Proposed Increase in Compensation for Mediation Services

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Prompted by a recommendation by the New Jersey Supreme Court Committee on Complimentary Dispute Resolution, there is a proposal pending to raise the compensation for Court-referred mediators to $100 per hour for the first three hours of the mediator's services.

At present, the first three hours of the mediator's time is without compensation. This has been the arrangement since Court-referred mediation began in the New Jersey Superior Court in 2000. After the first three hours, mediators may charge customary hourly rates which average $250 to $300 per hour. These fees are split between the parties.

The current proposal is a result of increasing dissatisfaction among mediators, causing many to leave the ranks. The Court initiated program, which assigns most cases out for mediation within approximately 90 days after an Answer is filed to the Complaint, is operating in 17 counties, pending likely extension to all 21 counties. This program involves referral of more than 5,000 cases a year.

Extending compensation at $100 per hour for the first three hours, will likely cause some highly qualified mediators to return to the active roster, thereby making available to litigants mediators with greater expertise and increasing the likelihood that cases will be resolved through the process. The goal of mediation is to create an environment within which the parties can settle their disputes before each side has spent considerable sums in attorneys and expert fees, monies which could be better spent, or saved, as part of a settlement of the dispute.

The program has been quite effective and has not only resolved many cases, but has also exposed litigants to alternate means of resolving disputes. In some ways this has humanized the legal system for people otherwise anticipating long, drawn out expensive legal battles.

This should be a positive development, if adopted by the Court, and renew vigor to a program which has demonstrated its rightful place as a means of settling all manner of legal disputes, from the smallest neighborhood dispute to multi-million dollar commercial cases.

Condominium Association Not Automatically Responsible in Water Damage Cases

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Condominium owners often believe that water damage to their units automatically makes that Condominium Association responsible for repairs. Fortunately for New Jersey's condominiums, that is not the law. Last week, I along with Deborah Dunn, a member of the Firm's Community Association group, won a summary judgment motion on behalf of an Ocean City, New Jersey Hotel Condominium against a unit owner that claimed to have suffered interior water-related damage.

This owner believed that he could prevail without an expert to testify that the damage suffered in the unit was proximately caused by the Association's action or inaction. The owner, incorrectly, believed that all he had to do was establish that there was water damage to his unit, and the court would rule that the condominium was at fault. The trial court rejected this belief, criticizing the owner's "leap" to his conclusions against the condominium.

This decision shows yet again that condominium owners will mostly need experts to previal in a leak-related lawsuit against a condominium. It further shows that a condominium is not automatically responsible for any water damage to a condominium unit.

When faced with an owner claim regarding water damage to a unit, a condominium must investigate the leak to ensure that it is not, in fact, related to a "common element". If it is, the condominium then, of course, must act to stop the leak and preserve the property (in such a situation, the condominium may still not be responsible for the damages, but that's a topic for another time). If it is not, the Association should put the affected owner(s) in contact with the owner(s) responsible for the pipe, for example, so that they can all work together to address the leak and resulting damages.

Once the relevant owners are involved, the condominium may have an obligation to make its alternative dispute resolution process available to all owner, so that they can work out responsibility, damages, etc. short of litigation. Here, the Association has no obligation other than to make the ADR available (it cannot force any of the involved owner to participate).

Family Law in New Jersey - Back To Basics

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Back to Basics

For a broken family law system, the answer may be found in successfully settled cases, not 'Best Practices'

By Robert Durst


No section of our courts has a higher duty to the persons it serves than the Family Part. Virtually every Family Part matter directly impacts not only the litigants themselves, but the lives of third parties indirectly involved in the litigation. Children's rights to spend time with their respective parents are determined, extended family members' rights are often affected and even business partners are sometimes impacted by a pending Family Part matter.

No other section of our court system receives more multiple page motions, decides more pendente lite issues and exercises more discretion in interpreting and applying such nebulous concepts as "equitable" distribution and the "best interest" of a child.

