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DEG, LLC v. Township of Fairfield

198 N.J. 242, 966 A.2d 1036 (2009)

ZONING; SEXUALLY ORIENTED BUSINESSES — The Municipal Land Use Law only requires adoption of an ordinance if a municipality’s intent is to rezone a location to permit sexually oriented businesses, but where a settlement agreement with a business is only intended to settle a specific dispute and to acknowledge the business’s right to operate in its current location as non-conforming use, no ordinance is required to override the 1,000 foot buffer zone otherwise called for under New Jersey law.

A company leased a commercial property to operate a sexually oriented business. It applied for a business permit, but the municipality denied the permit because its zoning ordinance prohibited the operation of sexually oriented businesses anywhere within the municipality. The company hired a planning expert who opined that, based on the local zoning ordinance (which prohibited the operation of sexually oriented businesses) and based on N.J.S.A. 2C:34-7 (which prohibits the operation of such businesses within 1,000 feet of schools, bus stops, playgrounds, residential areas, and houses of worship), there was no available location to conduct this kind of business in the municipality. The company sued the municipality seeking a declaration that the local zoning ordinance and the state statute were unconstitutional and that the municipality’ s denial of its permit request was an invalid prior restraint of the company’s first amendment rights.

The lower court found the zoning ordinance to be unconstitutional on its face because it did not permit sexually oriented businesses anywhere in the municipality. It also found that the company demonstrated a reasonable likelihood of proving that the municipality’s application of N.J.S.A. 2C:34-7 to the company’s business location would also violate the First Amendment. On this basis, the lower court ordered the municipality to issue a permit that would allow the company to operate pending a final determination as to the constitutionality of the statute. The municipality then set out to retain its own planning expert to challenge the company’s claim that there was no available market. In the interim, the company began operating its business.

The company and the municipality settled their dispute with respect to the constitutionality of N.J.S.A. 2C:34-7. A consent judgment permitted the company to continue operating at its present location. It also provided that if the municipality adopted a zoning ordinance permitting the operation of sexually oriented businesses in other areas, but not where the company’s business was located, the municipality would issue a certificate of nonconformity within ten days. The municipality adopted a new ordinance that permitted the operation of sexually oriented businesses in a C-3 zone, which did not include the company’s location. When the company applied for a certificate of conformity, it was denied. The company sued to enforce the settlement. The municipality filed for relief from the consent judgment pursuant to Court R. 4:50-1 which allows such relief on the basis of mistake, surprise, or inadvertent neglect.

The lower court held that there were no grounds from relief and it ordered the municipality to issue a certificate of nonconformity. On appeal, the Appellate Division agreed with the lower court’s finding that the municipality was not entitled to vacate the settlement pursuant to R. 4:50-1, but it ordered a hearing to determine if the municipality’s adoption of a new zoning ordinance allowing sexually oriented businesses in certain zones would permit vacating the settlement for equitable reasons. The Court also found that the municipality’s agreement to provide a certificate of nonconformity to allow the company to operate violated the Municipal Land Use Law (MLUL).

On further appeal, the Supreme Court reversed, finding that R. 4:50-1 does not allow parties to a consent judgment to change their minds because the settlement turns out to be less advantageous than it originally appeared. It also overruled the Appellate Division’s holding that the agreement to issue a certificate of nonconformity violated the statute. The Court noted that N.J.S.A. 2C:34-7 did not outlaw sexually oriented businesses, but permitted them as long as they were outside a 1,000 foot buffer zone around schools, houses of worship, parks, and residential neighborhoods. Further, the statue permits a municipality to allow such uses within the buffer zone. The Court noted that the purpose of the exemption was to insulate the statute from constitutional attack in those municipalities where invoking the statute would prohibit any sexually oriented businesses from operating within the municipality. Lastly, the Court rejected the Appellate Division’s holding that the municipality violated the MLUL by not adopting an ordinance overriding the 1,000 foot buffer. According to the Supreme Court, the MLUL only requires adoption of an ordinance if a municipality’s intent is to rezone a location to permit sexually oriented businesses. Here, however, the settlement agreement was not intended to rezone the area where the company operated its business. Rather, it was only intended to settle a specific dispute and to acknowledge the company’s right to operate its business as a non-conforming use.


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