JWC Fitness, LLC v. Murphy

• Decision Date: 18 October 2021
• Docket Number: DOCKET NO. A-0639-20
• Citation: 469 N.J.Super. 414,265 A.3d 164
• Parties: JWC FITNESS, LLC, Plaintiff-Appellant, v. Philip D. MURPHY, in his official capacity as the Governor of the State of New Jersey, Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

469 N.J.Super. 414

265 A.3d 164

JWC FITNESS, LLC, Plaintiff-Appellant,

v.Philip D. MURPHY, in his official capacity as the Governor of the State of New Jersey, Defendant-Respondent.

DOCKET NO. A-0639-20

Superior Court of New Jersey, Appellate Division.

Argued September 13, 2021

Decided October 18, 2021

Catherine M. Brown, Morristown, argued the cause for appellant (Catherine M. Brown and Stern Kilcullen & Rufolo, LLC, attorneys; Catherine M. Brown and Robert W. Ferguson, of counsel and on the briefs).

Alec Schierenbeck, Deputy State Solicitor, argued the cause for respondent (Andrew J. Bruck, Acting Attorney General, attorney; Alec Schierenbeck and Melissa H. Raksa, Assistant Attorney General, of counsel; Jeremy M. Feigenbaum, State Solicitor, and Kevin R. Jespersen, Assistant Attorney General, of counsel and on the briefs; Amy E. Stevens and Kai W. Marshall-Otto, Deputy Attorneys General, on the briefs).

Before Judges Rothstadt, Mayer, and Natali.

The opinion of the court was delivered by

ROTHSTADT, J.A.D.

In this latest appeal arising from executive orders (EOs) issued by the Governor of New Jersey, defendant Philip D. Murphy, in response to health-related emergencies caused by the spread of the COVID-19 coronavirus, plaintiff JWC Fitness, LLC, which until October 2020 operated a kickboxing business in Franklin, claims entitlement to compensation under the New Jersey Civil Defense and Disaster Control Act (Disaster Control Act), N.J.S.A. App. A:9-30 to -63, for the closure and limitations placed on its business under some EOs.¹

More specifically, plaintiff contends that through the EOs that temporarily limited and shut down the operations of health clubs, including gyms and fitness centers, the State effectively "commandeered and utilized" its property under N.J.S.A. App. A:9-34, such that the State must establish an "emergency compensation board" under N.J.S.A. App. A:9-51(c), in order to provide "payment of the reasonable value of such ... privately owned property." N.J.S.A. App. A:9-34. Plaintiff also seeks a declaratory judgment that the EOs effectuated a taking of its property without just compensation, in violation of the New Jersey Constitution, art. I, ¶ 20, and the United States Constitution, amends. V and XIV.

We conclude that plaintiff's arguments are without merit as the statutory standard for compensation has not been implicated, and the EOs did not effectuate a taking of plaintiff's property within the meaning of the state and federal constitutions.

In its claim for compensation, plaintiff cites to EOs 104 and 107, which the Governor issued in March 2020, shortly after he first declared a public health emergency.² In EO 104, which the Governor issued on March 16, 2020, he directed, among other things, that gyms and fitness centers be closed to the public. Exec. Order No. 104 (Mar. 16, 2020), 52 N.J.R. 550(a) (Apr. 6, 2020). Five days later, in EO 107, he superseded EO 104, but maintained the closure of gyms and fitness centers. Exec. Order No. 107 (Mar. 21, 2020), 52 N.J.R. 554(a) (Apr. 6, 2020).

The closure mandate was temporary, however. Throughout the spring and summer of 2020, as the State's first wave of COVID-19 infections waned, the Governor issued EOs that permitted the reopening of many previously closed facilities and businesses, subject to limitations that were intended to mitigate the spread of COVID-19, including capacity limitations and mandates for social distancing, mask-wearing, and sanitization.³

As it relates to this appeal, on June 26, 2020, the Governor permitted gyms and fitness centers to open their outdoor spaces to the public and also to offer individualized instruction indoors. Exec. Order No. 157 (June 26, 2020), 52 N.J.R. 1455(a) (Aug. 3, 2020). The Governor explained that "indoor environments present[ed] increased risks of transmission as compared to outdoor environments." Ibid. In addition:

[I]ndoor gyms, sports facilities, and fitness centers present particularly high risks of COVID-19 transmission, where people are congregating in a confined indoor space and working out, which entails sustained physical activity resulting in heavy breathing and exhalations that can increase the risk of COVID-19 spread, and where exercise equipment is shared by many different people over the course of the day, creating an additional danger of COVID-19 spread, and there are a high number of outdoor recreation opportunities to ensure that members of the public can engage in a wide range of exercise and fitness ....

