning Board held a public hearing on August 31, 2004, and adopted a resolution recommending that the CECOM site be declared an area in need of redevelopment. The Borough Council adopted a resolution accepting this recommendation and designated the CECOM site as an area in need of redevelopment on October 25, 2004. Two weeks later, the Borough Council requested the Planning Board to prepare a redevelopment plan. On December 7, 2004, the Borough Council adopted an ordinance amending the land use ordinance to create an active adult residential zone that encompassed the CECOM site.
Litigation commenced on January 27, 2005, when plaintiffs filed a complaint against Leser and Tinton Telecom, LLC, in which they sought compensatory damages and injunctive relief as remedies for trespass and disparagement of title, and compensatory and punitive damages for unfair competition and intentional interference with prospective economic relations.
On April 27, 2006, this complaint was amended to add Abrams and Saymark Realtors as defendants.
On April 1, 2005, plaintiffs also filed a complaint in lieu of prerogative writs. On April 27, 2007, plaintiffs named PRC Tinton Avenue Developers, LLC, a business controlled by Leser, as defendant in their second amended complaint. They alleged the December 11, 2002 action by the Planning Board, recommending an amendment to the Master Plan affecting the CECOM site and all subsequent actions by the Borough Council and Planning Board, was tainted by the relationship between Abrams and Leser. The Borough filed a third-party complaint against Abrams, Leser, Saymark Realtors and Tinton Telecom, LLC, in which it alleged that Abrams, as a public official, and Leser, as his client, acted in concert to form a corrupt enterprise to use Abrams' public positions for a private end in violation of N.J.S.A. 2C:41-2c and -2d, the New Jersey Racketeer Influenced and Corrupt Organizations (RICO) Act.*fn2 The Borough sought to recoup all payments from Leser to Abrams.
While the litigation proceeded, on December 28, 2005, the Planning Board granted preliminary major subdivision approval and preliminary major site plan approval to allow construction of 151 detached, single-family, age-restricted houses; a community clubhouse; a swimming facility; open space and other amenities consistent with the previously adopted redevelopment plan for the CECOM site.
Two other complaints were filed relating to development of the CECOM site. We have not been provided with copies of these pleadings. Eventually, on April 10, 2008, the parties reached a settlement in which all cases were dismissed with prejudice, except the third-party complaint filed by the Borough against Abrams and Saymark Realtors. Thereafter, the remaining parties filed cross-motions for summary judgment. Judge Locascio denied the motions filed by third-party plaintiffs and granted summary judgment in favor of Abrams and Saymark Realtors.
The summary judgment record reveals that Abrams received $30,000 from Leser pursuant to the November 2002 consulting agreement. The record also includes a letter from the County Prosecutor to Abrams' criminal defense counsel that provides:
The above-captioned investigation, opened on January 27, 2006, by way of a referral to the Monmouth County Prosecutor's Office. The allegations were that your client had been hired by Abraham Lesser on behalf of Tinton Telecom as their salaried agent to help them develop a piece of property located in the Borough of Tinton Falls known as The CECOM Building Property. A portion of our investigation focused on whether Mr. Abrams illegally blurred the distinction between his various roles in the Tinton Falls community. The questions our investigation asked were: a.) Did Mr. Abrams hide his consulting agreement with Tinton Telecom from his colleagues on the respective Borough Boards of which he was a member or from other municipal officials?;
b.) Did Mr. Abrams improperly influence other public officials to favor the position of Tinton Telecom's [sic] in the development of the CECOM property?; c.) Did Mr. Abrams on his own or as an agent of Tinton Telecom make illegal cash or other payments to any public official to induce them to vote in favor of the interests of Tinton Telecom.
Our investigation has concluded that the answer to those questions is no. We did not develop evidence that Mr. Abrams did anything illegal in any of his positions either with Tinton Telecom or as a member of the aforementioned Borough Boards. While there may have been an appearance of impropriety in the way Mr. Abrams simultaneously held both private and public positions, the Monmouth County Prosecutor's Office developed no evidence to show that Mr. Abrams violated the law.
Accordingly, the Monmouth County Prosecutor's Office is closing our file. I want to take this opportunity to thank you and your client for your extended cooperation during the course of our investigation as well as agreeing to partake in the proffer session that was conducted in May 2008. If you have any questions regarding this matter, please feel free to call me at 732/577-6618.
In their motion, the Borough argued that Abrams should remit the money to it because the business relationship between Abrams and Leser was contrary to the criminal code and the local ethics law. The judge found that the relationship between Abrams and Leser did not violate any criminal statute based on the decision by the county prosecutor's letter. Judge Locascio also found that neither the municipality nor municipal officials had suffered any damage to allow them standing to seek a declaration that the consulting agreement between Abrams and Leser was unlawful and to recoup money paid to Abrams. In the course of his oral decision, the judge distinguished one case, County of Essex v. First Union National Bank, 186 N.J. 46 (2006), and relied on another, Township of Marlboro v. Scannapieco, 545 F. Supp. 2d 452 (D.N.J. 2008), to hold that absent a financial loss, a town cannot recover money paid to a municipal official in the form of bribes. Finding that the public entity must sustain a monetary loss due to the criminal or unethical conduct of a public official, and finding that neither the Borough nor its Planning Board had established a loss to its business or property, Judge Locascio denied summary judgment to the Borough and granted summary judgment to Abrams and Saymark Realtors.
