In In the Matter of Proposed Construction of Compressor Station (A-24-23/088744) (Decided August 6, 2024), the Supreme Court of New Jersey clarified a section of the Highlands Water Protection and Planning Act (Highlands Act) that exempts projects that qualify as “routine maintenance and operations, rehabilitation, preservation, reconstruction, repair, or upgrade of public utility lines, rights of way, or systems, by a public utility, provided that the activity is consistent with the goals and purposes of this act.” According to the Court, “routine” modifies only “maintenance and operations” and does not modify the remaining activities.

Facts of In the Matter of Proposed Construction of Compressor Station

Tennessee Gas (Tennessee) owns and operates an interstate natural gas transmission system. As part of a project known as the “East 300 Upgrade Project,” Tennessee proposed to install various compressor stations along its natural gas transmission system. Relevant here, Tennessee sought to construct a new compressor station and facility (Compressor Station 327) in West Milford Township, where Tennessee has an existing right-of-way on the site of a former quarry.

Because Compressor Station 327 is located within the Highlands Preservation Area, an area that is subject to stringent environmental standards, Tennessee applied to the Department of Environmental Protection (DEP) for a Highlands Applicability Determination (HAD). Before any major development occurs in the Highlands preservation area, an entity must seek either a HAD or Highlands Preservation Area Approval from the DEP. 

The Highlands Act creates certain exemptions from the requirements of the Act, the regional master plan, and any permitting rules or regulations imposed by the DEP Tennessee’s HAD application requested an exemption from the Highlands Act on the ground that Compressor Station 327 qualified for Exemption 11. Tennessee also submitted a copy of the complete HAD application to the Highlands Water Protection and Planning Council (Highlands Council).

On October 16, 2020, the Highlands Council wrote to the DEP stating that it would not object to the issuance of a HAD under Exemption 11 for this project, noting that Tennessee’s “efforts to avoid, minimize and mitigate . . . resource impacts are sufficient to find that the project is consistent with the goals of the Highlands Act,” especially because Compressor Station 327 would fall within a “historically disturbed” former quarry site where “[c]ritical wildlife habitat areas are disconnected and non-functional.” The DEP issued the HAD in June 2021.

Food & Water Watch appealed the DEP’s HAD, arguing that Exemption 11 must be narrowly construed such that the word “routine” modifies the word “upgrade.” The Appellate Division agreed, vacating the HAD and remanding the matter to consider whether Compressor Station 327 qualifies as a “routine upgrade.”

NJ Supreme Court’s Decision in In the Matter of Proposed Construction of Compressor Station

The New Jersey Supreme Court reversed. It held that based on the plain language deliberately crafted by the Legislature, read in context with the law as a whole, “routine” modifies only “maintenance and operations” and does not modify the remaining activities.

“Based on the plain language deliberately crafted by the Legislature, read in context with the law as a whole, we conclude that ‘routine’  modifies only “maintenance and operations” and does not modify the remaining activities. We therefore reverse the judgment of the Appellate Division and remand the matter for further proceedings,” Justice Michael Noriega wrote on behalf of the Court.

In reaching its decision, the New Jersey Supreme Court explained that Exemption 11 contains three components. First, an activity must either be “routine maintenance and operations, rehabilitation, preservation, reconstruction, repair, or upgrade.” Second, that activity must be conducted by a public utility to its lines, rights of way, or system. Third, the activity must be consistent with the goals of the Highlands Act. The case before the Court centered on the first element — whether “routine” modifies “maintenance and operations” or whether it modifies the entire series of exempt activities, including “upgrade.”

The New Jersey Supreme Court ultimately determined that “routine” modifies only “maintenance and operations” and does not modify “upgrade.”  In support, it cited the plain language of Exemption 11. The Court specifically noted that by their very nature, “maintenance and operations” are activities that would both inherently occur on a periodic or “routine” basis. Conversely, Exemption 11’s remaining activities all would occur on an as-needed basis after a triggering event, making them distinct from “routine maintenance and operations.”

The New Jersey Supreme Court went on to note that the first statutory requirement for Exemption 11 is met here, while the second requirement — that the action be performed “by a public utility” —is undisputed. With regard to the third requirement — “that the activity is consistent with the goals and purposes of [the Highlands A]ct,” the Court offered guidance for the lower court on remand.

As Justice Noriega explained, just as any activity must be undertaken by a public utility to qualify for Exemption 11, so too must any activity, routine or not, be consistent with the goals and purposes of the Highlands Act for the exemption to apply. The Court further advised that while the goals of the preservation area are chiefly to promote preservation and conservation, the statute explicitly states that development should be limited to the maximum extent possible when it is “incompatible with preservation of this unique area.”

“Simply stated, the Highlands Act does not preclude development in this area; it limits only development that is incompatible with preservation and would therefore cause a decline in the environmental quality of the region,” Justice Noriega wrote. 

According to the Court, in determining whether construction of Compressor Station 327 is consistent with the Highlands Act’s “goals and purposes,” it will be necessary to consider the circumstances of the project, including the fact that Compressor Station 327 is being built upon already disturbed lands that are unsuitable for vegetation and wildlife, among other arguments

In Board of Education of the Township of Sparta v. M.N. (A-16-23/088378) (Decided August 7, 2024), the Supreme Court of New Jersey held that under the Individuals with Disabilities Education Act (IDEA), a student with disabilities who received a State-issued diploma based on passing the General Education Development test (GED) is entitled to re-enroll in his local public high school to receive a free appropriate public education (FAPE).

