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D. Russo, Inc. v. Romankow

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


September 17, 2010

D. RUSSO, INC. AND DANIEL RUSSO, PLAINTIFFS-APPELLANTS,
v.
THEODORE J. ROMANKOW, IN HIS OFFICIAL CAPACITY AS THE PROSECUTOR OF THE TOWNSHIP OF UNION, DEFENDANT-RESPONDENT, AND KEVIN KALENDEK, DEFENDANT.
TOWNSHIP OF UNION, PLAINTIFF-RESPONDENT,
v.
D. RUSSO, INC. AND DANIEL RUSSO, DEFENDANTS-APPELLANTS.

On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. L-3740-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 4, 2010

Before Judges Skillman, Fuentes and Simonelli.

Plaintiff*fn1 Daniel Russo is the owner of a sexually oriented business know as Hott 22. A Union County Grand Jury indicted Russo on several counts of operating Hott 22 within 1000 feet of a residential or recreational area in violation of N.J.S.A. 2C:34-7.*fn2 In response, Russo filed this civil action in the Law Division against defendants the Township of Union and Theodore J. Romankow, in his official capacity as the Union County Prosecutor, seeking injunctive and declaratory relief concerning the constitutionality of N.J.S.A. 2C:34-7 as applied to the operation of Hott 22.

The matter was adjudicated before the Law Division during a four-day bench trial. Both sides presented expert testimony concerning the factors outlined by the Court in Township of Saddle Brook v. A.B. Family Center, Inc., 156 N.J. 587 (1999). At the conclusion of the trial, the court issued a memorandum of opinion upholding the constitutionality of the statute as applied to Hott 22.

Plaintiff now appeals arguing that defendants failed to prove the existence of alternative sites where he can operate his sexually oriented business within its relevant market area. He also argues that defendants' expert witnesses' testimony, concerning the availability of alternate sites within the relevant market area, should have been rejected by the trial court as net opinions.

After reviewing the record before us, we reverse and remand for the trial court to conduct the analysis mandated by the Court in Saddle Brook, namely: (1) to make specific findings as to what constitutes the relevant market for this type of sexually oriented business; (2) to identify what alternative sites exist within this market area; and (3) to determine whether the number of available sites in relation to the size of the market area passes constitutional muster. Saddle Brook, supra, 156 N.J. at 597. We reject, however, plaintiff's argument challenging the admissibility of defendants' experts' opinions.

The following facts will inform our discussion of the legal issues raised by the parties.

I.

It is not disputed that Hott 22 is a sexually oriented business.*fn3 It is equally undisputed that given its location, Hott 22 cannot conduct business unless the court finds N.J.S.A. 2C:34-7 unconstitutional as applied to this case.

Because the statute impinges upon a form of expression protected by the First Amendment, the Court in Saddle Brook imposed upon defendants the burden of proving what constitutes plaintiff's relevant market area and what available alternative sites exist within this area for plaintiff to operate his business. Id. at 597-98. At trial, defendants sought to meet this burden of proof through the testimony of two expert witnesses.

Susan Gruel, a licensed professional planner, testified for the Township. She utilized a "twenty-minute drive time" test to establish Hott 22's relevant market area, focusing on the major highways that are accessible to Hott 22's customers from the club's current location. She determined that Hott 22's market area included forty-nine municipalities in five counties. After analyzing this market area, Gruel opined that available sites existed in Newark, Carteret, Springfield, and Woodbridge Township for plaintiff to operate Hott 22.

Richard Preiss, a professional planner, testified as an expert witness on behalf of the Union County Prosecutor. In determining the relevant market area, Preiss utilized customer data collected by the staff of Hott 22*fn4 and concluded that the primary market area, consisting of the towns in which seventy percent of the club's customer base lived, was located within a fourteen-mile radius of the club's current location.

After examining the zoning ordinances of the municipalities within this relevant market area, Preiss concluded that eighteen municipalities permitted sexually oriented businesses either as a permitted use, a conditional use, or in some other form of zoning category that required the procurement of a variance. Utilizing maps published on the New Jersey Department of Environmental Protection's website, Preiss excluded areas where Hott 22's business could not relocate because the site: (1) was covered by water; (2) included environmentally protected wetland areas; (3) was covered by a transportation right-of-way, such as those areas devoted to railroads or public utilities; or (4) violated N.J.S.A. 2C:34-7 because of its proximity to municipal recreational areas or residential zones. Ultimately, Preiss identified eleven municipalities that had sites suitable for Hott 22's relocation. These sites ranged in size from "very small" to "extremely large." The municipalities identified by Preiss were located in the northern part of the State, with Middlesex County representing the southern border of the group of sites and Bergen County representing the northern border.

