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Richard A. Murray; Allen Usdan and v. Borough of Beach Haven

October 24, 2012

RICHARD A. MURRAY; ALLEN USDAN AND MARION USDAN; DOUGLAS PHILLIPS AND ELIZABETH PHILLIPS; MICHAEL BRAITHWAITE AND MARIANNE DESKA; JOANNE THEBADO; RALPH DELIBERO AND LISA DELIBERO; JOHN COSTANZO AND KAREN COSTANZO; VAN ANGELAKOS AND ELIZABETH ANGELAKOS; WILLIAM HENTHORNE AND EILEEN HENTHORNE; DOROTHY TOMINARO; RICHARD KURZ AND SUSAN KURZ; DOROTHY WILDER; JOSEPH ZUBECK; THOMAS ANGELL, JR.; KERRY HIGGINS; KATHLEEN SHEEDY; AND DAVID GURTCHEFF AND SHARON GURTHCHEFF, PLAINTIFFS-RESPONDENTS,
v.
BOROUGH OF BEACH HAVEN, DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. C-88-2011.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted October 10, 2012 -

Before Judges Fisher, Alvarez, and Waugh.

Defendant Borough of Beach Haven (Borough) appeals the Chancery Division's March 16, 2012 order denying its application for counsel fees and costs pursuant to N.J.S.A. 2A:15-59.1 and Rule 1:4-8. We affirm.

The underlying dispute between plaintiffs, who are individual owners of the fifteen residential units which comprise Shelter Cove Condominiums (Shelter Cove), and the Borough concerned Ordinance 2010-25, which governs the installation of remote-read water meters. The purpose of the ordinance was to provide accurate readings of water use in the Borough so that it could move from billing property owners a flat rate for water based upon the number of fixtures in residential units to billing based on residents' actual consumption of water. The Borough acted to comply with State requirements that there be a separate water meter for each residential unit.

Plaintiffs' May 17, 2011 verified complaint and application for a temporary restraining order sought to compel the Borough to fund the installation of new remote-read water meters at Shelter Cove and to prohibit the Borough from shutting off water service to residential units that did not comply with the ordinance. Plaintiffs challenged the ordinance's differential treatment of residences depending on their configuration.

Single family homes were generally to have the meters installed at public expense, while condominium owners were generally given the meters at no cost but required to pay for installation because the Borough's contractor initially could not install meters on private property. The Borough filed a counterclaim under the New Jersey Frivolous Litigation Act, N.J.S.A. 2:15- 59.1. It also served plaintiffs with a notice, pursuant to Rule 1:4-8(b), demanding that the complaint be withdrawn.

The trial judge declined to enter the temporary restraints sought by plaintiffs, but the Borough agreed not to shut off the water supply of non-compliant units pending disposition of the litigation. The Borough eventually modified the ordinance to provide an exemption for condominiums at which the installation expense would exceed $2500. The units at Shelter Cove did not qualify for that exemption.

Following completion of discovery, the Borough successfully moved for summary judgment. The trial judge granted the motion, concluding that plaintiffs had not overcome the presumption of validity attached to the enactment of the ordinances in question. With respect to plaintiffs' constitutional challenge to the manner in which the Borough implemented its water metering system, the judge declined to find that the plaintiff condominium owners were the subject of unlawful discriminatory treatment.

The Borough then moved for sanctions. The judge denied the Borough's request for sanctions and costs in a thorough and thoughtful letter opinion. He explained his reasons as follows:

The disposition of the summary judgment motion ultimately turned on the Borough's right to make a reasonable distinction between different classes of ownership. Although the court was satisfied that the Borough did make a reasonable classification among uniform users, the court must use a different standard in determining whether plaintiffs' position was frivolous. Because the Borough does not claim any bad faith, purpose to harass, or delay on the part of the plaintiffs, it must show that the plaintiffs knew or should have known that the litigation was without reasonable basis in law or equity. Here, that requires a showing that the plaintiffs should have known that there was no legal basis for claiming that the distinction drawn by the Borough was an unreasonable one and that there was no equitable argument that owners of multiple-family units should not be required to pay for installation where single-family units bore no such cost.

At the institution of this litigation, plaintiffs could reasonably view Ordinance 2010-25 and the Borough's plan for the installation of meters as treating single-family units different[ly] than multi-family units. More specifically, single-family units were incurring no expense because a meter pit was invariably installed along the public thoroughfare by the Borough's contractor. With multi-family units, everyone involved agreed that the installation of separate meter pits was impractical and cost prohibitive. As such, multi-family unit owners were subject to a different treatment. The question is whether the different treatment was arbitrary or unreasonable. In the context of a prerogative writ challenge, reasonable arguments can be advanced as to whether a municipality has acted within its lawful discretion as was the case here.

There are several arguments that cut against the reasonableness of the Borough's distinction. While the court determined that these facts do not render the distinction unreasonable, they provide a sufficient basis of fact for the plaintiffs to mount a challenge against that distinction without the challenge being labeled "frivolous." The plaintiffs argued that the Borough was receiving as much as four million dollars in grants and low-interest loans to provide and install the water meters. This fact at least supplies some basis for plaintiffs' argument that the ...


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