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Kane Properties, LLC v. City of Hoboken

Supreme Court of New Jersey

June 26, 2013

KANE PROPERTIES, LLC, Plaintiff-Appellant and Cross-Respondent,
v.
CITY OF HOBOKEN, NEW JERSEY and CITY OF HOBOKEN CITY COUNCIL, Defendants-Respondents and Cross-Appellants.

Argued February 26, 2013

On certification to the Superior Court, Appellate Division, whose opinion is reported at 423 N.J.Super. 49 (2011).

Arnold K. Mytelka argued the cause for appellant and cross-respondent (Kraemer Burns, attorneys; Mr. Mytelka and John A. Avery, on the briefs).

Edward J. Buzak argued the cause for respondents and cross-appellants (The Buzak Law Group, attorneys; Mr. Buzak and Susan L. Crawford, on the briefs).

HOENS, J., writing for a unanimous Court.

In this appeal, the Court determines the standard that governs the evaluation of a municipal attorney's conflict of interest and the appropriate remedy for a conflict that tainted a City Council's zoning decision.

Plaintiff Kane Properties, LLC, contracted to purchase a piece of property located in Hoboken's I-2 industrial zone and applied to the Hoboken Zoning Board for variances necessary to construct a residential building. At the Zoning Board's hearings, the principal objector to the development proposal, Skyline Condominium Association, Inc., was represented by Michael Kates, Esq. Kates cross-examined plaintiff's witnesses and presented evidence and witnesses in opposition to plaintiff's application. The Zoning Board granted the requested variances and adopted a resolution memorializing its decision. On December 31, 2009, Skyline appealed to the Hoboken City Council. W. Mark O'Brien, Esq., was substituted for Kates as Skyline's attorney because Kates had accepted an appointment as Hoboken's Corporation Counsel, making him the City Council's attorney. On January 11, 2010, Kates wrote to counsel for plaintiff and Skyline informing them of the procedures that govern appeals to the City Council. After plaintiff's attorney objected to Kates's participation due to his previous involvement as Skyline's counsel, Kates recused himself from the appeal. Edward J. Buzak, Esq., took over as the City Council's attorney.

On February 5, 2010, Kates forwarded a generic legal memorandum to the City Council detailing the procedures to be used in conducting appellate hearings of Zoning Board decisions. Buzak subsequently sent a memorandum to the City Council concerning the Skyline appeal that attached a copy of the Kates memorandum. Plaintiff's attorney objected to the submission of any legal memorandum from Kates. On March 24, 2010, the City Council held a hearing on the Skyline appeal. Buzak appeared as the City Council's attorney, and Kates was not present. The City Council reversed the Zoning Board's decision granting the variances. On May 5, 2010, the City Council met to consider a resolution memorializing its decision. Kates attended the May 5 meeting as Corporation Counsel. He actively participated in the meeting by answering questions about voting procedures that were posed by Council members. Moreover, after the Council had voted favorably on the resolution, Kates signed the resolution on the line indicating that he had approved it. As part of the City Council's reasons for its decision, it noted that there had been prior proposals to amend the ordinance to allow residential uses in the zone, and it deliberately decided not to make such amendments to the zoning ordinance.

On June 24, 2010, plaintiff initiated an action in lieu of prerogative writs challenging the City Council's decision. Plaintiff argued that Kates's involvement in the Skyline appeal in spite of a conflict of interest had irreparably tainted the City Council's decision. The trial court affirmed the City Council's decision. In evaluating the alleged conflict of interest, the trial court applied an actual prejudice standard and found no evidence that the City Council's decision was impacted by Kates's participation. Plaintiff appealed to the Appellate Division. After applying an appearance of impropriety standard and finding a conflict of interest, the panel concluded that Kates's participation in the appeal tainted the City Council's action. The matter was remanded to the City Council for a proceeding de novo. Kane Props., L.L.C. v. City of Hoboken, 423 N.J.Super. 49 (App. Div. 2011). Plaintiff filed a petition for certification arguing that a remand back to the City Council was inappropriate. Defendants cross-petitioned on the conflict of interest issue. The Court granted plaintiff's petition and defendants' cross-petition. 209 N.J. 597 (2012).