Facts of Board of Education of the Township of Sparta v. M.N

When he was fifteen years old, A.D. began attending Sparta High School. He had been designated as having a disability under the IDEA, and Sparta accepted his individualized education program from his previous school. In January 2019, Sparta informed A.D. that he was in danger of failing several classes. After a period of home instruction in March 2019, A.D.’s parents withdrew him from Sparta High School. A.D. then took the GED and passed, and he received a State-issued high school diploma in April 2019. That same month, A.D. re-enrolled at Sparta High School and again began receiving home instruction.

After periods of home instruction, in-person attendance, and further withdrawals from the high school, A.D.’s mother, M.N., tried to re-enroll A.D. in May 2021. A.D. was eighteen years old at the time. Sparta denied the request, citing A.D.’s receipt of a State-issued high school diploma in April 2019.

Under federal regulations implementing the IDEA, 34 C.F.R. § 300.102(a)(3)(i), a school district’s obligation to provide a free appropriate public education does not apply to “[c]hildren with disabilities who have graduated from high school with a regular high school diploma.” Students with disabilities “who have graduated from high school but have not been awarded a regular high school diploma,” however, remain eligible to receive a free appropriate public education. The regulations, 34 C.F.R. § 300.102(a)(3)(iv), define “regular high school diploma” as “the standard high school diploma awarded to the preponderance of students in the State that is fully aligned with State standards, or a higher diploma.” They then further specify that “[a] regular high school diploma does not include a recognized equivalent of a diploma, such as a general equivalency diploma.”

M.N. requested a due process hearing with the New Jersey Department of Education (DOE). The Commissioner of the DOE (Commissioner) transferred the matter to the Office of Administrative Law (OAL). The Administrative Law Judge (ALJ) determined that the State-issued diploma A.D. received was a “regular high school diploma” that was “fully aligned with State standards” under 34 C.F.R. § 300.102(a)(3)(iv). The ALJ concluded A.D. was no longer entitled to a FAPE.

M.N. appealed the ALJ’s decision to the Commissioner. The Commissioner concurred with the ALJ that “A.D.’s diploma is a ‘regular high school diploma’ that is fully aligned with State standards” and that “A.D. is no longer entitled to a free education in Sparta or any other New Jersey school district.”

The Appellate Division affirmed, finding that there was “no basis to undo DOE’s policy determination.” According to the Appellate Division, “[a]t the direction of the Legislature, the DOE promulgated regulations . . . to establish graduation standards for public high school students.” In doing so, “[t]he DOE . . . concluded as a matter of education policy that students who are not enrolled in school and achieve a passing score on the GED shall be awarded a high school diploma. That specific policy determination by the DOE represents the alignment with state standards required by 34 C.F.R. § 300.102(a)(3)(iv).”

NJ Supreme Court’s Decision in Board of Education of the Township of Sparta v. M.N

The New Jersey Supreme Court reversed. It held that a New Jersey State-issued diploma awarded based on passing the GED is not a “regular high school diploma” under 34 C.F.R. § 300.102(a)(3)(iv). Therefore, a student who receives such a State-issued diploma remains entitled to receive a free appropriate public education under the IDEA.

“In obtaining a State-issued diploma based on passing the GED, A.D. obtained a degree documenting “the attainment of academic skills and knowledge equivalent to a high school education,” the Court explained. “He did not, however, obtain a ‘regular high school diploma’ under 34 C.F.R. § 300.102(a)(3). A.D. therefore remains entitled to receive a free appropriate public education, and Sparta remains required, under the IDEA, to provide him with one.”

In reaching its decision, the Court emphasized that the IDEA regulations are clear — a regular high school diploma is “the standard high school diploma awarded to the preponderance of students in the State that is fully aligned with State standards, or a higher diploma.” It went on to discuss the two types of high school diplomas available under New Jersey law.

State-endorsed diplomas are defined as “a locally-issued document awarded to an exiting student indicating successful completion of high school graduation requirements.” Meanwhile, state-issued diplomas are issued not by local school districts, but by the Commissioner, upon “[d]emonstration of the appropriate level of academic competency,” including by “passage of the Tests of General Educational Development (GED) of the American Council on Education.” DOE regulations define a “State-issued high school diploma” as “a high school diploma provided by the [DOE] to persons 16 years of age or older and no longer enrolled in school to document the attainment of academic skills and knowledge equivalent to a high school education.”

The New Jersey Supreme Court went on to conclude that a State-issued diploma is not a “regular high school diploma” for purposes of the IDEA implementing regulations. In support, the Court noted that State-endorsed diplomas are awarded to the preponderance of students in the State and are fully aligned with State standards.

The Court also rejected the argument that both a State-endorsed and a State-issued diploma are “the standard high school diploma awarded to the preponderance of students in the State,” emphasizing that both the New Jersey Legislature and the DOE distinguish between State-issued and State-endorsed diplomas. The Court further cited that in other contexts, the Commissioner has expressly conceded that a State-issued diploma awarded upon passing the GED is a “general equivalency diploma” and not a “regular high school diploma” under 34 C.F.R. § 300.102(a)(3)(iv). Finally, because a State-issued diploma is not a “regular high school diploma” for purposes of the IDEA implementing regulations, the New Jersey Supreme Court found that the receipt of a State-issued diploma does not terminate this State’s obligation to provide a free appropriate public education to a student eligible to receive one.

In Hyman v. Rosenbaum Yeshiva of North Jersey (A-11-23/087994) (Decided July 24, 2024), the Supreme Court of New Jersey affirmed that the ministerial exception barred defamation claims against an Orthodox Jewish school. The six justices that heard the case all agreed that the standard set forth in McKelvey v. Pierce, 173 N.J. 26, 51 (2002), applied in the case. However, they were evenly divided as to whether the plaintiff was entitled to discovery. The 3-3 split allowed the Appellate Division’s dismissal to stand.

