CHARLES KRAVITZ VS. PHILIP D. MURPHY (L-0774-20, CUMBERLAND COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1584-20

CHARLES KRAVITZ, DAWN

JOHANSON-KRAVITZ,

LITTLE HARRY'S LLC,

MARGARITA JOHNSON, JOHN

JOHNSON, TWO BEARS

PROPERTY MANAGEMENT,

ANDREW VAN HOOK, and UNION

LAKE ENTERPRISES, LLC,

Plaintiffs-Appellants, APPROVED FOR PUBLICATION

July 20, 2021

v.

APPELLATE DIVISION

PHILIP D. MURPHY, in his

official capacity as Governor of New

Jersey, GURBIR S. GREWAL,

in his official capacity as New Jersey

Attorney General, and JUDITH M.

PERSICHILLI, in her official

capacity as Commissioner of the

New Jersey Department of Health,

Defendants-Respondents.

________________________________

Argued June 1, 2021 – Decided July 20, 2021

Before Judges Messano, Hoffman and Smith.

On appeal from Executive Order No. 128, pursuant to

a transfer from the Superior Court of New Jersey, Law

Division, Cumberland County, Docket No. L-0774-20.

Jared McClain (New Civil Liberties Alliance) of the

Maryland bar, admitted pro hac vice, argued the cause

for appellants (Zimolong, LLC, Jared McClain, and

Harriet Hageman (New Civil Liberties Alliance) of the

Wyoming, Colorado and Nebraska bars, admitted pro

hac vice, attorneys; Jared McClain, Harriet Hageman,

Kara Rollins and Walter S. Zimolong, on the briefs).

Stuart M. Feinblatt, Assistant Attorney General,

argued the cause for respondents (Gurbir S. Grewal,

Attorney General, attorney; Jeremy M. Feigenbaum,

State Solicitor, Alec Schierenbeck, Deputy State

Solicitor, and Melissa Raksa, Assistant Attorney

General, of counsel; Stuart M. Feinblatt, of counsel

and on the brief; Tim Sheehan, Deputy Attorney

General, on the brief).

Joseph C. O'Keefe (Proskauer Rose LLP), Lindsey

Olsen Collins (Proskauer Rose LLP) of the New York

bar, admitted pro hac vice, and Michelle M.

Ovanesian (Proskauer Rose LLP), of the California,

Delaware and District of Columbia bars, admitted pro

hac vice, attorneys for amici curiae Fair Share

Housing Center, Lawyers' Committee for Civil Rights

Under Law, Housing & Community Development

Network of New Jersey, National Association for the

Advancement of Colored People – New Jersey State

Conference, and the New Jersey Latino Action

Network (Joseph C. O'Keefe, Lindsey Olsen Collins

and Michelle M. Ovanesian, on the brief).

The opinion of the court was delivered by

HOFFMAN, J.A.D.

Appellants – five individuals and three businesses – own or manage New

Jersey properties leased to residential tenants. Appellants' tenants all paid

security deposits of varying amounts in connection with their leases. As a

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result of COVID-19, on April 24, 2020, Governor Philip D. Murphy issued

Executive Order 128 (EO 128) that permitted New Jersey residential tenants to

use their security deposits to pay rent. N.J. Exec. Order No. 128 (April 24,

2020).

Appellants argue that EO 128 exceeded the Governor's powers under the

Emergency Health Powers Act, N.J.S.A. 26:13-1 to -31 (the EHPA), and the

New Jersey Civil Defense and Disaster Control Act, N.J.S.A. App. A:9-30 to -

63 (the Disaster Control Act); in addition, they contend EO 128 violated their

rights under the contracts and due process clauses of the New Jersey

Constitution.1 For the reasons that follow, we conclude the Governor was

authorized to enact EO 128 pursuant to emergency powers the Legislature

delegated to the Governor under the Disaster Control Act. We further

conclude that EO 128 does not violate appellants' rights under the New Jersey

Constitution.

1

After oral argument, pursuant to Rule 2:6-11(d), respondents brought to our

attention that on June 4, 2021, Governor Murphy signed into law A5820,

which terminates most of the Governor's COVID-19 executive orders,

including EO 128, the order at issue in this appeal, effective July 4, 2021. T he

Governor simultaneously issued Executive Order 244 formally terminating the

Public Health Emergency declared in Executive Order 103. According to

respondents, "the expiration of EO 128 on July 4 will moot this appeal."

Substantially for the reasons expressed by appellants in their June 17, 2021

letter brief, including the fact that "the terms of EO 128 explicitly keep the

order's effects in place for at least six months after the expiration of EO 128,"

we decline to dismiss this appeal on mootness grounds.

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Appellants' Tenancies

Appellants Charles Kravitz and Dawn Johanson-Kravitz, residents of

Mullica Hill, own and operate appellant Little Harry's LLC, which leases a

residential property owned by the Kravitzes in Glassboro, near Rowan

University (the Glassboro Property). On August 3, 2019, the Kravitzes rented

the Glassboro Property to four Rowan University students (the Rowan

Tenants), pursuant to a residential lease agreement. The Rowan Tenants

agreed to lease the Glassboro Property from August 15, 2019 through June 1,

2020, for $2,000 per month in rent; in their lease, the parties agreed that the

Rowan Tenants would pay a security deposit of $2,000, which the Kravitzes

would "hold . . . in an interest bearing account." The lease specified that the

Kravitzes could "make deductions from the [s]ecurity [d]eposit" to cover ten

enumerated costs, and that the Rowan Tenants "may not use the [s]ecurity

[d]eposit as payment for [r]ent"; in addition, the Kravitzes would return the

security deposit "less any proper deductions" after termination of the lease.

Appellants Margarita Johnson and John Johnson, residents of Vineland,

own and operate Two Bears Property Management and serve as co-trustees of

the Johnson Trust, which owns a residential duplex in Vineland (the Vineland

Property). The Johnson Trust agreed to lease the Vineland Property to a tenant

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from August 1, 2017, through July 31, 2019, for $820 per month, pursuant to a

lease that required the tenant to pay a security deposit of $1,230.

Appellant Andrew Van Hook, a Millville resident, serves as the

managing member of Union Lake Enterprises, LLC (Union Lake), which owns

a residential property in Millville (the Millville Property). Union Lake agreed

to rent the Millville Property to a tenant, pursuant to a lease that required the

tenant to pay rent of $1,450 per month from August 1, 2018, to June 30, 2020,

with a security deposit of $2,175; later, the parties agreed to extend the lease

to June 30, 2021. The lease further provided that, within thirty days of the

termination of the lease, Union Lake "shall return the [s]ecurity [d]eposit . . .

less any charges expended by [Union Lake] for damages . . . resulting from the

[t]enant's occupancy." In addition, the lease stated that the tenant could not

use the security deposit "for the payment of rent without the written consent of

the [l]andlord."

New Jersey's Economic Response to COVID-19

In response to the economic and public health crises caused by COVID-

19, the State took multiple steps to address the risk of housing insecurity

across the State. For homeowners, in March 2020, the Governor announced a

statewide residential mortgage relief program, in which over 175 financial

institutions agreed to provide a ninety-day grace period for mortgage

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payments, waive mortgage-related late fees, and start no new foreclosures for

sixty days. See N.J. Dep't of Banking & Ins., COVID-19 & Residential

Mortgage Relief, https://www.state.nj.us/dobi/covid/mortgagerelief.html (last

visited July 14, 2021). For landlords, the Governor announced the Small

Landlord Emergency Grant Program (SLEG), a twenty-five-million-dollar

program established to reimburse small residential property owners for lost

rent revenue due to COVID-19 between April and July 2020. See N.J.

