Harmon v. Borough of Belmar
| Decision Date | 20 February 2020 |
| Docket Number | Civil Action No.: 17-cv-02437 (PGS)(ZNQ) |
| Parties | TIMOTHY HARMON, et al., Plaintiffs, v. BOROUGH OF BELMAR, et al., Defendants. |
| Court | U.S. District Court — District of New Jersey |
This matter comes before the Court on Defendants' motion to dismiss Counts X and XI of Plaintiffs' Fourth Amended Complaint for failure to state a claim upon which relief can be granted.1 (ECF Nos. 96, 100). In the Fourth Amended Complaint, Plaintiffs assert two new claims: (i) Breach of the Redevelopment Agreement (Count X); and (ii) Breach of the Implied Covenant of Good Faith and Fair Dealing (Count XI). In the instant motion, Defendants seek dismissal of those new Counts on the grounds that Plaintiffs are not third-party beneficiaries of the subject Redevelopment Agreement and therefore lack standing to bring these claims. In the alternative, Defendants argue that dismissal is warranted because there was no breach of the Redevelopment Agreement and no bad faith. For the reasons stated herein, Defendants' motions to dismiss are denied.
The Court presumes that the parties are familiar with the factual context and the procedural history of this action, which are set forth at length in the Court's prior Memorandum and Order dated November 20, 2018 (ECF No. 63). Accordingly, in the interest of judicial economy, the Court will recapitulate only those facts integral to resolving the instant motion.
Plaintiffs Timothy and Matthew Harmon ("Plaintiffs") maintain restaurants and bars in the Borough of Belmar, New Jersey. (Fourth Amended Complaint ("FAC") ¶¶ 2-3). The Defendant Borough of Belmar (the "Borough") is a resort community located along the Jersey Shore. (Id. ¶ 5).
The northern boundary of the Borough is marked by the Shark River Inlet and the Shark River. (Id. ¶ 6). The Borough created a redevelopment area along and near its boundary with the Shark River, including the property Plaintiffs refer to as the "Salt property" or the "Loko property." (Id. ¶ 7).
In January 2014, the Borough entered into the subject Redevelopment Agreement with real estate developer Loko, LLC ("Loko"). (Id. ¶ 8). The Redevelopment Agreement provided for a two-phase redevelopment of the Loko property; the first phase provided for the construction and operation of an outdoor café and bar; and the second phase provided for the construction of residential condominium units in which the first floor would contain commercial space. (Id. ¶ 10).
Throughout the course of Loko's negotiations with the Borough concerning the Redevelopment Agreement, Loko was engaged in discussions, consultations, and negotiations with Plaintiffs in a purported effort to induce Plaintiffs to own and operate the outdoor café and bar on the Loko property. (Id. ¶ 11). Plaintiffs allege that the Borough, the Mayor, and others were aware that Loko intended to have Plaintiffs operate the outside café and bar. (Id.).
On or about March 20, 2015, Plaintiffs entered into a lease agreement with Loko to construct and operate the outdoor bar and café on the Loko property. (Id. ¶ 13). Thereafter, Plaintiffs engaged contractors, obtained construction permits, and began the process of constructing the outdoor bar or café, which is referred to by Plaintiffs as the "Salt facility" or "Salt." (Id. ¶ 14).
In this version of the complaint, Plaintiffs allege, however, that they were ultimately prevented from opening and operating the Salt facility as result of Defendant's breach of the Redevelopment Agreement. (Id. ¶¶ 184-98). Specifically, Plaintiffs allege that Defendants breached Article 5.27 of the Redevelopment Agreement, which provides, in pertinent part:
5.27. Borough Cooperation. The Borough shall cooperate with and assist the Redeveloper [or, Loko] so as to enable [Loko] to implement, develop and complete the Project in accordance with the Concept Plan and to otherwise perform [Loko's] obligations and responsibilities under this Redevelopment Agreement. This cooperation shall include, but not be limited to, (a) causing all construction and building permits over which the Borough or any of its agencies or offices has jurisdiction to be granted to [Loko] provided the applications for same comply with applicable law, [and] (b) assisting [Loko] in obtaining Governmental Approvals, in expediting required action by the Board in connection with site plan and subdivision applications filed by [Loko] in connection with this Redevelopment Agreement . . . . Nothing herein, however, shall constitute a guaranty or a warranty by the Borough that [Loko] will obtain site plan approval from the Planning Board, or any other Governmental Approvals that may be required from any governmental or quasi-governmental entity.