On appeal, the Borough argues that the agreement between Abrams and Leser was against public policy. It further argues that criminal conduct is not required to establish that the agreement is contrary to public policy, or that Abrams breached his fiduciary duty as a public official, or that Abrams acted contrary to ethical principles guiding the conduct of local officials. Furthermore, the Borough insists it can recoup the funds paid to Abrams by a private person to remedy the unethical behavior. The Borough seems to have abandoned the State civil RICO claims set forth in their third-party complaint and focuses instead on its contention that Abrams' business relationship with Leser violated statutory and common law ethical standards of conduct.*fn3
We need not determine whether criminal conduct by Abrams is a condition precedent for the Borough to recover damages from Abrams because the Borough confines its argument on appeal to Abrams' allegedly unethical conduct while a public official. Although the analysis of the motion judge seemed to focus almost exclusively on the civil RICO claim asserted by the Borough, we affirm the summary judgment in favor of Abrams. Our review of the record demonstrates that the Borough was not entitled to recover damages from Abrams because it did not establish that Abrams' conduct violated any ethical standard governing a public official or that it suffered a monetary loss.
As a member of the Planning Board, Abrams' conduct was governed by common law principles of ethical conduct; the ethical standard prescribed by the Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163, specifically N.J.S.A. 40:55D-23(b); and the Local Government Ethics Law, N.J.S.A. 40A:9-22.1 to -22.25. In Wyzykowski v. Rizas, the Court reviewed the common law principles concerning the participation of public officials in matters in which they have a personal interest. 132 N.J. 509, 523 (1993). The Court recognized that "[a]t common law '[a] public official is disqualified from participating in . . . proceedings in which the official has a conflicting interest that may interfere with the impartial performance of his duties as a member of the public body.'" Ibid. (quoting Scotch Plains-Fanwood Bd. of Educ. v. Syvertsen, 251 N.J. Super. 566, 568 (App. Div. 1991)).
The MLUL codified the common law principles. N.J.S.A. 40:55D-23(b) provides that "[n]o member of the planning board shall be permitted to act on any matter in which he has, either directly or indirectly, any personal or financial interest." Whether a member of the Planning Board must disqualify himself from a matter or submit their resignation is fact sensitive; however, "'[t]he question will always be whether the circumstances could reasonably be interpreted to show that they had the likely capacity to tempt the official to depart from his sworn public duty.'" Wyzykowski, supra, 132 N.J. at 523 (quoting Van Itallie v. Franklin Lakes, 28 N.J. 258, 268 (1958)).
The Local Government Ethics Law, specifically N.J.S.A. 40A:9-22.5, also regulates the conduct of public officers. An unpaid and part-time member of a planning board is a public officer. N.J.S.A. 40A:9-22.3g(2). A local government officer may not engage in any business or transaction "in substantial conflict with the proper discharge of his duties in the public interest," N.J.S.A. 40A:9-22.5a; or act in his official capacity in any matter in which "he has an interest, has a direct or indirect financial or personal involvement that might reasonably be expected to impair his objectivity or independence of judgment," N.J.S.A. 40A:9-22.5d; or undertake any employment that may "reasonably be expected to prejudice his independence of judgment in the exercise of his official duties," N.J.S.A. 40A:9-22.5e; or represent a third party in connection with an application or other matter pending before the board of which he is a member, N.J.S.A. 40A:9-22.5h.
Whether we apply the common law principles or the two codifications of the common law conflict of interest principles, Abrams' business relationship with Leser did not transgress these provisions. The record is bereft of any action taken by Abrams as a member of the Planning Board that furthered the interest of Leser over the interest of the public. At the time he sent offers of purchase to neighboring property owners on behalf of Leser, no matter specific to those properties or to the CECOM property was before the Planning Board. The Planning Board was studying and considering revisions to the Master Plan at that time, but the record reveals that discussion of the Master Plan revision specific to the CECOM parcel or to the neighboring properties did not occur until October 2002. When the issue was raised, Abrams recused himself. By the time the Planning Board voted and made a recommendation to the Borough Council, including a provision directly affecting the CECOM property, Abrams had resigned his position. Subsequently, the record reveals that Abrams participated in discussions with the Borough Council about the Master Plan and a redevelopment plan concerning the CECOM parcel, but there is no mention of any appearances before the Planning Board. In short, the record is bereft of any facts that establish unethical behavior by Abrams.
Furthermore, the Borough cannot demonstrate any direct financial loss to the public fisc. In County of Essex, the county government incurred increased costs directly related to the unethical and criminal conduct of county employees. 186 N.J. at 58-59. Here, as in Township of Marlboro, the municipal governing body cannot identify any financial loss to it occasioned by Abrams' conduct.*fn4
We, therefore, affirm the October 24, 2008 order granting summary judgment in favor of Abrams and Saymark Realtors and dismissing the Borough's complaint.