Facts of Hyman v. Rosenbaum Yeshiva of North Jersey

Plaintiff Shlomo Hyman was employed as a Judaic Studies teacher by defendant Rosenbaum Yeshiva of New Jersey, an Orthodox Jewish school. In 2019, after investigating claims of misconduct and consulting with legal counsel and authorities on Jewish law, Rosenbaum Yeshiva terminated Hyman’s employment. In a letter, the Head of School advised parents and faculty members that the Yeshiva took that action because it deemed Hyman’s conduct “neither acceptable nor consistent with how a rebbe in our Yeshiva should interact with students.”

Hyman and six members of his family filed suit against Rosenbaum Yeshiva and three of its leaders. Hyman asserted individual claims for age discrimination and defamation. After discovery, which was limited to the question whether Hyman qualified as a “minister” for purposes of the First Amendment during his employment at the Yeshiva, he conceded that he was a minister and abandoned his age discrimination claim.

The trial court granted defendants’ motion for summary judgment and dismissed the complaint. It reasoned that if the claims were allowed to proceed to trial, they would entangle the court in matters of religious doctrine, thus violating the First Amendment. Plaintiffs appealed, contending that the ministerial exception applied only to Hyman’s age discrimination claim and that he could prove defamation under legal principles that would not implicate the First Amendment. The Appellate Division affirmed the trial court’s grant of summary judgment. It held that the ministerial exception bars tort claims if they are asserted by a party who constitutes a minister for purposes of the exception and the claims are “related to the religious institution’s employment decision.” According to the Appellate Division, the defamation claims in this case met that test.

NJ Supreme Court’s Decision in Hyman v. Rosenbaum Yeshiva of North Jersey

The six members of the Court who participated in the appeal unanimously agreed that the standard set forth in in McKelvey v. Pierce, 173 N.J. 26, 51 (2002), applied in the case. The Court readopted that standard, with two refinements to accord with recent United States Supreme Court precedent. Because the justices were equally divided as to whether discovery is required in the case, the judgment of the Appellate Division, which affirmed the trial court’s dismissal of the case on summary judgment without discovery, is affirmed.

The New Jersey Supreme Court’s per curium opinion first addressed the standard set forth in McKelvey, under which a court must analyze each element of a challenged tort claim and determine whether the court’s adjudication of that claim would require it to “choose between competing religious visions, or cause interference with a church’s administrative prerogatives, including its core right to select, and govern the duties of, its ministers.” If adjudication raises no such First Amendment concerns, the court may decide the claim; if not, it must dismiss it.

The Court concluded that McKelvey remains good law, with some modifications required to comply with recent U.S. Supreme Court precedent. First, the Court clarified that the ministerial exception is clearly not limited to employment decisions made by religious institutions on religious grounds. Second, the Court declined to readopt language suggesting that a minister’s claim for damages in the employment discrimination setting does not implicate the First Amendment.

Applying that standard to Hyman’s defamation claims, the New Jersey Supreme Court concluded that a court’s determination of each element of those claims would mandate an inquiry into the religious tenets that govern Rosenbaum Yeshiva and would interfere with the Yeshiva’s right to choose and supervise its ministers. However, the Court divided 3-3 regarding whether the Appellate Division should have affirmed the dismissal of Hyman’s defamation claims given that only limited discovery was conducted before applying McKelvey’s First Amendment protections. Accordingly, the Appellate Division was affirmed.

In a concurring opinion, Justice Anne M. Patterson argued that reversing the Appellate Division’s decision “would mandate an inquiry into the religious tenets that govern Rosenbaum Yeshiva and would interfere with the Yeshiva’s right to choose and supervise its ministers.” Justices Lee A. Solomon and Douglas M. Fasciale joined the concurrence.

In a dissenting opinion, Justice Fabiana Pierre-Louis maintained that that plaintiffs are entitled to full discovery in any defamation case before McKelvey can be applied. “Under the concurring opinion’s analysis, a religious entity can seemingly fire an employee based solely on a personal vendetta, publish a knowingly false and defamatory statement about the plaintiff, and shield itself from liability — and even discovery — by invoking the ministerial exception,” he wrote. “Such a holding slams the courthouse door shut on potentially wronged plaintiffs before they can even obtain discovery that would allow a court to determine whether adjudicating their claims actually interferes with religious autonomy.” His dissent was joined Chief Justice Stuart Rabner and Justice Michael Noriega.

In Verizon New Jersey, Inc. v. Borough of Hopewell (A-22-23/088421) (Decided July 25, 2024), the Supreme Court of New Jersey upheld an Appellate Division decision holding “that ‘local telephone exchange’ as used in N.J.S.A. 54:4-1 means a local telephone network within a defined geographical area as depicted on Verizon’s tariff exchange maps.” The Court’s per curium decision resolved a long-standing suit between Verizon New Jersey and the Borough of Hopewell over unpaid municipal taxes.

Facts of Verizon New Jersey, Inc. v. Borough of Hopewell

The sole issue in the case was the meaning of the phrase “Local Telephone Exchange” (LTE) in N.J.S.A. 54:4-1. Under that statute, the personal and real property of a local exchange telephone company is defined as “a telecommunications carrier providing dial tone and access to 51% of a local telephone exchange.” As the Appellate Division noted in its decision, N.J.S.A. 54:4-1 does not define “local telephone exchange” or provide a means for calculating 51% of it. 

In August 2008, plaintiff Verizon New Jersey, Inc. notified the Borough of Hopewell that it would not be filing a return for the 2009 tax year because it no longer provided dial tone or access to at least 51% of the LTE within the Borough. Verizon based its position on the then-recent assignment of 10,000 new phone numbers served by AT&T to the Hopewell rate center. According to Verizon, in light of those new phone numbers, it no longer provided dial tone and access to 51% of the phone numbers associated with the Hopewell rate center.

