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D. Russo, Inc. v. Romankow

A-3483-10T1 (N.J. Super. App. Div. 2011) (Unpublished)

ZONING; SEXUALLY ORIENTED BUSINESSES — A court, when determining whether there are alternate sites available for locating a sexually oriented business, can use its reasonable judgment in determining the applicable, relevant market area for such a business.

A sexually oriented business challenged a municipality’s decision not to let it operate its business within the municipality pursuant to N.J.S.A. 2C:34-7. The business argued that the statute, as applied to its business was unconstitutional, but the lower court affirmed. The Appellate Division reversed and remanded the case back to the lower court with instructions to render findings as required by Saddle Brook v. A.B. Family Center, Inc., 156 N.J. 587 (1989). Saddle Brook requires a lower court to determine: (1) the relevant market area for the type of sexually oriented business; (2) the availability of alternative sites within the relevant market area; and (3) whether the available sites, in relation to the size of the market area, provide enough suitable alternative sites to comply with constitutional standards.

The municipal prosecutor and the municipality presented two experts who testified that the first factor, relevant market area, could be determined either by: (a) a twenty minute drive from the business; or (b) by drawing a circle on a map with a radius of fourteen miles and placing the business at the center. The business’s expert calculated the proposed market area based on customer data and determined that the relevant market area included sixteen municipalities in which about seventy percent of the business’s customers lived.

After determining the relevant market area, the municipality, prosecutor, and business determined the second prong of the Saddle Brook analysis – available alternative sites. The municipality’s expert used the twenty mile drive test to find that available alternatives were located in four municipalities. The prosecutor used the circular trade method to find that there were eleven municipalities with available sites. The business’s expert determined that there were no available sites.

The lower court evaluated the expert opinions and found that the circular trade methodology for determining relevant market area was more appropriate, and that there were nineteen available sites within that market area. Prior to remand, the lower court had failed to consider to third prong of Saddle Brook, whether the number of available sites, in relation to market area, provided enough sites. The lower court, on remand, reject the business’s argument that in order to satisfy the third prong of the test it was required to do a site by site analysis of the available sites to assess the real adequacy of the proposed available sites. It determined that, based on the nineteen available sites in one municipality plus sites in ten other municipalities within the fourteen mile radius, and based on a the fact that seventy percent of the business’s customers lived in that area, there were enough suitable alternative locations elsewhere. The business appealed. The Appellate Division affirmed.

The Court found that the lower court met the standards set forth in Saddle Brook and that it was not required to directly address the geographic distribution of customers at comparable sexually oriented businesses in determining the validity of the market area. It rejected the business’s argument that the lower court should have analyzed the economic costs for developing alternative sites. The Court disagreed, finding that sexually oriented businesses need to “fend for themselves in the real estate market” on equal footing with other, non-sexually oriented, businesses. It noted that Saddle Brook only requires a finding that there are available locations, but that analysis does not require a due diligence inquiry as to the actual availability or economic feasibility of certain alternative locations. Lastly, the Court rejected the business’s argument that the lower court did not satisfy the third prong by considering whether the available sites, in relation to the market size, provided enough alternative sites. Although the lower court had a superficial analysis of this question, by taking judicial notice of the census figures in one municipality with nineteen available sites, the Court found it reasonable and acceptable.


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