HELD: The appearance of impropriety standard governs the evaluation of a municipal attorney's conflict of interest. The City Council's decision is set aside because it was tainted by its attorney's conflict of interest. In these unusual circumstances, to balance the rights of the parties and recognize the proper roles of the relevant decision-making bodies, the Court remands this matter to the Law Division for a de novo review of the Zoning Board's resolution, and directs the court to entertain the City Council's arguments or supplements to the record that bear upon its own expertise and knowledge of the zoning scheme and give due consideration to the City Council's evaluation of the proposed use variances.

1.Although an attorney's claimed conflict of interest is no longer evaluated in accordance with the appearance of impropriety standard, that standard remains applicable to judges and municipal officials acting in a quasi-judicial capacity. The Court finds no basis on which to conclude that a different standard should apply to an attorney advising a governing body in its performance of a quasi-judicial act. Pursuant to the appearance of impropriety standard, it is not necessary to prove actual prejudice; rather, there must be an objectively reasonable belief that the proceedings were unfair. DeNike v. Cupo, 196 N.J. 502 (2008). (pp. 25-31)

2. An objectively reasonable, fully informed member of the public would perceive that Kates's participation in the proceedings calls into question the impartiality of the governing body and the integrity of the proceedings. Even if the other acts by Kates could be excused, there is no ground on which to conclude that his involvement during the May 5 meeting was appropriate. Kates acted as counsel to the governing body, he answered questions from Council members, he advised them on voting procedures, and he signed the resolution following their vote. Recusal of an attorney advising a municipal decision-making body must involve a complete separation from any aspect of the matter whatsoever to safeguard public confidence. Because Kates's incomplete recusal irretrievably tainted the action taken thereafter by the City Council, its decision must be set aside. (pp. 31-34)

3. The determination of the appropriate forum for further proceedings requires an evaluation of the role played by each of the decision-making bodies relevant to this dispute. The Municipal Land Use Law (MLUL), N.J.S.A. 40:55D-1 to -163, permits responsibility for decisions on land use applications, in general, to be divided between the planning board and the zoning board. A party aggrieved by the decision of a board can appeal to the Law Division by filing an action in lieu of prerogative writs. See R. 4:69-1 to -7. The decision is reviewed to determine if it is arbitrary, capricious or unreasonable, and the board's factual determinations are presumed to be valid. The MLUL also permits a party to appeal to the municipality's governing body, but only if it is permitted by ordinance and only from a board decision granting a use variance pursuant to N.J.S.A. 40:55D-70(d). N.J.S.A. 40:55D-17(a). In that circumstance, the governing body conducts a de novo review, limited to consideration of the record established before the zoning board, and need not accord the zoning board any deference. The governing body may apply its own "expertise and knowledge" of the community and its own view of the overall plan for the zone. Evesham Twp. Bd. of Adjustment v. Evesham Twp. Council, 86 N.J. 295 (1981). A court reviewing a governing body's action must defer to its judgment and knowledge of local conditions as long as its decision does not amount to an abuse of discretion. (pp. 34-42)

4. The choice of a forum for the proceedings on remand dictates the degree of deference to be accorded to the zoning board's resolution. A remand to the City Council would uphold the governing body's election to retain oversight of the Zoning Board's decision to grant use variances, but would not cure the taint of the conflict of interest. A remand to the Law Division, in circumstances in which the City Council's determinations have been stricken, would elevate the Zoning Board's decision by giving it deference that is inappropriate in light of the role that should be played by the City Council. In these unusual circumstances, the Court crafts a remedy that will balance the rights of the parties and recognize the proper roles that would ordinarily be played in the process by the two levels of municipal decision makers. The matter is remanded to the Law Division, which shall conduct a de novo review of the Zoning Board's resolution. The Law Division shall entertain such arguments or supplements to the record that the City Council may present bearing upon its own "expertise and knowledge" of the zoning scheme. The court shall also give due consideration to the City Council's evaluation of whether the proposed use variances satisfy the positive and negative criteria imposed by the MLUL. Finally, in recognition of the appearance of impropriety standard, the remanded matter should be assigned to a judge who has not previously evaluated the matters in dispute. (pp. 42-45)

The judgment of the Appellate Division is AFFIRMED AS MODIFIED and the matter is REMANDED to the Law Division for proceedings consistent with this opinion.