In response, Hopewell took the position that the Hopewell LTE was defined by geographic boundaries rather than assignment to the rate center. Because the phone numbers were physically based in Pennington, outside of Hopewell, Verizon remained the provider for at least 51% of the Borough’s LTE.

Considering their arguments and the legislative history of N.J.S.A. 54:4-1, the Tax Court adopted a definition of the LTE “based on . . . geographic boundaries.” The court elaborated that “the term ‘local telephone exchange’ is a common and historical concept in the telecommunications industry. It is a geographically defined area serviced by a physical construct that functions as the building block for service delivery . . . .” The Tax Court further concluded the fact “[t]hat the business personal property being taxed is physically located within the boundaries of the exchange . . . demonstrates a geographic component to the definition of” an LTE.

The Appellate Division affirmed. The court was “convinced by the centrality of the local exchanges to the structure of the telephone industry . . . , as well as by the testimony of the experts in this case, that when the Legislature added the qualifier ‘local exchange’ to ‘telephone companies’ . . . [when it amended N.J.S.A. 54:4-1] in 1989, it intended the phrase ‘local telephone exchange’ to be understood as a specified geographical area, the territorial boundaries of which were as depicted on exchange maps on file.” The Appellate Division was “also convinced that understanding is the most sensible when considering how New Jersey’s 209 local exchanges were built and developed.”

NJ Supreme Court’s Decision in Verizon New Jersey, Inc. v. Borough of Hopewell

The New Jersey Supreme Court affirmed. In a per curium opinion, the Court concurred concurs with the Appellate Division “that ‘local telephone exchange’ as used in N.J.S.A. 54:4-1 means a local telephone network within a defined geographical area as depicted on Verizon’s tariff exchange maps.”

In reaching its decision, the New Jersey Supreme Court noted that contrary to Verizon’s assertions, the written evidence from the relevant time period, including Verizon’s own documents, points only toward a geographical definition of a “local telephone exchange.”

“We conclude that the Legislature understood a ‘local telephone exchange’ to mean a geographic area depicted in Verizon’s tariff maps, both when it first adopted the term in 1989 and when it amended the relevant clause of N.J.S.A. 54:4-1 in 1997.”

The New Jersey Supreme Court rejected Verizon’s claim that it always understood a “local telephone exchange” to be defined not geographically, but by the set of NPA-NXX codes associated with a particular rate center. “Verizon now claims that it always understood a ‘local telephone exchange’ to be defined not geographically, but by the set of NPA-NXX codes associated with a particular rate center,” the Court wrote. “But the record contains no evidence that Verizon shared that view with the legislature either in 1989 or in 1997, or that the legislature adopted such a view.”

The New Jersey Supreme Court also dismissed Verizon’s argument that the Appellate Division’s decision “subject[s] Verizon and other [incumbent local exchange carriers] to an outdated tax assessment method, divorced from current practices within the telecommunications industry.”

“That may be true. But this Court is constrained to interpret the statutory text before it; we may neither update nor amend the text to better fit current technological realities,” the Court wrote. The New Jersey Supreme Court further advised that if the New Jersey Legislature agrees with Verizon that the current tax assessment method is out of date, “it is of course free to amend the statute.”

In Moschella v. Hackensack Meridian Jersey Shore University Medical Center (A-7-23/088312) (Decided July 11, 2024), the Supreme Court of New Jersey held that an affidavit of merit does not need to specify that the affiant reviewed medical records attesting to the merits of a claim.

Facts of Moschella v. Hackensack Meridian Jersey Shore University Medical Center

On July 20, 2018, plaintiff’s daughter, Alexandrianna Lowe, who suffered from an opioid addiction, was admitted to Hackensack Meridian Jersey Shore University Medical Center (JSUMC) for complications associated with Type 1 diabetes. Two days later, Lowe was found unresponsive. Hospital staff administered anti-opioid medication but failed to check Lowe’s blood sugar levels. An autopsy revealed Lowe had no illicit drugs in her system at the time of her death.

Plaintiff filed a complaint against JSUMC, Michael Carson, M.D., and John and Jane Does 1 through 100. The suit alleged that while Lowe was admitted at JSUMC, “numerous other persons, whose identities are currently unknown . . . were also involved in the provision of medical care to” Lowe. As is required by N.J.S.A. 2A:53A-27, plaintiff submitted an AOM in support of the validity of her claim. Dr. Joseph Fallon prepared plaintiff’s AOM.

Pursuant to N.J.S.A. 2A:53A-27, a plaintiff in an action against a licensed professional must produce an affidavit from an expert attesting to the merits of the claim. Issues regarding the AOM must be resolved at an accelerated case management conference conducted by the trial court in accordance with Ferreira v. Rancocas Orthopedic Assocs., 178 N.J. 144, 154-55 (2003), otherwise known as a Ferreira conference.

The trial court, without holding a Ferreira conference, granted defendants’ motion to dismiss plaintiff’s complaint with prejudice, finding the Fallon AOM insufficient under N.J.S.A. 2A:53A-27. The court reasoned that the Fallon AOM did not state that Dr. Fallon reviewed any medical records, and it did not indicate that any named defendant committed negligence. The court further denied plaintiff’s claims that she substantially complied with the AOM statute’s requirements or that extraordinary circumstances warranted dismissal without prejudice. The Appellate Division affirmed.

NJ Supreme Court’s Decision in Moschella v. Hackensack Meridian Jersey Shore University Medical Center

The New Jersey Supreme Court unanimously reversed, holding that the Fallon AOM complied with N.J.S.A. 2A:53A-27.