Housing & Mortgage Finance Agency, "Small Landlord Emergency Grant

Program (SLEG) – Round 1," https://www.state.nj.us/dca/hmfa

/covid19/sleground1 (last visited July 14, 2021). SLEG

provides financial support for small rental property

owners (and, indirectly, to renters) who are struggling

due to the COVID-19 emergency in the State of New

Jersey. The Program will reimburse small landlords

for rent payments that were missed or reduced in

April, May, June, and/or July 2020. Only properties

with low-to-moderate rent levels are eligible.

[Ibid.]

What constitutes low to moderate rent levels depends upon the rental

property's county and number of bedrooms. Ibid. Glassboro is in Gloucester

County; Vineland and Millville are in Cumberland County. The record does

not indicate the number of units owned by each appellant or the number of

bedrooms in the properties under discussion here. On March 22, 2021, the

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New Jersey Department of Community Affairs announced Phase II of the

rental relief fund for renters unable to make rent payments due to COVID -19.

Ibid. These rental relief payments will be made directly to landlords. 2

For tenants, the Governor issued two Executive Orders to address the

challenges many renters faced in making rent payments, given the sharp loss of

jobs and income caused by COVID-19. First, on March 19, 2020, the

Governor issued Executive Order 106 (EO 106), which placed a temporary

emergency moratorium on evictions, with the moratorium expiring two months

after the ongoing public-health emergency ends. N.J. Exec. Order No. 106

(March 19, 2020). Governor Murphy explained that "many New Jerseyans are

or will be experiencing substantial loss of income as a result of business

closures, reductions in hours, or layoffs related to COVID-19, impeding their

ability to keep current on rent and mortgage payments . . . ." Ibid. He further

stated that the "removal of residents pursuant to evictions or foreclosure

proceedings can increase the risk to those residents of contracting COVID -19,

which in turn increases the risks to the rest of society and endangers public

health . . . ." Ibid.

2

N.J. Dep't of Cmty. Affairs, COVID-19 Emergency Rental Assistance

Program, https://njdca.onlinepha.com (last visited July 14, 2021).

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Importantly, the Governor qualified the reach of EO 106 in two ways.

The order first made clear that it "does not affect any schedule of rent that is

due." Ibid. In addition, although the EO 106 temporarily paused actual

evictions, "eviction and foreclosure proceedings may be initiated or continued

during the time this [o]rder is in effect . . . ." Ibid. State courts resumed

processing landlord/tenant matters on June 15, 2020. See N.J. Supreme Court,

Notice & Order – COVID-19 – Fourth Omnibus Order ¶ 4 (June 11, 2020),

https://njcourts.gov/notices/2020/n200612a.pdf.

With the crisis worsening in New Jersey, on April 24, 2020, the

Governor issued EO 128, the order under review, to assist renters, who

continued to struggle, despite EO 106. Explaining the need for this measure,

the Governor stated that "tenants may be suffering from one or more financial

hardships that are caused by or related to the COVID-19 pandemic, including

but not limited to a substantial loss of or drop in income, and additional

expenses such as those relating to necessary health care . . . ." Ibid. The

Governor noted that these tenants, while largely protected from removal,

would still be subject to eviction proceedings, such that there was an

"increased risk" of mass evictions when EO 106's temporary moratorium

lapses. Ibid. In addition, the Governor explained that renters "may face other

consequences from a late payment of rent, including interest and late fees,

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which they may be unable to satisfy in light of their substantial loss of income,

as well as negative credit reports that may affect their ability to find housing

options in the future . . . ." Ibid.

The Governor then identified a temporary way to help tenants continue

to make rent payments owed to landlords. As he explained, under New Jersey

law "a security deposit and the accumulated interest and earnings on the

investment of such deposit remain the property of the tenant . . . ." Ibid.

(citing N.J.S.A. 46:8-19). The Governor concluded that "enabling individuals

to pay portions of their rent with the security deposit they own will allow those

individuals to mitigate the consequences regarding evictions and accumulation

of interest and late fees upon termination of [EO 106] . . . ." Ibid. The

Governor's order thus allowed New Jersey tenants to use "a security deposit

governed by the provisions of N.J.S.A. 46:8-19 et seq., as well as the tenant's

portion of the interest and/or earnings accumulated thereon . . . towards rent

payments due . . . ." Ibid.

In an effort to minimize any adverse impact upon landlords resulting

from this temporary change, the Governor qualified EO 128 in three important

ways. First, EO 128 states that, where a tenant applies a security deposit to

unpaid rent, "[t]he landlord may recoup from the tenant any monies the

landlord expended that would have been reimbursable by the security deposit

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and interest or earnings thereon, at the time that such reimbursement from the

deposit and interest or earnings thereon would have taken place . . . ."

Restated, the landlord remains legally entitled to precisely the same money

from the tenant as before. Second, EO 128 established that tenants "shall be

obligated to replenish the security deposit in full" if they renew the lease. Ibid.

And third, EO 128 was time-limited to address the need for continued rent

payments during and right after the public-health emergency; it only applies to

payments "due to become due from the tenant during the Public Health

Emergency . . . or up to [sixty] days after the Public Health Emergency

terminates." Ibid.

In June 2020, appellants filed an action in New Jersey federal district

court seeking declaratory and injunctive relief regarding EO 128. Johnson v.

Murphy (Johnson), No. 20-cv-6750-NLH, 2021 WL 1085744 (D.N.J. Mar. 22,

2021). Appellants alleged that EO 128 violated the federal Contracts Clause,

federal substantive and procedural due process, federal equal protection, and

the federal Privileges and Immunities Clause. Id. at *12-13. Appellants also

asserted causes of action under state law. 3

3

After respondents declined to waive sovereign immunity over the state-law

claims, appellants dismissed those claims without prejudice; on December 15,

2020, appellants refiled the claims in the Law Division. Because we maintain

exclusive jurisdiction to hear challenges to Executive Orders, on January 26,

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On March 22, 2021, the district court rejected all of appellants' claims,

granting the State's Rule 12(b)(6) 4 motion to dismiss and dismissing appellants'

complaint in its entirety. As part of its ruling on the State's motion, the court

set forth the following facts surrounding the issuance of EO 128:

As of today, over twenty-nine million Americans are

known to have contracted COVID-19 and five

hundred thirty-six thousand seven hundred thirty-four

Americans have died from the disease. These

numbers are steadily increasing, and they have

increased significantly since the filing of this lawsuit

on June 2, 2020. New Jersey alone, as of today, has

recorded more than seven hundred fifty-eight thousand

confirmed cases and twenty-one thousand five

hundred eighty-eight confirmed deaths. . . .

....

In response to the COVID-19 pandemic,

Governor Murphy declared a public health emergency

and state of emergency on March 9, 2020. The stated

purpose of Executive Order 103 was "to protect the

health, safety and welfare of the people of the State of

New Jersey." N.J. Exec. Order 103. Governor

Murphy explained he was exercising certain

emergency powers of the Governor provided under

"the Constitution and statutes of the State of New

Jersey . . . ."

____________________

2021, the Law Division signed a consent order transferring the case to us. On

February 18, 2021, we ordered the appeal accelerated.

4

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a

complaint for "failure to state a claim upon which relief can be granted."

