January 1, 1900

by Anne L. H. Studholme

Builders who have been abused by municipal officers or boards can sue under federal law seeking damages, and attorney's fees, for violation of their rights under the U.S. Constitution. These lawsuits, like much civil rights litigation, are often called "1983 cases," because they are filed under Section 1983 of the relevant federal statute. Although such suits often may succeed in federal court, they are far less likely to work if they are brought in New Jersey's state courts.

The "Shocks The Conscience" Standard In New Jersey's State Courts

The issue is whether illegitimate conduct by board members - for instance, denying an application in order to extort money for a town - is so serious that the developer should get damages and attorney's fees for deprivation of what is called "substantive due process." The term, as currently used, means an abuse by the government which, while not procedural, amounts to depriving someone of "due process under law," a right protected by the Constitution. New Jersey courts have the authority to hear such cases, but in the land use context they are much more reluctant to grant relief than a federal court hearing the same case would be. In the 1996 case of Rivkin v. Dover Tp. Rent Leveling Bd., the New Jersey Supreme Court said it would not grant relief under the U.S. Constitution unless the alleged abuse "shocked the conscience," and it hinted that little short of actual bodily torture would fit the bill.

Federal Courts More Favorable To Builder Plaintiffs

A recent federal case from the Eastern District of Pennsylvania shows how differently the federal courts view this question.

In United Artists v. Twp. of Warrington, it was decided last summer that it is a violation of substantive due process for a board to delay approval of an application in order to attempt to extract an "impact fee" from the developer. Even better from a developer's point of view, the court said that the violation was so clear that the board members could not claim personal immunity from suit for their actions.

Although United Artists is a trial court decision, its rulings on these points were approved by the U.S.Third Circuit Court of Appeals (the same appeals court that decides appeals of federal cases brought in New Jersey). The only issue the appellate court sent back to the trial court was the question of whether the qualified immunity from suit was stripped from each individual board member, or merely from the board as a whole. The District Court then confirmed that each individual board member had violated the plaintiff's rights, and had done so knowing that his actions amounted to such a violation, even though there was no personal pecuniary motive or personal bias at issue.

The Facts In United Artists

In United Artists, the town of Warrington had received two applications, one year apart, from developers seeking to build multiplex theaters. When the town asked both applicants to pay hefty "impact fees," the second applicant, Goodman, immediately agreed to pay $100,000 yearly. The first applicant, United Artists, balked, and its proposal was therefore delayed for years and put through onerous review while, at the same time, the Goodman application sailed through in a few months with far less review. During hearings on the United Artists application, board members repeatedly asked United Artists for "impact fees." The court found the desire for fees was the motivation behind the delays and excessive review, that this deprived United Artists of its rights under the U.S. Constitution, and that the board members should have known that such attempted tit-for-tat was illegal.

The Related Federal Cases

United Artists cited two other Third Circuit cases - Blanche Road v. Bensalem Twp. and Parkway Garage v.City of Philadelphia - for the proposition that this sort of conduct is so clearly abusive that any public official who engages in it will be presumed to know he or she was acting unlawfully and will be held personally accountable. In Blanche Road, a land use board trying to get a developer to pay impact fees revoked permits, denied applications, and otherwise "slowed down" approvals. In Parkway Garage, Philadelphia condemned a sound structure merely so the city could break a lease on property that was more valuable without the current tenant.

It is interesting to note that the United Artists court said that the conduct there would probably have met the "shocks the conscience" standard in states like New Jersey or in federal circuits which use that standard. However, this is not necessarily true, given that the facts in the New Jersey "shocks the conscience" case, Rivkin, were quite shocking themselves, and the property owner's case was nevertheless dismissed. In Rivkin, a rent-control board member, having clearly prejudged the matter, harassed, insulted, and vociferously opposed the proposal of an applicant seeking a rent increase for the mobile home park where the board member happened to live. Still, the New Jersey Supreme Court concluded from recent trends that "the collective conscience of the United States Supreme Court is not easily shocked. . . . [W]e believe that the denial of a property right in the context of municipal governance rarely will rise to the level of a substantive due process violation." This was so, said the Court, even where, as in Rivkin, the board "violated its own standards of governance by allowing a member with a demonstrated bias to participate in the hearings."

The Lesson To Be Learned

A comparison of the ways in which our state courts and federal courts resolve such matters reveals that a builder confronted with bias, bad faith, or improper motive on the part of municipal bodies or board members is usually better off in federal court. Attorneys handling such matters must be fully familiar with the applicable federal law and federal court procedures, which vary a good deal from state court practice, but which, in the right hands, are not necessarily any more cumbersome or expensive and may yield a better result.

Anne L. H. Studholme is an associate of the firm and member of the Land Use Division. She concentrates her practice in diverse land use matters.