Both the bench and bar have consistently sought -- through the Family Part Practice Committee, commissioned studies and CLE programs -- to improve the Family Part's ability to deliver the highest quality of service to those litigant's who place their trust and confidence in our system.

The question, however, is, despite our best intentions, have we lost our way, and, if so, how can we recover?

Best Practices Not the Best?
In the late 1990's, a study committee, chaired by The Honorable Linda R. Feinberg and Lee Hymerling, assessed the then status of the Family Part. After months of focus groups, public hearings and input from both the Bench and Bar, the message delivered to the Feinberg-Hymerling Committee was unequivocal - "It costs too much and takes too long."

Litigants, lawyers and judges were virtually unanimous in their conclusion that the processing of matrimonial actions had become far too lengthy and expensive. The study revealed that the back logs in some counties were as long as five to eight years. In part, the Feinberg-Hymerling Committee's work resulted in "Best Practices" being implemented in the Family Part.

It was the well-meaning intention of Best Practices to move cases in an efficient fashion reducing both cost and time. Has it succeeded? Probably not.

The application of Best Practice standards varies so widely from county to county that it is virtually ineffective. Some counties apply Best Practice standards rigidly, while others do little more than pay it lip service. Practitioners tend to not take it seriously because most courts do not. Litigant's complain that Best Practices either pressure them to act too quickly, or, alternatively, Best Practices are not enforced and their cases languish.

Our efforts to expedite the system produce as many inequities as benefits. Any experienced matrimonial attorney or jurist knows that there is a synergy to a case, a period of adjustment and emotional reaction that must occur, and that timing is the essence of virtually every settlement. Unfortunately, rigid time standards do not take into account any of these human variables.

Becoming Cost Prohibitive
Not only have hourly rates for average matrimonial lawyers now risen to a $250 to $350 range, but experienced counsel rates are now approaching $500 per hour. Even as little as forty hours (the equivalent of one work week) results in minimum fees of $10,000 to as much as $20,000.

To make matters worse, the hours counsel expends are often not the result of reasoned judgment, but an attempt to avoid future allegations of malpractice. Numerous hours are spent on extensive discovery (whether such discovery is necessary is another issue), multiple appearances for repetitive case management conferences and, in those cases which do proceed to litigation, direct and cross examination on virtually every facet of the litigant's personal and financial life.

The system has also spawned a variety of new experts, including: forensic psychologists, forensic accountants, real estate appraisers, lifestyle analysts and vocational and earning potential analysts. In routine cases, it is not unusual to see expert witness fees of $5,000 to $10,000 and, in a complex matter, expert fees often equal or exceed counsel fees.

The decision to use an expert is often not a reasoned judgment, but the result of counsel's perceived need to avoid the future criticism of not having produced such experts. On this basis, counsel will hire experts to recapitulate the parties' marital lifestyle, offer psychological testimony on virtually any issue which impacts the parenting time or custody, or impute income to persons who have not actively worked outside the home sometimes for as long as 25 or 30 years.

Dissatisfied Clients
An equal number of clients complain that the system is moving "too fast" or "too slow." They also believe that it is too costly. As early as 1979, interim report of the first "Pashman Committee" stated that: "a clients often feel that they have not received adequate return for money paid...."

Twenty-two years later, the Feinberg-Hymerling Committee received the same message. Thus, for over 25 years, and through multiple studies, we have yet to develop a system which satisfactorily serves the public.

The inescapable conclusion is that we are creating a "have and have not" legal system for matrimonial litigants. Those with unlimited resources can engage competent counsel and experts, those without such resources cannot. An average working-class family with a combined income of low six figures and two or three children literally cannot afford to access our system. To expend legal and attorneys' fees in a combined total of $40,000 to $50,000 is unaffordable, and in many instances, virtually bankrupts such families.

Even middle aged professional couples with combined income in the mid-six figures, very often, with the expenses of private secondary schooling or college, second homes and upper middle income lifestyle, cannot afford to spend a combined total of $100,000 to $150,000 on legal fees and experts. It is only the families with virtually unlimited discretionary income that can fully access and utilize the cadre of experts which can be employed in a matrimonial case and to afford high-quality legal services. Statistically such families are in the top 1 percent to 2 percent of the general population.