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Following Executive Order 103, Governor

Murphy issued several executive orders with the

purpose of attempting to monitor, plan for and

mitigate the spread of COVID-19. To reduce the

spread of COVID-19, on March 16, 2020, Governor

Murphy ordered gatherings in New Jersey limited to

no more than [fifty] persons and mandated the closure

of schools, casinos, racetracks, gyms and fitness

centers, entertainment centers, bars, and restaurants

(except for takeout and delivery). N.J. Exec. Order

104. On March 15, 2020, the national Centers for

Disease Control and Prevention ("CDC")

recommended that gatherings of [fifty] or more people

should be cancelled or at least postponed throughout

the United States for the following eight weeks.

Governor Murphy implemented that recommendation

in Executive Order 104. Governor Murphy further

explained that the "CDC has advised that COVID-19

spreads most frequently through person-to-person

contact when individuals are within six feet or less of

one another" and that for this reason, the CDC has

recommended individuals through the United State[s]

to practice social distancing. Governor Murphy

ordered that any violator of Executive 104 may be

subjected to criminal penalties.

Five days later on March 21, 2020, Governor

Murphy issued Executive Order 107, which mandated

the closure of non-essential businesses to the public

and required that New Jersey residents, with limited

exceptions, remain at their residence. N.J. Exec.

Order 107. In doing so, Governor Murphy explained

that "to mitigate community spread of COVID-19, it is

necessary to limit the unnecessary movement of

individuals in and around their communities and

person-to-person interactions in accordance with CDC

and DOH guidance." N.J. Exec. Order 107. Governor

Murphy ordered that any violator of Executive 107

may be subjected to criminal penalties.

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....

In April 2020, New Jersey was one of the eight

jurisdictions accounting for two-thirds of COVID-19

cases identified in the United States and one of the

three jurisdictions accounting for approximately half

of all deaths related to COVID-19.

[Id. 2021 WL 1085744 at *1-3.]

Regarding the Glassboro Property, on June 1, 2020, three of the Rowan

Tenants submitted letters requesting to use their portions of the security

deposit ($500 each) to pay rent. After the Rowan Tenants vacated the property

at the conclusion of their lease, the Kravitzes claim they discovered $1,854.94

in damage. As for the Vineland Property, the tenant made only one partial rent

payment after April 2020; as of April 1, 2021, the tenant owed $13,999 .50.

Regarding the Millville Property, the record does not indicate whether the

tenant used the security deposit to pay rent or caused damage to the leased

premises.

In their brief, appellants present the following points of argument:

I. Governor Murphy Exceeded His Emergency

Statutory Powers.

II. EO-128 Violates the Separation of Powers.

III. EO-128 Violates the Contracts Clause.

IV. EO-128 Violates Due Process.

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After carefully considering each argument, we conclude that none of them

warrant setting aside EO-128. We analyze each argument in turn.

I.

Appellants argue that EO 128 exceeds the Governor's emergency

powers. We reject this argument, finding that EO 128 constitutes a valid use

of the Governor's emergency powers.

The Governor is authorized to issue executive orders, "a well-accepted

tool of gubernatorial action." Perth Amboy Bd. of Educ. v. Christie, 413 N.J.

Super. 590, 598-99 (App. Div. 2010). An executive order is only valid if

authorized by statute. Worthington v. Fauver, 88 N.J. 183, 197-98 (1982).

The Security Deposit Act (SDA) provides certain safeguards for

residential tenants' security deposits. For example, a security deposit remains

the property of the tenant, "shall not be mingled with the personal property of

the [landlord]," and shall be deposited in an interest bearing account. N.J.S.A.

46:8-19. The SDA also provides instruction as to: what happens to the

tenant's security deposit when the property is conveyed to another person,

N.J.S.A. 46:8-20 and -21; when and how the security deposit should be

returned to the tenant minus any charges, N.J.S.A. 46:8-21.1; the amount that a

landlord may demand for a security deposit, N.J.S.A. 46:8-21.2; and that

landlords and tenants may not waive any provision of the law, N.J.S.A. 46:8 -

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24. The landlord must provide the tenant with itemized deductions

establishing what was deducted from the security deposit. N.J.S.A. 46:8-21.1.

The SDA provides double recovery to tenants when a landlord wrongfully

withholds a security deposit. Ibid.; MD Assocs. v. Alvarado, 302 N.J. Super.

583, 586 (App. Div. 1997). The SDA permits a landlord to deduct from the

security deposit for unpaid rent. Truesdell v. Carr, 351 N.J. Super. 317, 321

(Law Div. 2002). In fact,

[t]he purpose of a security deposit is to afford

protection to the landlord in the event that the

tenant defaults in the payment of rent, causes

damage to the premises, or breaches any

covenants in the lease. Where the lease

provides, . . . that the landlord shall retain the

deposit until the end of the term of the lease, he

may not be compelled to apply it to any earlier

default. If this were not the case the landlord

would be without protection for the remainder

of the term.

[Brownstone Arms v. Asher, 121 N.J. Super.

401, 403-04 (Cnty. D. Ct. 1972) (citations

omitted).]

Appellants argue that the EHPA and the Disaster Control Act, as cited

by the Governor in the executive order, do not authorize the actions he took

regarding rental security deposits in EO 128. 5 We address each statute in turn.

5

EO 128 also cited N.J.S.A. 38A:3-6.1 (authorizing the Governor to order to

active duty the New Jersey National Guard), and N.J.S.A. 38A:2-4

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A. Emergency Health Powers Act

Appellants argue that the EHPA specifically lists the powers given to the

Governor and the Commissioner of Health, with no other powers authorized.

According to appellants, authorizing tenants to use security deposits to pay

rent is not a power envisioned by the EHPA and is not related to the other

powers given by that statute, which pertain to addressing consequences of a

public health emergency. Significantly, respondents' brief advances no

arguments pertaining to the EHPA.

The EHPA grants the Governor authority to "declare a public health

emergency." N.J.S.A. 26:13-3(a). The statute provides in pertinent part:

a. The Governor, in consultation with the

commissioner [of health] and the Director of the

State Office of Emergency Management, may

declare a public health emergency. In declaring a

public health emergency, the Governor shall issue

an order that specifies:

1) the nature of the public health emergency;

2) the geographic area subject to the declaration;

3) the conditions that have brought about the

public health emergency to the extent known;

and

____________________

(authorizing the Governor to "order to active duty all or any part of the militia

that he may deem necessary"). Since these statutes clearly do not apply to the

actions the Governor took in EO 128, the parties' briefs did not address either

statute.

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4) the expected duration of the state of public

health emergency, if less than [thirty] days.

Such order may also prescribe necessary actions

or countermeasures to protect the public's

health.

[N.J.S.A. 26:13-3.]

Although the Governor is charged with declaring the state of emergency,

the EPHA primarily empowers the Commissioner of Health to protect the

wellbeing of New Jersey citizens. For example, under the EHPA, the

Commissioner may: investigate any incident or imminent threat of a human

disease or health condition; identify exposed individuals; establish a registry of

health care workers; provide for the safe disposition of human remains;

evacuate facilities; dispose of infectious waste; and control the supply and

distribution of vaccines. N.J.S.A. 26:13-4 to 11. In addition, the

Commissioner may vaccinate, decontaminate, and provide medical treatment

to address the public health emergency. N.J.S.A. 26:13-14.

We agree with appellants that the EHPA addresses public health

emergencies and that most powers authorized by that statute are directed

toward the Commissioner of Health, not the Governor. According to the plain

meaning of the EHPA, the executive branch may take certain acts to address a

public health emergency and to "prescribe necessary actions or

countermeasures to protect the public's health." N.J.S.A. 26:13-3. By

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permitting tenants to use their security deposits to pay rent, EO 128 does not

directly protect the community's health, but instead creates an economic

safeguard. We therefore conclude that the EHPA does not provide authority

for the Governor's issuance EO 128 because it was not directly related to the

public health.