CHIEF JUSTICE RABNER; JUSTICES LaVECCHIA, ALBIN, and PATTERSON; and JUDGES RODRÍGUEZ and CUFF (both temporarily assigned) join in JUSTICE HOENS's opinion.

OPINION

HOENS JUSTICE

The matter before this Court relates to the claim of a property owner who successfully sought a use variance before the local Zoning Board, only to see that grant of relief reversed by the municipality's governing body. Believing that the decision of the governing body was tainted because one of the municipal attorneys who participated in the governing body's proceedings had represented the principal objector to the project before the Zoning Board, the property owner filed a complaint to commence an action in lieu of prerogative writs.

In that proceeding, the trial court agreed that the municipal attorney had a conflict of interest but found no evidence that it had affected the decision of the governing body. As a result, the trial court conducted its de novo review of the decision of the governing body and, concluding that it was not arbitrary, capricious or unreasonable, let it stand.

The property owner, still aggrieved, next pursued its appellate remedies. The Appellate Division first found that although the municipal attorney had recognized that his prior representation of the objector created a conflict of interest and had announced that he would recuse himself from the proceedings before the governing body, his recusal was not complete. Furthermore, the appellate panel concluded that, because the attorney had participated in certain aspects of the proceedings before the governing body, the attorney's conflict of interest had tainted the governing body's decision.

Disagreeing with the trial court's view that the property owner was required to demonstrate that the attorney's involvement had an actual effect on the governing body's decision, and relying instead on the appearance of impropriety standard, the Appellate Division concluded that the governing body's decision could not be sustained. The appellate panel therefore vacated that decision and remanded the dispute back to the governing body, with instructions that it hear the matter anew.

This series of events spawned cross-petitions for certification which present two issues for this Court's consideration. The first issue relates to conflicts of interest of municipal attorneys. More particularly, we are called upon to determine the standards that govern the evaluation of such conflicts of interest, the obligations that recusal imposes on an attorney in order to adequately address a conflict of interest, and whether involvement in a matter by an attorney who was required to be recused can be excused as harmless to the outcome. The second issue before this Court is, assuming that the municipal attorney's involvement tainted the proceedings before the governing body and that its decision on the merits must be vacated, what is the appropriate remedy and the proper forum for further proceedings on the underlying application.

I.

We derive our recitation of the facts from the record developed before the municipal Zoning Board and the governing body.

Plaintiff Kane Properties, LLC, has a contract to buy a piece of property located at 511-521 Newark Street in Hoboken. The property is located in Hoboken's I-2 zone, which is an industrial district where food processing, storage and distribution activities, manufacturing, fabricating operations, retail businesses and services, public buildings, parking facilities, parks, playgrounds, and wireless telecommunications towers are permitted uses.

At all times relevant to this matter, the property was owned by Anthony Rey. From 1980 to 2001, Rey operated a wholesale meat business known as Rey Foods at the site. Over time, as the general area around the site, both in Hoboken and in neighboring Jersey City, became gentrified, residential neighbors began to voice complaints about noise and odors emanating from Rey's business. The complaints came principally from the tenants of a nearby high-rise condominium complex known as Skyline Condominiums.

By 2001, largely due to the increasingly frequent complaints from the Skyline tenants, Rey ceased operating his business at the Hoboken site and moved the business to North Bergen. The Hoboken property has remained vacant since that time and plaintiff's contract to purchase it is conditioned on plaintiff being able to obtain the necessary variances for its proposed development plan.

A.

