1/14/2007

Relocation Assistance: The step-child of eminent domain: New Jersey Eminent Domain Blog, 1/11/07

By Bill Ward

In Jersey City School District v. Marathon Enterprises, the Appellate Division issued a comprehensive 22-page per curiam opinion and unanimously affirmed a $2 million award made by the Office of Administrative Law (“OAL”) in favor of Marathon Enterprises, Inc., a Jersey City property owner who had been displaced by a school construction project.

Marathon used the condemned facility to manufacture hotdogs. Marathon moved its product production operation to a new facility in the Bronx, New York.

The issue in the case was the interpretation of the relocation regulations. N.J.A.C. 5:11-3.9 et seq. The specific issue resolved by the court involved whether the modifications made to the Bronx facility were improvements to the real estate, and therefore not reimbursable, as opposed to modifications to the facility in order to accommodate the relocated equipment. The Appellate Division affirmed all of Marathon’s claims based on the comprehensive opinion issued by Administrative Law Judge Leslie Z. Celentano. Marathon cross-appealed for interest on the amount awarded by the court in the relocation case. This claim was rejected by the A.L.J. and affirmed by the Appellate Division.

Relocation assistance goes hand in glove with any eminent domain case. In New Jersey, an eminent domain case proceeds under the Eminent Domain Act of 1971, N.J.S.A. 20:3-1 et seq. Relocation assistance proceeds under the Relocation Assistance Act, N.J.S.A. 20:4-1 and the Relocation Regulations, N.J.A.C. 5:11-1 et seq. The New Jersey Superious Court is the venue of an eminent domain action. The relocation claim, if it is contested, is decided initially by the agency and may be referred to the O.A.L. for adjudication. Any decision by the O.A.L. must be submitted to the agency for final approval. Any appeal from the final agency decision proceeds in the Appellate Division of the Superior Court.

There is very little reported case law in New Jersey regarding the interpretation of the Relocation Assistance Act and the regulations. Any practitioner who deals with the regulations will agree that the regulations are very poorly written and ill defined. That is why this case is important and should be published. Prior to this decision, the only Appellate case dealing with the Relocaton Assstance Act and the regulations was Foreign Auto Preparation Service v. New Jersey Economic Development Authority, 201 N.J. Super. 428 (App. Div. 1985). The New Jersey Supreme Court also dealt with relocation issues in the case of Paterson Redevelopment Agency v. Schulman, 78 NJ 378 (1979). The Marathon case, decided 21 years after Foreign Auto Preparation Service and 27 years after Schulman, is the the most recent case on relocation assistance.

Any owner or occupant displaced by a public project is eligible for relocation assistance. Relocation assistance can involve much more than moving a resident or business from Point A to Point B. As demonstrated in the Marathon case, when a complex manufacturing operation is dislocated, the relocation claim can involve expert valuation of the machinery and equipment and engineering testimony that addresses the cost to move the equipment and, more importantly, the cost incurred to make the equipment operational at the new relocation facility.

One issue that frequently surfaces in a complex manufacturing relocation is the juxtaposition of the functional unit claim in the eminent domain action with the relocation claim in the administrative action. New Jersey recognizes the value of the functional unit (i.e.: land, building and equipment), first enunciated in the leading case of State v. Gallant, 42 N.J. 583, 590 (1964). However, a property owner cannot have it both ways. You either get compensation for value in place, or compensation for the costs of moving the equipment to a new facility. In some cases, the equipment is incapable of being moved without being destroyed. In other cases, the owner and the attorney will have to decide which is the best course of action: Either a claim for value in place in the eminent domain case, or a claim for relocation or related modification to the building in the relocation case.


New Jersey Eminent Domain Blog: http://www.njeminentdomain.com