[Ibid. ]

Two months later, the Governor issued EO 181, permitting gyms and fitness centers to reopen their indoor premises effective September 1, 2020, subject to a twenty-five percent capacity limitation, as well as additional measures to mitigate the risk of COVID-19 transmission. Exec. Order No. 181 (Aug. 27, 2020), 52 N.J.R. 1712(a) (Sept. 21, 2020). Five months later, on February 3, 2021 (after plaintiff permanently closed its business), the Governor raised the indoor capacity limit for gyms and fitness centers to thirty-five percent. Exec. Order No. 219 (Feb. 3, 2021), 53 N.J.R. 288(a) (Mar. 1, 2021). And, on March 11, 2021, he increased the indoor capacity limit for such businesses to fifty percent. Exec. Order No. 230 (Mar. 11, 2021), 53 N.J.R. 576(a) (Apr. 19, 2021).

On May 14, 2021, the Governor eliminated percentage-based capacity limitations previously placed upon gyms and fitness centers but ordered that such businesses "shall limit occupancy to a number that ensures that all patrons or groups of patrons entering the facility together can remain six feet apart." Exec. Order No. 239 (May 14, 2021), 53 N.J.R. 970(a) (June 7, 2021). Ten days later, the Governor issued EO 242, in which he permitted businesses, including gyms and fitness centers, to operate at full capacity, with no need for maintaining a six-foot distance between patrons, and also eliminated the requirement that individuals wear masks while in indoor public spaces. Exec. Order No. 242 (May 24, 2021), 53 N.J.R. 1044(a) (June 21, 2021).

Finally, on June 4, 2021, the Governor declared an end to the public health emergency under the Emergency Health Powers Act, N.J.S.A. 26:13-1 to -31, (EHPA) but continued his declaration of a state of emergency under the Disaster Control Act. Exec. Order No. 244 (June 4, 2021), 53 N.J.R. 1131(a) (July 6, 2021). The same day, the Governor signed into law a bill passed by the Legislature providing that all EOs "issued by the Governor prior to the effective date of this act, ... that relied on the existence of the public health emergency declared by the Governor in Executive Order No. 103 of 2020, as extended, shall expire 30 days following the effective date of this act," with the exception of certain enumerated EOs, none of which are relevant to this appeal. L. 2021, c. 103. The Legislature also affirmed the Governor's continuation of a state of emergency under the Disaster Control Act. Ibid.

Before the Governor declared a health emergency in 2020, plaintiff offered thirty instructor-led kickboxing classes per week, with a maximum class size of thirty. It had more than 200 members who paid either on a monthly basis, or prepaid for specified periods of time, with all members entitled to attend as many classes as they wished. It also offered a small gym area and personal training; however, these services constituted an insubstantial component of the business.

On March 16, 2020, plaintiff shut its doors in compliance with EO 104 and, in April, it suspended automatic membership payments, and those members who prepaid for specified periods of time no longer had the benefit of attending unlimited in-person classes. However, in the immediate aftermath of the shutdown, plaintiff offered live-stream classes to its members, without charge. It also offered free classes to local schools as a gym class option.

Consistent with EO 157, in the summer of 2020 plaintiff began offering outdoor classes, which were shorter and less intense than its indoor classes had been. It charged $10 per class, with a maximum of eighteen participants; however, the capacity limit was never reached.

Later, after the Governor issued EO 181, which permitted plaintiff to open its indoor operations effective September 1, 2020, plaintiff did not do so until October 12, 2020. At the twenty-five percent capacity limit permitted by the EO, and subject to Department of Health (DOH) regulations, plaintiff's maximum indoor class size was limited to nine. In practice, however, the class size averaged four-to-five members. Moreover, with the twenty-five percent capacity limit, plaintiff could not resume its business model of offering unlimited classes for a flat monthly fee. Instead, it charged $10 per class, and offered ten indoor classes per week.

Plaintiff hoped to eventually reopen at full capacity. However, on September 14, 2020, plaintiff's landlord commenced eviction proceedings due to plaintiff's non-payment of rent. At that time, after considering the deficit between its revenue and expenses, plaintiff determined to close permanently effective October 31, 2020.

There is no question that plaintiff's business generated little revenue after March 2020. However, it received $21,650 in grants from the federal government (of which $16,650 was used to pay employee salaries and rent), as well as a grant of $1,000 from the State. In addition, plaintiff's principal received unemployment benefits that were enhanced pursuant to federal legislation.

On appeal, citing the Disaster Control Act, plaintiff contends it is entitled to compensation for its losses caused by the limitations the EOs placed on its business and for its eventual closure. Plaintiff specially relies upon N.J.S.A. App. A:9-34. It contends the Governor exercised his power under that section of the Disaster Control Act to "commandeer and utilize" plaintiff's property by means of the EOs that shut or limited its operations. It also contends it is entitled to...