Thus, we have created a system which effectively serves only an extremely small percentage of the public. Any system of justice which serves such a small minority is not only intrinsically immoral, but destined to fail. How do we right this runaway train of escalating legal fees, expert fees and the timely delivery of justice?

Thinking Outside the Box
One would think that our now 30-plus years of commissions, study groups and committees would have created a more effective means of disposing of these matters. But, perhaps the ineffectiveness is in part because we continue to evaluate and work from existing models.

Certainly, there are those cases which will continue through the litigation process and can only ultimately be resolved by trial and judicial decision. Statistically, however, we know that that accounts for only about 1 percent of all Family Part cases. How do we service the other 99 percent? A system founded on litigation is not the answer.

Mediation has been tried on both a voluntary and involuntary basis. The mediation pilot program has been in effect in several pilot counties for years. Mediation has unquestionably resulted in the resolution of many cases, but, has not universally solved the problems. Arbitration is growing in popularity, but many practitioners and litigants remain opposed to arbitration based on their own perceptions.

Hearing officers have been used in discrete areas of the practice. Suggestions have been made to attempt a Master's system similar to the Pennsylvania system, but there is no data which would suggest that the use of Masters is any more effective than other existing systems. Good argument is often made that it simply adds another layer to the process.

In short, there is no readily apparent answer. However, a solution must be developed before for the cost and sheer numbers of matrimonial litigation further frustrates litigants and breaks down our system.

We constantly struggle for an alternative, but the answer was identified and articulated over a quarter of a century ago when the second Pashman Committee's report stated the following:


The personal attributes of Family Part Judges are critical. The Judges must be learned both in the law and behavioral science and able to apply them to complex factual situations... A Family Part Judge needs physical and mental energy, confidence, patience and an accepting, sympathetic and open mind... Most importantly, Family Part Judges must have a personal gyroscope which enables them to stay level and adhere to Kipling's admonition to 'keep your head when all about you are losing theirs'...

Even with training, some Judges will never have (the necessary) attributes. It is incumbent upon the Assignment Judges and the Chief Justice to carefully evaluate persons whom they are considering for recommendation and assignment to the Family Part.

As to counsel, the committee said:


Attorneys must educate their clients about the need to disclose financial information and to compromise... the attorney's responsibility is that clients must recognize that the Courts are not tools for spousal revenge.

It requires greater courage, more patience and many times a higher level of professional skill to negotiate a fair settlement than it does to litigate Family Law issues.

These concepts are as sound today as they were in 1989. The answer is not to impose a rigid Best Practice system to track the progress of a matrimonial case through the litigation process, evaluate our Family Part Judges "by the numbers," or equate good matrimonial lawyering with trials. The answer is found in successfully settled cases.

Indeed, as we struggle to develop new methodology for servicing matrimonial litigants, we should, perhaps, simply return to basics. Perhaps, as concisely articulated by Justice Pashman over 25 years ago, the answers are simply lodged in the minds, skills and attitudes of the bench and bar. A system of judges with the right traits and lawyers with the courage to settle, may indeed, be how we find our way again.

This article originally appeared in the August 15, 2005 New Jersey Law Journal's Family Law Supplement.

New Jersey Legal Update - Podcast #8

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This week's New Jersey Legal Update podcast will discuss the New Jersey Consumer Fraud Act and what it means to businesses in the Garden State.

This week's New Jersey Legal Update is presented by Scott Unger, a member of the Firm's Litigation group.