B. Disaster Control Act

Appellants argue that EO 128 is not authorized by the Disaster Control

Act, asserting that the statute imposes definite limits on the Governor's

authority to take actions in a public emergency, and the actions taken in EO

128 are not within those limits. We reject this argument.

The Disaster Control Act authorizes the Governor

to render to the Government of the United States, in

the present crisis, and to provide for the public safety,

any assistance within the power of the State, and to

that end he is authorized to organize and employ any

and all resources within the State, whether of men,

properties or instrumentalities, and to exercise any and

all power convenient or necessary in his judgment to

render such assistance.

[N.J.S.A. App. A:9-30.]

A disaster is defined under the Disaster Control Act as

any unusual incident resulting from natural or

unnatural causes which endangers the health, safety or

resources of the residents of one or more

municipalities of the State, and which is or may

become too large in scope or unusual in type to be

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handled in its entirety by regular municipal operating

services.

[N.J.S.A. App. A:9-33.1(1).]

The purpose of the Disaster Control Act

is to provide for the health, safety and welfare of the

people of the State of New Jersey and to aid in the

prevention of damage to and the destruction of

property during any emergency as herein defined by

prescribing a course of conduct for the civilian

population of this State during such emergency and by

centralizing control of all civilian activities having to

do with such emergency under the Governor and for

that purpose to give to the Governor control over such

resources of the State Government and of each and

every political subdivision thereof as may be

necessary to cope with any condition that shall arise

out of such emergency and to invest the Governor

with all other power convenient or necessary to

effectuate such purpose.

[N.J.S.A. App. A:9-33.]

Pursuant to the Disaster Control Act,

[t]he Governor is authorized to utilize and employ all

the available resources of the State Government and of

each and every political subdivision of this State,

whether of men, properties or instrumentalities, and to

commandeer and utilize any personal services and any

privately owned property necessary to avoid or protect

against any emergency subject to the future payment

of the reasonable value of such services and privately

owned property as hereinafter in this act provided.

[N.J.S.A. App. A:9-34.]

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Originally, under the Disaster Control Act, the Legislature only gave the

Governor powers to address war emergencies. Worthington v. Fauver, 88 N.J.

183, 200 (1982); however, the Legislature eventually expanded the Governor's

powers to address any unusual incident which endangers the public health,

safety, or welfare. Ibid. The Governor is also not required to wait for a

catastrophe to occur before taking action. Ibid. However, the Governor's

power under the Disaster Control Act

is not without limit. While a situation of impending

disaster may sometimes fall within the statutory

definition of "emergency," the statute does not grant

the executive the power to label any situation

an "emergency" merely because there is a chance that

some kind of disruption will occur in the foreseeable

future. There must be a substantial likelihood of

occurrence within the immediate future.

[Id. at 196-97.]

Notwithstanding this limitation, "the Governor's power under the Disaster

Control Act must be liberally construed to accomplish its crucial legislative

purpose." Id. at 199.

N.J.S.A. App. A:9-45 provides:

In order to accomplish the purposes of this act, the

Governor is empowered to make such orders, rules

and regulations as may be necessary adequately to

meet the various problems presented by any

emergency and from time to time to amend or rescind

such orders, rules and regulations, including among

others the following subjects: . . . .

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N.J.S.A. App. A:9-45 then lists some of the subjects the Governor may address

in an emergency, including: blackouts; air raid warnings; recruitment of

volunteers including air raid wardens, police and firemen; designation of

vehicles and persons who can move during an air raid or any emergency;

conduct of civilian population during an emergency; air raid protocol for

schools; counteracting threatened sabotage; and evacuating residents.

The last two sections of N.J.S.A. App. A:9-45 give the Governor

powers:

i. On any matter that may be necessary to protect the

health, safety and welfare of the people or that will

aid in the prevention of loss to and destruction of

property.

j. Such other matters whatsoever as are or may

become necessary in the fair, impartial, stringent

and comprehensive administration of this act.

Appellants correctly cite Worthington, 88 N.J. at 187-98, and Cnty. of

Gloucester v. State, 132 N.J. 141, 146-52 (1993), for the proposition that in

determining whether the actions were authorized by the Disaster Control Act,

the court must first determine whether the governor's action is "rationally

related" to the legislative goal of protecting the public, and second, whether it

is "closely tailored to the magnitude of the emergency." Appellants argue that

EO 128 fails both prongs in that it is neither rationally related to protecting the

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public from damage related to COVID-19, nor is it closely tailored to the

magnitude of the emergency. We disagree, finding both prongs satisfied.

1. Rationally related (prong one)

Appellants contend that EO 128 is not rationally related to the legislative

goal of protecting the public from the damage created by COVID-19 because it

does not protect residential tenants from eviction, given that EO 106 already

accomplished that goal.

According to appellants, unlike EO 106, which protects New Jersey

residential tenants from evictions until two months after the end of the public

health emergency, EO 128 protects tenants from challenges in finding housing

rentals that might arise after the end of the pandemic. Appellants argue that

EO 128, therefore, is not rationally related to protecting the public from

damage caused by the public health emergency because it addresses future

consequences that might arise for New Jersey tenants after the end of the

pandemic, such as interest and late fees and negative credit reports. In

particular, appellants point to the highlighted language in the following two

paragraphs of EO 128:

[F]amilies struggling to pay rent due to financial

hardship during the ongoing Public Health Emergency

and the State of Emergency may also remain at

increased risk for eviction upon the termination of [EO

106] which under the terms of the Order must happen

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no later than two months after the end of the Public

Health Emergency or State of Emergency . . . .

WHEREAS, in addition to eviction proceedings

being initiated and the continued risk of eviction upon

termination of the Order, individuals may face other

consequences from a late payment of rent, including

interest and late fees, which they may be unable to

satisfy in light of their substantial loss of income, as

well as negative credit reports that may affect their

ability to find housing options in the future . . . .

[(emphasis added)].

Based on this language, appellants contend that EO 128 is intended to

protect tenants from the continued risk of eviction after the end of the

pandemic; however, the Disaster Control Act is meant to "provide for the

health, safety and welfare of the people of the State of New Jersey and to aid

in the prevention of damage to and the destruction of property during any

emergency." N.J.S.A. App. A:9-33 (emphasis added). In addition, by

removing any incentive for tenants to maintain their rental properties,

appellants contend that EO 128 will actually make "damage to and the

destruction of property" more likely, not less.

Respondents counter that EO 128 is, in fact, rationally related to the

public emergency because COVID-19 has created a fiscal and economic crisis,

in addition to a public health emergency. In support, respondents cite N.J.

Republican State Comm. v. Murphy (NJRSC), 243 N.J. 574, 580-81 (2020)

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where the Court found, "[l]aypeople, scientists, and legal scholars alike would

agree that COVID-19 is a true disaster with widespread consequences. The

pandemic has caused a health emergency, a broad based economic one that has

devastated many individuals and families, and a fiscal crisis for the State."

The Court in NJRSC further expressed that:

The virus has also triggered staggering

economic consequences for the nation and the State.