Plaintiff called Jason Kasler, a planning and zoning expert, to offer his analysis and opinion on the availability of suitable sites within Hott 22's relevant market area. Kasler also relied on the customer data collected by the Hott 22 staff to demarcate the boundaries of the proposed market area. Using the place of residency indicated by seventy percent of Hott 22's customers, he determined that the relevant market area included: Union, Livingston, West Orange, Berkley Heights, Hillside, Mountainside, Millburn, Maplewood, Roselle, Roselle Park, Springfield, Elizabeth, Clark, Linden, Rahway, and Newark. He did not find any alternative available sites within this market area.

Against this evidence, the trial court found that defendants had met their burden of proof under Saddle Brook; it therefore upheld the constitutionality of N.J.S.A. 2C:34-7 as applied to plaintiff's sexually oriented business. The trial judge gave the following explanation in support of his ruling:

Although each party employs different methods to identify what the relevant market is, Hott [22] admits that "all of the experts who testified for each of the parties used approximately the same market area" . . . Hott [22] used a linear (straight line) method following the major roads that service the present location and concluded that it serves a market area of 393.53 square miles wherein 2.1 million people reside.

Romankow's experts, after reviewing customer demographics supplied in discovery, identified the "primary market" area as that from which [seventy percent] of Hott [22]'s customer base comes. This was accomplished by using techniques [that] developed a [fourteen] mile radius from Hott [22]. As Hott [22] notes, these techniques give rise to roughly the same general area as its expert.

Union's expert, Susan Gruel, employed a [twenty]-minute drive time as a means of identifying the relevant [market] area. She concluded that her relevant market area consisted of [forty] municipalities in a 290 square mile area within five counties. After reviewing all applicable zoning ordinances, mapping and conducting field inspections, she opined that five municipalities (Newark, Springfield, Woodbridge, Carteret and Kearney) provided at least 2,309 acres available as alternative channels of communication for a [sexually oriented business].

. . . Hott [22]'s expert, Kasler Associates, P.A.[,] opines there is no alternative site available in the relevant market area. That is "no" as in zero, zilch, none, etc.

On the other hand, Ramankow's expert, not surprisingly, takes quite a different position . . . Preiss suggests the availability of areas in Carlstadt, Carteret, East Rutherford, Lyndhurst, Woodbridge, Secaucus, Harrison, Montclair, Livingston, Bayonne and nineteen (19) sites in Newark, including one bordering Route 22.

Romankow's attorney also argues that sites in New York City should be considered, an argument this court now rejects. This court finds it unreasonable to force or even ask a New Jersey business to consider an out of state site with all the attendant uniqueness another state would bring to the table . . . .

[T]he court found Kasler's conclusion to be more adversarial than expertise. He relied on his understanding of the law more than decisional precedent. It is virtually inescapable to conclude that his mission upon retention was to defend against moving Hott 22 by any means he could conceive.

The sites in Newark cannot be automatically excluded in their totality . . . . . . . .

. . . [L]ooking to Newark, while reserving consideration of the applicability of the other sites: (1) it is "within reasonable proximity" to Hott [22]'s current location; (2) it is as accessible by motor vehicle as Hott [22]'s current site; (3) it is within the relevant market area; (4) it is not a prohibited use by all the zoning ordinances; (5) and [it] certainly provided a sufficient number of potential sites to sustain the business.

Several Newark sites already fulfill these "requirements", and others can be modified to . . . . As Hott [22]'s expert testified, availability for our purposes here includes those actually available, potentially available and quite possibly available.

II.

We are bound to accept the trial court's factual findings if they are "supported by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). In Saddle Brook, the Court held that the constitutionality of N.J.S.A. 2C:34-7 will depend upon "whether its application to [the sexually oriented business] allows adequate alternative channels of communication within the relevant market area." 156 N.J. at 596-97.

Distilling the holding in Saddle Brook to its most basic elements, in evaluating an as-applied challenge to N.J.S.A. 2C:34-7, a trial court must determine: (1) the relevant market area of the sexually oriented business; (2) the availability of alternative sites within the relevant market; and (3) whether the available sites, in relation to the size of the market area, provide enough suitable alternative sites for expression to comply with constitutional standards. Id. at 597; see also Twp. of Cinnaminson v. Bertino, 405 N.J. Super. 521, 537 (App. Div.), certif. denied, 199 N.J. 516 (2009). The governmental entity seeking to uphold the statute bears the burden of proof under each factor of this test. Saddle Brook, supra, 156 N.J. at 597-98.