You can download the New Jersey Legal Update Podcast # 8 here.(14MB)

NJ's Condominium Act and Planned Real Estate Development Full Disclosure Act

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In what may be the first appeal of its kind, Stark & Stark's Community Association group was able to secure the New Jersey Appellate Court's reversal of a trial court's refusal to order a condominium developer to provide a very detailed affidavit, in accordance with New Jersey's Condominium Act (PDF), N.J.S.A. 46:8B-12.1d (the "Condominium Act"), and New Jersey's Planned Real Estate Development Full Disclosure Act, N.J.S.A 45:22A-21 et seq. ("PREDFDA")

In this case, the condominium's developer provided the plans, etc. it used to develop the project. However, this developer refused to provide an affidavit, required by the Condominium Act, with a specific listing of each plan, by sheet number, content and last revision date. The trial court refused to order the developer to provide that affidavit. On appeal, we were able to convince the Appellate Court that the Condominium Act may require that level of detail in the affidavit required by the Condominium Act. The Appellate Court ordered the trial court to reconsider its earlier position, with additional facts, etc. from the condominium client.

With no reported cases in New Jersey interpreting the Condominium Act or PREDFDA in this respect, this case is important in helping condominiums protect their rights during and following a developer's creation and development of a project.

Proposed Sewer Connection Prohibition Threatens Real Estate Development

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Based upon good, albeit unconfirmed, information, we understand that the New Jersey Department of Environmental Protection ("NJDEP") has drafted and is floating possible new regulations that would prohibit all property in the State Development and Redevelopment Plan ("State Plan") located in Planning Areas 3, 4 and 5 from connecting to sanitary sewer systems, even if the property is located in a sewer service area and sewer lines were already constructed, in the ground and available for connection. This means that any development in those areas would be forced to rely upon septic systems, draining wastewater and sewerage from toilets, showers and sinks, for instance, into the soils utilizing a ground (soils) based or alternative filtration system. Indeed, with the possibility of limited or no grandfathering, approved developments could be at risk. The proposal would likely affect thousands of properties around the state. One stark example is that under the currently approved State Plan property owners with projects in several counties would almost all lose the right to connect to existing sanitary sewer systems. The number of properties that would lose the right to connect to existing sanitary sewer facilities will only increase under the State Plan currently pending review by the State Planning Commission.

Public sanitary sewer systems discharge to sewerage treatment plants as opposed to the ground. The to be proposed regulatory change would not only impact groundwater, but where sewerage treatment facilities have been built and sized anticipating additional development and connections, residents would be forced to absorb substantial additional costs arising from the elimination of intended users for these systems. These regulations would limit development in many areas, possibly even where such development was intended as part of "smart growth" that the State Plan and NJDEP have touted, but would also have negative environmental impacts. While it must be noted that the regulations have not been released by the NJDEP or seen by this author, even the limited information available suggests that such a proposal would have various adverse impacts, intended and unintended. Indeed, anyone owning or under a contract to purchase property in Planning Areas 3, 4 or 5 and located in a sewer service area, would be wise to consider the impacts of the regulations on their ability to develop and use their real estate and the likely downzoning that will result in the event such regulations are adopted by the NJDEP.

Anyone having questions about the new regulations and whether their property is located in Planning Areas 3, 4 or 5 as well as a sewer service area should contact the Real Estate or Environmental Group at Stark & Stark at (609) 895-7250.

Robert Rose, Mercer County College Trustees Meet

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Today's Trenton Times reports on Mercer County College (MCC) President Robert Rose's meeting with the school's board of trustees. The board is investigating financial practices at the school. Kevin Hart, Chair of the Firm's Corporate Investigation and White Collar group, attended this meeting with his client Rose. After the closed door meeting both Rose and Hart spoke to the press and expressed their optimism that Rose will soon return to his position at the college.

New Jersey Legal Update - Podcast #7

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This week's New Jersey Legal Update podcast will discuss the New Jersey Supreme Court's recent decision in Banco Popular North America v. Suresh Gandhi. In this matter, the Court examined the question of whether a creditor has a cause of action against an attorney who counseled and assisted the debtor to transfer assets to the detriment of the creditor.

This week's New Jersey Legal Update is presented by Timothy Duggan, Chair of the Firm's Bankruptcy & Creditor's Rights group.