As states and cities imposed restrictions to slow the

spread of the virus, business closures led to mass

layoffs and furloughs. Gross Domestic Product fell

32.9% on an annualized basis during the second

quarter of this year, marking one of the steepest

declines in the country's history. The nation's

unemployment rate rose from 3.5% in February 2020

to 14.7% in mid-April. In May, the number of people

seeking unemployment benefits peaked at nearly 25

million nationwide. By June, New Jersey's

unemployment rate had reached 16.6%. Nearly 1.4

million New Jersey residents filed unemployment

claims between mid-March and mid-July. Even as

workers returned to their jobs, the number of

continuing claims remained close to 500,000 in mid-

July.

[Id. at 583-84.]

Thus, respondents argue that EO 128 is rationally related to the COVID-

19 pandemic, inasmuch as it addresses the State's fiscal and economic

emergencies. Also, respondents point out that EO 128 addresses the many

tenants who experienced a loss of income resulting in an impaired ability to

pay for health care.

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In support of their position that COVID-19 has caused an economic

crisis, respondents cite federal cases, including Bauer v. Elrich, 463 F. Supp.

3d 606, 614 (D. Md. 2020) ("The COVID-19 pandemic is a genuine public

health crisis that poses dire health risks" and has "brought on a severe

economic crisis."), and Washington v. DeVos, 466 F. Supp. 3d 1151, 1171

(E.D. Wash. 2020) ("[T]he COVID-19 pandemic has had devastating economic

consequences.").

Because of the serious economic crisis affecting New Jersey,

respondents argue that EO 128 is rationally related to the COVID-19 pandemic

by permitting tenants to use their security deposits to pay rent, thereby

contributing additional funds to the tenants who lost income and suffered

corresponding hardship in paying for their household expenses, including

medical care.

In determining whether a statute is rationally related, a court's inquiry is

limited to whether the law "rationally furthers any legitimate state objective."

Am. Express Travel Related Servs., Inc. v. Sidamon-Eristoff, 669 F.3d 359,

367 (3d Cir. 2012) (quoting Malmed v. Thornburgh, 621 F.2d 565, 569 (3d

Cir. 1980)). "[T]he rationality standard is a low threshold; to be va lid, the

Ordinance need only 'find some footing in the realities of the subject addressed

by the legislation.'" Greater Houston Small Taxicab Co. Owners Ass'n v. City

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25

of Hous., 660 F.3d 235, 240 (5th Cir. 2011) (quoting Heller v. Doe, 509 U.S.

312, 321 (1993)). A statute will be upheld if it "reasonably relates to a

legitimate legislative purpose and is not arbitrary or discriminatory."

Greenberg v. Kimmelman, 99 N.J. 552, 563 (1985) (citing Nebbia v. N.Y., 291

U.S. 502, 537 (1934)).

Applying this relatively low threshold standard, EO 128 clearly bears a

rational relationship to the health and economic crises created by COVID -19.

EO 128 permits tenants to use security deposits to pay rent so as to permit

access to additional funds to pay for health care during the pandemic. Also, it

seeks to prevent evictions for nonpayment of rent that might occur after the

pandemic and could create additional homelessness. Despite appellants'

argument that EO 106 was intended to prevent homelessness, EO 128 also

addresses that concern, albeit, using a different strategy. Thus, we agree with

respondents that EO 128 meets the first part of the Supreme Court's test for a

valid executive order because it is rationally related to the emergency.

2. Closely tailored (prong two)

Appellants next argue that EO 128 does not meet the second part of the

New Jersey Supreme Court's test, contending that it is not "closely tailored" to

the emergency. Appellants assert that increasing the rights of tenants, while

simultaneously decreasing the rights of landlords, amounts to favoring the

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economic situation of one group of New Jersey citizens at the expense of

another.

To bolster their argument that EO 128 is not closely tailored to meet the

needs of the public emergency, appellants cite N.J.S.A. App. A:9-45. As

noted, that statute lists ten subjects that may be addressed by executive orders,

with most relating to actions the Governor might take during wartime,

including black outs and air raid warnings. We are not persuaded by this

argument since N.J.S.A. App. A:9-45(i) also provides a more comprehensive

authorization to the Governor to issue executive orders "[o]n any matter that

may be necessary to protect the health, safety and welfare of the people or that

will aid in the prevention of loss to and destruction of property."

In considering the meaning of N.J.S.A. App. A:9-45(i), appellants cite

two canons of statutory construction, ejusdem generis (of the same kind) and

noscitur a sociis (words are interpreted based on the company they keep). For

example,

[W]hen general words follow specific words in a

statutory enumeration, the general words are construed

to embrace only the objects similar in nature to those

objects enumerated by the preceding specific words.

This technique saves the legislature from spelling out

in advance every contingency in which the statute

could apply.

[State v. Hoffman, 149 N.J. 564, 584 (1997) (quoting

Hovbilt, Inc. v. Twp. of Howell, 263 N.J. Super. 567,

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27

571 (App. Div. 1993)).]

Also, in Germann v. Matriss, 55 N.J. 193, 220-21 (1970) (citations

omitted), the Court explained:

It is an ancient maxim of statutory construction that

the meaning of words may be indicated or controlled

by those with which they are associated. . . . The rule

is not absolute, but it does serve as a helpful guide in

ascertaining the intended scope of associated words or

phrases in a statute where a particular word is

followed by more general words, and the legislative

purpose is unclear in such situations.

Appellants argue that the first eight subdivisions of N.J.S.A. App. A:9 -

45 describe very specific steps the Governor may take in an emergency;

therefore, the court should interpret the more comprehensive power given to

the Governor in N.J.S.A. App. A:9-45(i) (to address "any matter that may be

necessary to protect the health, safety and welfare of the people or that will aid

in the prevention of loss to and destruction of property") as limited to actions

directly responding to dangers created by the emergency. Appellants contend

that N.J.S.A. App. A:9-45(i) does not authorize the Governor to act on "any"

matter that might protect the health, safety, and welfare of a discrete portion of

the citizenry, without regard to the degree of connection between that matter

and the danger created by the declared emergency.

Appellants further argue that the appropriateness of reading a limitation

into the scope of N.J.S.A. App. A:9-45(i) is reinforced by N.J.S.A. App. A:9-

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28

45(j), which gives the Governor authority to address "[s]uch other matters

whatsoever as are or may become necessary in the fair, impartial, stringent and

comprehensive administration of this act." Appellants contend that EO 128

violates the "fair" and "impartial" requirements by altering statutory law and

private contracts to increase tenants' rights at the expense of landlords' rights.

Respondents counter that the list in N.J.S.A. App. A:9-45 is not

comprehensive, but instead explicitly permits additional gubernatorial acts

because of the following language: "[i]n order to accomplish the purposes of

this act, the Governor is empowered to make such orders, rules and regulations

as may be necessary adequately to meet the various problems presented by any

emergency . . . , including among others the following subjects . . . ." N.J.S.A.

App. A:9-45 (emphasis added). Also, the more general authorization in

N.J.S.A. App. A:9-45(i) is meant to permit the Governor to take any act in the

public welfare, so long as it is rationally related and closely tailored to the

emergency.

Respondents further assert that EO 128 is closely tailored to the

emergency because it "directly targets tenants' inability to pay rent without

significant collateral consequences" and security deposits are the property of

tenants, pursuant to N.J.S.A. 46:8-19. Moreover, respondents point out that

EO 128 does not relieve the tenant of the responsibilities to pay rent or to

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29

compensate the landlord for damage to property. Rather, landlords may obtain

a judgment against a tenant for damages, just as they could have done

previously, and in the real world, tenants often use their security deposits in

place of their final rent payment. See Elmsford Apartment Assocs., LLC v.

