On January 4, 2007, the Appellate Division affirmed a case which awarded $2 million in relocation assistance for a hot dog manufacturer forced to move its business as a result of a condemnation case.
In New Jersey, a business operator (owner or tenant) is entitled to relocation assistance if the business is required to be moved as a result of an eminent domain case. However, under New Jersey law, the mandated relocation benefits are skimpy at best and are presently under review as part of the pending legislation seeking eminent domain reform. As evidenced by a recent Appellate Division decision, business owners must be very diligent in order to maximize their potential recovery of relocation benefits. Jersey City School District v. Marathon Enterprises, docket no. A-6188-03T5, Jan. 4, 2007).
Marathon Enterprises owned a building which was acquired by the Jersey City School District to build a school. After a trial, the jury awarded Marathon $5.2 million as just compensation for the building. Marathon also sought relocation benefits arising from the relocation of machinery and equipment to its new facility. After a three day trial before an administrative law judge, the court awarded Marathon $2,039,265 in relocation benefits. The New Jersey Department of Community Affairs adopted the decision and the Appellate Division affirmed. Why did Marathon receive so much money for relocation benefits? The answer is:
- The business involved a meat processing operation (Sabrett hot dogs) which was subject to strict regulation by the United States Department of Agriculture (USDA). The USDA regulations require raw and cook meat to be kept separate, the plant must be cleaned and sanitized daily, and the floors must have drains and be slanted to allow for proper water flow . The administrative law judge’s opinion will tell you everything you always wanted to know (or not know) about hot dogs! As a result of the unique operation, it was not a simple move.
- Neither the school district nor property owner could find a suitable place to relocate the business in the surrounding towns. Marathon decided to buy a building adjacent to its operation in the Bronx, New York, and renovate the building to make it USDA-compliant and accommodate the equipment being relocated from Jersey City. The total cost of the land acquisition and renovations to the building was $11 million.
- Among some of the big ticket items in the renovations of the building were (a) lowering the floor several feet, (b) new electrical service necessary for the equipment being moved, and (c) modifying the building to keep the raw meat process separate from the cooked meat process. The attached decision goes into detail on what was done to the building. Since the USDA has onerous requirements for meat processing operations, the cost of the new facility was exorbitant.
- Most important, Marathon had outstanding documentation to prove its case. During the trial, Marathon was able to separately identify which expenses were directly related to machinery and equipment being moved to the new location. For example, invoices for electrical work were broken down by area of the plant which enable Marathon’s witnesses to relate the invoice to specific equipment (ie. machine being relocated or a new piece of machinery).
This case is important to both condemning authorities and property owners. Condemning authorities must understand the nature of a business to be relocated and investigate any unique needs of the business. The time to do this is before the Workable Relocation Assistance Plan (WRAP) is completed. Properties owners must prepare their case while renovations are being made and ask their contractors to provide detailed invoices for work which may be recoverable under New Jersey law.