Relevant Market

Although the trial court described some of the data relied upon by the expert witnesses in discussing plaintiff's relevant market area, the court's ruling did not explicitly demarcate the parameters of Hott 22's relevant market area. The only conclusion reached by the court is that the three experts appeared to agree on the same general market area for plaintiff's business. Without more, this conclusory statement does not satisfy the Court's mandate in Saddle Brook. R. 1:7-4.

In order to determine the relevant market area, the Court anticipated that "the parties will offer expert testimony on that issue to assist the Law Division in its determination." Saddle Brook, supra, 156 N.J. at 597. Further, the Court determined that "the relevant market area should include areas located in other municipalities within reasonable proximity to the [current site's] location." Ibid. (quotation and citation omitted). Proximity could be established by "evidence of regional marketing patterns, availability of public transportation and access by automobiles, geographical distribution of customers[,]" and any other factors deemed relevant by the trial court. Ibid.

The three experts who testified here regarding Hott 22's relevant market area did not employ a consistent approach or methodology in determining what constitutes the club's relevant market area. Kasler utilized customer data collected by Hott 22; Gruel employed a twenty-minute drive time test; Preiss used customer data to pinpoint Hott 22's market area as a fourteen-mile radius surrounding the business's place of operation.

As the fact finder, the trial judge did not reconcile or attempt to harmonize these distinctive methodologies. Although the customer data methodology utilized by Kasler and Preiss may be viewed as supporting the court's findings, the court's analysis lacks the clarity of reasoning required by Rule 1:7-4. As we emphasized in Kas Oriental Rugs, Inc. v. Ellman, 407 N.J. Super. 538, 563 (App. Div.), certif. denied, 200 N.J. 476 (2009), clear factual findings must be made to support the legal conclusions reached. We therefore remand this matter for the trial court to make the findings and conclusions necessary to determine Hott 22's relevant market area.

Availability of Alternative Sites

Plaintiff argues that defendants failed to demonstrate sufficient "available" alternative sites for Hott 22's business. According to plaintiff, the court was required to determine the availability of a site by taking into account the area's population and the geographical location of the particular site.

In rebuttal, the Township maintains that the court was not required to take population into account when determining whether a proposed site is "available" for Hott 22's relocation. Despite this, the Township argues that the court nevertheless considered population when it examined the availability of potential sites.

Romankow argues that "commercial viability of an adult-oriented business at a particular location is not an appropriate consideration." Instead, Romankow cites the Ninth Circuit case of Topanga Press, Inc. v. City of Los Angeles, 989 F.2d 1524 (9th Cir. 1993), cert. denied, 511 U.S. 1030 (1994), for guidance on what constitutes "availability." In Topanga Press, the Circuit Court identified five relevant factors for an availability determination: (1) whether there is a "genuine possibility" that the site is available; (2) whether the site is "reasonably accessible to the general public"; (3) whether the site contains infrastructure "such as sidewalks, roads and lighting"; (4) whether the "site suits some generic commercial enterprise, although not every particular enterprise"; and (5) whether the proposed site is "commercially zoned." Id. at 1530-31.

Although the Topanga factors may be binding authority for federal courts within the Ninth Circuit, we are constrained by the criteria established by our Supreme Court in Saddle Brook. Under the second factor in Saddle Brook, the trial court must determine whether alternative sites in the relevant market are "available" for the relocation of the sexually oriented business. Saddle Brook, supra, 156 N.J. at 597. Toward that end, the Court noted that this determination depends, in part, upon the zoning ordinances of neighboring municipalities, specifically, whether those communities "permit, prohibit, restrict or affect the feasibility of establishing sexually oriented businesses." Ibid.

In determining availability, New Jersey courts have also considered "whether such sites are feasible alternatives and . . . have de-emphasized the significance of higher costs in determining feasibility." Id. at 595. Thus, trial courts confronted with this question must only determine the feasibility of relocation, regardless of any additional costs involved in bringing about the relocation.

Here, the trial judge identified several locations in Newark as sites available for Hott 22's relocation. This conclusion is supported by the record. In this respect, the judge began his analysis by acknowledging that certain factors would eliminate potential sites as "available" under Saddle Brook:

(1) parcels lacking access roads are not . . . available alternative communicative site[s]; (2) parcels lacking infrastructure are not available; (3) parcels not suitable for commercial occupancy are not available; (4) land with physical obstacles, such as wetlands, are not available; [(5)] warehouses, industrial plants or areas with a large dedicated use are not available; [(6)] parcels too expensive to convert to commercial site[s] should not be available; and [(7)] parcels that violate N.J.S.A. 2C:34-7 [are not available]. [(Internal citations omitted).]

