Article

New Jersey Supreme Court Preserves Rights of Common Interest Ownership Associations
by Michael S. Karpoff

Community association governing boards may reasonably regulate conduct of their members on common property even if such regulation affects members’ expressive activity, the New Jersey Supreme Court has held. In a unanimous decision in Committee for a Better Twin Rivers v.Twin Rivers Homeowners Association, the Court reversed the ruling of the Appellate Division of the Superior Court regarding speech and assembly and found that the New Jersey State Constitution did not override the association’s regulations. The plaintiffs had argued that the association’s rules regarding signs, use of the community room and access to the newsletter were unconstitutional, but the Supreme Court found them to be reasonable and to not violate constitutional rights. Hill Wallack LLP represented the association’s president, Scott Pohl, in the case.

Twin Rivers is a planned residential development in East Windsor, New Jersey. It consists of 2,700 homes with a population of about 10,000. The Twin Rivers Community Trust owns the common property, and the Twin Rivers Homeowners Association serves as trustee and governs the use of the common property. A number of commercial properties and municipal facilities are located within the community’s borders but are not part of the association.

Owners Challenged Association Rules

Several Twin Rivers owners formed the Committee for a Better Twin Rivers to attempt to change certain association rules and policies. They eventually filed suit against the association, the trust, the property manager, who was later dismissed from the case, and Mr. Pohl, who also had served as the editor of the newsletter. The plaintiffs challenged a number of rules regarding access to records and the membership list, confidentiality of board discussions, alternative dispute resolution and voting procedures, as well as signs, the community room and the association’s monthly newsletter.

With respect to these latter three issues, the plaintiffs conceded that the First Amendment to the United States Constitution did not control, because the First Amendment restricts only government conduct, and instead relied upon the New Jersey State Constitution. They argued that the association’s regulation limiting the number and location of members’ signs, a rental fee and insurance requirement for use of the community room and editorial policies for the newsletter violated the State Constitution’s free speech and right to assembly clauses, which can, under certain circumstances, apply to private property.

The defendants argued that the association’s regulations were valid under the business judgment rule, which requires that board decisions be authorized by statute or the governing documents and not involve bad faith, self-dealing or unconscionable conduct. The defendants also maintained that because Twin Rivers is private property which does not invite public access, the State Constitution’s protections do not apply and the rights of the parties are determined by contract principles. In addition, Mr. Pohl argued that any judicial or government review of the newsletter’s editorial policies would violate the association’s First Amendment rights to free speech and free press. The trial judge vacated a portion of the association’s rules because there were insufficient standards, but he generally agreed with the defendants and upheld most of the regulations.

On appeal, the Appellate Division affirmed much of the trial court’s reasoning. However, it concluded that the State Constitution’s speech and assembly provisions protect members’ expressive activities on the private property. It therefore remanded the case to the lower court to reconsider the rules regarding signs, the community room and the newsletter, utilizing the constitutional standard. The defendants appealed that decision to the New Jersey Supreme Court.

No Constitutional Violation

In an opinion with potential national implications, the Supreme Court rejected the plaintiffs’ position and reinstated the trial court’s decision. To reach its conclusion, the Court applied a test it had crafted in 1980, in State v. Schmid, to determine when the State Constitution’s speech provision applies to private conduct.

Schmid held that the State Constitution speech clause grants broader rights than the First Amendment to the United States Constitution and that when private property permits public access for purposes of speech, constitutional protections come into play. The Court stated that in determining whether to apply constitutional protections to private property, it needed to decide three issues: (1) the nature, purposes and primary use of such private property, generally, its “normal” use, (2) the extent and nature of the public’s invitation to use that property, and (3) the purpose of the expressional activity undertaken upon such property in relation to both the private and public use of the property. Using that test, the Court held that Schmid’s conviction for trespass for distributing political leaflets at Princeton University was unconstitutional because the university had made itself a public forum for speech and the defendant’s activities were consistent with the university’s purpose.

In New Jersey Coalition Against the War in the Middle East v. J.M.B. Realty Corp., the Court expanded on the Schmid test by adding that after looking at the three prongs, there must be a balancing of the expressional rights and the private interests. It then held that large regional shopping centers could not prohibit the distribution of political flyers on their property because they had become public centers.

Although the Pennsylvania Supreme Court has not expressly adopted the Schmid/Coalition test, it has applied similar reasoning. In Commonwealth v.Tate, the Pennsylvania Court held that when Muhlenberg College invited the director of the FBI to speak at a public symposium, it made itself subject to the Pennsylvania Constitution’s speech protections and thus could not constitutionally prosecute for trespassing protesters distributing leaflets on campus. Later, in Western Pennsylvania Socialist Workers 1982 Campaign v. Connecticut General Life Insurance Co., the Court declined to apply similar constitutional protection in a shopping center, unlike the New Jersey Court, but it reaffirmed that the Pennsylvania Constitution’s free speech clause applies to private property if the owner permits the property to be used as a forum for public issues.

Schmid/Coalition Test the Rule

Twin Rivers reaffirmed the Schmid/Coalition test. The Supreme Court found that the plaintiffs had failed to satisfy any of the prongs of the test. The primary use of Twin Rivers is for private residences. The property is for the exclusive use of the residents, and any incidental public access does not rise to the level of a public invitation. Moreover, the rules in question provide a mutual benefit to the residents and are necessary to maintain the nature of the community. The Court also explained that the rules are reasonable and have only a minor effect on the plaintiffs’ ability to communicate, so balancing the respective interests favors the association.

Contrary to much of the publicity about the case, the Court did not eliminate residents’ rights or allow community associations to suppress speech. As the Court pointed out, association members have rights granted by statutory provisions such as the Planned Real Estate Development Full Disclosure Act and the Non-Profit Corporation Act, the terms of the community’s governing documents, the association’s fiduciary duty to its members and public policy. The Court also stated that it was not ruling out applying constitutional protections in an appropriate case but did not indicate what circumstances would call for such intervention. However, if an association invites public speech or makes itself a public forum, the Schmid/Coalition test will weigh more heavily in favor of constitutional protection.

New Jersey’s Supreme Court thus confirmed that community associations which do not invite public access may adopt reasonable rules to regulate use of common property even if such regulations have an incidental effect on members’ speech. Through this power, common interest ownership communities can preserve aesthetics, protect residents’ security and promote cooperative communal living without the need to satisfy constitutional standards. On the other hand, the Court made clear that association members do have remedies against boards who abuse their power.

Members do not have an unfettered right to speech, and the association need not fund members’ speech. However, boards must allow opportunities for residents to express themselves, in order to enable participation in community affairs. The Twin Rivers decision preserves the authority of each association governing board to balance members’ interests, impose reasonable restrictions and determine how best to meet the needs of the community.

Michael S. Karpoffis a partner in the Community Association Law Practice Group. He is a member of the national College of Community Association Lawyers of the Community Association Institute (CAI).