New Jersey Franchise Agreement Litigation
Rachel Lilienthal Stark, Chair of the Firm's Franchise Group, appeared in the January 24th edition of NJBiz Magazine discussing the enforceability of arbitration clauses in franchise agreements.
New Jersey Supreme Court Empowers Municipalities to Enforce UCC in New Construction
New Jersey's Supreme Court unanimously ruled yesterday, reversing a previously issued lower court ruling, that municipalities are in fact empowered to enforce New Jersey's Uniform Construction Code against builders, developers and contractors even after a home has been sold and occupied by the owner.
New Jersey's builders, developers and contractors had argued that once a new home is sold and then occupied by the owner, only that owner, and not the municipality could enforce the Construction Code. As a result of this decision, municipalities now have the ability to penalize builders, developers and contractors for construction defects plaguing homes and condominiums even after those homes and condominiums have been sold.
You can read the New Jersey Supreme Court Decision here.
Condemnation
The New Jersey Law Journal has recently reported that New Brunswick's Housing Authority will pay $2.05 million to an Investment company that owns homes and commercial properties in the city. The properties have been condemned by the Authority so that they may be converted into low and moderate-cost housing.
The process through which the Housing Authority went through in order to proceed with condemnation began in 2000 when it offered $972,000 for the properties. The property owner, Suydam Investors did not accept the Authority's offer, instead claiming that the properties were worth $2.5 million. Finally a compensation commission determined and awarded the investors $1.7 million.
As is the case with many condemnation proceedings in New Jersey, there was an environmental issue raised. It was alleged that there were contamination of certain properties with asbestos, oil, and lead paint. As such, the authority sued to amend its original valuation so that it could take into account the costs associated with remediation. The matter went to the State Supreme Court which held that contaminated property, when condemned, must be valued as if it has been remediated and the condemnor should reserve the right to maintain a separate action for remediation or cleanup costs.
This case is important since the reported decision confirms that the condemning authority is not allowed to withhold funds for estimated environmental problems, but must deposit the full compensation amount with the court. Secondly, this shows that often times the clean up costs are exaggerated by the condemning authority, and as such, individuals whose property is labeled as having environmental clean up concerns should retain an attorney with a knowledge of the applicable environmental clean up standards in New Jersey.
Bankruptcy Trustee v. Non-Debtor Spouse - Is the Battleground State Court or Bankruptcy Court
The December 2004 edition of the New Jersey Family Lawyer has an article authored by Timothy Duggan, Chair of the Firm's Bankruptcy and Creditor's Rights Group.
The article, Bankruptcy Trustee v. Non-Debtor Spouse - Is the Battleground State Court or Bankruptcy Court discusses the recent New Jersey Bankruptcy Court decision, In Re Howell, and the implications this decision has on matrimonial lawyers.
You can read Mr. Duggan's article here.
New Jersey's First Inspector General
Kevin Hart, Chair of the Firm's Corporate Investigation & White Collar Group, was interviewed by WNBC News New York regarding Acting New Jersey Governor Richard Codey's appointment of Mary Jane Cooper to the position of Inspector General for the State.
The Inspector General of New Jersey will be charged with ferreting out fraud and wasteful spending at all levels of government.
You can read more about this story here.
Sentencing Guidelines
The United States Supreme Court on Wednesday January 12, 2005 rendered the long awaited decision regarding the constitutionality of the U.S. Sentencing Guidelines (Guidelines). In an interesting decision, two separate groups of Justices essentially rendered two opinions in the one case, the first determining that the Guidelines violate the Sixth Amendment, to the extent that they allow judicial rather than jury fact finding to form the basis for the sentence, and the second determining that the Guidelines can continue to be used, as long as they are advisory rather than mandatory.
The background for this decision relates back to the June 2004 decision in Blakely v. Washington, where the Court in a groundbreaking opinion held that Washington State's Guidelines violated the Sixth Amendment guarantee of a trial by jury in criminal cases. Washington's guidelines allowed judges rather than juries to make certain findings of fact that increased an offender's sentence. The Court held that a judge may impose a sentence solely on the basis of facts reflected in the jury verdict or admitted by the defendant.
The U.S. Sentencing Guidelines, like Washington State's allow judicial fact finding to play a role in determining the sentence. After, Blakely the federal courts were immediately faced with the prospect that the Guidelines also violated the Sixth Amendment, thus raising the thorny question of whether all sentences determined under the Guidelines were unconstitutional. Thankfully, the Court granted quick review of two cases that raised the issue, Booker and United States v. Fanfan.
As was set forth above, not surprisingly, a majority of the Court composed of Justices Stevens, Scalia, Souter, Thomas and Ginsburg found the same Sixth Amendment violation that they found in Blakely. The reasoning followed the Scalia opinion in Blakely, by holding that "Any fact which is necessary to support a sentence exceeding the maximum authorized by the facts established by a plea of guilty or a jury verdict must be admitted by the defendant or proved to a jury beyond a reasonable doubt."