Cuomo, 469 F. Supp. 3d 148, 171 (S.D.N.Y. 2020) ("The whole scheme is no

different than what actually happens in the real world, where tenants routinely

forfeit their security deposit by allowing it to 'cover the last month's rent' on a

lease."). Respondents also point out that EO 128 expires two months after the

end of the pandemic, making it closely tailored to the COVID-19 emergency.

Regarding fairness, respondents contend that EO 128 represents one of

many measures taken by the State to help individuals in the pandemic. Some

of those measures assist landlords, including mortgage forbearance 6 and the

SLEG.

In their reply brief, appellants state they do not qualify for the SLEG,

because, apparently, they own less than three rental units. Also, appellants

contend that EO 128 does not require tenants to replenish their security

deposits, even after the pandemic ends. This argument lacks merit as the

6

On March 28, 2020, the Governor announced that more than forty banks,

credit unions, and servicers had committed to providing mortgage forbearance

for New Jersey homeowners. N.J. Dep't of Banking & Ins., COVID-19 and

Residential Mortgage Relief, https://www.state.nj.us/dobi/covid

/mortgagerelief.html (last visited July 14, 2021).

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executive order does, in fact, require tenants to replenish their security

deposits six months after the conclusion of the pandemic, or when renewing

their lease, whichever is later. N.J. Exec. Order No. 128.

We conclude that EO 128 meets the Court's test for being closely

tailored to meet the needs of the public health and economic emergency

because: it gives tenants an opportunity to pay rent using their own funds held

by landlords as security deposits; it does not hinder landlords' ability to obtain

judgments for unpaid rent or damages; and it is time limited, inasmuch as it

terminates two months after the end of the pandemic. Moreover, it is one of

many measures meant to aid both landlords and tenants to financially survive

the pandemic.

II.

Appellants argue that EO 128 violates the separation of powers between

the three branches of government. This argument lacks merit.

Article III, Paragraph 1 of the New Jersey Constitution provides that

"[t]he powers of the government shall be divided among three distinct

branches, the legislative, executive, and judicial. No person or persons

belonging to or constituting one branch shall exercise any of the powers

properly belonging to either of the others, except as expressly provided in this

Constitution."

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"[T]he purpose of the separation of powers is to create a system of

checks and balances among the three branches of government." State v. Bond,

365 N.J. Super. 430, 441 (App. Div. 2003). However, it is not intended "to

create an absolute division of powers among the three branches of government,

thereby preventing cooperative action among them." Ibid.

"[W]hen the Governor is acting consistently with express or implied

authority from the Legislature, his or her action should be given the widest

latitude of judicial interpretation, and the burden of persuasion . . . rest[s]

heavily upon any who might attack it." Perth Amboy, 413 N.J. Super. at 601

(citations and internal quotation marks omitted). "Only when the challenged

action impairs 'the essential integrity' of another branch will a court step in to

enforce the constitutional boundaries." Bullet Hole, Inc. v. Dunbar, 335 N.J.

Super. 562, 574 (App. Div. 2000) (quoting Cupano v. Gluck, 133 N.J. 225, 233

(1993)).

The sharing of constitutional power among the three branches of

government ordinarily will be upheld. Commc'ns Workers of Am. v. Christie,

413 N.J. Super. 229, 257 (App. Div. 2010). "That is particularly true in

situations where . . . the executive order flows out of the Governor's

legislatively-delegated emergency powers to act on behalf of the safety and

welfare of the people of New Jersey under the Disaster Control Act . . . ." Id.

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at 259. Executive orders are generally upheld, even when they are challenged

on separation of power grounds. Ibid. In reviewing an executive order, courts

should give the executive action "the strongest of presumptions and the widest

latitude of judicial interpretation, and the burden of persuasion would rest

heavily upon any who might attack it." Worthington, 88 N.J. at 208 (citation

omitted).

Appellants argue that EO 128 violates the New Jersey Constitution's

fundamental separation of powers requirements by usurping the Legislature's

lawmaking powers. According to appellants, only the Legislature may make

or suspend laws. In fact, appellants argue that the Constitution only permits

laws to be suspended in the context of habeas corpus: "The privilege of the

writ of habeas corpus shall not be suspended, unless in case of rebellion or

invasion the public safety may require it." N.J. Const. art. I, ¶ 14. Appellants

argue that this explicit exception of habeas corpus means that the Governor

possesses no implicit constitutional authority to suspend other laws.

Appellants further argue that EO 128 directly undermines the SDA,

which authorizes landlords to take a security deposit from a tenant and hold it

until the end of the lease. Moreover, EO 128 creates new criminal sanctions, a

purely legislative function. Appellants contend that EO 128 thus violates the

Constitution's separation of powers requirements.

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33

In a related argument, appellants contend the Disaster Control Act would

violate the nondelegation doctrine if interpreted to authorize EO 128. The

nondelegation doctrine provides that the Legislature may only delegate its

power to legislate under very limited circumstances. In Roe v. Kervick, 42

N.J. 191, 232 (1964), the Court stated that the executive cannot be given

"unbridled" powers that constitute an "abdication of the duty of the Legislature

. . . ." Instead, a statute that confers on the executive the power to legislate

"must impose basic standards, guidelines and a reasonably definite policy to be

followed in its administration." Id. at 232. Here, appellants argue that if the

Disaster Control Act authorizes EO 128, this would, in effect, empower the

Governor to take virtually any action to address the COVID-19 pandemic, and

essentially this would mean that no standards exist to limit the Governor's

executive orders. Rather, appellants contend that the Disaster Control Act

explicitly requires the Governor to focus solely on public health, safety, and

welfare at the time of the emergency, and bars adoption of measures unrelated

to problems directly created by the pandemic.

Respondents counter this argument by citing NJRSC, 243 N.J. at 580-81,

where the Court recognized that the COVID-19 pandemic resulted in an

economic crisis in addition to a public health emergency; for this reason, they

assert that EO 128 is authorized by the Disaster Control Act.

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34

Because of the widespread economic emergency, we conclude that EO

128 did not violate the nondelegation doctrine. Instead, the Governor used his

emergency powers to protect the health and welfare of the public, which

includes the public economic crisis, and the executive order is a valid exercise

of the Governor's powers pursuant to the Disaster Control Act.

In sum, we conclude EO 128 does not violate the doctrine of separation

of powers. The Legislature expressly authorized the Governor, pursuant to the

Disaster Control Act, to take the actions he took in EO 128.

III.

Appellants further contend that EO 128 violates the contracts clause of

the New Jersey Constitution. This argument also lacks merit.

The New Jersey Constitution provides: "The Legislature shall not pass

any . . . law impairing the obligation of contracts, or depriving a party of any

remedy for enforcing a contract which existed when the contract was made."

N.J. Const. art. IV, § 7, ¶ 3. The New Jersey contracts clause is interpreted

similarly to its federal counterpart. In re Recycling & Salvage Corp., 246 N.J.

Super. 79, 100-01 (App. Div. 1991). "The contract clause does not deprive the

states of their power to adopt general regulatory measures even if those

regulatory measures result in the impairment or destruction of private

contracts." Ibid. A statute does not violate the contracts clause "simply

A-1584-20

35

because it has the effect of restricting, or even barring altogether, the

performance of duties created by contracts prior to [the statute's] enactment."

Ibid. (alteration in original) (quoting Exxon Corp. v. Eagerton, 462 U.S. 176,

190 (1983)).

Every contract is subordinate to the laws of nature and of the

community, and the State may make laws for the common welfare even if

those laws conflict with or affect individual contracts. Home Bldg. & Loan

Ass'n v. Blaisdell, 290 U.S. 398, 435-36 (1934). In fact, a temporary restraint

on private contracts may become necessary when the State is addressing "a

great public calamity." Ibid.