In 2009, plaintiff submitted an application to the Zoning Board of Adjustment of the City of Hoboken to develop the property. Plaintiff proposed to demolish the vacant buildings and to replace them with a twelve-story high-rise residential building. The new building was designed to contain seventy-two dwelling units, 1, 700 square feet of space for a nursery school and daycare center, and seventy-eight parking spaces. Plaintiff's application included a request for site plan approval as well as requests for numerous variances. Among them were requests for use variances to permit residential and childcare uses, variances to permit deviations from the floor area ratio and height limitations, and several variances for deviations from depth, lot coverage, and front- and rear-yard setback requirements. The Zoning Board held public hearings on five dates during September, October, and November 2009. Because of the nature of the arguments on appeal, we need only focus on the testimony relating to the application for a residential use variance.

Plaintiff first introduced testimony from Rey, who described the increasing difficulty he had encountered in conducting his wholesale meat operation at the property, all of which he attributed to the changing character of the neighborhood. Rey pointed to a 1992 notice that he had received from the City of Hoboken informing him that the noises made by the delivery trucks that brought meat to his place of business were causing "major disturbances in the area of the Skyline apartments."

Rey explained that although the delivery trucks were required to keep their motors running to maintain the temperature needed to keep their cargo of meat refrigerated, the Skyline tenants complained that this caused noise and pollution that adversely affected their health, safety, and welfare. As a result of their complaints, the Hoboken police served Rey with the 1992 notice ordering him to instruct the drivers of the delivery trucks to turn their motors off. Rey testified that, had he complied with that directive, he would have been in violation of the regulations imposed on him by the United States Department of Agriculture governing the safe handling of meat. Nonetheless, the notice threatened Rey with fines and with closure of his business if he failed to comply, and the police began ticketing delivery trucks parked outside of his business.

Rey eventually moved his business operation from Hoboken to North Bergen because of the difficulty he had encountered at the Newark Street location. After moving, he retained possession of the property and he testified that he attempted to sell or lease it to a fish wholesaler and to a pastry importer without success. Although he was unable to recall the names of those potential buyers, Rey testified that each had declined to proceed with a purchase of the property because of the past difficulties Rey had experienced with the neighbors and the police.

Rey conceded that he never listed the property with a broker and he testified that it never occurred to him to try to sell the property to other dissimilar, but permitted, businesses, such as retail establishments. He explained that his efforts to sell were limited because much of the building was filled with costly refrigeration equipment that he thought would be useful only to a purchaser in a business similar in kind to his meat operation.

Plaintiff then presented the testimony of an architect who described the proposed building's design, a traffic engineer who discussed potential impacts on traffic, and a licensed professional planner who testified that, in his professional opinion, the requested variances should be granted.

The planner's testimony is the most important for our consideration of this appeal. He testified that he believed the property had been zoned into inutility because the permitted industrial uses in the zone were ones that were declining in Hoboken. He found support for this opinion by observing that only half of the property in the zone was devoted to permitted uses. He opined that the permitted uses therefore had become obsolete ones that the site could no longer accommodate. He described residential buildings as representing the emerging use, pointing to several high-rise residential buildings adjacent to or near this property.

Plaintiff's planner also opined that the property could not be used for any of the nonindustrial permitted uses in the zone, including retail businesses and services, because of the property's size, parking and traffic concerns, and because of the numerous existing similar businesses that were located nearby. He concluded that requiring the property to comply with the permitted uses in the zone would create an undue hardship.

Consistent with the required analysis of the positive and negative criteria, the planner offered his opinion that the proposed development would improve the visual environment of the streetscape for this gateway area of Hoboken. Moreover, he maintained that granting a use variance to enable plaintiff to build the proposed residential development on the site would be consistent with the City's Master Plan, which designates the area as an industrial transition zone and which recommends that residential uses be permitted. Plaintiff's expert planner found further support for his opinion by pointing to the fact that the rear line of the property borders the neighboring municipality of Jersey City, where high-rise residential buildings are a permitted use.

In summarizing his opinion, the planner testified that he believed that plaintiff's application satisfied the statutory requirements for the requested use variances because the property could not reasonably be adapted to a conforming ...


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