Does NJ Owe Compensation to Business Owners for Forced Shutdowns and Limitations?
Oct 21, 2021 | Written by: | Share
As a result of Governor Murphy’s Executive Orders 104 and 107 in March 2020, which closed gymnasiums and other businesses, along with subsequent Executive Orders through June 21, 2021, a lawsuit was filed by a kick-boxing gym seeking compensation from the State for the alleged “governmental taking” of its business.
In JWS Fitness, LLC v. Philip D. Murphy, ____ NJ Super ___ (App. Div. decided October 18, 2021), the court ruled that these Executive Orders were not “governmental takings” of the affected businesses under the Federal or State Constitutions or under the NJ Disaster Control Act (DCA), NJSA App. A:9-34, and that the government is not required to compensate the affected business owners/operators.
In summary, the DCA entitles a property owner to compensation when the state “commandeers and utilizes private property.” The finding relied upon the common and ordinary meanings of the terms “commandeer” and “utilize”. The court noted the term “commandeer” derived from the military practice of taking property to house troops or for other military purposes, and the term “utilize” was commonly understood as the use or intended use of the commandeered property. The Executive Orders did not physically take the businesses and the State did not utilize the businesses for its intended purposes, but only restricted or limited the businesses operations. Because the State did not appropriate or commandeer the businesses for the State’s use, the business owners/operators were not entitled to compensation, even if it meant the businesses permanently ceased operations. Presumably, the business owners and operators would have a right to compensation if the state took the properties to use as neighborhood COVID-19 testing or vaccination centers.
Many businesses are wearied from the last 19 months of numerous and often inconsistent COVID-19 restrictions, orders, mandates, and guidelines imposed on their activities. Unfortunately, the business that filed the lawsuit permanently went out-of-business, as the owner/operator could no longer earn monies to pay the rent and other expenses. The court noted the business received some federal and state COVID-19 relief grants, but the amounts were insufficient to cover the business’ actual losses. Although the court determined that the Governor’s Executive Orders in question did not actually appropriate the business property or operations, the distinction between actual appropriations of a business property versus a mandated closure of the business was probably lost on the owners and operators of this and other closed businesses. At this time, there appears to be no satisfactory legal recourse for these businesses to recoup their losses beyond what they may receive from the applicable federal and state COVID-19 relief grants.
Jacob A. Papay, Jr. is a partner with Gebhardt & Kiefer, PC, and practices primarily in the areas of construction defect claims, construction injury claims, first-party insurer claims, insurance coverage disputes, subrogation, provider health care law, commercial law, defense of professional negligence, and public entity general liability. He represents numerous insurers, Third Party Administrators, medical groups, and businesses, and he has successfully defended public entity officials and employers in wrongful death, discrimination, excessive force and other civil rights claims. In addition, Mr. Papay represents small businesses in mergers, acquisitions, trade secrets, employment and unfair trade practice claims.
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