(Id. ¶ 189; see also Defendants' Moving Br., Ex. A, Redevelopment Agreement, Article 5.27 at 19, ECF No. 96-3). Rather than "cooperating and assisting" in the construction of the two-phase project set forth in the Redevelopment Agreement, which included Plaintiffs' Salt facility, the Borough allegedly "interfered with and disrupted the construction of Salt and, inter alia, delayed,denied, or refused to issue permits for Salt despite its having been approved by the Borough Planning Board." (Id. ¶ 190).
In particular, Plaintiffs contend that Defendants breached Article 5.27 of the Redevelopment Agreement by: (i) filing a false Coastal Area Facility Review Act ("CAFRA") claim with the New Jersey Department of Environmental Protection in an effort to stop the project (Id. ¶ 191); (ii) issuing stop-work orders based upon erroneous correspondence indicating that construction on the Salt facility failed in numerous ways to comply with the plans approved by the Borough Planning Board (id. ¶¶ 192-93); (iii) appearing before the Borough Planning Board to object to the approval of an amended site plan for the Salt facility (id. ¶ 194); (iv) and voting against Plaintiffs' liquor license transfer application despite knowing that the Borough Council had previously approved the Redevelopment Agreement that provided for such an outdoor establishment to be located on the premises (id. ¶ 195).2
Plaintiffs do not purport to be parties to the Redevelopment Agreement. Rather, Plaintiffs contend that they are third-party beneficiaries of the Redevelopment Agreement because the Agreement provided for the construction of the outdoor café and bar at the Loko property—Salt-in which Plaintiffs agreed to operate. (Id. ¶¶ 185-88).
Defendants oppose Plaintiffs' contention that they are third-party beneficiaries because Article 3.02 of the Redevelopment Agreement did not permit Loko to lease any part of the Loko property to Plaintiffs without the express written consent of the Borough, which Loko did not obtain. Article 3.02 provides, in relevant part:
(Redevelopment Agreement, Article 3.02 at 10 (emphasis supplied)). As emphasized, however, the Redevelopment Agreement exempts leases to "retail tenants" from Loko's obligation to seek the express written consent of the Borough. The Redevelopment Agreement does not define the term "retail tenant," nor do Defendants.
Defendants also contend that other Articles of the Redevelopment Agreement demonstrate no contractual intent to recognize the rights of any third party to enforce the Agreement, including Plaintiffs. For example, Defendants point to Article 5.03 which expressly allocates to Loko the sole responsibility for the construction of the project. Article 5.03 provides, in pertinent part:
(Redevelopment Agreement, Article 5.03 at 13). Based on the foregoing, among other reasons, Defendants seek dismissal of Counts X and XI for failure to state a claim upon which relief can be granted.
On a motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), the Court is required to accept as true all allegations in the Fourth Amended Complaint and all reasonable inferences that can be drawn therefrom, and to view them in the light most favorable to the non-moving party. See Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). While a court will accept well-pleaded allegations as true for the purposes of the motion, it will not accept bald assertions, unsupported conclusions, unwarranted inferences, or sweeping legal conclusions cast in the form of factual allegations. Iqbal, 556 U.S. at 678-79; see also Morse v. Lower Merion School District, 132 F.3d 902, 906 (3d Cir. 1997). A complaint should be dismissed only if the well-pleaded alleged facts, taken as true, fail to state a claim. See In re Warfarin...
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