“First, an AOM does not need to specify that the affiant reviewed medical records. Second, a doctor to whom the affidavit attributed negligence is the agent of a named defendant and is identified in the AOM as one of the John or Jane Doe defendants included in the complaint,” Justice Solomon wrote. “We therefore reverse the judgment of the Appellate Division and remand the matter for further proceedings. We stress once again the importance of the Ferreira conference in professional negligence actions.”

In reaching its decision, the New Jersey Supreme Courtemphasized that the dual purpose of the AOM statute is to weed out frivolous lawsuits early in the litigation while, at the same time, ensuring that plaintiffs with meritorious claims will have their day in court. With regard to theFallon AOM’s alleged failure to mention that any medical records were reviewed, the Court concluded that because N.J.S.A. 2A:53A-27 does not refer to the review of medical records, affiants are not required to state that they reviewed the medical records of the injured party.

As for the Fallon AOM’s failure to name a specific named defendant whose actions fell below the applicable standard of care, the Court also found the claim baseless. In support, it noted that the AOM statute “is silent as to any requirement that the affidavit specifically identify a defendant by name.” In this case, the plaintiff’s AOM specifically names Dr. Singh as “one of the John and Jane Doe [d]efendants sued therein.” Furthermore, Dr. Singh was not required to be named individually in the complaint because he was an agent of JSUMC and was one of the John and Jane Does referred to in the complaint.

Finally, the New Jersey Supreme Court emphasized the need for a timely and effective Ferreira conference in all professional negligence actions. It also noted that failing to hold such a conference in this case gave rise to issues that could have been resolved.

“Because we find the Fallon AOM is compliant with N.J.S.A. 2A:53A- 27’s requirements, we need not reach the equitable remedies of substantial compliance or extraordinary circumstances. If we were to reach the question of extraordinary circumstances, however, the trial court’s failure to hold a Ferreira conference would weigh heavily in favor of such a finding,” Justice Solomon explained. “We emphasize once again the conference’s importance in professional negligence actions.”

In William Pace v. Hamilton Cove (A-4-23/088302) (Decided July 10, 2024), the Supreme Court of New Jersey held that contract provisions waiving class actions are lawful, even if they aren’t accompanied by arbitration provisions; however, such waivers may be unenforceable if found to be unconscionable or to violate other tenets of state contract law.

The Court further found that because the plaintiffs clearly and unambiguously waived their right to maintain a class action and the lease contract is not unconscionable as a matter of law, it can be enforced.

Facts of Pace v. Cove

The Hamilton Cove apartment complex, located in Weehawken, includes hundreds of apartments along the Hudson River waterfront. Plaintiffs allege that in April 2020, Hamilton Cove advertised on its website and social media pages that its apartments had “elevated, 24/7 security.” Plaintiffs each leased apartments at Hamilton Cove.

Both plaintiffs’ leases allowed three days to consult with an attorney, after which the leases would become final. The leases were both standard form contracts with multiple addenda, including a “Class Action Waiver” Addendum. The lease addenda were incorporated into and made part of the lease.

After moving into their apartments, Pace and Walters discovered that the complex’s security cameras did not work and that there was no 24/7 security. According to plaintiffs, the advertised “24/7 security” drew them to lease defendants’ apartments and pay the leasehold price, especially because, plaintiffs allege, Weehawken has a property crime rate higher than the state average.

In March 2022, Pace and Walters jointly filed a complaint, alleging common law fraud and a violation of the Consumer Fraud Act (CFA). Defendants moved to dismiss plaintiffs’ claims for failure to state a claim or, alternatively, to strike plaintiffs’ class allegations, arguing that plaintiffs waived their ability to proceed as a class when they signed the class action waiver addendum. The trial court denied defendants’ motions, finding plaintiffs’ complaint sufficiently pled fraud.

The Appellate Division affirmed the trial court’s decision and held that “a class action waiver in a contract that does not contain a mandatory arbitration provision” is unenforceable as a matter of law and public policy. The court distinguished AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), in which the United States Supreme Court held that “the Federal Arbitration Act [(FAA)]…preempts states from invalidating class action waiver clauses contained within arbitration agreements on public policy or unconscionability grounds” because no arbitration agreement was present in the lease agreements at issue. The Appellate Division further held that unless they are not rendered enforceable by the presence of an arbitration agreement, “[c]lass action waivers are clearly contrary to the public policy of this State.”

NJ Supreme Court’s Decision in Pace v. Cove

The New Jersey Supreme Court reversed. “Class action waivers in consumer contracts are not per se contrary to public policy, but they may be unenforceable if found to be unconscionable or to violate other tenets of state contract law,” Justice Fabiana Pierre-Louis wrote for the court. “In this case, because plaintiffs clearly and unambiguously waived their right to maintain a class action and the lease contract is not unconscionable as a matter of law, we hold that it is enforceable.”

In reaching its decision, the New Jersey Supreme Court emphasized that class action waivers are distinct from arbitration provisions even though, they are frequently paired with arbitration provisions to prevent class arbitration. “Simply because courts have considered and upheld class waivers accompanied by arbitration agreements in light of the arbitration-protective policies adopted in the FAA and state arbitration acts, however, does not mean that an arbitration provision is necessary to a class waiver’s enforceability,” Justice Pierre-Louis explained.

The Court also noted that the fact that class actions advance several important policy goals does not mean that they cannot be waived. “Our law supports the contractual waiver of many rights that advance important goals, such as the constitutional right to a jury trial, provided that the requisite procedural safeguards surrounding the waiver are met,” Justice Pierre-Louis wrote.

The New Jersey Supreme Court when on to hold that class action waivers standing alone and apart from a mandatory arbitration provision are not per se unenforceable. Instead, a particular class action waiver in a given contract may be unenforceable if found to be unconscionable or invalid under general contract principles. “As a matter of general contract law, the inquiry is the same regardless of whether a contract contains an arbitration provision,” Justice Pierre-Louis explained.