As explained by the trial judge, the concept of "availability" includes a temporal component, "whether it will become available within a reasonable time," a practical component, whether it has "adequate infrastructure," and a commercial component, whether it "is appropriate for commercial use." In evaluating these factors, the judge determined that:

(1) [Newark] is "within reasonable proximity" to Hott [22]'s current location; (2) it is as accessible by motor vehicle as Hott [22]'s current site; (3) it is within the relevant market area; (4) it is not a prohibited use by all the zoning ordinances; (5) and [it] certainly provided a sufficient number of potential sites to sustain the business.

These restrictions, the judge determined, did "not remove all proposed sites from consideration." In fact, the trial court determined that "defendants have put forth mostly good faith proposals of numerous alternative avenues of expression to which [they have] encountered less than candid, or credible, opposition."

In this respect, the judge found Preiss's opinion persuasive because he identified several towns within the relevant market where sexually orientated businesses could be located without running afoul of local zoning restrictions or N.J.S.A. 2C:34-7. Preiss's report included charts that identified which municipalities permit, restrict, or prohibit sexually oriented businesses. Priess also selected forty-six parcels of land in Newark that could be "available" sites for Hott 22's business. He then analyzed the availability of nineteen specific locations in the industrial area of Newark and opined that approximately six of those locations provided potentially available sites for Hott 22's relocation. From this evidence, the trial judge found that these sites provided available alternative locations within Hott 22's relevant market area*fn5 for the business's relocation.

By contrast, the trial judge rejected as unpersuasive the opinion of Hott 22's expert, Kasler, who attempted to exclude all of the potential sites proposed by the Prosecutor's and the Township's experts. He characterized Kasler's opinion as "more adversarial than expertise." The judge also noted that Kasler "d[id] not specifically address one site, but [spoke] only in generalities" while Preiss identified and analyzed dozens of specific potential relocation sites.

We thus affirm the trial judge's ruling finding that defendants met their burden of proof on the question of available alternative channels for Hott 22's communication. In so doing, we recognize that this finding can be viewed as arguably identifying the relevant market area. That is, the locations of the available sites can create a de facto map from which we can extrapolate the relevant market area. We reject such a boot-strapping approach, however, as inconsistent with the Court's clear analytical mandate in Saddle Brook. Stated differently, the location of a suitable site cannot be used to define the relevant market area. Under Saddle Brook, the concepts of "market area" and "suitable sites" are legally and analytically independent from each other.

Therefore, we affirm the judge's methodology as to what factors must be considered when the court is determining a site's "availability," but remand for the court to apply these factors to establish available sites after the relevant market area has been delineated.

Adequacy of Available Alternative Sites

The third and final factor under Saddle Brook requires the trial court to determine whether the available sites, in relation to the size of the market area, provide a constitutionally sufficient number of alternative sites for the expression of this protected form of speech. Saddle Brook, supra, 156 N.J. at 597. Plaintiff argues that the trial court failed to make this critical analysis.

The Township asserts that the trial judge made this determination by identifying the nineteen proposed sites in Newark as a sufficient number of alternative sites to sustain Hott 22's business. The Prosecutor adopts the Township's position and further contends that this factor does not require the court to identify a precise number of available sites.

We agree with plaintiff's position and remand for the trial court to address this issue directly. Under the third factor in Saddle Brook, the trial court must determine "whether the extent of the alternative opportunities to locate the regulated use is commensurate with the size of the relevant market." Saddle Brook, supra, 156 N.J. at 595. As we emphasized in Cinnaminson, supra, 405 N.J. Super. at 537, this determination is necessarily fact-specific and "will depend upon an exquisite exercise of judicial authority, guided by the fundamental principles embodied in the First Amendment." For example, "five suitable sites within a ten-mile market area may be enough to satisfy constitutional concerns [while t]he same number of suitable sites within a fifty-mile market area may not be." Ibid.

Here, the court merely noted that "a plethora of sites have been proposed" and that "numerous alternative avenues of expression" have been identified by defendants. The court's memorandum of opinion makes no reference to the relationship between the number of proposed sites and the size of the relevant market area for Hott 22's business. Indeed, the court never established the exact size of the market area or the specific number of available sites within that market. Independent of the other deficiencies identified here, this omission alone requires a remand.

III.

In summary, we reverse the trial court's order upholding the constitutionality of N.J.S.A. 2C:34-7 as applied to plaintiff and vacate the injunction against plaintiff. We remand for the court to make the findings required under Saddle Brook with respect to plaintiff's relevant market area. Although we affirm the analysis employed by the court in determining when a site is considered available under Saddle Brook, we remand for the court to apply this reasoning to sites the court finds to be located within the relevant market area. The court must then determine whether the available locations, in relation to the size of the market area, provide a constitutionally sufficient number of alternative sites for plaintiff to operate its sexually oriented business.


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