You can download the New Jersey Legal Update Podcast # 7 here.(14MB)

Children, Association Bylaws, and the Fair Housing Act

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In the May 2005 edition of the New Jersey Cooperator, David Byrne, Co-Chair of the firm's Community Associations group, discussed how to keep association bylaws restricting the activities of children fair and legal.

The article, The Kids Aren't All Right, discussed various scenarios and court cases across the country in which association bylaws ran afoul of the Fair Housing Act.

Excerpt from article:

"...the fact is that quite often, bylaws that state where and when children can play in a condo development or residential building are in violation of the Fair Housing Act and can lead to lawsuits and fines against the development or homeowners association."

Exclusion of Gain from Sale of Principal Residence

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When selling a home, whether due to an employment move, trading up, or downsizing, a homeowner-taxpayer should be aware that special tax treatment applies under certain situations when the sale is of the taxpayer's principal residence.

Under certain circumstances, a single taxpayer can exclude up to $250,000.00 of gain on both federal and state income tax returns and married taxpayers can exclude up to $500,000.00. For married couples, the $500,000.00 exemption, requires that they file a joint return in the year their residence is sold.

The determination of whether gain on the sale of a residence can be excluded from a homeowner's income for tax purposes depends on whether the property has been owned and used by the taxpayer for a period of two or more years during the five year period prior to the sale. The five year period ends on the date title is transferred. The two year time period, for both ownership and use, does not need to be a consecutive. The time can be aggregated over the five year period.

There is, however, a limitation on how often this exclusion of gain can be used. The exclusion can only be applied to one sale every two years.

For married couples to qualify for the up to $500,000.00 exemption, in addition to filing a joint return, either the husband or wife must meet the ownership requirement and both spouses must meet the use requirement. In addition, neither spouse shall be ineligible for the exclusion because he or she sold a property within the past two years. If the married couple do not share a principal residence, an exclusion of up to $250,000.00 is available on a sale that qualifies as the principal residence of one of the spouses.

If a single homeowner who is eligible for the exclusion marries someone who elected to use the exclusion benefit within the two years prior to the marriage, the now married taxpayer is only allowed a maximum exclusion of $250,000.00.

If a taxpayer has more than one home, only the sale of the principal home qualifies for the exclusion of gain benefit.

There can be an exception to the minimum two year ownership and use requirement when a sale results from a change in the taxpayer's place of employment, health, or certain unforeseen circumstances. In such situations, a taxpayer is provided a reduced exclusion based on the portion of the two year period for which the ownership and use requirement is met.

The Taxpayer Relief Act of 1997 modified Section 121 of the Internal Revenue Code to provide this exclusion of gain benefit. It replaced the prior law which provided rollover and one-time exclusion provisions for the sale of taxpayers' residences and replaced it with a simpler law which no longer requires a taxpayer to continually "trade up" to benefit from substantial tax savings. The exclusion of gain benefits are also available on an exchange of a principal residence.

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Recruiting and Retaining Board Members

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Recruitment and retention of board members is an issue every association must face. A question I am often asked is "Is there any legal way to compel members to serve on the board?" There is no way to force anyone to serve on the board of a condominium in which he/she owns. If, because of apathy, complete satisfaction or otherwise, only one owner volunteers to serve on a condominium's board, then that board becomes a board of one (1) and that one (1) trustee will, in effect, make all decisions. This is generally why even in small condominiums, more than one person is ready, willing and able to serve in this capacity.

Most people living in a condominium would be uncomfortable by having every resident's property, money, and general investment determined, in a large part, on the decision of one person. This usually motivates more than one person to serve as a board member. Ultimately, someone has to pay the insurance, collect the trash, fix the leaks, shampoo the hall carpets, etc. If only one person is willing to volunteer and serve, so be it.

It is worth noting that should there be a board of only one person, that person as the board is still obligated to comply with the condominium act, etc. with respect to accounting records, open meetings, ADR, etc. His or her engagement of a management company would help, in which the actual day-to-day operations (collection of funds, disbursement of funds, etc.) would be handled by an outside professional. This would provide for some desired financial oversight.