The New Jersey Supreme Court next turned to whether the class action waiver at issue in the case was deemed unconscionable. To answer this question, the Court considered the factors set forth in Rudbart v. N. Jersey District Water Supply Commission, 127 N.J. 344 (1992): (1) the subject matter of the contract, (2) the parties’ relative bargaining positions, (3) the degree of economic compulsion motivating the adhering party, and (4) the public interests affected by the contract.

The Court ultimately concluded that the waiver is not unconscionable. “In sum, because plaintiffs knowingly and voluntarily waived their right to bring a class action by assenting to their respective leases and the class action waiver contained therein is not unconscionable, the lease is enforceable,” Justice Pierre-Louis wrote.

In Susan Seago v. Board of Trustees, Teachers’ Pension and Annuity Fund (A-9-23/087786) (May 22, 2024), the Supreme Court of New Jersey held that the Board of Trustees of the Teachers’ Pension and Annuity Fund (TPAF Board) acted arbitrarily, capriciously, and unreasonably when it denied petitioner Susan Seago’s application for an interfund transfer from her expired Public Employees’ Retirement System (PERS) account to her active Teachers’ Pension and Annuity Fund (TPAF) account.

Facts of Seago v. Board of Trustees, Teachers’ Pension and Annuity Fund

The Edison Township Board of Education (Edison BOE) hired Susan Seago as a paraprofessional in 2004, and she became a member of PERS that same year. At the beginning of the 2017-2018 school year, Seago resigned from her position as a paraprofessional and became employed as a teacher by the Edison BOE. By that time, her PERS account had reached “Tier 1” membership status and had vested.

On July 6, 2017, Seago filled out an “Application for Interfund Transfer” to transfer her PERS credits and contributions to her new TPAF account. Pursuant to N.J.A.C. 17:3-7.1(b), a TPAF member seeking to effectuate an interfund transfer from a former PERS account must file an “Application for Interfund Transfer” before the member’s PERS account expires, which occurs two years from the date of the member’s last contribution.

According to the printed instructions on the application, Seago and the Edison BOE were required to complete different portions of the application. Seago completed and signed her section and sent the application to the Edison BOE. Although the Edison BOE enrolled Seago as a TPAF member in September 2017, it did not complete its portion of Seago’s interfund transfer application at that time.

In early March 2019, the Department of the Treasury, Division of Pensions and Benefits (Division) notified Seago that she had not contributed to her PERS account since June 30, 2017. Seago spoke with representatives of the Edison BOE’s human resources department, who assured her that all she needed to do to effectuate her interfund transfer request was to complete “the top portion” of the application, as she had already done. On June 30, 2019, Seago’s membership in PERS ceased pursuant to N.J.S.A. 43:15A-7(e), which provides that membership in PERS “shall cease if [the member] shall discontinue [their] service for more than two consecutive years.”

At that time, and unbeknownst to Seago, the Edison BOE had still not completed its portion of Seago’s interfund transfer application. On August 31, 2020, the Edison BOE realized that it failed to send Seago’s interfund transfer application to the Division on time. The Edison BOE attempted to rectify the situation by completing its portion of the application and submitting it to the Division that same day. Along with the application, the Edison BOE sent a letter admitting its mistake. The Division informed Seago and the Edison BOE that, despite the Edison BOE’s conceded error, Seago’s application for interfund transfer could not be processed because her PERS account had expired.

The Edison BOE challenged the denial of Seago’s interfund transfer application. The TPAF Board again denied the interfund transfer request, and the Appellate Division affirmed.

NJ Supreme Court’s Decision in Seago v. Board of Trustees, Teachers’ Pension and Annuity Fund

The New Jersey Supreme Court reversed. It held that the TPAF Board acted arbitrarily, capriciously, and unreasonably when it denied Seago’s interfund transfer application and directed the TPAF Board to grant Seago’s interfund transfer application as if it were timely filed.

“Under the unique facts of this case, we conclude that equity requires that the TPAF Board grant Seago’s interfund transfer application,” the Court wrote. “Seago’s reasonable and good- faith attempts to ensure that her interfund transfer application was timely filed, coupled with the absence of apparent harm to the pension fund, necessitate this outcome.”

In reaching its decision, the New Jersey Supreme Court acknowledged that equitable principles are rarely applied against governmental entities. However, the Court also noted that it has held that the principle of equitable estoppel “may be invoked” against a governmental entity “where interests of justice, morality and common fairness clearly dictate that course.” Gruber v. Mayor & Twp. Comm. of Raritan, 39 N.J. 1, 13 (1962).

The New Jersey went on to consider several factors, as outlined by the Appellate Division in Sellers v. Board of Trustees, PFRS, 399 N.J. Super. 51 (App. Div. 2008), to determine whether to apply equitable principles in this case. The factors include: “whether the government failed to ‘turn square corners’”; whether the pension member “acted in good faith and reasonably”; the harm a member will suffer; the harm to the pension scheme; and any other relevant factors in the interest of fairness.

In finding that the equitable principles outlined in Sellers applied, the New Jersey Supreme Court found it “evident” that the TPAF Board did not “turn square corners” when considering Seago’s interfund transfer application in light of the reasons provided for the delayed submission. In support, it cited that the TPAF Board did not reasonably and adequately consider the Edison BOE’s admitted responsibility and how the Guidebook, application, and regulations led to the late filing of Seago’s interfund transfer application, through no fault of Seago’s.