In practical terms, a defendant appears for sentencing after having either pled guilty, or having been convicted by a jury. In entering a guilty plea, the defendant must allocute under oath the facts that establish th defendant's guilt. Likewise a jury must make findings of fact, at a minimum, facts necessary to establish that the legal elements of the crime were proven. Fast forwarding to sentencing, the Guideline sentencing range requires a finding as to the "criminal history category" and "offense level". Particularly, with the offense level, the sentencing Judge is required to make factual findings that are often beyond the proven facts including evidence that would not be admissible at trial.
The second part of the Court's holding dealt with whether the Guidelines by virtue of the Sixth Amendment problem are null and void. The Court's answer was surprisingly, no. This answer was given by a different majority comprised of Justices Breyer (a former Chairman of the Sentencing Commission), Rehnquist, O'Connor, Kennedy, and Ginsburg (the one common denominator). This majority sought to determine whether Congress would have intended the Guidelines be defunct, or would it have intended that a partially altered set of Guidelines continue to be in effect.
The Court believed that Congress would have intended the Guidelines to survive in a way that allowed them to comply with the Sixth Amendment. That was accomplished by the Court determining that the Guidelines now become advisory rather than mandatory. Thus the Guidelines help judges choose an appropriate sentence between a statutory maximum and minimum, but no longer dictate the result. Therefore judges must consider the Guidelines, but are not bound to follow them. This is an outcome that few predicted. In fact Justice Stevens noted in his dissent from the second holding, "Neither the Government, nor the respondents, nor any of the numerous amici (friends of the court) has suggested [this]."
The guidelines were intended to create uniformity, certainty and parity in sentencing. Put simply, they were meant to ensure that similarly situated defendants were treated more or less alike. Prior to the Guidelines, the result depended on the particular judge that imposed sentence. The Guidelines by constraining judicial discretion were designed to change that by making sentencing a matter of rational decision making, not just the luck of the draw as to the sentencing judge.
Now that the guidelines are merely advisory, it will be interesting to see if they will continue to serve their purpose. Will judges feel constrained to apply them or will they ignore them. An educated guess is that most judges will continue to follow the guidelines except in those special cases were a judge feels strongly enough to depart from the guidelines, and set forth the reasons for the departure.
The most likely beneficiaries of the new Guideline approach will be those charged with white collar offenses. White collar defendants prior to the Guidelines generally stood a better chance of avoiding jail time. Under the Guidelines the discretion of the sentencing judge was taken away, forcing many judges to impose sentences of incarceration in white collar cases based upon the application of the Guidelines. With that discretion being returned, it will be interesting to see if sentencing judges become more willing to consider non custodial type sentences for first time white collar offenders.
The ball has been passed squarely into the lap of Congress to decide whether a new sentencing system needs to be developed. It will be interesting to see what happens next.
The "Sopranos Suit"
In Baer v. Chase, 2004 WL 350050 (3rd Cir. 2004), which was decided on December 21, 2004, the Third Circuit rejected claims brought by a plaintiff who believed himself to have had a role in the creation and development of the popular HBO show "The Sopranos." The plaintiff brought an action against the creator of The Sopranos alleging breach of contract, fraud, negligent misrepresentation, breach of fiduciary duty, unfair competition, and tortious interference with prospective economic advantage relating to the creator's alleged refusal to pay the Plaintiff for his role in the creation and development of the popular show.
The plaintiff was introduced to the creator of The Sopranos through a mutual friend when the plaintiff, who was an attorney, showed interest in writing, directing, and producing. At a meeting between the plaintiff and the creator in 1995, the plaintiff alleged that he pitched the idea of "a film or television series about the New Jersey mafia." In late 1995, the creator visited New Jersey for "research visit" where the plaintiff arranged meetings for the creator with detectives in northern New Jersey who provided the creator with information, material and personal stories about their experience with organized crime. One of the detectives also served as a tour guide and drove the creator to various locations in northern New Jersey. All the ideas and locations that the plaintiff allegedly contributed existed in the public record. Also in late 1995, Plaintiff reviewed a copy of a draft of The Sopranos screenplay and made various comments. Aside from a letter from the plaintiff to the creator in 1997, the parties' relationship ended in 1995.
According to the plaintiff, the creator of the series orally agreed on three separate occasions that if the show became a success, he would "take care of" plaintiff and "remunerate plaintiff in a manner commensurate with the true value of his services." The alleged oral agreements did not include any fixed term of duration or price.