Contract impairment claims involves "three inquiries: (1) whether a

contractual right exists in the first instance; (2) whether a change in the law

impairs that right; and (3) whether the defined impairment is substantial."

Berg v. Christie, 225 N.J. 245, 259 (2016). The first two inquiries are

typically resolved easily, and courts focus on the severity of the impairment.

Gen. Motors Corp. v. Romein, 503 U.S. 181, 186 (1992). To determine

whether the government action has created a severe impairment of a private

contract requires "a careful examination of the nature and purpose of the state

legislation." Allied Structural Steel Co. v. Vill. of Schaumburg, 438 U.S. 234,

245 (1978).

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In analyzing whether the state law operates as a substantial impairment,

courts consider "the extent to which the law undermines the contractual

bargain, interferes with a party's reasonable expectations, and prevents the

party from safeguarding or reinstating his rights." Sveen v. Melin, 138 S. Ct.

1815, 1822 (2018). Whether the parties were operating in a regulated indu stry

is "[a]n important factor in determining the substantiality of any contractual

impairment . . . ." Am. Express Travel Related Servs., 669 F.3d at 369 (citing

Energy Rsrvs. Grp., Inc. v. Kan. Power & Light Co., 459 U.S. 400, 411

(1983)). "When a party enters an industry that is regulated in a particular

manner, it is entering subject to further legislation in the area, and changes in

the regulation that may affect its contractual relationships are foreseeable."

Ibid.

If a court finds that a law substantially impairs a private contract, it must

then continue to the second part of the contracts clause analysis and that is

whether the State established "a significant and legitimate public purpose"

underlying the challenged statute and whether the adjustment in contractual

rights is sufficiently related to the governmental objective. Edgewater Inv.

Assocs. v. Borough of Edgewater, 201 N.J. Super. 267, 278 (App. Div. 1985)

(citing Energy Rsrvs. Grp., 459 U.S. at 411-12).

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"States have broad power to regulate housing conditions in general and

the landlord-tenant relationship in particular . . . ." Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419, 440 (1982).

Because past regulation puts industry

participants on notice that they may face further

government intervention in the future, a later-in-time

regulation is less likely to violate the contracts clause

where it "covers the same topic [as the prior

regulation] and shares the same overt legislative intent

to the [sic] protect [the parties protected by the prior

regulation]."

[Elmsford, 469 F. Supp. 3d at 169-70 (first and third

alteration in original) (quoting All. of Auto. Mfrs.,

Inc. v. Currey, 984 F. Supp. 2d 32, 55 (D. Conn.

2013)).]

New Jersey has a long history of regulating the residential rental

industry, as discussed in Edgewater Inv. Assocs., 201 N.J. Super. at 278

(finding "the State's long history of regulation pertaining to the housing

industry" meant that law rendering certain senior citizens immune from

eviction for forty years did not substantially impair property owners'

contractual rights); Chase Manhattan Bank v. Josephson, 135 N.J. 209, 234-35

(1994) (law extending eviction restrictions to landlord's successors in

ownership did not substantially impair contractual rights); and Troy, Ltd. v.

Renna, 727 F.2d 287, 297-98 (3d Cir. 1984) (retroactive application of New

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Jersey's anti-eviction law did not substantially impair landlords' preexisting

contractual rights).

Residential security deposits are also heavily regulated and include

requirements as to how a security deposit is paid, maintained, and returned,

N.J.S.A. 46:8-19 and -21.1; how much of a security deposit a landlord may

require, N.J.S.A. 46:8-21.2; and what happens to the security deposit when the

property is conveyed to another person, N.J.S.A. 46:8-20 and -21.

In light of the COVID-19 pandemic, other jurisdictions have recently

considered contracts clause challenges to executive orders similar to EO 128.

For example, in Elmsford, the court held:

Again, there is no question that residential leases are

subject to a number of regulations that do not

implicate the Contracts Clause. For example, "It is

well established that [New York] City's rent control

laws do not unconstitutionally impair contract rights."

Therefore, EO 202.28 – which modifies aspects of the

statutory scheme relating to permissible uses of

security deposits – should have come as a no surprise

to the landlord [p]laintiffs, and thus could not amount

to a substantial impairment of their rights under their

rental agreements.

[Elmsford, 469 F. Supp. 3d at 170 (internal citations

omitted) (quoting Brontel, Ltd. v. City of N.Y., 571 F.

Supp. 1065, 1072 (S.D.N.Y. 1983)).]

Similarly, in Auracle Homes, LLC v. Lamont, 478 F. Supp. 3d 199, 224 (D.

Conn. 2020), the federal district court found that Connecticut Governor

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Lamont's executive order, similar to EO 128, did not substantially impair the

plaintiffs' contracts because the housing industry is heavily regulated.

In Johnson, the court provided the following explanation for rejecting

appellants' contracts clause argument:

Similar to the executive order in Elmsford,

Executive Order 128 "does not displace the civil

remedies always available to landlords seeking to

recover the costs of repairs or unpaid rents still owed

at the end of a lease term." Just as in Elmsford,

nothing in Executive Order 128 "diminishes the

tenant's rental obligation by even a nickel" and the

changes in Executive Order 128 are temporary. . . . In

Elmsford, the court noted, although it was true that a

landlord might have to "obtain a judgment for the

amount expended in repairs," this "whole scheme is no

different than what actually happens in the real world,

where tenants routinely forfeit their security deposit

by allowing it to 'cover the last month's rent' on a

lease." The court further explained "[t]he landlord can

collect all he is owed at the end of the day by the

simple expedient of going to some court when the

courts are fully reopened. The fact that landlords

would prefer not to avail themselves of their legal

remedies -- because it is often not worth the trouble to

pursue a deadbeat tenant -- does not mean that the

state has impaired their contractual rights."

[Johnson, 2021 WL 1085744 at *10 (internal citations

omitted) (quoting Elmsford, 469 F. Supp. 3d at 171).]

Appellants argue that EO 128 violates the contracts clause by

substantially impairing their leases, claiming they explicitly contracted for the

payment and maintenance of security deposits to ensure their tenants met their

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40

obligations. Moreover, the Glassboro and Millville leases specifically

precluded using security deposits to pay rent.

The test for whether a state law substantially impairs a private contract is

the extent to which it undermines the contractual bargain, interferes with a

party's reasonable expectations, and prevents the party from safeguarding or

reinstating his [or her] rights." Sveen, 138 S. Ct. at 1822.

A. Undermining appellants' contractual bargain

Here, according to appellants, the State fundamentally altered the

parties' obligations under their leases, because their security deposits secure

the value of their real property and ensure the tenants' compliance with their

contractual obligations. Appellants argue that that EO 128 substantially

impaired their private contracts when it removed the incentive for tenants to

comply with the terms of their leases and maintain the condition of appellants'

properties.

We reject this argument. As the court in Johnson found, EO 128 did not

alter the tenants' obligations to pay rent or compensate landlords for damages

they caused. Instead, the Johnson court found:

Executive Order 128 sufficiently safeguards

[p]laintiffs' ability to realize the benefit of their

bargain. In Executive Order 128, Governor Murphy

explicitly allows a landlord to "to recoup from the

tenant any monies the landlord expended that would

have been reimbursable by the security deposit and

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41

interest or earnings thereon, at the time that such

reimbursement from the deposit and interest or

earnings thereon would have taken place." Moreover,

Executive Order 106 explains that Governor Murphy’s

actions do not "affect any schedule of rent that is due."