New Jersey Legal Update - Podcast #6

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This week's New Jersey Legal Update podcast will feature the recent Appellate Court decision in Bursztyn v. Burszytn, which clarified the extent to which trial courts in the state are able to intervene in the lives of parties involved in divorce proceedings.

This week's New Jersey Legal Update is presented by Sandy Durst a member of the Firm's Divorce group.

You can download the New Jersey Legal Update Podcast # 6 here.(3.75MB)

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SEC Rule 206(4)-7

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With the advent of SEC rule 206(4)-7 requiring SEC registered investment advisors to implement and maintain policies and procedures appropriate for their investment advisory business, it is critical for all RIAs to recognize that compliance is an ongoing process that requires the review, updating, and amendment of regulatory filings, disclosures, and procedures.

The August edition of Investment Advisior Magazine has an article by Thomas Giachetti, Chair of the Firm's Securities Compliance & Arbitration group, titled Come Right In. The article discusses issues pertaining to an advisor's compliance-readiness, including a list of some of the more substantive issues that are currently the focus of SEC examiners.

Flip-Tax : Possible Income Generator for Condominiums

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Recent New Jersey and New York court decisions have made the "flip-tax" (closing-related fee tied to the purchase price of the condominium unit) a possible avenue of income generation for condominiums. Condominiums should consider amending their bylaws to empower their boards to adopt, or to create it without board effort, policies which require the purchaser of a unit within that condominium to pay a "membership fee", or "capital contribution fee" or "privileges fee" equal to a specific percentage of the purchase price. Currently, most condominiums generate such fees, but base them on a flat rate unrelated to the purchase price, or a rate tied to the then current monthly fee. A fee tied to the purchase price allows that condominium to benefit from the strong real estate market and ever-increasing purchase prices. It is important however that this right and/or power be set forth specifically in the condominium's bylaws

New Jersey Legal Update - Podcast #5

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This week's New Jersey Legal Update podcast will feature the New Jersey Supreme Court's decision in Gerety v. Atlantic City Hilton Casino Resort, which was decided July 25, 2005. This decision is important for all New Jersey employers as it applies both the state's anti-discrimination law, the "Law Against Discrimination" and federal medical leave requirements to pregnant employees.

This week's New Jersey Legal Update is presented by David Krulewicz a member of the Firm's Employment group.

You can download the New Jersey Legal Update Podcast # 5 here.(13MB)

Eminent Domain - Long Branch New Jersey

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Yesterday's edition of All Things Considered on NPR has a story by Anthony Brooks about the eminent domain challenge taking place in Long Branch New Jersey.

NPR's summary:

All Things Considered, August 3, 2005 * In one of many development plans that got a boost from the recent Supreme Court decision on eminent domain, Long Branch, N.J., plans to condemn dozens of modest bungalows along the shore so a developer can put up condos. The mayor think this would be great for tax revenue. Longtime residents -- and some lawmakers -- wonder about the limits of "public interest."

You can listen to the story here.

Eminent Domain - Full and Fair Compensation

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In response to the Kelo decision and inequities in the present New Jersey eminent domain law, several New Jersey state senators have introduced legislation that (1) further defines a condemning authority's obligation to enter into bona fide negotiations for the purchase of property prior to filing a condemnation action, and (2) for the first time, would require a business owner to be compensated for the lose of his or her business, not just the real property. (Senate, No. 177 - PDF)

Under existing law, a business owner is only entitled to be compensated for the value of the real estate and certain relocation expenses (ie. moving expenses, cost to hook-up equipment being moved, ect). However, the actual loss of one's business is not part of the "just compensation" to be paid to a property owner. Under the proposed legislation, the definition of "Property" now includes any business that is conducted on the property being taken. The private business must be separately valued and be part of the just compensation offered to a property owner. However, the proposed legislation does not apply to cases filed by the New Jersey Department of Transportation.

This is a good and fair proposal. If a business is forced to close, what shouldn't the government pay the full value of the land and business? Just compensation must be read to include "full and fair" compensation of everything that is being taken, including the business.