In May of 2002, the plaintiff brought an action against the creator in Federal Court. The creator thereafter filed a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56(c) alleging that there was no genuine issue as to any material fact and that he was entitled to judgment as a matter of law. The lower court granted the creator's motion finding that 1) plaintiffs contract claims were unenforceable due to vagueness, uncertainty, and lack of essential terms in the contract; 2) the statute of limitations barred the quasi contract claim; and 3) the misappropriation tort claim was without merit due to lack of novelty. The plaintiff appealed and the Third Circuit affirmed in part and reversed in part. The Third Circuit held that because the lower court disregarded the plaintiff's certification, which, if included may have precluded a grant of summary judgment on the statute of limitations issue, the case was remanded to the lower court for further proceedings solely on that claim.
Nonconforming Use
On December 22, 2004, the Appellate Division in S & S Auto Sales, Inc. v. Zoning Board of Adjustment for Borough of Stratford squarely rejected an attempt on the part of a municipality to nullify a legal, nonconforming auto sales business based mostly, if not exclusively, upon the cessation of the protected use without adequately looking at and weighing such factors, as the cause of the abandonment, efforts to resume the operation "and any other objective manifestations supporting or negating the owner's expressed intention to continue the use." According to the court, the municipality "glaringly" omitted from its consideration, among other things, "ongoing efforts to cause a resumption of automobile sales activities" and the absence of any attempt on the part of the business operator "to use or market the property for use for any other purpose."
The court further held that the so-called objective discontinuance test requiring termination of a nonconforming use upon the mere abandonment thereof for a set period of time, which is used in a minority of states and was employed by the lower court in this instance, "is not permissible in New Jersey under our well-settled jurisprudence" and is contrary to the dictates of the Municipal Land Use Law.
The importance of the S & S Auto Sales decision is two-fold. First, by highlighting many of the things that can (and should) be done to protect the status of a nonconforming use during times of cessation, the S & S Auto Sales is an invaluable resource for anyone who holds an interest in a legal, nonconforming use. The S & S Auto Sales case also serves to reinforce and clarify existing precedent dealing with a municipality's power to knock out politically unpopular or generally unwanted nonconforming establishments by requiring zoning boards of adjustment to find that there has been an actual intent to abandon before terminating a nonconforming use and (in dictum) by prohibiting local ordinances that might seek to institute a per se termination rule.
Condo Owners Face Daunting Repair Bills
A. Christopher Florio, Co-Chair of the Firm's Community Associations Group appeared in a January 12, 2005 Trenton Times article concerning necessary repairs which must be made by the Grandville Condominium Association in Hamilton New Jersey. Mr. Florio is the board's attorney.
The association of 352 condominiums is facing a special assessment of $2.5 million (as much as $8,500 per condo) to repair structural damage to the development's condominiums that was discovered 18 months ago.
You can read the Times article here.
Third Circuit Lowers Standard for Plaintiffs in Price Fixing Antitrust Litigation
In a major decision recently issued by the Third Circuit Court of Appeals, the court lowered the standard for Plaintiffs in proving price fixing in antitrust litigation. In In re Flat Glass Anti-Trust Litigation, 385 F.3d 350 (3d Cir. 2004), the court reversed the decision of the lower court granting summary judgment in favor of a defendant in an anti-trust class action where the plaintiffs alleged that five of the primary manufacturers of glass in the United States conspired to fix prices from 1991 to 1995 for glass made for use in residential and commercial construction as well as for automobiles. The lower court found that summary judgment should be granted in the defendant's favor because it found no data which indicated that the prices paid by glass purchasers rose during the period in question. The lower court also found that even though the manufacturers' prices were similar during the same periods of time this was not in and of itself indicative that a price fixing conspiracy was taking place.
The Third Circuit Court of Appeals affirmed the lower court's decision regarding the automotive glass business. It nevertheless reversed the lower court regarding the architectural glass business holding that the defendant manufacturer could not sufficiently prove on summary judgment that there was no conspiracy to fix glass prices. The court conclusively rejected the argument that transactional prices must rise in order to prove that price fixing has occurred because an agreement to fix prices is per se violation of the Sherman Act. The court found that Defendants repeatedly raised list prices with an intended effect of rasing transactional prices. Though the transactional prices did not rise, this had no effect on whether the conspiracy did or did not exist.
The court performed a detailed factual analysis, finding that the evidence was sufficient to provide a finder of fact with a reasonable basis to conclude that there was a price conspiracy. There were several instances where the manufacturers issued price increase announcements for approximately the same amounts and in approximately the same time period. In addition, on several occasions, announcements regarding the price increases occurred immediately after the upper level executives of the conspirators held joint meetings. The court held that even though the content of such meetings was largely unknown, the fact that the meetings existed served as an adverse inference against the defendant manufacturer. Finally, the court looked to several internal documents of the conspirators which accurately predicted the price increases well before they were announced. Based on these findings, the court held that there was sufficient evidence in the record to prove that the defendant conspired with the other manufacturers to fix prices.
In the past plaintiffs had an extremely high hurdle to get over for summary judgment in anti-trust cases based on circumstantial evidence because courts did not want to stifle or discourage competition in the marketplace. The Flat Glass decision seems to suggest that the Third Circuit may be moving in another direction.