[Johnson, 2021 WL 1085744, at *10 (citing Elmsford,

469 F. Supp. 3d at 171).]

Appellants also cite the dissent in Sveen, 138 S. Ct. at 1830 (Gorsuch, J.,

dissenting), where Justice Gorsuch distinguished between laws that merely

alter the means of enforcing a contract from those that actually interfere with

contractual obligations. In this regard, Justice Gorsuch expressed that cases

relying on Blaisdell to find that there was no substantial impairment of

contracts had involved contractual remedies and not contractual obligations.

138 S. Ct. at 1830-31. Justice Gorsuch stated:

Although the Constitution allows legislatures some

flexibility to address changing social conditions

through retroactive remedial legislation, it does not

permit upsetting settled expectations in contractual

obligations. We must respect that line found in the

text of the Constitution, not elide it. Indeed, our

precedent teaches that if remedial changes are just

disguised efforts at impairing obligations they will

violate the Constitution too.

[Ibid. (citations omitted).]

We reject the contention that EO128 materially altered appellants'

ultimate contractual remedies, as tenants' obligations regarding rent and

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42

damages were not impaired by EO 128. Thus, we do not find relevant the

distinction advanced by Justice Gorsuch.

B. Interfering with a party's reasonable expectations

According to appellants, the Legislature passed the SDA in 1968 and

since that time, New Jersey's security deposit legislation has remained mostly

static; therefore, they argue that their reasonable expectations were that it

would remain so. Appellants argue they were not put on notice that the

Governor might nullify their ability to maintain a security deposit.

This claim lacks merit. A party's reasonable expectations directly relate

to whether they operate in a heavily regulated industry; here, appellants

operate in the heavily regulated residential rental industry. Thus, appellants'

reasonable expectations should have been that in a pandemic, rental contracts

might be impacted by the State regulating the use of tenants' security deposits.

See Am. Express Travel Related Servs., 669 F.3d at 369 (holding that changes

to regulations in a heavily regulated industry are foreseeable).

C. Preventing the party from safeguarding or reinstating his or her rights

As the court in Johnson found, appellants will be able to enforce their

rights by obtaining a judgment against any tenants who default on rent or

cause damages; tenants' rental obligations are not diminished by "even a

nickel"; in addition, "in the real world, . . . tenants routinely forfeit their

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security deposit by allowing it to 'cover the last month's rent' on a lease."

Johnson, 2021 WL 1085744, at *10 (quoting Elmsford, 469 F. Supp. 3d at

171).

We conclude that EO 128 did not substantially impair appellants'

contracts because: it did not undermine their contractual bargains given that

they are still able to recover unpaid rent and the cost of damages; it did not

prevent them from safeguarding their rights because they are still able to

obtain a judgment against tenants who do not meet their obligations; and it did

not interfere with their reasonable expectations since they operate in a heavily

regulated industry.

Because EO 128 has not substantially impaired appellants' contractual

rights, we need not reach the next part of the analysis – whether the State

established "a significant and legitimate public purpose" and whether the

adjustment in the parties' contractual rights is sufficiently related to the

governmental objective. Edgewater Inv. Assocs., 201 N.J. Super. at 278

(citing Energy Rsrvs. Grp., 459 U.S. at 411).

IV.

Lastly, appellants argue that EO 128 violates the due process clause of

the New Jersey Constitution. We disagree.

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Courts should not reach constitutional questions unless necessary to

resolve the appeal. Comm. to Recall Robert Menendez v. Wells, 204 N.J. 79,

95 (2010). The Fourteenth Amendment to the United States Constitution

provides that no state may "deprive any person of life, liberty, or property,

without due process of law . . . ." U.S. Const. amend. XIV, § 1. The New

Jersey Constitution guarantees that all persons "have certain natural and

unalienable rights" including the fundamental right of "acquiring, possessing,

and protecting property. . . ." N.J. Const. art. I, ¶ 1. Substantive due process

claims are recognized under the New Jersey Constitution. State in Interest of

C.K., 233 N.J. 44, 73 (2018).

Our courts apply the same standard as applied under the federal

constitution. Roman Check Cashing, Inc. v. N.J. Dep't of Banking & Ins., 169

N.J. 105, 110 (2001). In analyzing due process violations, New Jersey courts

consider "the nature of the affected right, the extent to which the governmental

restriction intrudes upon it, and the public need for the restriction."

Greenberg, 99 N.J. at 567.

"[A] statute is invalid on substantive due process grounds if it 'seeks to

promote [a] state interest by impermissible means . . . .'" Caviglia v. Royal

Tours of Am., 178 N.J. 460, 472 (2004) (second alteration in original) (quoting

Greenberg, 99 N.J. at 562).

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The substantive due process doctrine "does not

protect individuals from all governmental actions that

infringe liberty or injure property in violation of some

law." Rather, substantive due process is reserved for

the most egregious governmental abuses against

liberty or property rights, abuses that 'shock the

conscience or otherwise offend . . . judicial notions of

fairness . . . [and that are] offensive to human

dignity."

[Rivkin v. Dover Twp. Rent Leveling Bd., 143 N.J.

352, 366 (1996) (alterations in original) (citations

omitted).]

The federal court in Johnson rejected appellants' due process arguments,

explaining that "'[i]t is elementary that procedural due process is implicated

only where someone has claimed that there has been a taking or deprivation of

a legally protected liberty or property interest,' and that 'possessory interests in

property invoke procedural due process protections.'" Johnson, 2021 WL

1085744, at *30 (quoting Abbott v. Latshaw, 164 F.3d 141, 146 (3d Cir.

1998)). "Because Plaintiffs have failed to demonstrate a substantial

impairment of their property rights, they 'ha[ve] pointed to no specific

constitutional guarantee safeguarding the interest [they] assert ha[ve] been

invaded." Ibid. (alterations in original) (quoting Auracle, 478 F. Supp. 3d at

226-27).

Here appellants have not identified a property interest independent of the

interests addressed by their Contracts Claims. This is fatal to their due process

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claims. As the Supreme Court has held, when "a particular Amendment

provides an explicit textual source of constitutional protection against a

particular sort of government behavior, that Amendment, not the more

generalized notion of substantive due process, must be the guide for analyzing

these claims." Stop the Beach Renourishment, Inc. v. Fla. Dep't of Env't Prot.,

560 U.S. 702, 721 (2010) (citations and internal quotation marks omitted).

Nonetheless, appellants cite Montville Twp. v. Block 69, 74 N.J. 1, 7

(1977), in support of their argument that EO 128 deprives them of the

substantive right to protect their real property. We disagree. The security

deposits are the property of appellants' tenants. Nothing in EO 128 prevents

appellants from protecting their properties by seeking judgments against t heir

tenants for violations of their leases.

Also, appellants claim that the criminal penalties in EO 128 violate their

procedural due process rights, citing Band's Refuse Removal, Inc. v. Borough

of Fair Lawn, 62 N.J. Super. 522, 553 (App. Div. 1960) ("Established

procedures lie at the heart of due process and are as important to the

attainment of ultimate justice as the factual merits of a cause."). This claim

lacks merit as the Disaster Control Act permits the Governor to criminalize

actions that contravene the Governor's emergency orders. Appellants'

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remaining arguments asserting due process claims lack sufficient merit to

warrant discussion in a written opinion. R. 2:11-3(e)(1)E.

In sum, we conclude that EO 128 constitutes a valid exercise of

gubernatorial power pursuant to the Disaster Control Act.

Affirmed.

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