The New Jersey Supreme Court also concluded that Seago acted in good faith and took reasonable steps to attempt to ensure that her interfund transfer application was filed. As noted by the Court, Seago completed her portion of the application timely and reasonably believed, based on reassurances by her employer coupled with the instructions in the Guidebook and on the application itself, that it was the Edison BOE’s responsibility to complete and submit her application.

Additionally, the Court determined that Seago would suffer significant harm from the denial of her interfund transfer application. Because she will be unable to transfer her PERS “Tier 1” membership status, she would have to wait five additional years to retire and would ultimately receive a lower monthly pension allowance. Finally, the New Jersey Supreme Court emphasized that it did not hold that it is the employer’s responsibility to file an interfund transfer application on a member’s behalf, or that a member will be entitled to an interfund transfer in every case in which a former employer fails to timely complete an interfund transfer application on the member’s behalf. Rather, under the specific circumstances of the case, it found that as a matter of equity the TPAF Board must grant Seago’s interfund transfer application as if it were timely filed.

In Padilla v. Young Il An (A-43-22/087862) (Decided June 13, 2024), the Supreme Court of New Jersey held that owners of vacant commercial lots have a common law duty to maintain the public sidewalks abutting those lots in reasonably good condition.

Facts of Padilla v. Young Il An

In September 2019, plaintiff Alejandra Padilla allegedly tripped, fell, and suffered injuries on the sidewalk abutting a vacant commercial lot in Camden. At the time of plaintiff’s fall, defendants Young Il An and Myo Soon An owned the subject lot, which they had purchased in 1992, intending to construct a building there.

According to testimony, they never built a structure on that lot or on the adjacent lot they also owned because “the economic situations [were] really bad,” and they did not purchase liability insurance to cover the lot because insurance companies “didn’t really want to insure it.”

In April 2020, plaintiff filed a complaint alleging that defendants’ negligence in failing to reasonably maintain the sidewalk abutting the subject lot caused her fall and resulting injuries. Defendants moved for summary judgment. The trial court granted defendants’ motion, holding they did not owe a duty of care to plaintiff.

The court relied heavily on Abraham v. Gupta, 281 N.J. Super. 81 (App. Div. 1995), which held that the liability imposed on commercial property owners to reasonably maintain abutting sidewalks does not apply to sidewalks abutting vacant lots. The court reasoned that defendants did not have a duty to maintain the sidewalk because it abutted a vacant lot that was not generating any income, citing Stewart v. 104 Wallace Street, Inc., 87 N.J. 146 (1981).

The trial court rejected plaintiff’s contention that summary judgment was improper because a Camden municipal ordinance required defendants to maintain the lot’s abutting sidewalk, explaining that municipal ordinances do not create a separate common law duty. The Appellate Division affirmed.

NJ Supreme Court’s Decision in Padilla v. Young Il An

The New Jersey Supreme Court reversed. It held that all commercial landowners — including owners of vacant commercial lots — have a duty to maintain the public sidewalks abutting their property in reasonably good condition and are liable to pedestrians injured as a result of their negligent failure to do so.

According to the Court, its decision was based largely on “considerations of fairness.” “There is something profoundly unfair about commercial property owners purchasing vacant lots and having no responsibility whatsoever for maintaining the area where the general public traverses,” Justice Fabiana Pierre-Louis wrote.

The New Jersey Supreme Court emphasized that purchasing a vacant commercial lot is a business decision that embraces the attendant costs and burdens of conducting business. “Indeed, when someone purchases a vacant commercial lot, that is a business decision that embraces all the attendant costs and burdens of conducting business,” Justice Pierre-Louis wrote. “We conclude that one of those costs necessarily includes maintaining the abutting sidewalks so that they are in a reasonably safe condition for innocent passersby.”

The Court determined that the defendants’ argument to base liability on profitability or a path to profitability is an “unworkable approach that will only further confuse our commercial sidewalk liability law, lead to inconsistent results, and unfairly harm the public.” It further determined that bright-line rule that all commercial property owners owe a duty is the “most workable rule to protect the general public and ensure consistency in our courts.” To the extent that Abraham conflicts with its decision, the New Jersey Supreme Court held that it is overruled. Finally, Justice Pierre-Louis called on the New Jersey Legislature to address the issue of commercial sidewalk liability.

In New Jersey Division of Child Protection and Permanency v. J.C. (A-8-23/088071) (Decided May 29, 2024), the Supreme Court of New Jersey held that the family court does not have the authority under N.J.S.A. 30:4C-12 to dismiss a Title 30 action — and with it, a parent’s appointed counsel — but continue restraints on a parent’s conduct.

If the family court finds that it is in the best interests of the child to continue the restraints on a parent’s conduct, it must keep the case open to facilitate judicial oversight of the Division’s continued involvement, while safeguarding a parent’s right to counsel.

Facts of New Jersey Division of Child Protection and Permanency v. J.C.

As set forth in the opinion, the Division of Child Protection and Permanency (the Division) became involved with J.C. (Jan) and her family in July 2018, when a hospital employee notified the Division that Jan had been involuntarily hospitalized for manic and paranoid behavior. The Division implemented a safety plan that mandated temporary supervision of Jan’s contact with her children. Later, the Division lifted the plan.

Following a referral in December 2019, when Jan admitted that she had stopped seeing her therapist and was diagnosed with bipolar disorder with psychotic features, the Division reinstituted the safety plan and filed a complaint under N.J.S.A. 30:4C-12, which authorizes the Division to seek a temporary court order granting it care and supervision of a child, and the provision of services to parents.

A summary hearing is required within six months to review the order granting the Division care and supervision, which may be extended by the court if it is in the child’s best interests. At these State- initiated proceedings, parents are entitled to the assistance of counsel as a matter of due process.

The Family Part granted the Division care and supervision of the children. In March 2021, the Law Guardian sought to dismiss the Title 30 action because of Jan’s lack of cooperation with the Division. The court discontinued the Division’s care and supervision of the children but dismissed the litigation with restraints, deeming it “irresponsible” to allow Jan to have unsupervised contact with the children, considering her mental health issues. The Appellate Division affirmed

NJ Supreme Court’s Decision in New Jersey Division of Child Protection and Permanency v. J.C.

The New Jersey Supreme Court reversed. “We hold that the family court does not have the authority under N.J.S.A. 30:4C-12 to dismiss a Title 30 action — and with it, a parent’s appointed counsel — but continue restraints on a parent’s conduct. If the family court finds that it is in the best interests of the child to continue the restraints on a parent’s conduct, it must keep the case open to facilitate judicial oversight of the Division’s continued involvement, while safeguarding a parent’s right to counsel.”

In its opinion, the New Jersey Supreme Court reviewed the multi-step process that the Division must follow to properly exercise its authority under Title 30. In this case, the Court found that the order would result in the Division’s continued involvement with the family without the requisite judicial oversight. “Such an action is inconsistent with the express provisions of N.J.S.A. 30:4C- 12,” according to the Court.

“A case should be dismissed only when the court determines that neither services nor supervision are required to ensure the child’s health and safety,” the Court explained. “Thus, if the court finds that the Division established by a preponderance of the evidence that restraints on a parent’s contact with her children is in their best interests, the case should not be dismissed.”

The New Jersey Supreme Court went on to find that when a Title 30 action is terminated, as was the case here, so too is the right to the appointment of counsel. “Therefore, if a case is dismissed with continuing restraints, a parent with appointed counsel, like Jan, who seeks review in the future would not be entitled to the assistance of counsel to begin that process, unless the parent has the means to hire private counsel to do so,” the Court wrote. “Indeed, the Family Part’s order in this case requires Jan to initiate review of the restraints, but the Office of the Public Defender confirmed that they no longer represented Jan following dismissal of the action. We find this result incompatible with due process and a parent’s right to counsel in Title 30 proceedings.”

Finally, the Court recognized that periodic in- person visits to an intact family by a Division representative are inherently disruptive to the family in general and the children in particular. It, therefore, recommended that N.J.A.C. 3A:12-2.6 should be amended to provide an exception to regular weekly or monthly visitation where the Division contends, and the family court finds, that the provision of services by the Division is not required.

In Patrick Boyle v. Carol Huff (A-42-22) (087900) (Decided May 30, 2024), the Supreme Court of New Jersey held that indemnification can exist in first-party claims; however, contracts must be drafted to expressly provide for such indemnification.

“[I]ndemnification may also apply to first-party claims if that is the clear intent of the parties as expressed by their deliberate word choices when drafting contracts,” the Court wrote. “Those word choices will govern whether an indemnification supports a first- or third-party claim for damages.”

Facts of Boyle v. Huff

Plaintiff Patrick Boyle owns one of the approximately 750 units of the Ocean Club Condominium (OC Condominium). As a unit owner, Boyle is afforded membership in the Ocean Club Condominium Association, which oversees OC Condominium affairs in accordance with the OC Condominium Master Deed and By-laws (bylaws). The Association is managed by a Board of Trustees (Board), comprised of seven members, who are all unit owners. Trustees are indemnified by the Association in accordance with Article VI, Section 1 of the bylaws.

Boyle was appointed to a seat on the Board. Following a bitter dispute between Boyle and his fellow trustees over the financial management of the Association, the Board adopted a special resolution to expel Boyle as a trustee.

Boyle filed a complaint challenging his removal. The trial court reinstated him as a trustee, holding that the Board violated the bylaws and relevant regulations by failing to provide adequate notice of the vote to consider Boyle’s expulsion. Boyle filed an amended complaint, adding additional claims including for indemnification. He later filed a third amended complaint, bringing a derivative claim on behalf of the Association and alleging that the trustee defendants breached their fiduciary duties; he sought indemnification for that claim as well.

Boyle was defeated in the next Board election, after which both sides moved for summary judgment. The trial court held in relevant part that the plain language of the bylaws entitled Boyle to counsel fees and costs. The Appellate Division found that the indemnification provision covered the fees and costs Boyle incurred in his action to be reinstated as trustee but not in his derivative action claim.

NJ Supreme Court’s Decision in Boyle v. Huff

The New Jersey Supreme Court reversed, holding that the ambiguous indemnification provision must be construed against the indemnitee.

According to the New Jersey Supreme Court, the second sentence of the indemnification provision, when read in isolation, could support indemnification, as Boyle argues and the Appellate Division found. However, the Court further found that the interplay between the third sentence, in which the Association’s counsel must judge the indemnitee trustee’s behavior — an assessment that would be illogical if the second sentence were to extend indemnification to suits in which the Association and the trustees were adverse — and the first sentence, which provides that trustees “shall not be liable to the Unit Owners,” suggested that the reasonable interpretation of the second sentence is that the agreement was meant to cover any and all actions by unit owners who bring actions against trustees in their capacity as trustees.

“At minimum, the indemnification provision is ambiguous and must therefore be construed against Boyle as the indemnitee,” Justice Noriega wrote. “Contrary to the conclusion reached by the Appellate Division, we cannot presume first-party coverage in the absence of language precluding it; rather, there must be affirmative indicia of the intent to indemnify to overcome the presumption that parties will each pay their own way.”

The New Jersey Supreme Court advised that prospectively, parties to a contract intending to extend indemnification to first parties should include express language to achieve such an agreement. “[W]e encourage parties seeking to permit indemnification of first-party claims to include express language to do so,” Justice Noriega explained. “Otherwise, any ambiguity will continue to be construed against the indemnitee.”